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AGREEMENT
and
PLAN OF MERGER
by and among
BENIHANA INC.,
BENIHANA MERGER CORP.,
RUDY'S RESTAURANT GROUP, INC.,
BAYVIEW PARTNERS
and
DOUGLAS M. RUDOLPH
Dated: July 22, 1997
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EXHIBIT LIST
8.1.12 Severance Letters
10.1.4 Rudy's Counsel Option
10.2.3 Benihana's Counsel Opinion
10.2.4 Non-Competition Agreement
10.2.5 Benihana Warrant
SCHEDULES
1.1 The Adjustment Amount
5.1.1 Foreign Qualification of Rudy's
5.1.2 Officers and Directors of Rudy's
5.2 Subsidiaries
5.6 No Violation
5.8 No Undisclosed Liabilities
5.9 Certain Changes
5.10.1 Owned Real Properties
5.11.1 Leases
5.12.1 Restaurants
5.12.2 Liquor Licenses
5.13.1 List of Patents, Trademarks, etc.
5.13.2 Licenses
5.13.3 Infringements
5.15.1 Taxes, Assessments and Deficiencies
5.15.2 States Where Returns Filed
5.15.3 NOL's
5.16.1 Transactions with Affiliates
5.17. Contracts and Commitments
5.19.1 Insurance Policies
5.19.2 Group Insurance Policies
5.20 Labor Matters
5.22 Litigation
5.26 Employee Benefit Plans
5.27 Brokers and Finders
5.28 Consents
8.1.12 Severance and Bonus Payments
10.1.6 Required Consents
<PAGE>
AGREEMENT AND PLAN OF MERGER (the "Agreement") dated as of July 22,
1997 by and among RUDY'S RESTAURANT GROUP, INC., a Nevada corporation
("Rudy's"), DOUGLAS M. RUDOLPH ("Rudolph"), BAYVIEW PARTNERS, a general
partnership organized under the laws of Texas ("Bayview"), BENIHANA, INC., a
Delaware corporation ("Benihana") and BENIHANA MERGER CORP., a Nevada
corporation and a wholly-owned subsidiary of Benihana ("Newco"). Each of Rudy's
and Bayview are parties to the Agreement solely for purposes of the
representations and covenants set forth in Sections 6 and 8.10.
R E C I T A L S:
A. The Boards of Directors of Rudy's and Benihana and the Board of
Directors and sole stockholder of Newco, respectively, deem it advisable and in
the best interests of Rudy's, Benihana, and Newco and their respective
stockholders that Benihana acquire the business and assets of Rudy's through the
merger (the "Merger") of Rudy's with Newco upon the terms and subject to the
conditions of this Agreement.
B. The Boards of Directors of Rudy's, Benihana and Newco, respectively, and
the stockholders of Newco have approved and adopted this Agreement. Accordingly,
the Parties hereto hereby agree as follows: 1. DEFINITIONS: 1.1 Defined Terms.
As used in this Agreement, the following terms have the following meanings:
"Adjustment Amount" shall have the meaning set forth on Schedule 1.1 hereto.
"Affiliate" means, as to any Person, a Person controlling, controlled by or
under common control with such Person. "Agreement" means this Agreement and Plan
of Merger, as amended, supplemented or otherwise modified from time to time.
"Approvals" has the meaning set forth in Section 5.14. "Articles of Merger" has
the meaning set forth in Section 2.2. "Balance Sheet Date" means March 16, 1997.
"Benihana Reports" means Benihana's Annual Reports on Form 10-K filed pursuant
to Section 13 or 15(d) of the Exchange Act for the fiscal years ended March 26,
1995,
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March 31, 1996 and March 30, 1997 and all other registration statements and
reports required to be or otherwise filed by it since March 26, 1995 with the
SEC pursuant to the Securities Act or the Exchange Act.
"Cash Consideration" means the amount of $5.00 per share plus the
Adjustment Amount payable in cash as the consideration for the Merger to holders
of Rudy's Shares.
"Class A Stock" means the Class A Common Stock, par value $.10 per
share, of Benihana.
"Closing" has the meaning set forth in Section 4.1.
"Code" means the Internal Revenue Code of 1986, as amended from time
to time, and the regulations and rulings issued thereunder.
"Common Control Entity" has the meaning set forth in Section 5.26.1.
"Contracts" has the meaning set forth in Section 5.17.
"Contractual Obligation" means as to any Person, any provision of any
agreement, instrument or other undertaking to which such Person is a party or by
which it or any of its property is bound.
"Effective Date" means the date upon which the Effective Time occurs.
"Effective Time" means has the meaning set forth in Section 2.2.
"Employment Plans" has the meaning set forth in Section 5.26.1.
"Environmental Laws" means any and all federal, state, local or
municipal Laws, rules, orders, regulations, statutes, ordinances, codes,
decrees or requirements of any Governmental Authority regulating, relating to
or imposing liability or standards of conduct concerning environmental protec-
tion matters, including without limitation, Hazardous Materials, as now or
may at any time hereafter be in effect.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and the regulations and rulings issued thereunder.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder.
"Exchange Agent" has the meaning set forth in Section 3.2.
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"Fairness Opinion" has the meaning set forth in Section 5.30.
"Fiduciary Obligations" has the meaning set forth in Section 8.8.
"GAAP" means generally accepted accounting principles in the United
States of America in effect from time to time.
"Governmental Authority" means any nation, state, county, local or
other governmental authority or any political subdivision thereof and any
federal, state, county, local or foreign entity or body exercising
executive, legislative, judicial, regulatory or administrative functions of
or pertaining to government.
"Hazardous Materials" means any (i) "hazardous substance," "waste,"
"pollutants," or "contaminant" (as defined in Sections 101(14),(33) of the
Comprehensive Environmental Response Compensation and Liability Act ("CERCLA")
or the regulations issued pursuant to Section 102 of CERCLA and found at 40
C.F.R. ss.302), including any element, compound, mixture, solutions, or
substance that is or may be designated pursuant to Section 102 of CERCLA; (ii)
substance that is or may be designated pursuant to Section 311(b)(2)(A) of the
Federal Water Pollution Control Act, as amended (33 U.S.C. ss.ss.1251,
1321(b)(2)(A) ("FWPCA"); (iii) hazardous waste having the characteristics
identified under or listed pursuant to Section 3001 of the Resource Conservation
and Recovery Act, as amended (42 U.S.C. ss.ss. 6901, 6921) ("RCRA"); (iv)
substance containing petroleum, as that term is defined in Section 9001(8) of
RCRA; (v) toxic pollutant that is or may be listed under Section 307(a) of
FWPCA; (vi) hazardous air pollutant that is or may be listed under Section 112
of the Clean Air Act, as amended (42 U.S.C. ss.ss. 7401, 7412); (vii) asbestos,
asbestos-containing material, or urea formaldehyde or material that contains it;
and (viii) waste oil and other petroleum products.
"Higher Offer" has the meaning set forth in Section 8.8.
"IRS" means the Internal Revenue Service.
"Leases" has the meaning set forth in Section 5.12
"Lien" means any mortgage, pledge, hypothecation, assignment, deposit
arrangement, encumbrance, lien (statutory or other), or preference, priority or
other security interest or agreement or preferential arrangement of any kind or
nature whatsoever (including, without limitation, any conditional sale or other
title retention agreement, any financing lease having substantially the same
economic effect as any of the foregoing, and the filing of any financing
statement under the Uniform Commercial Code or comparable law of any
jurisdiction in respect of any of the foregoing).
"Liquor License" has the meaning set forth in Section 5.12.
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"Material Adverse Effect" means for a specified party, a material adverse
effect on (a) the business, operations, property, condition, or prospects of the
specified party and its Subsidiaries taken as a whole, (b) the ability of the
specified party to perform its material obligations under this Agreement, or (c)
the validity or enforceability against the specified party of this Agreement or
the rights or remedies of any other party hereunder to such an extent that such
other party would be deprived of the practical realization of the benefits
contemplated by this Agreement to be derived by such other party from this
Agreement and the transactions expressly referenced in this Agreement, including
the exhibits to this Agreement; provided, however, that the existence of a
Material Adverse Effect shall be deemed not to include (x) the adverse impact,
if any, of changes in laws, rules, regulations, interpretations or other
promulgations of any Governmental Authority, or changes in GAAP, regulatory
accounting requirements and market conditions applicable to companies in the
same line of business as the specified party, or (y) the impact of the fees and
expenses of all counsel, accountants and financial advisors, and the other costs
and expenses reasonably incurred by the specified party, in connection with the
Shareholders' Meeting, this Agreement and the transactions referenced in this
Agreement and the exhibits to this Agreement.
"Merger" shall have the meaning set forth in Recital A.
"Multiemployer Plans" has the meaning set forth in Section 5.26.1.
"NASDAQ" means National Association of Securities Dealers, Inc.
Automated Quotation System.
"Nevada Law" means the Nevada Corporation Law including Chapters 78
and 92A of the Nevada Revised Statutes.
"NLRB" means the U.S. National Labor Relations Board.
"Owned Real Estate" has the meaning set forth in Section 5.10.
"PBGC" means the Pension Benefit Guaranty Corporation.
"Pension Plan" has the meaning set forth in Section 5.27.1.
"Person" means an individual, partnership, corporation, limited
liability company, business trust, joint stock company, trust, unincorporated
association, joint venture, Governmental Authority or other entity of whatever
nature.
"Plans" has the meaning set forth in Section 5.27.1.
"Principal Shareholders" means each of Rudolph and Bayview;
"Principal Shareholder" means either of them.
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"Proxy Statement" has the meaning set forth in Section 8.3.
"Requirement of Law" means as to any Person, any law, treaty, rule or
regulation or determination of an arbitrator or a court or other Governmental
Authority, in each case applicable to or binding upon such Person or any of its
property or to which such Person or any of its property is subject.
"Restaurant" has the meaning set forth in Section 5.12.
"Rudy's" means Rudy's Restaurant Group, Inc., a Nevada corporation,
and its Subsidiaries, except where the context indicates that reference is
made to the parent company only.
"Rudy's Audited Financial Statements" has the meaning set forth in
Section 5.7.
"Rudy's Reports" means Rudy's Annual Reports on Form 10-KSB filed
pursuant to Sections 13 or 15(d) of the Exchange Act for the fiscal years ended
October 2, 1994, October 1, 1995 and September 29, 1996, and all other
registration statements and reports required to be or otherwise filed by it
since October 2, 1994 with the SEC pursuant to the Securities Act or the
Exchange Act.
"Rudy's Shares" means the issued and outstanding shares of Rudy's
Common Stock, par value $.01 per share.
"Rudy's Unaudited Financial Statements" has the meaning set forth in
Section 5.7.
"SEC" means the United States Securities and Exchange Commission.
"Securities Act": means the Securities Act of 1933, as amended, and
the rules and regulations promulgated thereunder.
"Shareholders' Meeting" means the special meeting of the shareholders
of Rudy's called pursuant to the provisions of Section 8.3 hereof to approve
this Agreement and the Merger.
"Significant Employee" means as to any Person, "significant employees"
of such Person as that term is defined in Regulation S-K of the Securities Act.
"Subsidiary" means any Person of which shares of stock or other ownership
interests having ordinary voting power (other than stock having such power only
by reason of the happening of a contingency) to elect a majority of the board of
directors or other managers of such
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Person are at the time owned, or the management of which is otherwise
controlled, directly or indirectly through one or more intermediaries, or both,
by Rudy's. A Subsidiary shall include a partnership which has Rudy's or a
Subsidiary as a general partner of such partnership.
"Surviving Corporation" means Rudy's, as the surviving corporation of the
Merger as provided by Section 2.1 hereof.
"Tangible Property" means as to any Person, the plant, machinery,
equipment, leasehold improvements, vehicles, and structures of such Person and
related capitalized items and other tangible property material to the business
of such Person. Tangible Property shall not be deemed to include the personal
property of Rudolph referred to in Section 12.1.
"Taxes" shall mean all foreign, federal, state, county, local and other
taxes, levies, impositions, deductions, charges and withholdings, including,
without limitation, income or franchise taxes or other taxes imposed on or with
respect to net income or capital gain, gross receipts, profits, sales, use,
occupation, value added, ad valorem, transfer, withholding, payroll, employ-
ment, excise or property taxes, and shall include any interest, penalties or
additions thereto.
"Tax Returns and Statements" has the meaning set forth in Section 5.15.1.
"Transmittal Letter" has the meaning set forth in Section 3.2.
"Unaudited Balance Sheet" means the unaudited consolidated balance sheet
of Rudy's and the Subsidiaries as at March 16, 1997 previously delivered to
Benihana pursuant to Section 5.7.
"Warrant" shall mean the Warrant to purchase an aggregate of 200,000
shares of the Class A Stock of Benihana referred to in Section 10.2.5.
"Warrant Shares" means the shares of Class A Stock issuable upon a due
exercise of the Warrant.
"Welfare Plan" has the meaning set forth in Section 5.26.1.
1.2 Other Definitional Provisions; Interpretation.
1.2.1 Unless otherwise specified therein, all terms defined
in this Agreement shall have the defined meanings when used in any certificate
or other agreement, instrument or document made or delivered pursuant hereto.
1.2.2 The words "hereof", "herein" and "hereunder" and words
of similar import when used in this Agreement shall refer to this Agreement as
a whole and not to any
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particular provision of this Agreement, and Section and Schedule references are
to this Agreement unless otherwise specified.
1.2.3 The headings in this Agreement are included for
convenience of reference only and shall not in any way affect the meaning or
interpretation of this Agreement.
1.2.4 The meanings given to terms defined herein shall be
equally applicable to both the singular and plural forms of such terms.
2. THE MERGER.
2.1 The Merger and Its Effect. Subject to the terms and
conditions of this Agreement, at the Effective Time, Newco shall be merged with
and into Rudy's and Rudy's shall be the Surviving Corporation, in accordance
with this Agreement. Upon the effectiveness of the Merger: (a) the separate
corporate existence of Newco shall cease; (b) the Surviving Corporation shall
possess all of the rights, privileges, powers, immunities, purposes and
franchises, both public and private, of each of Rudy's and Newco; (c) all real
and personal property, tangible and intangible, of every kind and description
belonging to Rudy's and Newco shall be vested in the Surviving Corporation
without further act or deed, and the title to any real estate or any interest
therein vested in either Rudy's or Newco shall not revert or in any way be
impaired by reason of the Merger; (d) the Surviving Corporation shall be liable
for all the obligations and liabilities of each of Rudy's and Newco and any
claim existing or action or proceeding pending by or against either Rudy's or
Newco may be enforced as if the Merger had not taken place; and (e) neither the
rights of creditors nor any Liens upon the property of either Rudy's or Newco
shall be impaired by the Merger.
2.2 Effective Time of the Merger. Upon the satisfaction or
waiver of the conditions set forth in Sections 10.1 and 10.2 and the Closing of
the Merger in accordance with Articles 4 and 11, the parties hereto shall cause
Articles of Merger meeting the requirements of Section 92A.200 of the Nevada Law
(the "Articles of Merger") to be properly executed and filed in accordance with
the terms of this Agreement and the applicable provisions of the Nevada Law. The
Merger shall become effective at the time of the filing of the Articles of
Merger as provided above, or at such later time as the parties hereto have
theretofore agreed upon and designated in such filings as the effective time of
the Merger (the "Effective Time").
2.3 Articles of Incorporation and By-laws of Surviving
Corporation. From and after the Effective Time, the Articles of Incorporation
and By-laws of Rudy's as in effect immediately prior to the Effective Time shall
be the Articles of Incorporation and By-laws of the Surviving Corporation until
further amended.
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3. CONVERSION OF SHARES ON THE MERGER EFFECTIVE DATE.
3.1 Manner and Basis of Conversion. Pursuant to the Merger,
the manner and basis of converting the capital stock of each of Rudy's and Newco
into or for capital stock of the Surviving Corporation or the Cash Consideration
shall be as follows:
3.1.1 At the Effective Time each share of common stock of
Newco issued and outstanding immediately prior to the Effective Time shall be
converted into one (1) share of common stock of Rudy's as the Surviving
Corporation.
3.1.2 At the Effective Time each of the Rudy's Shares
issued and outstanding immediately prior to the Effective Time shall, by
virtue of the Merger and without any action on the part of the holder thereof,
be converted into the right to receive an amount equal to the Cash
Consideration per share.
3.1.3 The Rudy's Shares to be converted into cash pursuant
to Section 3.1.2 are sometimes hereinafter referred to as the "Converted Rudy's
Shares."
3.2 Procedure for Conversion of Share Certificates. As
promptly as possible on or after the Effective Date, a letter of transmittal
("Transmittal Letter") and instructions will be mailed or otherwise made
available for use in surrendering to the First Union National Bank of North
Carolina or other agent appointed by Benihana (the "Exchange Agent") stock
certificates which immediately prior to the Effective Time represented Converted
Rudy's Shares. The Transmittal Letter will authorize the Exchange Agent to do
all things necessary to accomplish the exchange of such stock certificates for
the consideration therefor. Each holder of record of Converted Rudy's Shares
will be entitled to receive, promptly upon proper surrender of the stock
certificate or certificates representing such shares to the Exchange Agent
together with a properly completed and duly executed Transmittal Letter, and
compliance with the terms of the Transmittal Letter, the Cash Consideration.
From and after the Effective Time and until so surrendered, each certificate
representing Converted Rudy's Shares shall be deemed for all corporate purposes
to evidence only the right to receive, upon proper surrender together with a
properly completed and duly executed Transmittal Letter, the Cash Consideration.
4. CLOSING.
4.1 Time and Place. The Merger shall be consummated at a
closing (the "Closing") at the offices of Berman Wolfe & Rennert, P.A., 100
Southeast Second Street, Miami, Florida 33131, or at such other place as may be
agreed by the parties. The Closing shall take place at 10:00 a.m. on a date that
is as soon as practicable following the fulfillment or waiver, in accordance
with the terms of this Agreement, of all conditions to the Closing but in no
event later than January 31, 1998, subject only to the provisions of Section
13.1.4. As promptly as possible
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following the Closing, the Merger shall be consummated by the filing of the
Articles of Merger, as specified in Section 2.2.
4.2 Delivery of Cash Consideration. At the Closing, Benihana
will deliver an amount equal to the Cash Consideration per share multiplied by
the number of Rudy's Shares owned by the shareholders of Rudy's to the Exchange
Agent for delivery to the shareholders of Rudy's.
5. REPRESENTATIONS AND WARRANTIES OF RUDY'S.
In order to induce Benihana and Newco to enter into this Agreement and
to consummate the Merger and the other transactions contemplated herein Rudy's
makes each of the representations and warranties set forth in this Article 5 as
follows:
5.1 Corporate Organization of Rudy's.
5.1.1 Rudy's is a corporation duly organized, validly
existing and in good standing under the laws of the State of Nevada and has
full corporate power and authority to carry on its business as it is now being
conducted and to own the properties and assets it now owns; is duly qualified or
licensed to do business as a foreign corporation and is in good standing in the
jurisdictions listed on Schedule 5.1.1, which are all the jurisdictions in which
ownership or leasing of property or the conduct of its business requires such
qualification, except where the failure to be so qualified or licensed or to be
in good standing would not have a Material Adverse Effect. The copies of the
Articles of Incorporation and By-Laws of Rudy's heretofore delivered to Benihana
are complete and correct copies of such instruments as presently in effect.
5.1.2 Schedule 5.1.2 hereto sets forth the name, position
and total compensation of each officer and director of Rudy's and each
Subsidiary, and the name, position and total compensation for each other
employee of or consultant to Rudy's whose total compensation in the fiscal year
ended September 29, 1996 was, or in the current fiscal year is expected to be,
in excess of $60,000.
5.2 Subsidiaries. Schedule 5.2 hereto sets forth the name and
state of incorporation of each direct and indirect Subsidiary of Rudy's. Except
as set forth on Schedule 5.2, Rudy's does not own, directly or indirectly, or
have any obligation to acquire, any capital stock or other equity securities of
any corporation, nor does Rudy's have any direct or indirect equity or ownership
investment, or any obligation to incur such investment, in any corporation,
limited liability company, partnership, joint venture, trust or other business,
organization or entity. Each Subsidiary is a corporation duly organized, validly
existing and in good standing under the laws of its respective state of
incorporation set forth on Schedule 5.2 hereto and has full corporate power and
authority to carry on its business as it is now being conducted and to own the
properties and assets it now owns; is duly qualified or licensed to do business
as a foreign corporation in good standing in the jurisdictions listed on
Schedule 5.2, which are all the jurisdictions in which
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ownership or leasing of property or the conduct of its business requires such
qualification, except where the failure to be so qualified or licensed or to be
in good standing would not have a Material Adverse Effect. The copies of the
Certificate of Incorporation or Articles of Incorporation and By-Laws of each
Subsidiary heretofore delivered to Benihana are complete and correct copies of
such instruments as presently in effect.
5.3 Capitalization of Rudy's; Title to Shares.
5.3.1 The authorized capital stock of Rudy's consists of
30,000,000 shares of Common Stock, $.01 par value per share, of which
3,765,000 shares are issued and outstanding and 10,000,000 shares of preferred
stock, par value $.01, of which no shares are issued or outstanding. There are
no other shares of capital stock issued except for shares of Common Stock held
in treasury, if any. All of the outstanding shares of Rudy's capital stock are
validly issued, fully paid and nonassessable. There are no outstanding (i)
securities convertible into or exchangeable for any of Rudy's capital stock;
(ii) options, warrants, calls or other rights (including conversion rights,
preemptive rights or stock appreciation rights) with respect to the issued and
outstanding stock of Rudy's, or to purchase or subscribe to any class of
authorized capital stock of Rudy's or securities convertible into or
exchangeable for capital stock of Rudy's; or (iii) contracts, commitments,
agreements, understandings or arrangements of any kind relating to the issuance,
sale, transfer, and/or assignment of any shares of capital stock of Rudy's, any
convertible or exchangeable securities or any such options, warrants or rights.
5.3.2 Rudolph is the owner, beneficially and of record, of
2,086,000 Rudy's Shares which constitute 55.4% of the issued and
outstanding Rudy's Shares as of the date hereof, Bayview is the owner,
beneficially and of record, of 450,000 Rudy's Shares which constitute 12.0% of
the issued and outstanding Rudy's Shares as of the date hereof and each has
good, valid and marketable title to such Rudy's Shares free and clear of all
liens, encumbrances, security interests or claims, whatsoever, with full power
and authority to transfer and convey the same.
5.4 Capitalization of Subsidiaries. Rudy's is the record owner
of all issued and outstanding shares of capital stock of each Subsidiary listed
on Schedule 5.2.. All issued and outstanding shares of capital stock of each
Subsidiary are equal in their rights, preferences and privileges, validly
issued, fully paid and nonassessable. There are, with respect to each
Subsidiary, no outstanding (a) securities convertible into or exchangeable for
any of the capital stock of such Subsidiary; (b) options, warrants, calls or
other rights (including conversion rights, preemptive rights or stock
appreciation rights) with respect to the issued and outstanding stock of such
Subsidiary, or to purchase or subscribe to capital stock of or securities
convertible into or exchangeable for capital stock of such Subsidiary; (c)
contracts, commitments, agreements, understandings or arrangements of any kind
relating to the issuance, sale, transfer, and/or assignment of any capital stock
of such Subsidiary, any such convertible or exchangeable securities, or any such
options, warrants or rights; or (d) any shares of capital stock of such
Subsidiary pledged as collateral to secure any agreement or obligation.
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5.5 Authorization, Etc. This Agreement has been duly and
validly authorized by all necessary corporate action of Rudy's (subject only to
the approval of the shareholders of Rudy's to this Agreement and the Merger
under Nevada Law) and has been duly and validly executed by Rudy's, Bayview and
Rudolph. Without limiting the generality of the foregoing, Rudy's has full
corporate power and authority to enter into this Agreement, subject to such
approval by the shareholders of Rudy's, and to consummate the transactions
contemplated hereby. This Agreement is the legal, valid and binding obligation
of Rudy's and, with respect to Sections 6 and 8.10, of the Principal
Shareholders enforceable against Rudy's and the Principal Shareholders in
accordance with its terms, as applicable.
5.6 No Violation. Neither the execution, delivery or
performance of this Agreement nor the consummation of the transactions
contemplated hereby will violate any provision of the Certificate of
Incorporation, Articles of Incorporation or By-Laws or similar corporate
documents of Rudy's or any Subsidiary or will (a) violate, or be in conflict
with, or constitute a breach or default (or an event which, with the giving of
notice or lapse of time or both, would constitute a default) under, or result in
the termination of, or acceleration of the performance required by, or cause the
acceleration of the maturity of any debt or obligation pursuant to, or result in
the creation or imposition of any security interest, lien or other encumbrance
upon any property or assets of Rudy's or any Subsidiary under any Contractual
Obligation to which Rudy's or any Subsidiary is a party or by which Rudy's or
any Subsidiary is bound, or to which the property of Rudy's or any Subsidiary is
subject, except where such violation, conflict, breach, default, termination,
acceleration, security interest, lien or other encumbrance would not have a
Material Adverse Effect; or (b) violate any statute or law or any judgment,
decree, order, regulation or rule of any court or Governmental Authority to
which Rudy's is subject, except where such violation would not have a Material
Adverse Effect.
5.7 Financial Statements. Rudy's has heretofore delivered to
Benihana: (a) consolidated balance sheets of Rudy's as at September 29, 1996,
October 1, 1995, October 2, 1994, October 3, 1993 and September 27, 1992,
together with consolidated statements of income, changes in stockholders' equity
and changes in financial position (or statements of cash flow) for the years
then ended (the "Rudy's Audited Financial Statements"), all certified by
Deloitte & Touche LLP, independent certified public accountants, whose reports
thereon are included therein; and (b) the Unaudited Balance Sheet, and the
unaudited consolidated statements of income and cash flow for the six periods
ended March 16, 1997. Such consolidated balance sheets and notes thereto are
true, complete and accurate in all material respects and fairly present in
accordance with generally accepted accounting principles GAAP the consolidated
assets, liabilities and financial condition of Rudy's as at the respective dates
thereof, and all such consolidated statements of income, changes in
stockholders' equity and changes in financial position (or statements of cash
flow) and the notes thereto are true, complete and accurate in all material
respects and fairly present in accordance with GAAP the results of operations
for the periods therein referred to. All of the foregoing financial statements
were prepared in accordance with GAAP consistently applied throughout the
periods involved (except in the case of the Unaudited Balance Sheet to the
extent subject to normal year end adjustments).
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5.8 No Undisclosed Liabilities; Etc.. Rudy's has no
liabilities or obligations of any nature (absolute, accrued, contingent or
otherwise) which were not properly reflected or adequately reserved against in
accordance with GAAP on the Unaudited Balance Sheet, except for liabilities and
obligations incurred in the ordinary course of business and consistent with past
practice since the date thereof and except as set forth in this Agreement. The
reserves reflected on the Unaudited Balance Sheet are adequate, appropriate and
reasonable in light of historical practices.
5.9 Absence of Certain Changes. Except as and to the extent
set forth on Schedule 5.9, or disclosed in a Rudy's Report, from the Balance
Sheet Date through the date hereof, Rudy's and its Subsidiaries have not (except
as contemplated by, or disclosed in, this Agreement):
5.9.1 amended any certificate or articles of incorporation
or by-laws or merged with or into or consolidated with any other Person,
subdivided or in any way reclassified any shares of its capital stock or changed
or agreed to change in any manner the rights of its outstanding capital stock
or, in any material manner, the character of its business;
5.9.2 issued or sold or purchased any convertible
securities, or entered into any contracts or commitments to issue or sell or
purchase, any shares of its capital stock;
5.9.3 entered into or amended any material employment
agreement, entered into any agreement with any labor union or association
representing any material employee or entered into or amended any material
Plan; amended any certificate;
5.9.4 incurred any liabilities or obligations (absolute,
accrued, contingent or otherwise) except nonmaterial items incurred in the
ordinary course of business and consistent with past practice which do not
exceed $25,000.00 individually, or $50,000.00 in the aggregate, (counting
obligations or liabilities arising from any single transaction or a series of
similar transactions, and all periodic installments or payments under any lease
or other agreement providing for periodic installments or payments, as a single
obligation or liability), or increased, or experienced any change in any
assumptions underlying or methods of calculating, any bad debt, contingency or
other reserves not in accordance with GAAP or entered into any lease or sublease
of real property or exercised any purchase options or rights of first refusal
contained in any of the Leases (as hereinafter defined) except in the ordinary
course of business and consistent with past practice;
5.9.5 paid, discharged or satisfied any material claim,
liabilities or obligations (absolute, accrued, contingent or otherwise)
other than the payment, discharge or satisfaction in the ordinary course of
business and consistent with past practice of liabilities and obligations
reflected on or reserved against on the Unaudited Balance Sheet or incurred in
the ordinary course of business and consistent with past practice since the
Balance Sheet Date;
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5.9.6 permitted or allowed any of its Owned Real Property,
or property demised under the Leases or assets (real, personal or mixed,
tangible or intangible) to be subjected to any mortgage, pledge, lien, security
interest, encumbrance, assignment, restriction or charge of any kind, except for
liens for current taxes not yet due; 5.9.7 written down the value of any
inventory (including write-downs by reason of shrinkage or mark-down) or
written off as uncollectible any notes or accounts receivable, except for
immaterial write-downs and write-offs in the ordinary course of business and
consistent with past practice;
5.9.8 cancelled any debts or waived any claims or rights
involving more than $5,000;
5.9.9 sold, transferred, abandoned or otherwise disposed of
any of its Owned Real Property, or any interest therein, or its other
properties or assets (real, personal or mixed, tangible or intangible, or
entered into any lease (as lessor or Lessee)) except in the ordinary course of
business and consistent with past practice;
5.9.10 disposed of or permitted to lapse (except by its
own terms) any rights to the use of any existing patent, trademark, trade
name or copyright, or disposed of or disclosed (except as necessary in the
conduct of its business) to any person, other than representatives of Benihana,
any trade secret, formula, process or know-how not theretofore a matter of
public knowledge;
5.9.11 granted or committed to grant any general increase in
the compensation of officers, directors or employees (including any such
increase pursuant to any bonus, pension, profit sharing or other plan or
commitment) or any increases in the compensation payable or to become
payable to any officer, director or employee, including payments or commitments
to pay severance or termination pay, except for increases granted in the
ordinary course of business consistent with past practices or pursuant to
existing agreements;
5.9.12 made any single capital expenditure or commitment in
excess of $50,000.00 for additions to property, plant, equipment or
intangible capital assets or made aggregate capital expenditures and commitments
in excess of $100,000.00 since the Balance Sheet Date for additions to property,
plant, equipment or intangible capital assets;
5.9.13 declared, paid or set aside for payment any dividend or
other distribution in respect of its capital stock (other than "upstream"
dividends from Subsidiaries) or redeemed, purchased or otherwise acquired,
directly or indirectly, any shares of capital stock or other securities of
Rudy's or a Subsidiary;
5.9.14 made any material change in any method of accounting or
accounting practice except as required by GAAP;
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5.9.15 paid, distributed, loaned or advanced any amount to, or
sold, transferred or leased any properties or assets (real, personal or
mixed, tangible or intangible) to, or entered into any agreement or arrangement
with any Affiliates, officers or directors of Rudy's, or any Affiliate or
associate of any officers or directors of Rudy's except for directors' fees, and
compensation to officers at rates not exceeding the rates of compensation in
effect during the period ended on the Balance Sheet Date;
5.9.16 entered into or amended any written contract or other
agreement pursuant to which it agrees to indemnify any party or to refrain from
competing with any party;
5.9.17 except for inventory, supplies or equipment
acquired in the ordinary course of business, made any acquisition of all or
any part of the assets, properties, capital stock or business of any other
entity which is material to Rudy's;
5.9.18 entered into any transaction other than in the ordinary
course of business; or
5.9.19 terminated, surrendered, cancelled or assigned any of
its properties demised under the Leases, or any part thereof, except in the
ordinary course of business consistent with past practice; or
5.9.20 agreed, whether in writing or otherwise, to take any
action described in this Section.
5.10 Title to Properties; Encumbrances. Rudy's has good,
valid, marketable and indefeasible fee simple title to all the properties and
assets which it purports to own, including, without limitation, all the
properties and assets reflected in the Unaudited Balance Sheet, and all the
properties and assets purchased by Rudy's since the date of the Unaudited
Balance Sheet. Schedule 5.10.1 hereto lists each and every parcel of real
property owned in fee by Rudy's (such real property is referred to herein as
"Owned Real Properties"). Properties and assets reflected in the Unaudited
Balance Sheet, including, without limitation, the Owned Real Properties, are
free and clear of all title defects or objections, liens, mortgages, deeds of
trust, claims, charges, security interests or other encumbrances of any nature
whatsoever, including, without limitation, leases, subleases, rights of
occupancy, deed restrictions, chattel mortgages, conditional sales contracts,
collateral security arrangements and other title or interest retention
arrangements, and are not, in the case of the Owned Real Properties subject to
any rights of way, building use restrictions, exceptions, variances or
reservations of any nature whatsoever except, (a) liens shown on the Unaudited
Balance Sheet as securing specified liabilities or obligations, with respect to
which no material defaults exist, (b) imperfections of title, covenants or
restrictions, if any, none of which are substantial in amount and which would
not have a Material Adverse Effect, (c) zoning or land use ordinances which
would not have a Material Adverse Effect and (d) liens for taxes not yet due and
payable. Rudy's is in actual possession of the Owned Real Properties. To the
knowledge of Rudy's, no portion of any of the improvements erected on the Owned
Real
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Properties encroaches on adjoining property or public streets and no portion of
any of the Owned Real Properties is, or has been, subjected to a special ad
valorem tax valuation such that a change in ownership or use (whether now
existing or in the future) has caused or will cause additional ad valorem taxes
to be imposed upon the Owned Real Properties.
5.11 Leases.
5.11.1 Schedule 5.11.1 hereto is an accurate and complete
list of all leases or rights of occupancy pursuant to which Rudy's and any
Subsidiary leases or subleases any real property or interest therein or material
personal property (the "Leases"). A true and correct copy of each Lease has been
delivered to Benihana together with all amendments and modifications thereto,
and all subordination, non-disturbance and/or attornment agreements related
thereto, and no changes have been made thereto since the date of delivery. Each
Lease is valid and in full force and effect except where such invalidity or
ineffectiveness would not have a Material Adverse Effect. There are no existing
defaults under any provision of any Lease, and no event has occurred which (with
or without notice, lapse of time or both) would constitute a default thereunder,
where any such default would have a Material Adverse Effect.
5.11.2 Rudy's is in actual possession of the properties
demised under the Leases and to the knowledge of Rudy's, has good and
indefeasible title to the leasehold estates conveyed under the Leases free and
clear of all title defects or objections, mortgages, liens, claims, charges,
security interests or other encumbrances of any nature whatsoever, including,
without limitation, leases, subleases, rights of occupancy, chattel mortgages,
conditional sales contracts, deed restrictions, collateral security arrangements
and other title or interest retention arrangements, and are not, in the case of
the properties demised under the Leases subject to any rights of way, building
use restrictions, exceptions, variances, reservations or limitations of any
nature whatsoever except, (i) liens shown on the Unaudited Balance Sheet as
securing specific liabilities or obligations with respect to which no material
default exists, (ii) imperfections of title, covenants or restrictions, if any,
none of which are substantial in amount or would have a Material Adverse Effect,
(iii) zoning or land use ordinances or which would not have a Material Adverse
Effect and (iv) liens for taxes not yet due and payable. To the knowledge of
Rudy's, no portion of any of the improvements erected by and under the direction
of Rudy's on the properties demised under the Leases encroach on adjoining
property or public streets and no portion of any of the properties demised under
the Leases are, or have been, subjected to a special ad valorem tax valuation
such that a change in ownership or use (whether now existing or in the future)
has caused or will cause additional ad valorem taxes to be imposed upon the
properties demised under the Leases.
5.11.3 The basic rent and all additional rent payable under
the Leases have been paid to date. To the knowledge of Rudy's, except as
set forth on Schedule 5.11.3, all work required to be performed under the Leases
by the landlords thereunder or by Rudy's has been performed and to the extent
that Rudy's is responsible for payment of such work, has been fully
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paid for, whether directly to the contractor performing such work or to such
landlord as reimbursement therefor except for items which Rudy's is disputing in
good faith.
5.11.4 There have been no casualties which could result in
the termination of any Lease or the application of any buy-out provisions
contained in any Lease relative to damage by casualty.
5.12 Restaurants; Liquor Licenses. Schedule 5.12.1 hereto is a
complete and accurate list of each restaurant or other facility owned and/or
operated by Rudy's or any Subsidiary (the "Restaurants"). Schedule 5.12.2 is a
complete and accurate list of all liquor licenses held by Rudy's and the
Subsidiaries in connection with the operation of the Restaurants (the "Liquor
Licenses"). Each of the Liquor Licenses is presently in full force and effect,
duly and validly issued and appropriate and adequate for the conduct of
operations at the Restaurant for which it is issued to be in the manner
conducted as of the date hereof.
5.13 Patents, Trademarks, Trade Names, Etc.
5.13.1 Schedule 5.13.1 sets forth:
(a) all patents held by Rudy's and each Subsidiary
and all reissues, divisions, continuations, continuations in part and
extensions thereof and all pending patent applications by Rudy's, including, for
each such patent, the serial or patent number, filing and expiration date and
title;
(b) all registered trademarks and service marks of
Rudy's and each Subsidiary and pending applications by Rudy's and each
Subsidiary to register trademarks, including, for each such trademark, the
registration or application number, filing and expiration date, and mark, and
all unregistered trademarks and service marks used by Rudy's and/or any
Subsidiary; and
(c) all registered copyrights of Rudy's and
applications by Rudy's and each Subsidiary for registration of copyrights,
including the registration number, and filing and expiration date of each
such copyright.
5.13.2 Schedule 5.13.2 identifies all licenses and other
contracts or commitments to which Rudy's and each Subsidiary is a party
(either as licensor or licensee) or otherwise subject relating to patents,
trademarks, service
marks, trade names or copyrights (or applications or registration as applicable
for any thereof), trade secrets or other proprietary know-how or technical
assistance, and, except as set forth on Schedule 5.13.2, no claims have been
asserted by any person to the use of any such patents, trademarks, trade names,
copyrights, technology, know-how or processes or challenging or questioning the
validity or effectiveness of any such license or agreement, and Rudy's actually
knows of any valid basis for any such claim.
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5.13.3 Except as set forth on Schedule 5.13.3, Rudy's and its
Subsidiaries have not (during the past five years), nor is Rudy's or any
Subsidiary the subject of any pending or, to the knowledge of Rudy's,
threatened, claim alleging that it has infringed upon any patent, trademark,
trade name or copyright or misappropriated or misused any invention, trade
secret or other proprietary information entitled to legal protection. Other than
as set forth on Schedule 5.13.3, Rudy's has not asserted any claim of
infringement, misappropriation or misuse within the past five (5) years.
5.14 Business Permits. Except for immaterial items, the
failure of which would not have a Material Adverse Effect, Rudy's has obtained
all approvals, authorizations, consents, licenses, franchises, orders,
certificates or other permits of all governmental or regulatory agencies,
whether federal, state, local or foreign (collectively, the "Approvals")
necessary to the operations of the business as presently conducted, including,
without limitation, the constructions, alterations, operation, use and occupancy
of the Owned Real Properties or any part thereof, or the properties demised
under the Leases or any part thereof, or any of the improvements thereon,
including, but not limited to the certificates of occupancy or the local
equivalents, if any, and certificates relating to fire and health approval. All
such Approvals are in full force and effect and good standing, Rudy's is not in
material default under any Approval and there exists no basis for the
termination, suspension or revocation of any such Approvals.
5.15 Tax Matters.
5.15.1 Rudy's and each of the Subsidiaries files
consolidated federal income tax returns. Rudy's and each Subsidiary have
(i) filed or has caused to be filed all federal, foreign, state and local
franchise, income or other tax returns and statements which were required to be
filed prior to the date hereof (the "Tax Returns and Statements") on a timely
basis in accordance with the laws, regulations and administrative requirements
of the appropriate Governmental Authorities except for such Tax Returns and
Statements of which the failure to file would not have a Material Adverse
Effect, and (ii) paid within the time and in the manner prescribed by law all
material amounts of Taxes (as defined below) shown on any Tax Returns and
Statements, due for all periods ending on or prior to the date hereof. All Tax
Returns and Statements were, when filed, and continue to be, complete and
accurate in all material respects, and there exist no material inaccuracies in
the Tax Returns and Statements. Except as set forth on Schedule 5.15.1, no tax
assessments or deficiency has been made or proposed against Rudy's or any
Subsidiary nor has any notice been given of any actual or proposed assessment or
deficiency. Except as set forth on Schedule 5.15.1, the Tax Returns and
Statements are not presently the subject of any audit or other administrative or
court proceeding by any Governmental Authority. No consents extending any
applicable statute of limitations have been filed and no Governmental Authority
has made a written request for such a consent. None of the matters disclosed on
Schedule 5.15.1 have had or could reasonably be anticipated to have a Material
Adverse Effect.
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5.15.2 Rudy's and the Subsidiaries file Tax Returns and
Statements with respect to the income, capital gain, gross receipts or
profits earned by them in the states and localities listed on Schedule 5.15.2
and in no other states or localities.
5.15.3 The net operating loss (as defined in Section 172 of
the Code) of Rudy's and the Subsidiaries on a consolidated basis for federal
income tax purposes as of September 29, 1997 is as set forth on Schedule 5.15.3.
5.15.4 All taxes that Rudy's or the Subsidiaries were required
by law to
withhold or collect have been duly withheld or collected and, to the extent
required, have been paid to the appropriate Governmental Authority, except for
those Taxes of which the failure to withhold or collect would not have a
Material Adverse Effect. There are no liens with respect to Taxes upon any of
the properties or assets, real or personal, tangible or intangible, of Rudy's or
the Subsidiaries (except for Taxes not yet due) and except for liens which would
not have a Material Adverse Effect.
5.15.5 No consent to the application of Section 341(f)(2) of
the Code has been filed with respect to any assets acquired by Rudy's or the
Subsidiaries.
5.15.6 No property owned by Rudy's or the Subsidiaries is
property as to which an election was made under Section 168(f)(8) of the
Internal Revenue Code of 1954, as amended and in effect immediately before the
enactment of the Tax Reform Act of 1986, or is "tax-exempt use property" within
the meaning of Section 168(h)(1) of the Code.
5.15.7 Rudy's and the Subsidiaries: (i) have not agreed to
or been required to make any adjustment pursuant to Section 481(a) of the
Code; (ii) have received no written notice that the Internal Revenue Service has
proposed any such adjustment or change in accounting method; and (iii) do not
have an application pending with any Governmental Body requesting permission for
any change in accounting method.
5.15.8 None of Rudy's or any of the Subsidiaries has in effect
any tax elections under Section 108, 168, 338, 441, 471, 1017, 1033 or 4977 of
the Code.
5.15.9 Rudy's and the Subsidiaries are not a party (other than
as an investor) to any industrial development bond.
5.15.10 During the previous two fiscal years Rudy's and the
Subsidiaries have not engaged in any exchange under which the gain realized on
such exchange was not recognized due to Section 1031 of the Code.
5.15.11 No written claim has ever been received from any
Governmental Authority representing any jurisdiction in which Rudy's or the
Subsidiaries do not file Tax Returns that Rudy's or any of the Subsidiaries
are or may be subject to taxation by that jurisdiction.
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5.15.12 Rudy's and the Subsidiaries are not and have not been
a party to any tax sharing or similar agreement or arrangement.
5.15.13 Rudy's has provided Benihana with copies of: (i) all
material Tax Returns and Statement of or with respect to Rudy's and the
Subsidiaries for the period January 1, 1992 through the date hereof; (ii) any
written notices, protests, or closing agreements relating to issues arising in
any audit, litigation or similar proceeding with respect to the liability for
Taxes of Rudy's or the Subsidiaries; (iii) any elections or disclosures filed by
or on behalf of Rudy's or the Subsidiaries with any taxing authority (whether or
not filed with any Tax Returns and Statements); and (iv) any letter, rulings,
determination letters or similar documents issued by any taxing authority with
respect to Rudy's or the Subsidiaries.
5.15.14 Rudy's is not a U.S. Real Property Holding Corpora-
tion within the meaning of Section 897(c)(2) of the Code.
5.16 Transactions with Affiliates. To the knowledge of Rudy's,
except as set forth on Schedule 5.16.1 hereto, no Affiliate, officer, director
or employee of Rudy's has any interest, directly or indirectly, in any lease,
lien, contract, license, encumbrance, loan or other Agreement to which Rudy's or
any Subsidiary is a party, or any interest in any competitor, supplier or
customer of Rudy's or any Subsidiary. Except as set forth on Schedule 5.16.1
hereto, neither Rudy's nor any Subsidiary is indebted, directly or indirectly,
or to any Affiliate for any liability or obligation, whether arising by reason
of stock ownership, contract, oral or written agreement or otherwise.
5.17 Contracts and Commitments. Schedule 5.17 hereto contains
a complete, current and correct list of all material contracts, commitments,
obligations or agreements of Rudy's and the Subsidiaries (other than the Leases)
whether written or oral (the "Contracts). For purposes of this Section 5.17 a
contract which is "material" shall mean a single contract, whether written or
oral:
5.17.1 pursuant to which any party thereto is obligated to
make annual payments aggregating more than $50,000;
5.17.2 which constitutes an employment agreement or an agree-
ment with any union or member organization;
5.17.3 which is not subject to cancellation by Rudy's or a
Subsidiary, as the case may be, on not more than thirty (30)days notice without
material penalty;
5.17.4 which constitutes a purchase or sale contract or
commitment which continues for a period of more than twelve (12) months;
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5.17.5 which constitutes an agreement which restricts Rudy's
or any Subsidiary from carrying out its business anywhere in the world or from
competing with any other person;
5.17.6 which constitutes an agreement by Rudy's or any
Subsidiary with any Affiliate.
True, correct and complete copies of all written contracts
described in this Section 5.17 have been delivered to Benihana. Neither Rudy's
nor any Subsidiary is materially in default, nor does Rudy's have any knowledge
of any factual circumstances which can reasonably be expected to give rise to a
claim of default under any contract, except for defaults which would not have a
Material Adverse Effect.
5.18 Compliance with Contracts. To the knowledge of Rudy's,
each of the Contracts and Leases is valid and in full force and effect except
when such invalidity or ineffectiveness would not have a Material Adverse
Effect. Neither Rudy's nor any Subsidiary is in material default under any the
Contracts or Leases and, to the knowledge of Rudy's, no act or omission has
occurred which, with notice or lapse of time or both, would constitute a breach
or default under any term or provision of any such Contract or Lease and no
party is in breach or default under any of the Contracts or Leases, and no act
or omission has occurred by any party which, with notice or lapse of time or
both, would constitute such a breach or default under any term or provision
thereof except where such breach or default would not have a Material Adverse
Effect.
5.19 Insurance.
5.19.1 Schedule 5.19.1 contains an accurate and
complete description of all policies of fire, business interruption, liability,
worker's compensation and other forms of insurance owned or held by Rudy's. All
such policies are in full force and effect, all premiums with respect
thereto covering all periods up to and including the date hereof have been paid,
and no notice of cancellation or termination has been received with respect to
any such policy. Such policies are sufficient for compliance with all
requirements of law and of all of the Contracts and Leases except where any such
non-compliance would not have a Material Adverse Effect; provide adequate
insurance coverage for the assets and operations of Rudy's in light of current
industry practice; will remain in full force and effect through the respective
dates set forth on Schedule 5.19.1. Neither Rudy's nor any Subsidiary has been
unable to obtain any insurance with respect to its assets or operations, nor has
its coverage been limited by any insurance carrier to which it has applied for
any such insurance or with which it has carried insurance during the last five
(5) years.
5.19.2 Schedule 5.19.2 sets forth a true and complete list of
all group insurance programs in effect for employees of Rudy's and the subsid-
iaries. Rudy's and the Subsidiaries are not in default with respect to
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any of its obligations with respect to any such group insurance program except
where such default would not have a Material Adverse Effect.
5.20 Labor Relations. Except to the extent set forth on
Schedule 5.20:
5.20.1 Rudy's and the Subsidiaries are in compliance
with all applicable laws respecting employment and employment practices
(including matters related to immigration or citizenship status), terms and
conditions of employment and wages and hours, and is not engaged in any unfair
labor practice except for such minor violations that, individually or in the
aggregate, would have no Material Adverse Effect;
5.20.2 there is no unfair labor practice charge or
complaint against Rudy's or any Subsidiary pending before the NLRB;
5.20.3 there is no labor strike, dispute, slowdown
or stoppage actually pending or threatened against or affecting Rudy's or any
Subsidiary;
5.20.4 no representation question is pending before
the NLRB exists respecting the employees of Rudy's or any Subsidiary;
5.20.5 no grievance against Rudy's or any Subsidiary
or the conduct of its business, nor any arbitration proceeding arising out of or
under collective bargaining agreements is pending;
5.20.6 neither Rudy's nor any Subsidiary is a party
to any collective bargaining agreement; and
5.20.7 neither Rudy's nor any Subsidiary has
experienced any work stoppage or other labor difficulty since January 1, 1992.
5.21 Public Reports; Compliance.
5.21.1 Rudy's has heretofore delivered to Benihana
true and complete copies of the Rudy's Reports. Each of the Rudy's Reports
complied with all applicable rules and regulations of the Securities Act or the
Exchange Act, as the case may be, as of their respective dates of filing. None
of the Rudy's Reports contained any untrue statement of a material fact or
omitted to state any material fact required to be stated therein or necessary in
order to make the statements therein not misleading (in each case as of the
respective dates thereof).
5.21.2 Rudy's Shares are registered under Section 12
(g) of the Exchange Act, are quoted in the NASDAQ, and Rudy's is currently
subject to the periodic reporting requirements of Section 13 or Section 15(d) of
the Exchange Act. Rudy's has filed and will file all reports required to be
filed by it pursuant to the Exchange Act and the regulations promulgated
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thereunder through the date hereof and the Closing. No such reports filed by
Rudy's after the date hereof and prior to the Effective Time will contain, and
the Proxy Statement will 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 not misleading (in each case as of the date
filed).
5.22 Litigation. Except as set forth on Schedule 5.22 hereto:
---------- -------------
5.22.1 there is no claim, action, suit or arbitra-
tion proceeding, before any federal, state, municipal, foreign or other court or
governmental or administrative body or agency, or any private arbitration
tribunal or any investigation or inquiry before any federal, state, municipal,
foreign or other court or governmental or administrative body now pending,
relating to or affecting Rudy's or any Subsidiary or any director, officer,
agent or employee thereof in his capacity as such, or the assets, properties or
business of Rudy's or any Subsidiary, or the transactions contemplated by this
Agreement, nor has Rudy's, any Subsidiary received written notice of any threat
to institute such a proceeding;
5.22.2 there is not in effect any order, judgment or
decree of any court or governmental or administrative body enjoining,
barring, suspending, prohibiting or otherwise limiting Rudy's or any Subsidiary
or any officer, director, employee or agent of Rudy's or any Subsidiary from
conducting or engaging in any aspect of its business, or requiring Rudy's or any
Subsidiary or any officer, director, employee or agent of Rudy's or any
Subsidiary to take certain action with respect to any aspect of the its business
which could reasonably be anticipated to have a Material Adverse Effect; and
5.22.3 neither Rudy's nor any Subsidiary is in
violation of or default under any order, judgment, writ, injunction or decree
of any court or regulatory authority except for such violations or defaults
as would not have a Material Adverse Effect.
5.22.4 None of the matters identified on Schedule
5.22 have had or could reasonably be anticipated to have a Material Adverse
Effect.
5.23 No Condemnation or Expropriation. Neither the Owned Real
Properties, or any portion thereof or the properties demised under the Leases,
or any portion thereof or any other assets of Rudy's and its Subsidiaries is
subject to any governmental decree or order to be sold of which Rudy's has
received notice or is being condemned, expropriated or otherwise taken by any
public authority with or without payment of compensation therefor, nor, to the
knowledge of Rudy's, has any such condemnation, expropriation or taking been
proposed.
5.24 Compliance with Law. Except to the extent any such
non-compliance or violation would not have a Material Adverse Effect, the
operations of Rudy's and each of the Subsidiaries have been conducted in
accordance with all applicable laws, regulations and other requirements of all
national governmental authorities, and of all states, municipalities and other
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political subdivisions and agencies thereof, having jurisdiction over Rudy's or
any of its Subsidiaries, including, without limitation, all such laws,
regulations and requirements relating to antitrust, consumer protection, equal
opportunity, discrimination on the basis of race, national origin, sex, age,
immigration, health, occupational safety, plant closing, pension, requirements
of any Board of Fire Underwriters or similar body, building, zoning, subdivision
matters, Environmental Laws or toxic waste laws. During the past three (3)
years, neither Rudy's nor any Subsidiary has received any notification of any
asserted present or past failure by Rudy's or any Subsidiary to comply with such
laws, rules or regulations.
5.25 Environmental Protection.
5.25.1 None of the Owned Real Properties or the
properties demised under the Leases or real property previously owned or
leased by Rudy's (which shall mean Rudy's, the Subsidiaries and all corporation
or other business entities substantially all of the capital stock or other
interest of which, or all or substantially all of the assets of which, Rudy's or
Subsidiaries has acquired) has been used at any time during which Rudy's owned
or leased such real property, or otherwise has been in possession or control of
such real property or leased property, and, to the knowledge of Rudy's, none of
the Owned Real Properties or the properties demised under the Lease or the real
property previously owned or leased by Rudy's was used at any time prior to the
time such company owned, leased, possessed or controlled such real property or
leased property (i) as a site for the disposal or storage of Hazardous
Materials, or (ii) so as (x) to cause a material violation or (y) to give rise
to a material removal or restoration obligation or material liability for the
costs of removal or restoration by others or a material liability for damages to
others under, any Environmental Law or under the regulations of any Governmental
Authority having jurisdiction over any of such real property. Each of Rudy's and
the Subsidiaries have complied and are in compliance with all applicable
Environmental Laws except where such non-compliance would not have a Material
Adverse Effect.
5.25.2 Rudy's and each of the Subsidiaries have
obtained and are in compliance with (except where any such non-compliance
would not have a Material Adverse Effect) all environmental permits, licenses
and other authorizations which are required with respect to the operation of its
business, except for such permits, licenses and other authorizations of which
the failure to obtain would not have a Material Adverse Effect. As to any such
permit, license or other authorization which has or is about to expire, Rudy's
or its respective Subsidiary has timely applied for renewal thereof under
Environmental Laws except where failure to renew would not have a Material
Adverse Effect.
5.25.3 There is no civil, criminal or administrative
action, suit, demand, claim, hearing, notice of violation, investigation,
proceeding, notice or demand letter pending or, to the knowledge of Rudy's,
threatened against Rudy's or any Subsidiary relating in any way to the
Environmental Laws or any regulation, code, plan, order, decree, judgment,
injunction, notice or demand letter issued, entered, promulgated or approved
thereunder.
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5.25.4 No release, spill, seepage, leak or emission
has occurred on the Owned Real Property or to the knowledge of Rudy's, on
the properties demised under the Leases or on any real property previously owned
or leased by Rudy's during the time of Rudy's ownership or possession.
5.25.5 There are no underground storage tanks located
on any of the Owned Real Properties, or on any of the properties demised
under the Leases, nor to the knowledge of Rudy's have there been any underground
storage tanks removed from any real property owned or leased by any company
during the period such real property was owned or leased by Rudy's, except to
the extent that such underground storage tanks were removed in compliance with
all applicable laws or required by applicable laws, ordinances, rules and
regulations, and, to the extent such removal was performed upon notice and with
the approval of, and the inspection and confirmation of closure as to such
removal was performed by, all applicable governmental agencies having
jurisdiction.
5.25.6 Rudy's has delivered to Benihana true, correct
and complete copies or results of any reports inspections, safety
procedures, logs, data, contracts, invoices, studies or tests initiated by
Rudy's or landlords or by any Governmental Authority which are in the possession
of Rudy's pertaining to Hazardous Materials, at any part of the Owned Real
Properties or the properties demised under the Lease or Rudy's with respect to
the business, any of Rudy's predecessors or concerning compliance with or
liability under Environmental Laws and other environmental matters in the
operation of the business and such properties.
5.26 Employee Benefit Plans.
5.26.1 Schedule 5.26 hereto contains a complete list
of "Plans" consisting of each:
(a) "multiemployer pension plan," as
defined in Section 3(37)of ERISA, to which Rudy's or any Subsidiary (or any
entity that is treated as a single employer with Rudy's or any Subsidiary under
Section 414(b), (c), (m) or (o) of the Code ("Common Control Entity")
contributes or is required to contribute, or with respect to which any of
Rudy's, any Subsidiary or a Common Control Entity has any liability (the
foregoing plans and any additional multiemployer pension plan to which Rudy's,
any Subsidiary or any Common Control Entity has previously contributed or been
required to contribute at any time after September 25, 1980 (the "Multiemployer
Plans");
(b) "employee welfare benefit plan," as
defined in Section 3(l) of ERISA, sponsored or maintained by Rudy's, any
Subsidiary or any Common Control Entity, or to which Rudy's, any Subsidiary or
any Common Control Entity contributes or is required to contribute, including
each multiemployer welfare plan ("Welfare Plan");
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(c) "employee pension benefit plan," as
defined in Section 3(2) of ERISA (other than a Multiemployer Plan),
sponsored or maintained by Rudy's, any Subsidiary or any Common Control Entity
or to which Rudy's, any Subsidiary or any Common Control Entity contributes or
is required to contribute ("Pension Plan"); and
(d) any other bonus, deferred or incentive
compensation, pension, profit-sharing, retirement, stock purchase, stock
grant, stock option, disability, sick pay, salary continuation, cafeteria,
flexible spending account, dependent care assistance, or any other fringe
benefit plan, arrangement or practices, other than normal payroll practices and
policies concerning holidays and vacations, sponsored or maintained by Rudy's or
any Subsidiary, whether formal or informal (collectively, "Employment Plans").
5.26.2 There are no "accumulated funding
deficiencies," as defined in Section 302(a)(2) of ERISA and Section 412 of the
Code, whether or not waived, with respect to any of the Pension Plans.
5.26.3 The Unaudited Balance Sheet reflects, to the
extent required by GAAP as consistently applied by Rudy's, an accrual of
all accrued but unpaid contributions to any Pension Plan, a Multiemployer Plan,
and an accrual of all amounts accrued but unpaid under the Welfare Plans and the
Employment Plans, all as of the Balance Sheet Date.
5.26.4 Each Pension Plan and each related trust
agreement, annuity contract, or other funding instrument, is qualified and
tax exempt under the provisions of Sections 401(a) (or 403(a) as appropriate)
and 501(a) of the Internal Revenue Code ("Code"), and a determination letter has
been received from the Internal Revenue Service as to such qualified status.
5.26.5 Each Pension Plan, Welfare Plan and Employ-
ment Plan complies in all material respects with all applicable laws
(including to the extent applicable, without limitation, the Code and ERISA) and
is operated in accordance with its terms, except where such non-compliance would
have no Material Adverse Effect.
5.26.6 Each of Rudy's, any Subsidiary and any Common
Control Entity has paid all premiums (and interest charges and penalties
for late payment, if applicable), due heretofore to the PBGC with respect to
each Pension Plan. Except as described on Schedule 5.26, there has been no
"reportable event", as defined in Section 4043(b) of ERISA and the PBGC
regulations under that Section, with respect to any Pension Plan as to which
notice has not been waived under applicable PBGC under PBGC regulations. No
liability to the PBGC has been incurred by Rudy's, any Subsidiary or any Common
Control Entity, on account of the termination of any Pension Plan. The PBGC has
not instituted proceedings to terminate any Pension Plan and to the knowledge of
Rudy's, there exists no condition or set of circumstances which could
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reasonably be expected to present a significant risk of the termination of any
Pension Plan by the PBGC.
5.26.7 Except as set forth on Schedule 5.26, none of
Rudy's, any Subsidiary nor any Common Control Entity has withdrawn from a Multi-
employer Plan in a "complete withdrawal" or a "partial withdrawal" as defined in
Sections 4203 and 4205 of ERISA, respectively.
5.26.8 True and complete copies of each of the
following documents have been delivered by Rudy's to Benihana: (i) each
Welfare Plan, each Pension Plan and each Multiemployer Plan, related trust
agreements, annuity contracts, or other funding instruments; (ii) each
Employment Plan and complete descriptions of any such plans that are not in
writing; (iii) the most recent determination letter issued by the Internal
Revenue Service with respect to each Pension Plan; (iv) Annual Reports on Form
5500 Series required to be filed with any governmental agency for each Welfare
Plan and each Pension Plan for the two most recent plan years; and (v) all
actuarial reports prepared for the last two available plan years for each
Pension Plan.
5.26.9 Except as described on Schedule 5.26, neither
Rudy's, any Subsidiary nor any Welfare Plan or Employment Plan is obligated
to make any payment of post-retirement life, accidental death, medical or
disability insurance benefits of any type, excluding, for this purpose, the
provisions of any such benefit as a result of an individual's exercise of his or
her health care continuation rights under the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended, to or with respect to any former
employee of Rudy's or a Subsidiary.
5.27 Brokers and Finders. Except as set forth on Schedule
5.27, Rudy's is not a party to any agreement with any person that would obligate
Rudy's or any of the Subsidiaries to pay any brokerage fee, commission, finder's
fees or investment banking fee in connection with the transactions contemplated
by this Agreement.
5.28 Consents. Except as set forth in this Agreement, the
consummation of the transactions contemplated hereby in respect to Rudy's and
Principal Shareholders and the fulfillment of the terms of this Agreement in
respect of Rudy's and the Principal Shareholders do not require the consent,
approval, filing with, registration or release of any governmental authority or
any other Person including, without limitation, any Person who is a party to a
contract or a lease, except for those approvals, consents, filings,
registrations or releases the failure of which to file or obtain would not have
a Material Adverse Effect.
5.29 Books and Records. Rudy's has maintained complete and
correct copies of: (a) the Articles or Certificate of Incorporation and by-laws
and other charter documents of Rudy's and each of the Subsidiaries and all
amendments thereto; (b) the stock records of Rudy's and each Subsidiary; and (c)
the minutes and other records of the meetings and other proceedings of the
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shareholders and directors of Rudy's and each Subsidiary are complete and
current in all material respects.
5.30 Fairness Opinion. The Board of Directors of Rudy's has
received the written opinion (the "Fairness Opinion") of Ladenburg Thalmann &
Co., Inc. to the effect that the Cash Consideration is fair, from a financial
point of view, to the holders of the Rudy's Shares, other than the Principal
Shareholders. Benihana has been furnished with a true and complete copy of the
Fairness Opinion.
6. REPRESENTATIONS AND WARRANTIES OF PRINCIPAL SHAREHOLDERS.
6.1 Representations and Warranties of Rudolph.
In order to induce Benihana and Newco to enter into this
Agreement and to consummate the Merger and the other transactions contemplated
herein, Rudolph represents and warrants as follows:
6.1.1 Rudolph is the owner, beneficially and of
record, of 2,086,000 Rudy's Shares and Rudolph has good, valid and marketable
title to such Rudy's Shares free and clear of all liens, encumbrances,
security interests or claims whatsoever.
6.1.2 This Agreement has been duly and validly
executed by Rudolph as to the provisions of Sections 6 and 8.10. The provisions
of Sections 6 and 8.10 are the legal, valid and binding obligations of
Rudolph enforceable against Rudolph in accordance with their terms.
6.1.3 Rudolph is acquiring the Warrant for
investment and not with a view to distribution of the Warrant or the
Warrant Shares without compliance with the registration provisions of the
Securities Act or the availability of an exemption therefrom.
6.2 Representations and Warranties of Bayview.
In order to induce Benihana and Newco to enter into this
Agreement and to consummate the Merger and the other transactions contemplated
herein, Bayview represents and warrants as follows:
6.2.1 Bayview is the owner, beneficially and of
record, of 450,000 Rudy's Shares. Bayview has good, valid and marketable title
to such Shares free and clear of all liens, encumbrances, security interests or
claims whatsoever.
6.2.2 This Agreement has been duly and validly
authorized and executed by all necessary corporate action of Bayview as to the
provisions of Section 6 and 8.10. The
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provisions of Sections 6 and 8.10 are legal, valid and binding obligations of
Bayview enforceable against Bayview in accordance with their terms.
7. REPRESENTATIONS AND WARRANTIES OF BENIHANA AND NEWCO.
In order to induce Rudy's to enter into this Agreement and to
consummate the Merger and the other transactions contemplated herein, Benihana
and Newco represent and warrant to Rudy's as follows:
7.1 Corporate Organizations; Etc.. Benihana and Newco
are corporations duly organized, validly existing and in good standing under the
laws of the States of Delaware and Nevada, respectively.
7.2 Authorization, Etc.. This Agreement and each agreement,
document and instrument required to be delivered by Benihana at the Closing,
including, without limitation, the Warrant, have been duly and validly
authorized by all necessary corporate action of Benihana and Newco, as the case
may be. Benihana and Newco each have full corporate power and authority to enter
into this Agreement and to consummate the transactions contemplated hereby. This
Agreement is the valid and binding agreement of Benihana and Newco enforceable
against them in accordance with its terms.
7.3 Warrant Shares. The Warrant Shares, when issued upon a due
exercise of the Warrant, will be fully paid, validly issued, duly authorized and
non-assessable shares of the Class A Stock of Benihana.
7.4 No Violation. Neither the execution, delivery or
performance of this Agreement nor the consummation of the transactions
contemplated hereby will violate any provision of the Certificate of
Incorporation, Articles of Incorporation or By-Laws or similar corporate
documents of Benihana or any subsidiary of Benihana or will (a) violate, or be
in conflict with, or constitute a breach or default (or an event which, with the
giving of notice or lapse of time or both, would constitute a default) under, or
result in the termination of, or acceleration of the performance required by, or
cause the acceleration of the maturity of any debt or obligation pursuant to, or
result in the creation or imposition of any security interest, lien or other
encumbrance upon any property or assets of Benihana or any subsidiary of
Benihana under any Contractual Obligation to which Benihana or any subsidiary of
Benihana is a party or by which Benihana or any subsidiary of Benihana is bound,
or to which the property of Benihana or any subsidiary of Benihana is subject,
except where such violation, conflict, breach, default, termination,
acceleration, security interest, lien or other encumbrance would not have a
Material Adverse Effect; or (b) violate any statute or law or any judgment,
decree, order, regulation or rule of any court or Governmental Authority to
which Benihana is subject, except where such violation would not have a Material
Adverse Effect.
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7.5 Approvals of Governmental Authorities. No action, consent,
approval or authorization of or declaration, filing or registration with any
person or entity, including without limitation, any Governmental Authority is
required to be obtained or made by or on behalf of Benihana or Newco in
connection with the execution, delivery and performance by Benihana and Newco of
this Agreement or the consummation of the transactions contemplated hereby in
respect of Benihana and Newco.
7.6 Brokers and Finders. Neither Benihana nor Newco is a party
to any agreement with any person or entity which would obligate Rudy's, any
Subsidiary or the Principal Shareholders to pay any commission, finder's fee,
investment banking fee, or brokerage fee in connection with the transactions
contemplated by this Agreement.
7.7 Public Reports; Compliance. Benihana has heretofore
delivered to Rudy's true and complete copies of the Benihana Reports. Each of
the Benihana Reports complied with all applicable rules and regulations of the
Securities Act or the Exchange Act, as the case may be, as of their respective
dates of filing. None of the Benihana Reports contained any untrue statement of
a material fact or omitted to state any material fact required to be stated
therein or necessary in order to make the statements therein not misleading (in
each case as of the respective dates thereof).
7.8 The Class A Stock. The Class A Stock and the Common Stock,
par value $.10 per share, of Benihana are registered under Section 12(g) of the
Exchange Act, are quoted on NASDAQ, and Benihana is currently subject to the
periodic reporting requirements of Section 13 or Section 15(c) of the Exchange
Act. Benihana has filed and will file all reports required to be filed by it
pursuant to the Exchange Act and the regulations promulgated thereunder through
the date hereof and the Closing.
8. COVENANTS OF RUDY'S AND THE PRINCIPAL SHAREHOLDERS.
A. Covenants of Rudy's
8.1 Conduct of Business - Negative Covenants. From the date
hereof through the Effective Time and except as contemplated by this Agreement,
Rudy's and the Subsidiaries shall not, without the prior written consent of
Benihana, conduct the business of Rudy's and the Subsidiaries other than in the
ordinary course or commit or cause or authorize any act or omission which
deviates from the ordinary course of business. Without limiting the generality
of the foregoing, prior to the Effective Time, none of the following shall occur
without the prior written consent of Benihana:
8.1.1 Rudy's and the Subsidiaries shall not
institute any new methods of purchase, sale, lease, management, accounting
or operation or engage in any transaction or activity, enter into any agreement
or make any commitment or amend any existing material agreement, except in the
ordinary course of business and consistent with past practice.
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8.1.2 Rudy's and the Subsidiaries shall not change
or amend their articles or certificates of incorporation or by-laws or propose
any such change or amendment.
8.1.3 Rudy's and the Subsidiaries shall not offer,
issue or sell any shares of the capital stock or other securities (such term
as used in this subsection to include, without limitation, debt securities)
of Rudy's or any Subsidiary of any kind whatsoever, acquire directly or
indirectly, by redemption or otherwise, any such capital stock, reclassify or
split-up any such capital stock, declare or pay any dividends thereon in cash,
securities or other property, or make any other distribution with respect
thereto, or grant or enter into any stock options, warrants, or other rights to
acquire securities of Rudy's or any Subsidiary or enter into any other contracts
or commitments of any kind with respect to the issuance of additional shares of
capital stock or other securities of Rudy's or any Subsidiary.
8.1.4 Rudy's and the Subsidiaries shall not borrow
or agree to borrow any funds or incur, or assume or become subject to, whether
directly or by way of guaranty or otherwise, any obligation or liability
(absolute or contingent), except in the ordinary court of business consistent
with past practices or pursuant to existing credit arrangements copies of which
have previously been furnished to Benihana.
8.1.5 Rudy's and the Subsidiaries shall not pay,
discharge, waive, satisfy or compromise or adjust any claim, liability or
obligation (absolute, accrued, contingent or otherwise), other than the payment,
discharge or satisfaction in the ordinary course of business and consistent with
past practice of liabilities or obligations reflected or reserved against the
Unaudited Balance Sheet or incurred in the ordinary course of business and
consistent with past practice since the date of the Unaudited Balance Sheet.
8.1.6 Rudy's and the Subsidiaries shall not make any
single capital expenditure or commitment in excess of $50,000 for additions to
property, plant, equipment or intangible capital assets or make any capital
expenditure or commitments so that the aggregate of capital expenditures and
commitments do not exceed $100,000 since the Balance Sheet Date for additions to
property, plant, equipment or intangible capital assets;
8.1.7 Rudy's and the Subsidiaries shall not prepay
any obligation having a fixed maturity of more than sixty (60) days from the
date such obligation was incurred.
8.1.8 Rudy's and the Subsidiaries shall not permit
or allow any of its property or assets (real, personal or mixed, tangible
or intangible) to be subjected to any mortgage, pledge, lien or encumbrance,
except in the ordinary course of business and consistent with past practice or
pursuant to existing credit arrangements which have been disclosed to Benihana.
8.1.9 Rudy's and the Subsidiaries shall not write
down the value of any inventory (including write-downs by reason of shrinkage or
markdown) or write off as
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uncollectible any notes or accounts receivable, except for immaterial
write-downs of inventory or accounts receivable in the ordinary course of
business and consistent with past practice.
8.1.10 Rudy's and the Subsidiaries shall not cancel
any debts or waive any claims or rights involving more than $1,000 or sell,
transfer, or otherwise dispose of any of its properties or assets, except in the
ordinary course of business and consistent with past practice.
8.1.11 Rudy's and the Subsidiaries shall not dispose
of any rights to the use of any patent, trademark, trade name or copyright,
or dispose of or disclose to any person any trade secret, formula, process or
know-how not theretofore a matter of public knowledge except where such
disposition or disclosure would not have a Material Adverse Effect.
8.1.12 Rudy's and the Subsidiaries shall not grant
any increase in the compensation of officers or general increase in the
compensation of employees (including any such increase pursuant to any bonus,
pension, profit sharing or other plan or commitment) or any increase in the
compensation payable or to become payable to any officer or employee, except
increases granted in the ordinary course of business and reasonable increases to
employees who are not officers consistent with past practice and pursuant to
existing agreements. Notwithstanding the preceding or any other term or
condition hereof, Rudy's shall be entitled to expend or commit to expend on or
before the Effective Time, an amount not to exceed an aggregate of $787,500 to
be paid as severance payments or bonuses to certain employees of Rudy's.
Schedule 8.1.12 sets forth the names of each employee with respect to whom such
payments will be made and the respective amounts of each such payment. Rudy's
shall cause each of such employees (except any who have accepted an offer of
continued employment following the Effective Time from the Surviving Corporation
or Benihana) to deliver a letter (each a "Severance Letter") to the Surviving
Corporation at the Closing providing for the terms as annexed hereto as Exhibit
8.1.12.
8.1.13 Rudy's and the Subsidiaries shall not sell,
transfer, surrender, terminate, sublease or lease any properties or assets
to, or enter into any agreement or arrangement with, any of their officers or
directors, except pursuant to existing arrangements with such directors and
officers relating to directors' fees and compensation to officers.
8.1.14 Rudy's and the Subsidiaries shall not modify
any collective bargaining or other labor agreement to which they are a
party or by which it may be bound, except for immaterial modifications in the
ordinary course of business which are consistent with past practice or required
by applicable law.
8.1.15 Rudy's and the Subsidiaries shall not
terminate any Plan or withdraw from any Multiemployer Plan or fail to notify
Benihana of any "prohibited transaction", as such term is defined in Section
4975 of the Internal Revenue Code.
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8.1.16 Rudy's and the Subsidiaries shall not enter
into or consent to any amendment of, or sublease with respect to the
properties demised under the Leases except in the ordinary course of business
and consistent with past practice.
8.1.17 Rudy's and the Subsidiaries shall not take
any action, or omit the taking of any action, which would cause any of the
representations or warranties made in Article 5 hereof to be or become untrue or
incorrect in any material respect as of the Closing Date.
8.1.18 Rudy's and the Subsidiaries shall not agree
or commit, whether in writing or otherwise, to do any of the foregoing.
8.2 Conduct of Business - Affirmative Covenants. Prior to the
Effective Time, Rudy's and each Subsidiary will conduct its business in the
ordinary course and consistent with past practice, except where the failure to
do so would not have a Material Adverse Effect. Without limiting the generality
of the foregoing, prior to the Effective Time each of Rudy's and the
Subsidiaries:
8.2.1 will maintain its good standing and qualifi-
cation to do business in all jurisdictions where it is required to be
qualified to do business, and all licenses, permits, franchises, rights and
privileges which are necessary for the conduct of the its business;
8.2.2 shall continue at its expense to maintain its
property and equipment in customary repair, order and working condition,
reasonable wear and use excepted, and keep in full force and effect the Leases,
except those which expire by their terms, and, if any Leases expire by their own
terms, renew the same if such renewal is in the ordinary course of business and
consistent with past custom and practice;
8.2.3 shall duly comply with all laws, regulatory
requirements and agreements to which it is subject or by which it is bound;
8.2.4 shall maintain the current insurance upon its
properties and with respect to the conduct of its business;
8.2.5 shall pay and discharge, before the same shall
become delinquent, all Taxes imposed on it or against its income or profits
or any of its properties, and all other Liabilities which, if unpaid, might
become an encumbrance, except to the extent and so long as (i) the same are
being contested in good faith and by appropriate proceedings, and (ii) it shall
have set aside on its books reasonable reserves with respect thereto under GAAP
consistently applied;
8.2.6 shall use commercially reasonable efforts to
keep intact its present business organizations, keep available the services
of its present officers, employees and agents and use commercially reasonable
efforts to preserve its present relationships with all customers, clients,
accounts, suppliers and other entities or persons having business relationships
with it, in
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each case in theordinary course of business or in a manner consistent with
customary historical practices or course of conduct;
8.2.7 shall furnish to Benihana for its examination
(i) its minute books containing all records required to be set forth of all
proceedings, consents, actions and meetings of the shareholders and Board of
Directors; (ii) all permits, orders, and consents issued by any governmental
authority with respect to Rudy's and such Subsidiary, and all applications for
such permits, orders, and consents; and (iii) its stock transfer books setting
forth all transfers of any shares of capital stock; 8.2.8 shall maintain its
books, records and accounts with accuracy and
consistently with past practices; and
8.2.9 shall comply with the requirements of any
state, city or local law, statute, ordinance, regulation or otherwise in
any state, city or locality in which any of the Owned Real Properties are
located and/or in which any of the properties demised under the Leases are
located, which law, statute, ordinance or regulation imposes a transfer tax
and/or filing requirement in connection with the transactions contemplated
hereby.
8.3 Shareholders' Meeting; Proxy Statement.
8.3.1 Promptly following the date hereof, Rudy's
will prepare and file with the SEC a proxy statement (the "Proxy Statement")
for a special meeting of the shareholders of Rudy's to be held pursuant to
Section 8.3.2. The Proxy Statement shall contain all information required
by Schedule 14A promulgated under the Exchange Act. Benihana will cooperate with
Rudy's in the preparation of the Proxy Statement, including the furnishing of
all information with respect to Benihana, including financial statements, to the
extent required to be included in the Proxy Statement.
Rudy's covenants and warrants that at the time it is
furnished to the shareholders of Rudy's, the Proxy Statement shall not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein in order to make the statements therein not
misleading. Such covenant shall not be deemed to apply to information furnished
in writing by Benihana specifically for inclusion in the Proxy Statement.
8.3.2 At the earliest practicable date following the
date that the Proxy Statement has been cleared for mailing by the SEC,
Rudy's shall distribute the Proxy Statement to its shareholders giving notice of
the Shareholders' Meeting for the purposes of adopting this Agreement and
approving the Merger and soliciting proxies in favor thereof. The Shareholders'
Meeting shall be held as soon as practicable (but in no event less than 30 or
more than 60 days) following the date that the Proxy Statement has been cleared
for mailing by the SEC.
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8.4 Access to Information and Personnel. Subject to the
confidentiality obligations under Section 9.1 hereof, at reasonable times before
the Effective Time, Benihana, through its duly appointed representatives and
agents, during normal business hours and in a manner which does not unduly
interfere with the business operations of Rudy's or any of the Subsidiaries,
shall have the right to speak with, interview and discuss the business and
operations of Rudy's and the Subsidiaries with the officers, employees,
attorneys and agents of Rudy's and the Subsidiaries and shall have the right to
visit the premises of Rudy's and the Subsidiaries, to examine, to the extent
permitted by law, any and all records, books, contracts, commitments,
shareholder lists, files, working papers and drafts prepared by accountants and
any independent public accounting firms retained by Rudy's and the Subsidiaries
and other documents pertaining to the business and operations of Rudy's and the
Subsidiaries and the ownership of its properties and to undertake such other
steps as Benihana considers appropriate to familiarize itself with Rudy's and
the Subsidiaries. All of such interviews, discussions and inspections shall be
coordinated reasonably in advance with the President of Rudy's.
8.5 Estoppel Certificates or Consents. Immediately upon its
execution of this Agreement, Rudy's shall exercise its best efforts to obtain
and deliver to Benihana at the Closing customary estoppel certificates from
landlords under the leases and, with respect to Leases which require the consent
of the landlord thereunder for the transactions contemplated hereby, landlord
consents (such consents not to be conditioned on any increased rental, other
payment, reduced term, or other change of lease terms) in form and substance
reasonably satisfactory to Benihana.
8.6 Confidentiality. During the period before the Effective
Time, each of Rudy's and the Principal Shareholders severally covenants that it
shall not disclose or assist in the disclosure by any person or entity, or use
to the competitive detriment of Benihana, any confidential or proprietary
information regarding Benihana, except that disclosure of such information may
be made to their respective legal counsel, accountants, financial advisors,
investment bankers and their other authorized agents and representatives, and to
such persons only to the extent required for activities directly related to the
transactions contemplated by this Agreement, or except to the extent that
disclosure is required by law or by a court of competent jurisdiction. Following
the Closing, the Principal Shareholders shall not disclose or acquiesce in the
disclosure by any person or entity (other than Rudy's), or use to the
competitive detriment of Benihana or Rudy's, any confidential or proprietary
information regarding Benihana or Rudy's.
8.7 No Solicitation. Neither the Principal Shareholders, their
representatives or agents, nor Rudy's not its officers, directors,
representatives or agents shall, directly or indirectly, solicit, initiate or
participate in discussions or negotiations with, or provide any information to,
any Person (other than Benihana or Newco) concerning, or enter into any
agreement providing for any merger, sale of material assets, sale of shares of
capital stock or similar transactions involving Rudy's; provided that the Board
of Directors of Rudy's may furnish information and may participate in such
discussion or negotiations if required to satisfy the Fiduciary Obligations (as
hereinafter defined) of the Board of Directors of Rudy's. "Fiduciary
Obligations" shall arise if the Board of Directors believes, in good faith,
after consultation with
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its financial and legal advisors, that such Person may make a bona fide proposal
for a transaction materially more favorable to the stockholders of Rudy's from a
financial point of view than the transactions contemplated hereby (a "Higher
Offer"). The Board of Directors will communicate to Benihana within one business
day of receipt the terms of any proposal received, or the fact that Rudy's has
received inquiry with respect to, any such transactions.
8.8 Best Efforts. So long as this Agreement remains in effect,
Rudy's and the Principal Shareholders shall use their best efforts to cause the
transactions contemplated herein to be consummated at the earliest practicable
date. Rudy's shall proceed as soon as practicable in the procurement of permits,
consents and approvals and in the taking of any other action, and the
satisfaction of all other requirements prescribed by law or otherwise necessary
for consummation of the acquisition on the terms herein provided, and shall
diligently prosecute the same.
8.9 Tax Returns; Section 338 Election. For all periods ending
on or prior to the Effective Time, Rudy's shall file all Tax Returns and
Statements which are required by applicable law to be filed, all in a manner
consistent with past practices. In connection therewith, Rudy's agrees that any
decision as to whether to make an election under Section 338 of the Code (or any
corresponding or similar provision under state or local law) shall be made by
Benihana in its sole discretion and Rudy's will cooperate at Benihana's expense
as requested in connection with all such elections.
B. Covenants of Principal Shareholders.
8.10 Covenants of Principal Shareholders.
8.10.1 Prior to the Effective Time, the Principal
Shareholders shall not, directly or indirectly, sell, transfer, pledge,
hypothecate, encumber or otherwise dispose or surrender possession of, or enter
into any contract or agreement for the sale, transfer or other disposition of
the Rudy Shares, except by will, intestacy or otherwise by operation of law.
8.10.2 The Principal Shareholders shall not permit
Rudy's or the Subsidiaries to take any actions in contravention of Section 8.1.
8.10.3 The Principal Shareholders shall use their
reasonable efforts to cause Rudy's and the Subsidiaries to comply with the
covenants of Section 8.2.
8.10.4 At the Shareholders' Meeting, the Principal
Shareholders will vote, or cause to be voted, all of Rudy's Shares owned
beneficially by each of them in favor of approving the Merger and this
Agreement.
8.10.5 The Principal Shareholders shall comply with
the covenants set forth in Sections 8.6, 8.7 and 8.8 to the extent applicable
to them.
9. COVENANTS OF BENIHANA AND NEWCO.
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9.1 Confidentiality. Prior to the Closing, Benihana and Newco
shall not disclose or acquiesce in the disclosure by any Person, or use to the
competitive detriment of Rudy's, any confidential or proprietary information
regarding Rudy's or its business or financial condition, contained in any
documents or otherwise furnished by or on behalf of Rudy's or the Principal
Shareholders, or otherwise learned by Benihana or Newco as a result of
participation in the transactions contemplated hereby, to any Person except its
legal counsel, accountants, financial advisors, bankers, investment bankers and
other authorized agents and representatives, and to such persons only to the
extent required for activities directly related to the transactions contemplated
by this Agreement, including, without limitation, the financing of Benihana's
obligation hereunder. If the transaction contemplated by this Agreement for any
reason does not close, Benihana and Newco agree to, and shall thereafter
continue to, abide by the preceding provisions of this Section 9.1 and in so
doing, and without limitation, shall permanently protect the confidentiality of
all confidential or proprietary information provided to it by Rudy's and return
to Rudy's all written information provided to Benihana and Newco by Rudy's, and
also shall return or, at Rudy's election, destroy all copies made of such
written information and submit its affidavit of its duly authorized officers
that all such written information and copies have been returned. In addition,
neither Benihana nor any subsidiary of Benihana will, without the prior written
consent of Rudy's, solicit or make an offer of employment to any present
employee of Rudy's for a period of 12 months from the date of any termination of
this Agreement without a Closing.
9.2 Best Efforts. So long as this Agreement remains in effect,
Benihana and Newco shall use their best efforts to cause the transactions
contemplated hereby to be consummated at the earliest practicable date. Benihana
and Newco shall proceed as soon as practicable in the procurement of permits,
consents and approvals (including, without limitation, Liquor License
applications or transfers) and in the taking of any other action, and the
satisfaction of all other requirements prescribed by law or otherwise necessary
for consummation of the acquisition on the terms herein provided, and shall
diligently prosecute the same.
10. CONDITIONS TO CLOSING.
10.1 Conditions Precedent to the Performance of Benihana and
Newco. The obligations of Benihana and Newco to consummate the acquisition in
accordance with this Agreement is subject to the fulfillment of each of the
following conditions, any of which may be waived in writing by Benihana, in
whole or in part, in its sole discretion:
10.1.1 Compliance with this Agreement.
(a) Rudy's and the Principal
Shareholders shall have performed and satisfied in all material
respects all covenants, obligations, agreements and conditions
required by this Agreement to be performed and satisfied by each of
them, on or prior to the Effective Date;
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(b) The representations and warranties
contained in Articles 5 and 6 hereof shall be in all material
respects true, correct and complete as of the date when made and at
and as of the Effective Date as though such representations and
warranties were made at and as of such date, except for changes
expressly permitted or contemplated by the terms of this Agreement.
For purposes of this condition and the certificate required by
subsection (c) below, any decline in sales or net income of Rudy's
arising from operations in the ordinary course, consistent with past
practices and not resulting from a violation of any covenant of Rudy's
hereunder shall be deemed a change expressly permitted or contemplated
by the terms of this Agreement;
(c) Rudy's shall have delivered to
Benihana a certificate signed by its Chief Executive Officer and Chief
Financial Officer dated as of the Effective Date. Such certificate
shall certify as to the truth, completeness and correctness in all
material respects of each of the representations and warranties set
forth in Article 5 made by Rudy's and as to the fulfillment in all
material respects of the covenants set forth in Article 8A hereof which
are required by this Agreement to be performed and satisfied by Rudy's
on or before the Effective Date.
10.1.2 Approvals. All corporate action, including
approval by the shareholders of Rudy's at the Shareholders' Meeting,
necessary for Rudy's to approve the execution and delivery of this Agreement and
the consummation of the transactions contemplated by this Agreement shall have
been taken and not revoked by the Board of Directors and shareholders of Rudy's,
and Rudy's shall have delivered to Benihana certified copies of resolutions of
the Board of Directors and shareholders of Rudy's evidencing such action.
10.1.3 No Material Adverse Effect. As of the
Effective Date, there shall have been no condition, development or
occurrence in respect of the assets, business, financial condition or prospects
of Rudy's and the Subsidiaries which would constitute a Material Adverse Effect
when compared to such condition as at the Balance Sheet Date, other than any
such condition, development or occurrence arising from operations in the
ordinary course and consistent with past practices or course of conduct and
which does not consist of or result from a violation of any covenant of Rudy's
hereunder, and, on the Effective Date, Rudy's shall deliver a certificate to
such effect signed by the Chief Financial Officer of Rudy's.
10.1.4 Opinion of Counsel for Rudy's. Benihana
shall have received the legal opinion of counsel for Rudy's, including an
opinion of Nevada counsel, dated as of the Effective Date, which opinion
shall opine as to the items set forth on Exhibit 10.1.4, subject to customary
exceptions and qualifications (the "Rudy's Counsel Opinion").
10.1.5 No Injunction. On the Effective Date, there
shall be no effective injunction, writ, preliminary or temporary
restraining order or order of any nature issued by a court of competent
jurisdiction directing that the transactions provided for herein or any of them
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not be consummated as so provided or imposing any conditions on the consummation
of the transaction contemplated hereby that Benihana deems unacceptable in its
sole discretion.
10.1.6 Consents and Approvals. Benihana shall have
received any necessary approvals and consents from all third parties,
including, without limitation, the landlords under the Leases to the extent such
consent is required by the terms of the Leases, and the approval of all relevant
state authorities with respect to Newco's and Benihana's acquisition of an
interest in the Restaurants pursuant to the Merger, and such approvals and
consents shall not have expired or been withdrawn as of the Effective Date. Each
of such required consents is set forth on Schedule 10.1.6 hereof.
10.1.7 No Litigation. As of the Effective Date, no
writ, action, investigation, inquiry, litigation or other proceeding
relating to or affecting Rudy's or any Subsidiary or any of their respective
directors, officers, employees or agents in their capacities as such, the
assets, properties or business of Rudy's or the transactions contemplated by
this Agreement shall have been instituted seeking any relief which, if granted,
would have a Material Adverse Effect or challenging the legality of the Merger,
seeking to restrain the consummation thereof or seeking damages in connection
therewith.
10.1.8 Approval of Documentation. The form and
substance of all certificates, instruments, opinions, and other documents
delivered to Benihana under this Agreement shall be reasonably satisfactory in
all material respects to Benihana and its counsel.
10.1.9 Appraisal Rights. Holders of Rudy's Shares
representing no more than 7.5% of the outstanding Rudy's Shares shall have
duly submitted valid written requests for the payment of the fair value of their
Rudy's Shares in accordance with Section 92A.380 of the Nevada Law. 10.1.10
Severance Letters. Benihana shall have received duly executed
copies of the Severance Letters referred to in Section 8.1.12.
10.1.11 Fairness Opinion. The Fairness Opinion
shall have been confirmed in writing by Ladenburg Thalmann & Co., Inc. as of
the date of mailing of the Proxy Statement.
10.1.12 Resignations. Each of the directors and
officers of Rudy's and the Subsidiaries immediately prior to the Effective Time
shall have resigned from all offices held by a written letter of resignation,
copies of which shall be delivered to Benihana at the Closing.
10.2 Conditions Precedent to Rudy's Performance. The
obligation of Rudy's to consummate the Merger in accordance with this Agreement
is subject to the fulfillment of each
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of the following conditions, any of which may be waived in writing by Rudy's, in
whole or in part, in its sole discretion:
10.2.1 Compliance with This Agreement.
(a) Benihana and Newco shall have
performed and satisfied in all material respects all covenants,
obligations, agreements and conditions required by this Agreement to
be performed and satisfied by Benihana and Newco on or prior to the
Effective Date;
(b) The representations and warranties
of Benihana and Newco contained in Article 7 hereof shall be true,
correct and complete in all material respects as of the date when
made and at and as of the Effective Date as though such representations
and warranties had been made on such date, except for changes
expressly permitted on contemplated by the terms of this Agreement;
(c) Benihana shall have delivered to
Rudy's a certificate, signed by its President and its Chief Financial
Officer, dated as of the Effective Date, certifying as to the truth,
completeness and correctness in all material respects of each of the
representations and warranties set forth in Article 7 hereof and the
fulfillment in all material respects of each of the covenants set
forth in Article 9 hereof.
10.2.2 Approvals. All corporate action by Benihana
and Newco necessary to approve the execution and delivery of this Agreement
and the consummation of the transactions contemplated by this Agreement prior to
the Effective Date shall have been taken and not revoked and Benihana shall have
delivered to Rudy's certified copies of resolutions of the Board of Directors of
Benihana and Newco evidencing such actions.
10.2.3 Opinions of Counsel for Benihana. Rudy's
shall have received the opinion of Dornbush Mensch Mandelstam & Schaeffer,
LLP, counsel for Benihana and Newco, dated as of the Effective Date, and
addressed to Rudy's, which opinion shall opine as to the ite |
