<PAGE> 1
EXHIBIT 99.1
AGREEMENT AND PLAN OF MERGER
BETWEEN
IL FORNAIO (AMERICA) CORPORATION
AND
MANHATTAN ACQUISITION CORP.
DATED AS OF NOVEMBER 15, 2000
AS AMENDED AS OF JANUARY 9, 2001
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
ARTICLE I THE MERGER............................................................ 2
Section 1.1. The Merger.................................................. 2
Section 1.2. Effective Time.............................................. 2
Section 1.3. Effect of the Merger........................................ 2
Section 1.4. Certificate of Incorporation; Bylaws........................ 2
Section 1.5. Directors and Officers...................................... 2
Section 1.6. Conversion of Securities.................................... 3
Section 1.7. Adjustments to Prevent Dilution............................. 3
Section 1.8. Dissenting Shares........................................... 4
Section 1.9. Surrender of Shares......................................... 4
Section 1.10. No Further Transfer or Ownership Rights..................... 5
Section 1.11. Treatment of Options........................................ 5
Section 1.12. Closing..................................................... 6
ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE COMPANY........................ 6
Section 2.1. Organization and Qualification.............................. 6
Section 2.2. Capitalization.............................................. 7
Section 2.3. Authority Relative to this Agreement........................ 8
Section 2.4. Absence of Certain Changes.................................. 8
Section 2.5. Reports..................................................... 9
Section 2.6. Proxy Statement............................................. 9
Section 2.7. Consents and Approvals; No Violation........................ 10
Section 2.8. Brokerage Fees and Commissions.............................. 10
Section 2.9. Litigation.................................................. 11
Section 2.10. Absence of Changes in Benefit Plans......................... 11
Section 2.11. ERISA Compliance............................................ 11
Section 2.12. Taxes....................................................... 13
Section 2.13. Compliance with Applicable Laws............................. 14
Section 2.14. Environmental............................................... 14
Section 2.15. State Takeover Statutes..................................... 16
Section 2.16. Contracts................................................... 16
Section 2.17. Labor Matters............................................... 17
Section 2.18. Property.................................................... 17
Section 2.19. Undisclosed Liabilities..................................... 17
Section 2.20. Opinion of Financial Advisors............................... 18
Section 2.21. Intellectual Property....................................... 18
Section 2.22. Insurance................................................... 19
Section 2.23. Affiliate Transactions...................................... 19
ARTICLE III REPRESENTATIONS AND WARRANTIES OF NEWCO............................. 19
Section 3.1. Organization and Qualification.............................. 19
Section 3.2. Authority Relative to this Agreement........................ 19
Section 3.3. Proxy Statement............................................. 19
Section 3.4. Consents and Approvals; No Violation........................ 19
Section 3.5. Financing Commitments....................................... 20
Section 3.6. Ownership of Company Stock.................................. 20
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
ARTICLE IV CONDUCT OF BUSINESS PENDING THE MERGER............................... 20
Section 4.1. Conduct of Business of the Company Pending the Merger....... 20
Section 4.2. Prohibited Actions by the Company........................... 21
ARTICLE V COVENANTS AND ADDITIONAL AGREEMENTS................................... 23
Section 5.1. No Solicitation............................................. 23
Section 5.2. Access to Information....................................... 24
Section 5.3. Confidentiality Agreement................................... 25
Section 5.4. Reasonable Efforts.......................................... 25
Section 5.5. Indemnification of Directors and Officers................... 26
Section 5.6. Event Notices and Other Actions............................. 26
Section 5.7. Third Party Standstill Agreements........................... 27
Section 5.8. Employee Stock Options; Employee Plans and Benefits and
Employment Contracts........................................ 27
Section 5.9. Meeting of the Company's Stockholders....................... 28
Section 5.10. Proxy Statement............................................. 28
Section 5.11. Public Announcements........................................ 29
Section 5.12. Stockholder Litigation...................................... 29
Section 5.13. FIRPTA...................................................... 29
Section 5.14. Alternative Financing; Disclosure........................... 29
Section 5.15. HSR Act..................................................... 30
ARTICLE VI CONDITIONS TO CONSUMMATION OF THE MERGER............................. 30
Section 6.1. Conditions to Each Party's Obligation to Effect the
Merger...................................................... 30
Section 6.2. Conditions to Obligations of Newco to Effect the Merger..... 30
Section 6.3. Conditions to the Obligations of the Company................ 32
ARTICLE VII TERMINATION; AMENDMENT; WAIVER...................................... 32
Section 7.1. Termination................................................. 32
Section 7.2. Effect of Termination....................................... 34
Section 7.3. Fees and Expenses........................................... 34
Section 7.4. Amendment................................................... 35
Section 7.5. Extension; Waiver........................................... 35
ARTICLE VIII MISCELLANEOUS...................................................... 35
Section 8.1. Non-Survival of Representations and Warranties.............. 35
Section 8.2. Enforcement of the Agreement................................ 35
Section 8.3. Severability................................................ 36
Section 8.4. Notices..................................................... 36
Section 8.5. Failure or Indulgence Not Waiver; Remedies Cumulative....... 37
Section 8.6. Governing Law............................................... 37
Section 8.7. Descriptive Headings........................................ 37
Section 8.8. Parties in Interest......................................... 37
Section 8.9. Counterparts................................................ 37
Section 8.10. Certain Definitions......................................... 37
Section 8.11. Interpretation.............................................. 38
Section 8.12. Entire Agreement; Assignment................................ 38
Section 8.13. Disclaimers................................................. 39
</TABLE>
<PAGE> 4
DEFINED TERMS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
1988 Option Plan............................................ 8
1991 Option Plan............................................ 7
1992 Directors Plan......................................... 7
1997 Directors Plan......................................... 7
1997 Incentive Plan......................................... 7
1997 Purchase Plan.......................................... 10
Acquisition Agreement....................................... 32
Acquisition Proposal........................................ 33
affiliate................................................... 51
Agreement................................................... 1
Alternative Transaction..................................... 46
beneficial owner............................................ 52
Benefit Plans............................................... 16
business day................................................ 52
Bylaws...................................................... 3
Cash and Cash Equivalents................................... 43
Cash Merger Consideration................................... 4
Cash Payments............................................... 8
Certificate of Incorporation................................ 3
Certificate of Merger....................................... 2
Certificates................................................ 6
Closing..................................................... 8
Closing Date................................................ 8
Code........................................................ 16
Company..................................................... 1
Company Common Stock........................................ 4
Company Disclosure Schedule................................. 8
Company Preferred Stock..................................... 9
Company Restaurant.......................................... 20
Company SEC Documents....................................... 12
Company Stock Option Plans.................................. 8
Company Stockholder Approval................................ 11
Confidentiality Agreement................................... 34
Contract.................................................... 22
control..................................................... 52
D&O Insurance............................................... 36
DGCL........................................................ 1
Dissenting Shares........................................... 5
Dissenting Stockholder...................................... 5
Effective Time.............................................. 3
Environmental Claim......................................... 22
Environmental Laws.......................................... 20
Environmental Liabilities................................... 22
Environmental Permit........................................ 20
ERISA....................................................... 15
ERISA Affiliate............................................. 16
Exchange Act................................................ 11
Expense Reimbursement....................................... 48
Filed Company SEC Documents................................. 11
Financing Commitments....................................... 28
Governmental Entity......................................... 14
group....................................................... 52
</TABLE>
<PAGE> 5
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Hazardous Materials......................................... 21
HSR Act..................................................... 14
IFAC........................................................ 14
Intellectual Property....................................... 25
IRS......................................................... 16
JH&C Group.................................................. 14
JH&Co....................................................... 14
Leases...................................................... 24
Licenses.................................................... 14
Liens....................................................... 13
Liquor Licenses............................................. 20
Management.................................................. 20
Material Adverse Effect..................................... 52
Material Business........................................... 34
Merger...................................................... 1
Merger Consideration........................................ 5
Newco....................................................... 1
Option...................................................... 7
Paying Agent................................................ 6
Pension Plan................................................ 16
Permits..................................................... 19
Permitted Liens............................................. 24
person...................................................... 52
Proxy Statement............................................. 13
Releases.................................................... 21
Rollover Group.............................................. 1
SARs........................................................ 10
Schedule 13E-3.............................................. 13
SEC......................................................... 12
Securities Act.............................................. 11
Securities Purchase and Voting Agreement.................... 1
Series A Company Preferred Stock............................ 3
Series A Surviving Corporation Preferred Stock.............. 4
Series B Company Preferred Stock............................ 3
Series B Surviving Corporation Preferred Stock.............. 4
Series C Company Preferred Stock............................ 3
Settlement Agreement........................................ 14
Settlement Fee.............................................. 14
Special Committee........................................... 2
Special Committee Financial Advisor......................... 2
Stockholder Meeting......................................... 39
Subsidiary.................................................. 9
Superior Proposal........................................... 33
Surviving Corporation....................................... 2
Surviving Corporation Common Stock.......................... 5
Tax Returns................................................. 19
Taxes....................................................... 19
Termination Fee............................................. 47
TRAC Agreement.............................................. 19
Transactions................................................ 11
Voting Agreement............................................ 1, 2
Voting Company Debt......................................... 10
WARN........................................................ 17
</TABLE>
<PAGE> 6
AGREEMENT AND PLAN OF MERGER
THIS IS AN AGREEMENT AND PLAN OF MERGER, dated as of November 15, 2000, as
amended as of January 9, 2001 (as so amended, this "Agreement") between
Manhattan Acquisition Corp., a Delaware corporation ("Newco"), and Il Fornaio
(America) Corporation, a Delaware corporation (the "Company").
BACKGROUND
A. The Boards of Directors of the Company and Newco have each determined
that it is in the best interests of their respective stockholders for Newco to
be merged with and into the Company in accordance with the applicable provisions
of the Delaware General Corporation Law (the "DGCL") and upon the terms and
subject to the conditions set forth in this Agreement (the "Merger"). The
parties to this Agreement entered into the original Agreement and Plan of Merger
dated as of November 15, 2000 (the "Original Agreement"), and desire to add
certain additional terms and provisions applying to the Merger.
B. Pursuant to a Securities Purchase and Contribution Agreement, dated as
of November 15, 2000, among the beneficial and record stockholders of the
Company set forth on Exhibit A to the Original Agreement and Newco (the
"Original Securities Purchase Agreement"), and subject to the terms and
conditions thereof, (i) the stockholders comprising the Rollover Group described
therein have agreed to receive or retain securities of the Surviving Corporation
(as defined in Section 1.1) upon consummation of the Merger and (ii) Bruckmann,
Rosser, Sherrill & Co. II, L.P. has agreed to purchase securities of Newco for
cash immediately prior to the consummation of the Merger. The parties to the
Original Securities Purchase Agreement, contemporaneously with the execution of
this Agreement, are amending the Original Securities Purchase Agreement (as so
amended, the "Securities Purchase Agreement") to add another individual to the
Rollover Group described therein (as so augmented and reflected in Exhibit A to
this Agreement, the "Rollover Group") and agree more specifically on the manner
in which the transactions contemplated thereby are to be carried out. It is
understood and agreed that Newco will have the right to further amend Exhibit A
to this Agreement by written notice delivered to the Company after the date
hereof to add additional stockholders of the Company or holders of options to
purchase shares of the Company's capital stock to such Exhibit, whereupon such
stockholders or optionholders will be deemed to be members of the Rollover Group
for all purposes hereof.
C. Newco has obtained the Financing Commitments referred to in Section 3.5
of this Agreement.
D. Pursuant to a Voting Agreement, dated as of November 15, 2000, among the
Rollover Group and Newco (the "Original Voting Agreement"), the then-current
members of the Rollover Group have agreed, among other things, to vote any
shares of capital stock or other securities of the Company entitled to vote in
respect of the Merger in favor of the Merger. The parties to the Original Voting
Agreement, contemporaneously with the execution of this Agreement, are amending
the Original Voting Agreement (as so amended, the "Voting Agreement"), to add
additional parties subject to such agreement.
E. The approval of the Board of Directors of the Company referred to above
is based upon the unanimous recommendation of a special committee (the "Special
Committee") of the Board of Directors of the Company comprised solely of
directors of the Company who are not employees of the Company and are not
affiliated with any stockholder which is party to the Securities Purchase
Agreement or the Voting Agreement, which Special Committee has approved this
Agreement (and, solely for purposes of Section 203 of the DGCL, the Voting
Agreement and the Securities Purchase Agreement) and has determined, after
consultation with its independent financial advisor (the "Special Committee
Financial Advisor"), that the consideration to be paid for each share of Company
Common Stock in the Merger is fair to the holders of such shares and to
recommend that the holders of shares of Company Common Stock approve the Merger
and adopt this Agreement.
<PAGE> 7
F. It is Newco's intent that the transactions contemplated hereby be
recorded as a recapitalization for financial reporting purposes.
TERMS
THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein, and
intending to be legally bound hereby, Newco and the Company hereby agree as
follows:
ARTICLE I
THE MERGER
SECTION 1.1. The Merger. Upon the terms and subject to the conditions set
forth in this Agreement, at the Effective Time (as defined in Section 1.2),
Newco shall be merged with and into the Company and the separate corporate
existence of Newco shall thereupon cease. The Company shall be the surviving
corporation in the Merger (sometimes hereinafter referred to as the "Surviving
Corporation") and continue its existence under the laws of the State of
Delaware.
SECTION 1.2. Effective Time. As promptly as practicable after the
satisfaction or waiver in accordance with this Agreement of the conditions set
forth in Article VI of this Agreement, the parties hereto shall cause the Merger
to be consummated by filing a Certificate of Merger (the "Certificate of
Merger") with the Secretary of State of the State of Delaware in such form as is
required by, and executed in accordance with, the applicable provisions of the
DGCL. The Certificate of Merger will provide that the Merger will become
effective immediately upon the filing of the Certificate of Merger with such
Secretary of State in accordance with the DGCL. The time when the Merger becomes
effective is hereinafter referred to as the "Effective Time."
SECTION 1.3. Effect of the Merger. At the Effective Time, the effect of the
Merger shall be as provided by the DGCL. Without limiting the foregoing, all the
property, rights, privileges, powers and franchises of the Company and Newco
shall be vested in the Surviving Corporation, and all debts, liabilities and
duties of the Company and Newco shall become the debts, liabilities and duties
of the Surviving Corporation.
SECTION 1.4. Certificate of Incorporation; Bylaws.
(a) The certificate of incorporation of the Company as in effect
immediately prior to the Effective Time shall be the certificate of
incorporation of the Surviving Corporation (the "Certificate of Incorporation"),
until duly amended as provided therein or by applicable law, except that the
Certificate of Incorporation may, at Newco's option, be amended after the
Effective Time as determined by Newco in its discretion. The Company will, not
less than one business day prior to the Effective Time, file a certificate of
designations with the Delaware Secretary of State pursuant to the second
paragraph of Article IV of its certificate of incorporation to create three
series of preferred stock, par value $.001 per share, of the Company, having the
rights, designations and preferences set forth in Schedule VI of the Securities
Purchase Agreement and, immediately prior to the Effective Time, will issue such
shares to members of the Rollover Group in such amounts, for such consideration
and on such other terms as are set forth in the Securities Purchase Agreement.
The three series of preferred stock of the Company to be so created are referred
to herein as "Series A Company Preferred Stock," "Series B Company Preferred
Stock" and "Series C Company Preferred Stock," respectively.
(b) The bylaws of Newco in effect at the Effective Time shall be the bylaws
of the Surviving Corporation (the "Bylaws"), until thereafter amended as
provided therein or by applicable law.
SECTION 1.5. Directors and Officers.
(a) The directors of Newco at the Effective Time shall, from and after the
Effective Time, be the directors of the Surviving Corporation until their
successors have been duly elected or appointed and
<PAGE> 8
qualified or until their earlier death, resignation or removal in accordance
with the Certificate of Incorporation and the Bylaws.
(b) The officers of the Company at the Effective Time shall, from and after
the Effective Time, be the officers of the Surviving Corporation until their
successors have been duly elected or appointed and qualified or until their
earlier death, resignation or removal in accordance with the Certificate of
Incorporation and the Bylaws.
SECTION 1.6. Conversion of Securities. At the Effective Time, by virtue of
the Merger and without any action on the part of Newco, the Company or the
holders of any of the following securities:
(a) Each share of common stock of the Company, par value $.001 per
share ("Company Common Stock"), issued and outstanding immediately before
the Effective Time (other than (i) Dissenting Shares (as defined in Section
1.8(a)) and (ii) shares of Company Common Stock cancelled pursuant to
Section 1.6(c)) shall be converted into and represent the right to receive
$14.00 in cash (the "Cash Merger Consideration"), without interest, upon
surrender of the certificate formerly representing such share in the manner
provided in Section 1.9, less any required withholding taxes.
(b) Each share of capital stock of Newco, par value $.001 per share,
issued and outstanding immediately before the Effective Time shall be
converted into and exchanged for one fully paid and non-assessable share of
the same class and series of capital stock of the Surviving Corporation,
par value $.001 per share. From and after the Effective Time, each
outstanding certificate theretofore representing shares of capital stock of
Newco shall be deemed for all purposes to evidence ownership and to
represent the same number of shares of the same class and series of capital
stock of the Surviving Corporation.
(c) Each share of Company Common Stock held in the treasury of the
Company or held by any subsidiary of the Company, and each share of Company
Common Stock held by Newco immediately before the Effective Time, shall be
cancelled and cease to exist, and no payment shall be made with respect
thereto.
(d) Each share of Series A Company Preferred Stock issued and
outstanding immediately before the Effective Time (other than (i)
Dissenting Shares and (ii) shares of Series A Company Preferred Stock
cancelled pursuant to Section 1.6(c)) shall not be affected by the Merger
and shall remain outstanding as one share of Series A Cumulative
Compounding Preferred Stock, par value $.001 per share ("Series A Surviving
Corporation Preferred Stock"), of the Surviving Corporation.
(e) Each share of Series B Company Preferred Stock issued and
outstanding immediately before the Effective Time (other than (i)
Dissenting Shares and (ii) shares of Series B Company Preferred Stock
cancelled pursuant to Section 1.6(c)) shall not be affected by the Merger
and shall remain outstanding as one share of Series B Cumulative
Compounding Preferred Stock, par value $.001 per share ("Series B Surviving
Corporation Preferred Stock"), of the Surviving Corporation.
(f) Each share of Series C Company Preferred Stock issued and
outstanding immediately before the Effective Time (other than (i)
Dissenting Shares and (ii) shares of Series C Company Preferred Stock
cancelled pursuant to Section 1.6(c)) shall be converted into one share of
Common Stock, par value $.001 per share ("Surviving Corporation Common
Stock"), of the Surviving Corporation.
(g) The Cash Merger Consideration and the shares of Series A Surviving
Corporation Preferred Stock, Series B Surviving Corporation Preferred Stock
and Surviving Corporation Common Stock to be delivered as merger
consideration under paragraphs (d), (e) and (f) above, are collectively
referred to herein as the "Merger Consideration."
SECTION 1.7. Adjustments to Prevent Dilution. In the event that the Company
changes the number of shares of capital stock of the Company or securities
convertible or exchangeable into or exercisable for shares of capital stock of
the Company issued and outstanding prior to the Effective Time as a result of a
<PAGE> 9
reclassification, stock split (including a reverse split), stock dividend or
distribution, recapitalization, merger, subdivision, issuer tender or exchange
offer, or other similar transaction, but not in respect of the amendment to the
Company's certificate of incorporation expressly contemplated by Section 1.4(a),
the Merger Consideration shall be equitably adjusted.
SECTION 1.8. Dissenting Shares.
(a) Notwithstanding any provision of this Agreement to the contrary, at the
Effective Time, any issued and outstanding shares of Company Common Stock,
Series A Company Preferred Stock, Series B Company Preferred Stock or Series C
Company Preferred Stock ("Dissenting Shares") held by a Dissenting Stockholder
(as defined below) shall not be converted into the Merger Consideration but
shall be converted into or represent the right to receive only such
consideration as may be determined to be due to such Dissenting Stockholder
pursuant to Section 262 and the other applicable provisions of the DGCL;
provided, however, that each share of Company Common Stock, Series A Company
Preferred Stock, Series B Company Preferred Stock and Series C Company Preferred
Stock outstanding immediately prior to the Effective Time and held by a
Dissenting Stockholder who, after the Effective Time, loses or fails to perfect
his or her right of appraisal, pursuant to the DGCL, shall be deemed to be
converted as of the Effective Time into the right to receive the Merger
Consideration, without any interest thereon. As used in this Agreement, the term
"Dissenting Stockholder" means any record holder or beneficial owner of shares
of Company Common Stock, Series A Company Preferred Stock, Series B Company
Preferred Stock or Series C Company Preferred Stock who complies with all
provisions of the DGCL concerning the right of holders of such stock to dissent
from the Merger and obtain fair value for their shares.
(b) The Company shall give Newco (i) prompt notice of any demands for
appraisal pursuant to the applicable provisions of the DGCL received by the
Company, withdrawals of such demands, and any other instruments served pursuant
to the DGCL and received by the Company and (ii) the opportunity to participate
in all negotiations and proceedings with respect to demands for appraisal under
the DGCL. The Company shall not, except with the prior written consent of Newco,
make any payment with respect to any such demands for appraisal or offer to
settle or settle any such demands.
SECTION 1.9. Surrender of Shares.
(a) Prior to the mailing of the Proxy Statement (as defined in Section
2.6), Newco shall appoint a bank or trust company which is reasonably
satisfactory to the Company to act as paying agent (the "Paying Agent") for the
payment of the Cash Merger Consideration. At the Effective Time, the Surviving
Corporation shall deposit with the Paying Agent for the benefit of former
holders of shares of Company Common Stock sufficient funds to make payments of
the Cash Merger Consideration on all shares of Company Common Stock to be
converted into cash under Section 1.6(a). Such funds shall be invested by the
Paying Agent in prime money market obligations selected by the Surviving
Corporation. Any net profit resulting from, or interest or income produced by,
such investments shall be payable to the Surviving Corporation or as it directs.
(b) Promptly after the Effective Time, the Surviving Corporation shall
cause to be mailed to each record holder, as of the Effective Time, of an
outstanding certificate or certificates which immediately prior to the Effective
Time represented shares of Company Common Stock (the "Certificates "), a form of
letter of transmittal (which shall specify that delivery shall be effected, and
risk of loss and title to the Certificates shall pass, only upon proper delivery
of the Certificates to the Paying Agent) and instructions for use in effecting
the surrender of the Certificates for payment of the Cash Merger Consideration
therefor. Upon surrender to the Paying Agent of a Certificate, together with
such letter of transmittal, duly completed and validly executed in accordance
with the instructions thereto, and such other documents as may be required
pursuant to such instructions, the holder of such Certificate shall be entitled
to receive in exchange therefor the aggregate amount of Cash Merger
Consideration into which the number of shares of Company Common Stock previously
represented by such Certificate or Certificates surrendered shall have been
converted pursuant to this Agreement. If any Cash Merger Consideration is to be
remitted to a person whose name is other than that in which the Certificate
surrendered for exchange is registered, it shall be a condition of such exchange
that the Certificate so surrendered shall be properly endorsed, with
<PAGE> 10
signature guaranteed, or otherwise in proper form for transfer, and that the
person requesting such exchange shall have paid any transfer and/or other taxes
required by reason of the remittance of Cash Merger Consideration to a person
whose name is other than that of the registered holder of the Certificate
surrendered, or the person requesting such exchange shall have established to
the satisfaction of the Surviving Corporation that such tax either has been paid
or is not applicable. No interest shall be paid or accrued, upon the surrender
of the Certificates, for the benefit of holders of the Certificates on any Cash
Merger Consideration.
(c) At any time following the date six months after the Effective Time, the
Surviving Corporation shall be entitled to require the Paying Agent to deliver
to it any funds (including any interest received with respect thereto) which
shall have been deposited with the Paying Agent and which shall have not been
disbursed to holders of Certificates, and thereafter such holders shall be
entitled to look only to the Surviving Corporation (subject to abandoned
property, escheat or other similar laws) and only as general creditors thereof
for payment of their claim for Cash Merger Consideration to which such holders
may be entitled.
(d) Notwithstanding the provisions of Section 1.9(c), neither the Surviving
Corporation nor the Paying Agent shall be liable to any person in respect of any
Cash Merger Consideration delivered to a public official pursuant to any
applicable abandoned property, escheat or similar law.
(e) The Surviving Corporation shall be entitled to deduct and withhold from
the consideration otherwise payable pursuant to this Agreement to any former
holder of shares of Company Common Stock such amounts as the Surviving
Corporation (or any affiliate thereof) is required to deduct and withhold with
respect to the making of such payment under the Code (as defined in Section
2.11), or any provision of any applicable state, local or foreign law, rule or
regulation. To the extent that amounts are so withheld by the Surviving
Corporation and paid by the Surviving Corporation to the applicable taxing
authority, such withheld amounts shall be treated for all purposes of this
Agreement as having been paid to the former holder of shares of Company Common
Stock in respect of which such deduction and withholding was made by the
Surviving Corporation.
SECTION 1.10. No Further Transfer or Ownership Rights. After the Effective
Time, there shall be no further transfer on the records of the Company (or the
Surviving Corporation) or its transfer agent of Certificates representing shares
of Company Common Stock (or Series C Company Preferred Stock), and if such
Certificates (or any certificates representing shares of Series C Company
Preferred Stock) are presented to the Company (or the Surviving Corporation) for
transfer, they shall be cancelled. From and after the Effective Time, the
holders of certificates evidencing ownership of shares of capital stock of the
Company outstanding immediately prior to the Effective Time shall cease to have
any rights with respect to such shares of capital stock except as otherwise
provided for herein or by applicable law. All Merger Consideration paid upon the
surrender for exchange of certificates representing shares of capital stock of
the Company in accordance with the terms of this Article I shall be deemed to
have been issued (and paid) in full satisfaction of all rights pertaining to the
shares of capital stock of the Company exchanged for Merger Consideration
theretofore represented by such certificates.
SECTION 1.11. Treatment of Options. Prior to the Effective Time, the Board
of Directors of the Company (and/or, if appropriate, the Special Committee)
shall adopt appropriate resolutions and take all other actions necessary to
provide that each outstanding stock option (each, an "Option") heretofore
granted under the Company's 1997 Equity Incentive Plan, as amended (the "1997
Incentive Plan"), the Company's 1997 Non-Employee Directors' Stock Option Plan,
as amended (the "1997 Directors Plan"), the Company's 1992 Non-Employees
Directors' Stock Option Plan, as amended (the "1992 Directors Plan"), and each
of the Company's 1991 Incentive Stock Option Plan, as amended (the "1991 Option
Plan"), and the Company's 1988 Stock Option Plan, as amended (the "1988 Option
Plan") (collectively, the "Company Stock Option Plans"), whether or not then
vested or exercisable, shall, at the Effective Time, be cancelled, and each
holder thereof shall be entitled to receive a payment in cash as provided in
Section 5.8 hereof, if any (subject to any applicable withholding taxes, the
"Cash Payment"), it being understood that a portion of the Options held by
members of the Rollover Group will be cancelled in
<PAGE> 11
exchange for substitute options to purchase shares of capital stock of the
Surviving Corporation, as contemplated by the Securities Purchase Agreement. As
provided herein, unless otherwise determined by Newco, the Company Stock Option
Plans (and any feature of any other Benefit Plan (as defined in Section 2.11) or
other plan, program or arrangement providing for the issuance or grant of any
other interest in respect of the capital stock of the Company) shall terminate
as of the Effective Time. The Company shall take all steps necessary to ensure
that, after the date of the Original Agreement, the Company will not issue any
Options or other options, warrants, rights or agreements which would entitle any
person to acquire any capital stock of the Company or, except as otherwise
provided in this Section 1.11 or in Section 5.8 (or in connection with the
Securities Purchase Agreement), to receive any payment in respect thereof and,
except as otherwise provided above, to cause such Options to be cancelled or
cause the holders of the Options to agree to such cancellation thereof as
provided herein.
SECTION 1.12. Closing. Immediately prior to the Effective Time, a closing
for the transactions contemplated hereby (the "Closing") will be held at the
offices of Dechert, 30 Rockefeller Plaza, New York, NY 10112, unless another
place is agreed in writing by Newco and the Company. All actions taken at the
Closing shall be deemed to have been taken simultaneously at the time the last
of any such actions is taken or completed. The date such Closing occurs is
referred to herein as the "Closing Date."
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Newco that the statements contained
in this Article II were true and correct as of the date of the Original
Agreement (or, in the case of Section 2.6, will be true at the respective dates
stated therein), with references to "this Agreement" referring to the Original
Agreement and "the date hereof" and "the date of this Agreement" referring to
the date of the Original Agreement, it being understood such representations and
warranties must be read in conjunction with, and are subject to the exceptions
set forth in, the disclosure schedule delivered by the Company to Newco on or
before the date of the Original Agreement (the "Company Disclosure Schedule").
The Company Disclosure Schedule shall be arranged in Sections corresponding to
the numbered and lettered Sections contained in this Article II, and the
disclosures in any Section, including appropriate cross references, shall
qualify only the corresponding Section in this Article II; provided, however,
that disclosure of a matter in one Section of the Company Disclosure Schedule
shall be deemed incorporated into any other Section of the Company Disclosure
Schedule where the relevance of the incorporation is reasonably apparent from
the disclosure of the matter then appearing in the Section where it is
disclosed. In addition, the Company represents and warrants to Newco that the
statements contained in Sections 2.1, 2.3, 2.7 and 2.15 are true and correct as
of the date of this Agreement, with references to "this Agreement" referring to
this Agreement. Subject to the foregoing, the Company hereby represents and
warrants to Newco as follows:
SECTION 2.1. Organization and Qualification.
(a) The Company is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware and has the requisite
corporate power and authority necessary to enable it to own, lease and operate
its properties and assets and to carry on its business as it is now being
conducted. The Company is duly qualified as a foreign corporation, and is in
good standing, in each state where the character of the properties owned or
leased by it or the nature of its activities makes such qualification or
licensing necessary, and possesses all governmental franchises and Permits (as
defined in Section 2.13), except where the failure to be so qualified or in good
standing or to possess such franchises and Permits has not had and would not
reasonably be expected to have a Material Adverse Effect (as defined in Section
8.10) on the Company.
(b) The Company has no Subsidiaries. As used in this Agreement, the term
"Subsidiary" shall mean, with respect to any party, any corporation or other
organization, whether incorporated or unincorporated, of which (i) such party or
any other Subsidiary of such party is a general partner (excluding partnerships,
the general partnership interests of which held by such party or any Subsidiary
of
<PAGE> 12
such party do not have the majority of the voting interest in such partnership)
or (ii) at least a majority of the securities or other interests having by their
terms ordinary voting power to elect a majority of the Board of Directors or
others performing similar functions with respect to such corporation or other
organization is directly or indirectly owned or controlled by such party or by
any one or more of its Subsidiaries, or by such party and one or more of its
Subsidiaries. Except as set forth on Section 2.1(b) of the Company Disclosure
Schedule, the Company does not own, directly or indirectly, any capital stock or
other ownership interest in any corporation, partnership, limited liability
company, joint venture or other entity.
(c) The Company has delivered to Newco complete and correct copies of its
certificate of incorporation and bylaws, in each case as amended to the date of
the Original Agreement.
SECTION 2.2. Capitalization.
(a) The authorized capital stock of the Company consists of 20,000,000
shares of Company Common Stock and 5,000,000 shares of preferred stock, par
value $.001 per share ("Company Preferred Stock"). As of the date hereof,
5,811,551 shares of Company Common Stock are issued and outstanding, and no
shares of Company Preferred Stock are issued and outstanding. As of the date
hereof, 190,486 shares of Company Common Stock are reserved for future issuance
under the 1997 Employee Stock Purchase Plan (the "1997 Purchase Plan"). As of
the date hereof, Options to purchase 1,541,634 shares of Company Common Stock
are issued and outstanding under the 1997 Incentive Plan, Options to purchase
34,500 shares of Company Common Stock are issued and outstanding under the 1997
Directors Plan and Options to purchase 16,000 shares of Company Common Stock are
issued and outstanding under the 1992 Directors Plan. Except for the Options
referred to in the preceding sentence, no Options are issued or outstanding. All
of the issued and outstanding shares of Company Common Stock have been duly
authorized and validly issued and are fully paid and nonassessable and are not
subject to preemptive rights. The shares of Company Common Stock referred to
above that are reserved for issuance, consisting of the shares reserved under
the 1997 Purchase Plan, and the 1,592,134 shares of Company Common Stock
reserved for issuance for outstanding Options, have not been issued and will not
be issued prior to the Effective Time, and no commitment has been or will be
made for their issuance, other than (in the case of both preceding clauses)
pursuant to the exercise of the Options described above that are issued and
outstanding under the Company Stock Option Plans as of the date of this
Agreement. At the Effective Time, except as otherwise provided in Section 1.11
hereof, each Option shall be cancelled, and the holder thereof shall not be
entitled to receive any consideration therefor other than the cash payments, if
any, provided by Section 1.11 and Section 5.8 of this Agreement (or, in the case
of the Rollover Group, the consideration received under the Securities Purchase
Agreement). Section 2.2(a) of the Company Disclosure Schedule sets forth the
exercise prices and number of shares of Company Common Stock in respect of
outstanding Options under the Company Stock Option Plans. There are no bonds,
debentures, notes or other indebtedness of the Company having the right to vote
(or convertible into, or exchangeable for, securities having the right to vote)
on any matters on which stockholders of the Company may vote ("Voting Company
Debt"). Except as set forth above in this Section 2.2(a), there are no
outstanding securities, options, warrants, calls, rights, convertible or
exchangeable securities, "phantom" stock rights, stock appreciation rights
("SARs"), stock-based performance units, commitments, agreements, arrangements
or undertakings of any kind (including any stockholder rights plan) to which the
Company is a party or by which the Company is bound obligating the Company to
issue, deliver or sell, or cause to be issued, delivered or sold, additional
shares of capital stock or other voting securities of the Company or obligating
the Company to issue, grant, extend or enter into any such security, option,
warrant, call, right, unit, commitment, agreement, arrangement or undertaking.
Except as set forth in Section 2.2 of the Company Disclosure Schedule, there are
not any outstanding contractual obligations of the Company to repurchase, redeem
or otherwise acquire, or providing preemptive or registration rights with
respect to, any shares of, or any outstanding options, warrants or rights of any
kind to acquire any shares of, or any outstanding securities that are
convertible into or exchangeable for any shares of, capital stock of the
Company. The Company does not have outstanding any loans to any person in
respect of the purchase of securities issued by the Company.
<PAGE> 13
(b) There are no voting trusts, proxies, registration rights agreements, or
other agreements, commitments or understandings of any character to which the
Company is bound with respect to the voting of any shares of capital stock of
the Company or with respect to the registration of the offering, sale or
delivery of any shares of capital stock of the Company under the Securities Act
of 1933, as amended (the "Securities Act").
SECTION 2.3. Authority Relative to this Agreement.
(a) The Company has all requisite corporate power and authority to execute
and deliver this Agreement and each instrument required hereby to be executed
and delivered by the Company prior to or at the Effective Time, to perform its
obligations hereunder and thereunder, and to consummate the transactions
contemplated hereby (the "Transactions") (subject to the Company Stockholder
Approval (as defined below) with respect to the Merger). The execution and
delivery of this Agreement and each instrument required hereby to be executed
and delivered by the Company prior to or at the Effective Time and the
performance of its obligations hereunder and thereunder and the consummation by
the Company of the Transactions have been duly and validly authorized by all
necessary corporate action on the part of the Company (including the unanimous
approval of the Special Committee), and no other corporate proceedings on the
part of the Company are necessary to authorize this Agreement or to consummate
the Transactions (other than the Company Stockholder Approval and the filing of
appropriate merger documents as required by the DGCL). This Agreement has been
duly and validly executed and delivered by the Company, and, assuming this
Agreement constitutes a valid and binding obligation of Newco, this Agreement
constitutes a valid and binding agreement of the Company, enforceable against
the Company in accordance with its terms, subject to bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium and similar laws of general
applicability relating to or affecting creditors' rights and to general equity
principles.
(b) Based in part on the representation set forth in Section 3.6, the only
vote of holders of any class or series of capital stock of the Company necessary
under applicable law or stock exchange (or similar self regulatory organization)
regulations to adopt or approve this Agreement and the Merger is the adoption
and approval of this Agreement and the Merger by the holders of a majority of
the outstanding shares of Company Common Stock at the Stockholder Meeting (as
defined in Section 5.9) entitled to vote on the Merger, voting together as a
single class, with each share of Company Common Stock entitled to one vote per
share (the "Company Stockholder Approval"). No vote of the holders of any
capital stock or other securities of the Company is necessary to consummate any
of the Transactions other than as set forth in the preceding sentence.
(c) Consummation of the Transactions (including the transactions
contemplated by Sections 1.11 and 5.8 hereof) does not conflict with or violate
the provisions of any Company Stock Option Plan or any option agreement
evidencing the grant of any Options.
SECTION 2.4. Absence of Certain Changes. Except as disclosed in the
Company's filings and reports under the Securities Exchange Act of 1934, as
amended (the "Exchange Act") filed and publicly available prior to the date of
this Agreement (the "Filed Company SEC Documents") or as set forth in Section
2.4 of the Company Disclosure Schedule, since December 26, 1999, the Company has
conducted its business only in the ordinary course, and during such period there
has not been any event, change, effect or development that has had or would
reasonably be expected to have a Material Adverse Effect on the Company. Except
as disclosed in the Filed Company SEC Documents or as set forth in Section 2.4
of the Company Disclosure Schedule, since December 26, 1999 there has not been
(a) any declaration, setting aside or payment of any dividend or other
distribution in respect of the capital stock of the Company or any redemption or
other acquisition by the Company of any capital stock of the Company; (b) any
entry into any agreement, commitment or transaction by the Company which is
material to the Company, except agreements, commitments or transactions in the
ordinary course of business, consistent with prior practice; (c) any split,
combination or reclassification of the Company's capital stock or of any other
equity interests in the Company, or any issuance or the authorization of any
issuance of any other securities in respect of, in lieu of or in substitution
for shares of its capital stock or of any other equity
<PAGE> 14
interests in the Company; (d)(i) any granting by the Company to any officer or
director of the Company of any increase in compensation, except in the ordinary
course of business consistent with prior practice or as was required under
employment agreements in effect as of the date of the most recent audited
financial statements included in the Filed Company SEC Documents, (ii) any
granting by the Company to any such officer or director of any increase in
severance or termination pay, except as was required under employment, severance
or termination agreements in effect as of the date of the most recent audited
financial statements included in the Filed Company SEC Documents or (iii) any
entry by the Company into any employment, severance or termination agreement
with any such officer or director; (e) any damage, destruction or loss, whether
or not covered by insurance, that has had or would reasonably be expected to
have a Material Adverse Effect on the Company; or (f) any change in accounting
methods, principles or practices by the Company materially affecting the
consolidated assets, liabilities, results of operations or business of the
Company, except insofar as may have been required by a change in generally
accepted accounting principles.
SECTION 2.5. Reports.
(a) Since September 24, 1997, the Company has timely filed all required
forms, reports and documents with the Securities and Exchange Commission (the
"SEC") required to be filed by it pursuant to the federal securities laws and
the rules and regulations of the SEC thereunder (collectively, the "Company SEC
Documents"), all of which have complied as of their respective filing dates in
all material respects with all applicable requirements of the Securities Act and
the Exchange Act, and the rules and regulations promulgated thereunder. None of
such forms, reports or documents at the time filed contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading.
(b) The financial statements of the Company included in the Company SEC
Documents (including the notes thereto) comply as to form in all material
respects with applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto, have been prepared in accordance
with generally accepted accounting principles (except, in the case of unaudited
statements, as permitted by Form 10-Q of the SEC) applied on a consistent basis
during the periods involved (except as may be indicated in the notes thereto)
and fairly present in accordance with generally accepted accounting principles
the financial position of the Company as of the dates thereof and the results of
its operations and cash flows for the periods then ended (subject, in the case
of any unaudited interim financial statements, to the absence of footnote
disclosure and normal year-end adjustments).
SECTION 2.6. Proxy Statement. At the time the Proxy Statement is mailed,
the Proxy Statement (as defined below) will comply as to form in all material
respects with the Exchange Act and the regulations thereunder, except that no
representation is being made by the Company with respect to information supplied
in writing by or on behalf of Newco specifically for inclusion in the Proxy
Statement. None of the information supplied by the Company specifically for
inclusion in the Proxy Statement shall, at the time the Proxy Statement is
mailed, at the time of the Stockholder Meeting or at the Effective Time, contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading; provided, however, that the Company is not making any representation
or warranty as to any of the information relating to and supplied in writing by
or on behalf of Newco specifically for inclusion in the Proxy Statement. The
letter to stockholders, notice of meeting, proxy statement and form of proxy, or
the information statement, as the case may be, to be distributed to stockholders
of the Company in connection with the Merger, and the Schedule 14A and the
Schedule 13E-3 filing required under the rules and regulations of the SEC in
connection with the Transactions (the "Schedule 13E-3") and any other schedule
required to be filed with the SEC in connection therewith, together with any
amendments or supplements thereto, are collectively referred to herein as the
"Proxy Statement."
<PAGE> 15
SECTION 2.7. Consents and Approvals; No Violation. Subject to obtaining the
Company Stockholder Approval and the taking of the actions described in the
immediately succeeding sentence, the execution, delivery and performance of this
Agreement do not, and the consummation of the Transactions (including the
changes in ownership of the shares of Company Common Stock or the composition of
the Board of Directors of the Company) and compliance with the provisions of
this Agreement will not, conflict with, or result in any violation of, or
default (with or without notice or lapse of time, or both) under, or give rise
to a right of modification, termination, cancellation or acceleration of any
obligation or loss of a material benefit under, or result in the creation of any
pledges, claims, equities, options, liens, charges, call rights, rights of first
refusal, "tag" or "drag" along rights, encumbrances and security interests of
any kind or nature whatsoever (collectively, "Liens") upon any of the material
properties or assets of the Company under, or result in the termination or
modification (including in the amount, nature or timing of lease payments) of,
or require that any consent be obtained or any notice be given with respect to
(a) the Certificate of Incorporation or Bylaws of the Company, as currently in
effect, (b) any loan or credit agreement, note, bond, mortgage, indenture,
lease, license or other agreement, instrument, Contract or Permit applicable to
the Company or any of its properties or assets, (c) any judgment, order, writ,
injunction, decree, law, statute, ordinance, rule or regulation applicable to
the Company or any of its properties or assets, (d) any license, sublicense,
consent or other agreement (whether written or otherwise) pertaining to
Intellectual Property (as defined in Section 2.21) used by the Company in the
conduct of its business, and by which the Company licenses or otherwise
authorizes a third party to use any Intellectual Property (the "Licenses"),
other than, in the case of clauses (b), (c) or (d), any such conflicts,
violations, defaults, modifications, rights, Liens, losses of a material
benefit, consents or notices that have not had and would not reasonably be
expected to have a Material Adverse Effect on the Company. No consent, approval,
order or authorization of, or registration, declaration or filing with, any
Federal, state or, to the Company's knowledge, local government or any court,
administrative or regulatory agency or commission or other governmental
authority or agency, domestic or foreign (a "Governmental Entity"), is required
by the Company in connection with the execution and delivery of this Agreement
by the Company or the consummation by the Company of the Transactions, except
for (i) the filing of a premerger notification and report form by the Company
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the
"HSR Act"), (ii) the filing with the SEC of (x) the Schedule 13E-3 and (y) the
Proxy Statement relating to the approval by the Company's stockholders of this
Agreement, (iii) the filing of the Certificate of Merger pursuant to the DGCL
and (iv) such other consents, approvals, orders, authorizations, registrations,
declarations and filings the failure of which to be obtained or made has not had
and would not reasonably be expected to have a Material Adverse Effect on the
Company.
SECTION 2.8. Brokerage Fees and Commissions.
(a) Neither the Company nor any of its officers or directors has employed
any investment banker, business consultant, financial advisor, broker or finder
in connection with the Transactions, except for the Special Committee Financial
Advisor, or obligated the Company to pay any investment banking, business
consultancy, financial advisory, brokerage or finders' fees or commissions in
connection with the Transactions, except for fees payable to the Special
Committee Financial Advisor. The amount of such fees payable to the Special
Committee Financial Advisor and the terms related thereto have been previously
and accurately disclosed in writing to Newco and a correct and complete copy of
the engagement letter between the Special Committee Financial Advisor and the
Company with respect to the Transactions has been provided by the Company to
Newco.
(b) The Company and certain members of the Rollover Group named therein
have entered into a Mutual Release and Settlement of Claims, dated as of
November 15, 2000, with Jesse Hansen & Co., a California corporation ("JH&Co."),
William Jesse and John C. Hansen (collectively, the "JH&C Group"), Il Fornaio
Acquisition Corp., a Delaware corporation ("IFAC"), and Newco (the "Settlement
Agreement"), a true and complete copy of which has been delivered to Newco,
whereby, among other things, the Company and the members of the Rollover Group
named therein will pay to JH&C an amount not to exceed $611,627 (the "Settlement
Fee") and JH&C will release the Company, IFAC, the members of the Rollover Group
named therein and Newco, and their respective parents, subsidiaries and
affiliates
<PAGE> 16
and all of such parties' directors, officers, agents and other related person
from all liabilities, claims and obligations under each of (i) the Advisory
Engagement Letter, dated as of August 8, 2000, between JH&Co and IFAC and (ii)
the Project Engagement Letter, dated as of August 9, 2000, between JH&Co. and
IFAC. There is no obligation or liability of the Company to JH&C except the
obligation to pay the Settlement Fee, nor has the Company paid any other amount
or consideration to JH&C prior to the date hereof, nor will the Company pay any
amount or consideration to JH&C after the date hereof other than the Settlement
Fee.
SECTION 2.9. Litigation. Except as specifically disclosed in the Filed
Company SEC Documents and as set forth in Section 2.9 of the Company Disclosure
Schedule, there is no claim, suit, action or proceeding (including arbitration
proceedings) pending or, to the knowledge of the Company, threatened against the
Company that has had or would reasonably be expected to have a Material Adverse
Effect on the Company, nor is there any judgment, decree, injunction, rule or
order of any Governmental Entity or arbitrator outstanding against the Company
which has had or would reasonably be expected to have a Material Adverse Effect
on the Company.
SECTION 2.10. Absence of Changes in Benefit Plans. Except as disclosed in
the Filed Company SEC Documents or as required by applicable law, since December
26, 1999, there has not been any adoption or amendment in any material respect
by the Company of any bonus, pension, profit sharing, deferred compensation,
incentive compensation, stock ownership, stock purchase, stock option, phantom
stock, retirement, vacation, severance, disability, death benefit,
hospitalization, medical or other plan, arrangement or understanding (whether or
not legally binding) providing benefits to any current or former employee,
officer or director of the Company or for which the Company is liable. Except as
disclosed in the Filed Company SEC Documents or Section 2.10 of the Company
Disclosure Schedule, there exist no employment, consulting, severance,
termination or indemnification agreements, arrangements or understandings
between the Company and any current or former officer or director or employee of
the Company.
SECTION 2.11. ERISA Compliance.
(a) Section 2.11(a) of the Company Disclosure Schedule sets forth a
complete list of all "employee benefit plans" (as defined in Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA") including
employment contracts, bonus, pension, profit sharing, deferred compensation,
incentive compensation, excess benefit, stock, stock option, severance,
termination pay, change in control or other employee benefit plans, programs or
arrangements, including those providing medical, dental, vision, disability,
life insurance and vacation benefits (other than those required to be maintained
by law), whether written or unwritten, qualified or unqualified, funded or
unfunded, foreign or domestic currently maintained, or contributed to, or
required to be maintained or contributed to, by the Company or any other person
or entity that, together with the Company, is treated as a single employer under
Section 414 of the Internal Revenue Code of 1986, as amended (the "Code") (each
an "ERISA Affiliate") for the benefit of any current or former employees,
officers or directors of the Company or with respect to which the Company has
any liability (collectively, the "Benefit Plans"). As applicable with respect to
each Benefit Plan, the Company has delivered to Newco, true and complete copies
of (i) each Benefit Plan, including all amendments thereto, and in the case of
an unwritten Benefit Plan, a written description thereof, (ii) all trust
documents, investment management contracts, custodial agreements and insurance
contracts relating thereto, (iii) the current summary plan description and each
summary of material modifications thereto, (iv) the three most recent annual
reports (Form 5500 and all schedules thereto) filed with the Internal Revenue
Service ("IRS"), (v) the most recent IRS determination letter and each currently
pending application to the IRS for a determination letter, (vi) the three most
recent summary annual reports, financial statements and trustee reports, and
(vii) all records, notices and filing concerning IRS or Department of Labor
audits or investigations, "prohibited transactions" within the meaning of
Section 406 of ERISA or Section 4975 of the Code and "reportable events" within
the meaning of Section 4043 of ERISA.
<PAGE> 17
(b) No event has occurred and, to the knowledge of the Company, there
exists no condition or set of circumstances in connection with which the Company
or any ERISA Affiliate is or would reasonably be expected to be subject to any
liability under the terms of any Benefit Plan, under ERISA, or, with respect to
any Benefit Plan, under the Code or any other applicable law, rule or
regulation, domestic or foreign, other than any condition or set of
circumstances that has not had and would not reasonably be expected to have a
Material Adverse Effect on the Company. Neither the Company nor any ERISA
Affiliate has incurred or would reasonably be expected to incur any liability in
respect of any employee benefit plan maintained by an ERISA Affiliate but not
included within the term "Benefit Plan" or by any person other than the Company
or any ERISA Affiliate, which liability has had or would reasonably be expected
to have a Material Adverse Effect on the Company.
(c) Neither the Company nor any ERISA Affiliate has, at any time since
January 1, 1994 (i) maintained or contributed to any employee pension benefit
plan subject to Title IV of ERISA or Code sec. 412 or (ii) been required to
contribute to, or incurred any withdrawal liability within the meaning of ERISA
sec. 4201 to, any multiemployer plan as defined in ERISA sec. 3(37).
(d) To the knowledge of the Company, the Benefit Plans which are "employee
pension benefit plans" within the meaning of Section 3(2) of ERISA and which are
intended to meet the qualification requirements of Section 401(a) of the Code
(each a "Pension Plan") now meet, and at all times since their inception have
met the requirements for such qualification, and the related trusts are now, and
at all times since their inception have been, exempt from taxation under Section
501(a) of the Code. All Pension Plans have received determination letters from
the IRS to the effect that such Pension Plans are qualified and the related
trusts are exempt from federal income taxes and no determination letter with
respect to any Pension Plan has been revoked nor, to the knowledge of the
Company, is there any reason for such revocation, nor, to the knowledge of the
Company, has any Pension Plan been amended, or failed to be amended, since the
date of its most recent determination letter in any respect which would
adversely affect its qualification.
(e) Except as set forth on Section 2.11(e) of the Company Disclosure
Schedule, the execution and delivery of this Agreement do not, and the
consummation of the Transactions will not (i) require the Company or any ERISA
Affiliate to pay greater compensation or make a larger contribution to, or pay
greater benefits or accelerate payment or vesting of a benefit under, any
Benefit Plan or any other program, agreement, policy or arrangement or (ii)
create or give rise to any additional vested rights or service credits under any
Benefit Plan or any other program, agreement, policy or arrangement.
(f) Except as set forth in Section 2.11(f) of the Company Disclosure
Schedule, neither the Company nor any ERISA Affiliate is a party to or is bound
by any severance agreement, program or policy.
(g) Except as set forth in Section 2.11(g) of the Company Disclosure
Schedule, no Benefit Plan provides benefits, including without limitation, death
or medical benefits, beyond termination of employment or retirement other than
(i) coverage mandated by law or (ii) death or retirement benefits under a
Benefit Plan qualified under Section 401(a) of the Code. Neither the Company nor
any ERISA Affiliate is contractually obligated to provide any person with life,
medical, dental or disability benefits for any period of time beyond retirement
or termination of employment, other than as required by the provisions of
Sections 601 through 608 of ERISA and Section 4980B of the Code.
(h) With respect to any Benefit Plan that is an employee welfare benefit
plan (as defined in Section 3(1) of ERISA), (i) no such Benefit Plan is funded
through a "welfare benefit fund", as such term is defined in Section 419(e) of
the Code, (ii) to the knowledge of the Company, each such Benefit Plan that is a
"group health plan", as such term is defined in Section 5000(b)(l) of the Code,
complies in all material respects with the applicable requirements of Sections
601 through 608 of ERISA and Section 4980B(f) of the Code, and (iii) each such
Benefit Plan (including any such Plan covering retirees or other former
employees) may be amended or terminated as to future benefit accruals without
material liability to the Company or any ERISA Affiliate on or at any time after
the Effective Time.
<PAGE> 18
(i) There are no material pension, welfare, bonus, stock purchase, stock
ownership, stock option, deferred compensation, incentive, severance,
termination or other compensation plan or arrangement, or other material
employee fringe benefit plan presently maintained by, or contributed to by the
Company, or any ERISA Affiliate for the benefit of any employee of the Company,
including any such plan required to be maintained or contributed to by the law
of the relevant jurisdiction, maintained outside the jurisdiction of the United
States.
(j) The Company has not incurred any material liability under, and has
complied in all material respects with, the Worker Adjustment Retraining
Notification Act and the regulations promulgated thereunder ("WARN") and does
not reasonably expect to incur any such liability as a result of actions taken
or not taken prior to the Effective Time. The Company has not given, and has not
been required to give, any notice under WARN within 90 days prior to the date
hereof.
(k) There is no contract, agreement, Benefit Plan or other arrangement
covering any employee or former employee of the Company that could give rise to
the payment of any amount that would not be deductible under Section 280G of the
Code.
SECTION 2.12. Taxes.
(a) All federal income Tax Returns and all other material Tax Returns (as
defined herein) that are required to be filed by or with respect to the Company
have been timely filed, and reflect bona fide Tax reporting positions. All Taxes
that are shown therein as due have been paid in full, and there are no positions
taken on such Tax Returns with respect to any material issue that could result
in the Company being subject to penalties under Section 6662 of the Code. The
most recent financial statements contained in the Filed Company SEC Documents
reflect a reserve for all Taxes of the Company for all taxable periods and
portions thereof through the date of such financial statements which is adequate
under generally accepted accounting principles applied consistently with the
accounting principles used to prepare the financial statements contained in the
Filed Company SEC Documents, and to the Company's knowledge, nothing has
occurred since the date of the financial statements that would cause the reserve
to be inadequate under generally accepted accounting principles applied
consistently with the financial statements included in the Company SEC Reports.
(b) Except as set forth in Section 2.12(b) of the Company Disclosure
Schedule, no material Tax Return of the Company is under audit or examination by
any taxing authority, and no written notice of such an audit or examination has
been received by the Company.
(c) Except as set forth in Section 2.12(c) of the Company Disclosure
Schedule, there is not in force any extension of time with respect to the due
date for the filing of any Tax Return or any waiver or agreement for any
extension of time for the assessment or payment of any Tax due with respect to
the period covered by any Tax Return.
(d) Except as set forth in Section 2.12(d) of the Company Disclosure
Schedule, there is no material issue raised or claim against the Company for any
Taxes, and no assessments, deficiency or adjustment has been asserted or
proposed with respect to any Tax Return and no material issues relating to Taxes
were raised in writing by a taxing authority in a completed audit or examination
that, in each case, would reasonably be expected to result in an assessment,
deficiency, or adjustment for a later taxable period.
(e) Except as set forth in Section 2.12(e) of the Company Disclosure
Schedule, since January 1, 1994, the Company has not been a member of an
affiliated group filing a consolidated federal income Tax Return.
(f) There are no material Liens for Taxes on the assets of the Company
other than the Lien of property taxes not delinquent.
(g) Except as set forth in Section 2.12(g) of the Company Disclosure
Schedule, the Company is not bound by any tax sharing, tax indemnity or similar
agreement with respect to Taxes.
<PAGE> 19
(h) The Company is in substantial compliance with the Tip Reporting
Alternative Commitment Agreement (the "TRAC Agreement") executed by the Company
and the Internal Revenue Service in 1996. The TRAC Agreement governs the
reporting, withholding, payment of employment Taxes and filing of Tax Returns
with respect to tips received by the Company's employees.
(i) No record owner of shares of Company Common Stock is, to the Company's
knowledge, a non-resident alien individual or foreign corporation (within the
meaning of Section 897(a)(i) of the Code) that has held more than 5% of the
Company Common Stock at any time during the five-year period ending on the date
of the Original Agreement.
As used herein, "Tax Returns" shall mean all returns and reports of or with
respect to any Tax which are required to be filed by or with respect to the
Company, and "Taxes" shall mean (i) all taxes, charges, imposts, tariffs, fees,
levies or other similar assessments or liabilities of any kind whatsoever,
including income taxes, ad valorem taxes, excise taxes, withholding taxes, stamp
taxes or other taxes of or with respect to gross receipts, premiums, real
property, personal property, windfall profits, sales, use, transfers, licensing,
employment, payroll and franchises imposed by or under any statute, law, rule or
regulation, and such terms shall include any interest, fines, penalties,
assessments or additions to tax resulting from, attributable to or incurred in
connection with any such tax or any contest or dispute thereof; (ii) liability
of the Company or any fiduciary for the payment of any amounts of the type
described in clause (i) as a result of being a member of an affiliated, combined
consolidated or unitary group for any taxable period; and (iii) liability of the
Company for the payment of any amounts of the type described in clauses (i) or
(ii) as a result of any express or implied obligation to indemnify any other
person.
SECTION 2.13. Compliance with Applicable Laws.
(a) To the Company's knowledge, the Company has in effect all licenses,
franchises, permits and other governmental authorizations (including
Environmental Permits) ("Permits") necessary to conduct its business and the
Company is not in violation of any such license, franchise, permit or other
governmental authorization, or any statute, law, ordinance, rule or regulation
applicable to it or any of its properties, except, in each case, where the
failure to have any such license, franchise, permit or other governmental
authorization, or the existence of any such violation, has not had and could not
reasonably be expected to have a Material Adverse Effect.
(b) Section 2.13(b) of the Company Disclosure Schedule contains a list of
all liquor licenses, including beer and wine licenses, held by the Company in
connection with the operation of each restaurant or bakery owned or operated by
the Company (each, a "Company Restaurant"), along with the address of each such
Company Restaurant (the "Liquor Licenses"). To the extent required by applicable
law or regulation, each Company Restaurant currently in operation possesses a
liquor license. The Company has no reason to believe that it will not be able to
obtain liquor licenses for restaurants currently being brought into operation
identified in Section 2.13(b) of the Company Disclosure Schedule. Each of the
Liquor Licenses has been validly issued and is in full force and effect and is
adequate for the current conduct of the operations at the Company Restaurant for
which it is issued. The Company has not received any written notice of any
pending or threatened modification, suspension or cancellation of a Liquor
License or any proceeding related thereto. During the past three years, there
have been no such proceedings relating to any of the Liquor Licenses. With
regard to the Liquor Licenses, there are no (i) pending disciplinary actions or
(ii) past disciplinary actions that would reasonably be expected to have any
adverse impact on current operations or the nature or level of discipline
imposed on account of future violations of the laws related to sales and service
of alcoholic beverages.
SECTION 2.14. Environmental.
(a) For purposes of this Agreement, the term "Environmental Permit" means
any permit, license, approval or other authorization issued under any
Environmental Law (as defined below);
(b) To the Company's knowledge, each of the Company and its properties,
assets, businesses, and operations has all Environmental Permits, and each of
the Company and its properties, assets, businesses and operations is, and has
been, and each of the Company's former subsidiaries, if any, while subsidiaries
<PAGE> 20
of the Company and their respective properties, assets, businesses and
operations, was, in compliance with all applicable Environmental Laws (as
defined below) and Environmental Permits, except for such Environmental Permits
the failure of which to have or the violation of which has not had or would not
be reasonably expected to have a Material Adverse Effect. The term
"Environmental Laws" means any federal, state, local or foreign statute, code,
ordinance, rule, regulation, policy, guideline, permit, consent, approval,
license, judgment, order, writ, decree, injunction or other authorization,
including the requirement to register underground storage tanks, relating to:
(i) Releases (as defined below) of Hazardous Material (as defined below) into
the environment or any structure, including into ambient air, soil, sediments,
land surface or subsurface, buildings or facilities, surface water, groundwater,
publicly-owned treatment works, septic systems or land; or (ii) the generation,
treatment, storage, recycling, disposal, use, handling, manufacturing,
transportation, distribution in commerce, or shipment (collectively,
"Management") of Hazardous Material; including the following statutes, their
implementing regulations and any state corollaries: the Hazardous Materials
Transportation Act, 49 U.S.C. Section 1801 et seq., the Resource Conservation
and Recovery Act, 42 U.S.C. Section 6901 et seq., the Comprehensive
Environmental Response, Compensation and Liability Act, as amended by the
Superfund Amendments and Reauthorization Act, 42 U.S.C. Section 9601 et seq.,
the Toxic Substances Control Act, 15 U.S.C. Section 2601 et seq., the Clean
Water Act, 33 U.S.C. Section 1251 et seq. and the Clean Air Act, 42 U.S.C.
Section 7401 et seq.
(c) To the Company's knowledge, (i) during the period of ownership or
operation by the Company of any of its current or previously-owned or operated
properties, there have been no Releases (as defined below) of Hazardous Material
in, on, under, from or affecting such properties, any surrounding site or any
off-site location; and (ii) prior to the period of ownership or operation by the
Company of any of its current or previously-owned or operated properties there
were no Releases of Hazardous Material in, on, under or affecting any such
property, any surrounding site or any off-site location, in each case in
violation of Environmental Laws or Environmental Permits or which has created a
condition which imposes liability or responsibility on the Company, except in
each case for such violations, liabilities or responsibilities which have been
resolved or which have not had or could not reasonably be expected to have a
Material Adverse Effect on the Company. "Hazardous Materials" means (i)
hazardous materials, pollutants or contaminants, medical, hazardous or
infectious wastes, hazardous waste constituents, hazardous chemicals, hazardous
or toxic pollutants, and hazardous or toxic substances as those terms are
defined in or regulated by any Environmental Law, (ii) petroleum, including
crude oil and any fractions thereof, (iii) natural gas, synthetic gas and any
mixtures thereof, (iv) radioactive materials including source byproduct or
special nuclear materials, (v) pesticides and (vi) asbestos or
asbestos-containing materials, but does not include materials normal in nature
and amount for the Company's business, provided such materials are used in their
intended fashion and in material compliance with Environmental Laws. "Releases"
means spills, leaks, discharges, disposal, pumping, pouring, emissions,
injection, emptying, leaching, dumping or allowing to escape.
(d) No Environmental Claims or Environmental Liabilities (as such terms are
defined below) are being asserted against the Company nor is the Company aware
of any acts, omissions, facts, or circumstances which would so subject it,
arising from or based upon any act, omission, event, condition or circumstance
occurring or existing on or prior to the date hereof or for which the Company is
responsible, including any such Environmental Claims or Environmental
Liabilities arising from or based upon the ownership or operation of assets,
businesses or properties of the Company or its predecessors, and (ii) the
Company has not received any notice of any violation of any Environmental Law or
Environmental Permit or any Environmental Claim in connection with its assets,
properties, businesses or operations, or, in each case, those of its
predecessors, except in each case such Environmental Liabilities, Environmental
Claims or violations which have not had or could not reasonably be expected to
have a Material Adverse Effect on the Company. Without regard to the potential
for a Material Adverse Effect on the Company, the Company has provided to Newco
and has disclosed on Section 2.14(d) of the Company Disclosure Schedule all
material environmental assessment reports prepared by, on behalf of or, to the
extent in the Company's possession or contract, relating to the Company since
January 1, 1994 (or earlier for any such matter which is unresolved) regarding
the environmental condition of the Company's properties or the
<PAGE> 21
environmental compliance of the Company or any subsidiary. The term
"Environmental Claim" means any third party (including governmental agencies,
regulatory agencies, employees or other private parties) action, lawsuit, claim,
investigation proceeding (including claims or proceedings under the Occupational
Safety and Health Act or similar laws relating to safety of employees) which
seeks to impose liability for (i) noise; (ii) pollution or contamination of the
air, surface water, ground water, land or structure; (iii) Hazardous Materials
Management; (iv) exposure to Hazardous Material; (v) the safety or health of
employees; or (vi) any violation of any Environmental Law or Environmental
Permit. An "Environmental Claim" includes, but is not limited, to, a common law
action, as well as a proceeding to issue, modify or terminate an Environmental
Permit of the Company, or to adopt or amend a regulation to the extent that such
a proceeding attempts to redress violations of such an Environmental Permit as
alleged by a federal, state or local executive, legislative, judicial,
regulatory or administrative agency, board or authority. The term "Environmental
Liabilities" includes all costs arising from any Environmental Claim or
violation or alleged violation or circumstance or condition which would give
rise to a violation or liability under any Environmental Permit or Environmental
Law under any theory of recovery, at law or in equity, and whether based on
negligence, strict liability or otherwise, including but not limited to:
remedial, removal, response, abatement, investigative, monitoring, personal
injury and damage to property, and any other related costs, expenses, losses,
damages, investigatory remediation or monitoring costs, penalties, fines,
liabilities and obligations, including reasonable attorney's fees and court
costs.
SECTION 2.15. State Takeover Statutes. The Special Committee and the Board
of Directors of the Company have approved the Merger and this Agreement (and,
solely for purposes of Section 203 of the DGCL, the Securities Purchase
Agreement and the Voting Agreement), and, based in part on the representation
set forth in Section 3.6, such approval is sufficient to render inapplicable to
the Merger, this Agreement, the Securities Purchase Agreement, the Voting
Agreement and the other Transactions the provisions of Section 203 of the DGCL
to the extent, if any, such provisions are applicable to the Merger, this
Agreement, the Securities Purchase Agreement, the Voting Agreement and the other
Transactions. No other "fair price," "moratorium," "control share acquisition,"
"business combination," or other state takeover statute or similar statute or
regulation applies or purports to apply to the Company, Newco, affiliates of
Newco, the Merger, the Securities Purchase Agreement, the Voting Agreement, this
Agreement, or any of the other Transactions.
SECTION 2.16. Contracts. Section 2.16 to the Company Disclosure Schedule
lists, under the relevant heading, all contracts, agreements, arrangements,
guarantees, licenses, leases and executory commitments (each a "Contract"),
other than Benefit Plans, agreements disclosed on Section 2.10 to the Company
Disclosure Schedule, Leases disclosed on Schedule 2.18(b) of the Company
Disclosure Schedule and any Contracts heretofore filed as an exhibit to any
Filed Company SEC Document, that exist as of the date hereof to which the
Company is a party or by which it is bound and which fall within any of the
following categories: (a) Contracts not entered into in the ordinary course of
the Company's businesses other than those that are not or would not reasonably
be expected to be material to the business of the Company, (b) joint venture,
partnership or franchising agreements, (c) Contracts containing covenants
purporting to limit the freedom of the Company to compete in any line of
business in any geographic area or to hire any individual or group of
individuals, (d) Contracts which after the consummation of any of the
Transactions would have the effect of limiting the freedom of the Surviving
Corporation or any of its affiliates to compete in any line of business in any
geographic area or to hire any individual or group of individuals, (e) Contracts
relating to any outstanding commitment for capital expenditures in excess of
$250,000, (f) indentures, mortgages, promissory notes, loan agreements or
guarantees of borrowed money, letters of credit or other agreements or
instruments of the Company evidencing indebtedness for borrowed money or
providing for the creation of any charge, security interest, encumbrance or Lien
upon any of the assets of the Company, (g) Licenses, (h) Contracts with respect
to which a change in the ownership (whether directly or indirectly) of the
shares of Company Common Stock or the composition of the Board of Directors of
the Company or any of the other Transactions may result in a violation of or
default under, or give rise to a right of termination, modification,
cancellation or acceleration of any obligation or loss of benefits under, such
Contract or (i) any other agreement of a type required to be filed under Item
601(b)(10) of Regulation S-K promulgated by the SEC. All Contracts to which the
Company is a
<PAGE> 22
party or by which it is bound are valid and binding obligations of the Company
and, to the knowledge of the Company, the valid and binding obligation of each
other party thereto except such Contracts the invalidity or non-binding nature
of which has not had and would not reasonably be expected to have a Material
Adverse Effect on the Company. Neither the Company nor, to the knowledge of the
Company, any other party thereto is in violation of or in default in respect of,
nor has there occurred an event or condition which with the passage of time or
giving of notice (or both) would constitute a default by the Company (or to its
knowledge a default by any other party thereto) under or permit the termination
of, any such Contract except such violations or defaults under or terminations
which have not had and would not reasonably be expected to have a Material
Adverse Effect on the Company. The Company has, prior to the date hereof,
delivered true, complete and correct copies of the Contracts to Newco.
SECTION 2.17. Labor Matters. Except to the extent set forth in Section 2.17
of the Company Disclosure Schedule, (a) no employee of the Company is
represented by any union or other labor organization; (b) there is no labor
strike, material dispute, material slowdown, representation campaign or work
stoppage pending or, to the knowledge of the Company, threatened against or
affecting the Company; and (c) the Company has not experienced any material work
stoppage or other labor unrest since December 26, 1999.
SECTION 2.18. Property.
(a) Section 2.18(a) of the Disclosure Schedule sets forth a list of all
real property owned in fee by the Company. The Company has good and valid title
to all such real property, free and clear of all Liens known to the Company
except (i) Liens for taxes, assessments and other governmental charges that are
not delinquent or that are being contested in good faith and in respect of which
adequate reserves have been established, (ii) mechanics', materialmen's,
carriers', workmen's, warehousemen's, repairmen's landlord's or other similar
Liens securing obligations that are not due and payable or that are being
contested in good faith and in respect of which adequate reserves have been
established, (iii) imperfections of title and Liens that do not and would not
reasonably be expected to detract materially from the value or materially
interfere with the present use of the properties subject thereto or affected
thereby, and (iv) in the case of any real property subject to a title commitment
described in Section 2.18(a) of the Company Disclosure Schedule, imperfections
of title and Liens that are shown on such title commitment or are otherwise of
record (collectively, "Permitted Liens").
(b) Section 2.18(b)(i) of the Company Disclosure Schedule sets forth a
correct and complete list of all real property leased by the Company, as lessor
or lessee (or under which the Company otherwise has any liability), as of the
date hereof, and the name of the lessor, the date of the lease (the "Leases")
pertaining thereto and each amendment to the Lease. All such Leases are valid
and binding in accordance with their respective terms and the Company is not in
default in any material respect under any Lease. Except as set forth in Section
2.18(b)(ii) of the Company Disclosure Schedule, the execution and delivery of
this Agreement by the Company and the consummation of the Transactions,
including the Merger, does not and will not result in a breach or violation of,
or constitute a default or an event that, with the passage of time or the giving
of notice, or both, would constitute a default, give rise to a right of
termination, modification (including as to the amount, timing or nature of lease
payments), cancellation or acceleration or require the consent or approval of
any party (other than the Company) under any Lease. Section 2.18(b)(i) of the
Company Disclosure Schedule also sets forth a list of all restaurants or
bakeries owned or operated by the Company, together with the addresses of such
restaurants or bakeries. The Company has duly given the notice required under
the Commercial Lease between the Company and Runhil Investment Co., as landlord,
for the premises located at 115 N.W. 22nd Street in Portland, Oregon to renew
this Lease for a five year renewal term, and the term of this Lease will expire
December 31, 2005. The Company has, prior to the date hereof, delivered true,
complete and correct copies of the Leases to Newco.
SECTION 2.19. Undisclosed Liabilities. Except as and to the extent
specifically disclosed in the Filed Company SEC Documents or accrued on the June
25, 2000 balance sheet included in the Filed Company SEC Documents, or as set
forth in Section 2.19 of the Company Disclosure Schedule, and except for
<PAGE> 23
liabilities incurred in the ordinary course of business and otherwise not in
contravention of this Agreement which are not material, to the Company's
knowledge, the Company does not have any liabilities or obligations of any
nature (whether absolute, contingent or otherwise, and whether or not required
to be reflected or reserved against in a balance sheet of the Company prepared
in accordance with United States generally accepted accounting principles) that
have had or would reasonably be expected to have a Material Adverse Effect on
the Company.
SECTION 2.20. Opinion of Financial Advisors. The Company and the Special
Committee have received the opinion of the Special Committee Financial Advisor,
dated November 14, 2000, to the effect that, as of such date, the consideration
to be received in the Merger by the Company's stockholders is fair to the
Company's stockholders from a financial point of view. The Company has delivered
a signed copy of such opinion to Newco (it being understood that Newco will not
be a third party beneficiary of such opinion), and such opinion has not been
amended, modified or revoked in a manner adverse to Newco. The Company has been
authorized by the Special Committee Financial Advisor to permit the inclusion of
such fairness opinion (and, subject to prior review and consent by such Special
Committee Financial Advisor, a reference thereto) in the Schedule 13E-3 and the
Proxy Statement.
SECTION 2.21. Intellectual Property. Except to the extent the inaccuracy of
any of the following has not had and would not reasonably be expected to have a
Material Adverse Effect on the Company:
(a) To the knowledge of the Company, the Company owns and/or is
licensed to use (in each case, free and clear of any Liens, claims, or
similar encumbrances), and has the right to bring actions for the
infringement, dilution, misappropriation or other violation of, all patents
and patent applications, trademarks, service marks, trade names, and
registrations and applications for registration of industrial designs,
copyrights, mask works, trademarks, service marks, trade names, trade
dress, and all domain names, technology, inventions, know-how, trade
secrets, processes and all agreements and other rights with respect to
intellectual property and computer programs (collectively, "Intellectual
Property") material to the conduct of Company's business as currently
conducted;
(b) All of the patents, industrial design registrations, trademark and
service mark registrations (including the U.S. trademark registration for
"Il Fornaio"), copyright registrations and domain name registrations, and
all applications for such registrations, owned by and/or exclusively
licensed (including where exclusively licensed within a discrete territory)
to the Company (A) to the knowledge of the Company, are valid and in full
force, (B) are held of record in the name of the Company or are licensed
exclusively to the Company in the discrete territory indicated, if
applicable, and (C) are not, to the knowledge of the Company, the subject
of any cancellation or reexamination proceeding or any other proceeding
challenging their extent or validity. To the knowledge of the Company, all
necessary registration, maintenance and renewal fees in connection with
such patents and registrations have been paid and all necessary documents
and certificates in connection with such patents and registrations have
been filed with the relevant patent, copyright, trademark or other
authorities in the United States or foreign jurisdictions, as the case may
be, for the purposes of maintaining such patents and registrations;
(c) To the knowledge of the Company, the use of such Intellectual
Property by the Company does not infringe on the rights of any party;
(d) To the knowledge of Company, no person is infringing on any right
of the Company with respect to such Intellectual Property;
(e) The Company is not, and the consummation of the Transactions will
not cause them to be, in breach or violation of any agreement relating to
the use of any of its Intellectual Property, and the Company has not
received any notification, written or oral, from any third party that there
is any such violation, breach, or inability to perform under any such
agreement and is not aware of any basis therefor; and
(f) Other than the Licenses, there are no agreements, written or oral,
which limit or otherwise relate to any rights by the Company to use any of
its Intellectual Property.
<PAGE> 24
SECTION 2.22. Insurance. The Company maintains policies of fire and
casualty, liability and other forms of insurance in such amounts, with such
deductibles and against such risks and losses as are set forth in Section 2.22
of the Company Disclosure Schedule. As of the date of the Original Agreement,
except as set forth in Section 2.22 of the Company's Disclosure Schedule, all
such policies are in full force and effect, all premiums due and payable thereon
have been paid, and no notice of cancellation or termination has been received
with respect to any such policy.
SECTION 2.23. Affiliate Transactions. Except as disclosed in the Filed
Company SEC Documents or in Section 2.23 of the Company Disclosure Schedule,
there are no transactions, agreements, arrangements or understandings (or series
thereof), written or oral, between the Company and any of its directors or
officers (including, in the case of natural persons, any of such persons'
relatives or affiliates) currently existing or effected or entered into since
January 1, 1997 involving amounts in excess of $60,000.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF NEWCO
Newco represents and warrants to the Company as follows:
SECTION 3.1. Organization and Qualification. Newco is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has the requisite corporate power and authority to carry on its
business as it is now being conducted. Newco is duly qualified as a foreign
corporation or licensed to do business, and is in good standing, in each state
where the character of its properties owned or leased or the nature of its
activities makes such qualification or licensing necessary, except where the
failure to be so qualified or licensed and in good standing would not reasonably
be expected to prevent or materially delay the consummation of the Merger or the
other Transactions.
SECTION 3.2. Authority Relative to this Agreement. Newco has all requisite
corporate power and authority to execute and deliver this Agreement and each
instrument required hereby to be executed and delivered by Newco prior to or at
the Effective Time, to perform its obligations hereunder and thereunder, and to
consummate the Transactions. The execution and delivery by Newco of this
Agreement and each instrument required hereby to be exercised and delivered by
Newco prior to or at the Effective Time and the performance of its obligations
hereunder and thereunder, and the consummation by Newco of the Transactions have
been duly and validly authorized by the Board of Directors of Newco, and no
other corporate proceedings on the part of Newco are necessary to authorize this
Agreement or to consummate the Transactions, other than filing of appropriate
merger documents as required by the DGCL. This Agreement has been duly and
validly executed and delivered by Newco, and, assuming this Agreement
constitutes a valid and binding obligation of the Company, this Agreement
constitutes a valid and binding agreement of each of Newco, enforceable against
Newco in accordance with its terms, subject to bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium and similar laws of general
applicability relating to or affecting creditors' rights and to general equity
principles.
SECTION 3.3. Proxy Statement. None of the information supplied in writing
by Newco specifically for inclusion in the Proxy Statement, if required, shall,
at the time the Proxy Statement is mailed, at the time of the Stockholder
Meeting or at the Effective Time, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading; provided, however, that Newco is not
making any representation or warranty as to any of the information relating to
and supplied by or on behalf of the Company specifically for inclusion in the
Proxy Statement. If, at any time prior to the Effective Time, any event relating
to Newco is discovered by Newco that should be set forth in a supplement to the
Proxy Statement, Newco will promptly inform the Company.
SECTION 3.4. Consents and Approvals; No Violation. Subject to the taking
of the actions described in the immediately succeeding sentence, the execution
and delivery of this Agreement do not, and the consummation of the Transactions
will not, conflict with, or result in any violation of, or default (with or
without notice or lapse of time, or both) under, or give rise to a right of
modification, termination,
<PAGE> 25
cancellation or acceleration of any obligation or to loss of a material benefit
under, or result in the creation of any Lien upon any of the material properties
or assets of Newco under (a) the certificate of incorporation or bylaws of
Newco, (b) any loan or credit agreement, note, bond, indenture, lease or other
agreement, instrument or Permit applicable to Newco or its properties or assets,
(c) any judgment, order, writ, injunction, decree, law, statute, ordinance, rule
or regulation applicable to Newco or its properties or assets, other than, in
the case of clause (b) and (c), any such conflicts, violations, defaults, rights
or Liens that could not reasonably be expected to (x) impair in any material
respect the ability of Newco to perform its obligation under this Agreement or
(y) prevent or materially delay the consummation of any of the Transactions. No
consent, approval, order or authorization of, or registration, declaration or
filing with, any Governmental Entity or any other person is required by Newco in
connection with the execution and delivery of this Agreement or the consummation
by Newco of any of the Transactions, except (i) in connection with the HSR Act,
(ii) pursuant to the Exchange Act, (iii) the filing of the Certificate of Merger
pursuant to the DGCL, (iv) where the failure to obtain any such consent,
approval, authorization or permit, or to make any such filing or notification,
would not reasonably be expected to prevent or materially delay consummation of
the Merger or would not otherwise prevent Newco from performing its obligations
under this Agreement or where the requirement to obtain such consent, approval,
authorization or permit, or to make such filing or notification arises from the
regulatory status of the Company, including in respect of the Liquor Licenses.
SECTION 3.5. Financing Commitments. As of the date of the Original
Agreement, Newco has delivered to the Company true and complete copies of
commitments (the "Financing Commitments") of Fleet National Bank and BancBoston
Capital, Inc. which, subject to the terms and conditions contained therein,
would provide sufficient debt financing to enable Newco to consummate the
Transactions. Newco has also delivered to the Company a true and complete copy
of the Securities Purchase Agreement, which subject to the terms and conditions
contained therein, would provide sufficient equity financing to enable Newco to
consummate the Transactions. As of the date of the Original Agreement, the
Financing Commitments are in full force and effect and Newco has no reason to
believe that the conditions included in the Financing Commitments will not be
satisfied before the Effective Time. The Securities Purchase Agreement is in
full force and effect, and Newco has no reason to believe that the conditions
included in the Securities Purchase Agreement will not be satisfied before the
Effective Time.
SECTION 3.6. Ownership of Company Stock. Newco has delivered to the
Company a true and complete copy of the final form of the Voting Agreement. As
of the date of the Original Agreement (and immediately prior to execution of the
Original Securities Purchase Agreement and the Original Voting Agreement),
neither Newco nor any "affiliate" or "associate" of Newco "owned" any voting
stock of the Company, as such quoted terms are defined in Section 203 of the
DGCL. As of the parties' entry into this Agreement, no person is a party to the
Securities Purchase Agreement or the Voting Agreement other than Newco ,
Bruckmann, Rosser, Sherrill & Co. II, L.P. and the persons listed on Exhibit A,
as such Exhibit A reads on the date hereof.
ARTICLE IV
CONDUCT OF BUSINESS PENDING THE MERGER
SECTION 4.1. Conduct of Business of the Company Pending the Merger. The
Company hereby covenants and agrees that, from the date of the Original
Agreement until the Effective Time, unless otherwise expressly contemplated by
this Agreement or consented to in writing by Newco (which consent will not
unreasonably be withheld or delayed), it shall:
(a) operate its business in the usual and ordinary course consistent
with past practices;
(b) use its reasonable best efforts to preserve intact its business
organization, maintain its rights and franchises, retain the services of
its respective key employees and maintain its relationships with its
respective customers and suppliers and others having business dealings with
it to the end that its goodwill and ongoing business shall be unimpaired at
the Effective Time;
<PAGE> 26
(c) maintain and keep its properties and assets in as good repair and
condition as at present, ordinary wear and tear excepted, and maintain
supplies and inventories in quantities consistent with its customary
business practice; and
(d) use its reasonable best efforts to keep in full force and effect
insurance and bonds comparable in amount and scope of coverage to that
currently maintained.
SECTION 4.2. Prohibited Actions by the Company. Without limiting the
generality of Section 4.1, the Company covenants and agrees that, except as
expressly contemplated by this Agreement or otherwise consented to in writing by
Newco (which consent will not unreasonably be withheld or delayed), from the
date of the Original Agreement until the Effective Time, it shall not do any of
the following:
(a) (i) increase the compensation (or benefits) payable to or to
become payable to any director or employee, except for increases in salary
or wages of employees in the ordinary course of business and consistent
with past practice; (ii) grant any severance or termination pay to, or
enter into or amend in any material respect any employment or severance
agreement with, any employee; (iii) establish, adopt, enter into or amend
any collective bargaining agreement or Benefit Plan of the Company or any
ERISA Affiliate; or (iv) take any action to accelerate any rights or
benefits, or make any determinations not in the ordinary course of business
consistent with past practice, under any Benefit Plan of the Company or any
ERISA Affiliate; provided, however, that the Company may amend the Company
Stock Option Plans or take other action to accelerate the vesting of any
unvested Options that were issued and outstanding on the date of the
Original Agreement and disclosed in Section 2.3 of the Company Disclosure
Schedule; and may otherwise amend the Company Stock Option Plans (and
option agreements entered into thereunder) to effectuate the purposes of
Section 1.11 hereof;
(b) declare, set aside or pay any dividend on, or make any other
distribution in respect of (whether in cash, stock or property),
outstanding shares of capital stock;
(c) redeem, purchase or otherwise acquire, or offer or propose to
redeem, purchase or otherwise acquire, any outstanding shares of capital
stock of, or other equity interests in, or any securities that are
convertible into or exchangeable for any shares of capital stock of, or
other equity interests in, or any outstanding options, warrants or rights
of any kind to acquire any shares of capital stock of, or other equity
interests in, the Company (other than any purchase, forfeiture or
retirement of shares of Company Common Stock or the Options occurring
pursuant to the terms (as in effect on the date of the Original Agreement)
of any existing Benefit Plan of the Company);
(d) except as provided in Sections 1.4 and 1.6 hereof, effect any
reorganization or recapitalization; or split, combine or reclassify any of
the capital stock of, or other equity interests in, the Company or issue or
authorize or propose the issuance of any other securities in respect of, in
lieu of or in substitution for, shares of such capital stock or such equity
interests;
(e) except as provided in Sections 1.4 and 1.6 hereof, offer, sell,
issue or grant, or authorize or propose the offering, sale, issuance or
grant of, any shares of capital stock of, or other equity interests in, any
securities convertible into or exchangeable for (or accelerate any right to
convert or exchange securities for) any shares of capital stock of, or
other equity interest in, or any options, warrants or rights of any kind to
acquire any shares of capital stock of, or other equity interests in, or
any Voting Company Debt or other voting securities of, the Company, or any
"phantom" stock, "phantom" stock rights, SARs or stock-based performance
units (or increase the number of shares reserved for issuance under the
Company Option Plans), other than issuance of shares of Company Common
Stock upon the exercise of the Options issued and outstanding as of the
date of the Original Agreement and disclosed in Section 2.3 of the Company
Disclosure Statement in accordance with the terms thereof (as in effect on
the date of the Original Agreement);
(f) acquire or agree to acquire, by merging or consolidating with, by
purchasing an equity interest in or a portion of the assets of, or in any
other manner, any business or any corporation, partnership, association or
other business organization or division thereof or otherwise acquire any
<PAGE> 27
assets of any other person (other than the purchase of inventories and
supplies from suppliers or vendors in the ordinary course of business and
consistent with past practice);
(g) sell, lease, exchange or otherwise dispose of, or grant any Lien
with respect to, any of the properties or assets of the Company that are
material to the business of the Company, except for dispositions of excess
or obsolete assets and sales in the ordinary course of business and
consistent with past practice;
(h) except as contemplated by Section 1.4, propose or adopt any
amendments to its Certificate of Incorporation or Bylaws or other
organizational documents;
(i) effect any change in any accounting methods, principles or
practices in effect as of December 26, 1999 affecting the reported
consolidated assets, liabilities or results of operations of the Company,
except as may be required by a change in generally accepted accounting
principles;
(j) (i) incur any indebtedness for borrowed money other than pursuant
to the Revolving Line of Credit Note & Loan Agreement, dated as of March
31, 1998, between the Company and Wells Fargo Bank, N.A., issue or sell any
debt securities or warrants or other rights to acquire any debt securities
of the Company, guarantee any such indebtedness or debt securities of
another person, enter into any capital lease, enter into any "keep well" or
other agreement to maintain any financial statement condition of another
person or enter into any arrangement having the economic effect of any of
the foregoing, or grant to any person or create any Lien outside the
ordinary course of business, or (ii) make any loans, advances or capital
contributions to, or investments in, any other person;
(k) enter into or amend any Contract of a type described in Section
2.16 (except for Licenses which are not material to the Company or its
business and except for Contracts entered into or amended in the ordinary
course of business) or enter into or amend a lease for real property (it
being understood the Company enters into new leases in the ordinary course
of business);
(l) pay, discharge, settle or satisfy any claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge, settlement or satisfaction,
in the ordinary course of business consistent with past practice or in
accordance with their terms, of liabilities reflected or reserved against
in the most recent consolidated financial statements (or the notes thereto)
of the Company included in the Filed Company SEC Documents or incurred
since the date of such financial statements in the ordinary course of
business consistent with past practice;
(m) make any Tax election except in a manner consistent with past
practice, change any method of accounting for Tax purposes, or settle or
compromise any material Tax liability;
(n) make or agree to make any capital expenditures for the period from
October 1, 2000 until the Effective Time in excess of the amount of capital
expenditures for such period reflected in the capital budget attached as
Section 4.2(n) of the Company Disclosure Schedule (except for capital
expenditures which exceed such budgeted amount by less than $250,000);
(o) make any payment to any landlord under a Lease, except for
payments of rent in the ordinary course of business and except for payments
not to exceed the amount, and for the purpose, set forth in Section 4.2(o)
of the Company Disclosure Schedule in the aggregate;
(p) form, create or organize any Subsidiary, or purchase or acquire
any capital stock or other ownership interest in any corporation,
partnership, limited liability company, joint venture or other entity; or
(q) agree in writing or otherwise to take any of the foregoing actions
or any action which would cause any condition set forth in Article VI to be
unsatisfied.
<PAGE> 28
ARTICLE V
COVENANTS AND ADDITIONAL AGREEMENTS
SECTION 5.1. No Solicitation.
(a) From and after the date of the Original Agreement until the Effective
Time or the termination of this Agreement in accordance with Section 7.1,
neither the Company, nor any of its respective officers, directors, employees,
representatives, agents or affiliates (including any investment banker, attorney
or accountant retained by the Company or the Special Committee but excluding any
affiliate of the Company that is not controlled by the Company (other than
directors of the Company)) will directly or indirectly initiate, solicit or
knowingly encourage (including by way of furnishing non-public information or
assistance), or take any other action with the intention of facilitating, any
inquiries or the making or submission of any Acquisition Proposal (as defined
below), or enter into or maintain or continue discussions or negotiate with any
person or group in furtherance of such inquiries or to obtain or induce any
person or group to make or submit an Acquisition Proposal, or agree to or
endorse any Acquisition Proposal, or assist or participate in, facilitate or
encourage, any effort or attempt by any other person or group to do or seek any
of the foregoing, or authorize or permit any of its officers, directors or
employees or any of its affiliates or any investment banker, financial advisor,
attorney, accountant or other representative or agent retained by it to take any
such action; provided, however, that nothing contained in this Agreement shall
prohibit the Board of Directors of the Company or the Special Committee or the
Representatives from furnishing information to or entering into discussions or
negotiations with any person or group that makes an unsolicited written, bona
fide Acquisition Proposal, if, and only to the extent that (i) the Special
Committee determines in good faith by a majority vote, after consultation with
the Special Committee Financial Advisor (or other nationally reputable financial
advisor) and with independent legal counsel that such proposal is, or is
reasonably likely to lead to, a Superior Proposal (provided that the Special
Committee or its advisors shall be permitted to contact such third party and its
advisors solely for the purpose of clarifying the proposal and any material
contingencies and the likelihood of consummation), (ii) the Special Committee
determines in good faith by a majority vote after consultation with its outside
legal counsel that the failure to negotiate, or otherwise engage in discussions,
with such third party would be inconsistent with the Board's fiduciary duties
under applicable law, and (iii) such person or group, prior to the disclosure of
any non-public information, enters into a confidentiality agreement with the
Company that is not, in any material respect, less restrictive as to such person
or group than the Confidentiality Agreement (as defined in Section 5.3) in terms
of confidentiality and standstill restrictions and which does not contain
exclusivity provisions which would prevent the Company from complying with its
obligations hereunder. Without limiting the foregoing, it is understood that any
violation of the restrictions set forth in this Section 5.1 by any officer,
director, employee or affiliate of the Company (except an affiliate who is not
controlled by the Company (other than a director)) or any investment banker,
attorney, accountant or other advisor, agent or representative of the Company or
the Special Committee, whether or not such person is purporting to act on behalf
of the Company or its directors or otherwise, shall be deemed to be a breach of
this Section 5.1 by the Company.
(b) Except as expressly permitted by this Section 5.1, neither the Board of
Directors of the Company nor the Special Committee (or any other committee
thereof) shall (i) approve or recommend, or propose to approve or recommend, any
Acquisition Proposal, or (ii) cause the Company to accept such Acquisition
Proposal and/or enter into any letter of intent, agreement in principle,
acquisition agreement or other similar agreement (each, an "Acquisition
Agreement") related to any Acquisition Proposal; provided, however, that the
Board of Directors of the Company (acting on the recommendation of the Special
Committee) may take such actions if, and only to the extent that (A) such
Acquisition Proposal is a Superior Proposal, (B) the Special Committee
determines in good faith by a majority vote, after consultation with its outside
legal counsel, that the failure to do so would be inconsistent with the
fiduciary duty of the Board of Directors of the Company under applicable law,
(C) the Company is not in breach of this Section 5.1 and (D) in the case of
clause (ii) above, (I) the Company shall, prior to or simultaneously with the
taking of such action, have paid or pay to Newco or its designee the Termination
<PAGE> 29
Fee and Expense Reimbursement referred to in Section 7.3, and (II) the Company
shall have complied with its obligations under Section 7.1(h).
(c) In addition to the obligations of the Company set forth in Sections (a)
and (b) above, the Company shall promptly (and in any event, within 24 hours)
advise Newco orally and in writing of any request for information or the
submission or receipt of any Acquisition Proposal, or any inquiry with respect
to or which could lead to any Acquisition Proposal, the material terms and
conditions of such request, Acquisition Proposal or inquiry, and the identity of
the person making any such request, Acquisition Proposal or inquiry and its
response or responses thereto. The Company will keep Newco fully informed of the
status and material terms (including amendments or proposed amendments) of any
such request, Acquisition Proposal or inquiry. The Company will immediately
cease and cause to be terminated any activities, discussions or negotiations
existing on the date of the Original Agreement with any parties conducted
heretofore with respect to any of the foregoing, provided that this sentence
will not make the provisions of Sections 5.1(a) or (b) inapplicable to a
subsequent proposal by any such party.
(d) As used herein, "Acquisition Proposal" means an inquiry, offer or
proposal regarding any of the following (other than the Transactions
contemplated by this Agreement) involving the Company: (i) any merger,
consolidation, share exchange, recapitalization, liquidation, dissolution,
business combination or other similar transaction; (ii) any sale, lease,
exchange, mortgage, pledge, transfer or other disposition of 15% or more of the
assets of the Company or of any Material Business (as defined below) in a single
transaction or series of related transactions; (iii) any tender offer (including
a self tender offer) or exchange offer that, if consummated, would result in any
person or group beneficially owning more than 15% of the outstanding shares of
any class of equity securities of the Company (or in the case of a person or
group which beneficially owns more than 15% of the outstanding shares of any
class of equity securities of the Company as of the date of the Original
Agreement, would result in such person or group increasing the percentage or
number of shares of such class beneficially owned by such person or group) or
the filing of a registration statement under the Securities Act in connection
therewith; (iv) any acquisition of 15% or more of the outstanding shares of
capital stock of the Company or the filing of a registration statement under the
Securities Act in connection therewith or any other acquisition or disposition
the consummation of which would prevent or materially diminish the benefits to
Newco of the Merger; or (v) any public announcement by the Company or any third
party of a proposal, plan or intention to do any of the foregoing or any
agreement to engage in any of the foregoing. "Superior Proposal" means any
proposal made by a third party to acquire, directly or indirectly, including
pursuant to a tender offer, exchange offer, merger, consolidation, share
exchange, business combination, recapitalization, liquidation, dissolution or
other similar transaction, not less than 51% of the shares of Company Common
Stock then outstanding or all or substantially all of the assets of the Company
which the Special Committee determines in good faith (A) is more favorable to
the stockholders of the Company (other than the Rollover Group) from a financial
point of view than the transactions contemplated by this Agreement (including
any adjustment to the terms and conditions proposed in writing by Newco in
response to such Acquisition Proposal), (B) is not subject to any material
contingency, to which the other party thereto has not reasonably demonstrated in
its written offer its ability to overcome or address, including the receipt of
government consents or approvals (including any such approval required under the
HSR Act), and (C) is reasonably likely to be consummated and is in the best
interests of the stockholders of the Company. "Material Business" means any
business (or the assets needed to carry out such business) that contributed or
represented 15% or more of the net sales, the net income or the assets
(including equity securities) of the Company.
(e) Subject to compliance with Section 5.1(b), the Company or the Board of
Directors of the Company or the Special Committee may make any disclosure or
statement to the Company's stockholders if it determines in good faith after
consultation with independent legal counsel as to legal matters that the failure
to take such action would be inconsistent with the fiduciary duty of the Board
of Directors under applicable law or is required by applicable law.
SECTION 5.2. Access to Information. Between the date of the Original
Agreement and the Effective Time, the Company shall (a) afford to Newco and its
officers, directors, employees, accountants, consultants, legal counsel, agents
and other representatives full access during normal business hours and at
<PAGE> 30
all other reasonable times to the officers, employees, agents, properties,
offices and other facilities of the Company and to their books and records
(including all Tax Returns and all books and records related to Taxes and such
returns), (b) permit Newco to make such inspections as it may require (and the
Company shall cooperate with Newco in any inspections, including environmental
due diligence), and (c) furnish promptly to Newco and its representatives a copy
of each report, schedule, registration statement and other document filed by it
during such period pursuant to the requirements of federal or state securities
laws and such other information concerning the business, properties, contracts,
records and personnel of the Company (including financial, operating and other
data and information) in the possession of the Company or the Company's counsel,
accountants or other consultants or agents as may be reasonably requested, from
time to time, by or on behalf of Newco. All access, inspections and furnishing
pursuant to this Section 5.2 shall (i) be on reasonable notice to the Company,
(ii) be scheduled and otherwise managed so as not to unreasonably disrupt the
Company's operations, (iii) without prior authorization of the Company (such
authorization not to be unreasonably withheld) not involve direct contact with
non-officer employees, suppliers or non-retail customers and (iv) not extend to
any matter otherwise protected by the attorney-client privilege, unless, in the
case of this clause (iv), Newco agrees that such information is to be provided
in confidence in anticipation of litigation and is subject to the
attorney-client privilege.
SECTION 5.3. Confidentiality Agreement. The parties agree that the
provisions of the Confidentiality Agreement, dated October 10, 2000 (the
"Confidentiality Agreement"), between an affiliate of Newco and the Company
shall remain binding and in full force and effect in accordance with its terms.
The parties shall comply with, and shall cause their respective representatives
to comply with, all of their respective obligations under the Confidentiality
Agreement until the Merger, at which time the Confidentiality Agreement shall
terminate and be of no further force and effect.
SECTION 5.4. Reasonable Efforts.
(a) Subject to the terms and conditions herein (including Section 5.1),
each of the parties hereto agrees to use its reasonable efforts to take, or
cause to be taken, all appropriate action, and to do, or cause to be done, all
things necessary, proper or advisable under applicable laws and regulations to
consummate and make effective as soon as reasonably practicable the Merger and
the other Transactions and, in the case of Newco, the debt and equity financing
required to consummate the Merger. In case at any time after the Effective Time
any further action is necessary or desirable to carry out the purposes of this
Agreement, the proper officers and directors of each party to this Agreement
shall take all such necessary action. Such reasonable efforts shall include
reasonable efforts to obtain all necessary consents, approvals or waivers from
third parties (including any required consents of holders of securities of the
Company) and Governmental Entities necessary to the consummation of the
Transactions.
(b) The Company shall give and make all required notices and reports to the
appropriate persons with respect to the Permits (including the Liquor Licenses)
and Environmental Permits that may be necessary for the ownership, operation and
use of the assets of Surviving Corporation after the Effective Time. Subject to
the other terms of this Agreement, each of the Company and Newco shall cooperate
and use their respective reasonable efforts to make all filings, to obtain all
actions or nonactions, waivers, and orders of Governmental Entities necessary to
consummate the Transactions and to take all reasonable steps as may be necessary
to obtain an approval or waiver from, or to avoid an action or proceeding by,
any Governmental Entity. Each of the parties hereto will furnish to the other
parties such necessary information and reasonable assistance as such other
parties may reasonably request in connection with the foregoing.
(c) Without limiting the foregoing, the Company shall prior to the
Effective Time cooperate with Newco in any manner reasonably requested by Newco
in connection with obtaining the regulatory approvals as may be required by any
Governmental Entities to maintain in effect following the Effective Time all
Liquor Licenses and other Permits necessary to maintain continuity of service of
alcoholic beverages, as well as the continuity of the same forms of business
operations conducted at, in or upon each property owned or leased by the Company
as of the date of the Original Agreement. The Company agrees
<PAGE> 31
to use reasonable efforts to obtain any such approvals required in respect of
the Liquor Licenses and other Permits in an expeditious manner.
(d) The Company and its Board of Directors shall (i) take all action within
its power to make any state takeover statute or similar statute, rule or
regulation inapplicable to the Merger, this Agreement, the Securities Purchase
Agreement, the Voting Agreement or any of the other Transactions and (ii) if any
state takeover statute or similar statute, rule or regulation becomes applicable
to the Merger, this Agreement, the Securities Purchase Agreement, the Voting
Agreement or any of the other Transactions, take all action within its power to
ensure that the Merger and such other Transactions may be consummated as
promptly as practicable on the terms contemplated by this Agreement and
otherwise to minimize the effect of such statute or regulation on the Merger and
such other Transactions.
SECTION 5.5. Indemnification of Directors and Officers.
(a) Newco agrees that all rights to indemnification for acts or omissions
occurring prior to or upon the Effective Time existing as of the date of the
Original Agreement in favor of the current or former directors or officers of
the Company as provided in the certificate of incorporation or bylaws or
indemnification agreements of the Company shall survive the Merger and shall
continue in full force and effect in accordance with their terms for a period of
six years from the Effective Time, it being understood that during such six year
period, the Surviving Corporation may make modifications or amendments to its
Certificate of Incorporation or Bylaws so long as the rights of such current and
former directors or officers under such documents are not adversely affected
with respect to matters existing or occurring prior to or upon the Effective
Time. Newco shall cause to be maintained, if commercially available, for a
period of six years from the Effective Time the Company's current directors' and
officers' insurance and indemnification policy (the "D&O Insurance") (provided
that Newco may substitute therefor, at its election, policies or financial
guarantees with the same carriers or other obligors of substantially equal or
better financial standing as insure Newco's directors and officers of at least
the same coverage and amounts containing terms and conditions which are
substantially similar to the existing D&O Insurance or which are the same as
those applicable to Newco's directors or officers) to the extent that such
insurance policies provide coverage for events occurring prior to or upon the
Effective Time for all persons who are directors and officers of the Company on
the date of the Original Agreement, so long as the annual premium to be paid by
the Company after the date of the Original Agreement for such D&O Insurance
during such six-year period would not exceed 200% of the current annual premium.
If, during such six-year period, such insurance coverage cannot be obtained at
all or can only be obtained for an amount in excess of 200% of the current
annual premium therefor, Newco shall use reasonable efforts to cause to be
obtained for an amount equal to 200% of the current annual premium therefor, on
terms and conditions substantially similar to the existing D&O Insurance.
(b) If any claim or claims shall, subsequent to the Effective Time and
within six years thereafter, be made in writing against any present or former
director or officer of the Company based on or arising out of the services of
such person prior to or upon the Effective Time in the capacity of such person
as a director or officer of the Company (and such director or officer shall have
given Newco written notice of such claim or claims within such six year period),
the provisions of paragraph (a) of this Section 5.5 respecting the rights to
indemnify the current or former directors or officers under the Certificate of
Incorporation and Bylaws of the Company shall continue in effect until the final
disposition of all such claims.
(c) Notwithstanding anything to the contrary in this Section 5.5, but
subject to the terms of the Company's existing indemnification agreements (in
the form filed with the Company SEC Documents), neither Newco nor the Surviving
Corporation shall be liable for any settlement effected without its written
consent, which shall not be unreasonably withheld.
SECTION 5.6. Event Notices and Other Actions.
(a) From and after the date of the Original Agreement until the Effective
Time, the Company shall promptly notify Newco of (i) the occurrence or
nonoccurrence of any event, the occurrence or nonoccurrence of which has
resulted in, or would reasonably be expected to result in, any condition to the
Merger set forth in Article VI not being satisfied, (ii) the Company's failure
to comply with any covenant
<PAGE> 32
or agreement to be complied with by it pursuant to this Agreement which has
resulted in, or would reasonably be expected to result in, any condition to the
Merger set forth in Article VI not being satisfied and (iii) any representation
or warranty made by the Company contained in this Agreement that is qualified as
to materiality becoming untrue or inaccurate in any respect or any such
representation or warranty that is not so qualified as to materiality becoming
untrue or inaccurate in any material respect. The Company's delivery of any
notice pursuant to this Section 5.6(a) shall not cure any breach of any
representation or warranty of the Company contained in this Agreement or
otherwise limit or affect the remedies available hereunder to Newco.
(b) The Company shall not take any action or nonaction that will, or that
would reasonably be expected to, cause any condition to the Merger set forth in
Section 6.2(a) not to be satisfied.
(c) From and after the date of the Original Agreement until the Effective
Time, Newco shall promptly notify the Company of (i) the occurrence or
nonoccurrence of any event, the occurrence or nonoccurrence of which has
resulted in, or would reasonably be expected to result in, any condition to the
Merger set forth in Article VI not being satisfied, (ii) Newco's failure to
comply with any covenant or agreement to be complied with by it pursuant to this
Agreement which has resulted in, or would reasonably be expected to result in,
any condition to the Merger set forth in Article VI not being satisfied and
(iii) any representation or warranty made by Newco contained in this agreement
that is qualified as to materiality becoming untrue or inaccurate in any respect
or any such representation or warranty that is not so qualified as to
materiality becoming untrue or inaccurate in any material respect. Newco's
delivery of any notice pursuant to this Section 5.6(c) shall not cure any breach
of any representation or warranty of Newco contained in this Agreement or
otherwise limit or affect the remedies available hereunder to the Company.
(d) Newco shall not take any action or nonaction that will, or that would
reasonably be expected to cause any condition to the Merger set forth in Section
6.3(a) not to be satisfied.
(e) No rights of a party hereunder shall be limited, and no party shall be
deemed to have waived any rights, by reason of any investigation or audit
conducted before or after the date hereof by any party or the knowledge of any
breach of a representation, warranty or covenant by the other party. Each of
Newco, on the one hand, and the Company, on the other, shall have the right to
rely fully on the representations, warranties and covenants of the other party.
SECTION 5.7. Third Party Standstill Agreements. During the period from the
date of the Original Agreement through the Effective Time, the Company shall not
terminate, amend, modify or take any action to waive any provision of any
confidentiality or standstill or similar agreement to which the Company is a
party (other than any involving Newco). Subject to the foregoing, during such
period, the Company agrees to enforce to the fullest extent permitted under
applicable law, the provisions of any such agreements, including obtaining
injunctions to prevent any breaches of such agreements and to enforce
specifically the terms and provisions thereof in any court or other tribunal
having jurisdiction. Notwithstanding the foregoing, nothing in this Section 5.7
is intended to prevent the Company from exercising its rights under Section 5.1
in accordance with the provisions of such Section.
SECTION 5.8. Employee Stock Options; Employee Plans and Benefits and
Employment Contracts.
(a) Company Stock Option Plans. Simultaneously with the execution of the
Original Agreement, the Board of Directors of the Company (or, if appropriate,
the Special Committee or any committee administering the Company Stock Option
Plans) shall adopt such resolutions or take such other actions as are required
to effect the transactions contemplated by Section 1.11 in respect of all
outstanding Options, and thereafter the Board of Directors of the Company (or
any such committee) shall adopt any such additional resolutions and take such
additional actions as are required in furtherance of the foregoing.
(b) Payments in Respect of Options and Award Units. Each Option cancelled
pursuant to Section 1.11 (other than Options cancelled in exchange for
substitute options to purchase shares of capital stock of the Surviving
Corporation by members of the Rollover Group under the Securities Purchase
Agreement) shall, upon cancellation, be converted into the right to receive an
amount in cash equal to the
<PAGE> 33
product of (i) the number of shares of Company Common Stock subject to such
Option, whether or not then exercisable, and (ii) the excess, if any, of the
Cash Merger Consideration over the exercise price per share subject or related
to such Option.
(c) Time of Payment. The cash amount described in paragraph (b) of this
Section 5.8 shall be paid as promptly as is practicable after the Effective
Time.
(d) Withholding. All amounts payable pursuant to Section 1.11 and Section
5.8(b) and (c) shall be subject to any required withholding of taxes and shall
be paid without interest. Payment shall, at Newco's request, be withheld in
respect of any Option until Newco has received reasonable documentation that
such payment is in full satisfaction of all rights under such Option.
(e) Termination of Equity-Based Compensation. No Options will be issued
under the Company Option Plans after the date of the Original Agreement, and,
effective as of November 1, 2000, any offering of shares of Company Common Stock
pursuant to the Company's 1997 Employee Stock Purchase Plan has been terminated
(and the Company's Board of Directors have taken the necessary action to cause
such termination). Unless otherwise determined by Newco, any provision in any
other Benefit Plan providing for the potential issuance, transfer or grant of
any capital stock of the Company or any interest, or release of restrictions, in
respect of any capital stock of the Company shall be terminated as of the
Effective Time. The Company shall ensure that, following the date of the
Original Agreement, unless otherwise determined by Newco (and except as
contemplated by the Securities Purchase Agreement), no holder of an Option,
restricted stock or derivative security or any participant in the Company Stock
Option Plans or other Benefit Plan shall have any right thereunder to acquire
any capital stock of the Company or the Surviving Corporation, other than shares
of Company Common Stock issued or issuable upon exercise of Options that were
issued and outstanding on the date of the Original Agreement. No participant in
the Company Stock Option Plans shall be entitled to receive any other payment or
benefit thereunder except as provided in Section 1.11 and this Section 5.8 (or
pursuant to the Securities Purchase Agreement).
(f) No Right to Employment. Nothing contained in this Agreement shall
confer upon any employee of the Company or any ERISA Affiliate any right with
respect to employment by Newco, the Surviving Corporation or any of Newco's
affiliates, nor shall anything herein interfere with any or create any
additional right of Newco, the Surviving Corporation or any of Newco's
affiliates to terminate the employment of any such employee at any time, with or
without cause, or restrict Newco, the Surviving Corporation or any of Newco's
affiliates in the exercise of their independent business judgment in modifying
any other terms and conditions of the employment of any such employee.
SECTION 5.9. Meeting of the Company's Stockholders.
The Company shall promptly after execution of this Agreement take all
action necessary in accordance with the DGCL and its Certificate of
Incorporation and Bylaws to convene a stockholder meeting to consider and vote
on the Merger and this Agreement (the "Stockholder Meeting"). At the Stockholder
Meeting, all of the shares of Company Common Stock then owned by Newco or any
other affiliate of Newco shall be voted to approve the Merger and this
Agreement. Subject to Section 5.1, the Board of Directors of the Company (and
the Special Committee) shall recommend that the Company's stockholders vote to
approve the Merger and this Agreement if such vote is sought, shall use its
reasonable efforts to solicit from stockholders of the Company proxies in favor
of the Merger and shall take all other action in its judgment necessary and
appropriate to secure the vote of stockholders required by the DGCL to effect
the Merger.
SECTION 5.10. Proxy Statement.
(a) The Company and Newco shall furnish to each other all information
concerning such person or such person's business that is required for the Proxy
Statement. The Company shall, as soon as practicable after the date hereof,
prepare and file (after providing Newco with a reasonable opportunity to review
and comment thereon) the Proxy Statement (including the Schedule 13E-3) with the
SEC and shall use its reasonable efforts to respond to any comments of the SEC
(after providing Newco with a reasonable opportunity to review and comment
thereon) and to cause the Proxy Statement to be mailed to the
<PAGE> 34
Company's stockholders as promptly as practicable after responding to all such
comments to the satisfaction of the staff of the SEC; provided, however, that in
no event shall the Company file the preliminary Proxy Statement with the SEC any
later than January 31, 2001 (unless Newco shall have failed to cooperate with
the preparation thereof as contemplated by this Section 5.10). The Company shall
notify Newco promptly of the receipt of any comments from the SEC and of any
request by the SEC for amendments or supplements to the Proxy Statement or for
additional information and shall supply Newco with copies of all correspondence
between the Company or any of its representatives, on the one hand, and the SEC,
on the other hand, with respect to the Proxy Statement or the Transactions. The
Company will cause the Proxy Statement to comply in all material respects with
the applicable provisions of the Exchange Act and the rules and regulations
thereunder applicable to the Proxy Statement and the solicitation of proxies for
the Stockholder Meeting (including any requirement to amend or supplement the
Proxy Statement). Newco shall cooperate with the Company in the preparation of
the Proxy Statement, and without limiting the generality of the foregoing, the
Company and Newco shall promptly furnish to the other such information relating
to it and its affiliates and the Transactions and such further and supplemental
information as may be reasonably requested by the other party and shall promptly
notify the other party of any change in such information. If at any time prior
to the Stockholder Meeting there shall occur any event that should be set forth
in an amendment or supplement to the Proxy Statement, the Company shall promptly
prepare and mail to its stockholders such an amendment or supplement; provided,
however, that no such amendment or supplement to the Proxy Statement will be
made by the Company without providing Newco the reasonable opportunity to review
and comment thereon and without the approval of Newco, which approval shall not
be unreasonably withheld. To the extent practicable, the Company and its counsel
shall (and the Company shall cause the Special Committee and its counsel to)
permit Newco and its counsel to participate in all communications with the SEC
and its staff, including all meetings and telephone conferences, relating to the
Proxy Statement, this Agreement or the Transactions; provided, however, that in
the event that such participation by Newco is not practicable, the Company (or
the Special Committee) shall promptly inform Newco of the content of all such
communications and the participants involved therein.
(b) Subject to the provisions of Section 5.1, the Company agrees to include
in the Proxy Statement the recommendation of the Company's Board of Directors
and the Special Committee. The Proxy Statement shall contain a copy of the
opinion of the Special Committee Financial Advisor.
SECTION 5.11. Public Announcements. Newco and the Company shall to the
fullest extent practicable consult with each other before issuing any press
release or otherwise making any public statement with respect to this Agreement,
the Merger and the other Transactions and shall not issue any such press release
or make any such public statement prior to such consultation, except as may be
required by law.
SECTION 5.12. Stockholder Litigation. The Company shall give Newco the
opportunity to participate in the defense or settlement of any stockholder
litigation against the Company and its directors relating to any of the
Transactions until the Effective Time pursuant to this Agreement; provided,
however, that no such settlement shall be agreed to without Newco's consent,
which consent shall not be unreasonably withheld.
SECTION 5.13. FIRPTA. The Company shall deliver to Newco prior to the
execution of this Agreement a certified statement, prepared in accordance with
Sections 897 and 1445 of the Code, that the shares of Company Common Stock are
not "United States real property interests" within the meaning of Section 897 of
the Code.
SECTION 5.14. Alternative Financing; Disclosure.
(a) So long as the Company is in material compliance with its obligations
under this Agreement, Newco shall use commercially reasonable efforts to satisfy
the requirements of the Financing Commitments and the Securities Purchase
Agreement and to obtain the funding contemplated by and on the terms contained
in the Financing Commitments and the Securities Purchase Agreement, or, in the
case of the Financing Commitments, if any of the Financing Commitments is
terminated or such funds
<PAGE> 35
shall not otherwise be available, use commercially reasonable efforts to obtain
an alternative source of financing, in each case, on financial and other terms
no less favorable to Newco than those set forth in the respective Financing
Commitments.
(b) Following the date of the Original Agreement, any amendment,
termination or cancellation of any Financing Commitment or any modification of
any Financing Commitment or any information which becomes known to Newco which
makes it substantially unlikely to obtain the financing on the terms set forth
in the Financing Commitments, shall be promptly disclosed to the Company and the
Special Committee of the Board of Directors. Newco shall keep the Company and
the Special Committee of the Board of Directors reasonably apprised of any
discussions or communications with each person providing debt financing which
relates to the matters referred to in the preceding sentence. Newco shall make
available to each person providing debt financing under the Financing
Commitments or such alternative financing true and complete copies of the
Company Disclosure Statement and any supplement thereto delivered by the Company
pursuant to Section 5.6(a), and shall promptly advise each such person (or any
agent on their behalf) of any information of which it becomes aware which would
reasonably be expected to constitute a Material Adverse Effect.
SECTION 5.15. HSR Act. The Company and Newco will file all Notification and
Report Forms and related material that it may be required to file with the
Federal Trade Commission and the Antitrust Division of the United States
Department of Justice under the HSR Act, will exercise reasonable efforts to
obtain an early termination of the applicable waiting period, and will make any
further filings pursuant thereto that may be necessary or advisable.
ARTICLE VI
CONDITIONS TO CONSUMMATION OF THE MERGER
SECTION 6.1. Conditions to Each Party's Obligation to Effect the
Merger. The respective obligations of each party to effect the Merger are
subject to the satisfaction or waiver, where permissible, prior to the Effective
Time, of the following conditions:
(a) this Agreement shall have been approved by the affirmative vote of
the stockholders of the Company by the requisite vote in accordance with
the DGCL, the rules of the Nasdaq National Market and any applicable
provisions of the Company's certificate of incorporation or bylaws;
(b) no statute, rule, regulation, executive order, decree or
injunction shall have been enacted, entered, promulgated, or enforced by
any court or Governmental Entity which is in effect and has the effect of
prohibiting the consummation of the Merger; and
(c) the waiting period (and any extension thereof) applicable to the
consummation of the Merger under the HSR Act, if any, shall have expired or
been terminated.
SECTION 6.2. Conditions to Obligations of Newco to Effect the Merger. The
obligations of Newco to effect the Merger shall be subject to the fulfillment at
or before the Effective Time of the following conditions, any one or more of
which may be waived by Newco, in its sole discretion:
(a) The representations and warranties of the Company contained in
this Agreement shall be true and correct in all respects (i) as of the date
of the Original Agreement, (ii) in the case of Sections 2.1, 2.3 and 2.7,
as of the date of this Agreement and (iii) except for changes specifically
contemplated by the provisions of this Agreement (other than Section
5.6(a)), immediately before the Effective Time with the same effect as if
such representation and warranties had been made immediately before the
Effective Time (except for representations and warranties made as to
specified dates, which shall be true and correct as of such dates), except
to the extent that any and all inaccuracies in any representations and
warranties (other than those set forth in Sections 2.1 - 2.3 and 2.8(b),
which must be true and correct at the Effective Time) that were true and
correct on the date of the Original Agreement (or in the case of Sections
2.1, 2.3 and 2.7, as of the date of this Agreement) but were inaccurate
immediately before the Effective Time have not had and would not
<PAGE> 36
reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect on the Company (provided that, for purposes of this
clause (ii), any representation or warranty set forth in Article II that is
qualified by materiality or references to "Material Adverse Effect" or
similar qualifications shall be read solely for purposes of this Section
6.2(a)(ii) as if such qualifications were not present); the Company shall
have performed and complied in all material respects with the agreements
and obligations contained in this Agreement required to be performed and
complied with by it at or immediately before the Effective Time; and Newco
shall have received a certificate signed by an executive officer of the
Company to the effects set forth in this Section 6.2(a);
(b) The Company shall not have, since the date of the Original
Agreement, suffered any business interruption, damage to or destruction of
its properties that has had or would reasonably be expected to have a
Material Adverse Effect, nor shall any other incident, occurrence or event
have occurred since the date of the Original Agreement that has had or
would reasonably be expected to have a Material Adverse Effect;
(c) There shall not be pending or threatened any suit, action,
proceeding or investigation: (i) relating to the Merger to which a
Governmental Entity is a party or (ii) which has had or would reasonably be
expected to have a Material Adverse Effect on the Company;
(d) The Company shall have received (and furnished to Newco evidence
thereof reasonably satisfactory to Newco) (i) any necessary or required
approvals and consents from all third parties or Governmental Entities
necessary or required to maintain the Leases and the Liquor Licenses in
effect following the Merger on the same terms as in effect on the date of
the Original Agreement, and such approvals and consents shall not have
expired or been withdrawn; and (ii) any necessary or required approvals and
consents from all third parties and Governmental Entities other than those
referred to in clause (i) necessary or required to complete the
Transactions and to maintain the Contracts and the Permits in effect
following the Merger on the same terms as in effect on the date of the
Original Agreement, other than (in the case of this clause (ii) only) any
such approvals and consents the absence of which does not and would not
reasonably be expected to have a Material Adverse Effect on the Company or
the Surviving Corporation, and such approvals and consents (subject to such
exception) shall not have expired or been withdrawn;
(e) Newco shall have received the proceeds of the financing
contemplated in the Financing Commitments on the terms and conditions set
forth in the Financing Commitments or upon terms and conditions that are no
less favorable to Newco;
(f) Construction of the Company's restaurants or bakeries referred to
in Section 6.2(f) of the Company Disclosure Schedule shall have been
completed; and such restaurants or bakeries shall have opened for business;
(g) Immediately prior to the Effective Time, the Company (i) shall not
have any indebtedness for borrowed money (including any capital leases and
any indebtedness incurred by guaranty, suretyship or similar arrangement)
and (ii) shall have at least $4,400,000 in available Cash and Cash
Equivalents. As used above, "Cash and Cash Equivalents" means, as of the
date of determination, the amount of the Company's cash and cash
equivalents as of such date (determined in accordance with generally
accepted accounting principles applied consistently with the financial
statements contained in the Company SEC Reports), plus (x) the amount of
tenant improvement allowances to be paid to the Company under the Leases
within 90 days after such date (but only up to a maximum of $2,500,000 in
the aggregate), plus (y) the reasonable out-of-pocket expenses of the
Company incurred in connection with the negotiation and consummation of the
Merger and the other Transactions (other than the Settlement Fee) that
have, prior to such date, been paid in cash by the Company, plus (z) the
amount of the Settlement Fee (but only up to a maximum of $250,000), less
(aa) the amount of capital expenditures, pre-opening expenses, cost of
supplies and other start-up costs associated with the Company Restaurants
referred to in Section 6.2(f) of the Company Disclosure Schedule that have
not theretofore been fully paid in cash;
<PAGE> 37
(h) The Company, the members of the Rollover Group named therein and
JH&C shall have entered into the Settlement Agreement and JH&C shall have
released the Company, Newco, the Surviving Corporation and their respective
officers, directors and agents from all liabilities, claims and obligations
(and such release shall be in full force and effect);
(i) Notwithstanding any matters disclosed by the Company in connection
with the representations and warranties set forth in Article II or
elsewhere in this Agreement, neither Newco nor its lenders, agents or
representatives shall have identified any facts, conditions or
circumstances which have resulted in or would reasonably be likely to
result in any material Environmental Claim, Environmental Liability or any
other material environmental conditions or violations;
(j) The Dissenting Shares shall not include more than 10% of the
issued and outstanding shares of Company Common Stock.
SECTION 6.3. Conditions to the Obligations of the Company. The obligations
of the Company to effect the Merger shall be subject to the fulfillment at or
before the Effective Time of the following conditions, any one or more of which
may be waived by the Company, in its sole discretion:
(a) the representations and warranties of Newco contained in this
Agreement shall be true and correct in all material respects (i) as of the
date of the Original Agreement or this Agreement, as the case may be with
respect to any particular representation and warranty, and (ii) except for
changes specifically contemplated by the provisions of this Agreement
(other than Section 5.6(c)), immediately before the Effective Time with the
same effect as if such representations and warranties had been made
immediately before the Effective Time (except for representations and
warranties made as to specified dates, which shall be true and correct as
of such dates); Newco shall have performed and complied in all material
respects with the agreements and obligations contained in this Agreement
required to be performed and complied with by it at or immediately before
the Effective Time; and the Company shall have received a certificate
signed by an executive officer of Newco to the effects set forth in this
Section 6.3(a).
(b) Newco or the Surviving Corporation shall have received $40 million
in equity financing, composed of either cash equity financing and/or the
exchange of shares of Company Common Stock pursuant to Section 1.4(a)
and/or the cancellation in exchange for substitute options, or cancellation
and reinvestment of cancellation proceeds from options, to purchase Company
Common Stock from the Rollover Group pursuant to the Securities Purchase
Agreement; and (i) Newco or the Surviving Corporation shall have received
the proceeds of the debt financing contemplated by the Financing
Commitments on the terms and conditions set forth in the Financing
Commitments or (ii) Newco or the Surviving Corporation shall have received
the proceeds of debt financing sufficient to permit Newco to consummate the
Merger on other terms not materially less advantageous to Newco as a whole
or (iii) Newco or the Surviving Corporation shall have received the
proceeds of debt financing sufficient to permit Newco to consummate the
Merger on other terms so long as the incurrence of such debt by Newco will
not render the Surviving Corporation insolvent.
ARTICLE VII
TERMINATION; AMENDMENT; WAIVER
SECTION 7.1. Termination. This Agreement may be terminated and the Merger
and the other Transactions may be abandoned at any time prior to the Effective
Time, by written notice by the terminating party to the other party, whether
before or after approval of the matters presented in connection with the Merger
to the stockholders of the Company:
(a) by the mutual written consent of the Board of Directors of Newco
and the Company;
(b) by either Newco or the Company by action of its Board of Directors
if the Merger shall not have been consummated by May 31, 2001 (provided the
right to terminate this Agreement under this Section 7.1(b) shall not be
available to a party whose failure to fulfill any obligation under this
<PAGE> 38
Agreement has been the cause of or resulted in the failure of the Merger to
occur on or before such date);
(c) by either Newco or the Company by action of its Board of Directors
if a court of competent jurisdiction or other Governmental Entity shall
have issued a nonappealable final order, decree or ruling or taken any
other action, in each case having the effect of permanently restraining,
enjoining, or otherwise prohibiting the Merger, except if the party relying
on such order, decree, or ruling or other action has not complied with its
obligations under Section 5.4 of this Agreement;
(d) by either Newco or the Company by action of its Board of
Directors, if at the Stockholders Meeting (including any adjournment or
postponement thereof), the requisite vote of the stockholders of the
Company in favor of the Merger and this Agreement shall have not been
obtained;
(e) by Newco by action of its Board of Directors, (i) if (A) the Board
of Directors of the Company (or any committee thereof, including the
Special Committee) shall have taken any action prohibited by Section 5.1;
or (B) the Board of Directors of the Company (or any committee thereof,
including the Special Committee) shall have recommended to the stockholders
of the Company an Acquisition Proposal; or (ii) (A) if the Board of
Directors of the Company (or any committee thereof, including the Special
Committee) shall have withdrawn, revoked, amended or modified its approval
or recommendation of the Merger and this Agreement in a manner adverse to
Newco, (B) if the Special Committee Financial Advisor shall have withdrawn,
revoked, amended or modified its opinion referred to in Section 2.20 in a
manner adverse to Newco or (C) the Company shall fail to include in the
Proxy Statement its approval or recommendation of the Merger and this
Agreement;
(f) by Newco, if the Company shall have breached or failed to perform
in any material respect any of its representations, warranties or covenants
required to be performed by it under this Agreement, and such breach or
failure to perform has continued unremedied for ten business days following
notice of such breach to Company by the Newco;
(g) by the Company, if Newco shall have breached or failed to perform
in any material respect any of its representations, warranties or covenants
required to be performed by it under this Agreement, and such breach or
failure to perform has continued unremedied for ten business days following
notice of such breach to Newco by the Company; and
(h) by the Company at any time prior to the Stockholder Meeting, by
action of the Special Committee, if the Company shall have received after
the date of the Original Agreement an Acquisition Proposal for an
Alternative Transaction from a third party that was not initiated,
solicited or encouraged by the Company in violation of this Agreement and
that does not materially violate or breach any confidentiality or
standstill agreement executed by such party with respect to the Company and
(i) the Special Committee determines in good faith by a majority vote after
consultation with its financial and legal advisors that such Acquisition
Proposal is a Superior Proposal, (ii) the Special Committee determines in
good faith by a majority vote after consultation with its outside legal
counsel that the failure to approve such agreement would be inconsistent
with the fiduciary duties of the Board of Directors under applicable law,
(iii) the Special Committee has received a written opinion, a copy of which
has been delivered to Newco, from the Special Committee Financial Advisor
that the Acquisition Proposal is fair from a financial point of view to the
stockholders of the Company (other than any stockholders participating in
the buying group in such transaction); provided, however, that any such
termination shall not be effective unless: (I) the Special Committee has
provided Newco with written notice that it intends to terminate this
Agreement pursuant to this Section 7.1(h), identifying the Alternative
Transaction (and the parties thereto) then determined to be more favorable
and delivering to Newco a copy of the written agreement for such
Alternative Transaction in the form to be entered into (it being understood
that if such form changes prior to termination of this Agreement, the
Special Committee will notify Newco thereof pursuant to Section 5.1(c), but
the two business day advance notice requirement referred to in the
following clause (II) will not apply to such subsequent notices), and (II)
at least two full business days after the Special Committed has provided
the initial notice required by clause (I) above, the Special
<PAGE> 39
Committee delivers to Newco a written notice of termination of this
Agreement pursuant to this Section 7.1(h); and (iv) upon delivery of the
termination notice referred to in clause (II) above, the Company has
delivered to Newco a check or wire transfer of same day funds in the amount
of the Expense Reimbursement (as defined in Section 7.3(e)) and the
Termination Fee (as defined in Section 7.3(b)) and written acknowledgement
from the Company that the Company has irrevocably waived any right to
contest or object to such payment. As used herein, "Alternative
Transaction" means any of the transactions set forth in clauses (i) - (v)
or otherwise contemplated in the definition of Acquisition Proposal set
forth in Section 5.1(d).
SECTION 7.2. Effect of Termination. In the event of termination of this
Agreement as provided in Section 7.1, this Agreement, except for the provisions
of Sections 5.3, 7.2, 7.3, and 8.6, shall immediately become void and there
shall be no liability or obligation on the part of Newco or the Company or their
respective officers, directors, stockholders or affiliates, except as set forth
in Section 7.3 below or except to the extent that a party to this Agreement has
breached in any material respect any representation, warranty or covenant
contained in this Agreement; provided, however, that the provisions of Sections
5.3, 7.2, 7.3 and 8.6 of this Agreement shall remain in full force and effect
and survive any termination of this Agreement.
SECTION 7.3. Fees and Expenses.
(a) Except as set forth in this Section 7.3, all fees and expenses incurred
in connection with this Agreement and the transactions contemplated hereby shall
be paid by the party incurring such expenses, whether or not the Merger is
consummated.
(b) In the event of a termination of this Agreement by the Company pursuant
to Section 7.1(h), the Company shall pay to Newco (i) the Expense Reimbursement
(as defined in Section 7.3(e) below), and (ii) an amount equal to $2,700,000
(the "Termination Fee"), in each case in accordance with Section 7.1(h).
(c) In the event of termination of this Agreement pursuant to Section
7.1(e)(i) hereof, then the Company shall pay to Newco (i) the Expense
Reimbursement and (ii) the Termination Fee, in each case within five business
days after such termination (by check or wire transfer of same day funds).
(d) In the event of termination of this Agreement pursuant to Section
7.1(b), Section 7.1(d) or Section 7.1(e)(ii) hereof, the Company shall pay to
Newco the Expense Reimbursement prior to or simultaneously with such termination
(or, if such termination is by Newco, within five business days of such
termination) (in either case, by check or wire transfer of same day funds), and
if (i) the Company receives an Acquisition Proposal from any person or group
prior to such termination of this Agreement and (ii) within 12 months after such
termination an Acquisition Proposal (whether or not involving such person or
group) is consummated, then the Company shall pay to Newco, in addition to the
Expense Reimbursement, the Termination Fee within five business days after
consummation of such transaction (by check or wire transfer of same day funds);
provided, however, that (i) if such termination occurs under Section 7.1(b) as a
result of a material adverse change in the Company's business, financial
condition or prospects, the Company will have no such obligation to pay such
Termination Fee to Newco; provided, further, that if termination occurs under
Section 7.1(b) due to the failure to obtain the debt financing referred to in
Section 6.2(e) and the reasons for the failure to obtain such financing do not
include (i) a material adverse change in the Company's business, financial
condition or prospects or (ii) the Company's failure to satisfy the conditions
set forth in Section 6.2(a) or Section 6.2(i), the Company will have no
obligation to pay Newco either of the Expense Reimbursement or the Termination
Fee.
(e) In the event this Agreement is terminated other than under Section
7.1(b) as a result of the failure to obtain any required consents or waivers in
respect of the Leases under Section 6.2(d) or as a result of the failure to
obtain the debt financing described in Section 6.2(e) and the reason for the
failure to obtain such financing is a material adverse change in the Company's
business, financial condition or prospects the Company shall reimburse Newco for
the Expense Reimbursement. As used herein, "Expense
<PAGE> 40
Reimbursement" means all reasonable out-of-pocket fees and expenses actually
incurred by Newco (and its agents and representatives) or on its behalf in
connection with the Merger and the proposed financing thereof (including travel
expenses of such parties, HSR Act filing fees, fees and expenses of accountants,
appraisers, engineers, consultants and other persons engaged to perform due
diligence, syndication, due diligence and other expenses of prospective
financing sources of Newco and reasonable attorneys' fees and expenses of
counsel for Newco and reasonable attorneys' fees and expenses of counsel for
prospective financing sources of Newco, but excluding any equity fundraising or
structuring fees, fees (but not expenses) payable to stockholders or prospective
stockholders of Newco (or their affiliates), expenses payable to stockholders or
potential stockholders of Newco (other than Bruckmann, Rosser, Sherrill & Co.
II, L.P., BancBoston Capital and their respective affiliates), or any
commitment, transaction or similar fees payable to financing sources of Newco.
The Company shall pay the Expense Reimbursement required under this paragraph
(e) to Newco (i) prior to the time that this Agreement is terminated, if this
Agreement is terminated by the Company or (ii) within five business days after
the termination of this Agreement, if this Agreement is terminated by Newco (in
either case, by check or wire transfer of same day funds).
(f) The Company acknowledges that the Termination Fee and Expense
Reimbursement provided for in this Article VII are an integral part of the
transactions contemplated by this Agreement and not a penalty, and that, without
the Termination Fee and Expense Reimbursement provided for above, Newco would
not enter into this Agreement. Further, nothing in this Section 7.3 shall be
deemed to limit any liability of any party hereto for any breach in any material
respect of any representations, warranties or covenants contained in this
Agreement that occurs prior to termination of this Agreement.
SECTION 7.4. Amendment. To the extent permitted by applicable law, this
Agreement may be amended by action taken by Newco and the Board of Directors of
the Company at any time before or after approval of this Agreement by the
stockholders of the Company (except that Newco may unilaterally amend Exhibit A
hereto as set forth in the Background section hereof), but, after any such
stockholder approval, no amendment shall be made that by law requires the
further approval of such stockholders without the approval of such stockholders.
Except in the case of an amendment to Exhibit A hereto, which may be amended by
a writing signed by Newco and delivered to the Company, this Agreement may not
be amended except by an instrument in writing signed on behalf of all the
parties.
SECTION 7.5. Extension; Waiver. At any time prior to the Effective Time, a
party may (a) extend the time for the performance of any of the obligations or
other acts of the other parties hereto, (b) waive any inaccuracies in the
representations and warranties of the other parties contained herein or in any
documents, certificate or writing delivered pursuant hereto and (c) waive
compliance with any of the agreements or conditions of the other parties hereto
contained herein; provided that after the approval of the Merger by the
stockholders of the Company, no extensions or waivers shall be made that by law
require further approval by such stockholders without the approval of such
stockholders. Any agreement on the part of any party to any such extension or
waiver shall be valid only if set forth in an instrument in writing signed on
behalf of such party.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.1. Non-Survival of Representations and Warranties. None of the
representations and warranties made in this Agreement shall survive after the
Effective Time. This Section 8.1 shall not limit any covenant or agreement of
the parties hereto which by its terms contemplates performance after the
Effective Time.
SECTION 8.2. Enforcement of the Agreement. The Company agrees that
irreparable damage would occur to Newco in the event that any of the provisions
of this Agreement were not performed by the Company in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that Newco
shall be entitled to an injunction or injunctions to prevent breaches of this
Agreement and to
<PAGE> 41
enforce specifically the terms and provisions hereof in any federal or state
court located in the State of New York (as to which the parties agree to submit
jurisdiction of the purposes of such action), this being in addition to any
other remedy to which they are entitled at law or in equity including those set
forth in Section 7.3 of this Agreement. The Company further agrees to waive any
requirement for the securing or posting of any bond in connection with obtaining
any such injunction or other equitable relief.
SECTION 8.3. Severability. If any term or other provision of this Agreement
is invalid, illegal or incapable of being enforced by any rule of law or public
policy, all other conditions and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the economic and legal substance of
the Transactions is not affected in any manner materially adverse to any party.
Upon such determination that any term or other provision is invalid, illegal or
incapable of being enforced, the parties hereto shall negotiate in good faith to
modify this Agreement so as to effect the original intent of the parties as
closely as possible in an acceptable manner to the end that transactions
contemplated hereby are fulfilled to the extent possible. The invalidity or
unenforceability of any provision of this Agreement shall not affect the
validity or enforceability of any other provisions of this Agreement, which
shall remain in full force and effect.
SECTION 8.4. Notices. All notices and other communications hereunder shall
be in writing and shall be deemed to have been duly given upon receipt if
delivered personally, mailed by registered or certified mail (postage prepaid,
return receipt requested) to the respective parties at the following addresses
or sent by electronic transmission to the fax number specified below (or at such
other address or fax number of a party as shall be specified by like notice):
if to Newco:
c/o Bruckmann, Rosser, Sherrill & Co., Inc.
126 East 56th Street
New York, NY 10022
Attention: Mr. Harold O. Rosser
Fax: (212) 521-3799
with a copy to:
Dechert
4000 Bell Atlantic Tower
1717 Arch Street
Philadelphia, PA 19103
Attention: Carmen J. Romano, Esquire
David S. Denious, Esquire
Fax: 215-994-2222
if to the Company:
Il Fornaio (America) Corporation
770 Tamalpais Drive, Suite 400
Corte Madera, CA 94925
Attention: Mr. Michael J. Hislop
Mr. Lawrence Levy
Mr. George James
Fax: (415) 924-3880
(312) 280-2739
(415) 392-7896
<PAGE> 42
with a copy to:
Cooley Godward LLP
20th Floor, One Maritime Plaza
San Francisco, CA 94111
Attention: Cydney S. Posner, Esquire
Fax: 415-951-3699
and a copy to:
McCutchen, Doyle, Brown & Enersen, LLP
3150 Porter Drive
Palo Alto, CA 94304
Attention: Bartley C. Deamer, Esquire
Fax: 650-849-4800
Notice given by fax shall be deemed received on the day the sender receives
fax confirmation that such notice was received at the fax number of the
addressee. Notice given by mail as set out above shall be deemed received three
days after the date the same is postmarked.
SECTION 8.5. Failure or Indulgence Not Waiver; Remedies Cumulative. No
failure or delay on the part of any party hereto in the exercise of any right
hereunder shall impair such right or be construed to be a waiver of, or
acquiescence in, any breach of any representation, warranty or agreement herein,
nor shall any single or partial exercise of any such right preclude other or
further exercise thereof or of any other right.
SECTION 8.6. Governing Law. Except to the extent the provisions of the DGCL
mandatorily apply hereto, this Agreement shall be governed by and construed in
accordance with the substantive laws of the State of New York regardless of the
laws that might otherwise govern under principles of conflicts of laws
applicable thereto.
SECTION 8.7. Descriptive Headings. The descriptive headings herein are
inserted for convenience of reference only and are not intended to be part of or
to affect the meaning or interpretation of this Agreement.
SECTION 8.8. Parties in Interest. This Agreement shall be binding upon and
inure solely to the benefit of each party hereto, and nothing in this Agreement,
express or implied, is intended to confer upon any other person any rights or
remedies of any nature whatsoever under or by reason of this Agreement.
SECTION 8.9. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
shall constitute one and the same agreement.
SECTION 8.10. Certain Definitions. For purposes of this Agreement, the
following terms shall have the meanings ascribed to them below:
(a) "affiliate" of a person shall mean (i) a person that directly or
indirectly, through one or more intermediaries, controls, is controlled by,
or is under common control with, the first-mentioned person and (ii) an
"associate" of such person, as that term is defined in Rule 12b-2
promulgated under the Exchange Act as in effect on the date of the Original
Agreement.
(b) "beneficial owner" (including the term "beneficially own" or
correlative terms) shall have the meaning ascribed to such term under Rule
13d-3(a) under the Exchange Act.
(c) "business day" shall have the meaning ascribed to such term under
Rule 14d-1 of the Exchange Act.
(d) "control" (including the terms "controlling," "controlled by" and
"under common control with" or correlative terms) shall mean the
possession, directly or indirectly or as trustee or executor, of the power
to direct or cause the direction of the management and policies of a
person, whether
<PAGE> 43
through ownership of voting securities or as trustee or executor, by
contract or credit arrangement, or otherwise.
(e) "group" shall have the meaning ascribed to such term under Rule
13d-3(a) under the Exchange Act.
(f) "Material Adverse Effect" shall mean (i) any adverse change or
effect or prospective adverse change or effect in the financial condition,
assets, liabilities, business, properties or results of operations of a
specified person, which change or effect is material with any other such
changes or effects, to the specified person, or (ii) any event, matter,
condition or effect which materially impairs the ability of a specified
person to perform on a timely basis its obligations under this Agreement or
the consummation of the Transactions; provided, however, that no effect or
change reflecting general business or economic conditions or affecting the
restaurant industry generally shall constitute a Material Adverse Effect
and any resignation of employees of the Company as a result of Newco
failing to offer terms of employment to such employees on terms comparable
to the terms on which such employees are employed by the Company on the
date of the Original Agreement shall not constitute a Material Adverse
Effect on the Company.
(g) "person" shall mean a natural person, company, corporation,
partnership, association, trust or any unincorporated organization.
Section 8.11. Interpretation.
(a) The words "hereof," "herein" and "herewith" and words of similar import
shall, unless otherwise stated, be construed to refer to this Agreement as a
whole and not to any particular provision of this Agreement, and article,
section, paragraph, exhibit and schedule references are to the articles,
sections, paragraphs, exhibits and schedules of this Agreement unless otherwise
specified. Whenever the words "include," "includes" or "including" are used in
this Agreement they shall be deemed to be followed by the words "without
limitation." All terms defined in this Agreement shall have the defined meanings
contained herein when used in any certificate or other document made or
delivered pursuant hereto unless otherwise defined therein. The definitions
contained in this Agreement are applicable to the singular as well as the plural
forms of such terms and to the masculine as well as to the feminine and neuter
genders of such term. Any agreement, instrument, statute or rule defined or
referred to herein or in any agreement or instrument that is referred to herein
means such agreement, instrument, statute or rule as from time to time amended,
modified or supplemented, including (in the case of agreements and instruments)
by waiver or consent and (in the case of statutes and rules) by succession of
comparable successor statutes and rules and all attachments thereto and
instruments incorporated therein. References to a person are also to its
permitted successors and assigns.
(b) The parties have participated jointly in the negotiation and drafting
of this Agreement. In the event an ambiguity or question of intent or
interpretation arises, this Agreement shall be construed as if drafted jointly
by the parties and no presumption or burden of proof shall arise favoring or
disfavoring any party by virtue of the authorship of any provisions of this
Agreement.
(c) References in this Agreement to "the Company's knowledge" or "the
knowledge of the Company" or similar terms mean the actual knowledge of any of
the following persons: Laurence B. Mindel, Michael J. Hislop, Michael Beatrice,
Peter J. Hausback, Craig Michel, Marilyn McNulty, or Michael Mindel.
Section 8.12. Entire Agreement; Assignment. This Agreement (including the
Company Disclosure Schedule), the Securities Purchase Agreement, the Voting
Agreement and, to the extent contemplated in Section 5.3, the Confidentiality
Agreement, (a) constitute the entire agreement among the parties with respect to
the subject matter hereof and supersede all other prior agreements and
understandings, both written and oral, among the parties or any of them with
respect to the subject matter hereof, including the Original Agreement, the
Original Securities Purchase Agreement and the Original Voting Agreement,
provided that nothing in this Agreement shall operate as a waiver of any breach
of the Original Agreement and (b) shall not be assigned by operation of law or
otherwise, provided that Newco may assign any of its
<PAGE> 44
rights and obligations to any direct or indirect wholly owned subsidiary of
Newco or as collateral security to any lender providing financing to Newco in
connection with the Transactions, but no such assignment shall relieve Newco of
its obligations hereunder. Any attempted assignment in violation of this Section
8.12 shall be void. Subject to the preceding sentences, this Agreement will be
binding upon, inure to the benefit of, and be enforceable by, the parties and
their respective successors and assigns.
SECTION 8.13. Disclaimers. There are no representations or warranties,
express or implied by any party with reference to the transactions contemplated
hereby, other than the representations and warranties expressly stated herein.
Newco acknowledges and agrees that (i) any financial projections and forecasts
delivered to it or an affiliated or associated company are inherently uncertain,
(ii) it is familiar with such uncertainties, (iii) it has accepted full
responsibility for evaluating such financial projections and the associated
uncertainties and (iv) it shall have no claim against the Company or any
officer, director or shareholder with respect thereto.
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed on its behalf by its officers thereunto duly authorized, on the day and
year first above written.
IL FORNAIO (AMERICA) CORPORATION
By: /s/ MICHAEL J. HISLOP
------------------------------------
Name: Michael J. Hislop
Title: CEO
MANHATTAN ACQUISITION CORP.
By: /s/ HAROLD O. ROSSER
------------------------------------
Name: Harold O. Rosser, II
Title: President
<PAGE> 45
EXHIBIT A
ROLLOVER GROUP
Laurence B. Mindel
Michael J. Hislop
Michael Beatrice
Peter P. Hausback
F. Warren Hellman
Dean A. Cortopassi
W. Scott Hedrick
Carlo Vegetti
