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EXHIBIT 2.2
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AGREEMENT AND PLAN OF MERGER
dated as of October 6, 2000
among
CARROLS CORPORATION,
SPUR ACQUISITION CORP.
and
TACO CABANA, INC.
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TABLE OF CONTENTS
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ARTICLE I THE MERGER............................................................... 1
1.1 The merger............................................................... 1
1.2 Closing.................................................................. 1
1.3 Effective Time of the Merger............................................. 1
1.4 Effects of the Merger.................................................... 2
1.5 Certificate of Incorporation; By-Laws.................................... 2
1.6 Directors; Officers...................................................... 2
ARTICLE II CANCELLATION OF THE CAPITAL STOCK OF THE COMPANY AND
PAYMENT WITH RESPECT THERETO.......................................... 2
2.1 Effect on Capital Stock................................................... 2
(a) Common Stock of Sub................................................... 2
(b) Cancellation of Treasury Stock and Parent-Owned Stock................. 2
(c) Cancellation of Company Common Stock and Payment with Respect Thereto. 2
(d) Appraisal Rights...................................................... 3
2.2 Payment With Respect To Certificates...................................... 3
(a) Payment Agent......................................................... 3
(b) Payment Procedures.................................................... 3
(c) No Further Ownership Rights in Company Common Stock................... 4
(d) Termination of Payment Fund........................................... 4
(e) No Liability.......................................................... 4
(f) Investment of Exchange Fund........................................... 4
(g) Withholding Rights.................................................... 5
(h) Associated Company Rights............................................. 5
2.3 Stock Options With Respect To Company Common Stock........................ 5
ARTICLE III REPRESENTATIONS AND WARRANTIES........................................ 6
3.1 Representations and Warranties of the Company............................. 6
(a) Organization, Standing and Power...................................... 6
(b) Subsidiaries.......................................................... 6
(c) Capital Structure..................................................... 7
(d) Authority............................................................. 8
(e) SEC Documents......................................................... 9
(f) Information Supplied.................................................. 10
(g) Absence of Certain Changes or Events.................................. 10
(h) Compliance with Applicable Laws....................................... 13
(i) Environmental......................................................... 13
(j) Litigation............................................................ 13
(k) Taxes................................................................. 14
(l) Employee Benefit Plans................................................ 15
(m) Restaurants and Properties............................................ 16
(n) Properties............................................................ 17
(o) Labor Controversies................................................... 18
(p) Intellectual Property................................................. 18
(q) Change of Control Agreements.......................................... 19
(r) Contracts and Commitments............................................. 20
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(s) Affiliated Transactions............................................... 21
(t) Insurance............................................................. 22
(u) Records............................................................... 22
(v) Section 203 of the DGCL............................................... 22
(w) Opinion of Financial Advisor.......................................... 22
(x) Franchise Matters..................................................... 22
(y) Disclosure............................................................ 23
(z) Company Rights Agreement.............................................. 23
3.2 Representations and Warranties of Parent and Sub.......................... 23
(a) Organization, Standing and Power...................................... 23
(b) Authority............................................................. 23
(c) Information Supplied.................................................. 24
(d) Interim Operations of Sub............................................. 24
(e) Financial Capability.................................................. 25
ARTICLE IV COVENANTS RELATING TO CONDUCT OF BUSINESS............................... 25
4.1 Covenants of Company.................................................. ... 25
(a) Ordinary Course....................................................... 25
(b) Dividends; Changes in Stock........................................... 25
(c) Issuance of Securities................................................ 26
(d) Governing Documents................................................... 26
(e) No Solicitations...................................................... 26
(f) No Acquisitions....................................................... 27
(g) No Dispositions....................................................... 27
(h) Indebtedness.......................................................... 27
(i) Other Actions......................................................... 27
(j) Advice of Changes; Government Filings................................. 28
(k) Accounting Methods.................................................... 28
(l) Benefit Plans......................................................... 28
(m) Tax Elections......................................................... 29
4.2 Covenants of Parent....................................................... 29
(a) Other Actions......................................................... 29
(b) Government Filings.................................................... 29
(c) Extraordinary Transactions............................................ 29
ARTICLE V ADDITIONAL AGREEMENTS.................................................... 29
5.1 Preparation of the Proxy Statement........................................ 29
5.2 Stockholder Meeting....................................................... 30
5.3 Legal Conditions to Merger................................................ 30
5.4 Access To Information..................................................... 30
5.5 Brokers or Finders........................................................ 31
5.6 Indemnification; Directors' and Officers' Insurance....................... 31
5.7 Shareholder Lists......................................................... 32
5.8 Shareholder Litigation.................................................... 32
5.9 Communication To Employees................................................ 32
5.10 Environmental Matters..................................................... 32
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ARTICLE VI CONDITIONS PRECEDENT.................................................... 32
6.1 Conditions to Each Party's Obligation to Effect the Merger................ 32
(a) Stockholder Approval.................................................. 32
(b) Other Approvals....................................................... 33
(c) No Injunctions or Restraints; Illegality.............................. 33
6.2 Conditions to Obligations of Parent and Sub............................... 33
(a) Representations and Warranties........................................ 33
(b) Performance of Obligations of Company................................. 33
(c) Consents Under Agreements............................................. 33
(d) Burdensome Condition.................................................. 34
(e) Material Adverse Effect............................................... 34
(f) Proceedings........................................................... 34
(g) Financing............................................................. 34
6.3 Conditions to Obligations of Company...................................... 34
(a) Representations and Warranties........................................ 34
(b) Performance of Obligations of Parent and Sub.......................... 35
ARTICLE VII TERMINATION AND AMENDMENT.............................................. 35
7.1 Termination............................................................... 35
7.2 Effect of Termination..................................................... 36
7.3 Fees, Expenses and Other Payments......................................... 36
7.4 Amendment................................................................. 38
7.5 Extension; Waiver......................................................... 38
ARTICLE VIII GENERAL PROVISIONS.................................................... 38
8.1 Nonsurvival of Representations, Warranties and Agreements................. 38
8.2 Notices................................................................... 38
8.3 Certain Definitions....................................................... 39
8.4 Interpretation............................................................ 40
8.5 Counterparts.............................................................. 40
8.6 Entire Agreement; No Third Party Beneficiaries; Rights of Ownership....... 40
8.7 Governing Law............................................................. 40
8.8 Severability; No Remedy In Certain Circumstances.......................... 40
8.9 Publicity................................................................. 41
8.10 Assignment................................................................ 41
8.11 Adjustment................................................................ 41
8.12 Specific Performance...................................................... 41
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EXHIBIT A Certificate of Incorporation of Sub
EXHIBIT B By-Laws of Sub
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INDEX OF DEFINED TERMS
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affiliate........................................................................ 39
Agreement........................................................................ 1
Balance Sheet.................................................................... 10
beneficial ownership............................................................. 39
beneficially own................................................................. 39
Business Combination............................................................. 38
Certificate of Merger............................................................ 1
Certificates..................................................................... 3
Closing.......................................................................... 1
Closing Date..................................................................... 1
Code............................................................................. 5
Commitment Letter................................................................ 25
Company.......................................................................... 1
Company Benefit Plans............................................................ 15
Company Common Stock............................................................. 2
Company Disclosure Letter........................................................ 6
Company Preferred Stock.......................................................... 7
Company Rights................................................................... 7
Company SEC Documents............................................................ 9
Company Stock Options............................................................ 5
Company Stock Plans.............................................................. 5
Competing Transaction............................................................ 27
Confidentiality Agreement........................................................ 26
Consents......................................................................... 33
dgcl............................................................................. 1
Dissenting Shares................................................................ 3
Dissenting Stockholder........................................................... 3
Effective Time................................................................... 1
Environmental Audit.............................................................. 32
Environmental Liability.......................................................... 13
Environmental Matters............................................................ 13
ERISA............................................................................ 15
ERISA Affiliate.................................................................. 16
Expenses......................................................................... 36
Financing........................................................................ 25
Franchise Agreements............................................................. 22
Franchised Leased Property....................................................... 16
GAAP............................................................................. 10
Governmental Entity.............................................................. 9
group............................................................................ 39
HSR Act.......................................................................... 9
HSR Filings...................................................................... 9
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INDEX OF DEFINED TERMS
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DEFINED TERM PAGE
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Independent Advisor.............................................................. 22
Intellectual Property Rights..................................................... 18
Leased Real Property............................................................. 16
Licensed Rights.................................................................. 18
Litigation....................................................................... 13
material......................................................................... 6
Material Adverse Effect.......................................................... 6
Material Contracts............................................................... 20
merger........................................................................... 1
Merger Consideration............................................................. 3
Offer Consideration.............................................................. 25
Option Consideration............................................................. 5
Owned Real Property.............................................................. 16
Parent........................................................................... 1
Payment Agent.................................................................... 3
Payment Fund..................................................................... 3
person........................................................................... 39
Proxy Statement.................................................................. 29
Related Party.................................................................... 12
Requisite Regulatory Approvals................................................... 33
Rights Agreement................................................................. 7
SEC.............................................................................. 9
Series A Preferred Stock......................................................... 7
Sub.............................................................................. 1
subsidiary....................................................................... 39
Surplus Leased Property.......................................................... 16
Surviving Corporation............................................................ 1
Tax Entity....................................................................... 14
Tax Return....................................................................... 14
Taxes............................................................................ 14
Vacant Surplus Property.......................................................... 17
Violation........................................................................ 9
Voting Debt...................................................................... 7
Year-End Financial Statements.................................................... 10
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AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of
---------
October 6, 2000, among Carrols Corporation, a Delaware corporation ("Parent"),
------
Spur Acquisition Corp., A Delaware corporation and a wholly-owned subsidiary of
Parent ("Sub"), and Taco Cabana, Inc., A Delaware corporation (the "Company").
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RECITALS
A. Parent, Sub and the Company intend to effect a merger of Sub into
the Company (the "Merger") in accordance with this Agreement and the General
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Corporation Law of the State of Delaware (the "DGCL"). Upon consummation of the
----
Merger, Sub will cease to exist and the Company will become a wholly-owned
subsidiary of Parent.
B. For accounting purposes, it is intended that the Merger be treated
as a "purchase."
C. This Agreement has been approved by the respective boards of
directors of Parent, Sub and the Company.
AGREEMENT
The parties to this Agreement hereby agree as follows:
ARTICLE I
THE MERGER
1.1 The Merger. Upon the terms and subject to the conditions set forth
in this Agreement, and in accordance with the DGCL, Sub shall be merged with and
into the Company at the Effective Time. At the Effective Time, the separate
existence of Sub shall cease, and the Company shall continue as the surviving
corporation (the "Surviving Corporation") and shall continue under the name
---------------------
"Taco Cabana, Inc."
1.2 Closing. Unless this Agreement shall have been terminated pursuant
to Section 7.1 and subject to the satisfaction or waiver of the conditions set
forth in Article VI, the closing of the Merger (the "Closing") will take place
-------
as promptly as practicable (and in any event within two business days) following
satisfaction or waiver of the conditions set forth in Article VI (the "Closing
-------
Date"), at 10:00 a.m., New York City time, at the offices of Rosenman & Colin
----
LLP, 575 Madison Avenue, New York, New York 10022, unless another date, time or
place is agreed to in writing by the parties hereto.
1.3 Effective Time of the Merger. As soon as practicable following the
satisfaction or waiver of the conditions set forth in Article VI, Sub shall file
a certificate of merger conforming to the requirements of Subchapter IX of the
DGCL (the "Certificate of Merger") with the Secretary of State of the State of
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Delaware and make all other filings or recordings required by the DGCL in
connection with the Merger. The Merger shall become effective at such time as
the Certificate of Merger is duly filed with the Secretary of State of the State
of Delaware, or such other time thereafter as is provided in the Certificate of
Merger in accordance with the DGCL (the "Effective Time").
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1.4 Effects of the Merger. The Merger shall have the effects set forth
in this Agreement and in the applicable provisions of the DGCL.
1.5 Certificate of Incorporation; By-Laws. (a) The certificate of
incorporation of Sub which is attached as Exhibit A hereto, as in effect
immediately prior to the Effective Time, shall be the certificate of
incorporation of the Surviving Corporation until thereafter changed or amended
as provided therein or by applicable law; provided that Article I of the
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certificate of incorporation of the Surviving Corporation shall be amended by
the Certificate of Merger to read as follows: "The name of the corporation is:
Taco Cabana, Inc."
(b) The by-laws of Sub which are attached as Exhibit B hereto shall be
the by-laws of the Surviving Corporation until thereafter changed or amended as
provided therein or by applicable law.
1.6 Directors; Officers. (a) The directors of Sub at the Effective Time
shall be the directors of the Surviving Corporation, until the earlier of their
resignation or removal or until their respective successors are duly elected and
qualified, as the case may be.
(b) The officers of Sub at the Effective Time shall be the officers of
the Surviving Corporation, until the earlier of their resignation or removal or
until their respective successors are duly elected and qualified, as the case
may be.
ARTICLE II
CANCELLATION OF THE CAPITAL STOCK OF THE
COMPANY AND PAYMENT WITH RESPECT THERETO
2.1 Effect on Capital Stock. As of the Effective Time, by virtue of the
Merger and without any action on the part of the holder of any shares of capital
stock of the Company or any shares of capital stock of Parent or Sub:
(a) Common Stock of Sub. Each share of common stock, par value $.0l per
share, of Sub issued and outstanding immediately prior to the Effective Time
shall be converted into one share of common stock, par value $.0l per share, of
the Surviving Corporation and shall be the only issued and outstanding capital
stock of the Surviving Corporation.
(b) Cancellation of Treasury Stock and Parent-Owned Stock. Each share
of common stock of the Company, par value $.0l per share ("Company Common
--------------
Stock"), that is owned by the Company or by any subsidiary of the Company,
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together with the associated Company Rights, and each share of Company Common
Stock that is owned by Parent, Sub or any other subsidiary of Parent, together
with the associated Company Rights, shall automatically be cancelled and retired
and shall cease to exist, and no Merger Consideration or other consideration
shall be delivered or payable with respect thereto.
(c) Cancellation of Company Common Stock and Payment with Respect
Thereto. Each share of Company Common Stock issued and outstanding immediately
prior to the Effective Time (other than shares to be cancelled in accordance
with Section 2.1(b) and Dissenting Shares), together with the associated Company
Rights, shall be converted into the
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right to receive $9.04, payable, without interest, to the holder of such shares,
upon surrender, in the manner provided in Section 2.2, of the certificate(s)
that formerly evidenced such shares (the "Merger Consideration"). As of the
--------------------
Effective Time, all such shares of Company Common Stock, together with the
associated Company Rights, shall no longer be outstanding and shall
automatically be cancelled and retired and shall cease to exist, and each holder
of a certificate previously representing any such shares shall cease to have any
rights with respect thereto, except the right to receive the Merger
Consideration, as applicable.
(d) Appraisal Rights. Notwithstanding anything in this Agreement to the
contrary, to the extent provided by the DGCL, Parent will not make any payment
of Merger Consideration with respect to Company Common Stock held by any person
(a "Dissenting Stockholder") who elects to demand appraisal of his shares and
----------------------
duly and timely complies with all the provisions of the DGCL concerning the
right of holders of Company Common Stock to require appraisal of their shares
("Dissenting Shares"), but such Dissenting Stockholders shall have the right to
-----------------
receive such consideration as may be determined to be due such Dissenting
Stockholders pursuant to the laws of the State of Delaware. If, after the
Effective Time, a Dissenting Stockholder withdraws his demand for appraisal or
fails to perfect or otherwise loses his right of appraisal, in any case pursuant
to the DGCL, his shares will be deemed to be converted as of the Effective Time
into the right to receive the Merger Consideration pursuant to Section 2.1(c).
The Company will give Parent (i) prompt notice of any demands for appraisal of
Dissenting Shares received by the Company and (ii) the opportunity to
participate in and direct all negotiations and proceedings with respect to any
such demands. The Company will not, without the prior written consent of Parent,
make any payment with respect to, or enter into any negotiations or discussions
or a binding settlement agreement or make an offer, written or oral, to settle,
any such demands.
2.2 Payment with Respect to Certificates.
(a) Payment Agent. As of the Effective Time, Parent shall deposit, or
shall cause to be deposited, with a bank or trust company designated by Parent
(the "Payment Agent"), for the benefit of the holders of shares of Company
-------------
Common Stock, for payment in accordance with this Article II through the Payment
Agent, the Merger Consideration to be paid in respect of all shares of Company
Common Stock (other than shares representing Dissenting Shares or shares to be
cancelled in accordance with Section 2.1(b)) (such funds deposited with the
Payment Agent, the "Payment Fund").
------------
(b) Payment Procedures. As soon as reasonably practicable after the
Effective Time, the Payment Agent shall mail to each holder of record of a
certificate or certificates which immediately prior to the Effective Time
represented outstanding shares of Company Common Stock (the "Certificates")
------------
whose shares were cancelled in the Merger pursuant to Section 2.1(c) the
following documents: (i) a letter of transmittal (which shall specify that
delivery shall be effected, and risk of loss and title to the Certificates shall
pass, only upon delivery of the Certificates to the Payment Agent and shall be
in such form and have such other provisions as Parent may reasonably specify);
and (ii) instructions for use in effecting the surrender of the Certificates in
exchange for payment with respect thereto. Upon surrender of a Certificate for
cancellation to the Payment Agent together with such letter of transmittal, duly
executed, the holder of such Certificate shall be entitled to receive in
exchange therefor the
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Merger Consideration payable with respect to the shares represented by such
Certificate pursuant to the provisions of this Article II, and the Certificate
so surrendered shall forthwith be cancelled. In the event that a holder has lost
or misplaced a Certificate, an affidavit of loss thereof (together with an
appropriate indemnity and/or bond if Parent so requires by notice in writing to
the holder of such Certificate) satisfactory in form and substance to the
Company's transfer agent and the Payment Agent shall accompany such letter of
transmittal in lieu of the applicable Certificate. In the event of a transfer of
ownership of Company Common Stock which is not registered in the transfer
records of the Company, payment of the applicable Merger Consideration may be
made to a transferee if the Certificate representing such Company Common Stock
is presented to the Payment Agent, accompanied by all documents required to
evidence and effect such transfer and by evidence that any applicable stock
transfer taxes have been paid. Until surrendered as contemplated by this Section
2.2, each Certificate shall be deemed at any time after the Effective Time to
represent only the right to receive upon such surrender the Merger Consideration
with respect thereto as contemplated by this Section 2.2. No interest shall
accrue or be paid to any beneficial owner of shares of Company Common Stock or
any holder of any Certificate with respect to the Merger Consideration payable
upon the surrender of any Certificate.
(c) No Further Ownership Rights in Company Common Stock. The Merger
Consideration paid with respect to the cancellation of Company Common Stock in
accordance with the terms hereof shall be deemed to have been paid in full
satisfaction of all rights pertaining to such shares of Company Common Stock,
and there shall be no further registration of transfers on the stock transfer
books of the Surviving Corporation of the shares of Company Common Stock which
were outstanding immediately prior to the Effective Time. If, after the
Effective Time, Certificates are presented to the Surviving Corporation for any
reason, they shall be cancelled and exchanged as provided in this Article II,
subject to applicable law in the case of Dissenting Shares.
(d) Termination of Payment Fund. Any portion of the Payment Fund which
remains undistributed to the stockholders of the Company for six months after
the Effective Time shall be delivered to Parent, upon demand, and any
stockholders of the Company who have not theretofore complied with this Article
II shall thereafter look only to Parent for payment of their claim for the
Merger Consideration.
(e) No Liability. If any Certificates shall not have been surrendered
prior to five (5) years after the Effective Time (or immediately prior to such
earlier date on which the Merger Consideration in respect of such certificate
would otherwise escheat to or become the property of any Governmental Entity (as
defined in Section 3.1(d)(iii)), any cash or other property payable in respect
of such Certificate shall, to the extent permitted by applicable law, become the
property of the Surviving Corporation, free and clear of all claims or interest
of any person previously entitled thereto. Notwithstanding the foregoing, none
of the Surviving Corporation, Parent or the Payment Agent shall be liable to any
holder of a Certificate or the shares represented thereby for any Merger
Consideration delivered in respect of such Certificate or the shares represented
thereby to a public official pursuant to any abandoned property, escheat or
other similar law.
(f) Investment of Exchange Fund. The Payment Agent shall invest any
cash included in the Payment Fund as directed by Parent. Any interest or other
income resulting from
4
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such investments shall be paid to Parent. The Parent shall replace any net
losses incurred by the Payment Fund as a result of investments made pursuant to
this Section 2.2(f).
(g) Withholding Rights. Parent or the Payment Agent shall be entitled
to deduct and withhold from the consideration otherwise payable pursuant to this
Agreement to any holder of Certificates or the shares of Company Common Stock
represented thereby such amounts (if any) as Parent or the Payment Agent is
required to deduct and withhold with respect to the making of such payment under
the Internal Revenue Code of 1986, as amended (the "Code"), or any provision of
----
state, local or foreign tax law. To the extent that amounts are so withheld by
Parent or the Payment Agent, such withheld amounts shall be treated for all
purposes of this Agreement as having been paid to the holder of the shares of
Company Common Stock in respect of which such deduction and withholding was made
by Parent or the Payment Agent.
(h) Associated Company Rights. References in Article II of this
Agreement to Company Common Stock shall include, unless the context requires
otherwise, the associated Company Rights.
2.3 Stock Options with Respect to Company Common Stock. (a) The Company
shall take all actions necessary pursuant to the Company's 1990 Stock Option
Plan, the Company's 1994 Stock Option Plan and the Company's 2000 Stock
Ownership Plan (collectively, the "Company Stock Plans"), and the terms and
-------------------
provisions of any outstanding options to acquire shares of Company Common Stock
not issued under any Company Stock Plan, to cause the following: (i) all
outstanding options to acquire shares of Company Common Stock granted under the
Company Stock Plans or otherwise (the "Company Stock Options") shall be
---------------------
exercisable in full immediately prior to the Effective Time, and (ii) all
Company Stock Options that are not exercised prior to the Effective Time will
terminate and expire as of the Effective Time. The Company shall give written
notice to the holders of all Company Stock Options of the foregoing, which
written notice shall include an offer to pay such holder at the Effective Time,
in exchange for the cancellation of such holder's Company Stock Options at the
Effective Time, an amount in cash determined by multiplying (A) the excess, if
any, of the Merger Consideration over the applicable exercise price per share of
the Company Stock Option by (B) the number of Shares such holder could have
purchased had such holder exercised such Company Stock Option in full
immediately prior to the Effective Time (such amount, the "Option
------
Consideration"), and each such Company Stock Option shall thereafter be
-------------
canceled. All actions required to be taken pursuant to this Section 2.3(a) with
respect to Company Stock Options has been, or prior to the Effective Time will
be, taken by the Company.
(b) Promptly after the Effective Time, the Surviving Corporations shall
cause to be mailed to each holder of Company Stock Options a check payable to
such holder in an amount equal to the Option Consideration payable with respect
to all Company Stock Options held by such holder.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of the Company. The Company
represents and warrants to Parent and Sub that, except as specifically disclosed
in the letter dated the date hereof and delivered by the Company to Parent
simultaneously with the execution and delivery of this Agreement (the "Company
-------
Disclosure Letter"):
-----------------
(a) Organization, Standing and Power. Each of the Company and its
subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation, has all
requisite power and authority and all necessary governmental approvals to own,
lease and operate its properties and assets and to conduct its business as it is
now being conducted and is duly qualified and in good standing to do business in
each jurisdiction in which the nature of its business or the ownership or
leasing of its properties and assets makes such qualification necessary, other
than in such jurisdictions where the failure so to qualify would not,
individually or in the aggregate, have a Material Adverse Effect on the Company.
As used in this Agreement, (i) any reference to any event, change or effect
being "material" with respect to any entity means an event, change or effect
--------
which is material in relation to the condition (financial or otherwise),
properties, assets, liabilities, businesses or operations of such entity and its
subsidiaries taken as a whole, and (ii) the term "Material Adverse Effect"
-----------------------
means, with respect to the Company or Parent, any change, event or effect shall
have occurred or been threatened that, when taken together with all other
adverse changes, events or effects that have occurred or been threatened would
or would reasonably be expected to (a) be materially adverse to the business,
assets, properties, results of operations or condition (financial or otherwise)
of such party and its subsidiaries taken as a whole, or (b) prevent or
materially delay the consummation of the Merger. The Company has made available
to Parent true and complete copies of its certificate of incorporation and
by-laws and the certificate of incorporation and by-laws (or equivalent
organizational documents) of each subsidiary of the Company, each as amended to
date. Such certificates of incorporation, by-laws or equivalent organizational
documents are in full force and effect, and neither the Company nor any
subsidiary of the Company is in violation of any provision of its certificate of
incorporation, by-laws or equivalent organizational documents.
(b) Subsidiaries. The Company owns, directly or indirectly, all of the
outstanding capital stock or other equity interests in each of its subsidiaries
free and clear of any claim, lien, encumbrance, security interest or agreement
with respect thereto. The Company Disclosure Letter sets forth a complete list
of the Company's subsidiaries. Other than the capital stock or other interests
held by the Company in such subsidiaries, neither the Company nor any such
subsidiary owns any direct or indirect equity interest in any person, domestic
or foreign. All of the outstanding shares of capital stock in each of its
corporate subsidiaries are duly authorized, validly issued, fully paid and
nonassessable and were issued free of preemptive rights and in compliance with
applicable securities laws and regulations. All of the outstanding partnership
interests in each of its partnership subsidiaries are validly existing,
nonassessable and were issued in compliance with applicable securities laws and
regulations, and all capital contributions required with respect to such
partnership interests have been made in full. There are no irrevocable proxies
or similar obligations with respect to such capital stock or partnership
6
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interests of such subsidiaries and no equity securities or other interests of
any of its subsidiaries are or may become required to be issued or purchased by
reason of any options, warrants, rights to subscribe to, puts, calls or
commitments of any character whatsoever relating to, or securities or rights
convertible into or exchangeable for, shares of any capital stock or any other
equity interest of any such subsidiary, and there are no agreements, contracts,
commitments, understandings or arrangements by which any such subsidiary is
bound to issue additional shares of its capital stock or other equity interests,
or options, warrants or rights to purchase or acquire any additional shares of
its capital stock or other equity interests or securities convertible into or
exchangeable for such shares or other equity interests.
(c) Capital Structure. (i) The authorized capital stock of the Company
consists of 30,000,000 shares of Company Common Stock and 2,500,000 shares of
Preferred Stock of the Company, par value $1.00 per share (the "Company
-------
Preferred Stock"), of which 100,000 shares have been designated Series A Junior
---------------
Preferred Stock (the "Series A Preferred Stock"). At the close of business on
------------------------
October 3, 2000, (A) 11,625,232 shares of Company Common Stock were outstanding,
(B) no shares of Company Common Stock were reserved for issuance upon the
exercise of outstanding warrants, (C) 1,550,975 Company Stock Options were
outstanding pursuant to the Company Stock Plans, each such option entitling the
holder thereof to purchase one share of Company Common Stock, (D) 114,506
Company Stock Options were outstanding other than pursuant to the Company Stock
Plans, each such option entitling the holder thereof to purchase one share of
Company Common Stock, (E) 1,665,481 shares of Company Common Stock are
authorized and reserved for issuance upon the exercise of outstanding Company
Stock Options, (F) 1,865,000 shares of Company Common Stock were held by the
Company in its treasury or by its subsidiaries, (G) no shares of Company
Preferred Stock, including Series A Preferred Stock, were issued or outstanding,
and (H) 100,000 shares of Series A Preferred Stock have been reserved for
issuance upon exercise of the rights (the "Company Rights") distributed to the
--------------
holders of Company Common Stock pursuant to the Rights Agreement dated as of
June 9, 1995 between the Company and Society National Bank, in Dallas, Texas, as
Rights Agent (the "Rights Agreement"). The Company Disclosure Letter sets forth
----------------
a true and complete list of the outstanding Company Stock Options, including the
exercise prices and vesting schedules therefor.
(ii) No bonds, debentures, notes or other indebtedness having the right
to vote (or convertible into or exercisable for securities having the right to
vote) on any matters on which stockholders may vote ("Voting Debt") of the
-----------
Company are issued or outstanding.
(iii) All outstanding shares of Company capital stock are validly
issued, fully paid and nonassessable and free of preemptive rights and were
issued in compliance with applicable securities laws and regulations. All shares
of Company Common Stock subject to issuance upon the exercise of Company Stock
Options, upon issuance on the terms and conditions specified in the instruments
pursuant to which they are issuable, will be duly authorized, validly issued,
fully paid and nonassessable and free of preemptive rights and will be issued in
compliance with applicable securities laws and regulations.
(iv) Except for this Agreement, the Rights Agreement, the Company
Rights, the Company Stock Plans and the Company Stock Options, there are no
options, warrants, calls, rights, convertible securities, subscriptions, stock
appreciation rights, phantom stock plans or
7
<PAGE>
stock equivalents, or other rights, commitments or agreements of any character
to which the Company or any subsidiary of the Company is a party or by which it
is bound obligating the Company or any subsidiary of the Company to issue,
deliver or sell, or cause to be issued, delivered or sold, additional shares of
capital stock or any Voting Debt of the Company or of any subsidiary of the
Company or obligating the Company or any subsidiary of the Company to grant,
extend or enter into any such option, warrant, call, right, commitment or
agreement. After the Effective Time, there will be no option, warrant, call,
right or agreement obligating the Company or any subsidiary of the Company to
issue, deliver or sell, or cause to be issued, delivered or sold, any shares of
capital stock or any Voting Debt of the Company or any subsidiary of the
Company, or obligating the Company or any subsidiary of the Company to grant,
extend or enter into any such option, warrant, call, right or agreement. The
execution, delivery and performance by the Company of this Agreement and the
consummation of the Merger and the other transactions contemplated hereby will
not obligate the Company to issue, or result in the issuance of, any capital
stock of the Company pursuant to the Rights Agreement or any other agreement or
arrangement, except for the acceleration of vesting and potential exercise of
Company Stock Options contemplated by Section 2.3. There are no outstanding
contractual obligations of the Company or any of its subsidiaries to repurchase,
redeem or otherwise acquire any shares of capital stock of the Company or any of
its subsidiaries.
(v) Since July 2, 2000, the Company and each of its subsidiaries has
not (A) issued, permitted to be issued or entered into any obligation to issue,
any shares of capital stock, or securities exercisable for or convertible into
shares of capital stock, of the Company or any of its subsidiaries, other than
pursuant to and as required by the terms of any Company Stock Options that were
issued and outstanding on such date; (B) repurchased, redeemed or otherwise
acquired, directly or indirectly through one or more of its subsidiaries, any
shares of capital stock of the Company or any of its subsidiaries; (C) declared,
set aside, made or paid to the stockholders of the Company dividends or other
distributions on the outstanding shares of capital stock of the Company; or (D)
split, combined or reclassified any of its shares of capital stock of the
Company or any of its subsidiaries.
(d) Authority. (i) The Company has all requisite corporate power and
authority to enter into this Agreement and, subject to approval by the
stockholders of the Company, to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of the Company, other than such approval by the
stockholders of the Company. This Agreement has been duly executed and delivered
by the Company and constitutes a valid and binding obligation of the Company
enforceable in accordance with its terms, except as affected by bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and other similar
laws relating to or affecting creditors' rights generally and general equitable
principles (whether considered in a proceeding in equity or at law). The
affirmative vote of holders of a majority of the outstanding shares of Company
Common Stock entitled to vote at a duly called and held meeting of stockholders
is the only vote of the Company's stockholders necessary to approve this
Agreement, the Merger and the other transactions contemplated by this Agreement.
At a meeting duly called and held on October 4, the Company's Board of Directors
adopted resolutions approving this Agreement and the Merger, determining that
the terms of the Merger are fair, from a financial point of view, to,
8
<PAGE>
and in the best interests of, the Company's stockholders and recommending that
the Company's stockholders approve and adopt this Agreement.
(ii) Subject to compliance with the applicable requirements of the
Exchange Act, the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended (the "HSR Act"), and the filing of the Certificate of Merger as
-------
contemplated by Section 1.1, the execution and delivery of this Agreement and
the Certificate of Merger, the consummation of the transactions contemplated
hereby and thereby, and compliance of the Company with any of the provisions
hereof or thereof will not breach, constitute an ultra vires act under, 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 termination, cancellation or
acceleration of any obligation or the loss of a material benefit under, or the
creation of a lien, pledge, security interest, charge or other encumbrance on
assets (any such breach, ultra vires act, violation, default, right of
termination, cancellation, acceleration loss or creation, a "Violation")
---------
pursuant to, (x) any provision of the certificate of incorporation or by-laws of
the Company or the governing instruments of any subsidiary of the Company or (y)
subject to obtaining or making the consents, approvals, orders, authorizations,
registrations, declarations and filings referred to in paragraph (iii) below or
in the Company Disclosure Letter, any loan or credit agreement, note, mortgage,
indenture, lease, Company Benefit Plan or other agreement, obligation,
instrument, permit, concession, franchise, license, judgment, order, decree,
statute, law, ordinance, rule or regulation applicable to the Company or any
subsidiary of the Company or their respective properties or assets except
Violations under clause (y) which would not have a Material Adverse Effect on
the Company.
(iii) No consent, approval, order or authorization of, or registration,
declaration or filing with, any court, administrative agency or commission or
other governmental authority or instrumentality, domestic or foreign (a
"Governmental Entity"), is required by or with respect to the Company or any
-------------------
subsidiary of the Company in connection with the execution and delivery of this
Agreement and the Certificate of Merger by the Company, the consummation by the
Company of the transactions contemplated hereby and thereby, and compliance of
the Company with any of the provisions hereof or thereof, the failure to obtain
which would have a Material Adverse Effect on the Company, except for (A) the
filing with the Securities and Exchange Commission (the "SEC") of (1) a Proxy
---
Statement in definitive form relating to the meeting of the Company's
stockholders to be held in connection with the Merger and (2) such other filings
under the Exchange Act as may be required in connection with this Agreement and
the transactions contemplated hereby, (B) the filing of the Certificate of
Merger as contemplated by Section 1.1 and appropriate documents with the
relevant authorities of states in which the Company is qualified to do business,
(C) filings pursuant to the rules of the Nasdaq National Market, and (D) filings
(the "HSR Filings") under the HSR Act.
-----------
(e) SEC Documents. The Company has made available to Parent a true and
complete copy of each report, schedule, registration statement and definitive
proxy statement filed by the Company with the SEC since December 28, 1997 (as
such documents have since the time of their filing been amended, the "Company
-------
SEC Documents"), which are all the documents (other than preliminary material)
-------------
that the Company was required to file with the SEC since such date. As of their
respective dates, (i) the Company SEC Documents complied in all material
respects with the requirements of the Securities Act of 1933, as amended (the
"Securities Act") or the Exchange Act, as the case may be, and the rules and
regulations of the
9
<PAGE>
SEC thereunder applicable to such Company SEC Documents, and (ii) none of the
Company SEC Documents contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading. The financial statements of the Company included in the
Company SEC Documents (including, without limitation, the audited balance sheet
and related statements of operations, stockholders' equity and cash flows of the
Company and its subsidiaries for the fiscal year ended January 2, 2000, as
audited by Deloitte & Touche LLP (such balance sheet and related statements are
referred to hereinafter as the "Year-End Financial Statements"), and the
-----------------------------
unaudited financial statements of the Company and its subsidiaries for the
fiscal quarters ended April 2, 2000 and July 2, 2000, including the balance
sheet of the Company and its subsidiaries dated July 2, 2000 (the "Balance
-------
Sheet")) complied in all material respects with applicable accounting
-----
requirements and with the published rules and regulations of the SEC with
respect thereto, have been prepared in accordance with generally accepted
accounting principles ("GAAP") applied on a consistent basis during the periods
----
involved (except as may be indicated in the notes thereto or, in the case of the
unaudited statements, as permitted by Form 10-Q of the SEC) and fairly present
the consolidated financial position of the Company and its consolidated
subsidiaries as at the dates thereof and the consolidated results of their
operations, stockholders' equity and cash flows for the periods then ended in
accordance with GAAP. As of July 2, 2000, neither the Company nor any of its
subsidiaries had any liabilities or obligations of any nature, whether or not
accrued, contingent or otherwise, that would be required by GAAP to be reflected
on a consolidated balance sheet of the Company and its subsidiaries (including
the notes thereto) and which were not reflected on the Balance Sheet. Since July
2, 2000, except as and to the extent set forth in the Company SEC Documents and
except for liabilities or obligations incurred in the ordinary course of
business consistent with past practice and of substantially the same character,
type and magnitude as incurred in the past, neither the Company nor any of its
subsidiaries has incurred any liabilities of any nature, whether or not accrued,
contingent or otherwise, that would have a Material Adverse Effect on the
Company, or would be required by GAAP to be reflected on a consolidated balance
sheet of the Company and its subsidiaries (including the notes thereto). All
material agreements, contracts and other documents required to be filed as
exhibits to any of the Company SEC Documents have been so filed. No subsidiary
of the Company is required to file any form, report or other document with the
SEC.
(f) Information Supplied. None of the information included or
incorporated by reference in the Proxy Statement (other than information
concerning Parent or Sub provided in writing by Parent or Sub or their counsel
specifically for inclusion or incorporation by reference therein) will, at the
date of mailing to stockholders of the Company and at the time of the meeting of
stockholders to be held in connection with the Merger, 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. The Proxy
Statement (except for information concerning Parent or Sub provided in writing
by Parent or Sub or their counsel specifically for inclusion or incorporation by
reference therein) will comply as to form in all material respects with the
provisions of the Exchange Act and the rules and regulations thereunder.
(g) Absence of Certain Changes or Events. Except as contemplated by
this Agreement or as disclosed in the Company Disclosure Letter or in the
Company SEC
10
<PAGE>
Documents, since January 2, 2000, the Company and its subsidiaries have
conducted their respective businesses only in the ordinary course and consistent
with prior practice and there has not been:
(i) any event, occurrence, fact, condition, change, development or
effect that has had or could reasonably be expected to have, individually or in
the aggregate, a Material Adverse Effect on the Company;
(ii) any event which, if it had taken place following the execution of
this Agreement, would not have been permitted by Section 4.1(b), (c), (d), (f),
(g), (h), (l) or (m) without the prior consent of Parent,
(iii) any condition, event or occurrence which could reasonably be
expected to prevent, hinder or materially delay the ability of the Company to
consummate the transactions contemplated by this Agreement;
(iv) any material change in accounting methods, principles or practices
(or any disagreement with the Company's independent public accountants with
respect to such methods or practices) employed by the Company or any material
change in depreciation or amortization policies or rates applicable to the
Company or any of its subsidiaries;
(v) any incurrence of any material liabilities or obligations of any
nature (whether accrued, absolute, contingent or otherwise) not incurred in the
ordinary course of business consistent with past practice and of substantially
the same character, type and magnitude as incurred in the past, or any other
failure by the Company or any of its subsidiaries to conduct its business in the
ordinary course consistent with past practice;
(vi) any change in the financial condition, capitalization, assets,
liabilities or net worth of the Company, except changes in the ordinary course
of business consistent with past practice and of substantially the same
character, type and magnitude as incurred in the past, none of which changes,
individually or in the aggregate, has had or will have a Material Adverse Effect
on the Company;
(vii) any material damage, destruction or loss, whether or not covered
by insurance, adversely affecting the properties or business of the Company or
its subsidiaries, or any material deterioration in the operating condition of
the Company's or its subsidiaries' assets;
(viii) any mortgage, pledge or subjection to lien, charge or
encumbrance of any kind of any of the Company's or its subsidiaries' assets,
tangible or intangible (other than pursuant to after-acquired property clauses
in security agreements related to indebtedness existing as of January 2, 2000);
(ix) any strike, walkout, labor trouble (other than routine individual
grievances or complaints) or, to the extent that such event has had or could
reasonably be expected to have a Material Adverse Effect on the Company, any
other new or continued event, development or condition of any character relating
to the labor relations of the Company or its subsidiaries;
11
<PAGE>
(x) any increase in the salaries or other compensation payable or to
become payable to, or any advance (excluding advances for ordinary business
expenses) or loan to, any officer, director, employee or stockholder of the
Company or its subsidiaries (except increases made in the ordinary course of
business and consistent with past practice), or any increase in, or any addition
to, other benefits (including without limitation any bonus, profit-sharing,
pension or other plan) to which any of the Company's or its subsidiaries'
officers, directors, employees or stockholders may be entitled, or any payments
to any pension, retirement, profit-sharing, bonus or similar plan except
payments in the ordinary course of business and consistent with past practice
made pursuant to the employee benefit plans described in the Company Disclosure
Letter, or any other payment of any kind to or on behalf of any such officer,
director, employee or stockholder other than payment of base compensation and
reimbursement for reasonable business expenses in the ordinary course of
business;
(xi) any material adverse change or, to the knowledge of the Company,
any threat of any material adverse change in the Company's or any of its
subsidiaries' relations with, or any loss or threat of loss of, any of the
Company's or any of its subsidiaries' important suppliers, distributors or
employees;
(xii) any write-offs as uncollectible of any notes or accounts
receivable of the Company or any of its subsidiaries or write-downs of the value
of any assets or inventory by the Company or any of its subsidiaries other than
in immaterial amounts or in the ordinary course of business consistent with past
practice and of substantially the same character, type and magnitude as incurred
in the past;
(xiii) any payment, loan or advance of any amount to or in respect of,
or the sale, transfer or lease of any properties or assets (whether real,
personal or mixed, tangible or intangible) to, or entering into of any
agreement, arrangement or transaction with, any Related Party, except for (i)
directors' fees and (ii) compensation to the officers and employees of the
Company and its subsidiaries at rates not exceeding the rates of compensation
disclosed in the Company Disclosure Letter (as used herein, a "Related Party"
-------------
means the Company, any of its subsidiaries, any of the officers or directors of
the Company or any of its subsidiaries, any affiliate of the Company or any of
its subsidiaries or any of their respective officers or directors, or any
business or entity controlled, directly or indirectly, by the Company or any of
its subsidiaries);
(xiv) any disposition of or failure to keep in effect any rights in, to
or for the use of, any patent, trademark, service mark, trade name or copyright,
or any disclosure to any person not either an employee, franchisee or other
person subject to a duty of confidentiality with respect thereto, or other
disposal of any trade secret, process or know-how;
(xv) any disposition of or failure to keep in effect any right in, to
or for the use of any franchise, right, license, permit or other authorization
of the Company or any of its subsidiaries;
(xvi) any transaction, agreement or event outside the ordinary course
of the Company's or its subsidiaries' business or inconsistent with past
practice or not of substantially the same character, type or magnitude as
incurred in the past.
12
<PAGE>
(h) Compliance with Applicable Laws. The Company and its subsidiaries
have been operated at all times in compliance with all applicable laws and
regulations, and are not in default or violation of any notes, bonds, mortgages,
indentures, contracts, agreements, leases, licenses, permits, franchises, or
other instruments or obligations to which the Company or any of its subsidiaries
is a party or by which any of their property or assets is bound, except where
any such noncompliance, conflicts, defaults or violations would not have a
Material Adverse Effect on the Company. As of the date hereof, no investigation
by any Governmental Entity with respect to the Company or any of its
subsidiaries is pending or, to the Company's best knowledge, threatened. The
Company or one of its subsidiaries possesses a valid license or licenses to sell
and serve alcoholic beverages in each restaurant operated by the Company and any
of its subsidiaries, and the validity of such licenses and the ability to sell
and serve alcoholic beverages in each such restaurant as currently permitted
shall not be affected by the Merger.
(i) Environmental. Except for any matters which, individually or in
the aggregate, could not reasonably be expected to have a Material Adverse
Effect on the Company, (i) the Company and each of its subsidiaries is and at
all times has been in compliance with all applicable laws relating to
Environmental Matters; (ii) the Company and each of its subsidiaries has
obtained, and is in compliance with, all permits, licenses or approvals required
by applicable laws for the use, storage, treatment, transportation, release,
emission and disposal of raw materials, by-products, wastes and other
substances, including, without limitation, hazardous substances and wastes, used
or produced by or otherwise relating to the operations of any of them; and (iii)
there are no past or present events, conditions, activities or practices that
would prevent compliance or continued compliance with any law or give rise to
any Environmental Liability. There are no claims either by any Governmental
Entity or any third party pending, or to the Company's knowledge, threatened,
against the Company or any of its subsidiaries arising from any Environmental
Matter.
As used in this Agreement, the term "Environmental Matters" means any
---------------------
matter arising out of or relating to pollution or protection of the environment,
human safety or health, or sanitation, including, without limitation, matters
relating to food preparation and handling, emissions, discharges, releases,
exposures, or threatened releases of pollutants, contaminants, or hazardous or
toxic materials or wastes including petroleum and its fractions, radiation,
polychlorinated byphenols, biohazards and all toxic agents of whatever type or
nature into ambient air, surface water, ground water, or land, or otherwise
relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of pollutants, contaminants or hazardous or
toxic materials or wastes including petroleum and its fractions, radiation,
biohazards and all toxic agents of whatever type or nature. "Environmental
-------------
Liability" means any liability or obligation arising under any law or under any
---------
other theory of law or equity (including, without limitation, any liability for
personal injury, property damage or remediation) arising from or relating to any
Environmental Matters.
(j) Litigation. There are no material claims, actions, suits or
legal or administrative arbitrations or other proceedings or investigations
("Litigation") pending against the Company or any of its subsidiaries,
----------
or, to the Company's knowledge, threatened against or affecting the Company or
any of its subsidiaries, or to which the Company or any of its subsidiaries is a
party, before or by any Federal, foreign, state, local or other governmental or
non-governmental department, commission, board, bureau, agency, court or other
13
<PAGE>
instrumentality, or by any private person or entity. There are no existing or,
to the best knowledge of the Company, threatened material orders, judgments or
decrees of any court or other Governmental Entity which specifically apply to
the Company, any of its subsidiaries or any of their respective properties or
assets.
(k) Taxes. (i) Each Tax Entity has timely filed all Tax Returns
required to be filed by any of them (subject to permitted extensions). All such
Tax Returns are true, correct and complete when filed, except for such instances
which individually or in the aggregate could not have a Material Adverse Effect
on the Company. All Taxes of each Tax Entity which are (i) shown as due on such
Tax Returns, (ii) otherwise due and payable or (iii) claimed or asserted by any
taxing authority to be due, have been paid, except for those Taxes being
contested in good faith and for which adequate reserves have been established in
the financial statements included in the Company SEC Documents in accordance
with GAAP. The Company does not know of any proposed or threatened Tax claims or
assessments which, if upheld, could individually or in the aggregate have a
Material Adverse Effect on the Company. Each Tax Entity has withheld and paid
over to the relevant taxing authority all Taxes required to have been withheld
and paid in connection with payments to employees, independent contractors,
creditors, shareholders or other third parties, except for such Taxes which
individually or in the aggregate could not have a Material Adverse Effect on the
Company. No material deficiencies for any Taxes have been proposed, asserted or
assessed against any Tax Entity that are not adequately reserved for, no audit
of any Tax Return of any Tax Entity is being conducted by a tax authority, and
no extension of the statute of limitations on the assessment of any taxes has
been granted to any Tax Entity and is currently in effect. For purposes of this
Agreement, (a) "Tax" (and, with correlative meaning, "Taxes") means any federal,
--- -----
state, local or foreign income, gross receipts, property, sales, use, license,
excise, franchise, employment, payroll, premium, withholding, alternative or
added minimum, ad valorem, transfer or excise tax, or any other tax, custom,
duty, governmental fee or other like assessment or charge of any kind
whatsoever, together with any interest or penalty, imposed by any Governmental
Entity; (b) "Tax Return" means any return, report or similar statement required
----------
to be filed with respect to any Tax (including any attached schedules),
including, without limitation, any information return, claim for refund, amended
return or declaration of estimated Tax; and (c) "Tax Entity" means the Company,
----------
each of the Company's subsidiaries, and each consolidated, combined, unitary or
similar group of which the Company or any of its subsidiaries is now, or within
the preceding eight (8) years has been, a member.
(ii) No Tax Entity has executed any closing agreement pursuant to
Section 7121 of the Code or any predecessor provisions thereof, or any similar
provision of foreign, state or local law, or has any ruling request pending with
any tax authority. There are no tax certiorari proceedings currently pending,
tax abatements currently in effect or proposed materially increased tax
assessments of which any Tax Entity has been notified or has knowledge in the
context of such Tax Entity's real estate assets. No assets of any Tax Entity
constitutes tax-exempt financed property or tax-exempt use property within the
meaning of Section 168 of the Code, and no assets of any Tax Entity are subject
to a lease, safe-harbor lease, or other arrangement as a result of which any Tax
Entity is not treated as the owner for federal income tax purposes. No Tax
Entity has filed a consent pursuant to Section 341(f) of the Code or agreed to
have Section 341(f)(2) of the Code apply to any disposition of a "subsection (f)
asset" (as such term is defined in Section 341(f)(4) of the Code). No Tax Entity
(i) is required or has agreed to
14
<PAGE>
make any adjustments pursuant to Section 481(a) of the Code or any similar
provision of foreign, state or local law by reason of a change in accounting
method initiated by it or any other relevant party, (ii) has knowledge that any
tax authority has proposed any such adjustment or change in accounting method,
and/or (iii) has an application pending with any tax authority requesting
permission for any changes in accounting methods that relate to the business or
assets of any Tax Entity. No Tax Entity is a party to any contract, agreement,
plan or arrangement covering any periods that, individually or collectively,
could give rise to any amount not being deductible by reason of Section 280G of
the Code. The Company and each of its subsidiaries are not, have not been within
the preceding eight (8) years, own no interest in, and have never owned an
interest in, "S corporations" within the meaning of Section 1361(a)(1) of the
Code, "qualified subchapter S subsidiaries" within the meaning of Section
1361(b)(3)(B) of the Code, "personal holding companies" within the meaning of
Section 542 of the Code, "controlled foreign corporations" within the meaning of
Section 957 of the Code, "foreign personal holding companies" within the meaning
of Section 552 of the Code, "passive foreign investment companies" within the
meaning of Section 1296 of the Code, "foreign investment companies" within the
meaning of Section 1246 of the Code, an "FSC" within the meaning of Section 922
of the Code, or a "DISC" or "Former DISC" within the meaning of Section 992 of
the Code. No Tax Entity has made, been party to, or been the subject of, any
elections under Sections 108, 168, 338, 441, 472, 1017, 1033 or 4977 of the
Code. No Tax Entity has entered into any transfer pricing agreements with any
tax authority. No assets of any Tax Entity are held in an arrangement for which
partnership Tax Returns are being filed or are required to be filed. No Tax
Entity has availed itself of any Tax amnesty or similar relief in any taxing
jurisdiction. None of Parent or any of its subsidiaries will be required to
withhold tax under Section 1445 of the Code with respect to any consideration
paid pursuant to this Agreement.
(l) Employee Benefit Plans. All employee benefit plans, compensation
arrangements and other benefit arrangements covering employees of the Company or
any of its subsidiaries (the Company Benefit Plans") and all employee agreements
---------------------
providing compensation, severance or other benefits to any employee or former
employee of the Company or any of its subsidiaries which are not disclosed in
the Company SEC Documents and which exceed $50,000 per annum are set forth in
the Company Disclosure Letter. True and complete copies of the Company Benefit
Plans have been made available to Parent. To the extent applicable, the Company
Benefit Plans comply in all material respects with the requirements of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), and the
-----
Code, and any Company Plan intended to be qualified under Section 401(a) of the
Code has received a determination letter and, to the knowledge of the Company,
continues to satisfy the requirements for such qualification. Neither the
Company nor any of its subsidiaries nor any ERISA Affiliate of the Company
maintains, contributes to or is obligated to contribute to or has maintained or
contributed or been obligated to contribute to in the past six (6) years to any
benefit plan which is covered by Title IV of ERISA or Section 412 of the Code or
a "multi-employer plan" within the meaning of Section 3(37) of ERISA or Section
4001(a)(3) of the Code. No Company Benefit Plan nor the Company nor any
subsidiary has incurred any liability or penalty under Section 4975 of the Code
or Section 502(i) of ERISA or, to the knowledge of the Company, engaged in any
transaction that would reasonably be expected to result in any such liability or
penalty. Each Company Benefit Plan has been maintained and administered in
compliance with its terms and with ERISA and the Code to the extent applicable
thereto, except for such non-compliance which individually or in the aggregate
would not have a Material
15
<PAGE>
Adverse Effect on the Company. There is no pending or, to the knowledge of the
Company, anticipated, Litigation against or otherwise involving any of the
Company Benefit Plans and no Litigation (excluding claims for benefits incurred
in the ordinary course of Company Benefit Plan activities) has been brought
against or with respect to any such Company Benefit Plan. All contributions
required to be made as of the date hereof to the Company Benefit Plans have been
made or provided for. Except as described in the Company SEC Documents or as
required by law, neither the Company nor any of its subsidiaries maintains or
contributes to any plan or arrangement which provides or has any liability to
provide life insurance or medical or other employee welfare benefits to any
employee or former employee upon his retirement or termination of employment,
and neither the Company nor any of its subsidiaries has ever represented,
promised or contracted (whether in oral or written form) to any employee or
former employee that such benefits would be provided. No Company Benefit Plan is
under investigation or audit by either the United States Department of Labor or
the Internal Revenue Service. Except as provided for in this Agreement, the
execution of, and performance of the transactions contemplated in, this
Agreement will not (either alone or upon the occurrence of any additional or
subsequent events) constitute an event under any benefit plan, policy,
arrangement or agreement or any trust or loan that will or may result in any
payment (whether of severance pay or otherwise), acceleration, forgiveness of
indebtedness, vesting, distribution, increase in benefits or obligation to fund
benefits with respect to any employee. No payment or benefit which will or may
be made by the Company, any of its subsidiaries or Parent with respect to any
employee of the Company or any of its subsidiaries will constitute an "excess
parachute payment" within the meaning of Section 280G(b)(1) of the Code.
For purposes of this Agreement "ERISA Affiliate" means any business or
---------------
entity which is a member of the same "controlled group of corporations," under
"common control" or an "affiliated service group" with the Company within the
meaning of Sections 414(b), (c) or (m) of the Code, as required to be aggregated
with the Company under Section 414(o) of the Code, or is under "common control"
with the Company, within the meaning of Section 4001(a)(14) of ERISA, or any
regulations promulgated or proposed under any of the foregoing Sections.
(m) Restaurants and Properties.
(i) The Company operates 116 restaurants at the locations listed in
the Company Disclosure Letter.
(ii) The Company Disclosure Letter lists by address and lessor all
leases and subleases (including those denominated as "licenses") of real
property entered into by the Company or any of its subsidiaries as lessee (the
"Leased Real Property"). The Company Disclosure Letter lists by address all real
--------------------
property owned by the Company or any of its subsidiaries (the "Owned Real
Property").
(iii) The Company Disclosure Letter lists by address and lessee all
leases and subleases (including those denominated as "licenses") of real
property entered into by the Company or any of its subsidiaries as lessor with a
franchisee as lessee (the "Franchised Leased Property"). The Company Disclosure
--------------------------
Letter lists by address and lessee all leases and subleases (including those
denominated as "licenses") of real property entered into by the Company or any
of its subsidiaries as lessor with a non-franchisee as lessee (the "Surplus
-------
Leased Property"). The
---------------
16
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Company Disclosure Letter lists by address and lessor (if applicable) all
property leased (or "licensed") or owned by the Company or any of its
subsidiaries where it neither operates a restaurant nor leases the property to a
third party (the "Vacant Surplus Property").
-----------------------
(iv) None of the Company or its subsidiaries is in default in any
material respect under any leases under which it is the tenant of real or
personal property. All leases with respect to the Leased Real Property, the
Franchised Leased Property, the Surplus Leased Property and the Vacant Surplus
Property are valid and binding obligations of the Company or one of its
subsidiaries, as the case may be, and are enforceable by and against the Company
or one of its subsidiaries, as the case may be, in accordance with their terms.
To the knowledge of the Company, all such leases are valid, binding and
enforceable against the other parties thereto in accordance with their terms and
are in full force and no party to such leases has given any notice of default
with respect thereto which remains outstanding.
(v) The Company has provided or made available to Parent true and
correct copies of all leases and subleases described in this section, together
with any amendments, modifications or supplements thereto. The Company has
provided or made available to Parent true and correct copies of all title
insurance policies owned by the Company relating to Owned Real Property and
leaseholds owned by the Company or any of its subsidiaries. The premiums for
such title insurance policies have been paid in full.
(vi) The construction, use and operation of the Leased and Owned Real
Property conforms to all applicable building, zoning, fire and life safety,
subdivision, and other laws, ordinances, regulations, codes, permits, licenses
and to any and all certificates, restrictions and conditions affecting title,
except for such non-conformance as could not have a material adverse effect on
the Company's' or its subsidiaries' ownership, use or operation of the relevant
property.
(vii) The Company has not received any written notice or order by any
Governmental Entity with respect to the Leased or Owned Real Property which (i)
relates to the violation of building, safety, fire or other ordinances or
regulations, (ii) claims any defect or deficiency, or (iii) requests the
performance of any repairs or alterations.
(viii) There is no pending or, to the knowledge of the Company,
threatened or contemplated, condemnation, expropriation, eminent domain or
similar proceeding affecting all or any portion of any of the Leased or Owned
Real Property. (ix) There are no special assessments for public improvements or
otherwise now affecting the Leased Real Property or Owned Real Property nor does
the Company know of (i) any such pending or threatened assessment affecting the
Leased Real Property or Owned Real Property or (ii) any contemplated
improvements affecting the Leased Real Property or Owned Real Property that may
result in special assessments affecting the Leased Real Property or Owned Real
Property.
(n) Properties. The Company or its subsidiaries has good title and,
in the case of Owned Real Property, good and marketable fee simple title, to its
properties and assets, including the properties and assets reflected in the
Balance Sheet or acquired after July 2, 2000
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(other than assets disposed of since July 2, 2000 in the ordinary course of
business consistent with past practice and of substantially the same character,
type and magnitude as assets disposed of in the past), in each case free and
clear of all title defects, liens, claims, charges, encumbrances and
restrictions, except for (i) liens, encumbrances or restrictions which secure
indebtedness which is properly reflected in the Balance Sheet; (ii) liens for
Taxes accrued but not yet payable; (iii) liens arising as a matter of law in the
ordinary course of business with respect to obligations incurred after July 2,
2000, provided that the obligations secured by such liens are not delinquent;
and (iv) such title defects, liens, encumbrances and restrictions, if any, as
individually or in the aggregate would not have a Material Adverse Effect on the
Company. None of the Company's or its subsidiaries' properties or assets is
owned jointly with any other person, nor does any other person have any option
to acquire the same. The Company and each of its subsidiaries either own, or
have valid leasehold interests in, and are in possession of, all properties and
assets used by them in the conduct of their business and each such lease is
valid without material default thereunder by the lessee or, to the Company's
knowledge, by the lessor. Neither the Company nor any of its subsidiaries has
any legal obligation, absolute or contingent, to any other person to sell or
otherwise dispose of any interest in any of the restaurants owned or operated by
the Company or any of its subsidiaries, or to sell or dispose of any of their
other respective assets with an individual value of $25,000 or an aggregate
value in excess of $100,000.
(o) Labor Controversies. Neither the Company nor any of its
subsidiaries is a party to, or bound by, any collective bargaining agreement or
other contracts or understanding with a labor union or labor organization.
Except for such matters which, individually or in the aggregate, would not have
a Material Adverse Effect on the Company, there is no (i) unfair labor practice,
labor dispute (other than routine individual grievances or complaints) or labor
arbitration proceeding pending or, to the knowledge of the Company, threatened,
against the Company or any of its subsidiaries relating to their business, (ii)
to the knowledge of the Company, activity or proceeding by a labor union or
representative thereof to organize any employees of the Company or any of its
subsidiaries, or (iii) lockouts, strikes, slowdowns, work stoppages or, to the
knowledge of the Company, threats thereof by or with respect to such employees.
(p) Intellectual Property. The Company Disclosure Letter sets forth
a true and complete list and description of (a) all United States and foreign
patents, trademarks, trade names, service marks, copyrights and applications
therefor owned by the Company and its subsidiaries (the foregoing, together with
the Company's trade dress and trade secrets (including secret recipes and
formulae), the "Intellectual Property Rights") and (b) all United States and
----------------------------
foreign patents, trademarks, trade names, service marks, copyrights and
applications therefor licensed to the Company or any of its subsidiaries (the
foregoing, together with any rights in trade dress or trade secrets (including
secret recipes and formulae) licensed to the Company or any of its subsidiaries,
the "Licensed Rights").
---------------
(1) (i) The Intellectual Property Rights are free and clear of any liens,
claims or encumbrances and are not subject to any license (royalty bearing
or royalty-free) or any other arrangement requiring any payment to any
person nor the obligation to grant rights to any person in exchange, except
for Franchise Agreements disclosed pursuant to the Company Disclosure
Letter; (ii) the Licensed Rights are free and clear of any liens,
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<PAGE>
claims, encumbrances, royalties or other obligations other than such terms,
conditions and restrictions as are contained in the document granting such
license; (iii) the Intellectual Property Rights and the Licensed Rights are
all those rights necessary to the conduct of the business of each of the
Company, its subsidiaries and the Company's and its subsidiaries'
franchisees as presently conducted or as currently contemplated to be
conducted; and (iv) neither the Intellectual Property Rights nor the
Licensed Rights nor the exploitation by the Company and its subsidiaries
thereof shall infringe upon any right of any third party, including,
without limitation, any rights under the laws respecting patents,
trademarks, copyrights or trade secrets.
(2) The validity of the Intellectual Property Rights and title thereto, and the
validity of the Licensed Rights: (i) have not been questioned in any prior
Litigation against or involving the Company or any of its subsidiaries;
(ii) are not being questioned in any pending Litigation against or
involving the Company or any of its subsidiaries; and (iii) to the
knowledge of the Company, are not the subject(s) of any threatened or
proposed Litigation.
(3) The business of each of the Company, its subsidiaries and, to the knowledge
of the Company, the Company's and its subsidiaries' franchisees, as
presently conducted, does not conflict with and has not been alleged to
conflict with any patents, trademarks, trade names, service marks,
copyrights or other intellectual property rights of others.
(4) The consummation of the transactions contemplated hereby will not result in
the loss or impairment of any of the Intellectual Property Rights or any of
the Licensed Rights.
(5) The Company or its subsidiaries have filed all certificates, affidavits and
other documents, and taken all other actions necessary to retain their
respective title to all their respective trademarks, service marks, patents
and other Intellectual Property Rights and Licensed Rights.
(6) Since its respective organization, each of the Company and its subsidiaries
has taken reasonable security measures to protect the secrecy,
confidentiality and value of its respective trade secrets, including know-
how, negative know-how, formulas, patterns, compilations, programs,
devices, methods, techniques, processes, inventions, designs, computer
programs, and technical data and all information that derives independent
economic value, actual or potential, from not being generally known or
known by competitors.
The Company does not know of any use by others of any of the
Intellectual Property Rights or the Licensed Rights material to the business of
the Company, its subsidiaries or the Company's and its subsidiaries'
franchisees, each as presently conducted.
(q) Change of Control Agreements. Except as set forth in the Company
SEC Documents filed prior to the date hereof, neither the execution and delivery
of this Agreement nor the consummation of the Merger or the other transactions
contemplated by this Agreement, will (either alone or in conjunction with any
other event) result in, cause the accelerated vesting or delivery of (except as
contemplated by Section 2.3), or increase the amount or value of, any
19
<PAGE>
payment or benefit to any director, officer or employee of the Company, and,
without limiting the generality of the foregoing, no amount paid or payable by
the Company in connection with the Merger or the other transactions contemplated
by this Agreement (either solely as a result thereof or as a result of such
transactions in conjunction with any other event) will be an "excess parachute
payment" within the meaning of Section 280G of the Code .
(r) Contracts and Commitments. All material contracts of the Company
or its subsidiaries have been included in the Company SEC Documents, except for
those contracts not required to be filed pursuant to the rules and regulations
of the SEC. Except as listed in the Company Disclosure Letter, neither the
Company nor any of its subsidiaries is a party to or bound by any lease,
contract or commitment, oral or written, formal or informal, of the following
types (each such contract, together with the material contracts required to be
filed in the Company SEC documents, the "Material Contracts"):
(i) mortgages, indentures, security agreements or other agreements
and instruments relating to the borrowing of money, the extension of credit or
the granting of liens or encumbrances, or any guaranty of any of the foregoing;
(ii) employment and consulting agreements providing for payment in
excess of $25,000 per annum;
(iii) union or other collective bargaining agreements;
(iv) powers of attorney;
(v) sales agency, broker, manufacturer's representative and
distributorship agreements or other distribution or commission arrangements;
(vi) licenses of patent, trademark and other intellectual property
rights (except for Franchise Agreements and Licensed Intellectual Property
identified elsewhere herein);
(vii) agreements, orders or commitments for the purchase of services,
raw materials, supplies or finished products from any one supplier for an amount
in excess of $100,000;
(viii) contracts or options relating to the sale of any asset with a
book value in excess of $100,000, other than sales of inventory in the ordinary
course of business;
(ix) bonus, profit-sharing, compensation, stock option, pension,
retirement, deferred compensation, accrued vacation pay, group insurance,
welfare agreements or other plans, agreements, trusts or arrangements for the
benefit of employees, officers or directors of the Company or any of its
subsidiaries;
(x) agreements or commitments for capital expenditures in excess of
$100,000;
(xi) partnership or joint venture agreements;
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<PAGE>
(xii) agreements requiring the consent of any party thereto to the
consummation of the transactions contemplated hereby;
(xiii) agreements, contracts or commitments for any charitable or
political contribution, except as to charitable contributions not in excess of
$1000 in the case of any individual commitment or $5000 in the aggregate;
(xiv) agreements, contracts, commitments or arrangements relating to
any liquor license of any restaurant operated by the Company or any of its
subsidiaries; and
(xv) other agreements, contracts and commitments which are material
to the business of the Company or its subsidiaries or which involve payments or
receipts of more than $100,000 in any single year, or which were entered into
other than in the ordinary and usual course of business consistent with past
practice and of substantially the same character, type and magnitude as incurred
in the past.
All Material Contracts are valid and binding obligations of the
Company and/or its subsidiaries (as the case may be) and are enforceable against
the Company and/or its subsidiaries, as the case may be, in accordance with
their terms. The Company has made available true, correct and complete copies
of all Material Contracts to Parent. All Material Contracts have not been
modified or amended except as disclosed in the Company Disclosure Letter and
there are no other contracts and commitments which were material to the Company
or its subsidiaries and their businesses which have lapsed in the last twelve
months and which have not been replaced by a comparable contract. The Company
and each of its subsidiaries has performed all obligations required to be
performed by them, have been paid all amounts required to be paid by them and
are not in default in any material respect under any Material Contract and no
event has occurred thereunder in each case which, with the lapse of time or the
giving of notice or both, would constitute such a default. To the knowledge of
the Company: (i) all Material Contracts are valid, binding and enforceable
against the other parties thereto in accordance with their terms, and are in
full force and effect; (ii) all parties to Material Contracts (other than the
Company) have complied with the provisions thereof and have performed all
obligations required to be performed by each of them to date; (iii) no such
party is in default under any of the terms thereof, and (iv) no event has
occurred that with the passage of time or the giving of notice or both would
constitute a default by any party (other than the Company) under any provision
thereof except, in each case, for such non-compliance or default which will not
have a Material Adverse Effect on the Company.
(s) Affiliated Transactions. All transactions between the Company or
any of its subsidiaries, on the one hand, and any officer, director or holder of
in excess of five percent (5%) of the Company Common Stock, or any affiliate of
any of them, have been disclosed in the Company SEC Documents or the Company
Disclosure Letter. Except as disclosed in the Company SEC Documents, no officer,
director or holder of in excess of five percent (5%) of Company Common Stock has
any material interest in (i) any assets, including, without limitation, any
intellectual property, used or held for use in the business of the Company and
its subsidiaries or (ii) any creditor, supplier or franchisee of the Company or
any or its subsidiaries.
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<PAGE>
(t) Insurance. The Company and each of its subsidiaries are
adequately insured in such amounts and against such risks as are usually insured
against by persons operating in the businesses in which the Company and its
subsidiaries operate, and all policies relating to such insurance are in full
force and effect. All products liability and general liability policies
maintained by or for the benefit of the Company or its subsidiaries have been
"occurrence" policies and not "claims made" policies .
(u) Records. The respective corporate record books of or relating to
the Company and each of its Significant Subsidiaries made available to Parent by
the Company contain accurate and substantially complete records of (x) all
material corporate actions of the respective stockholders and directors (and
committees thereof) of the Company and its subsidiaries and (y) the certificate
of incorporation, by-laws and/or other governing instruments of the Company and
its Significant Subsidiaries.
(ii) The books and records of the Company and its subsidiaries are
substantially complete and correct.
(v) Section 203 of the DGCL. The Board of Directors of the Company
has approved the Merger and this Agreement, and such approval is sufficient to
render inapplicable to the Merger and this Agreement, and the transactions
contemplated by this Agreement, the provisions of Section 203 of the DGCL. No
other state takeover statute or similar statute or regulation applies or
purports to apply to the Merger, this Agreement or the transactions contemplated
by this Agreement. No provision of the certificate of incorporation, by-laws
and/or other governing instruments of the Company or any of its subsidiaries
would restrict or impair the ability of Parent to vote, or otherwise to exercise
the rights of a stockholder with respect to, shares of the Company and any of
its subsidiaries that may be acquired or controlled by Parent.
(w) Opinion of Financial Advisor. The Company has received the
opinion of Donaldson, Lufkin & Jenrette (the "Independent Advisor") dated
October 4, 2000 to the effect that, as of such date, the consideration to be
received by the stockholders of the Company pursuant to this Agreement is fair
to such stockholders from a financial point of view, a signed copy of which
opinion has been delivered to Parent.
(x) Franchise Matters. The Company Disclosure Letter contains a list
of the agreements whereby the Company or its subsidiaries has granted
development, franchise or license rights to operate Taco Cabana restaurants,
except for agreements which have expired or been terminated (the "Franchise
Agreements"). The Franchise Agreements are binding and enforceable against the
other parties thereto in accordance with their terms, and are in full force and
effect. The Company and each of its subsidiaries is in compliance with all
applicable laws governing the offering of franchises. All of the Franchise
Agreements are valid and binding obligations of the Company or its subsidiaries,
as the case may be, and are enforceable against the Company or its subsidiaries,
as the case may be, in accordance with their terms. None of the Franchise
Agreements have been amended or modified except as disclosed in the Company
Disclosure Letter. The Company or its subsidiaries, as the case may be, has
performed all obligations required to be performed by it under the Franchise
Agreements, and the Company is not in default in any material respect under any
Franchise Agreement and no event has occurred
22
<PAGE>
thereunder in each case which, with the lapse of time or the giving of notice or
both, would constitute such default. All parties to the Franchise Agreements
(other than the Company or its subsidiaries, as the case may be) have complied
in all material respects with the provisions thereof and have performed in all
material respects all obligations required to be performed by each of them to
date; and, except as disclosed in the Company Disclosure Letter, no such party
is in default or has ever been in default under any of the material terms
thereof and no event has occurred that with the passage of time or the giving of
notice or both would constitute a default by any such party under any material
provision thereof. Except as set forth in the Company Disclosure Letter, there
are no claims, actions, suits, arbitrations, controversies, investigations or
proceedings pending, or to the knowledge of the Company, threatened or
contemplated, against or affecting the Company or any of its subsidiaries in
connection with the Franchise Agreements.
(y) Disclosure. No representation, warranty or covenant made by the
Company in this Agreement, any Exhibits or the Company Disclosure Letter
contains an untrue statement of a material fact or omits to state a material
fact required to be stated herein or therein or necessary to make the statements
contained herein or therein, in light of the circumstances under which they were
made, not misleading.
(z) Company Rights Agreement. The Company has delivered to Parent a
true and correct copy of the Rights Agreement as in effect as of the execution
and delivery of this Agreement. The board of directors of the Company has
amended the Rights Agreement in accordance with its terms to render it
inapplicable to the transactions contemplated by this Agreement. Neither Parent
nor Sub shall be deemed to be an "Acquiring Person" (as defined in the Rights
Agreement) and the "Distribution Date" (as defined in the Rights Agreement)
shall not be deemed to occur and the Company Rights will not separate from the
Company Common Stock as a result of the Company entering into this Agreement or
consummating the Merger and/or the other transactions contemplated by this
Agreement. Neither Parent, the Surviving Corporation nor any of Parent's
subsidiaries will have any obligations under the Company Rights or the Rights
Agreement and the holders of the Company Rights will have no rights under the
Company Rights or the Rights Agreement as a result of the Company entering into
this Agreement or the consummation of the Merger and/or the other transactions
contemplated by this Agreement.
3.2 Representations and Warranties of Parent and Sub Parent and Sub
jointly and severally represent and warrant to the Company as follows:
(a) Organization, Standing and Power. Each of Parent and Sub is a
corporation, duly organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation, has all requisite power and
authority and all necessary governmental approvals to own, lease and operate its
properties and to carry on its business as it is now being conducted, and is
duly qualified and in good standing to do business in each jurisdiction in which
the nature of its business or the ownership or leasing of its properties makes
such qualification necessary, other than in such jurisdictions where the failure
so to qualify would not, individually or in the aggregate, have a Material
Adverse Effect on Parent.
(b) Authority. (i) Parent and Sub have all requisite corporate power
and authority to enter into this Agreement and to consummate the transactions
contemplated hereby.
23
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The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of Parent or Sub, as the case may be. This
Agreement has been duly executed and delivered by Parent and Sub and constitutes
a valid and binding obligation of Parent or Sub, as the case may be, enforceable
in accordance with its terms, except as affected by bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and other similar laws
relating to or affecting creditors' rights generally and general equitable
principles (whether considered in a proceeding in equity or at law).
(ii) Subject to compliance with the applicable requirements of the
Exchange Act, the HSR Act and the filing of the Certificate of Merger, the
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby will not result in any Violation pursuant to
(x) any provision of the certificate of incorporation or by-laws of Parent, the
certificate of incorporation or by-laws of Sub, or the governing instruments of
any other subsidiary of Parent or (y) except as disclosed in the letter dated
the date hereof and delivered by Parent to the Company simultaneously with the
execution and delivery of this Agreement (the "Parent Disclosure Letter") and
subject to obtaining or making the consents, approvals, orders, authorizations,
registrations, declarations and filings referred to in paragraph (iii) below or
in the Parent Disclosure Letter, any loan or credit agreement, note, mortgage,
indenture, lease, benefit plan or other agreement, obligation, instrument,
permit, concession, franchise, license, judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to Parent, Sub or any other subsidiary
of Parent or their respective properties or assets except Violations under
clause (y) above which do not or would not have a Material Adverse Effect on
Parent.
(iii) No consent, approval, order or authorization of, or
registration, declaration or filing with, any Governmental Entity is required by
or with respect to Parent, Sub or any other subsidiary of Parent in connection
with the execution and delivery of this Agreement by Parent and Sub, the
consummation by Parent or Sub, as the case may be, of the transactions
contemplated hereby, and compliance by Parent and Sub with any of the provisions
hereof, the failure to obtain which would have a Material Adverse Effect on
Parent, except for (A) such filings under the Exchange Act as may be required in
connection with this Agreement and the transactions contemplated hereby, (B) the
filing of the Certificate of Merger as contemplated by Section 1.1 and
appropriate documents with the relevant authorities of states in which Parent
and Sub are qualified to do business, and (C) the HSR Filings.
(c) Information Supplied. None of the information concerning Parent
or Sub provided by or on behalf of Parent or Sub specifically for inclusion or
incorporation by reference in the Proxy Statement will, at the date of mailing
to stockholders and at the times of the meetings of stockholders to be held in
connection with the Merger, 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.
(d) Interim Operations of Sub Sub was incorporated on October 5,
2000, has engaged in no other business activities and has conducted its
operations only as contemplated hereby.
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<PAGE>
(e) Financial Capability. Parent has previously delivered to the
Company a true and complete copy of a commitment letter, dated September 29,
2000 (the "Commitment Letter"), addressed to Parent from Chase Bank of Texas,
-----------------
N.A., Parent's debt financing source, for the aggregate amount of up to $250
million of bank financing (the "Financing") for, among other things, the funds
---------
necessary to fund the Merger (the "Offer Consideration"). Parent has no reason
-------------------
to believe that the conditions to the Financing will not be satisfied or waived.
The Financing and Parent's available funds will be sufficient to fund the Offer
Consideration.
ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS
4.1 Covenants of Company During the period from the date of this
Agreement and continuing until the Effective Time, the Company agrees as to
itself and its subsidiaries that (except as expressly contemplated or permitted
by this Agreement or to the extent that Parent shall otherwise consent in
writing):
(a) Ordinary Course. The Company and its subsidiaries shall carry on
their respective businesses in the usual, regular and ordinary course and use
commercially reasonable efforts to preserve intact their present business
organizations, maintain their rights and franchises and preserve their
relationships with employees, officers, customers, suppliers and others having
business dealings with them. The Company and its subsidiaries shall maintain in
force all insurance policies and Consents with respect to the Company and its
subsidiaries and shall maintain all assets and properties of the Company and its
subsidiaries in customary repair, order and condition, reasonable wear and tear
excepted. The Company shall not, nor shall it permit any of its subsidiaries to,
(i) enter into any new material line of business or (ii) incur or commit to any
significant capital expenditures or any obligations or liabilities other than
capital expenditures and obligations or liabilities incurred or committed to as
disclosed in the Company Disclosure Letter. The Company and its subsidiaries
will comply with all applicable laws and regulations wherever its business is
conducted, including without limitation the timely filing of all reports, forms
or other documents with the SEC required pursuant to the Securities Act or the
Exchange Act, except where such noncompliance would not have a Material Adverse
Effect on the Company. The Company and its subsidiaries shall not enter into any
new Franchise Agreements. The Company and its subsidiaries shall not amend or
modify any existing Franchise Agreements or the nature of its relationship with
their franchisees, or agree to do either of the foregoing.
(b) Dividends; Changes in Stock. The Company shall not, nor shall it
permit any of its subsidiaries to, nor shall the Company propose to, (i) declare
or pay any dividends on or make other distributions in respect of any of its
capital stock, other than cash dividends payable by a subsidiary of the Company
to the Company or one of its subsidiaries, (ii) split, combine or reclassify any
of its capital stock or issue or authorize or propose the issuance of any other
securities in respect of, in lieu of or in substitution for shares of its
capital stock, or (iii) repurchase, redeem or otherwise acquire, or permit any
subsidiary to purchase or otherwise acquire any shares of its capital stock or
any securities convertible into or exercisable for any shares of its capital
stock.
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(c) Issuance of Securities. The Company shall not, nor shall it permit
any of its subsidiaries to, issue, deliver or sell, or authorize or propose the
issuance, delivery or sale of, any shares of its capital stock of any class, any
Voting Debt or any securities convertible into or exercisable for (including any
stock appreciation rights, phantom stock plans or stock equivalents), or any
rights, warrants or options to acquire, any such shares or Voting Debt, or enter
into any agreement with respect to any of the foregoing, other than issuances of
Company Common Stock pursuant to exercises of Company Stock Options or Company
Common Stock awards to directors listed in the Company Disclosure Letter.
(d) Governing Documents. The Company shall not amend or propose to
amend, nor shall it permit any of its subsidiaries to amend, their respective
certificates of incorporation, by-laws or other governing instruments.
(e) No Solicitations. The Company shall not, nor shall it permit any
of its subsidiaries to, directly or indirectly, through any officer, director,
employee or agent, initiate, solicit or knowingly encourage (including by way of
furnishing information or assistance), or take any other action to facilitate
knowingly, any inquiries or the making of any proposal that constitutes, or
would reasonably be expected to lead to, any Competing Transaction, or enter
into or maintain or continue discussions or negotiate with any person in
furtherance of such inquiries or to obtain a Competing Transaction, or agree to
or endorse any Competing Transaction, or authorize or permit any of the
officers, directors or employees of the Company or any of its subsidiaries or
any investment banker, financial advisor, attorney, accountant or other
representative retained by the Company or any of its subsidiaries to take any
such action. The Company shall notify Parent in writing (as promptly as
practicable) if any written or oral request for information or proposal relating
to a Competing Transaction is made and shall keep Parent promptly advised of all
such requests and proposals, and shall provide a copy of any written proposals
or requests and a summary of all oral proposals or requests. Nothing contained
in this Section 4.1(e) shall prohibit the Company from (i) furnishing
information to, or entering into discussions or negotiations with, any person
that makes an unsolicited written, bona fide proposal to acquire it pursuant to
a merger, consolidation, share exchange, business combination, tender or
exchange offer or other similar transaction, if, (A) the failure to take such
action would be inconsistent with the Board of Directors' fiduciary duties to
the Company's stockholders under applicable law, and (B) prior to furnishing
such information to, or entering into discussions or negotiations with, such
person, the Company (x) provides reasonable notice to Parent to the effect that
it is furnishing information to, or entering into discussions or negotiations
with, such person and (y) receives from such person an executed confidentiality
agreement no less favorable to the Company than the Confidentiality Agreement
between Parent and the Independent Advisor, on behalf of the Company, dated June
4, 1999 (the "Confidentiality Agreement"), (ii) complying with Rule 14d-9 or
Rule 14e-2 promulgated under the Exchange Act with regard to a tender or
exchange offer, or (iii) failing to make or withdrawing or modifying its
recommendation referred to in Section 5.2, or recommending an unsolicited, bona
fide proposal to acquire the Company pursuant to a merger, consolidation, share
exchange, business combination, tender or exchange offer or other similar
transaction, following the receipt of such a proposal, if the failure to take
such action would be inconsistent with the Board of Directors' fiduciary duties
to the Company's stockholders under applicable law. In addition, if the Company
proposes to enter into an agreement with respect to any Competing Transaction,
it shall concurrently with entering into such agreement pay, or cause to be
paid, to Parent any
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amounts due to Parent from the Company pursuant to Section 7.3. As used in this
Agreement, "Competing Transaction" shall mean any of the following (other than
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the transactions contemplated by this Agreement) involving the Company or any of
its subsidiaries: (i) any merger, consolidation, share exchange, exchange offer,
business combination, recapitalization, liquidation, dissolution or other
similar transaction involving such person; (ii) any sale, lease, exchange,
mortgage, pledge, transfer or other disposition of assets representing 20% or
more of the total assets of such person and its subsidiaries, in a single
transaction or series of transactions; (iii) any tender offer or exchange offer
for 20% or more of the outstanding shares of capital stock of such person or the
filing of a registration statement under the Securities Act in connection
therewith; (iv) any person or group having acquired beneficial ownership of 15%
or more of the outstanding shares of capital stock of such person with respect
to Company Common Stock); or (v) any public announcement of a proposal, plan or
intention to do any of the foregoing or any agreement to engage in any of the
foregoing.
(f) No Acquisitions. The Company shall not, nor shall it permit any of
its subsidiaries to, (i) acquire or agree to acquire by merging or consolidating
with, or by purchasing a substantial equity interest in or a substantial portion
of the assets of, or by any other manner, any business or any corporation,
limited liability company, partnership, association or other business
organization or division thereof or (ii) otherwise acquire or agree to acquire
any assets which, in the case of this clause (ii), are material, individually or
in the aggregate, to the Company, except with respect to the development of
planned new restaurants as described in the Company Disclosure Letter.
(g) No Dispositions. The Company shall not, nor shall it permit any of
its subsidiaries to, sell, lease, encumber or otherwise dispose of, or agree to
sell, lease, encumber or otherwise dispose of any of its assets (including
capital stock of subsidiaries), except as disclosed in the Company Disclosure
Letter and for dispositions in the ordinary course of business consistent with
past practice and of substantially the same character, type and magnitude as
dispositions in the past.
(h) Indebtedness. The Company shall not, nor shall it permit any of
its subsidiaries to, (i) incur any indebtedness for borrowed money or guarantee
any such indebtedness or issue or sell any debt securities or warrants or rights
to acquire any long-term debt securities of the Company or any of its
subsidiaries or guarantee any long-term debt securities of others or enter into
or amend any contract, agreement, commitment or arrangement with respect to any
of the foregoing, other than (x) in replacement for existing or maturing debt,
(y) indebtedness of any subsidiary of the Company to the Company or to another
subsidiary of the Company or (z) other borrowing under existing lines of credit
in the ordinary course of business consistent with prior practice and of
substantially the same character, type and magnitude as borrowings made in the
past or (ii) make any loans, advances or capital contributions to any person.
(i) Other Actions. The Company shall not, nor shall it permit any of
its subsidiaries to, take any action that would, or might reasonably be expected
to, result in any of its representations and warranties set forth in this
Agreement being or becoming untrue in any material respect, or in any of the
conditions to the Merger set forth in Article VI not being satisfied, or which
would adversely affect the ability of any of them to obtain any of the
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Requisite Regulatory Approvals without imposition of a condition or restriction
of the type referred to in Section 6.2(d) and the Company shall, in the event
of, or promptly after the occurrence of, or promptly after obtaining knowledge
of the occurrence of or the impending or threatened occurrence of, any fact or
event which would cause or constitute a breach of any of the representations and
warranties set forth in this Agreement, the non-satisfaction of any of the
conditions to the Merger set forth in Article VI or the failure to obtain the
Requisite Regulatory Approvals, in each case at any time after the date hereof
and through the Closing Date, give detailed notice thereof to Parent, and the
Company shall use its best efforts to prevent or promptly to remedy such breach,
non-satisfaction or failure, as the case may be.
(j) Advice of Changes; Government Filings. The Company shall confer on
a regular basis with Parent, report on operational matters and promptly advise
Parent, orally and in writing, of any material change or event or any change or
event which would cause or constitute a material breach of any of the
representations, warranties or covenants of the Company contained herein. The
Company shall file all reports required to be filed by the Company with the SEC
between the date of this Agreement and the Effective Time and shall deliver to
Parent copies of all such reports promptly after the same are filed. The Company
shall cooperate with Parent in determining whether any filings are required to
be made with, or consents required to be obtained from, or fees or expenses
required to be paid to, any third party or Governmental Entity prior to the
Effective Time in connection with this Agreement or the transactions
contemplated hereby, and shall cooperate in making any such filings promptly and
in seeking to obtain timely any such consents and, subject to Parent's approval,
paying any such fees or expenses. The Company shall promptly provide Parent with
copies of all other filings made by the Company with any state or Federal
Governmental Entity (excluding the HSR Filing) in connection with this
Agreement, the Merger or the other transactions contemplated hereby.
(k) Accounting Methods. The Company shall not change its methods of
accounting in effect at July 2, 2000, except as required by changes in GAAP as
concurred in by the Company's independent auditors.
(l) Benefit Plans. During the period from the date of this Agreement
and continuing until the Effective Time, the Company agrees as to itself and its
subsidiaries that it will not, without the prior written consent of Parent,
except as set forth in the Company Disclosure Letter, (i) enter into, adopt,
amend (except as may be required by law) or terminate any Company Benefit Plan
or any other employee benefit plan or any agreement, arrangement, plan or policy
between the Company or any of its subsidiaries, on the one hand, and one or more
of its or their directors or officers, on the other hand, (ii) except for normal
increases in the ordinary course of business consistent with past practice and
of substantially the same character, type and magnitude as increases in the past
that, in the aggregate, do not result in a material increase in benefits or
compensation expense to the Company or any of its subsidiaries, increase in any
manner the compensation or fringe benefits of any director, officer or employee
or pay any benefit not required by any plan and arrangement as in effect as of
the date hereof (including, without limitation, the granting of stock options,
stock appreciation rights, restricted stock, restricted stock units or
performance units or shares) or enter into any contract, agreement, commitment
or arrangement to do any of the foregoing or (iii) enter into or renew any
contract, agreement, commitment or arrangement providing for the payment to any
director, officer or employee of the Company or any of its subsidiaries of
compensation or benefits contingent, or
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the terms of which are materially altered, upon the occurrence of any of the
transactions contemplated by this
Agreement.
(m) Tax Elections. Except in the ordinary course of business and
consistent with past practice and of substantially the same character, type and
magnitude as elections made in the past, the Company shall not make any material
tax election or settle or compromise any material federal, state, local or
foreign income tax claim or liability or amend any previously filed tax return
in any respect.
4.2 Covenants of Parent. Except as expressly contemplated by this
Agreement, after the date hereof and prior to the Effective Time, without the
prior written consent of the Company:
(a) Other Actions. Neither Parent nor Sub shall, nor shall it permit
any of their respective subsidiaries to, take any action that would, or might
reasonably be expected to, result in any of its representations and warranties
set forth in this Agreement being or becoming untrue in any material respect, or
in any of the conditions to the Merger set forth in Article VI not being
satisfied, or which would adversely affect the ability of any of them to obtain
any of the Requisite Regulatory Approvals without imposition of a condition or
restriction of the type referred to in Section 6.2(d).
(b) Government Filings. The Parent shall cooperate with the Company in
determining whether any filings are required to be made with, or consents
required to be obtained from, any third party or Governmental Entity prior to
the Effective Time in connection with this Agreement or the transactions
contemplated hereby, and shall cooperate in making any such filings promptly and
in seeking to obtain timely any such consents. The Parent shall promptly provide
the Company with copies of all other filings made by the Parent with any state
or Federal Governmental Entity (excluding the HSR Filings) in connection with
this Agreement, the Merger or the other transactions contemplated hereby.
(c) Extraordinary Transactions. Parent shall not, nor shall it permit
any of its subsidiaries to, knowingly enter into or consummate any extraordinary
transaction or agreement, which would have a Material Adverse Effect on Parent.
ARTICLE V
ADDITIONAL AGREEMENTS
5.1 Preparation of the Proxy Statement The Company shall as promptly
as practicable prepare and file a proxy or information statement relating to
Company stockholders' meeting to be held in connection with the approval of the
Merger (together with all amendments, supplements and exhibits thereto, the
"Proxy Statement") with the SEC and will use its best efforts to respond to the
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comments of the SEC and to cause the Proxy Statement to be mailed to the
Company's stockholders at the earliest practical time. The Company will notify
Parent promptly of the receipt of any comments from the SEC or its staff and of
any request by the SEC or its staff for amendments or supplements to the Proxy
Statement or for additional information and will supply Parent with copies of
all correspondence between the Company or any of its
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representatives, on the one hand, and the SEC or its staff, on the other hand,
with respect to the Proxy Statement or the Merger. If at any time prior to the
stockholders' meeting there shall occur any event that should be set forth in an
amendment or supplement to the Proxy Statement, the Company will promptly
prepare and mail to its stockholders such an amendment or supplement. The
Company will not mail any Proxy Statement, or any amendment or supplement
thereto, to which Parent reasonably objects. The Company hereby consents to the
inclusion in the Proxy Statement of the recommendation of the Board of Directors
of the Company described in Section 5.2, subject to any modification, amendment
or withdrawal thereof, and represents that the Independent Advisor has, subject
to the terms of its engagement letter with the Company, consented to the
inclusion of references to its opinion in the Proxy Statement.
5.2 Stockholder Meeting. The Company shall call a meeting of its
stockholders to be held as promptly as practicable for the purpose of voting
upon the approval of this Agreement, the Merger and the other transactions
contemplated hereby. The Company will, through its Board of Directors, recommend
to its stockholders approval of such matters, unless the taking of such action
would be inconsistent with the Board of Directors' fiduciary duties to
stockholders under applicable laws. The Company shall, at the direction of
Parent, solicit from Company stockholders entitled to vote at the Company
stockholders' meeting proxies in favor of such approval and shall take all other
action necessary or, in the judgment of Parent, helpful to secure the vote or
consent of such holders required by the DGCL or this Agreement to effect the
Merger. The Company shall coordinate and cooperate with Pare nt with respect
to the timing of such meeting.
5.3 Legal Conditions to Merger. Each of the Company and Parent shall,
and shall cause its subsidiaries to, use all reasonable efforts (i) to take, or
cause to be taken, all actions necessary to comply promptly with all legal
requirements which may be imposed on such party or its subsidiaries with respect
to the Merger and to consummate the transactions contemplated by this Agreement,
subject to the appropriate vote of stockholders of the Company described in
Section 6.1 (a), and (ii) to obtain (and to cooperate with the other party to
obtain) any consent, authorization, order or approval of, or any exemption by,
any Governmental Entity and of any other public or private third party which is
required to be obtained or made by such party or any of its subsidiaries in
connection with the Merger and the transactions contemplated by this Agreement;
provided, however, that a party shall not be obligated to take any action
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pursuant to the foregoing if the taking of such action or such compliance or the
obtaining of such consent, authorization, order, approval or exemption is
likely, in such party's reasonable opinion, (x) to be materially burdensome to
such party and its subsidiaries taken as a whole or to impact in a materially
adverse manner the economic or business benefits of the transactions
contemplated by this Agreement so as to render uneconomic the consummation of
the Merger or (y) in the case of the Company, to result in the imposition of a
condition or restriction on the Company, the Surviving Corporation or any of
their respective subsidiaries of the type referred to in Section 6.2(d). Each of
the Company and Parent will promptly cooperate with and furnish information to
the other in connection with any such burden suffered by, or requirement imposed
upon, any of them or any of their subsidiaries in connection with the foregoing.
5.4 Access to Information. Upon reasonable notice, the Company and
each of its subsidiaries shall afford to the officers, employees, accountants,
counsel and other representatives of Parent, access, during normal business
hours during the period prior to the
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Effective Time, to all its properties, books, commitments and records and,
during such period, each of the Company and its subsidiaries shall make
available to Parent (a) a copy of each report, schedule, registration statement
and other document filed or received by it during such period pursuant to the
requirements of Federal securities laws and (b) all other information concerning
its business, properties and personnel as Parent may reasonably request. The
parties will hold any such information which is nonpublic in confidence to the
extent required by, and in accordance with, the provisions of the
Confidentiality Agreement. No investigation by either Parent or the Company
shall affect the representations and warranties of the other, except to the
extent such representations and warranties are by their terms qualified by
disclosures made to such first party.
5.5 Brokers or Finders. Except as disclosed to the other party prior
to the date hereof, each of Parent and the Company represents, as to itself, its
subsidiaries and its affiliates, that no agent, broker, investment banker,
financial advisor or other firm or person is or will be entitled to any broker's
or finder's fee or any other commission or similar fee in connection with any of
the transactions contemplated by this Agreement, except the Independent Advisor,
whose fees and expenses will be paid by the Company in accordance with the
Company's agreement with such firm (a copy of which has been delivered by the
Company to Parent prior to the date of this Agreement), and each party agrees to
indemnify the other party and hold the other party harmless from and against any
and all claims, liabilities or obligations with respect to any other fees,
commissions or expenses asserted by any person on the basis of any act or
statement alleged to have been made by such first party or its affiliates.
5.6 Indemnification; Directors' and Officers' Insurance.
(a) As of the Effective Time, the certificate of incorporation of the
Surviving Corporation shall contain provisions no less favorable with respect to
indemnification than are set forth in the certification of incorporation of the
Company, which provisions shall not be amended, repealed or otherwise modified
for a period of six years from the Effective Time in any manner that would
adversely affect the rights thereunder of individuals who at the Effective Time
were directors, officers or employees of the Company. Parent and Company agree
that the directors, officers and employees of the Company covered thereby are
intended to be third party beneficiaries under this Section 5.6 and shall have
the right to enforce the obligations of the Surviving Corporation and the
Parent.
(b) The Surviving Corporation shall maintain in effect for six years
(or such shorter period as Parent maintains similar policies for the benefit of
its directors and officers) from the Effective Time the current policies of the
directors' and officers' liability insurance maintained by the Company (provided
that the Surviving Corporation may substitute therefor policies of at least the
same coverage containing terms and conditions which are not materially less
advantageous) with respect to matters occurring prior to the Effective Time to
the extent available; provided, however, that Parent and the Surviving
Corporation shall not be required to pay an annual premium for such insurance in
excess of 150% of the annual premium currently paid by the Company for such
insurance, but in such case shall purchase as much such coverage as possible for
such amount.
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5.7 Shareholder Lists. The Company shall promptly upon request of
Parent, or shall cause its transfer agent to promptly, furnish Parent with
mailing labels containing the names and addresses of all record holders of
Company Common Stock and with security position listings of Company Common Stock
held in stock depositories, each as of the most recent practicable date,
together with all other available listings and computer files containing names,
addresses and security position listings of record holders and beneficial owners
of Company Common Stock. The Company shall furnish Parent with such additional
information, including, without limitation, updated listings and computer files
of stockholders, mailing labels and security position listings, and such other
assistance as Parent or its agents may reasonably request.
5.8 Shareholder Litigation. The Company shall give Parent the
opportunity to participate in the defense or settlement of any shareholder
litigation against the Company and its directors relating to the transactions
contemplated by this Agreement; provided, however, that no such settlement shall
be agreed to without Company's and Parent's consent, which shall not be
unreasonably withheld.
5.9 Communication to Employees.The Company and Parent will cooperate
with each other with respect to, and endeavor in good faith to agree in advance
upon the method and content of, all written or oral communications or disclosure
to employees of the Company or any of its subsidiaries with respect to the
Merger and any other transactions contemplated by this Agreement. Upon
reasonable notice, the Company shall provide Parent access to the Company's and
its subsidiaries' employees and facilities.
5.10 Environmental Matters. The Company shall cooperate with Parent
and take or cause to be taken all actions necessary to complete any
questionnaires or surveys which Parent or its lenders may require in connection
with Environmental Matters relating to the Company, any of its subsidiaries or
any of their respective properties or assets. Parent shall have the right, if
required by its lenders, to cause an independent environmental consultant chosen
by it at its sole discretion, to inspect, audit, and test any of the Company's
or its subsidiaries' premises for the existence of any and all Environmental
Liabilities and any and all violations of laws related to Environmental Matters
(the "Environmental Audit") and to deliver a report describing the findings and
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conclusions of the Environmental Audit. The scope, sequence, and timing of the
Environmental Audit shall be at the sole discretion of Parent, and the
Environmental Audit may be commenced at any time on or after the date hereof.
ARTICLE VI
CONDITIONS PRECEDENT
6.1 Conditions to Each Party's Obligation To Effect the Merger. The
respective obligation of each party to effect the Merger shall be to the
satisfaction prior to the Closing Date of the following conditions:
(a) Stockholder Approval. This Agreement shall have been approved and
adopted by the affirmative vote of the holders of a majority of the outstanding
shares of Company Common Stock entitled to vote thereon.
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(b) Other Approvals. All authorizations, consents, orders or approvals
of, or declarations or filings with, and all expirations or early terminations
of waiting periods imposed by, any Governmental Entity (all the foregoing,
"Consents") which are necessary for the consummation of the Merger shall have
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been filed, occurred or been obtained (all such permits, approvals, filings and
consents and the lapse of all such waiting periods being referred to as the
"Requisite Regulatory Approvals") and all such Requisite Regulatory Approvals
------------------------------
shall be in full force and effect, including without limitation, with respect to
any liquor licenses or permits.
(c) No Injunctions or Restraints; Illegality. No temporary restraining
order, preliminary or permanent injunction or other order issued by any court of
competent jurisdiction or other legal restraint or prohibition preventing the
consummation of the Merger shall be in effect, nor shall any proceeding by any
Governmental Entity seeking any of the foregoing be pending. There shall not be
any action taken, or any statute, rule, regulation or order enacted, entered,
enforced or deemed applicable to the Merger, which makes the consummation of the
Merger illegal.
6.2 Conditions to Obligations of Parent and Sub. The obligations of
Parent and Sub to effect the Merger are subject to the satisfaction of the
following conditions unless waived by Parent and Sub:
(a) Representations and Warranties. The representations and warranties
of the Company set forth in this Agreement shall be true and correct in all
material respects as of the date of this Agreement and (except to the extent
such representations and warranties speak as of an earlier date) as of the
Closing Date as though made on and as of the Closing Date, and Parent shall have
received a certificate signed on behalf of the Company by the President and
Chief Executive Officer of the Company, and by the Chief Financial Officer of
the Company to such effect.
(b) Performance of Obligations of Company. The Company shall have
performed and complied in all material respects with all obligations required to
be performed or complied with by it under this Agreement at or prior to the
Closing Date, and Parent shall have received a certificate signed on behalf of
the Company by the President and Chief Executive Officer of the Company and by
the Chief Financial Officer of the Company to such effect.
(c) Consents Under Agreements. The Company shall have obtained the
consent or approval of (i) the landlords or lessors whose consent or approval
shall be required in order to permit the succession by the Surviving Corporation
or its subsidiaries pursuant to the Merger to any obligation, right or interest
of the Company or any of its subsidiaries under the real property leases set
forth in Section 6.2(c) of the Parent Disclosure Letter and (ii) except for
those consents or approvals for which failure to obtain such consents or
approvals could not, individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect on the Company, each person (other than the
Requisite Regulatory Approvals or with respect to any real property leases set
forth in Section 6.2(c) of the Parent Disclosure Letter) whose consent or
approval shall be required in order to permit the succession by the Surviving
Corporation pursuant to the Merger to any obligation, right or interest of the
Company or any subsidiary of the Company under any loan or credit agreement,
note, mortgage, indenture, lease, license or other agreement or instrument
(other than the consent of International Bank of Commerce with
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respect to the Sixth Amended Loan Agreement dated as of March 10, 2000, the
Fifth Amended Revolving Loan Agreement dated as of March 10, 2000 and associated
real estate lien notes and mortgages to which the Company is a party).
(d) Burdensome Condition. There shall not be any action taken, or any
statute, rule, regulation or order enacted, entered, enforced or deemed
applicable to the Merger, by any Governmental Entity which, in connection with
the grant of a Requisite Regulatory Approval, imposes any requirement upon
Parent, the Surviving Corporation or their respective subsidiaries which would
so materially adversely impact the economic or business benefits of the
transactions contemplated by this Agreement as to render uneconomic the
consummation of the Merger, or which would require Parent or any of its
subsidiaries to dispose of any asset which is material to Parent prior to the
Effective Time.
(e) Material Adverse Effect. Since the date of this Agreement, there
shall not have occurred a Material Adverse Effect with respect to the Company
and no facts or circumstances arising after the date of this Agreement shall
have occurred which, individually or in the aggregate, could reasonably be
expected to have a Material Adverse Effect with respect to the Company.
(f) Proceedings. All proceedings to be taken on the part of the
Company in connection with the transactions contemplated by this Agreement and
all documents incident thereto shall be reasonably satisfactory in form and
substance to Parent, and Parent shall have received copies of all such documents
and other evidences as Parent may reasonably request in order to establish the
consummation of such transactions and the taking of all proceedings in
connection therewith.
(g) Financing. Parent shall not have been unable to consummate the
Merger and the other transactions contemplated by this Agreement by reason of
inadequate financing as a result of the lenders described in the Commitment
Letter refusing to consummate the financing specified therein pursuant to and in
accordance with the terms thereof by reason of their assertion that the
condition precedent regarding no material adverse changes contained therein has
not been fulfilled or satisfied.
6.3 Conditions to Obligations of Company. The obligation of the
Company to effect the Merger is subject to the satisfaction of the following
conditions unless waived by the Company:
(a) Representations and Warranties. The representations and warranties
of Parent and Sub set forth in this Agreement shall be true and correct in all
material respects as of the date of this Agreement and (except to the extent
such representations and warranties speak as of an earlier date) as of the
Closing Date as though made on and as of the Closing Date, and the Company shall
have received a certificate signed on behalf of Parent by the Chairman and Chief
Executive Officer of Parent, or a Corporate Vice President of Parent, and by the
Senior Vice President and Chief Financial Officer of Parent or the Corporate
Vice President and Treasurer of Parent to such effect.
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(b) Performance of Obligations of Parent and Sub. Parent and Sub shall
have performed and complied in all material respects with all obligations
required to be performed by them under this Agreement at or prior to the Closing
Date, and the Company shall have received a certificate signed on behalf of
Parent by the President and Chief Executive Officer of Parent or a Corporate
Vice President of Parent, and by the Senior Vice President and Chief Financial
Officer of Parent or the Corporate Vice President and Treasurer of Parent to
such effect; provided, however, that the performance and compliance of Parent
and its subsidiaries with Section 4.2(c) shall not be a condition precedent to
the obligation of the Company to effect the Merger unless the lenders described
in the Commitment Letter refuse to consummate the financing specified therein on
the grounds that the condition precedent regarding no material adverse changes
relating to Parent and its subsidiaries, taken as a whole, contained in the
Commitment Letter was not fulfilled or satisfied as a result of Parent or any of
its subsidiaries entering into an extraordinary transaction prohibited under
Section 4.2(c).
ARTICLE VII
TERMINATION AND AMENDMENT
7.1 Termination. This Agreement may be terminated at any time prior to
the Effective Time, whether before or after approval of the matters presented in
connection with the Merger by the stockholders of the Company:
(a) by mutual consent of Parent and the Company in a written
instrument, whether or not the Merger has been approved by the stockholders of
the Company;
(b) by Parent, upon a material breach of any representation, warranty,
covenant or agreement on the part of the Company set forth in this Agreement, or
if any representation or warranty of the Company shall have become untrue such
that the conditions set forth in Section 6.2(a) or Section 6.2(b), as the case
may be, would be incapable of being satisfied by June 30, 2001;
(c) by the Company, upon a material breach of any representation,
warranty, covenant or agreement on the part of Parent or Sub set forth in this
Agreement, or if any representation or warranty of Parent or Sub shall have
become untrue such that the conditions set forth in Section 6.3(a) or Section
6.3(b), as the case may be, would be incapable of being satisfied by June 30,
2001;
(d) by either Parent or the Company, if any permanent injunction or
action by any Governmental Entity preventing the consummation of the Merger
shall have become final and nonappealable;
(e) by either Parent or the Company if the Merger shall not have been
consummated on or prior to June 30, 2001 (or such later date as may be agreed to
in writing by the Company and Parent) (other than due to the failure of the
party seeking to terminate this Agreement to perform its obligations under this
Agreement required to be performed at or prior to the Effective Time);
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(f) by either Parent or the Company, if any approval of the
stockholders of the Company required for the consummation of the Merger shall
not have been obtained by reason of the failure to obtain the required vote at a
duly held meeting of stockholders or at any adjournment thereof;
(g) by Parent, if the Board of Directors of the Company shall have (i)
withdrawn, modified or changed its approval or recommendation of this Agreement,
the Merger or any of the other transactions contemplated herein in any manner
which is adverse to Parent or Sub or shall have resolved to do the foregoing; or
(ii) approved or have recommended to the stockholders of the Company a Competing
Transaction or shall have resolved to do the foregoing;
(h) by Parent, if (i) the Company shall have exercised a right
specified in clause (i) of the third sentence of Section 4.1(e) with respect to
any transaction referred to therein and shall, directly or through agents or
representatives, continue discussions with any third party concerning such
transaction for more than 21 calendar days after the date of receipt of such
Competing Transaction, or (ii) (x) a tender offer or exchange offer or a
proposal by a third party to acquire the Company pursuant to a merger,
consolidation, share exchange, business combination, tender or exchange offer or
similar transaction shall have been commenced or publicly proposed which
contains a proposal as to price (without regard to the specificity of such price
proposal) and (y) the Company shall not have rejected such proposal within 10
business days of its commencement or the date such proposal first becomes
publicly disclosed, if sooner.
(i) The right of any party hereto to terminate this Agreement pursuant
to this Section 7.1 shall remain operative and in full force and effect
regardless of any investigation made by or on behalf of any party hereto, any
person controlling any such party or any of their respective officers or
directors, whether prior to or after the execution of this Agreement.
7.2 Effect of Termination. In the event of termination of this
Agreement and abandonment of the Merger by either the Company or Parent as
provided in Section 7.1, this Agreement shall forthwith terminate and there
shall be no liability or obligation on the part of Parent, Sub or the Company or
their respective officers or directors except with respect to the penultimate
sentence of Section 5.4 and Sections 5.5 and 7.3; provided, however, that,
subject to the provisions of Section 8.8, nothing herein shall relieve any party
of liability for any breach hereof .
7.3 Fees, Expenses and Other Payments. (a) Except as otherwise
provided in this Section 7.3, whether or not the Merger is consummated, all
costs and expenses incurred in connection with this Agreement and the
transactions contemplated hereby (including, without limitation, fees and
disbursements of counsel, financial advisors and accountants) shall be borne
solely and entirely by the party which has incurred such costs and expenses
(with respect to such party, its "Expenses").
--------
(b) The Company agrees that if this Agreement shall be terminated
pursuant to:
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(i) Section 7.1(b) and (x) such termination is the result of material
breach of any covenant, agreement, representation or warranty contained herein
and (y) at any time during the period commencing on the date hereof and ending
twelve months after the date of termination of this Agreement, a Business
Combination (as defined in Section 7.3(e)) involving the Company shall have
occurred or the Company shall have entered into a definitive agreement providing
for such a Business Combination, which Business Combination contains a proposal
as to the price per share which is in excess of the Merger Consideration;
(ii) Section 7.1(f) because the Agreement, the Merger and the other
transactions contemplated hereby shall fail to receive the requisite vote for
approval and adoption by the stockholders of the Company at a meeting of the
stockholders of the Company called to vote thereon, and at the time of such
meeting there shall exist a proposal with respect to a Business Combination with
respect to the Company which either (x) the Board of Directors of the Company
has not publicly opposed or (y) is consummated, or a definitive agreement with
respect to which is entered into, at any time during the period commencing on
the date hereof and ending twelve months after the date of termination of this
Agreement; or
(iii) Section 7.1(g) or Section 7.1(h); then in each such event the
Company shall pay to Parent an amount equal to $4,500,000, plus all of
Parent's Expenses not to exceed $850,000.
(c) The Company agrees that if this Agreement shall be terminated
pursuant to Section 7.1(b), then the Company shall pay to Parent an amount equal
to Parent's Expenses not to exceed $850,000; provided that the Company shall not
--------
be obligated to make any payment pursuant to this Section 7.3(c) if the Company
shall be obligated to make a payment to Parent pursuant to Section 7.3(b).
(d) Parent agrees that if this Agreement shall be terminated solely as
a result of the non-satisfaction or non-fulfillment of the condition set forth
in Section 6.2(g) due to the lenders described in the Commitment Letter
asserting that the condition precedent regarding no material adverse changes
contained in the Commitment Letter was not fulfilled or satisfied for any reason
other than a material adverse change in or affecting the business, operations,
property, condition (financial or otherwise) or prospects of the Company and its
subsidiaries, taken as a whole, then Parent shall pay to the Company an amount
equal to the Company's Expenses not to exceed $850,000.
(e) Any payment required to be made pursuant to Section 7.3(b),
Section 7.3(c) or Section 7.3(d) shall be made as promptly as practicable but
not later than five business days after termination of this Agreement and shall
be made by wire transfer of immediately available funds to an account designated
by Parent, except that any payment to be made as the result of an event
described in Section 7.3(b)(i) or clause (y) of Section 7.3(b)(ii) shall be made
as promptly as practicable but not later than five business days after the
occurrence of the Business Combination or the execution of the definitive
agreement providing for a Business Combination.
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(f) For purposes of this Section 7.3, the term "Business Combination"
--------------------
shall mean any of the following involving the Company: (i) any merger,
consolidation, share exchange, business combination or similar transaction; (ii)
any sale, lease, exchange, transfer or other disposition of 20% or more of the
assets of the Company and its subsidiaries, taken as a whole, in a single
transaction or series of transactions, or (iii) the acquisition by a person or
any group of beneficial ownership of 20% or more of the capital stock of the
Company whether by tender offer or exchange offer or otherwise.
7.4 Amendment. This Agreement may be amended by the parties hereto, by
action taken or authorized by their respective Boards of Directors, at any time
before or after approval of the matters presented in connection with the Merger
by the stockholders of the Company or of Parent, but, after any such approval,
no amendment shall be made which by law requires further approval by such
stockholders without such further approval. This Agreement may not be amended
except by an instrument in writing signed on behalf of each of the parties
hereto.
7.5 Extension; Waiver. At any time prior to the Effective Time, the
parties hereto, by action taken or authorized by their respective Board of
Directors, may, to the extent legally allowed, (i) extend the time for the
performance of any of the obligations or other acts of the other parties hereto,
(ii) waive any inaccuracies in the representations and warranties contained
herein or in any document delivered pursuant hereto and (iii) waive compliance
with any of the agreements or conditions contained herein. Any agreement on the
part of a party hereto to any such extension or waiver shall be valid only if
set forth in a written instrument signed on behalf of such party.
ARTICLE VIII
GENERAL PROVISIONS
8.1 Nonsurvival of Representations, Warranties and Agreements. None of
the representations, warranties, covenants and agreements in this Agreement or
in any instrument delivered pursuant to this Agreement shall survive the
Effective Time, except for the agreements contained in Sections 2.1, 2.2, 2.3,
4.2(a), 5.6, 5.8, 7.3 and Article VIII.
8.2 Notices. All notices and other communications hereunder shall be
in writing and shall be deemed given if delivered personally, telecopied (with
confirmation) or mailed by registered or certified mail (return receipt
requested) to the parties at the following addresses (or at such other address
for a party as shall be specified by like notice):
(a) if to Parent or Sub, to:
Carrols Corporation
968 James Street
Syracuse, NY 13203
Attention: Joseph A. Zirkman, Esq.
Facsimile: (315) 475-9616
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With a copy to:
Rosenman & Colin LLP
575 Madison Avenue
New York, New York 10022-2585
Attention: Wayne A. Wald, Esq.
Facsimile: (212) 940-8776
(b) if to the Company, to:
Taco Cabana, Inc.
8918 Tesoro Dr.
San Antonio, TX 78217
Attention: Chief Executive Officer
Facsimile: (210) 280-0616
With a copy to:
Akin Gump Strauss Hauer & Feld, L.L.P.
300 Convent Street, Suite 1500
San Antonio, TX 78205
Attention: Cecil Schenker, Esq.
Facsimile: (210) 224-2035
8.3 Certain Definitions. For purposes of this Agreement:
(a) an "affiliate" of any person means another person that directly
---------
or indirectly, through one or more intermediaries, controls, is controlled by,
or is under common control with, such first person;
(b) "beneficially own" or "beneficial ownership" with respect to any
------------ ----------
securities, means having "beneficial ownership" of such securities in accordance
with the provisions of Rule 13d-3 under the Exchange Act. Without duplicative
counting of the same securities by the same holder, securities beneficially
owned by a person include securities beneficially owned by all other persons
with whom such person would constitute a group;
(c) "group" means two or more persons acting together for the purpose
-----
of acquiring, holding, voting or disposing of any securities, which persons
would be required to file a Schedule 13D or Schedule 13G with the SEC as a
"person" within the meaning of Section 13(d)(3) of the Exchange Act if such
persons beneficially owned a sufficient amount of such securities to require
such a filing under the Exchange Act;
(d) "person" means an individual, corporation, limited liability
------
company, partnership, joint venture, association, trust, unincorporated
organization or other legal entity;
(e) a "subsidiary" of any person means another person, an amount of
----------
the voting securities, other voting ownership or voting partnership interests of
which is sufficient to elect at least a majority of its Board of Directors or
other governing body (or, if there are no such
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voting interests, 50% or more of the equity interests of which) is owned
directly or indirectly by such first person; and
(f) Any accounting term that is used in the context of describing or
referring to an accounting concept and that is not specifically defined herein
shall be construed in accordance with GAAP as applied in the preparation of the
financial statements of the Company included in the Company SEC Documents
(including, without limitation, the Year-End Financial Statements and the
Balance Sheet).
8.4 Interpretation. When a reference is made in this Agreement to
Sections or Exhibits, such reference shall be to a Section of or Exhibit to this
Agreement unless otherwise indicated. The recitals hereto constitute an integral
part of this Agreement. The table of contents and headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement. Whenever the words "include",
"includes" or "including" are used in this Agreement, they shall be deemed to be
followed by the words "without limitation". The phrase "made available" in this
Agreement shall mean that the information referred to has been made available if
requested by the party to whom such information is to be made available. The
phrases "the date of this Agreement", "the date hereof' and terms of similar
import, unless the context otherwise requires, shall be deemed to refer to
October 6, 2000.
8.5 Counterparts. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when two or more counterparts have been signed by each of
the parties and delivered to the other parties, it being understood that all
parties need not sign the same counterpart.
8.6 Entire Agreement; No Third Party Beneficiaries; Rights of
Ownership. This Agreement (including the documents and the instruments referred
to herein) (a) constitutes the entire agreement and supersedes all prior
agreements and understandings, both written and oral, among the parties with
respect to the subject matter hereof; provided that the Confidentiality
--------
Agreement shall survive the execution and delivery of this Agreement, and (b)
except as provided in Sections 2.2, 2.3 and 5.6, is not intended to confer upon
any person other than the parties hereto any rights or remedies hereunder. The
parties hereby acknowledge that, except as hereinafter agreed to in writing, no
party shall have the right to acquire or shall be deemed to have acquired shares
of common stock of the other party pursuant to the Merger until consummation
thereof.
8.7 Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the State of New York, except to the extent Delaware
law shall govern the Merger, without regard to any applicable conflicts of law
provisions thereof.
8.8 Severability; No Remedy in Certain Circumstances. Any term or
provision of this Agreement that is invalid or unenforceable in any situation in
any jurisdiction shall not affect the validity or enforceability of the
remaining terms and provisions hereof or the validity or enforceability of the
offending term or provision in any other situation or in any other jurisdiction.
If the final judgment of a court of competent jurisdiction declares that any
term or provision hereof is invalid or unenforceable, the parties agree that the
court making the
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determination of invalidity or unenforceability shall have the power to reduce
the scope, duration, or area of the term or provision, to delete specific words
or phrases, or to replace any invalid or unenforceable term or provision with a
term or provision that is valid and enforceable and that comes closest to
expressing the intention of the invalid or unenforceable term or provision, and
this Agreement shall be enforceable as so modified after the expiration of the
time within which the judgment may be appealed unless the foregoing inconsistent
action or the failure to take an action constitutes a material breach of this
Agreement or makes this Agreement impossible to perform, in which case this
Agreement shall terminate pursuant to Article VII hereof. Except as otherwise
contemplated by this Agreement, to the extent that a party hereto took an action
inconsistent herewith or failed to take action consistent herewith or required
hereby pursuant to an order or judgment of a court or other competent authority,
such party shall incur no liability or obligation unless such party did not in
good faith seek to resist or object to the imposition or entering of such order
or judgment.
8.9 Publicity. Except as otherwise required by law or the rules of the
Nasdaq National Market, so long as this Agreement is in effect, neither the
Company nor Parent shall, or shall permit any of its subsidiaries to, issue or
cause the publication of any press release or other public announcement with
respect to the transactions contemplated by this Agreement without the consent
of the other party, which consent shall not be unreasonably withheld.
8.10 Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto (whether by operation of law or otherwise) without the prior written
consent of the other parties. Subject to the preceding sentence, this Agreement
will be binding upon, inure to the benefit of and be enforceable by the parties
and their respective successors and assigns.
8.11 Adjustment. All dollar amounts and share numbers set forth
herein, including without limitation the Merger Consideration, shall be subject
to equitable adjustment in the event of any stock split, stock dividend, reverse
stock split or similar event affecting the Company Common Stock, between the
date of this Agreement and the Effective Time, to the extent appropriate.
8.12 Specific Performance. The parties agree that irreparable damage
would occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached. It
is accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement in any court of applicable
jurisdiction, this being in addition to any other remedy to which they are
entitled at law or in equity. In addition, each of the parties hereto (i)
consents to submit such party to the personal jurisdiction of any Federal court
located in the State of New York or any New York state court in the event any
dispute arises out of this Agreement or any of the transactions contemplated
hereby, (ii) agrees that such party will not attempt to deny or defeat such
personal jurisdiction by motion or other request for leave from any such court,
(iii) agrees that such party will not bring any action relating to this
Agreement or any of the transactions contemplated hereby in any court other than
a Federal court sitting in the state of New York or a New York state court and
(iv) waives any right to trial by jury with respect to any claim or proceeding
related to or arising out of this Agreement or any of the transactions
contemplated hereby.
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IN WITNESS WHEREOF, Parent, Sub and the Company have caused this
Agreement, to be signed by their respective officers thereunto duly authorized,
all as of October 6, 2000.
CARROLS CORPORATION
/s/ Joseph Zirkman
--------------------------------------------
Name: Joseph Zirkman
Title: Vice President
SPUR ACQUISITION CORP.
/s/ Joseph Zirkman
--------------------------------------------
Name: Joseph Zirkman
Title: Vice President
TACO CABANA, INC.
/s/ Stephen V. Clark
--------------------------------------------
Name: Stephen V. Clark
Title: President and CEO
42
