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EXECUTION COPY
AGREEMENT AND PLAN OF MERGER
BETWEEN
BLIMPIE INTERNATIONAL, INC.
AND
SANDWICH ACQUISITION CORP.
DATED AS OF OCTOBER 5, 2001
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE 1 THE MERGER .........................................................1
Section 1.1 The Merger .......................................................1
Section 1.2 Effective Time ...................................................2
Section 1.3 Effect of the Merger .............................................2
Section 1.4 Certificate of Incorporation; Bylaws .............................2
Section 1.5 Directors and Officers ...........................................2
Section 1.6 Conversion of Securities .........................................2
Section 1.7 Adjustments to Prevent Dilution ..................................3
Section 1.8 Surrender of Shares ..............................................3
Section 1.9 No Further Transfer or Ownership Rights ..........................4
Section 1.10 Treatment of Options ............................................4
Section 1.11 Execution of Voting Agreement ...................................5
Section 1.12 Execution of Employment and Non-Competition Agreements ..........5
Section 1.13 Adjustment of the Merger Consideration and the Option
Consideration ...................................................5
Section 1.14 Closing .........................................................5
Section 1.15 Deposit .........................................................5
ARTICLE 2 REPRESENTATIONS AND WARRANTIES OF THE COMPANY ......................5
Section 2.1 Organization and Qualification ...................................6
Section 2.2 Subsidiaries and Affiliates ......................................6
Section 2.3 Capitalization ...................................................6
Section 2.4 Authority Relative to this Agreement .............................7
Section 2.5 Absence of Certain Changes .......................................8
Section 2.6 Report and Financial Statements ..................................8
Section 2.7 Proxy Statement ..................................................9
Section 2.8 Consents and Approvals; No Violation .............................9
Section 2.9 Brokerage Fees and Commissions ...................................10
Section 2.10 Litigation ......................................................10
Section 2.11 Absence of Changes in Benefit Plans .............................10
Section 2.12 ERISA Compliance ................................................11
Section 2.13 Taxes ...........................................................13
Section 2.14 Compliance with Applicable Laws .................................14
Section 2.15 Environmental ...................................................14
Section 2.16 State Takeover Statutes .........................................15
Section 2.17 Contracts .......................................................16
Section 2.18 Labor Matters ...................................................16
Section 2.19 Property ........................................................17
Section 2.20 [Reserved.] .....................................................17
Section 2.21 Opinion of Financial Advisors ...................................17
Section 2.22 Intellectual Property ...........................................18
Section 2.23 Insurance .......................................................19
Section 2.24 Affiliate Transactions ..........................................19
Section 2.25 Franchise Operations ............................................19
Section 2.26 Health Claims ...................................................22
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF NEWCO ............................23
Section 3.1 Organization and Qualification ...................................23
Section 3.2 Authority Relative to this Agreement .............................23
<PAGE>
Page
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Section 3.3 Consents and Approvals; No Violation .............................23
Section 3.4 Financing Commitments; Solvency ..................................24
Section 3.5 Ownership of Company Stock .......................................24
Section 3.6 Information ......................................................24
Section 3.7 Brokerage Fees and Commissions ...................................24
Section 3.8 Litigation .......................................................24
ARTICLE 4 CONDUCT OF BUSINESS PENDING THE MERGER .............................25
Section 4.1 Conduct of Business of the Company Pending the Merger ............25
Section 4.2 Prohibited Actions by the Company ................................25
ARTICLE 5 COVENANTS AND ADDITIONAL AGREEMENTS ................................27
Section 5.1 Solicitation Provisions ..........................................27
Section 5.2 Access to Information ............................................29
Section 5.3 [Reserved] .......................................................30
Section 5.4 Reasonable Best Efforts ..........................................30
Section 5.5 Event Notices and Other Actions ..................................30
Section 5.6 Third Party Standstill Agreements ................................31
Section 5.7 Employee Stock Options; Employee Plans and Benefits ..............31
Section 5.8 Meeting of the Company's Shareholders ............................32
Section 5.9 Proxy Statement ..................................................32
Section 5.10 Public Announcements ............................................33
Section 5.11 FIRPTA ..........................................................33
Section 5.12 Alternative Financing; Disclosure ...............................34
Section 5.13 Delisting .......................................................34
Section 5.14 Stockholder Litigation ..........................................34
Section 5.15 Indemnification .................................................34
ARTICLE 6 CONDITIONS TO CONSUMMATION OF THE MERGER ...........................35
Section 6.1 Conditions to Each Party's Obligation to Effect the Merger .......35
Section 6.2 Conditions to Obligations of Newco to Effect the Merger ..........35
Section 6.3 Conditions to the Obligations of the Company .....................35
ARTICLE 7 TERMINATION; AMENDMENT; WAIVER .....................................36
Section 7.1 Termination ......................................................36
Section 7.2 Effect of Termination ............................................37
Section 7.3 Fees and Expenses ................................................37
Section 7.4 Amendment ........................................................38
Section 7.5 Extension; Waiver ................................................38
ARTICLE 8 MISCELLANEOUS ......................................................39
Section 8.1 Non-Survival of Representations and Warranties ...................39
Section 8.2 Enforcement of the Agreement .....................................39
Section 8.3 Severability .....................................................39
Section 8.4 Notices ..........................................................39
Section 8.5 Failure or Indulgence Not Waiver; Remedies Cumulative ............40
Section 8.6 Governing Law ....................................................40
Section 8.7 Descriptive Headings .............................................40
Section 8.8 Parties in Interest ..............................................40
Section 8.9 Counterparts .....................................................40
Section 8.10 Certain Definitions .............................................40
Section 8.11 Interpretation ..................................................42
Section 8.12 Entire Agreement; Assignment ....................................42
ii
<PAGE>
AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER, is dated as of October 5, 2001 (the
"Agreement") between Sandwich Acquisition Corp., a New Jersey corporation
("Newco") and Blimpie International, Inc., a New Jersey corporation (the
"Company").
WHEREAS, it is the intention of the parties that Newco shall merge with
and into the Company (the "Merger"), with the Company being the surviving
corporation;
WHEREAS, a Special Committee (the "Special Committee") of the Board of
Directors of the Company (composed entirely of directors who have no direct or
indirect interest in the transactions contemplated hereby) has unanimously
determined, and the Board of Directors of the Company has unanimously
determined, that the Merger and other transactions contemplated by this
Agreement are fair to, advisable and in the best interests of the Company and
its shareholders, and each of the Special Committee and the Board of Directors
of the Company has approved this Agreement and recommended its adoption by the
shareholders of the Company;
WHEREAS, the Special Committee, the Board of Directors of the Company and
the Board of Directors and the sole stockholder of Newco have each approved and
adopted this Agreement and have approved the transactions contemplated hereby;
WHEREAS, contemporaneously with the execution and delivery of this
Agreement, as a condition and inducement to Newco's willingness to enter into
this Agreement, Messrs. Anthony Conza, David Siegel, Patrick Pompeo, Charles
Leaness and Joe Conza, shareholders of the Company (the "Key Shareholders"),
have entered into a Voting Agreement with Newco (the "Voting Agreement"),
pursuant to which such shareholders have agreed to vote all shares of Company
Common Stock owned by them in favor of the approval of this Agreement and the
Merger and against any competing transaction;
WHEREAS, contemporaneously with the execution and delivery of this
Agreement, as a condition and inducement to Newco's willingness to enter into
this Agreement, the Key Shareholders have entered into employment agreements
(the "Employment Agreements") and Non-Competition and Non-Solicitation
Agreements (the "Non-Competition Agreements") with Newco, which, in each case,
are conditioned upon the consummation of the Merger;
WHEREAS, Newco and the Company desire to make certain representations,
warranties, covenants and agreements in connection with the Merger and also to
prescribe certain conditions to the Merger; and
NOW THEREFORE, in consideration of the foregoing and the representations,
warranties, covenants and agreements set forth herein, the parties hereto
intending to be legally bound, agree as follows:
ARTICLE 1
THE MERGER
Section 1.1 The Merger. Upon the terms and subject to the conditions set
forth in this Agreement, at the Effective Time (as defined in Section 1.2),
Newco shall be merged with and into the Company and the separate corporate
existence of Newco shall thereupon cease. The Company shall be the surviving
corporation in the Merger (sometimes hereinafter referred to as the "Surviving
Corporation") and continue its existence under the laws of the State of New
Jersey.
Section 1.2 Effective Time. As promptly as practicable after the
satisfaction or waiver in accordance with this Agreement of the conditions set
forth in Article VI of this Agreement, the parties
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hereto shall cause the Merger to be consummated by filing a Certificate of
Merger ("Certificate of Merger") with the Secretary of State of the State of New
Jersey in such form as is required by, and executed in accordance with, the
applicable provisions of the New Jersey Business Corporation Act (the "NJBCA").
The Certificate of Merger will provide that the Merger will become effective
immediately upon the filing thereof with such Secretary of State in accordance
with the NJBCA. The time when the Merger becomes effective is hereinafter
referred to as the "Effective Time."
Section 1.3 Effect of the Merger. At the Effective Time, the effect of the
Merger shall be as provided by the NJBCA. Without limiting the foregoing, all
the property, rights, privileges, powers and franchises of the Company and Newco
shall be vested in the Surviving Corporation, and all debts, liabilities and
duties of the Company and Newco shall become the debts, liabilities and duties
of the Surviving Corporation.
Section 1.4 Certificate of Incorporation; Bylaws.
(a) The certificate of incorporation of Newco as in effect at the
Effective Time shall be the certificate of incorporation of the Surviving
Corporation (the "Certificate of Incorporation"), until duly amended as
provided therein or by applicable law, except that Article I thereof shall
be amended to read, "The name of the corporation is Blimpie International,
Inc."
(b) The bylaws of Newco in effect at the Effective Time shall be the
bylaws of the Surviving Corporation (the "Bylaws"), until duly amended as
provided therein or by applicable law (with the name of the Surviving
Corporation changed, as appropriate).
Section 1.5 Directors and Officers.
(a) The directors of Newco at the Effective Time shall, from and
after the Effective Time, be the directors of the Surviving Corporation to
serve until their successors have been duly elected or appointed and
qualified or until their earlier death, resignation or removal in
accordance with the Certificate of Incorporation and the Bylaws.
(b) The officers of Newco at the Effective Time shall, from and
after the Effective Time, be the officers of the Surviving Corporation to
serve until their successors have been duly elected or appointed and
qualified or until their earlier death, resignation or removal in
accordance with the Certificate of Incorporation and the Bylaws.
Section 1.6 Conversion of Securities. At the Effective Time, by virtue of
the Merger and without any action on the part of Newco, the Company or the
holders of any of the following securities:
(a) Each share of common stock of the Company, par value $.01 per
share ("Company Common Stock"), issued and outstanding immediately before
the Effective Time (other than shares of Company Common Stock cancelled
pursuant to Section 1.6(b)) shall be converted into and represent the
right to receive $2.80 in cash (the "Merger Consideration"), without
interest, upon surrender of the certificate formerly representing such
share in the manner provided in Section 1.8, less any required withholding
taxes.
(b) Each share of Company Common Stock held in the treasury of the
Company or held by any Subsidiary of the Company, and each share of
Company Common Stock held by Newco immediately before the Effective Time,
shall be cancelled and cease to exist, and no payment shall be made with
respect thereto.
(c) Each share of common stock, par value $0.01 per share, of Newco
that is issued and outstanding immediately prior to the Effective Time
shall be converted into one share of common stock, par value $0.01 per
share, of the Surviving Corporation.
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Section 1.7 Adjustments to Prevent Dilution. In the event that the Company
changes the number of shares of capital stock of the Company or securities
convertible or exchangeable into or exercisable for shares of capital stock of
the Company issued and outstanding prior to the Effective Time as a result of a
reclassification, stock split (including a reverse split), stock dividend or
distribution, recapitalization, merger, subdivision, issuer tender or exchange
offer, or other similar transaction, the Merger Consideration shall be equitably
adjusted on a dollar-for-dollar or share-for-share basis.
Section 1.8 Surrender of Shares.
(a) Prior to the mailing of the Proxy Statement (as defined in
Section 2.7), Newco shall appoint a bank or trust company to act as paying
agent (the "Paying Agent") for the payment of the Merger Consideration. At
the Effective Time, the Surviving Corporation shall deposit with the
Paying Agent for the benefit of former holders of shares of Company Common
Stock sufficient funds to make payments of the Merger Consideration on all
shares of Company Common Stock to be converted into cash under Section
1.6(a). Such funds shall be invested by the Paying Agent in money market
obligations selected by the Surviving Corporation. Any net profit
resulting from, or interest or income produced by, such investments shall
be payable to the Surviving Corporation or as it directs.
(b) Promptly after the Effective Time, the Surviving Corporation
shall cause to be mailed to each record holder, as of the Effective Time,
of an outstanding certificate or certificates which immediately prior to
the Effective Time represented shares of Company Common Stock (the
"Certificates"), a form of letter of transmittal (which shall specify that
delivery shall be effected, and risk of loss and title to the Certificates
shall pass, only upon proper delivery of the Certificates to the Paying
Agent) and instructions for use in effecting the surrender of the
Certificates for payment of the Merger Consideration therefor. Upon
surrender to the Paying Agent of a Certificate, together with such letter
of transmittal, duly completed and validly executed in accordance with the
instructions thereto, and such other documents as may be required pursuant
to such instructions, the holder of such Certificate shall be entitled to
receive in exchange therefor the aggregate amount of Merger Consideration
into which the number of shares of Company Common Stock previously
represented by such Certificate or Certificates surrendered shall have
been converted pursuant to this Agreement. If any Merger Consideration is
to be remitted to a person whose name is other than that in which the
Certificate surrendered for exchange is registered, it shall be a
condition of such exchange that the Certificate so surrendered shall be
properly endorsed, with signature guaranteed, or otherwise in proper form
for transfer, and that the person requesting such exchange shall have paid
any transfer and/or other taxes required by reason of the remittance of
Merger Consideration to a person whose name is other than that of the
registered holder of the Certificate surrendered, or the person requesting
such exchange shall have established to the satisfaction of the Surviving
Corporation that such tax either has been paid or is not applicable. No
interest shall be paid or accrued, upon the surrender of the Certificates,
for the benefit of holders of the Certificates on any Merger
Consideration.
(c) At any time following the date six months after the Effective
Time, the Surviving Corporation, at its option, shall be entitled to
require the Paying Agent to deliver to it any funds (including any
interest received with respect thereto) which shall have been deposited
with the Paying Agent and which shall have not been disbursed to holders
of Certificates, and thereafter such holders shall be entitled to look
only to the Surviving Corporation (subject to abandoned property, escheat
or other similar laws) and only as general creditors thereof for payment
of their claim for Merger Consideration to which such holders may be
entitled.
(d) Notwithstanding the provisions of Section 1.8(c), neither the
Surviving Corporation nor the Paying Agent shall be liable to any person
in respect of any Merger Consideration delivered to a public official
pursuant to any applicable abandoned property, escheat or similar law.
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(e) The Surviving Corporation shall be entitled to deduct and
withhold from the consideration otherwise payable pursuant to this
Agreement to any former holder of shares of Company Common Stock such
amounts as the Surviving Corporation (or any affiliate thereof) is
required to deduct and withhold with respect to the making of such payment
under the Code (as defined in Section 2.12), or any provision of any
applicable state, local or foreign law, rule or regulation. To the extent
that amounts are so withheld by the Surviving Corporation and paid by the
Surviving Corporation to the applicable taxing authority, such withheld
amounts shall be treated for all purposes of this Agreement as having been
paid to the former holder of shares of Company Common Stock in respect of
which such deduction and withholding was made by the Surviving
Corporation.
Section 1.9 No Further Transfer or Ownership Rights. After the Effective
Time, there shall be no further transfer on the records of the Company (or the
Surviving Corporation) or its transfer agent of Certificates representing shares
of Company Common Stock, and if such Certificates are presented to the Company
(or the Surviving Corporation) for transfer, they shall be cancelled. From and
after the Effective Time, the holders of certificates evidencing ownership of
shares of capital stock of the Company outstanding immediately prior to the
Effective Time shall cease to have any rights with respect to such shares of
capital stock except as otherwise provided for herein or by applicable law. All
Merger Consideration paid upon the surrender for exchange of certificates
representing shares of capital stock of the Company in accordance with the terms
of this Article I shall be deemed to have been issued (and paid) in full
satisfaction of all rights pertaining to the shares of capital stock of the
Company exchanged for Merger Consideration theretofore represented by such
certificates.
Section 1.10 Treatment of Options. Prior to the Effective Time, the Board
of Directors of the Company (and/or, if appropriate, the Special Committee)
shall adopt appropriate resolutions and take all other actions necessary to
provide that each outstanding stock option or warrant (each, an "Option")
heretofore granted by the Company, whether under the Company's Omnibus Stock
Incentive Plan (the "Stock Incentive Plan"), the Company's 2000 Omnibus Stock
Incentive Plan (the "2000 Plan") (collectively, the "Company Stock Option
Plans"), or otherwise, whether or not then vested or exercisable, shall, at the
Effective Time, be cancelled, and each holder thereof shall be entitled to
receive a payment in cash as provided in Section 5.7 hereof, if any (subject to
any applicable withholding taxes, the "Cash Payment"). As provided herein,
unless otherwise determined by Newco, the Company Stock Option Plans (and any
feature of any other Benefit Plan (as defined in Section 2.11) or other plan,
program or arrangement providing for the issuance or grant of any other interest
in respect of the capital stock of the Company) shall terminate as of the
Effective Time. After the date hereof, the Company will not issue any Options or
other options, warrants, rights or agreements which would entitle any person to
acquire any capital stock of the Company or, except as otherwise provided in
this Section 1.10 or in Section 5.7, to receive any payment in respect thereof.
Section 1.11 Execution of Voting Agreement. Concurrently with the
execution and delivery of this Agreement, and as a condition to Newco's
willingness to enter into this Agreement, the Key Shareholders have executed and
delivered to Newco the Voting Agreement.
Section 1.12 Execution of Employment and Non-Competition Agreements.
Concurrently with the execution and delivery of this Agreement, and as a
condition to Newco's willingness to enter into this Agreement, the Key
Shareholders have executed and delivered their respective Employment Agreements
and Non-Competition Agreements.
Section 1.13 Adjustment of the Merger Consideration and the Option
Consideration. The Merger Consideration and the Option Consideration (as defined
in Section 5.7), each payable pursuant to this Agreement, have been calculated
based upon the representations and warranties made by the Company in Section
2.3. In the event that, at the Closing Date, (i) the actual number of shares of
Company Common Stock outstanding and/or the actual number of shares issuable
upon the exercise of Options or similar agreements or upon conversion of
securities (including without limitation, as a result of any stock split,
reclassification, stock dividend (including any dividend or distribution of
securities
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convertible into shares of Company Common Stock) or recapitalization) is greater
than as described in Section 2.3 hereof, or (ii) the weighted average exercise
price of the Options is lower than described in Section 2.3 hereof, the Merger
Consideration and the Option Consideration shall be appropriately adjusted
downward; provided, however, that no such adjustment shall be required unless
and until the aggregate impact from such differences results in an increase in
the aggregate Merger Consideration and Option Consideration payable by Newco of
at least $50,000. The provisions of this Section 1.13 shall not, in any event,
adversely affect, constitute a waiver of or otherwise impair any of Newco's
rights under this Agreement (including any of Newco's rights arising from any
misrepresentation or breach of the representations and warranties set forth in
Section 2.3 hereof).
Section 1.14 Closing. Immediately prior to the Effective Time, a closing
for the transactions contemplated hereby (the "Closing") will be held at the
offices of Smith, Gambrell & Russell, LLP, 1230 Peachtree Street, NE, Suite
3100, Atlanta, Georgia 30309, unless another place is agreed in writing by Newco
and the Company. All actions taken at the Closing shall be deemed to have been
taken simultaneously at the time the last of any such actions is taken or
completed. The date such Closing occurs is referred to herein as the "Closing
Date."
Section 1.15 Deposit. As of the date of execution of this Agreement, Newco
has deposited Fifty Thousand Dollars ($50,000) (the "Deposit") into an escrow
account to be held by First Union National Bank ("Escrow Agent") pursuant to the
terms of the Escrow Agreement attached hereto as Exhibit 1.15. The Deposit shall
be applied against the Merger Consideration upon Closing. In the event the
Closing does not occur: (x) if this Agreement is terminated by the Company
pursuant to Section 7.1(g) or Section 7.1(i) hereof, then the Deposit shall be
delivered to the Company in accordance with Section 7.3(f) hereof; or (y) if
this Agreement is terminated for any other reason, then the Deposit shall be
returned to Newco.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Newco that, except as set forth in
the corresponding section of the disclosure schedule delivered by the Company to
Newco concurrently with entering into this Agreement (the "Company Disclosure
Schedule"):
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Section 2.1 Organization and Qualification. Except as set forth in Section
2.1(a) of the Company Disclosure Schedule, each of the Company and its
Subsidiaries (specifically excluding for this purpose, the Leasing
Subsidiaries) is a corporation duly organized, validly existing and in
good standing under the laws of the jurisdiction of its incorporation or
organization and has the requisite corporate power and authority necessary
to enable it to own, lease and operate its properties and assets and to
carry on its business as it is now being conducted. Except as set forth in
Section 2.1(a) of the Company Disclosure Schedule, each of the Leasing
Subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation or
organization and has the requisite corporate power and authority necessary
to enable it to own, lease and operate its properties and assets and to
carry on its business as it is now being conducted, except where the
failure to be so organized, existing or in good standing would not have,
individually or in the aggregate, a Material Adverse Effect on the
Company. Each of the Company and its Subsidiaries (specifically excluding
for this purpose, the Leasing Subsidiaries) is duly qualified as a foreign
corporation, and is in good standing, in each state where the character of
the properties owned or leased by it or the nature of its activities makes
such qualification or licensing necessary, except where the failure to be
so qualified would not have, individually or in the aggregate, a Material
Adverse Effect on the Company.
(b) The Company has delivered or made available to Newco for
inspection complete and correct copies of the certificate or articles of
incorporation and bylaws, or other governing documents as currently in
effect of the Company and each of its Subsidiaries.
Section 2.2 Subsidiaries and Affiliates.
The Company Disclosure Schedule sets forth the name and jurisdiction of
incorporation of each Company Subsidiary and the jurisdictions in which each
such Company Subsidiary is qualified to do business (specifically excluding for
this purpose, the Leasing Subsidiaries). Except for each Company Subsidiary and
except as set forth in the Company Disclosure Schedule, the Company does not
own, directly or indirectly, any capital stock or other equity or similar
interest in, or any interest convertible into or exchangeable or exercisable for
any equity or similar interest in, any corporation or have any direct or
indirect equity or ownership interest in any business. Except as set forth in
the Company Disclosure Schedule, all the outstanding capital stock or other
equity interests of each Company Subsidiary is owned directly or indirectly by
the Company, free and clear of all Liens (as defined in Section 2.8), and is
validly issued, fully paid and non-assessable, and there are no outstanding
options, rights or agreements of any kind relating to the issuance, sale or
transfer of any capital stock or other equity securities of any such Company
Subsidiary to any person except the Company.
Section 2.3 Capitalization.
(a) The authorized capital stock of the Company consists of
20,000,000 shares of Company Common Stock, par value $.01 per share. As of
the date hereof, 9,163,659 shares of Company Common Stock are issued and
outstanding. As of the date hereof, an aggregate of 1,293,700 shares of
Company Common Stock are reserved for future issuance under the Company
Stock Option Plans and Options to purchase 1,038,000 shares of Company
Common Stock are issued and outstanding under the Company Stock Option
Plans and otherwise. Except for the Options referred to in the preceding
sentence, no Options are issued or outstanding. The weighted average
exercise price for the outstanding Options is $3.44. All of the issued and
outstanding shares of Company Common Stock have been duly authorized and
validly issued and are fully paid and nonassessable and are not subject to
preemptive rights. The shares of Company Common Stock referred to above
that are reserved for issuance, consisting of the shares reserved under
the Company Stock Option Plans, and the 100,000 shares of Company Common
Stock reserved for issuance for outstanding Options, have not been issued
and will not be issued prior to the Effective Time, and no commitment by
the Company has been or will be made for their issuance, other than (in
the case of both preceding clauses) pursuant to the exercise of the
Options described above that are issued and outstanding as of the date of
this Agreement. At the Effective
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Time, except as otherwise provided in Section 1.10 hereof, each Option
shall be cancelled, and the holder thereof shall not be entitled to
receive any consideration therefor other than the cash payments, if any,
provided by Section 1.10 and Section 5.7 of this Agreement. Section 2.3(a)
of the Company Disclosure Schedule sets forth the exercise prices and
number of shares of Company Common Stock in respect of outstanding Options
under the Company Stock Option Plans. There are no bonds, debentures,
notes or other indebtedness of the Company having the right to vote (or
convertible into, or exchangeable for, securities having the right to
vote) on any matters on which shareholders of the Company may vote
("Voting Company Debt"). Except as set forth above in this Section 2.3(a),
there are no outstanding securities, options, warrants, calls, rights,
convertible or exchangeable securities, "phantom" stock rights, stock
appreciation rights ("SARs"), stock-based performance units, commitments,
agreements, arrangements or undertakings of any kind (including any
shareholder rights plan) to which the Company is a party or by which the
Company is bound obligating the Company to issue, deliver or sell, or
cause to be issued, delivered or sold, additional shares of capital stock
or other voting securities of the Company or obligating the Company to
issue, grant, extend or enter into any such security, option, warrant,
call, right, unit, commitment, agreement, arrangement or undertaking.
Except as set forth in Section 2.3 of the Company Disclosure Schedule,
there are not any outstanding contractual obligations of the Company to
repurchase, redeem or otherwise acquire, or providing preemptive or
registration rights with respect to, any shares of, or any outstanding
options, warrants or rights of any kind to acquire any shares of, or any
outstanding securities that are convertible into or exchangeable for any
shares of, capital stock of the Company. Except as set forth in Section
2.3 of the Company Disclosure Schedule, the Company does not have
outstanding any loans to any person in respect of the purchase of
securities issued by the Company.
(b) Except as set forth in Section 2.3(b) of the Company Disclosure
Schedule, there are no voting trusts, proxies, registration rights
agreements, or other agreements, commitments or understandings of any
character to which the Company is bound with respect to the voting of any
shares of capital stock of the Company or with respect to the registration
of the offering, sale or delivery of any shares of capital stock of the
Company under the Securities Act of 1933, as amended (the "Securities
Act").
Section 2.4 Authority Relative to this Agreement.
(a) The Company has all requisite corporate power and authority to
execute and deliver this Agreement and each instrument required hereby to
be executed and delivered by the Company prior to or at the Effective
Time, to perform its obligations hereunder and thereunder, and to
consummate the transactions contemplated hereby (the "Transactions")
(subject to the Company Shareholder Approval (as defined below) with
respect to the Merger). The execution and delivery of this Agreement and
each instrument required hereby to be executed and delivered by the
Company prior to or at the Effective Time and the performance of its
obligations hereunder and thereunder and the consummation by the Company
of the Transactions have been duly and validly authorized by all necessary
corporate action on the part of the Company (including the unanimous
approval of the Special Committee), and no other corporate proceedings on
the part of the Company are necessary to authorize this Agreement or to
consummate the Transactions (other than the Company Shareholder Approval
and the filing of appropriate merger documents as required by the NJBCA).
This Agreement has been duly and validly executed and delivered by the
Company, and, assuming this Agreement constitutes a valid and binding
obligation of Newco, this Agreement constitutes a valid and binding
agreement of the Company, enforceable against the Company in accordance
with its terms, subject to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar laws of general applicability
relating to or affecting creditors' rights and to general equity
principles.
(b) The only vote of holders of any class or series of capital stock
of the Company necessary under applicable law or stock exchange (or
similar self regulatory organization)
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regulations to adopt or approve this Agreement and the Merger is the
adoption and approval of this Agreement and the Merger by the holders of a
majority of the votes cast at the Shareholder Meeting (as defined in
Section 5.8) entitled to vote on the Merger, voting together as a single
class, with each share of Company Common Stock entitled to one vote per
share (the "Company Shareholder Approval"). No vote of the holders of any
capital stock or other securities of the Company is necessary to
consummate any of the Transactions other than as set forth in the
preceding sentence.
(c) Consummation of the Transactions (including the transactions
contemplated by Sections 1.10 and 5.7 hereof) does not conflict with or
violate the provisions of any Company Stock Option Plan or any option
agreement evidencing the grant of any Options.
Section 2.5 Absence of Certain Changes. Except (i) as disclosed in the
Company's filings and reports under the Securities Exchange Act of 1934, as
amended (the "Exchange Act") filed and publicly available prior to the date of
this Agreement (the "Filed Company SEC Documents"), (ii) as set forth in Section
2.5 of the Company Disclosure Schedule, or (iii) for the transactions
contemplated by this Agreement, since June 30, 2001, the Company and each of its
Subsidiaries has conducted its respective business in the ordinary course, and
during such period there has not been any event, change, effect or development
that has had or would reasonably be expected to have a Material Adverse Effect
on the Company. Except (i) as disclosed in the Filed Company SEC Documents, (ii)
as set forth in Section 2.5 of the Company Disclosure Schedule, or (iii) for the
transactions contemplated by this Agreement, since June 30, 2001, there has not
been (a) any declaration, setting aside or payment of any dividend or other
distribution in respect of the capital stock of the Company or any redemption or
other acquisition by the Company of any capital stock of the Company; (b) any
entry into (or any amendment to any material terms of) any Material Agreement by
the Company or any of its Subsidiaries, other than in the ordinary course of
business consistent with past practice; (c) any split, combination or
reclassification of the Company's capital stock or of any other equity interests
in the Company, or any issuance or the authorization of any issuance of any
other securities in respect of, in lieu of or in substitution for shares of its
capital stock or of any other equity interests in the Company; (d)(i) any
granting by the Company or any of its Subsidiaries to any officer or director of
the Company or any of its Subsidiaries of any material increase in compensation,
except in the ordinary course of business consistent with prior practice or as
was required under employment agreements in effect as of the date hereof
identified in the Company Disclosure Schedule, (ii) any granting by the Company
or any of its Subsidiaries to any such officer or director of any increase in
severance or termination pay, except as was required under employment, severance
or termination agreements in effect as of the date hereof identified in the
Company Disclosure Schedule or (iii) any entry by the Company or any of its
Subsidiaries into (or any amendment to any material terms of) any employment,
severance or termination agreement with any officer or director; (e) any damage,
destruction or loss, whether or not covered by insurance, that has had or would
reasonably be expected to have a Material Adverse Effect on the Company; (f) any
change in accounting methods, principles or practices by the Company materially
affecting the consolidated assets, liabilities, results of operations or
business of the Company, except insofar as may have been required by a change in
generally accepted accounting principles; (g) any tax election that individually
or in the aggregate could reasonably be expected to have a Material Adverse
Effect on the Company; (h) any sale or license of any material Intellectual
Property by the Company or any of its Subsidiaries, other than in the ordinary
course of business consistent with prior practice; or (i) any material
charitable contributions or commitments therefor.
Section 2.6 Report and Financial Statements.
(a) Except as disclosed in Section 2.6(a) of the Company Disclosure
Schedule, since January 1, 1996, the Company has timely filed all required
forms, reports and documents with the Securities and Exchange Commission
(the "SEC") required to be filed by it pursuant to the federal securities
laws and the rules and regulations of the SEC thereunder (collectively,
the "Company SEC Documents"), all of which have complied as of their
respective filing dates (or, if amended or superceded by a filing, then on
the date of such filing) in all material respects with all
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applicable requirements of the Securities Act and the Exchange Act, and
the rules and regulations promulgated thereunder. None of such forms,
reports or documents at the time filed contained any untrue statement of a
material fact or omitted to state a material fact required to be stated
therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading. None of the
Company Subsidiaries is required to file any forms, reports or other
documents with the SEC.
(b) The financial statements of the Company and its Subsidiaries
included in the Company SEC Documents (including the notes thereto) have
been prepared from, and are in accordance with, the books and records of
the Company and its consolidated subsidiaries, and comply as to form in
all material respects with applicable accounting requirements and the
published rules and regulations of the SEC with respect thereto as in
effect as of the date of such filing, have been prepared in accordance
with generally accepted accounting principles (except, in the case of
unaudited statements, as permitted by Form 10-Q of the SEC) applied on a
consistent basis during the periods involved (except as may be indicated
in the notes thereto) and fairly present, in all material respects, in
accordance with generally accepted accounting principles the consolidated
financial position of the Company and its Subsidiaries as of the dates
thereof and the consolidated results of operations and cash flows of the
Company and its Subsidiaries for the periods then ended (subject, in the
case of any unaudited interim financial statements, to the absence of
footnote disclosure and normal year-end adjustments).
(c) Except as disclosed in Section 2.6(c) of the Company Disclosure
Schedule, at the date of the most recent audited financial statements of
the Company included in the Company SEC Documents, neither the Company nor
any of its Subsidiaries had, and since such date neither the Company nor
any of its Subsidiaries has incurred, any liabilities or obligations of
any nature (whether accrued, absolute, contingent, determinable or
otherwise, and whether or not required to be reflected or reserved against
in a consolidated balance sheet of the Company prepared in accordance with
United States generally accepted accounting principles) except liabilities
incurred in the ordinary and usual course of business and consistent with
past practice, liabilities expressly incurred in connection with the
Merger and liabilities that have not had and would not reasonably be
expected to have, individually or in the aggregate, a Material Adverse
Effect on the Company.
Section 2.7 Proxy Statement. At the time the Proxy Statement is mailed,
the Proxy Statement (as defined below) will comply as to form in all material
respects with the Exchange Act and the regulations thereunder. The Proxy
Statement shall not, at the time it is mailed, at the time of the Shareholder
Meeting or at the Effective Time, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading; provided, that, no representation is
made by the Company with respect to the information furnished by Newco for
inclusion therein. The letter to shareholders, notice of meeting, proxy
statement and form of proxy, or the information statement, as the case may be,
to be distributed to shareholders of the Company in connection with the Merger,
and the Schedule 14A and any other schedule required to be filed with the SEC in
connection therewith, together with any amendments or supplements thereto, are
collectively referred to herein as the "Proxy Statement."
Section 2.8 Consents and Approvals; No Violation. Subject to (i) obtaining
the Company Shareholder Approval, (ii) compliance with the requirements of the
Exchange Act, and (iii) the filing of the Certificate of Merger, and except as
disclosed on Section 2.8 of the Company Disclosure Schedule, the execution,
delivery and performance of this Agreement do not, and the consummation of the
Transactions (including the changes in ownership of the shares of Company Common
Stock or the composition of the Board of Directors of the Company) and
compliance with the provisions of this Agreement will not (i) conflict with or
violate the Certificate of Incorporation or Bylaws of the Company or the
comparable organizational documents of any of its Subsidiaries, (ii) conflict
with or violate any statute, ordinance, rule, regulation, judgment, order, writ,
injunction, decree or law applicable to the Company or its Subsidiaries, or by
which any of them or any of their respective properties or assets may
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<PAGE>
be bound or affected, or (iii) result in a violation or breach of or constitute
a default (or an event which with or without notice or lapse of time or both
would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, or result in any loss of any benefit
under, or the creation of any pledges, claims, equities, options, liens,
charges, call rights, rights of first refusal, "tag" or "drag" along rights,
encumbrances and security interests of any kind or nature whatsoever
(collectively, "Liens") on any of the property or assets of the Company or any
of its Subsidiaries pursuant to any loan or credit agreement, note, bond,
mortgage, indenture, License Agreement (as defined in Section 2.22), or other
agreement, instrument, Contract or Permit applicable to the Company, its
Subsidiaries or any of their respective properties or assets, except for such
violations, breaches or defaults that individually or in the aggregate would not
have a Material Adverse Effect on the Company. No consent, approval, order or
authorization of, or registration, declaration or filing with, any federal,
state or local government or any court, administrative or regulatory agency or
commission or other governmental authority or agency, domestic or foreign (a
"Governmental Entity"), is required by the Company in connection with the
execution and delivery of this Agreement by the Company or the consummation by
the Company of the Transactions, except for (i) the filing with the SEC of the
Proxy Statement relating to the approval by the Company's shareholders of this
Agreement, (ii) the filing of the Certificate of Merger pursuant to the NJBCA,
(iii) such other consents, approvals, orders, authorizations, registrations,
declarations and filings identified in Section 2.8 of the Company Disclosure
Schedule, and (iv) consents, approvals, orders, authorizations, registrations,
declarations or filings, the failure of which to obtain would not individually
or in the aggregate have a Material Adverse Effect on the Company.
Section 2.9 Brokerage Fees and Commissions. Neither the Company nor any of
its officers, directors or shareholders has employed any investment banker,
business consultant, financial advisor, broker or finder in connection with the
Transactions, except for the Special Committee Financial Advisor, or obligated
the Company to pay any investment banking, business consultancy, financial
advisory, brokerage or finders' fees or commissions in connection with the
Transactions, except for fees payable to the Special Committee Financial
Advisor. Correct and complete copies of the engagement letters between the
Special Committee Financial Advisor and the Company with respect to the
Transactions, which accurately describe the fees payable to the Special
Committee Financial Advisor, have been provided by the Company to Newco.
Section 2.10 Litigation. Except as disclosed in the Filed Company SEC
Documents or as set forth in Section 2.10 of the Company Disclosure Schedule,
there is no claim, suit, action or proceeding (including arbitration
proceedings) pending or, to the knowledge of the Company, threatened against the
Company that has had or would reasonably be expected to have individually or in
the aggregate a Material Adverse Effect on the Company, nor is there any
judgment, decree, injunction, rule or order of any Governmental Entity or
arbitrator outstanding against the Company or any of its Subsidiaries that has
had or would reasonably be expected to have individually or in the aggregate a
Material Adverse Effect on the Company.
Section 2.11 Absence of Changes in Benefit Plans. Except as disclosed in
the Filed Company SEC Documents, as required by applicable law, as contemplated
by this Agreement, or as set forth in Section 2.11 of the Company Disclosure
Schedule, since June 30, 2000, there has not been any adoption or material
amendment by the Company or any Subsidiary of any bonus, pension, profit
sharing, deferred compensation, incentive compensation, stock ownership, stock
purchase, stock option, phantom stock, retirement, vacation, severance,
disability, death benefit, hospitalization, medical or other plan, arrangement
or understanding providing benefits to any current or former employee, officer
or director of the Company or any Subsidiary. Except as disclosed in the Filed
Company SEC Documents, as required by applicable law or as set forth on Section
2.11 of the Company Disclosure Schedule, there exist no severance, bonus,
incentive award, termination or indemnification agreements, arrangements or
understandings between the Company or any Subsidiary and any of its current or
former officers or directors or employees.
Section 2.12 ERISA Compliance.
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(a) Section 2.12(a) of the Company Disclosure Schedule sets forth a
complete list of all "employee benefit plans" (as defined in Section 3(3)
of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), including, but not limited to, employment contracts, bonus,
pension, profit sharing, deferred compensation, incentive compensation,
excess benefit, stock, stock option, severance, termination pay, change in
control or other employee benefit plans, programs or arrangements,
including those providing medical, dental, vision, disability, life
insurance and vacation benefits (other than those required to be
maintained by law), whether written or unwritten, qualified or
unqualified, funded or unfunded, foreign or domestic, currently
maintained, or contributed to, or required to be maintained or contributed
to, by the Company or any other person or entity that, together with the
Company, is treated as a single employer under Section 414 of the Internal
Revenue Code of 1986, as amended (the "Code") (each an "ERISA Affiliate")
for the benefit of any current or former employees, officers or directors
of the Company or any Subsidiary or with respect to which the Company or
its Subsidiary has any liability (collectively, the "Benefit Plans"). As
applicable with respect to each Benefit Plan, the Company has delivered or
made available to Newco, true and complete copies of (i) each Benefit
Plan, including all amendments thereto, and in the case of an unwritten
Benefit Plan, a written description thereof, (ii) all trust documents,
investment management contracts, custodial agreements and insurance
contracts relating thereto, (iii) the current summary plan description and
each summary of material modifications thereto, (iv) the most recent
annual reports (Form 5500 and all schedules thereto) filed with the
Internal Revenue Service ("IRS"), (v) the most recent IRS determination
letter and each currently pending application to the IRS for a
determination letter, (vi) the most recent financial statements and
trustee reports, (vii) all records, notices and filings concerning IRS or
Department of Labor audits or investigations, "prohibited transactions"
within the meaning of Section 406 of ERISA or Section 4975 of the Code and
"reportable events" within the meaning of Section 4043 of ERISA, (viii)
all personnel, payroll, and employment manuals and policies; (ix) all
collective bargaining agreements pursuant to which contributions have been
made or obligations incurred (including both pension and welfare benefits)
by the Company and the ERISA Affiliates, and all collective bargaining
agreements pursuant to which contributions are being made or obligations
are owed by such entities; (x) all registration statements filed with
respect to any Company Plan; (xi) all insurance policies purchased by or
to provide benefits under any Company Plan; (xii) all contracts with third
party administrators, actuaries, investment managers, consultants, and
other independent contractors that relate to any Benefit Plan; (xiii) the
most recent reports submitted by third party administrators, actuaries,
investment managers, consultants, or other independent contractors with
respect to any Benefit Plan; (xiv) all notices that were given by the
Company or any ERISA Affiliate or any Benefit Plan to the IRS, the Pension
Benefit Guaranty Corporation ("PBGC"), or any participant or beneficiary,
pursuant to statute, within the four years preceding the date of this
Agreement; and (xv) with respect to Benefit Plans subject to Title IV of
ERISA, the Form PBGC-1 filed for the most recent plan year.
(b) No event has occurred and, to the knowledge of the Company,
there exists no condition or set of circumstances in connection with which
the Company or any ERISA Affiliate is or would reasonably be expected to
be subject to any material liability under the terms of any Benefit Plan,
under ERISA, or, with respect to any Benefit Plan, under the Code or any
other applicable law, rule or regulation, domestic or foreign. Neither the
Company nor any ERISA Affiliate has incurred or would reasonably be
expected to incur any material liability in respect of any employee
benefit plan maintained by an ERISA Affiliate but not included within the
term "Benefit Plan" or by any person other than the Company or any ERISA
Affiliate. No statement, either written or oral, has been made by the
Company or an ERISA Affiliate to any person with regard to any Benefit
Plan that was not in accordance with the terms of the Benefit Plan and
that would have a Material Adverse Effect on the Company or an ERISA
Affiliate. All filings required by ERISA and the Code as to each Benefit
Plan have been timely, completely and accurately filed, and all notices
and disclosures to participants required by either ERISA or the Code have
been timely, completely and accurately provided. All contributions and
payments
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made or accrued with respect to all Benefit Plans are deductible under
Section 162 or 404 of the Code. No amount, or any asset of any Benefit
Plan is subject to tax as unrelated business taxable income. The Company
has no material liability to the IRS with respect to any Benefit Plan,
including any liability imposed by Chapter 43 of the Code.
(c) Neither the Company nor any ERISA Affiliate has, at any time,
(i) maintained or contributed to any employee pension benefit plan subject
to Title IV of ERISA or Code Section 412 or (ii) been required to
contribute to, or incurred any withdrawal liability within the meaning of
ERISA Section 4201 to, any multiemployer plan as defined in ERISA Section
3(37).
(d) The Benefit Plans which are "employee pension benefit plans"
within the meaning of Section 3(2) of ERISA and which are intended to meet
the qualification requirements of Section 401(a) of the Code (each a
"Pension Plan") are prototype plans, which prototype plans have received
favorable determination letters from the IRS, and the Company has no
knowledge of any circumstances likely to result in the revocation of any
such favorable determination letter. The Company has no material liability
to the PBGC with respect to any Benefit Plan or has any liability under
Section 502 or 4071 of ERISA.
(e) Except as set forth on Section 2.12(e) of the Company Disclosure
Schedule or as contemplated by this Agreement, the execution and delivery
of this Agreement do not, and the consummation of the Transactions will
not (i) require the Company or any ERISA Affiliate to pay greater
compensation or make a larger contribution to, or pay greater benefits or
accelerate payment or vesting of a benefit under, any Benefit Plan or (ii)
create or give rise to any additional vested rights or service credits
under any Benefit Plan.
(f) Except for requirements under applicable law, as set forth in
Section 2.12(f) of the Company Disclosure Schedule or as contemplated by
this Agreement, neither the Company nor any ERISA Affiliate is a party to
or is bound by any severance agreement, program or policy.
(g) Except as set forth in Section 2.12(g) of the Company Disclosure
Schedule, no Benefit Plan provides benefits, including without limitation,
death or medical benefits, beyond termination of employment or retirement
other than (i) coverage mandated by law or (ii) death or retirement
benefits under a Benefit Plan qualified under Section 401(a) of the Code.
Neither the Company nor any ERISA Affiliate is contractually obligated to
provide any person with life, medical, dental or disability benefits for
any period of time beyond retirement or termination of employment, other
than as required by the provisions of Sections 601 through 608 of ERISA
and Section 4980B of the Code.
(h) With respect to any Benefit Plan that is an employee welfare
benefit plan (as defined in Section 3(1) of ERISA), (i) no such Benefit
Plan is funded through a "welfare benefit fund", as such term is defined
in Section 419(e) of the Code, (ii) each such Benefit Plan that is a
"group health plan", as such term is defined in Section 5000(b)(l) of the
Code, complies in all respects with the applicable requirements of
Sections 601 through 608 of ERISA and Section 4980B(f) of the Code, and
(iii) each such Benefit Plan (including any such Plan covering retirees or
other former employees), as in effect on the date hereof, may be amended
or terminated as to future benefit accruals without material liability to
the Company or any ERISA Affiliate on or at any time after the Effective
Time.
(i) Except as disclosed in the Company Disclosure Schedule or for
the transactions contemplated by this Agreement, there is no contract,
agreement, Benefit Plan or other arrangement covering any employee or
former employee of the Company or any of its Subsidiaries that would give
rise to the payment of any amount that would not be deductible under
Section 280G of the Code.
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(j) To the knowledge of the Company, no event has occurred or
circumstance exists that would result in a material increase in premium
costs of any Benefit Plan that is insured, or a material increase in
benefit costs of such Plan that is self-insured.
(k) Other than claims for benefits submitted by participants or
beneficiaries, no claim against, or legal proceeding involving, any
Benefit Plan is pending or, to the Knowledge of the Company or any
Shareholder, is threatened which, if adversely determined, would
individually or in the aggregate have a Material Adverse Effect on the
Company.
(l) Each current or former employee of the Company who has taken a
leave of absence under the Family and Medical Leave Act of 1994, as
amended, was, upon his or her return to employment with the Company,
placed in the same position with respect to all eligibility requirements
and benefits of any Benefit Plan as had been applicable to such employee
immediately before the leave commenced, except where the failure to so
comply would not have a Material Adverse Effect.
Section 2.13 Taxes.
(a) The Company and its Subsidiaries have timely filed (taking into
account any extension of time within which to file) all Tax Returns
required to be filed by or with respect to them, other than those the
failure of which to file would not individually or in the aggregate
reasonably be expected to have a Material Adverse Effect on the Company.
All such filed Tax Returns are complete and accurate in all material
respects. All Taxes that are shown therein as due have been paid in full.
(b) Except as set forth in Section 2.13(b) of the Company Disclosure
Schedule, no Tax Return of the Company or any of its Subsidiaries is under
audit or examination by any taxing authority, and no written notice of
such an audit or examination has been received by the Company or any of
its Subsidiaries.
(c) Except as set forth in Section 2.13(c) of the Company Disclosure
Schedule, there is not in force any waiver or agreement for any extension
of time for the assessment or payment of any Tax due with respect to the
period covered by any Tax Return.
(d) Except as set forth in Section 2.13(d) of the Company Disclosure
Schedule, there is no issue raised or claim against the Company or any of
its Subsidiaries for any Taxes, and no assessments, deficiency or
adjustment has been asserted or proposed with respect to any Tax Return
and no issues relating to Taxes were raised in writing by a taxing
authority in a completed audit or examination that, in each case, would
reasonably be expected to result in an assessment, deficiency, or
adjustment for a later taxable period that, if adversely determined would
individually or in the aggregate have a Material Adverse Effect on the
Company.
(e) Except as set forth in Section 2.13(e) of the Company Disclosure
Schedule, since January 1, 1996, the Company and each of its Subsidiaries
have been a member of an affiliated group filing a consolidated federal
income Tax Return.
(f) There are no material Liens for Taxes on the assets of the
Company or any of its Subsidiaries other than Liens for current taxes not
yet due or payable.
(g) Except as set forth in Section 2.13(g) of the Company Disclosure
Schedule, neither the Company nor any of its Subsidiaries is bound by any
tax sharing, tax indemnity or similar agreement with respect to Taxes.
(h) No record owner of shares of Company Common Stock is, to the
Company's knowledge, a non-resident alien individual or foreign
corporation (within the meaning of Section
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897(a)(i) of the Code) that has held more than 5% of the Company Common
Stock at any time during the five-year period ending on the date hereof.
(i) None of the Company and its Subsidiaries has filed a consent
under Code Section 341(f) concerning collapsible corporations. None of the
Company and its Subsidiaries has been a United States real property
holding corporation within the meaning of Code Section 897(c)(2) during
the applicable period specified in Code Section 897(c)(1)(A)(ii).
As used herein, "Tax Returns" shall mean all returns, declarations, claims
for refund, information returns and reports of or with respect to any Tax which
are required to be filed with a Tax authority by or with respect to the Company
or any of its Subsidiaries, and "Taxes" shall mean (i) income taxes, ad valorem
taxes, excise taxes, withholding taxes, stamp taxes or other taxes of or with
respect to gross receipts, premiums, real property, personal property, windfall
profits, sales, use, transfers, licensing, employment, payroll and franchises
imposed by or under any federal, state, local or foreign statute, law, rule or
regulation, and such terms shall include any interest, fines, penalties,
assessments or additions to tax resulting from, attributable to or incurred in
connection with any such tax or any contest or dispute thereof; (ii) liability
of the Company and its Subsidiaries or any fiduciary for the payment of any
amounts of the type described in clause (i) as a result of being a member of an
affiliated, combined consolidated or unitary group for any taxable period; and
(iii) liability of the Company and its Subsidiaries for the payment of any
amounts of the type described in clauses (i) or (ii) as a result of any express
or implied obligation to indemnify any other person.
Section 2.14 Compliance with Applicable Laws.
(a) The Company and each of its Subsidiaries has in effect all
licenses, franchises, permits and other governmental authorizations
(including Environmental Permits, as defined in Section 2.15) ("Permits")
necessary to conduct its respective business, other than Permits the
failure of which to hold would not individually or in the aggregate have a
Material Adverse Effect on the Company. Neither the Company nor any of its
Subsidiaries is in violation of any such Permits except for such
violations that would not individually or in the aggregate have a Material
Adverse Effect on the Company.
(b) Except as set forth in Section 2.14(b) of the Company Disclosure
Schedule, the business operations of the Company and its Subsidiaries have
been conducted in compliance with all applicable federal, state, local and
foreign laws, statutes, ordinances, rules, regulations, orders, judgments
and decrees, except for such violations which would not, individually or
in the aggregate, have a Material Adverse Effect on the Company.
Section 2.15 Environmental.
(a) For purposes of this Agreement, the term "Environmental Permit"
means any permit, license, approval or other authorization issued under
any Environmental Law (as defined below).
(b) Each of the Company, its Subsidiaries and their respective
properties, assets, businesses, and operations has all required
Environmental Permits that are material to the business of the Company,
and each of the Company, its Subsidiaries and their respective properties,
assets, businesses and operations is, and has been, in compliance with all
applicable Environmental Laws (as defined below) and Environmental
Permits, except for such violations as would not, individually or in the
aggregate, have a Material Adverse Effect on the Company. The term
"Environmental Laws" means any federal, state, local or foreign statute,
code, ordinance, rule, regulation, policy, guideline, permit, consent,
approval, license, judgment, order, writ, decree, injunction or other
authorization, including the requirement to register underground storage
tanks, relating to: (i) Releases (as defined below) of Hazardous Material
(as defined below) into the environment or any structure, including into
ambient air, soil, sediments, land
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surface or subsurface, buildings or facilities, surface water,
groundwater, publicly-owned treatment works, septic systems or land; or
(ii) the generation, treatment, storage, recycling, disposal, use,
handling, manufacturing, transportation, distribution in commerce, or
shipment (collectively, "Management") of Hazardous Material; including the
following statutes, their implementing regulations and any state
corollaries: the Hazardous Materials Transportation Act, 49 U.S.C. Section
1801 et seq., the Resource Conservation and Recovery Act, 42 U.S.C.
Section 6901 et seq., the Comprehensive Environmental Response,
Compensation and Liability Act, as amended by the Superfund Amendments and
Reauthorization Act, 42 U.S.C. Section 9601 et seq., the Toxic Substances
Control Act, 15 U.S.C. Section 2601 et seq., the Clean Water Act, 33
U.S.C. Section 1251 et seq. and the Clean Air Act, 42 U.S.C. Section 7401
et seq.
(c) No Environmental Claims or Environmental Liabilities (as such
terms are defined below) are being asserted against the Company or any of
its Subsidiaries nor is the Company aware of any acts, omissions, facts,
or circumstances which would so subject it, arising from or based upon any
act, omission, event, condition or circumstance occurring or existing on
or prior to the date hereof or for which the Company or any of its
Subsidiaries is responsible, including any such Environmental Claims or
Environmental Liabilities arising from or based upon the ownership or
operation of assets, businesses or properties of the Company or any of its
Subsidiaries which, if adversely determined, would individually or in the
aggregate have a Material Adverse Effect on the Company. Neither the
Company nor any of its Subsidiaries has received any notice of any
violation of any Environmental Law or Environmental Permit or any
Environmental Claim in connection with its assets, properties, businesses
or operations. The Company has provided to Newco and has disclosed on
Section 2.15(c) of the Company Disclosure Schedule all environmental
assessment reports prepared by, on behalf of or, to the extent in the
Company's possession or contract, relating to the Company or any of its
Subsidiaries since January 1, 1996 (or earlier for any such matter which
is unresolved) regarding the environmental condition of the Company's or
its Subsidiaries' properties or the environmental compliance of the
Company or any Subsidiary. The term "Environmental Claim" means any third
party (including governmental agencies, regulatory agencies, employees or
other private parties) action, lawsuit, claim, investigation proceeding
(including claims or proceedings under the Occupational Safety and Health
Act or similar laws relating to safety of employees) which seeks to impose
liability for (i) noise; (ii) pollution or contamination of the air,
surface water, ground water, land or structure; (iii) Hazardous Materials
Management; (iv) exposure to Hazardous Material; (v) the safety or health
of employees, consumers, customers or vendors; or (vi) any violation of
any Environmental Law or Environmental Permit. The term "Environmental
Liabilities" includes all costs arising from any Environmental Claim or
violation or alleged violation or circumstance or condition which would
give rise to a violation or liability under any Environmental Permit or
Environmental Law under any theory of recovery, at law or in equity, and
whether based on negligence, strict liability or otherwise, including but
not limited to: remedial, removal, response, abatement, investigative,
monitoring, personal injury and damage to property, and any other related
costs, expenses, losses, damages, investigatory remediation or monitoring
costs, penalties, fines, liabilities and obligations, including reasonable
attorney's fees and court costs.
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Section 2.16 State Takeover Statutes. The Special Committee and the Board
of Directors of the Company, subject to their fiduciary obligations under
applicable law, have approved the Merger and this Agreement, and such approval
is sufficient to render inapplicable to the Merger, this Agreement, the Voting
Agreement and the other Transactions the provisions of Section 14A:10A-4 and
14A:10A-5 of the NJBCA to the extent, if any, such provisions are applicable to
the Merger, this Agreement, the Voting Agreement and the other Transactions. No
other "fair price," "moratorium," "control share acquisition," "business
combination," or other state takeover statute or similar statute or regulation
applies or purports to apply to the Company, Newco, affiliates of Newco, the
Merger, the Voting Agreement, this Agreement, or any of the other Transactions.
Section 2.17 Contracts. Section 2.17 to the Company Disclosure Schedule
lists, under the relevant heading, all contracts, agreements, arrangements,
guarantees, licenses, leases and executory commitments, other than Benefit
Plans, agreements disclosed on Section 2.11 to the Company Disclosure Schedule,
Leases disclosed on Schedule 2.19(b) of the Company Disclosure Schedule,
Franchise Agreements described in Section 2.25(c) of the Company Disclosure
Schedule and any Contracts heretofore filed as an exhibit to any Filed Company
SEC Document, that exist as of the date hereof to which the Company or any of
its Subsidiaries is a party or by which it is bound and which fall within any of
the following categories (each a "Contract"): (a) Contracts not entered into in
the ordinary course of the Company's or any of its Subsidiaries' respective
businesses; (b) joint venture, partnership or franchising agreements, (c)
Contracts containing covenants purporting to limit the freedom of the Company or
any of its Subsidiaries to compete in any line of business in any geographic
area or to hire any individual or group of individuals, (d) Contracts which
after the consummation of any of the Transactions would have the effect of
limiting the freedom of the Surviving Corporation or any of its affiliates to
compete in any line of business in any geographic area or to hire any individual
or group of individuals, (e) Contracts relating to any outstanding commitment
for capital expenditures in excess of $10,000, (f) indentures, mortgages,
promissory notes, loan agreements or guarantees of borrowed money, letters of
credit or other agreements or instruments of the Company or any of its
Subsidiaries evidencing indebtedness for borrowed money or providing for the
creation of any charge, security interest, encumbrance or Lien upon any of the
assets of the Company or any of its Subsidiaries, (g) License Agreements, (h)
Contracts with respect to which a change in the ownership (whether directly or
indirectly) of the shares of Company Common Stock or the composition of the
Board of Directors of the Company or any of its Subsidiaries or any of the other
Transactions may result in a violation of or default under, or give rise to a
right of termination, modification, cancellation or acceleration of any
obligation or loss of benefits under, such Contract or (i) any other agreement
of a type required to be filed under Item 601(b)(10) of Regulation S-K
promulgated by the SEC. All Contracts to which the Company or any of its
Subsidiaries is a party or by which it is bound are valid and binding
obligations of the Company or its Subsidiary (as applicable) and, to the
knowledge of the Company, the valid and binding obligation of each other party
thereto. Neither the Company or its Subsidiary (as applicable) nor, to the
knowledge of the Company, any other party thereto is in violation of or in
default in respect of, nor has there occurred an event or condition which with
the passage of time or giving of notice (or both) would constitute a default by
the Company or its Subsidiary (as applicable) (or to its knowledge a default by
any other party thereto) under or permit the termination of, any such Contract,
except for such instances of default thereunder or terminations thereof that
would not individually or in the aggregate result in a Material Adverse Effect
on the Company. The Company has, prior to the date hereof, delivered or made
available true, complete and correct copies of the Contracts to Newco.
Section 2.18 Labor Matters. Except to the extent set forth in Section
2.18(a) of the Company Disclosure Schedule, (i) no employee of the Company or
any of its Subsidiaries is represented by any union or other labor organization;
(ii) there is no labor strike, dispute, or work stoppage pending or, to the
knowledge of the Company, threatened against or affecting the Company or any of
its Subsidiaries; and (iii) neither the Company nor any of its Subsidiaries has
ever experienced any work stoppage.
(b) Except to the extent set forth in Section 2.18(b) of the Company
Disclosure Schedule, the Company and each of its Subsidiaries has not
incurred any liability under, and has
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complied in all material respects with, the Worker Adjustment Retraining
Notification Act and the regulations promulgated thereunder ("WARN") and
does not reasonably expect to incur any such liability as a result of
actions taken or not taken prior to the Effective Time. The Company and
each of its Subsidiaries has not given, and has not been required to give,
any notice under WARN within 90 days prior to the date hereof.
Section 2.19 Property.
(a) Section 2.19(a) of the Disclosure Schedule sets forth a list of
all real property owned in fee by the Company or any of its Subsidiaries.
The Company or its Subsidiary (as applicable) has good and valid title to
all such real property, free and clear of all Liens known to the Company
except (i) Liens for taxes, assessments and other governmental charges
that are not delinquent or that are being contested in good faith and in
respect of which adequate reserves have been established, (ii) mechanics',
materialmen's, carriers', workmen's, warehousemen's, repairmen's
landlord's or other similar Liens securing obligations that are not due
and payable or that are being contested in good faith and in respect of
which adequate reserves have been established, (iii) imperfections of
title and Liens that do not and would not reasonably be expected to
detract materially from the value or materially interfere with the present
use of the properties subject thereto or affected thereby, and (iv) in the
case of any real property subject to a title commitment described in
Section 2.19(a) of the Company Disclosure Schedule, imperfections of title
and Liens that are shown on such title commitment or such schedule
(collectively, "Permitted Liens").
(b) The Company has provided or made available to Newco all leases
for all real property leased by the Company or any of its Subsidiaries, as
lessor or lessee, as of the date hereof (the "Leases"). All such Leases
are valid and binding in accordance with their respective terms and the
Company or its Subsidiary (as applicable) is not in default in any respect
under any Lease, except for such instances of default thereunder that
would not individually or in the aggregate result in a Material Adverse
Effect on the Company. Except as set forth in Section 2.19(b) of the
Company Disclosure Schedule, the execution and delivery of this Agreement
by the Company and the consummation of the Transactions, including the
Merger, does not and will not result in a breach or violation of, or
constitute a default or an event that, with the passage of time or the
giving of notice, or both, would constitute a default, give rise to a
right of termination, material modification (including as to the amount,
timing or nature of lease payments), cancellation or acceleration or
require the consent or approval of any party (other than the Company or
its Subsidiary (as applicable)) under any Lease.
Section 2.20 [Reserved.]
Section 2.21 Opinion of Financial Advisors. The Company and the Special
Committee have received the opinion of the Special Committee Financial Advisor,
dated October 5, 2001, to the effect that, as of such date, the consideration to
be received in the Merger by the Company's shareholders is fair to the Company's
shareholders from a financial point of view. The Company has delivered a signed
copy of such opinion to Newco (it being understood that Newco will not be a
third party beneficiary of such opinion), and such opinion has not been amended,
modified or revoked in a manner adverse to Newco. The Company has been
authorized by the Special Committee Financial Advisor to permit the inclusion of
such fairness opinion (and, subject to prior review and consent by such Special
Committee Financial Advisor, a reference thereto) in the Proxy Statement.
Section 2.22 Intellectual Property. Section 2.22(a) of the Company
Disclosure Schedule sets forth, for the Intellectual Property owned by the
Company or its Subsidiaries, a complete and accurate list of all U.S. and
foreign (i) patents and patent applications; (ii) trademark registrations
(including Internet domain registrations), trademark applications, and material
unregistered trademarks; (iii) copyright registrations, and material
unregistered copyrights, as well as (iv) in the case of registrations and
applications, the registration or application number and date. Section
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2.22(a) of the Company Disclosure Schedule contains a list of all software
programs material to the operation of the Company's business (other than readily
available commercial software programs) which are owned or licensed by Company
or its Subsidiaries, and identifies which software is owned or licensed, as the
case may be.
(b) Section 2.22(b) of the Company Disclosure Schedule sets forth a
complete and accurate list of all License Agreements (other than Franchise
Agreements or other agreements pursuant to which the Company or its
Subsidiaries have granted nonexclusive licenses of Intellectual Property
to franchisees or subfranchisees in the ordinary course of business). The
License Agreements are valid and binding obligations of all parties
thereto, enforceable in accordance with their terms, and there exists no
event or condition which will result in a violation or breach of, or
constitute (with or without due notice of lapse of time or both) a default
by any party under any such License Agreement. Neither Company nor any of
its Subsidiaries has licensed or sublicensed its rights in any
Intellectual Property other than pursuant to the License Agreements. No
royalties, honoraria or other fees are payable by Company or any of its
Subsidiaries to any third parties for the use of or right to use any
Intellectual Property except pursuant to the License Agreements.
(c) Except as set forth in Section 2.22(c) of the Company Disclosure
Schedule, the Company and each of its Subsidiaries owns and/or is licensed
to use (in each case, free and clear of any Liens, claims, or similar
encumbrances), and has the right to bring actions for the infringement,
dilution, misappropriation or other violation of, all patents and patent
applications, trademarks, service marks, trade names, and registrations
and applications for registration of industrial designs, copyrights, mask
works, trademarks, service marks, trade names, trade dress, and all domain
names, technology, inventions, know-how, trade secrets, processes and all
agreements and other rights with respect to intellectual property and
computer programs (collectively, "Intellectual Property") material to the
conduct of its respective business as currently conducted;
(d) Except as set forth in Section 2.22(d) of the Company Disclosure
Schedule, all of the patents, trademark and service mark registrations
(including the U.S. trademark registration for "Blimpie"), copyright
registrations and domain name registrations, and all applications for such
registrations, owned by the Company or any of its Subsidiaries (A) are
valid and in full force, (B) are held of record in the name of the Company
or its Subsidiary (as applicable), (C) are not the subject of any
cancellation or reexamination proceeding or any other proceeding
challenging their extent or validity and (D) all necessary registration,
maintenance and renewal fees in connection with such patents and
registrations have been paid and all necessary documents and certificates
in connection with such patents and registrations have been filed with the
relevant patent, copyright, trademark or other authorities in the United
States or foreign jurisdictions, as the case may be, for the purposes of
maintaining such patents and registrations. To the Company's knowledge,
all of the patents, trademark and service mark registrations (including
the U.S. trademark registration for "Blimpie"), copyright registrations
and domain name registrations, and all applications for such
registrations, exclusively licensed (including where exclusively licensed
within a discrete territory) to the Company or any of its Subsidiaries (A)
are valid and in full force, (B) are licensed exclusively to the Company
or its Subsidiary (as applicable) in the discrete territory indicated, if
applicable, (C) are not the subject of any cancellation or reexamination
proceeding or any other proceeding challenging their extent or validity
and (D) all necessary registration, maintenance and renewal fees in
connection with such patents and registrations have been paid and all
necessary documents and certificates in connection with such patents and
registrations have been filed with the relevant patent, copyright,
trademark or other authorities in the United States or foreign
jurisdictions, as the case may be, for the purposes of maintaining such
patents and registrations;
(e) The use of such Intellectual Property by the Company or any of
its Subsidiaries does not infringe on the rights of any party;
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(f) To the knowledge of Company, no person is infringing on any
right of the Company or any of its Subsidiaries with respect to such
Intellectual Property;
(g) Neither the Company nor any of its Subsidiaries is, and the
consummation of the Transactions will not cause them to be, in breach or
violation of any agreement relating to the use of any of its Intellectual
Property, and neither the Company nor any of its Subsidiaries has received
any notification, written or oral, from any third party that there is any
such violation, breach, or inability to perform under any such agreement
and is not aware of any basis therefor;
The Company takes reasonable measures to protect the confidentiality of its
trade secrets. No trade secret has been disclosed or authorized to be disclosed
to any third party other than pursuant to a non-disclosure agreement. To the
Company's knowledge, no party to any non-disclosure agreement relating to its
trade secrets is in breach or default thereof.
Section 2.23 Insurance. The Company and its Subsidiaries maintain policies
of franchise errors and omissions, directors' and officers' liability, fire and
casualty, liability and other forms of insurance in such amounts, with such
deductibles and against such risks and losses as are prudent and customary in
the industry in which the Company operates. As of the date hereof, except as set
forth in Section 2.23 of the Company's Disclosure Schedule, all such policies
are in full force and effect, all premiums due and payable thereon have been
paid, and no notice of cancellation or termination has been received with
respect to any such policy.
Section 2.24 Affiliate Transactions. Except as disclosed in the Filed
Company SEC Documents or in Section 2.24 of the Company Disclosure Schedule,
there are no transactions, agreements, arrangements or understandings (or series
thereof), written or oral, between the Company or any of its Subsidiaries and
any of their respective directors or officers (including, in the case of natural
persons, any of such persons' relatives or affiliates) that would be required to
be disclosed under Item 404 of Regulation S-K under the Securities Act.
Section 2.25 Franchise Operations.
(a) The Company has provided Newco with a copy of the Company's and its
Subsidiaries' currently effective uniform franchise offering circulars used by
the Company and its Subsidiaries to offer and sell franchises and subfranchises
in the United States and throughout the world for each of its and their brands,
namely, Blimpie, Smoothie Island Juice Bar, Maui Taco and Pasta Central
(collectively, the "Brands") ("Uniform Franchise Offering Circulars" or
"UFOCs").
(b) Except as set forth on Section 2.25(b) of the Company Disclosure
Schedule, the Company does not have any Subsidiary or Affiliate offering or
selling franchises or subfranchises relating to the Brands, domestically or
internationally.
(c) Section 2.25(c) of the Company Disclosure Schedule is a true and
complete list of all subfranchise, franchise or license agreements to which the
Company or a Subsidiary is a party, including at a minimum the name, address and
telephone number of each and every subfranchisee, franchisee, licensee, master
licensee, or master franchisee (a "Franchisee") (collectively, the "Franchise
Agreements"). Each Franchise Agreement is substantially similar to the form of
subfranchise, franchise or license agreement incorporated into the UFOC that was
issued to the Franchisee contemporaneously with the sale of a franchise or
subfranchise by the Company or a Subsidiary to the Franchisee. The Company and
its Subsidiaries had, at all relevant times and in all material respects, the
corporate power and authority and legal right to enter into and carry out the
terms of each Franchise Agreement. All of the Franchise Agreements are valid,
binding and enforceable against the Franchisee thereunder, subject to any such
Franchisee's bankruptcy, insolvency, receivership or similar proceeding under
state or federal law and is enforceable against such Franchisee in accordance
with its terms.
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(d) Section 2.25(d) of the Company Disclosure Schedule identifies each
current Franchisee that (i) has received any outstanding notices of financial
default under a Franchise Agreement, which default has not been cured as of the
Effective Time; (ii) is, to the Company's knowledge, in material default under a
Franchise Agreement for any other reason; or (iii) has on three or more
occasions within any twelve month period received written notices of events of
default under a Franchise Agreement.
(e) Except as set forth on Section 2.25(e) of the Company Disclosure
Schedule, and except as may be granted by operation of law, no Franchisee has a
protected territory, exclusive territory, right of first refusal, option or
other arrangement with the Company or its Subsidiaries for the acquisition of
additional franchises or expansion of the Franchisee's territory. Except as
described in Section 2.25(d) of the Company Disclosure Schedule, no Franchisee's
protected territory is shared in whole or in part with any other Franchisee.
(f) Section 2.25(f) of the Company Disclosure Schedule is a true and
complete list of all written or oral agreements (and with respect to oral
agreements a description thereof) with independent sales representatives,
contractors or agents (exclusive of representatives of subfranchisors) with
respect to the sale or development of franchises by the Company or its
Subsidiaries, brokers or consultants and all territorial development, and master
franchise agreements or any other agreements or arrangements under which the
Company or its Subsidiaries has authorized any person to sell or promote
franchises or licenses on behalf of the Company or its Subsidiaries or agreed to
rebate or share amounts receivable under any Franchise Agreement and indicating
which of such agreements are in default and may be terminated by the Company or
a Subsidiary by notice to the other party. The Company has delivered to Newco
true, correct and complete copies of all written agreements described in Section
2.25(f) of the Company Disclosure Schedule. The Company has delivered to Newco
true, correct and complete copies of all written correspondence and memoranda
evidencing such oral agreements described in Section 2.25(f) of the Company
Disclosure Schedule. The payments payable to all parties to each such oral
agreement are set forth on such Schedules.
(g) To the knowledge of the Company and its Subsidiaries, no outlet
operating under any Brand is in a condition or is being operated in a manner
that is so materially inconsistent with the requirements of the Franchise
Agreement or franchise systems associated with such Brand that such condition or
operation will result in early termination of the Franchise Agreement relating
to that outlet.
(h) The Company and its Subsidiaries have prepared and maintained each of
its and their UFOCs in an accurate and correct manner, have filed UFOCs in all
states requiring registration and approval prior to any offers or sales of
subfranchises and franchises in such states and have filed all material changes,
amendments, renewals thereto on a timely and accurate basis. There were no
material misrepresentations or material omissions of information in any UFOC at
the time the Company or its Subsidiaries was using such UFOC.
(i) (1) Except as disclosed in Section 2.25(i) of the Company Disclosure
Schedule, each Franchise Agreement complies, and the offer and sale thereof
complied at the time such offer and sale was made, in all material respects with
all foreign and domestic (federal and state) laws, rules, ordinances and
regulations thereunder and all orders, consents or decrees from any foreign or
domestic administrative or regulatory agency;
(2) Except as listed or described in Section 2.25(i) of the Company
Disclosure Schedule, no Franchise Agreement has been subordinated and no
provision regarding the calculation and payment of royalty fees in any
Franchise Agreement has been waived, altered or modified in any respect
adverse to the Company or its Subsidiaries thereunder; no right of
rescission, set-off, counterclaim or defense has been asserted or to the
knowledge of the Company, is threatened or exists, with respect to any
Franchise Agreement; no notices of default have been issued by the Company
with respect to any Franchise Agreement for defaults which
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have not been cured, and the Company has not waived any default by a
Franchisee which would adversely affect any Franchise Agreement.
(3) Except as set forth in Section 2.25(i) of the Company Disclosure
Schedule, neither the Company nor any Subsidiary operates a franchise or
subfranchise associated with the Brands;
(4) Except as set forth in Section 2.25(i) of the Company Disclosure
Schedule, the Company's and its Subsidiaries' franchise operation manuals
for all Brands have been in the past, and currently are, consistent in all
material respects with the respective UFOCs the Company and its
Subsidiaries previously used, and currently use, to offer and sell
subfranchises and franchises.
(j) (1) Except as set forth on Section 2.25(j) of the Company Disclosure
Schedule, no orders, consents or decrees have been issued by any foreign or
domestic (federal or state) administrative or regulatory agency to the Company
or a Subsidiary nor have letters of inquiry, investigation or the like been
issued to the Company or a Subsidiary by such foreign or domestic administrative
or regulatory agencies relating, directly or indirectly, to the Company's or a
Subsidiary's offer and sale of franchises or business opportunities. The Company
has permitted Newco the right to inspect all material correspondence between the
Company and its Subsidiaries and such foreign or domestic administrative and
regulatory agencies relating to the offering and sale of franchises or business
opportunities;
(2) Except as set forth in Section 2.25(j) of the Company Disclosure
Schedule, to the Company's knowledge, the Company and its Subsidiaries
have not violated any foreign or domestic (federal or state) law, rule,
ordinance or regulation thereunder in connection with the offer and sale
of franchises or business opportunities;
(3) At all times while the Company and its Subsidiaries and
affiliates have offered and sold franchises and business opportunities,
each of the Company and its Subsidiaries and affiliates has been duly
authorized pursuant to, or has otherwise qualified for exemption from
registration under, the various laws and regulations governing the
offering and sale of franchises and business opportunities in each of the
jurisdictions (domestic and international) in which they respectively
offered to sell or sold franchises or business opportunities. The Company
has heretofore made available to Newco correct and complete copies of all
registrations, advertising or promotional materials, UFOCs, disclosure
documents or agreements filed with any foreign or domestic administrative
or regulatory agency or otherwise used by the Company or any Subsidiaries
in connection with the offer, sale and operation of franchises or business
opportunities in any jurisdiction (domestic or international). Neither the
Company nor any of its Subsidiaries or affiliates has, in any of the
aforementioned documents (including, without limitation, UFOCs or
disclosure documents), made any untrue statement of a material fact, or
omitted to state any fact necessary to made the statements made by the
Company or its Subsidiaries, taken as a whole, not misleading, in
connection with the offer or sale of any franchise or business
opportunity;
(4) Neither the Company nor any Subsidiary has during the time
period described in (iii) above authorized its officers, directors or
representatives to furnish any materials or information which is in any
way inconsistent with the "earnings claim" information set forth in Item
19 of any UFOC and to the Company's knowledge, no such earnings claims
were ever made to prospective Franchisees by the Company, any Subsidiary
or an officer, director or representative of either.
(k) Except as set forth in Section 2.25(k) of the Company Disclosure
Schedule, no Franchisee has alleged to the Company or a Subsidiary that the
Company or a Subsidiary has acted improperly regarding (y) disparate treatment
among the Franchisees in violation of any foreign or domestic law, rule,
regulation or ordinance or (z) providing prospective Franchisees with inaccurate
or incorrect earnings claims or earnings claims that violated any foreign or
domestic law.
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(l) Except as set forth in Section 2.25(l) of the Company Disclosure
Schedule, neither the Company nor any Subsidiary or affiliate has entered into
any contracts, agreements, or arrangements, orally or in writing, whereby the
Company or any Subsidiary or affiliate receives rebates, commissions, discounts
or other payments or remuneration of any kind from suppliers selling products or
services to Franchisees.
(m) Neither the Company nor any Subsidiary is in material violation or
default of any Franchise Agreement, nor has there occurred any event or
condition which with the passage of time or giving of notice (or both) would
constitute a material default by the Company or any Subsidiary of any Franchise
Agreement under, or permit termination of, any such Franchise Agreement. Neither
the execution of this Agreement nor the consummation of the transactions
contemplated herein would result in a violation of or a default under, or give
rise to a right of termination, modification, cancellation or acceleration of
any obligation or loss of benefits under, any Franchise Agreement.
(n) The Company and its Subsidiaries have complied with all applicable
foreign and domestic franchise termination, fair practices and relationship laws
with respect to the proper notice of default, time to cure, and the actual
termination of any of its franchises or business opportunities as prescribed by
such laws.
(o) The Company and its Subsidiaries have not made to any Franchisee, or
any of its Franchisees' employees or agents, or to any other person, any
commitment to provide any special discount, allowance or accommodation other
than as set forth in the UFOCs. There are no material agreements or special
arrangements with any Franchisee other than as set forth in the UFOCs.
(p) Each of Blimpie Brand Building Fund, Inc., Maui Tacos Brand Building
Fund, Inc., Pasta Central Brand Building Fund, Inc. and Smoothie Island Brand
Building Fund, Inc. are entities that are authorized to receive voluntary
marketing allowances and payments from purveyors, distributors and manufacturers
servicing the Brands (the "Building Funds"). The Company and its Subsidiaries
have at all times complied fully with all agreements governing the Building
Funds including, without limitation, agreements contained in the Franchise
Agreements and UFOCs. The Building Funds and all monies paid thereto have been
allocated and used consistent with the Franchise Agreements and UFOCs and no
monies have been commingled with the monies or accounts of the Company or its
Subsidiaries.
Section 2.26 Health Claims. Except as set forth on Section 2.26 of the
Company Disclosure Schedule, no Health Claims (as defined below) are being
asserted against the Company or any of its Subsidiaries nor is the Company aware
of any acts, omissions, facts, or circumstances which would so subject it,
arising from or based upon any act, omission, event, condition or circumstance
occurring or existing on or prior to the date hereof or for which the Company or
any of its Subsidiaries is responsible, including any such Health Claims arising
from or based upon the ownership or operation of assets, businesses or
properties of the Company or any of its Subsidiaries, other than, in each case,
Health Claims that if adversely determined against the Company, would not
individually or in the aggregate have a Material Adverse Effect on the Company.
Neither the Company nor any of its Subsidiaries has received any notice of any
Health Claim in connection with its assets, properties, businesses or
operations. The term "Health Claim" means any third party (including
governmental agencies, regulatory agencies, employees or other private parties)
action, lawsuit, claim, investigation proceeding which seeks to impose liability
for (i) violation of the Federal Food Drug and Cosmetic Act ("FDC Act"), and all
acts and/or rules and regulations amending or supplementing same, the Federal
Wholesome Poultry Act, the Federal Wholesome Meat Act, the Federal Insecticide
Fungicide and Rodenticide Act, the Federal Hazardous Substance Labeling Act, any
state food and drug law or other applicable federal, state or municipals laws,
ordinances, rules or regulations; or (ii) sale of any food products containing
any salmonella or listeria organisms, toxins, foreign material or other
poisonous or injurious matter or any chemicals on any list promulgated by any
state or federal government of known chemicals causing cancer or reproductive
toxicity.
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ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF NEWCO
Newco represents and warrants to the Company as follows:
Section 3.1 Organization and Qualification. Newco is a corporation duly
organized, validly existing and in good standing under the laws of the State of
New Jersey and has the requisite corporate power and authority to carry on its
business as it is now being conducted. Newco is duly qualified as a foreign
corporation or licensed to do business, and is in good standing, in each state
where the character of its properties owned or leased or the nature of its
activities makes such qualification or licensing necessary, except where the
failure to be so qualified or licensed and in good standing would not reasonably
be expected to prevent or materially delay the consummation of the Merger or the
other Transactions.
Section 3.2 Authority Relative to this Agreement. Newco has all requisite
corporate power and authority to execute and deliver this Agreement and each
instrument required hereby to be executed and delivered by Newco prior to or at
the Effective Time, to perform its obligations hereunder and thereunder, and to
consummate the Transactions. The execution and delivery by Newco of this
Agreement and each instrument required hereby to be exercised and delivered by
Newco prior to or at the Effective Time and the performance of its obligations
hereunder and thereunder, and the consummation by Newco of the Transactions have
been duly and validly authorized by the Board of Directors and sole stockholder
of Newco, and no other corporate proceedings on the part of Newco are necessary
to authorize this Agreement or to consummate the Transactions, other than filing
of appropriate merger documents as required by the NJBCA. This Agreement has
been duly and validly executed and delivered by Newco, and, assuming this
Agreement constitutes a valid and binding obligation of the Company, this
Agreement constitutes a valid and binding agreement of Newco, enforceable
against Newco in accordance with its terms, subject to bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium and similar laws of general
applicability relating to or affecting creditors' rights and to general equity
principles.
Section 3.3 Consents and Approvals; No Violation. Subject to the taking of
the actions described in the immediately succeeding sentence, the execution and
delivery of this Agreement do not, and the consummation of the Transactions will
not, conflict with, or result in any violation of, or default (with or without
notice or lapse of time, or both) under, or give rise to a right of
modification, termination, cancellation or acceleration of any obligation or to
loss of a material benefit under, or result in the creation of any Lien upon any
of the material properties or assets of Newco under (a) the certificate of
incorporation or bylaws of Newco, (b) any loan or credit agreement, note, bond,
indenture, lease or other agreement, instrument or Permit applicable to Newco or
its properties or assets, (c) any judgment, order, writ, injunction, decree,
law, statute, ordinance, rule or regulation applicable to Newco or its
properties or assets. No consent, approval, order or authorization of, or
registration, declaration or filing with, any Governmental Entity or any other
person is required by Newco in connection with the execution and delivery of
this Agreement or the consummation by Newco of any of the Transactions, except
(i) pursuant to the Exchange Act, (ii) the filing of the Certificate of Merger
pursuant to the NJBCA, (iii) where the failure to obtain any such consent,
approval, authorization or permit, or to make any such filing or notification,
would not reasonably be expected to prevent or materially delay consummation of
the Merger or would not otherwise prevent Newco from performing its obligations
under this Agreement.
Section 3.4 Financing Commitments; Solvency. Newco has sufficient cash and
commitments for financing (and has provided the Special Committee with written
evidence thereof and all amendments or additions thereto) in an aggregate amount
sufficient to pay all of the Merger Consideration, Cash Payment and Company
Expense Reimbursement as required by this Agreement and to pay all other related
fees and expenses, and payments required under this Agreement. Newco has
delivered to the Special Committee true and correct copies of the commitment
letters of the lenders that will provide the debt financing which, together with
available equity, is expected to be sufficient to satisfy all of Newco's
obligations under this Agreement (the "Financing Commitments"). As of the date
of this Agreement, the Commitment Letters are in full force and effect and Newco
has paid all commitment fees required
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thereunder. Immediately after giving effect to the transactions contemplated
hereby, Newco will not (i) be insolvent (either because its financial condition
is such that the sum of its debts is greater than the fair value of its assets
or because the fair salable value of its assets is less than the amount required
to pay its probable liability on its existing debts as they mature), (ii) have
unreasonably small capital with which to engage in its business, or (iii) have
incurred debts beyond its ability to pay as they come due.
Section 3.5 Ownership of Company Stock. As of the date of this Agreement,
neither Newco nor any "affiliate" or "associate" of Newco is an "interested
stockholder" of the Company, as such quoted terms are defined in Section
14A:10A-3 of the NJBCA.
Section 3.6 Information. None of the information supplied or to be
supplied by Newco for inclusion or incorporation by reference in the Proxy
Statement will, at the respective times filed with the SEC and, in addition, at
the date it or any amendment or supplement is mailed to shareholders, at the
time of the Shareholder Meeting and the Effective Time, 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 made therein, in
light of the circumstances under which they were made, not misleading.
Section 3.7 Brokerage Fees and Commissions. Neither Newco nor any of its
officers, directors or shareholders has employed any investment banker, business
consultant, financial advisor, broker or finder in connection with the
Transactions, except for The Robinson-Humphrey Company, LLC
("Robinson-Humphrey"), or obligated Newco to pay any investment banking,
business consultancy, financial advisory, brokerage or finders' fees or
commissions in connection with the Transactions, except for fees payable to
Robinson-Humphrey. A correct and complete copy of the engagement letter between
Robinson-Humphrey and Newco with respect to the Transactions, which accurately
describes the fees payable to Robinson-Humphrey, has been provided by Newco to
the Company.
Section 3.8 Litigation. There is no claim, suit, action or proceeding
(including arbitration proceedings) pending or, to the knowledge of Newco,
threatened against Newco that has had or would reasonably be expected to have a
Material Adverse Effect on Newco, nor is there any judgment, decree, injunction,
rule or order of any Governmental Entity or arbitrator outstanding against Newco
or any of its Affiliates that has had or would reasonably be expected to have a
Material Adverse Effect on Newco.
ARTICLE 4
CONDUCT OF BUSINESS PENDING THE MERGER
Section 4.1 Conduct of Business of the Company Pending the Merger. The
Company hereby covenants and agrees that, from the date hereof until the
Effective Time, unless otherwise expressly contemplated by this Agreement or
consented to in writing by Newco, the Company will, and will cause each of its
Subsidiaries to:
(a) operate their respective businesses in the usual and ordinary
course consistent with past practices;
(b) employ their reasonable best efforts to preserve intact (i)
their business organization, maintain their rights and franchises, retain
the services of their respective key employees and maintain their
relationships with their respective customers and suppliers and others
having business dealings with them, and (ii) the goodwill of those having
relationships with it;
(c) use their reasonable best efforts to maintain and keep their
properties and assets in as good repair and condition as at present,
ordinary wear and tear excepted, and maintain supplies and inventories in
quantities consistent with their customary business practice; and
(d) use their reasonable best efforts to keep in full force and
effect insurance and bonds comparable in amount and scope of coverage to
that currently maintained.
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Section 4.2 Prohibited Actions by the Company. Without limiting the
generality of Section 4.1, the Company covenants and agrees that, except as
expressly contemplated by this Agreement or otherwise consented to in writing by
Newco, from the date hereof until the Effective Time, neither it nor any of its
Subsidiaries shall:
(a) (i) increase the compensation (or benefits) payable to or to
become payable to any director or employee, except for increases in salary
or wages of employees in the ordinary course of business and consistent
with past practice; (ii) grant any severance or termination pay to, or
enter into or amend any employment or severance agreement with, any
employee, except any such grants made in the ordinary course of business
consistent with past practice, or pursuant to agreements, plans or
policies existing on the date hereof or as otherwise provided under this
Agreement; (iii) establish, adopt, enter into or amend any collective
bargaining agreement or Benefit Plan of the Company or any ERISA
Affiliate; or (iv) take any action to accelerate any rights or benefits,
or make any determinations not in the ordinary course of business
consistent with past practice, under any Benefit Plan of the Company or
any ERISA Affiliate; provided, however, that the Company may amend the
Company Stock Option Plans or take other action to accelerate the vesting
of any unvested Options that were issued and outstanding on the date
hereof and disclosed in Section 2.3 of the Company Disclosure Schedule;
and may otherwise amend the Company Stock Option Plans (and option
agreements entered into thereunder) to effectuate the purposes of Section
1.10 hereof;
(b) declare, set aside or pay any dividend on, or make any other
distribution in respect of (whether in cash, stock or property),
outstanding shares of capital stock, other than dividends at the current
annual rate of $0.07 per share or dividends or distributions by a
wholly-owned Subsidiary to the Company;
(c) redeem, purchase or otherwise acquire, or offer or propose to
redeem, purchase or otherwise acquire, any outstanding shares of capital
stock of, or other equity interests in, or any securities that are
convertible into or exchangeable for any shares of capital stock of, or
other equity interests in, or any outstanding options, warrants or rights
of any kind to acquire any shares of capital stock of, or other equity
interests in, the Company (other than any purchase, forfeiture or
retirement of shares of Company Common Stock or the Options occurring
pursuant to the terms (as in effect on the date hereof) of any existing
Benefit Plan of the Company);
(d) except as provided in Sections 1.4 and 1.6 hereof, effect any
reorganization or recapitalization; or split, combine or reclassify any of
the capital stock of, or other equity interests in, the Company or issue
or authorize or propose the issuance of any other securities in respect
of, in lieu of or in substitution for, shares of such capital stock or
such equity interests;
(e) except as provided in Sections 1.4 and 1.6 hereof, offer, sell,
issue or grant, or authorize or propose the offering, sale, issuance or
grant of, any shares of capital stock of, or other equity interests in,
any securities convertible into or exchangeable for (or accelerate any
right to convert or exchange securities for) any shares of capital stock
of, or other equity interest in, or any options, warrants or rights of any
kind to acquire any shares of capital stock of, or other equity interests
in, or any Voting Company Debt or other voting securities of, the Company,
or any "phantom" stock, "phantom" stock rights, SARs or stock-based
performance units (or increase the number of shares reserved for issuance
under the Company Option Plans), other than issuance of shares of Company
Common Stock upon the exercise of the Options issued and outstanding as of
the date hereof and disclosed in Section 2.3 of the Company Disclosure
Statement in accordance with the terms thereof (as in effect on the date
hereof);
(f) acquire or agree to acquire, by merging or consolidating with,
by purchasing stock or other equity interest in or a portion of the assets
of, or in any other manner, any business or any corporation, partnership,
association or other business organization or division thereof or interest
therein or otherwise acquire any assets of any other person (other than
the purchase of
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inventories and supplies from suppliers or vendors in the ordinary course
of business and consistent with past practice);
(g) sell, lease, exchange or otherwise dispose of, or grant any Lien
with respect to, any of the properties or assets of the Company or any of
its Subsidiaries that are material to the business of the Company or any
of its Subsidiaries (including without limitation any Intellectual
Property), except for dispositions of excess or obsolete assets and sales
in the ordinary course of business and consistent with past practice
(provided, however, that (i) Newco has approved the Company's sale
or closing of its Maui Tacos st |
