EXHIBIT 10.4
AGREEMENT AND PLAN OF MERGER
dated as of
January 16, 1998
among
GB FOODS CORPORATION
TLS ACQUISITION CORP.
and
TIMBER LODGE STEAKHOUSE, INC.
TABLE OF CONTENTS
PAGE
ARTICLE I
THE MERGER
1.1 The Merger............................................................ 2
1.2 Closing............................................................... 2
1.3 Effective Time of the Merger.......................................... 2
1.4 Effects of the Merger................................................. 2
ARTICLE II
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE
CONSTITUENT CORPORATIONS
2.1 Conversion of Shares.................................................. 2
2.2 Surrender and Payment................................................. 3
2.3 Fractional Shares..................................................... 4
2.4 Stock Options......................................................... 5
2.5 Warrants.............................................................. 5
ARTICLE III
THE SURVIVING CORPORATION
3.1 Certificate of Incorporation.......................................... 5
3.2 Bylaws................................................................ 5
3.3 Directors............................................................. 5
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
4.1 Representations and Warranties of the Company......................... 6
(a) Organization, Standing and Corporate Power........................ 6
(b) Capital Structure................................................. 6
(c) Authority; Noncontravention....................................... 7
(d) SEC Documents; Financial Statements; No Undisclosed Liabilities... 8
(e) Nature of Business and Assets..................................... 8
(f) Inventory......................................................... 9
(g) Licenses, Approvals, etc.......................................... 9
(h) Real Properties................................................... 9
(i) Tangible Personal Property........................................10
(j) Intellectual Property.............................................10
(k) Environmental Compliance..........................................10
(l) Absence of Certain Changes or Events..............................11
(m) Litigation........................................................12
(n) Compliance with Laws..............................................12
(o) Absence of Changes in Stock or Benefit Plans......................13
(p) ERISA Compliance..................................................13
(q) Taxes.............................................................15
(r) Contracts; Debt Instruments.......................................16
(s) Insurance.........................................................18
(t) Interests of Officers and Directors...............................18
(u) Approval by Board.................................................18
(v) Brokers...........................................................18
(w) Fairness Opinion..................................................18
(x) Pooling of Interests..............................................18
(y) Disclosure........................................................18
4.2 Representations and Warranties of Parent and Merger Subsidiary........19
(a) Organization, Standing and Corporate Power........................19
(b) Capital Structure.................................................19
(c) Authority; Noncontravention.......................................19
(d) SEC Documents; Financial Statements; No Undisclosed
Liabilities......................................................20
(e) ..................................................................21
(f) Litigation........................................................21
(g) Absence of Changes................................................21
(h) Exchange Act Reports..............................................21
(i) Brokers...........................................................21
(j) Fairness Opinion..................................................21
(k) Pooling of Interests..............................................21
(1) Disclosure........................................................21
4.3 Delivery of Disclosure Schedules......................................22
ARTICLE V
COVENANTS OF THE COMPANY
5.1 Conduct of Business...................................................22
5.2 Affiliate Agreements..................................................24
5.3 Access to Information.................................................24
5.4 No Solicitation.......................................................24
5.5 Pooling of Interests; Tax Treatment...................................25
ARTICLE VI
COVENANTS OF PARENT
6.1 Conduct of Business...................................................25
6.2 Affiliate Agreements..................................................25
6.3 Confidentiality.......................................................26
6.4 Obligations of Merger Subsidiary......................................26
6.5 Employee Benefit Plans................................................26
6.6 Indemnification and Insurance.........................................26
6.7 Nasdaq Listing........................................................27
6.8 Publication of Combined Financial Results.............................27
6.9 Registration Relating to Company Options..............................27
6.10 Access to Information.................................................27
6.11 Pooling of Interests; Tax Treatment...................................27
ARTICLE VII
COVENANTS OF PARENT AND THE COMPANY
7.1 HSR Act Filings; Reasonable Efforts; Notification.....................27
7.2 Stockholder Meeting; Proxy Material...................................28
7.3 Press Releases........................................................30
7.4 Securities Reports....................................................30
7.5 Stockholder Approvals.................................................30
ARTICLE VIII
CONDITIONS TO THE MERGER
8.1 Conditions to the Obligations of Each Party...........................31
8.2 Conditions to the Obligations of Parent and Merger Subsidiary.........31
8.3 Conditions to the Obligations of the Company..........................33
ARTICLE IX
TERMINATION
9.1 Termination...........................................................35
9.2 Effect of Termination.................................................36
ARTICLE X
MISCELLANEOUS
10.1 Notices...............................................................37
10.2 Survival of Representations and Warranties............................37
10.3 Amendments; No Waivers................................................38
10.4 Fees and Expenses.....................................................38
10.5 Successors and Assigns; Parties in Interest...........................39
10.6 Severability..........................................................39
10.7 Governing Law.........................................................39
10.8 Entire Agreement......................................................39
10.9 Counterparts: Effectiveness; Interpretation...........................39
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (the "Agreement"), is entered into as
of January 16, 1998, among TIMBER LODGE STEAKHOUSE, INC., a Minnesota
corporation (the "Company"), GB FOODS CORPORATION, a Delaware corporation
("Parent"), and TLS ACQUISITION CORP., a Minnesota corporation and a
wholly-owned subsidiary of Parent ("Merger Subsidiary").
WHEREAS, the respective Boards of Directors of Parent, Merger
Subsidiary and the Company have approved the merger of Merger Subsidiary into
the Company as set forth below (the "Merger"), upon the terms and subject to the
conditions set forth in this Agreement and the Minnesota Business Corporation
Act (the "MBCA"), whereby each issued and outstanding share of common stock, par
value $0.01 per share, of the Company (the "Shares") shall be converted into the
Merger Consideration (as deemed herein);
WHEREAS, the Board of Directors of the Company has unanimously (i)
determined that this Agreement and the transactions contemplated hereby,
including the Merger, are fair to and in the best interests of the stockholders
of the Company, (ii) determined that the consideration to be paid in the Merger
is fair to and in the best interests of the stockholders of the Company, (iii)
approved this Agreement and the transactions contemplated hereby, including the
Merger, and (iv) resolved to recommend approval and adoption of this Agreement,
the Merger and the other transactions contemplated hereby by such stockholders;
WHEREAS, the Board of Directors of Parent has unanimously (i)
determined that this Agreement and the transactions contemplated hereby,
including the Merger, are fair to and in the best interests of the stockholders
of the Parent, (ii) approved this Agreement and the transactions contemplated
hereby, including the Merger, and (iii) resolved to recommend approval of the
issuance of the Parent Common Stock (as defined herein) in connection with the
Merger by the Parent's stockholders;
WHEREAS, as a condition and inducement to Parent's willingness to enter
into this Agreement, certain stockholders of the Company have agreed to enter
into agreements with Parent in the form attached hereto as Exhibit A (the
"Affiliate Agreement");
WHEREAS, Fidelity National Financial, Inc. ("Fidelity") intends to
exercise options to purchase shares of stock of the Parent as more particularly
described in Article VIII;
WHEREAS, it is intended that the Merger be accounted for as a "pooling
of interests"; and
WHEREAS, Parent, Merger Subsidiary and the Company desire to make
certain representations, warranties, covenants and agreements in connection with
the Merger and also to prescribe various conditions to the consummation thereof.
NOW, THEREFORE, in consideration of the foregoing and the mutual
promises, representations, warranties, covenants and agreements herein
contained, the parties hereto, intending to be legally bound, hereby agree as
follows:
ARTICLE I
THE MERGER
1.1 The Merger. Upon the terms and subject to the conditions set forth in this
Agreement, and in accordance with the MBCA, Merger Subsidiary shall be merged
with and into the Company at the Effective Time (as defined herein). At the
Effective Time, (i) the separate corporate existence of Merger Subsidiary shall
cease, and (ii) the Company shall continue as the surviving corporation as a
direct wholly-owned subsidiary of Parent (Merger Subsidiary and the Company are
sometimes hereinafter referred to as "Constituent Corporations" and, as the
context requires, the Company, after giving effect to the Merger, is sometimes
hereinafter referred to as the "Surviving Corporation").
1.2 Closing. The closing of the Merger (the "Closing") shall take place as soon
as practicable, but in any case on or prior to the third business day after
which all of the conditions set forth in Article VIII hereof shall be fulfilled
or waived in accordance with this Agreement (the "Closing Date"). At the time of
the Closing, the Company and Merger Subsidiary will file a certificate of merger
with the Secretary of State of the State of Minnesota (the "Certificate of
Merger") and make all other filings or recordings required by the MBCA in
connection with the Merger.
1.3 Effective Time of the Merger. The Merger shall, subject to the MBCA, become
effective as of such time as the Certificate of Merger is duly filed with the
Secretary of State of the State of Minnesota or at such later time as is
specified in the Certificate of Merger (the "Effective Time").
1.4 Effects of the Merger. From and after the Effective Time, the Surviving
Corporation shall possess all the rights, privileges, powers and franchises and
shall be subject to all of the restrictions, disabilities, duties and
liabilities of the Company and Merger Subsidiary shall cease to exist, all as
provided under the MBCA.
ARTICLE II
EFFECT OF THE MERGER ON THE CAPITAL
STOCK OF THE CONSTITUENT CORPORATIONS
2.1 Conversion of Shares. At the Effective Time, by virtue of the Merger and
without any action on the part of the holder of any Shares or the holder of any
shares of capital stock of Merger Subsidiary:
(a) each share of common stock of Merger Subsidiary outstanding
immediately prior to the Effective Time shall be converted into and become one
fully paid and nonassessable share of common stock of the Surviving Corporation
and such shares shall constitute the only outstanding shares of capital stock of
the Surviving Corporation; and
(b) each Share outstanding immediately prior to the Effective Time
shall be converted into the right to receive 0.8000 of a share (the "Exchange
Ratio") of Parent's common stock, par value $0.08 per share (the "Parent Common
Stock"), without interest, together with cash in lieu of any fractional share of
Parent Common Stock as provided in Section 2.3 below (the "Merger
Consideration"); provided however, that the Exchange Ratio shall be subject to
adjustment as follows:
(i) If the Average Parent Common Stock Price (as defined in
Section 9.1(vi) below) is less than $7.50, Parent or the Company may terminate
this Agreement as provided in Section 9.1(vi) below or, alternatively, Parent
may elect to increase the Exchange Ratio to the number (rounded to the nearest
1/10000) determined by dividing $7.61 by the Average Parent Common Stock Price,
in which event the Company shall not have the right to terminate this Agreement;
and
(ii) If the Average Parent Common Stock Price is more than
$14.00, the Exchange Ratio shall be reduced to a number (rounded to the nearest
1/10000) equal to the product of the Exchange Ratio multiplied by a fraction,
the numerator of which is $14.00 and the denominator of which is the Average
Parent Common Stock Price.
In the event, prior to the Effective Time, of any recapitalization of
Parent through a subdivision of its outstanding shares into a greater number of
shares, or a combination of its outstanding shares into a lesser number of
shares, or any reorganization reclassification or other change in its
outstanding shares into the same or a different number of shares of other
classes, or a declaration of or dividend on its outstanding shares payable in
shares of its capital stock (a "Capital Change"), then the Exchange Ratio shall
be appropriately adjusted so as to maintain after such Capital Change the
relative proportionate interests in the number of shares of Parent Common Stock
(assuming consummation of the Merger) which the holders of Shares and the
holders of shares of Parent Common Stock had immediately prior to such Capital
Change.
2.2 Surrender and Payment.
(a) Prior to the Effective Time, Parent shall appoint a bank or trust
company (the "Exchange Agent") for the purpose of exchanging certificates
representing Shares for the Merger Consideration. Parent will make available to
the Exchange Agent the Merger Consideration to be paid in respect of the Shares
(the "Exchange Fund"). Promptly after the Effective Time, Parent will send, or
will cause the Exchange Agent to send, to each holder of Shares as of the
Effective Time a letter of transmittal for use in such exchange (which shall
specify that the delivery shall be effected, and risk of loss and title shall
pass, only upon proper delivery of the certificates representing Shares to the
Exchange Agent). The Exchange Agent shall, pursuant to irrevocable instructions,
make the payments provided in this Section 2.2. The Exchange Fund shall not be
used for any other purpose, except as provided in this Agreement.
(b) Each holder of Shares that have been converted into the Merger
Consideration, upon surrender to the Exchange Agent of a certificate or
certificates representing such Shares, together with a properly completed letter
of transmittal covering such Shares and other customary documentation, will be
entitled to receive the Merger Consideration payable in respect of such Shares.
As of the Effective Time, all such Shares shall no longer be outstanding and
shall automatically be canceled and retired and shall cease to exist, and each
holder of a certificate
previously representing any such Shares shall cease to have any rights with
respect thereto, except the right to receive the Merger Consideration upon
surrender of the certificates representing such Shares, as contemplated hereby.
(c) If any portion of the Merger Consideration is to be paid to a
person other than the registered holder of the Shares represented by the
certificate or certificates surrendered in exchange therefor, it shall be a
condition to such payment that the certificate or certificates so surrendered
shall be properly endorsed or otherwise be in proper form for transfer and that
the person requesting such payment shall pay to the Exchange Agent any transfer
or other taxes required as a result of such payment to a person other than the
registered holder of such Shares or establish to the satisfaction of the Parent
and the Exchange Agent that such tax has been paid or is not required. For
purposes of this Agreement, "person" means an individual, a corporation, a
partnership, an association, a trust or any other entity or organization,
including a government or political subdivision or any agency or instrumentality
thereof.
(d) After the Effective Time, there shall be no further transfers of
Shares. If, after the Effective Time, certificates representing Shares are
presented to the Surviving Corporation, they shall be canceled and exchanged for
the consideration provided for, and in accordance with, the procedures set forth
in this Article II.
(e) Any portion of the Exchange Fund made available to the Exchange
Agent pursuant to this Agreement that remains unclaimed by the holders of Shares
twelve months after the Effective Time shall be returned to Parent, upon
Parent's demand, and any such holder who has not exchanged his Shares for the
Merger Consideration in accordance with this Section 2.2 prior to that time
shall thereafter look only to Parent for payment of the Merger Consideration in
respect of such holder's Shares. Notwithstanding the foregoing, Parent shall not
be liable to any holder of Shares for any amount paid to a public official
pursuant to and in accordance with the requirements of applicable abandoned
property, escheat or similar laws.
(f) No dividends or other distributions declared or made after the
Effective Time with respect to the Parent Common Stock for which the record date
is after the Effective Time shall be paid to the holder of any certificate
formerly representing Shares until such certificate is surrendered to the
Exchange Agent as provided herein. Following surrender of any such certificate,
there shall be paid to the holder of record thereof (i) certificates
representing whole shares of Parent Common Stock issued in exchange therefor,
without interest, (ii) as promptly as practicable the amount of dividends or
other distributions having a record date after the Effective Time paid with
respect to such whole shares of Parent Common Stock prior to their surrender and
(iii) on the appropriate payment date, the amount of dividends or other
distributions payable with respect to such whole shares of Parent Common Stock
and having a record date after the Effective Time but a payment date subsequent
to their surrender.
2.3 Fractional Shares. No fractional shares of Parent Common Stock will be
issued in connection with the Merger. In lieu of any fractional share of Parent
Common Stock to which the holder of any Share would otherwise be entitled to
receive, such holder shall be entitled to receive an amount of cash equal to the
value of such fractional shares of Parent Common Stock, which value shall be
based upon the Average Parent Common Stock Price (as defined in ss 9.1(vi)
below). The fractional interests of each holder of Shares will be aggregated so
that no holder of Shares will receive cash in an amount equal to or greater than
the value of one whole share of
Parent Common Stock. Parent shall provide sufficient funds to the Exchange Agent
to make the payments contemplated by this Section 2.3.
2.4 Stock Options. At the Effective Time, each Company Option and NQSO (as
defined below) shall be assumed by the Parent and shall thereafter be deemed to
constitute an option to purchase, on the same terms and conditions as were
applicable under such Company Option, the same Merger Consideration as the
holder of such Company Option would have been entitled to receive pursuant to
the Merger had such holder exercised such Company Option in full immediately
prior to the Effective Time and been the holder of the Shares issuable upon
exercise of such Company Option, at an exercise price per share calculated by
dividing the aggregate exercise price for the Shares otherwise purchasable
pursuant to such Company Option by the number of full shares of Parent Common
Stock deemed purchasable pursuant to such option; provided, however, that in the
case of any Company Option to which Section 421 of the Code applies by reason of
its qualification as an "incentive stock option" the exercise price and the
number of shares purchasable pursuant to such option and the terms and
conditions of exercise of such option shall be determined in order to comply
with Section 424(a) of the Code. "Company Option" means any option granted,
whether or not exercisable, and not exercised or expired, to a current or former
employee, director or independent contractor of the Company or any predecessor
thereof to purchase Shares pursuant to the Company's 1995 Stock Option Plan, as
amended (the "Option Plan"). "NQSO" means the non-qualified stock options
granted to the Company's officers in November, 1992.
2.5 Warrants. At the Effective Time, the warrant to purchase 120,000 Shares,
dated December 9, 1993, issued to ▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and Company, Incorporated (the
"Warrants") shall be assumed by the Parent in accordance with the provisions of
such Warrant and shall thereafter be deemed to constitute a warrant to purchase,
on the same terms and conditions as were applicable under such Warrant, the same
Merger Consideration as the holder of such Warrant would have been entitled to
receive pursuant to the Merger had such holder exercised such Warrant in full
immediately prior to the Effective Time and been the holder of the Shares
issuable upon exercise of such Warrant, at an exercise price to be determined in
accordance with the provisions of such Warrant.
ARTICLE III
THE SURVIVING CORPORATION
3.1 Articles of Incorporation. The Articles of Incorporation of the Company in
effect at the Effective Time shall be the Articles of Incorporation of the
Surviving Corporation until amended in accordance with applicable law.
3.2 Bylaws. The bylaws of the Merger Subsidiary in effect at the Effective Time
shall be the bylaws of the Surviving Corporation until amended in accordance
with applicable law.
3.3 Directors. Upon the Effective Time, the Board of Directors of the Surviving
Corporation shall consist of five (5) members, and the initial directors of the
Surviving Corporation shall, until successors are duly elected and qualified in
accordance with applicable law, be ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇▇
▇. ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, and ▇▇▇ ▇▇▇▇▇▇▇▇.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
4.1 Representations and Warranties of the Company. The Company represents and
warrants to Parent and Merger Subsidiary, as of the date hereof and as of the
Closing Date, subject to the exceptions and qualifications set forth in the
disclosure schedule delivered by the Company to Parent and Merger Subsidiary
pursuant to Section 4.3 of this Agreement (the "Disclosure Schedule"), as
follows (whenever the representations or warranties of the Company are qualified
by the knowledge of the Company, knowledge shall mean actual knowledge after
reasonable investigation of the fact or matter in question of the management
employees of the Company identified in Section 4.1 of the Disclosure Schedule):
(a) Organization. Standing and Corporate Power. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of Minnesota and has the requisite corporate power and authority to carry on its
business as now being conducted. The Company is duly qualified or licensed to do
business and is in good standing in each jurisdiction in which the nature of its
business or the ownership or leasing of its properties makes such qualification
or licensing necessary, other than in such jurisdictions where the failure to be
so qualified or licensed (individually or in the aggregate) could not reasonably
be expected to have a "Company Material Adverse Effect," which for purposes of
this Agreement means to (i) have a material adverse effect on the value,
condition (financial or otherwise), prospects, business, insurability or result
of operations of the Company, (ii) impair the ability of any party hereto to
perform its obligations under this Agreement or (iii) prevent or materially
delay consummation of any of the transactions contemplated by this Agreement.
The Company has delivered to Parent complete and correct copies of its Articles
of Incorporation and bylaws. The Company is not a party to any joint venture,
partnership or similar business or entity (the "Joint Ventures"). The Company
does not have any subsidiary. For purposes of this Agreement, a "subsidiary" of
any person means another person in which such first person, directly or
indirectly, owns 50% or more of the equity interests or has the right, through
ownership of equity, contractually or otherwise, to elect at least a majority of
its Board of Directors or other governing body.
(b) Capital Structure. The authorized capital stock of the Company
consists of 10,000,000 Shares par value $0.01 per share. As of December 31,
1997, (i) 3,625,750 Shares were issued and outstanding, (ii) Company Options to
Purchase 247,500 Shares were outstanding, (iii) no Shares were reserved for
issuance pursuant to the NQSO, and (iv) 120,000 Shares were reserved for
issuance upon exercise of the Warrants. Except as set forth above, no shares of
capital stock or other equity or voting securities of the Company are
authorized, issued, reserved for issuance or outstanding. All outstanding shares
of capital stock of the Company are, and all Shares which may be issued pursuant
to the Company Options or the Warrants will, when issued, be duly authorized,
validly issued, fully paid and nonassessable and not subject to preemptive
rights. There are not any bonds, debentures, notes or other indebtedness or
securities 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. Except as set forth above in this Section
4.1(b) and in Section 4.1(b) of the Disclosure Schedule there are not any
securities, options, warrants, calls, rights, commitments, agreements,
arrangements or undertakings of any kind to which the Company is a party or by
which it 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 equity or voting
securities of the Company or obligating the Company to issue, grant, extend or
enter into any such security, option, warrant, call, right, commitment,
agreement, arrangement or undertaking. Section 4. 1(b) of the Disclosure
Schedule also sets forth a true and correct list of the Company Options and
Warrants which are outstanding as of the date hereof, which list sets forth, for
each holder of a Company Option or Warrant, the number of Shares subject
thereto, the exercise price and the expiration date thereof. There are no
outstanding rights, commitments, agreements, arrangements or undertakings of any
kind obligating the Company to repurchase, redeem or otherwise acquire or
dispose of any shares of capital stock or other equity or voting securities of
the Company or any securities of any type described in the two immediately
preceding sentences.
(c) Authority; Noncontravention. The Company has the requisite
corporate power and authority to enter into this Agreement and, subject to the
Company Stockholder Approval (as defined below) required in connection with the
consummation of the Merger, to consummate the transactions contemplated by this
Agreement. The Merger requires the approval by the affirmative vote of the
holders of a majority of the outstanding Shares (the "Company Stockholder
Approval"), which approval is the only vote of the holders of any class or
series of the capital stock of the Company necessary to approve the Merger and
this Agreement and the transactions contemplated hereby. The execution and
delivery of this Agreement by the Company and the consummation by the Company of
the transactions contemplated by this Agreement have been duly authorized by all
necessary corporate action on the part of the Company, except for the Company
Stockholder Approval in connection with the consummation of the Merger. This
Agreement has been duly executed and delivered by the Company and constitutes a
valid and binding obligation of the Company, enforceable against the Company in
accordance with its terms. The execution and delivery of this Agreement does
not, and the consummation of the transactions contemplated by this Agreement 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 termination, cancellation,
modification or acceleration of any obligation or to a loss of a material
benefit under, or result in the creation of any Lien (as defined below) upon any
of the properties or assets of the Company under, (i) except as disclosed in
Section 4.1(c)(i) of the Disclosure Schedule, the Articles of Incorporation or
bylaws of the Company, (ii) except as disclosed in Section 4. 1(c)(ii) of the
Disclosure Schedule, any loan or credit agreement, note, bond, mortgage,
indenture, Lien, lease or any other contract, agreement, instrument, permit,
commitment, concession, franchise or license applicable to the Company, its
properties or assets, or (iii) subject to the governmental filings and other
matters referred to in the following sentence, any judgment, order, decree,
statute, law, ordinance, rule or regulation applicable to the Company or its
properties or assets, other than any such conflicts, violations, or defaults
that, individually or in the aggregate, would not have a Company Material
Adverse Effect. No consent, approval, franchise, order, license, permit, waiver
or authorization of, or registration, declaration or filing with or exemption,
notice, application, or certification by or to (collectively, "Consents") any
federal, state or local government or any arbitration panel or any court,
tribunal, administrative or regulatory agency or commission or other
governmental authority, department, bureau, commission or agency, domestic or
foreign (a "Governmental Entity"), is required by or with respect to the Company
in connection with the execution and delivery of this
Agreement by the Company or the consummation by the Company of the transactions
contemplated by this Agreement except for (i) the required Consents listed in
Section 4.1(c)(i) and 4.1(c)(ii) of the Disclosure Schedule, (ii) the filing of
the Certificate of Merger in accordance with the MBCA and similar documents with
the relevant authorities of other states in which the Company is qualified to do
business, (iii) compliance with any applicable requirements of the Securities
Act of 1933, as amended, and the rules and regulations thereunder (the
"Securities Act"), and the Securities Exchange Act of 1934, as amended, and the
rules and regulations thereunder (the "Exchange Act"), and (iv) such other
Consents as to which the failure to obtain or make, individually or in the
aggregate, could not reasonably be expected to have a Company Material Adverse
Effect. The term "Lien" means any mortgage, pledge, hypothecation, assignment,
deposit arrangement, encumbrance, lien (statutory or other) or preference,
priority or other security agreement of any kind or nature whatsoever,
including, without limitation, any conditional sale or other title retention
agreement and any financing lease having substantially the same effect as any of
the foregoing.
(d) SEC Documents; Financial Statements: No Undisclosed Liabilities.
The Company has timely filed all reports, schedules, forms, statements, exhibits
and other documents required to be filed with the Securities and Exchange
Commission ("SEC") by the Company (the "Company SEC Documents") under or
pursuant to the Exchange Act or the Securities Act. True and correct copies of
each of the Company SEC Documents have been provided or made available to
Parent. As of their respective dates, or as subsequently amended prior to the
date of this Agreement, the Company SEC Documents complied in all material
respects with the requirements of the Securities Act or the Exchange Act as the
case may be, applicable to such Company SEC Documents, and none of the Company
SEC Documents contained any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading. The financial statements of the Company included in the
Company SEC Documents comply 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 United States generally accepted
accounting principles ("GAAP") (except in the case of unaudited statements, as
permitted by Form 10-Q of the SEC) applied on a consistent basis throughout the
periods involved (except as specified on the Disclosure Schedule) and fairly
present 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 unaudited statements, to normal year-end audit adjustments). Except
as set forth in the Company SEC Documents, the Company has no liabilities or
obligations of any nature (whether accrued, absolute, contingent or otherwise),
except for liabilities and obligations which, individually or in the aggregate,
could not reasonably be expected to have a Company Material Adverse Effect.
(e) Nature of Business and Assets. The Company is engaged in the
business (the "Business") of owning and operating seventeen full-service
steakhouse restaurants (the "Restaurants"), under the name "Timber Lodge
Steakhouse." All assets used in the operation of the Business (the "Restaurant
Assets") constitute all of the assets necessary to conduct the operations of the
Restaurants in the ordinary course of business. All of the assets owned and
leased by the Company that are used or held for use in the operation of the
Restaurants are included in the Restaurant Assets and, except as set forth in
Sections 4.1(h) and 4.1(i)(ii) below at
the Effective Time good and marketable title to the Restaurant Assets will be
vested in the Surviving Corporation, free and clear of all claims, indebtedness,
liabilities, Liens and rights of any third party. All of the Restaurant Assets,
including all equipment, machinery and other items of tangible property, have
continuously been maintained by the Company in the ordinary course of business.
As of the Effective Time, the Restaurant Assets will be in good working
condition and repair (ordinary wear and tear excepted) and are suitable for use
in connection with the operation of the Restaurants. The Restaurant Assets do
not require any material repair other than in the normal course of business
which would require an expenditure in excess of $5,000 per Restaurant or $25,000
in the aggregate. Schedule 4.1(e) of the Disclosure Schedule sets forth a true,
correct and complete list of each item of personal property representing
Restaurant Assets having a net book value of more than $5,000.
(f) Inventory. The Company's inventory of food, beverages, utensils and
supplies (the "Inventory") for each Restaurant, as of the Effective Time, is (i)
sufficient for the operation of such Restaurant consistent with the ordinary
course of business; (ii) consists of items which are good and
merchantable within commercially reasonable standards in the restaurant
industry; and (iii) are of a quality and quantity presently usable or saleable
in the ordinary course of business.
(g) Licenses, Approvals. etc. The Company possesses or has been granted
all registrations, filings, applications, certifications, notices, consents,
licenses, permits, approvals, certificates, franchises, orders, qualifications,
authorizations and waivers of any Governmental Entity (federal, state and local)
necessary to enable it to conduct its business in the manner in which it is
presently being conducted (the "Licenses"), which Licenses are listed in Section
4.1(g) of the Disclosure Schedule. Except as described in Section 4.1(g) of the
Disclosure Schedule, all of the Licenses are in full force and effect. Except as
described in Section 4.1(g) of the Disclosure Schedule, no action of any kind is
pending or, to the knowledge of the Company, threatened seeking the revocation
or limitation of any of the Licenses.
(h) Real Properties. The Company does not own any real property.
Section 4. 1(h) of the Disclosure Schedule lists all real property (including
all land and buildings, "Real Estate") leased by the Company, stating the name
of the lessor or sublessor, whether the property is leased as lessee or
sublessee, and giving each property's address. The Company has delivered or
caused to be delivered to Parent complete and accurate copies of the written
leases and subleases which relate to the Real Estate, together with all
amendments or supplements thereto (the "Leases"). The Company has not received
written notice of condemnation or eminent domain proceedings and is not aware of
any such proceedings pending or threatened against any Real Estate property.
Except as disclosed in Section 4.1(h) of the Disclosure Schedule, the Company
has not received any notice from any city, village or other Governmental Entity
of any zoning, ordinance, building, fire or health code or other legal violation
in respect of any Real Estate. The Leases are in full force and effect and are
valid, binding and enforceable in accordance with their respective terms; no
amount payable under any Lease is past due; the Company is in compliance in all
material respects with all commitments and obligations on its part to be
performed or observed under each Lease and is not aware of the failure by any
other party to any Lease to comply in all material respects with all of its
commitments and obligations; the Company has not received any written notice (A)
of a default (which has not been cured), offset or counterclaim under any Lease,
or, any other communication calling upon it to comply with
any provision of any Lease or asserting noncompliance, or asserting the Company
has waived or altered its rights thereunder, and no event or condition has
happened or presently exists which constitutes a default or, after notice or
lapse of time or both, would constitute a default under any Lease on the part of
the Company or any other party, or (B) of any complaint, claim, prosecution,
indictment, action, suit, arbitration, investigation or proceeding by or before
any Governmental Entity (an "Action") against any party under any Lease which if
adversely determined would result in such Lease being terminated or cut off; and
(v) the Company has not assigned, mortgaged, pledged or otherwise encumbered its
interest, if any, under any Lease.
(i) Tangible Personal Property. Except as disclosed in Section 4.1(i)
of the Disclosure Schedule, the Company (i) has good and valid title to all the
tangible personal property material to its business and reflected in the latest
audited financial statements included in the Company SEC Documents as being
owned by the Company or acquired after the date thereof (except properties
consumed, sold or otherwise disposed of in the ordinary course of business since
the date thereof), free and clear of all Liens except (A) statutory Liens
securing payments not yet due and (B) such imperfections or irregularities of
title or Liens as do not materially affect the use of the properties or assets
subject thereto or affected thereby or otherwise materially impair its Business
operations, and (ii) is the lessee of all tangible personal property material to
the Company's Business and reflected as leased in the latest audited financial
statements included in the Company SEC Documents (or on the books and records of
the Company as of the date thereof or acquired after the date thereof, except
for leases that have expired by their terms or that have been transferred in the
ordinary course of business) and is in possession of the properties purported to
be leased thereunder, and each such lease is valid and in full force and effect
without default thereunder by the lessee or, to the Company's knowledge, the
lessor. The Company enjoys peaceful and undisturbed possession under all such
leases. Such owned and leased tangible personal property is in good working
order, reasonable wear and tear excepted.
(j) Intellectual Property. The Company has presently effective federal
and state registrations of its trade marks, trade names and service marks (the
"Registered Marks") as listed in Section 4.1(j) of the Disclosure Schedule, and
the same are adequate for use in, and the protection of, the Business. No person
other than the Company has any right to use any Registered ▇▇▇▇ in any fashion
other than as described on Schedule 4.l(j), no person has claimed or is
claiming that any Registered ▇▇▇▇ infringes any property or right of such
person, and no person is engaged in any infringing use of a Registered ▇▇▇▇ or
uses any name or ▇▇▇▇ confusingly similar to any Registered ▇▇▇▇. The Company
does not own any patents (including design patents) except as listed in Schedule
4.1(j) of the Disclosure Schedule.
(k) Environmental Compliance.
(i) For purposes of this Section 4.1(k), (A) "Hazardous
Substance" means any pollutant contaminant, hazardous or toxic substance or
waste, solid waste, petroleum or any fraction thereof, or any other chemical
substance or material listed or identified in or regulated by or under any
Environmental Law; (B) "Environmental Law" means the Comprehensive Environmental
Response, Compensation and Liability Act, 42 U.S.C. ss 9601 et seq., the Solid
Waste Disposal Act, as amended by the Resource Conservation and Recovery Act, 42
U.S.C. ss 6901 et seq., the Clean Water Act, 33 U.S.C. ss 1251 et seq., the
Clean Air Act, 42 U.S.C. ss 7401 et seq., the Toxic Substances Control Act, 15
U.S.C. ss 2601 et seq., the Safe
Drinking Water Act, 42 U.S.C. ss 300f et seq., the Emergency Planning and
Community Right to Know Act, 42 U.S.C. ss 11001 et seq., the Occupational Safety
and Health Act, 29 U.S.C. ss 651 et seq., the Oil Pollution Act, 33 U.S.C. ss
2701 et seq., in each case as amended from time to time, and all regulations
promulgated thereunder, and any other statute, law, regulation, ordinance,
bylaw, rule, judgment, order, decree or directive of any Governmental Entity
dealing with pollution or the protection of natural resources or the indoor or
ambient environment or with the protection of human health or safety, and (C)
"RCRA Hazardous Waste" means a solid waste that is listed or classified as a
hazardous waste, as that term is defined in or pursuant to the Resource
Conservation and Recovery Act, as amended, 42 U.S.C. ss 6901 et seq.
(ii) Except as set forth on Section 4.1(k) of the Disclosure
Schedule: (A) there are no claims pending against the Company, or any of its
predecessors (the "Company Interests") relating to or arising out of a Hazardous
Substance nor are any such claims, to the Company's knowledge, threatened
against Company Interests, nor has the Company received any notice, alleging or
warning that any Real Estate or any real property previously operated by any
Company Interests is, has been or may be in violation of or in noncompliance
with any Environmental Law; (B) to the Company's knowledge, no Hazardous
Substance is now present in amounts, concentrations or conditions requiring
removal, remediation or any other response, action or corrective action under,
or forming the basis of a claim pursuant to, any Environmental Law, in, on, from
or under the Real Estate or any real property previously owned or operated by
any Company Interests; (C) the Real Estate is not being and has not been during
the period of time they have been leased by any Company Interests used in
connection with the business of manufacturing, storing or transporting Hazardous
Substances, and no RCRA Hazardous Wastes are being or have been during the
period of time operated by any Company Interests treated, stored or disposed of
there in violation of any Environmental Law; and (D) there neither are now nor
have there been during the period of time they have been operated by any Company
Interests any underground storage tanks, lagoons or other containment facilities
of any kind which contain or contained any Hazardous Substances on the Real
Estate.
(iii) The Company has made available to the Parent true and
correct copies of any and all written communications received by the Company
from any Governmental Entity relating in whole or in part to the existence of
Hazardous Substances at any Real Estate or any real property previously owned or
operated by any Company Interests or the compliance of the owners, operators or
lessees thereof with respect to any Environmental Law.
(l) Absence of Certain Changes or Events. Except as contemplated by
this Agreement or disclosed in Section 4.1(l) of the Disclosure Schedule, since
September 10, 1997, the Company has conducted the Business only in the ordinary
course consistent with past practice, and there has not been (i) any event,
occurrence or development which, individually or in the aggregate, has had or
could reasonably be expected to have a Company Material Adverse Effect, (ii) any
declaration, setting aside or payment of any dividend or other distribution
(whether in cash, stock or property) with respect to any of the Company's
capital stock or any repurchase, redemption or other acquisition by the Company
of any outstanding shares of capital stock or other securities of the Company,
(iii) any adjustment, split, combination or reclassification of any of its
capital stock 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, (iv) (A) any granting by the Company to any current or former
director, officer or employee of the
Company of any material increase in compensation or benefits, except for grants
to employees who are not officers or directors in the ordinary course of
business consistent with past practice, (B) any granting by the Company to any
such director, officer or employee of any increase in severance or termination
pay (including the acceleration in the vesting of Shares (or other property) or
the provision of any tax grossup), or (C) any entry by the Company into any
employment, deferred compensation, severance or termination agreement or
arrangement with or for the benefit of any such current or former director,
officer or employee, (v) any damage, destruction or loss, whether or not covered
by insurance, that has had or could have a material adverse effect on the
Restaurants or a Company Material Adverse Effect, (vi) any change in accounting
methods, principles or practices by the Company, (vii) any amendment, waiver or
modification of any material term of any outstanding security of the Company,
(viii) any incurrence, assumption or guarantee by the Company of any material
indebtedness for borrowed money or other material obligations, other than in the
ordinary course of business consistent with past practice, (ix) any creation or
assumption by the Company of any Lien on any asset, other than financing
transactions in the ordinary course of business consistent with past practice,
(x) any making of any lease, loan, advance or capital contributions to or
investment in any person other than in the ordinary course of business
consistent with past practice, but in no event in the amount of more than
$10,000 for any one transaction or $50,000 in the aggregate, (xi) any
transaction or commitment made, or any contract or agreement entered into, by
the Company relating to its assets or business of more than $10,000 for any one
transaction or $50,000 for any series of transactions, (xii) any acquisition or
disposition of any assets involving more than $10,000 per transaction or $50,000
in the aggregate or any merger or consolidation with any person, (xiii) any
relinquishment by the Company of any contract or other right, in either case,
material to the Company, other than transactions and commitments in the ordinary
course of business consistent with past practice, or (xiv) any agreement,
commitment, arrangement or undertaking by the Company to perform any action
described in clauses (i) through (xiii).
(m) Litigation. Except as disclosed in Section 4.1(m) of the Disclosure
Schedule, there are no actions or proceedings pending or, to the knowledge of
the Company, threatened against the Company.
(n) Compliance with Laws. The conduct by the Company of the Business is
and has been in compliance with (i) all statutes and laws, (ii) all regulations,
ordinances, and rules, and (iii) all judgments, orders or decrees to which the
Company is subject or is a party, except for violations or failures so to
comply, if any, that, individually or in the aggregate, could not reasonably be
expected to have a Company Material Adverse Effect or to give rise to material
fines or other material civil penalties or any criminal liabilities. Except as
set forth on Section 4.1(n) of the Disclosure Schedule, the Company has not
received any notice or other communications relating to any alleged violation of
any statute, law, regulation, ordinance, rule, judgment, order or decree from
any Governmental Entity, or of any investigation with respect thereto,
applicable to the Company.
(o) Absence of Changes in Stock or Benefit Plans. Except as disclosed
in Section 4.1(o) of the Disclosure Schedule or as required under this
Agreement, since January 1, 1997, there has not been (i) any acceleration,
amendment or change of the period of exercisability or vesting of any Warrant,
NQSO, or Company Options under the Option Plan (including any discretionary
acceleration of the exercise periods or vesting by the Company's Board of
Directors or any committee thereof or any other persons administering the Option
Plan) or any authorization of cash payments in exchange for the Warrant, the
NQSO, or any Company Options under the Option Plan, (ii) any adoption or
material amendment by the Company of any collective bargaining agreement or any
bonus, pension, profit sharing, deferred compensation, incentive compensation,
stock ownership, stock purchase, stock option, phantom stock, stock appreciation
right, retirement, vacation, severance, disability, death benefit,
hospitalization, medical, worker's compensation, disability, supplementary
unemployment benefits, or other plan, arrangement or understanding (whether or
not legally binding) or any employment agreement providing compensation or
benefits to any current or former employee, officer, director or independent
contractor of the Company or any beneficiary thereof or entered into, maintained
or contributed to, as the case may be, by the Company (collectively, "Benefit
Plans"), or (iii) any adoption of, or amendment to, or change in employee
participation or coverage under, any Benefit Plans which would increase
materially the expense of maintaining such Benefit Plans above the level of the
expense incurred in respect thereof for the fiscal year ended on January 1,
1997.
(p) ERISA Compliance.
(i) Section 4.1(p) of the Disclosure Schedule contains a list
of all "employee pension benefit plans" (defined in Section 3(2) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA")), "employee welfare
benefit plans" (defined in Section 3(1) of ERISA) and all other employee benefit
plans (collectively the "Benefit Plans"). With respect to each Benefit Plan, the
Company has delivered or made available to Parent a true, correct and complete
copy of: (A) each writing constituting a part of such Benefit Plan, including
without limitation all plan documents, benefit schedules, trust agreements, and
insurance contracts and other funding vehicles; (B) the most recent Annual
Report (Form 5500 Series) and accompanying schedule, if any; (C) the current
summary plan description, if any; (D) the most recent annual financial report,
if any; and (E) the most recent determination letter from the Internal Revenue
Service, if any.
(ii) Section 4.1(p) of the Disclosure Schedule identifies each
Benefit Plan that is intended to be a "qualified plan" within the meaning of
Section 401(a) of the Code ("Qualified Plans"). No request for a favorable
determination letter has been filed with the Internal Revenue Service with
respect to any such Qualified Plan, but the Company believes that each such
Qualified Plan is in fact so "qualified" within the meaning of Section 401(a) of
the Code, and there are no existing circumstances nor any events that have
occurred that could adversely affect the qualified status of any Qualified Plan
or the related trust.
(iii) The Company has complied, and is now in compliance, in
all material respects with all provisions of ERISA, the Code, and all laws and
regulations applicable to the Benefit Plans of which the failure to comply would
have a Company Material Adverse Effect. Except as set forth in Section 4.1(p) of
the Disclosure Schedule, no prohibited transaction has
occurred with respect to any Benefit Plan. All contributions required to be made
to any Benefit Plan by applicable law or regulation or by any plan document or
other contractual undertaking, and all premiums due or payable with respect to
insurance policies funding any Benefit Plan, for any period through the date
hereof have been timely made or paid in full or, to the extent not required to
be made or paid on or before the date hereof, have been fully reflected in the
Company SEC Documents.
(iv) No Benefit Plan is subject to Title IV or Section 302 of
ERISA or Section 412 or 4971 of the Code. Neither the Company nor any of its
ERISA Affiliates (as defined below) has at any time since January 1, 1993,
contributed to or been obligated to contribute to any "multiemployer plan"
within the meaning of Section 4001(a)(3) of ERISA or any plan with two or more
contributing sponsors at least two of whom are not under common control, within
the meaning of Section 4063 of ERISA. There does not now exist, nor do any
circumstances exist that could result in, any Controlled Group Liability (as
defined below) that would be a liability of the Company following the Closing.
"ERISA Affiliate" means, with respect to any entity, trade or business, any
other entity, trade or business that is a member of a group described in Section
414(b), (c), (m) or (o) of the Code or Section 4001(b)(1) of ERISA that includes
the first entity, trade or business, or that is a member of the same "controlled
group" as the first entity, trade or business pursuant to Section 4001(a)(14) of
ERISA. "Controlled Group Liability" means any and all liabilities under (i)
Title IV of ERISA, (ii) Section 302 of ERISA, (iii) Sections 412 and 4971 of the
Code, (iv) the continuation coverage requirements of Section 601 et seq. of
ERISA and Section 4980B of the Code, and (v) corresponding or similar provisions
of foreign laws or regulations, other than such liabilities that arise solely
out of, or relate solely to, the Benefit Plans.
(v) Except as set forth in the Company SEC Documents or in
Section 4.1(p) of the Disclosure Schedule, the Company does not have any
liability for life, health, medical or other welfare benefits to former
employees or beneficiaries or dependents thereof, except for health continuation
coverage as required by Section 4980B of the Code or Part 6 of Title I of ERISA
and at no expense to the Company.
(vi) Except as set forth in Section 4.1(p) of the Disclosure
Schedule, neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will (either alone or in
conjunction with any other event) result in, cause the accelerated vesting or
delivery of, or increase the amount or value of, any payment or benefit to any
employee of the Company. Without limiting the generality of the foregoing, no
amount paid or payable by the Company in connection with the transactions
contemplated hereby (either solely as a result thereof or as a result of such
transactions in conjunction with any other event) will be an "excess parachute
payment" within the meaning of Section 280G of the Code.
(vii) No labor organization or group of employees of the
Company has made a pending demand for recognition or certification, and there
are no representation or arbitration proceedings or petitions seeking a
representation proceeding presently pending or threatened to be brought or
filed, with the National Labor Relations Board or any other labor relations
tribunal or authority. There are no organizing activities, strikes, work
stoppages, slowdowns, lockouts, material arbitrations or material grievances, or
other material labor disputes pending or, to the knowledge of the Company,
threatened against or involving the Company.
(viii) There are no pending or threatened claims, and the
fiduciaries of the Benefit Plans have not advised the Company that, with respect
to their duties to the Benefit Plans or the assets or any of the trusts under
any of the Benefit Plans, there are any pending or threatened claims (other than
claims for benefits in the ordinary course), lawsuits or arbitrations which have
been asserted or instituted against the Benefit Plans, which could reasonably be
expected to result in any material liability of the Company to the Pension
Benefit Guaranty Corporation, the Department of Treasury, the Department of
Labor or any multiemployer Benefit Plan.
(q) Taxes. For purposes of this Agreement, (A) the term "Returns" shall
mean all returns, declarations, reports, statements, and other documents
required to be filed with respect to federal, state, local and foreign Taxes (as
defined below) or for information purposes, and the term "Return" means any one
of the foregoing Returns, and (B) the term "Taxes" shall mean all federal,
state, local and foreign net income, gross income, gross receipts, sales, use,
ad valorem, transfer, franchise, profits, license, lease, service, service use,
withholding, payroll, employment, excise, severance, stamp, occupation, premium,
property, windfall profits, customs, duties, and any and all other taxes,
together with any interest and any penalties, additions to tax, or additional
amounts with respect thereto, and the term "Tax" means any one of the foregoing
Taxes.
(i) Except as set forth in Section 4.1(q)(i) of the Disclosure
Schedule, the Company has duly prepared and timely filed all federal, state,
local and foreign Returns which were required to be filed by or in respect of
the Company, or any of its properties, income and/or operations. As of the time
they were filed, such Returns accurately reflected the material facts regarding
the income, business, assets, operations, activities, status of the entity on
whose behalf the Return was filed and any other information required to be shown
thereon. No extension of time within which the Company may file any Return is
currently in force.
(ii) With respect to all amounts in respect of Taxes,
including interest and penalties imposed on the Company or for which the Company
is or could be liable, whether to taxing authorities or to other persons, all
material amounts required to be paid by or on behalf of the Company to taxing
authorities or to other persons have been paid.
(iii) The Company has not been advised that there is any
review or audit in progress by any taxing authority of any Tax liability of the
Company currently in progress. Except as disclosed in Section 4.1(q)(iii) of the
Disclosure Schedule, the Company has not received any written notice of any
pending or threatened audit by the Internal Revenue Service or any state, local
or foreign agency of any Returns or Tax liability of the Company for any period.
The Company currently has no unpaid deficiencies assessed by the Internal
Revenue Service or any state, local or foreign taxing authority arising out of
any examination of any of the Returns of
the Company nor, to the knowledge of the Company, is there reason to believe
that any material deficiency will be assessed.
(iv) No agreements are in force or are currently being
negotiated by or on behalf of the Company for any waiver or for the extension of
any statute of limitations governing the time of assessments or collection of
any Tax. No closing agreements or compromises concerning Taxes of the Company
are currently pending.
(v) The Company has withheld from each payment made to any of
its officers, directors and employees, the amount of all applicable Taxes,
including, but not limited to, income tax, social security contributions,
unemployment contributions, backup withholding and other deductions required to
be withheld therefrom by any Tax law and have paid the same to the proper Taxing
authorities within the time required under any applicable Tax law.
(vi) There are no tax Liens, whether imposed by any federal,
state, local or foreign taxing authority, outstanding against any assets owned
by the Company, except for Liens for Taxes that are not yet due and payable.
None of the assets owned by the Company is property that is required to be
treated as being owned by any other person pursuant to the safe harbor lease
provisions of former Section 168(f)(8) of the Code. None of the assets owned by
the Company directly or indirectly secures any debt, the interest on which is
tax-exempt under Section 103(a) of the Code. None of the assets owned by the
Company is "tax-exempt use property" within the meaning of Section 168(h) of the
Code. The Company is a "United States person" within the meaning of the Code.
(vii) Except as set forth in Section 4.1(q)(vii) of the
Disclosure Schedule, the Company is not a party to any agreement, contract, or
arrangement that, individually or collectively, could give rise to the payment
of any amount (whether in cash or property, including Shares or other equity
interests) that would not be deductible pursuant to the terms of Sections
162(a)(1), 162(m), 162(n) or 280G of the Code.
(r) Contracts; Debt instruments.
(i) Except as otherwise disclosed in Section 4.1(r)(i) of the
Disclosure Schedule, the Company is not a party to or subject to:
(A) any collective bargaining or other agreements
with labor unions, trade unions, employee representatives,
work committees, guilds or associations representing employees
of the Company;
(B) any employment, consulting, severance,
termination, or indemnification agreement, contract, lease or
arrangement, including any oral agreement, contract, lease or
arrangement which requires the payment of over $5,000 per
annum, with any current or former officer, consultant, agent,
director or employee;
(C) any lease for real or personal property which
requires the Company to pay, or under which the Company is
expected to receive, on an annual basis, in excess of
$100,000;
(D) any agreement, contract, instrument, arrangement
or commitment to repurchase assets previously sold or leased,
or to indemnify or otherwise compensate the purchaser in
respect thereof;
(E) any agreement, contract, policy, License,
document, instrument, arrangement or commitment that
materially limits the freedom of the Company to compete in any
line of business or with any person or in any geographic area
or which would so materially limit the freedom of the Parent
or any of their subsidiaries after the Effective Time;
(F) any agreement or contract relating to any
outstanding commitment for material capital expenditures, or
any partially or fully executory agreement or contract
relating to the acquisition or disposition of rights or assets
other than those entered into in the ordinary course
consistent with past practices;
(G) any sale-leaseback, conditional sale, exclusive
dealing, brokerage, finder's fee contract or agreement; or
(H) any other agreement, contract, policy, license,
document, instrument, arrangement or commitment not made in
the ordinary course of business which is material to the
Company or any one or more of the Restaurants and which is not
otherwise disclosed in the Disclosure Schedules.
(ii) The Company and, to the knowledge of the Company, none of
the other parties to any of the contracts and agreements identified in Section
4.1(r)(i) of the Disclosure Schedule or otherwise disclosed in the Company SEC
Documents, is in default under (or, with the giving of notice or passage of time
or both would be in default under) or has terminated any such contract or
agreement, or in any way expressed to the Company an intent to materially reduce
or terminate the amount of its business with the Company in the future.
(iii) Set forth in Section 4.1(r)(iii) of the Disclosure
Schedule is (A) a list of all sale-leaseback, loan or credit agreements, notes,
bonds, mortgages, indentures and other agreements and instruments pursuant to
which any indebtedness of the Company is outstanding or may be incurred, (B) the
respective principal amounts currently outstanding thereunder, and (C) any
interest rate swaps, caps, floors or option agreements or similar interest rate
risk management agreements. Except as set forth in Section 4.1(r)(iii) of the
Disclosure Schedule, all such indebtedness is prepayable at any time without
penalty, subject to the notice provisions of the agreements governing such
indebtedness (which, except as set forth in Section 4.1(r)(iii) of the
Disclosure Schedule, do not require a notice period of more than thirty days).
For purposes of this Section 4.1(r)(iii), "indebtedness" shall mean, with
respect to any person, without duplication, (A) all obligations of such person
for borrowed money, or with respect to deposits or advances of any kind to such
person, (B) all obligations of such person evidenced by bonds, debentures, notes
or similar instruments, (C) all obligations of such person upon which interest
charges are customarily paid, (D) all obligations of such person under
conditional sale or other title retention agreements relating to property
purchased by such person, (E) all obligations of such person issued or assumed
as the deferred purchase price of property or services (excluding obligations of
such person to creditors for raw materials, inventory, services and supplies
incurred in the ordinary course of such person's business), (F) all capitalized
lease obligations of
such person, (G) all indebtedness of others secured by any Lien on property or
assets owned or acquired by such person, whether or not the obligations secured
thereby have been assumed, (H) all obligations of such person under interest
rate or currency swap transactions (valued at the termination of value thereof),
(I) all letters of credit issued for the account of such person, (J) all
obligations of such person to purchase securities (or other property) which
arises out of or in connection with the sale of the same or substantially
similar securities or property, and (K) all guarantees and arrangements having
the economic effect of a guarantee of such person of any indebtedness of any
other person.
(s) Insurance. The Company is covered by valid and currently effective
insurance policies issued in favor of the Company as listed on the Disclosure
Schedule. To the best knowledge and belief of the Company, such insurance is
adequate to protect Company from all normal industry exposures. All such
policies are in full force and effect, all premiums due thereon have been paid
and the Company has complied with the provisions of such policies with respect
to which the failure to comply would result in a cancellation of, or increase in
premium in connection with, such policies. The Company has not received any
written notice from or on behalf of any insurance carrier issuing policies or
binders relating to or covering the Company that there will be a cancellation or
non-renewal of existing policies or binders, or that a material modification of
any of the methods of doing business will be required.
(t) Interests of Officers and Directors. Except as disclosed in the
Company SEC Documents, neither the Company's officers or directors, nor any
member of their respective immediate families, or any entity with respect to
which any such person is an affiliate, has any material interest in any
property, real or personal, tangible or intangible, used in or pertaining to the
business of the Company, or any other business relationship with the Company.
(u) Approval by Board. The Board of Directors of the Company duly
authorized and approved the execution and delivery of this Agreement by the
Company and the transactions contemplated hereby prior to the execution by the
Company of this Agreement.
(v) Brokers. No broker, investment banker, financial advisor or other
person is entitled to any broker's, finder's, financial advisor's or other
similar fee or commission in connection with the transactions contemplated by
this Agreement based upon arrangements made by or on behalf of the Company.
(w) Fairness Opinion. Pauli & Company has been engaged to deliver its
opinion regarding the fairness, from a financial point of view, to the holders
of Shares of the consideration to be paid in the Merger, which opinion shall be
delivered in writing to the Company's Board of Directors immediately prior to
the date the Company mails the Prospectus/Proxy Statement to the Company's
stockholders, as provided in Section 7.2 below.
(x) Pooling of Interests. Since the execution of the letter of intent
dated December 11, 1997 between the Company and the Parent regarding the Merger
(the "Letter of Intent"), the Company has not taken or agreed to take any
action, or omitted or agreed to omit to take any action, which would disqualify
the Merger as a "pooling of interests" for accounting purposes.
(y) Disclosure. The representations and warranties of the Company
contained in this Agreement are true and correct in all material respects and do
not omit any material fact
necessary to make the statements contained therein, in light of the
circumstances under which they were made, not misleading. There is no fact known
to the Company which has not been disclosed to Parent in the Disclosure Schedule
which has had, or would reasonably be expected to have, a Company Material
Adverse Effect.
4.2 Representations and Warranties of Parent and Merger Subsidiary. Parent and
Merger Subsidiary represent and warrant to the Company, as of the date hereof
and as of the Closing Date, subject to the exceptions and qualifications set
forth in the disclosure schedule to be delivered by the Parent to the Company
pursuant to Section 4.3 of this Agreement (the "Parent Disclosure Schedule"):
(a) Organization Standing and Corporate Power. Each of Parent and
Merger Subsidiary is a corporation duly organized, validly existing and in good
standing under the laws of its respective state of incorporation and has the
requisite corporate power and authority to carry on its business as now being
conducted. Each of the Parent and its subsidiaries is duly qualified or licensed
to do business and is in good standing in each jurisdiction in which the nature
of its business or the ownership or leasing of its properties makes such
qualification or licensing necessary, other than in such jurisdictions where the
failure to be so qualified or licensed (individually or in the aggregate) could
not reasonably be expected to be a "Parent Material Adverse Effect," which means
to (i) have a material adverse effect on the value, condition (financial or
otherwise), prospects, business, or results of operations of the Parent and its
subsidiaries as a whole, (ii) impair the ability of any party hereto to perform
its obligations under this Agreement or (iii) prevent or materially delay
consummation of any of the transactions contemplated by this Agreement. The
Parent has delivered to the Company complete and correct copies of its
Certificate of Incorporation and bylaws and of the Articles of Incorporation and
bylaws of Merger Subsidiary.
(b) Capital Structure. The authorized capital stock of the Parent
consists of 50,000,000 Shares par value $0.08 per share. As of December 31,
1997, (i) 6,570,984 Shares were issued and outstanding, (ii) no Shares were held
by the Parent, and (iii) there were outstanding options to purchase 998,012
shares and warrants to purchase 4,000,000 shares of Parent Common Stock. Except
as set forth above, no shares of capital stock or other equity or voting
securities of the Parent are issued, reserved for issuance or outstanding. All
outstanding shares of capital stock of the Parent are, and all shares of Parent
Common Stock to be issued in the Merger will, when issued, be duly authorized,
validly issued, fully paid and nonassessable and not subject to preemptive
rights. There are not any bonds, debentures, notes or other indebtedness or
securities of the Parent 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 Parent may vote. The authorized capital stock of Merger
Subsidiary consists of 1,500 shares, without par value. As of the date hereof,
100 such shares were issued and outstanding.
(c) Authority Noncontravention. Parent and Merger Subsidiary have all
requisite corporate power and authority to enter into this Agreement and,
subject to the Parent Common Stockholder Approval (as defined below), to
consummate the transactions contemplated by this Agreement. The affirmative vote
of the holders of a majority of the shares of Parent Common Stock represented
and voted on a proposal to approve the merger is required to complete the Merger
(the "Parent Common Stockholder Approval"), which approval is the only vote of
the
holders of any class or series of the capital stock of Parent necessary to
approve the transactions contemplated hereby. Except for Parent Common
Stockholder Approval, the execution and delivery of this Agreement and the
consummation of the transactions contemplated by this Agreement have been duly
authorized by all necessary corporate action on the part of Parent and Merger
Subsidiary. This Agreement has been duly executed and delivered by Parent and
Merger Subsidiary and, assuming this Agreement constitutes a valid and binding
agreement of the Company, constitutes a valid and binding obligation of such
party, enforceable against such party in accordance with its terms. The
execution and delivery of this Agreement do not, and the consummation of the
transactions contemplated by this Agreement 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 termination, cancellation, modification or acceleration of any
obligation or to a loss of a material benefit under, or result in the creation
of any Lien upon any of the properties or assets of Parent or any of its
subsidiaries under, (i) the Certificate or Articles of Incorporation or bylaws
of Parent or Merger Subsidiary, (ii) except as to be disclosed in Section 4.2(c)
of the Parent's Disclosure Schedules, any loan or credit agreement, note, bond,
mortgage, indenture, leases or other contract, agreement, instrument, permit,
concession, franchise or license a pplicable to Parent or Merger Subsidiary or
their respective properties or assets or (iii) subject to the governmental
filings and other matters referred to in the following sentence, any judgment,
order, decree, statute, law, ordinance, rule or regulation applicable to Parent,
Merger Subsidiary or any other subsidiary of Parent or their respective
properties or assets, other than any such conflicts, violations or defaults
that, individually or in the aggregate, would not have a "Parent Material
Adverse Effect". Other than those Consents referred to in the Disclosure
Schedule on the part of the Company, no Consent of any Governmental Entity is
required by or with respect to Parent, Merger Subsidiary or any other subsidiary
of Parent in connection with the execution and delivery of this Agreement or the
consummation by Parent or Merger Subsidiary, as the case may be, of any of the
transactions contemplated by this Agreement, except for (i) the Consents
disclosed in Section 4.2(b) of the Parent Disclosure Schedule, (ii) the filing
of the Certificate of Merger in accordance with the MBCA and similar documents
with the relevant authorities of other states in which the Company is qualified
to do business, (iii) compliance with applicable requirements of the Exchange
Act and the Securities Act, and applicable state blue sky laws, with respect to
the Registration Statement and the Prospectus/Proxy Statement, and (iv) such
other Consent as to which the failure to obtain or make, individually or in the
aggregate, could not reasonably be expected to have a Parent Material Adverse
Effect.
(d) SEC Documents; Financial Statements: No Undisclosed Liabilities.
Parent has provided or made available to the Company true and correct copies of
all reports, schedules, forms, statements, exhibits and other documents filed
with the SEC by Parent under or pursuant to the Exchange Act since January 1,
1996 (the "Parent SEC Documents"), all of which were timely filed with the SEC.
As of their respective dates, or as subsequently amended prior to the date of
this Agreement, the Parent SEC Documents complied in all material respects with
the requirements of the Exchange Act applicable to such Parent SEC Documents,
and none of the Parent SEC Documents 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. The financial
statements of the Parent included in the Parent SEC Documents comply 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 GAAP (except
as specified on the Parent Disclosure Schedule) and fairly present the
consolidated financial position of the Parent and its consolidated subsidiaries
as of the dates thereof and the consolidated results of their operations and
cash flows for periods then ended (subject, in the case of unaudited statements,
to normal year-end audit adjustments).
(e) The Parent is engaged in the business of operating Mexican
quick-service restaurants under the trade name "The Green Burrito" at leased
facilities, and the sale and supervision of franchises to operate such
restaurants under that trade name. As of December 31, 1997, there were 7 Green
Burrito stores owned by the Parent, 40 standalone stores operated by franchisees
and 134 dual-concept (i.e., incorporated into existing quick-service
restaurants) stores operated by franchisees.
(f) Litigation. Except as reflected in the financial and other
information delivered to the Company by Parent as referred to above, or except
as otherwise described by Parent in writing to the Company, there is no judicial
or administrative action, suit, proceeding or investigation pending or, to the
knowledge of Parent, threatened, which would be required to be reported by
Parent in its annual report on Form ▇▇-▇ (▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇) if such 10-K
were filed with the SEC on the date hereof.
(g) Absence of Changes. Since September 10, 1997, there has not been
any material adverse change in the business, financial condition or operations
or prospects of Parent, or any event or condition (other than changes in legal,
economic or other conditions which are not specially applicable to Parent) which
has materially and adversely affected the business or financial condition of
Parent and its subsidiaries, taken as a whole.
(h) Exchange Act Reports. Parent has filed in a timely manner all
reports required to be filed by it under the Exchange Act during at least the
12-month period preceding the date of this Agreement, and agrees to give the
Company a copy of each such report filed between the date hereof and the Closing
Date.
(i) Brokers. No broker, investment banker, financial advisor or other
person is entitled to any broker's, finder's, financial advisor's or other
similar fee or commission in connection with the transactions contemplated by
this Agreement based upon arrangements made by or on behalf of the Parent or any
of its subsidiaries.
(j) Fairness Opinion. ▇▇▇▇▇ ▇▇▇▇▇▇▇ Inc. has been engaged to deliver
its opinion regarding the fairness, from a financial point of view, of the
consideration to be paid in the Merger to the holders of Parent Common Stock,
which opinion shall be delivered in writing to the Parent's Board of Directors
immediately prior to the date the Parent mails the Prospectus/Proxy Statement to
the Parent's stockholders.
(k) Pooling of Interests. Since the execution of the Letter of Intent
the Parent has not taken or agreed to take any action, or omitted or agreed to
omit to take any action, which would disqualify the Merger as a "pooling of
interests" for accounting purposes.
(l) Disclosure. The representations and warranties of the Parent
contained in this Agreement are true and correct in all material respects, and
do not omit any material fact
necessary to make the statements contained therein, in light of the
circumstances under which they were made, not misleading. There is no fact known
to the Parent which has not been disclosed to the Company in the Parent
Disclosure Schedule and the Parent SEC Documents, taken as a whole, which has
had, or would reasonably be expected to have, a Parent Material Adverse Effect.
4.3 Delivery of Disclosure Schedules. Each of Company and Parent agrees to
deliver its respective Disclosure Schedule to the other party within five
business days after the execution of this Agreement; any failure to so deliver
shall be a breach of this Agreement and shall permit the nonbreaching party to
terminate this Agreement in accordance with Article IX. Upon receipt of the
other party's Disclosure Schedule, either of Company or Parent (respectively)
may object to any matter disclosed therein and terminate this Agreement,
provided that such objection is made and termination effected not later than the
tenth business day after receipt of the Disclosure Schedule from the other party
or the fifteenth business day after the execution of this Agreement, whichever
is later.
ARTICLE V
COVENANTS OF THE COMPANY
The Company agrees that:
5.1 Conduct of Business. During the period from the date of this Agreement to
the Effective Time, the Company shall carry on the Business in the ordinary
course of business in substantially the same manner as heretofore conducted and,
to the extent consistent therewith, use all reasonable efforts to preserve
intact its current business organization, keep available the services of its
current officers (as a group) and employees, at reasonably required staffing
levels, and preserve its relationships with customers, suppliers, licensors,
licensees, distributors and others having business dealings with it. Without
limiting the generality of the foregoing, during the period from the date of
this Agreement to the Effective Time, except as contemplated by this Agreement
or as set forth in Section 5.1 of the Disclosure Schedule, the Company shall
not, without the prior written approval of Parent:
(a) (i) declare, set aside or pay any dividends on, or make any other
distributions (whether in cash, stock or property) in respect of, any of its
capital stock; (ii) adjust, split, combine or reclassify any of its capital
stock or issue or authorize the issuance of any other securities in respect of,
in lieu of or in substitution for shares of its capital stock or (iii) purchase,
redeem or otherwise acquire any shares of capital stock of the Company or any
other securities thereof, or any rights, warrants or options to acquire any such
shares or other securities;
(b) issue, deliver, sell, pledge or otherwise encumber any shares of
its capital stock, any other voting securities or any securities convertible
into, or any rights, warrants or options, including Company Options, to acquire,
any such shares, voting securities or convertible securities (other than the
issuance of Shares upon the exercise of the NQSOs, Company Options, or Warrants
outstanding as of the date hereof or as contemplated by Section 5.1(l) hereof);
(c) amend its Articles of Incorporation, bylaws or other comparable
charter or organizational documents;
(d) amend, modify or waive any provision of any material contract or
agreement to which the Company is a party, including, without limitation, any
such agreements identified in the Disclosure Schedule;
(e) mortgage or otherwise encumber or subject to any Lien or sell,
lease, license, transfer or otherwise dispose of any material properties or
assets, except in the ordinary course of business consistent with past practice
or pursuant to existing contracts or commitments which were delivered to Parent
prior to its execution of this Agreement;
(f) amend, modify or waive any material term of any outstanding
security of the Company.
(g) incur, assume, guarantee or become obligated with respect to any
indebtedness (as defined in Section 4.1(r) hereof), other than drawings on
existing revolving credit facilities listed in Section 4.1(r) of the Disclosure
Schedule in the ordinary course of business, consistent with past practice and
in accordance with the terms thereof or incur, assume, guarantee or become
obligated with respect to any other material obligations other than in the
ordinary course of business and consistent with past practice;
(h) make or agree to make any new capital expenditures or acquisitions
of assets or property or other acquisitions or commitments in excess of $20,000
individually or $50,000 in the aggregate or otherwise acquire or agree to
acquire any material assets or property;
(i) make any material tax election or take any material tax position
(unless required by law and then only with prior or concurrent notice to Parent)
or change its fiscal year or accounting methods, policies or practices (except
as required by changes in GAAP and then only with prior or concurrent notice to
Parent) or settle or compromise any material income tax liability;
(j) enter into or commit to enter into, any lease, loan, advance or
capital contributions to or investment in any person other than in the ordinary
course of business consistent with past practices;
(k) pay, discharge or satisfy any claims, liabilities or obligations
(absolute, accrued, asserted or unasserted, contingent or otherwise), other than
the payment, discharge or satisfaction thereof, in the ordinary course of
business consistent with past practice and in accordance with their terms, or
release or waive any material rights or claims, or waive the benefits of, or
agree to modify in any manner, any confidentiality, standstill or similar
agreement to which the Company is a party;
(l) except as described in the Disclosure Schedule, (i) grant to any
current or former director, officer or employee of the Company any increase in
compensation or benefits, except for employees who are not officers or directors
in the ordinary course of business consistent with past practice or any grant
pursuant to any existing contract or agreement, (ii) grant to any such director,
officer, or employee any increase in severance or termination pay (including the
grant of, or acceleration in the exercisability of, any stock options or
warrants (including the NQSOs, Company Options or Warrant) or in the vesting of
Shares or other property except for automatic acceleration in accordance with
the terms of the NQSOs, Option Plan, or Warrant), or (iii) enter
into any employment, deferred compensation, severance or termination agreement
or arrangement with or for the benefit of any such current or former director,
officer, or employee;
(m) (i) take or agree or commit to take any action that would make any
representation or warranty of the Company hereunder inaccurate in any material
respect at, or as of any time prior to, the Effective Time or (ii) omit or agree
or commit to omit to take any action necessary to prevent any such
representation or warranty from being inaccurate in any material respect at any
such time; or
(n) authorize any of, or commit or agree to take any of, the foregoing
actions.
5.2 Affiliate Agreements. The Company will obtain and deliver to Parent, as
promptly as possible but not later than five business days prior to Closing, a
signed representation letter substantially in the form of Exhibit A hereto from
each executive officer and director of the Company and each stockholder of the
Company who may reasonably be deemed an "affiliate" of the Company within the
meaning of such term as used in Rule 145 under the Securities Act (all of such
persons are named in Section 5.2 of the Disclosure Schedule) and for purposes of
qualifying for pooling of interests accounting treatment for the Merger, and
shall obtain and deliver to Parent a signed representation letter substantially
in the form of Exhibit A from any person who becomes an executive officer or
director of the Company or any stockholder who becomes such an "affiliate" after
the date hereof as promptly as practicable after (and shall use its reasonable
best efforts to obtain and deliver within five days after) such person achieves
such status. Notwithstanding the foregoing, Parent shall not be permitted to
terminate the Agreement because of the Company's failure to obtain an Affiliate
Agreement from any shareholder other than a director or officer of Company,
unless, in the judgment of counsel to Parent, such failure results in material
adverse tax consequences to the Parent or (post-Closing) the Company or exposes
the Parent or (post-Closing) the Company to a material risk of liability
relating to improper disclosure in the Prospectus/Proxy Statement.
5.3 Access to Information. From the date hereof until the Effective Time, the
Company will (i) give Parent, its counsel, financial advisors, auditors and
other authorized representatives full access (during normal business hours and
upon reasonable notice) to the offices, properties, officers, employees,
accountants, auditors, counsel and other representatives, books and records of
the Company (including to perform any environmental studies), (ii) furnish to
Parent, its counsel, financial advisors, auditors and other authorized
representatives such financial operating and property related data and other
information as such persons may reasonably request, and (iii) instruct the
Company's employees, counsel and financial advisors to cooperate with Parent in
its investigations of the Business; provided that no investigation pursuant to
Section 5.3 shall affect any representation or warranty given by the Company
hereunder.
5.4 No Solicitation. The Company agrees that neither the Company nor any of its
officers and directors shall, and the Company shall direct and use its best
efforts to cause its employees, agents and representatives (including, without
limitation, any investment banker, attorney or accountant retained by the
Company) not to, initiate, continue, solicit, or encourage, directly or
indirectly, any inquiries or the making of any proposal or offer (including,
without limitation, any proposal or offer to stockholders of the Company) with
respect to a merger, consolidation or similar transaction involving, or any
purchase of all or any significant portion of the assets or any equity
securities of the Company (any such proposal or offer being hereinafter referred
to as an
"Acquisition Proposal") or, subject to the fiduciary duties of the Board of
Directors of the Company under the MBCA, engage in any negotiations concerning,
or provide any confidential information or data to, or have any discussions
with, any person relating to an Acquisition Proposal or otherwise facilitate any
effort or attempt to make or implement an Acquisition Proposal or, enter into
any agreement or understanding with any other person or entity with the intent
to effect any Acquisition Proposal. The Company will take all necessary steps to
inform the individuals or entities referred to in the first sentence hereof of
the obligations undertaken in this Section 5.4. The Company will notify Parent
immediately, orally and in writing (including the names of any party making and
the principal terms of any such proposal), if any such inquiries or proposals
are received by, any such information is requested from, or any such
negotiations or discussions are sought to be initiated or continued with the
Company. Immediately following the execution of this Agreement, the Company will
request each person which has heretofore executed a confidentiality agreement in
connection with its consideration of acquiring the Company or any portion
thereof (the "Confidentiality Agreements") to return all confidential
information heretofore furnished to such person by or on behalf of the Company.
Subject to the fiduciary duties of the Board of Directors of the Company under
the MBCA, the Company will keep Parent fully informed of the status and details
(including amendments or proposed amendments) of any such request, proposal or
inquiry.
5.5 Pooling of Interests: Tax Treatment. The Company shall not take any action
which would disqualify the Merger as a "pooling of interests" for accounting
purposes or as a "reorganization" that would be tax free to the stockholders of
the Company pursuant to Section 368(a) of the Code.
ARTICLE VI
COVENANTS OF PARENT
Parent and Merger Subsidiary agree that:
6.1 Conduct of Business. During the period from the date of this Agreement to
the Effective Time, the Parent shall carry on the business in which it is
presently engaged in the ordinary course of business in substantially the same
manner as heretofore conducted and, to the extent consistent therewith, use all
reasonable efforts to preserve intact its current business organization, keep
available the services of its current officers (as a group) and employees, at
reasonably required staffing levels, and preserve its relationships with
customers, suppliers, licensors, licensees, distributors and others having
business dealings with it.
6.2 Affiliate Agreements. The Parent has obtained or will promptly hereafter
obtain a signed representation letter substantially in the form of Exhibit B
hereto from each executive officer and director of the Parent and each
stockholder of the Parent who may reasonably be deemed an "affiliate" of the
Parent within the meaning of such term as used in Rule 145 under the Securities
Act (all of such persons are named in Section 6.2 of the Disclosure Schedule)
and for purposes of qualifying for pooling of interests accounting treatment for
the Merger, and shall obtain a signed representation letter substantially in the
form of Exhibit B from any person who becomes an executive officer or director
of the Parent or any stockholder who becomes such an "affiliate" after the date
hereof as promptly as practicable after (and shall use its reasonable best
efforts to obtain and deliver within five days after) such person achieves such
status.
6.3 Confidentiality. Prior to the Effective Time and after any termination of
this Agreement, Parent will hold, and will use its reasonable best efforts to
cause its officers, directors, employees, accountants, counsel, consultants,
advisors and agents to hold, in confidence, unless compelled to disclose by
judicial or administrative process or by other requirements of law, all
documents and information concerning the Company furnished to Parent in
connection with the transactions contemplated by this Agreement except to the
extent that such information can be shown to have been (i) previously known on a
nonconfidential basis by Parent, (ii) in the public domain through no fault of
Parent or (iii) later lawfully acquired by Parent from sources other than the
Company, provided that Parent may disclose such information to its officers,
directories, employees, accountants counsel, consultants, advisors and agents in
connection with the transactions contemplated by this Agreement so long as such
persons have a need to know such information, are informed by Parent of the
confidential nature of such information and are directed by Parent to treat such
information confidentially. Parent's obligation to hold any such information in
confidence shall be satisfied if it exercises the same care with respect to such
information as it would take to preserve the confidentiality of its own similar
information. If this Agreement is terminated, Parent will, and will use its best
efforts to cause its officers, directors, employees, accountants, counsel,
consultants, advisors and agents to, deliver to the Company, upon request, or,
at the election of Parent, destroy, all documents and other materials and all
copies thereof, obtained by Parent or on its behalf from the Company in
connection with this Agreement that are subject to such confidentiality.
6.4 Obligations of Merger Subsidiary. Parent will take all action necessary to
cause Merger Subsidiary to perform its obligations under this Agreement and to
consummate the Merger on terms and conditions set forth in this Agreement.
6.5 Employee Benefit Plans. Parent shall have the right to continue, amend or
terminate any of the Benefit Plans in accordance with the terms thereof and
subject to any limitation arising under applicable law.
6.6 Indemnification and Insurance.
(a) From and after the Effective Time, the Parent shall cause the
Company to indemnify, defend and hold harmless each person who is now, or who
becomes, prior to the Effective Time, an officer, director, employee or agent of
the Company (the "Indemnified Parties") against losses, claims, damages, costs,
expenses (including attorneys' fees), liabilities or judgments or amounts that
are paid in settlement (which settlement shall require the prior written consent
of Parent which shall not be unreasonably withheld) of or in connection with any
claim, action, suit, proceeding or investigation (a "Claim") at least to the
same extent as the officers, directors, employees and agents of the Parent are
indemnified pursuant to the Parent's Articles of Incorporation, Bylaws and any
standing shareholder and director resolutions. As long as any person who is now
or has ever been a director of the Company is a director of the Surviving
Corporation, the Parent will cause the Surviving Corporation to maintain a
provision in its Articles of Incorporation excluding director liability for good
faith actions to the extent and as permitted by Section 302A.25 1 subd(4) of the
MBCA.
(b) The contractual obligation provided under paragraph (a) of this
Section 6.4 is intended to benefit, and be enforceable directly by, the
Indemnified Parties, and shall be binding on all respective successors of Parent
and the Company.
6.7 Nasdaq Listing. Parent shall use its best efforts to list for quotation on
the Nasdaq Small Cap Market, subject to official notice of issuance, the shares
of Parent Common Stock to be issued in the Merger.
6.8 Publication of Combined Financial Results. Provided that the merger can be
accounted for as a "pooling of interests," Parent shall use reasonable efforts
to publish as soon as practicable after the end of its first fiscal quarter
which includes at least 30 days of post-Merger combined operations, combined
sales and net income figures and any other financial information necessary as
contemplated by and in accordance with the terms of SEC Accounting Series
Release No. 135 and any related accounting rules.
6.9 Registration Relating to Company Options. Parent shall register the shares
of Parent Common Stock issuable upon exercise of the Company Options after the
Effective Time in either the Registration Statement or in a registration
statement on Form S-8 to be filed as soon as practicable following the Effective
Time, and shall cause the shares of Parent Common Stock issuable upon exercise
thereof from and after the Effective Time, when issued, to be listed for
quotation on the Nasdaq Small Cap Market.
6.10 Access to Information. From the date hereof until the Effective Time, the
Parent will give the Company, its counsel, financial advisors, auditors and
other authorized representatives full access (during normal business hours and
upon reasonable advance notice) to the offices, properties, officers, employees,
accountants, auditors, counsel and other representatives, books and records of
the Parent and its subsidiaries, will furnish to the Company, its counsel,
financial advisors, auditors and other authorized representatives such
financial, operating and property related data and other information as such
persons may reasonably request and will instruct the Parent's and its
subsidiaries' employees, counsel and financial advisors to cooperate with the
Company in its investigation of the business of the Parent and its subsidiaries;
provided that no investigation pursuant to this Section 6.8 shall affect any
representation or warranty given by the Parent hereunder.
6.11 Pooling of Interests; Tax Treatment. The Parent shall not take any action
which would disqualify the Merger as a "pooling of interests" for accounting
purposes or as a "reorganization" that would be tax free to the stockholders of
the Company pursuant to Section 368(a) of the Code.
6.12 Board of Directors Approval. The Parent shall use its best efforts to
obtain the Board of Directors' authorization and approval of the execution and
delivery of this Agreement by the Parent and the transactions contemplated
hereby.
ARTICLE VII
COVENANTS OF PARENT AND THE COMPANY
The parties hereto agree that:
7.1 Reasonable Efforts; Notification.
(a) Subject to the fiduciary duties of their respective Boards of
Directors, each of the parties agrees to use all reasonable efforts to take, or
cause to be taken, all actions, and to do, or cause to be done, and to assist
and cooperate with the other parties in doing, all things necessary,
proper or advisable to consummate and make effective, in the most expeditious
manner practicable the Merger and the other transactions contemplated by this
Agreement, including (i) the obtaining of all necessary actions or nonactions,
waivers, consents and approvals from Governmental Entities and the making of all
other necessary registrations and filings (including other filings with
Governmental Entities, if any), (ii) the obtaining of all necessary consents,
approvals or waivers from third parties, (iii) the preparation, filing and
dissemination of the Registration Statement and the Prospectus/Proxy Statement,
and (iv) the execution and delivery of any additional instruments necessary to
consummate the transactions contemplated by, and to fully carry out the purposes
of, this Agreement.
(b) Notwithstanding anything to the contrary in Section 7.1(a)(i)
neither Parent nor any of its subsidiaries shall be required to divest, or cause
or permit the Company or its affiliates to divest, any of their respective
businesses, product lines or assets, or to make or agree to take any other
action or agree to any limitation that could reasonably be expected to have a
material adverse effect on the value, condition (financial or otherwise),
prospects, business or results of operations of Parent and its subsidiaries
taken as a whole or of the Company or all such entities taken together, and
neither Parent or Merger Subsidiary shall be required to waive any of the
conditions to the Merger set forth in Article VIII.
(c) Each party shall give prompt notice to the other party of (i) any
representation or warranty made by it contained in this Agreement becoming
untrue or inaccurate in any respect or (ii) the failure by it to comply with or
satisfy in any respect any covenant, condition or agreement to be compiled with
or ratified by it under this Agreement; provided, however, that no such
notification shall affect the representations, warranties, covenants or
agreements of the parties or the conditions to the obligations of the parties
under this Agreement.
(d) The Company shall give prompt notice to Parent, and Parent or
Merger Subsidiary shall give prompt notice to the Company, of:
(i) any notice or other communication from any person alleging
that the consent of such person is or may be required in connection with the
transactions contemplated by this Agreement;
(ii) any notice or other communication from any in connection
with the transactions contemplated by this Agreement; and
(iii) any actions, suits, claims, investigations or
proceedings commenced or, to the best of its knowledge threatened against,
relating to or involving or otherwise affecting it which, if pending on the date
of this Agreement would have been required to have been disclosed pursuant to
Section 4.1(m) or Section 4.2(f) or which relate to the consummation of the
transactions contemplated by this Agreement.
7.2 Stockholder Meeting: Proxy Material.
(a) For the purpose (i) of holding meetings of stockholders of Parent
and Company to approve this Agreement, the Merger and, with respect to Parent,
the issuance of shares of Parent Common Stock in the Merger, and (ii) of
registering under the Securities Act the Parent Common Stock to be issued as
contemplated by this Agreement, the parties hereto shall cooperate in the
preparation of an appropriate registration statement (such registration
statement,
together with all and any amendments and supplements thereto, being herein
referred to as the "Registration Statement"), which shall include a
prospectus/joint proxy statement satisfying all applicable requirements of the
Securities Act, the Exchange Act, and the rules and regulations thereunder (such
prospectus/joint proxy statement, together with any and all amendments or
supplements thereto, being herein referred to as the "Prospectus/Proxy
Statement"). At the time the Registration Statement or any amendment or
supplement thereto is first mailed to stockholders of the Company and Parent, at
all time subsequent to such mailing (including, without limitation, the time
such stockholders vote upon a proposal to approve and adopt this Agreement and
the Merger), and at the Effective Time, the Registration Statement and the
Prospectus/Proxy Statement, as supplemented or amended, if applicable, will (i)
comply in all material respects with applicable provisions of the Securities Act
and the Exchange Act, and (ii) not contain any untrue statement of a material
fact or omit to state any material fact necessary in order to make the
statements made therein, in the light of the circumstances under which they were
made, not misleading.
(b) Parent shall furnish such information concerning Parent and Merger
Subsidiary as is necessary in order to cause the Prospectus/Proxy Statement,
insofar as it relates to Parent and Parent Common Stock or the Merger
Subsidiary, to be prepared in accordance with Section 7.2(a). Parent agrees
promptly to advise the Company if at any time prior to the Parent or Company
stockholders' meetings held to consider and vote on the Merger any information
provided by Parent or the Merger Subsidiary in the Prospectus/Proxy Statement
becomes incorrect or incomplete in any material respect.
(c) The Company shall furnish Parent with such information concerning
the Company as is necessary in order to cause the Prospectus/Proxy Statement,
insofar as it relates to the Company to be prepared in accordance with Section
7.2(a). Parent agrees to provide the Company with reasonable opportunity to
review and comment on the Prospectus/Proxy Statement. The Company agrees
promptly to advise Parent if at any time prior to the Parent or Company
stockholders' meetings any information provided by the Company in the
Prospectus/Proxy Statement becomes incorrect or incomplete in any material
respect, and to provide Parent with the information needed to correct such
inaccuracy or omission.
(d) Parent shall promptly file the Registration Statement with the SEC.
Parent shall use reasonable efforts to cause the Registration Statement to
become effective under the Securities Act at the earliest practicable date. The
Company authorizes Parent to utilize in the Registration Statement the
information concerning the Company provided to Parent for the purpose of
inclusion in the Prospectus/Proxy Statement, provided that the Company and its
counsel shall have an opportunity to review the Registration Statement prior to
filing with the SEC and shall otherwise participate in responding to the
comments of the SEC and the process of achieving the effectiveness of the
Registration Statement. Parent shall promptly furnish copies of all written
communications from the SEC, and written summaries of all oral communications
with the SEC, to the Company and its counsel. Parent shall advise the Company
promptly when the Registration Statement has become effective and of any
supplements or amendments thereto, and Parent shall furnish the Company with
copies of all such documents. Prior to the Effective Time or the termination of
this Agreement, each party shall consult with the other with respect to any
material (other than the Prospectus/Proxy Statement) that might constitute a
"prospectus" relating to the Merger within the meaning of the Securities Act
prior to using or disseminating
such prospectus. Parent shall also take all steps necessary to comply with any
applicable state securities laws ("Blue Sky Laws"), for which an exemption is
not available, with respect to the Parent Common Stock to be issued in the
merger.
(e) Parent shall use reasonable efforts to cause to be delivered to the
Company a letter relating to the Registration Statement from ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLC,
Parent's independent auditors, dated a date within two business days before the
date on which the Registration Statement shall become effective and addressed to
the Company, in form and substance reasonably satisfactory to the Company and
customary in scope and substance for letters delivered by independent public
accountants in connection with registration statements similar to the
Registration Statement.
(f) The Company shall use reasonable efforts to cause to be delivered
to Parent a letter relating to the Registration Statement from Ernst & Young
LLP, the Company's independent auditors, dated a date within two business days
before the date on which the Registration Statement shall become effective and
addressed to Parent, in form and substance reasonably satisfactory to Parent and
customary in scope and substance for letters delivered by independent public
accountants in connection with registration statements similar to the
Registration Statement.
(g) Parent and the Company shall each bear 50% of all SEC and state
Blue Sky Laws filing fees with respect to the Registration Statement and all
printing and mailing costs in connection with the preparation of the Prospectus
Proxy Statement. Each party shall bear the expenses of mailing of the
Prospectus/Proxy Statement to its respective stockholders (including multiple
copies to brokers and other nominees). Parent and the Company shall bear their
own legal and accounting expenses in connection with the Registration Statement.
7.3 Press Releases. Parent and the Company shall agree with each other as to the
form and substance of any press release related to this Agreement or the
transactions contemplated hereby, and shall consult with each other as to the
form and substance of other public disclosures which may relate to the
transactions contemplated by this Agreement, provided, however, that nothing
contained herein shall prohibit either party, following notification to the
other party and reasonable opportunity to comment from making any disclosure
which is required by law, regulation or stock exchange requirements.
7.4 Securities Reports. Each of Parent and Company agrees to timely file all
reports required to be filed by it pursuant to the Exchange Act between the date
of this Agreement and the Effective Time. Each of Parent and the Company agree
to provide the other party with copies of all reports and other documents filed
under the Securities Act or Exchange Act with the SEC by it between the date
hereof and the Effective Time within five days after the date such reports or
other documents are filed with the SEC.
7.5 Stockholder Approvals. Each of Parent and the Company shall call a meeting
of its stockholders for the purposes of voting upon this Agreement and the
Merger, and shall schedule such meeting based on consultation with the other
party.
ARTICLE VIII
CONDITIONS TO THE MERGER
8.1 Conditions to the Obligations of Each Party. The obligations of the Company,
Parent and Merger Subsidiary to consummate the Merger are subject to the
satisfaction of the following conditions:
(a) the Registration Statement shall have been declared effective and
shall not be subject to any stop orders of the SEC;
(b) no provision of any applicable law or regulation and no judgment,
injunction, order, decree or other legal restraint shall prohibit the
consummation of the Merger.
(c) the Parent Common Stock to be issued to holders of Shares in the
Merger shall have been filed for listing and quotation on the Nasdaq Small Cap
Market, subject to official notice of issuance; and
(d) Fidelity National Financial, Inc. shall have exercised currently
outstanding warrants to purchase shares of Parent Common Stock for a cash
purchase price aggregating not less than $5,000,000.
8.2 Conditions to the Obligations of Parent and Merger Subsidiary. The
obligations of Parent and Merger Subsidiary to consummate the Merger are further
subject to the satisfaction of the following conditions:
(a) there shall not be instituted or pending any action by any
Governmental Entity (i) challenging or seeking to make illegal, to delay
materially or otherwise directly or indirectly to restrain or prohibit the
consummation by Parent or Merger Subsidiary of the Merger, seeking to obtain
material damages or imposing any material adverse conditions in connection
therewith or otherwise directly or indirectly relating to the transactions
contemplated by this Agreement or the Merger, (ii) seeking to restrain or
prohibit Parent's or Merger Subsidiary's ownership or operation (or that of
their respective subsidiaries or affiliates) of all or any portion of the
business or assets of the Company, or of Parent and its subsidiaries or
affiliates, or to compel Parent or any of its subsidiaries or affiliates to
dispose of or hold separate all or any material portion of the business or
assets of the Company, or of Parent and its subsidiaries and affiliates, (iii)
seeking to impose limitations on the ability of Parent and its subsidiaries or
affiliates effectively to exercise full rights of ownership of the Shares,
including, without limitation, the right to vote any Shares acquired or owned by
Parent or any of its subsidiaries or affiliates on all matters properly
presented to the Company's stockholders, (iv) seeking to require divestiture by
Parent or any of its subsidiaries or affiliates of any Shares, or (v) that
otherwise, in the reasonable judgment of Parent, is likely to have a Company
Material Adverse Effect or a Parent Material Adverse Effect;
(b) the Company shall have performed in all material respects its
covenants and agreements under this Agreement, and the representations and
warranties of the Company set forth in this Agreement shall be true in all
material respects when made and at and as of the Effective Time as if made at
and as of such time; and Parent and Merger Subsidiary shall have received a
certificate of the Chief Executive Officer and the Chief Financial Officer of
the Company to that effect;
(c) no change shall have occurred or been threatened (and no
development shall have occurred or been threatened involving a prospective
change) that, in the reasonable judgment of Parent, has or is likely to have a
Company Material Adverse Effect.
(d) each of the persons described in Section 5.2 of the Disclosure
Schedule shall have executed and delivered an Affiliate Agreement;
(e) Parent shall have been furnished with (i) copies of the text of the
resolutions by which the corporate action on the part of the Company necessary
to approve this Agreement, the Affiliates Agreements and the transactions
contemplated hereby and thereby were taken, together with a certificate dated as
of the Effective Time executed on behalf of the Company by its corporate
secretary certifying to Parent that such copies are true, correct and complete
copies of such resolutions and that such resolutions were duly adopted and have
not been amended or rescinded;
(f) the Parent Common Stockholder Approval shall have been obtained;
(g) shareholders (if any) of the Company who have objected to the
merger and taken steps necessary to exercise their dissenting stockholders'
rights of appraisal shall hold in the aggregate no more than 4% of the
outstanding Stock of the Company;
(h) Parent shall have received from ▇▇▇▇▇ ▇▇▇▇▇▇▇ Inc. the "fairness"
opinion contemplated by Section 4.2(k) hereof;
(i) the Company shall have completed the acquisition of the JB's
restaurants described on Schedule 8.2;
(j) the Company shall have entered into a written lease for its home
office facilities at ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇. ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇, on
terms and conditions reasonably acceptable to Parent;
(k) ▇▇▇▇▇ ▇▇▇▇▇▇ shall have entered into a written employment agreement
with Company on terms and conditions, including length of time and compensation,
reasonably satisfactory to Parent and ▇▇. ▇▇▇▇▇▇;
(l) the Board of Directors of the Parent shall have duly authorized and
approved the execution and delivery of this Agreement by the Parent and the
transactions contemplated;
(m) nothing shall have come to the attention of the Parent in the
course of its due diligence investigation of the Company which could reasonably
be expected to have a Company Material Adverse Effect; and
(n) Parent shall have received an opinion of counsel from Larkin,
Hoffman, ▇▇▇▇ & ▇▇▇▇▇▇▇▇, Ltd., counsel to the Company, in form and substance
reasonably satisfactory to Parent and its counsel, and dated the Closing Date,
to the effect that:
(i) The Company is duly organized and existing under the laws
of the State of Minnesota and has the power and authority to engage in its
business as presently conducted, and is a corporation in good standing under the
laws of the State of Minnesota and is qualified as a foreign corporation in good
standing under the laws of any state or jurisdiction where the ownership or the
conduct of its business receive such qualification.
(ii) The Company has the corporate power and authority to
execute and deliver, and perform its obligations under, this Agreement.
(iii) This Agreement has been duly authorized by all necessary
corporate action on the part of the Company, has been duly executed and
delivered by the Company and is a valid and binding obligation of the Company
enforceable against it in accordance with its terms.
(iv) The execution, delivery and performance of this Agreement
by the Company, and the consummation of the Merger by the Company, will not
violate the articles of incorporation and by-laws of the Company and, to such
counsel's knowledge after due inquiry, will not violate any agreement to which
the Company is a party or by which the Company's assets are bound;
(v) Except as may be specified by such counsel or set forth on
the Disclosure Schedule, such counsel knows of no litigation, proceeding or
governmental investigation pending or threatened against or relating to the
Company, or any of its respective assets and businesses, or the Company Stock;
and
(vi) The authorized and outstanding capital stock of the
Company is as specified in Section 4.1(b) hereof, of which all such outstanding
shares are validly issued and outstanding, fully paid and nonassessable.
In rendering the foregoing opinion, such counsel may rely, to the extent such
counsel deems such reliance necessary or appropriate, as to matters of fact,
upon certificates of government officials or of any officer or officers of the
Company, copies of which shall be expressly referred to in such opinion and
shall accompany such opinion. In addition, such counsel, in rendering such
opinion, shall be permitted to assume the authenticity of the Company's stock
book or records of its stock transfer agent and, if found in the Company's
minute book and otherwise proper in form and appearance, the authenticity of the
minutes of any directors' meetings and shareholders' meetings.
8.3 Conditions to the Obligations of the Company. The obligations of the Company
to consummate the Merger are subject to the further satisfaction of the
following conditions:
(a) there shall not be instituted or pending any action by any
Governmental Entity (i) challenging or seeking to make illegal, to delay
materially or otherwise directly or indirectly to restrain or prohibit the
consummation by the Company of the Merger, seeking to obtain material damages or
imposing any material adverse conditions in connection therewith or otherwise
directly or indirectly relating to the transactions contemplated by this
Agreement or the Merger, (ii) that otherwise, in the reasonable judgment of
Company, is likely to have a Company Material Adverse Effect or a Parent
Material Adverse Effect;
(b) Parent and Merger Subsidiary shall have performed in all material
respects their covenants and agreements under this Agreement, and the
representations and warranties of Parent and Merger Subsidiary set forth in this
Agreement that are qualified as to materiality shall be true in all material
respects when made at and as of the Effective Time as if made and at and as of
such
time; and the representations and warranties set forth in this Agreement that
are not so qualified shall be true when made and at and as of the Effective Time
as if made at and as of such time; and the Company shall have received a
certificate of the Chief Executive Officer of Parent and Merger Subsidiary to
that effect;
(c) the Company Stockholder Approval shall have been obtained;
(d) no change shall have occurred or been threatened (and no
development shall have occurred or been threatened involving a prospective
change), other than changes resulting from changes in interest rates, that, in
the reasonable judgment of the Company, has or is likely to have a Parent
Material Adverse Effect.
(e) each of the persons described in Section 6.2 of the Parent
Disclosure Schedule shall have executed and delivered an Affiliate Agreement;
(f) the Company shall have been furnished with (i) copies of the text
of the resolutions by which the corporate action on the part of the Company and
Merger Subsidiary necessary to approve this Agreement and the transactions
contemplated hereby were taken, together with a certificate dated as of the
Effective Time executed on behalf of the Company and Merger Subsidiary by the
respective corporate secretaries certifying to the Company that such copies are
true, correct and complete copies of such resolutions and that such resolutions
were duly adopted and have not been amended or rescinded.
(g) the Company shall have received from Pauli & Company the "fairness"
opinion contemplated by Section 4.1(w) hereof; and
(h) the Company shall have received an opinion of The ▇▇▇▇▇▇
Partnership, dated the Closing Date to the effect that:
(i) Each of Parent and Merger Subsidiary is a corporation
organized and existing and in good standing under the laws of its State of
incorporation.
(ii) Each of Parent and Merger Subsidiary has the corporate
power and authority to execute and deliver, and perform its obligations under,
this Agreement.
(iii) This Agreement has been duly authorized by all necessary
corporate action on the part of Parent and Merger Subsidiary, has been executed
and delivered by Parent and Merger Subsidiary, and is the valid and binding
obligation of Parent and Merger Subsidiary, and this Agreement is enforceable
against Parent and Merger Subsidiary, as the case may be, in accordance with its
terms.
(iv) The execution, delivery and performance of this Agreement
by the Parent do not violate the Certificate of Incorporation or By-Laws of
Parent, and, to such counsel's knowledge, will not violate any agreement or
instrument to which Parent is a party or by which it or its property is bound.
The execution, delivery and performance of this Agreement by Merger Subsidiary
will not violate the Articles of Incorporation or By-Laws of Merger Subsidiary,
and, to such counsel's knowledge, will not violate any agreement or instrument
to which Merger Subsidiary is a party or by which it or its property is bound.
(v) Except as may be specified by such counsel or set forth on
the Disclosure Schedule, such counsel knows of no litigation, proceeding or
governmental
investigation pending or threatened against or relating to the Parent or Merger
Subsidiary, or any of their respective assets and businesses, or the Parent
Common Stock; and
(vi) Based solely on such counsel's review of the minute books
and stock transfer records of Parent and Parent's filings with the Secretary of
State of Delaware, the issuance of the Parent Common Stock in the Merger has
been duly authorized by all necessary corporate action on the part of Parent.
The Parent Common Stock has been duly issued in accordance with the Certificate
of Incorporation and By-Laws of Parent and with applicable law, and upon
delivery of such in accordance with this Agreement, such Parent Common Stock is
or will be outstanding, fully-paid and non-assessable.
In rendering the foregoing opinion, such counsel may rely, to the extent such
counsel deems such reliance necessary or appropriate, as to matters of fact,
upon certificates of government officials and of any officer or officers of
Parent and Merger Subsidiary, which shall be expressly referred to in such
opinion and copies of which shall accompany such opinion. In addition, such
counsel, in rendering such opinions, shall be permitted to assume the
authenticity of Parent's stock book or records of its stock transfer agent and,
if found in Parent's minute book and otherwise proper in form and appearance,
the authenticity of the minutes of any directors' meetings and shareholders'
meetings.
ARTICLE IX
TERMINATION
9.1 Termination. This Agreement may be terminated and the Merger may be
abandoned at any time prior to the Effective Time (notwithstanding the Company
Stockholder Approval or the Parent Common Stockholder Approval):
(i) by mutual written consent of the Company and Parent;
(ii) by either Parent or the Company, if at the meeting, or at
any adjournment thereof, at which the Company Stockholder Approval or the Parent
Common Stockholder Approval is proposed and voted upon, the Company Stockholder
Approval or the Parent Common Stockholder Approval shall have not have been
obtained;
(iii) by either the Company or Parent, if the Merger has not
been consummated by May 31, 1998 (provided that the party seeking to terminate
the Agreement shall not have breached its obligations under this Agreement in
any material respect);
(iv) by Parent, at any time prior to the Effective Time, by
action of the Board of Directors of Parent, if (x) there has been a breach by
the Company of any of the representations, warranties, covenants or agreements
contained in this Agreement, or if any representation or warranty of the Company
shall have become untrue, in either case which has or could reasonably be
expected to have a Company Material Adverse Effect, or (y) the Board of
Directors of the Company shall have withdrawn or modified in a manner adverse to
Parent or Merger Subsidiary its approval of recommendation of this Agreement or
the Merger, or shall have resolved to do any of the foregoing;
(v) by the Company, at any time prior to the Effective Time,
by action of the Board of Directors of the Company, if (A) there has been a
breach by the Parent or Merger Subsidiary of any of the representations,
warranties, covenants or agreements contained in this Agreement or if any
representation or warranty of the Parent or Merger Subsidiary shall have become
untrue, in either case which has or could reasonably be expected to have a
Parent Material Adverse Effect, or (B) the Company receives an Acquisition
Proposal on terms the Company's Board of Directors (after consultation with its
independent financial advisors) determines in good faith to be more favorable to
the Company's stockholders than the terms of the Merger, and the Company's Board
of Directors determines, upon the written advice of its legal counsel, that to
continue to recommend that holders of Shares vote in favor of the Merger,
notwithstanding the receipt of such offer with respect to an Acquisition
Proposal, or to fail to recommend or accept the Acquisition Proposal, would
violate the fiduciary duties of the Company's Board of Directors; provided,
however, that the Company shall not be permitted to terminate this Agreement
pursuant to this Section 9.1(v)(B) unless it has provided Parent and Merger
Subsidiary with three (3) business days prior written notice of its intent to so
terminate this Agreement together with a detailed summary of the terms and
conditions (including proposed financing, if any) of such Acquisition Proposal;
provided, further, that Parent shall receive the fees set forth in Section
10.4(b) immediately prior to or concurrently with any termination pursuant to
this Section 9.1(v)(B); or
(vi) by either the Parent or the Company, by written notice to
the other, if the Average Parent Common Stock Price (as defined below) is less
than $7.50 per share, unless by written notice to the Company given not later
than three (3) business days after receipt of a termination notice from the
Company, the Parent agrees to increase the Exchange Ratio as permitted by
Section 2.1(c)(i). For purposes of this Agreement, the "Average Parent Common
Stock Price" shall be the average of the daily closing sales price of the Parent
Common Stock in the over-the-counter market (as reported by The Wall Street
Journal or, if not reported thereby, as reported by another authoritative source
as mutually agreed by Parent and the Company) for the 10 consecutive full
trading days ending on the second business day prior to the Effective Time.
9.2 Effect of Termination. If this Agreement is terminated pursuant to Section
9.1, this Agreement shall become void and of no effect with no liability on the
part of any party hereto or their respective officers and directors, except that
the agreements contained in Sections 6.1, 7.2(g) and 10.4 shall survive the
termination hereof. Specifically, and without limiting the generality of the
foregoing, Parent and Merger Subsidiary agree that, except as expressly provided
in this Section 9.2 or Section 10.4(b), termination of this Agreement shall be
their sole and exclusive remedy for any nonwillful breach by the Company of its
representations, warranties and covenants under this Agreement and the Company
agrees that except as provided in this Section 9.2 termination of this Agreement
shall be its sole and exclusive remedy for any nonwillful breach by Parent or
Merger Subsidiary of their representations, warranties and covenants under this
Agreement. If this Agreement is terminated by reason of a willful breach by a
party, then the breaching party shall be liable to the non-breaching party for
all actual, consequential and incidental damages suffered by the non-breaching
party (including, but not limited to, reasonable attorneys', accountants' and
investment brokers' fees, costs and expenses) arising from such willful breach.
ARTICLE X
MISCELLANEOUS
10.1 Notices. All notices, requests and other communications to any party
hereunder shall be in writing (including telecopy or similar writing) and shall
be given,
if to Parent or Merger Subsidiary, to:
GB Foods Corporation
▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇▇.
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Chief Executive Officer
with a copy to:
The ▇▇▇▇▇▇ Partnership
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇. ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
if to the Company, to:
Timber Lodge Steakhouse, Inc.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇. ▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Chief Executive Officer
with a copy to:
Larkin, Hoffman, ▇▇▇▇ & ▇▇▇▇▇▇▇▇, Ltd.
1500 Norwest Financial Center
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
or such other address or telecopy number as such party may hereafter specify for
the purpose of notice to the other parties. Each such notice, request or other
communication shall be effective when delivered at the address specified in this
Section 10.1.
10.2 Survival of Representations and Warranties. The representations and
warranties and agreements contained herein and in any certificate or other
writing delivered pursuant hereto shall
not survive the Effective Time except for the representations, warranties and
agreements set forth in Sections 6.3, 6.6, 6.7, 6.8, 6.9, 10.2, 10.4, 10.5,
10.6, 10.7, 10.8 and 10.9.
10.3 Amendments: No Waivers.
(a) Any provision of this Agreement may be amended or waived prior to
the Effective Time if, and only if, such amendment or waiver is in writing and
signed, in the case of an amendment, by the Company, Parent and Merger
Subsidiary or in the case of a waiver, by the party against whom the waiver is
to be effective, provided, that after the adoption of this Agreement by the
stockholders of the Company or the Parent, no such amendment or waiver shall,
without the further approval of such stockholders, alter or change (i) the
amount or kind of consideration to be received in exchange for any Shares, or
(ii) any of the terms of the Merger which are material to the stockholders of
the Company (as a group) or the Parent.
(b) No failure or delay by any party in exercising any right, power or
privilege hereunder shall operate as a waiver thereof nor shall any single or
partial exercise thereof preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The rights and remedies herein
provided shall be cumulative and not exclusive of any rights or remedies
provided by law.
10.4 Fees and Expenses.
(a) Except as otherwise provided in Sections 7.2(g) and 10.4(b) of this
Agreement, all costs and expenses incurred in connection with this Agreement
shall be paid by the party incurring such cost or expense.
(b) If (w)(1) any person or group (as contemplated by Section 13(d)(3)
of the Exchange Act) other than Parent or Merger Subsidiary or any of their
respective subsidiaries or affiliates (collectively, an "Acquiring Person")
shall have become the beneficial owner of a majority of the outstanding Shares,
and (2) either the Company shall fail to obtain the Company Stockholder Approval
or the Company's Board of Directors shall have withdrawn or changed its
recommendation or refused to make a recommendation in favor of this Agreement
and the Merger, or (x) Parent shall have terminated this Agreement pursuant to
Section 9.1(iv)(y), or (y) the Company shall have terminated this Agreement
pursuant to Section 9.1(v)(B), then the Company shall promptly, but in no event
later than five (5) days after the date of any request therefor, issue to the
Parent options to purchase such number of shares of the Company's voting common
stock as shall, after exercise of all such options, equal 19.9% of all such
voting common stock then outstanding, at an exercise price (subject to customary
adjustments for stock split, stock dividends and similar reclassifications or
adjustments) of $4.625 per share. Such options shall be immediately exercisable
without condition (other than payment of the exercise price), shall expire ten
years after their date of issue, shall be fully vested and nonforfeitable, shall
have customary anti-dilution provisions acceptable to Parent, shall be
transferable by their holder (subject to customary restrictions relating to
compliance with the Securities Act) in whole or part, and shall provide
customary piggyback registration rights so that the holder may sell the shares
received upon exercise in the public markets. The Company acknowledges that the
agreements contained in this Section 10.4(b) are an integral part of the
transactions contemplated in this Agreement, and that, without these agreements,
Parent and Merger Subsidiary would not enter into this Agreement; accordingly,
if the Company fails to promptly issue the options as described
above or otherwise perform its obligations pursuant to this Section 10.4(b),
and, in order to obtain such performance, Parent or Merger Subsidiary Commences
a suit against the Company for the options set forth this paragraph (b), the
prevailing party shall pay to the other party or parties their costs and
expenses (including reasonable attorneys' fees and expenses) in connection with
such suit, together with interest on the amount thereof at the prime rate of the
Citibank, N.A. on the date such payment was required to be made.
10.5 Successors and Assigns: Parties in Interest. The provisions of this
Agreement shall be binding, upon and inure to the benefit of the parties hereto
and their respective successors and assigns, provided, that no party may assign,
delegate or otherwise transfer any of its rights or obligations under this
Agreement without the consent of the other parties hereto except that Merger
Subsidiary may transfer or assign, in whole or, from time to time, in part, to
one or more of Parent or any of its wholly-owned subsidiaries, any or all of its
rights or obligations, but any such transfer or assignment will not relieve
Merger Subsidiary of its obligations under this Agreement. Except as expressly
set forth herein, nothing in this Agreement, express or implied, is intended to
or shall confer upon any person not a party hereto any right, benefit or remedy
of any nature whatsoever under or by reason of this Agreement, including to
confer third party beneficiary rights.
10.6 Severability. If any term, provision, covenant or restriction of this
Agreement is held by a court of competent jurisdiction to be invalid, void or
unenforceable, the remainder of the terms, provisions, covenants and
restrictions of this Agreement shall remain in full force and effect and shall
in no way be affected, impaired or invalidated, and the parties shall negotiate
in good faith to modify this Agreement and to preserve each party's anticipated
benefits under this Agreement.
10.7 Governing Law. This Agreement shall be construed in accordance with and
governed by the internal laws of the State of Minnesota, without giving effect
to the principles of conflicts of laws thereof, except that the consummation and
effectiveness of the Merger shall be governed by, and construed in accordance
with, the MBCA.
10.8 Entire Agreement. This Agreement, including Exhibits and Schedules hereto,
constitutes the entire agreement, and supersedes all other prior agreements,
written and oral among the parties, with respect to the subject matter hereof.
10.9 Counterparts: Effectiveness; Interpretation. This Agreement may be signed
in any number of counterparts, each of which shall be an original, with the same
effect as if the
signatures thereto and hereto were upon the same instrument. This Agreement
shall become effective when each party hereto shall have received counterparts
hereof signed by all of the other parties hereto. When a reference is made in
this Agreement to an Article or Section, such reference shall be to an Article
or section of this Agreement unless otherwise indicated. The table of contents
and headings contained in this Agreement are for reference purposes only and
shall not affect in any way the meaning or interpretation of this Agreement
Whenever the words "include", "includes" or "including" are used In this
Agreement, they shall be deemed to be followed by the words "without
limitation".
The parties hereto have caused this Agreement to be duly executed by
their respective authorized officers as of the day and year first above written.
GB FOODS CORPORATION
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Chief Executive Officer
TLS ACQUISITION CORP.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Executive Vice President
TIMBER LODGE STEAKHOUSE, INC.
BY: /s/ ▇▇▇▇▇▇ ▇. Kowland
------------------------------------
Name: ▇▇▇▇▇▇ ▇. Kowland
Title: Chief Executive Officer
Fidelity National Financial, Inc. is executing this Agreement solely
for the purposes of agreeing that, if the Company's stockholders approve the
Merger at the meeting held for that purpose, it will exercise currently
outstanding warrants to acquire Parent Common Stock as contemplated by Section
8.1(d).
FIDELITY NATIONAL FINANCIAL, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Executive Vice President
The undersigned is executing this Agreement solely for the purposes of
acknowledging its agreement to negotiate in good faith lo sell JB Restautants to
the Company as contemplated by Section 8.2(g).
CKE ENTERPRISES, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Executive Vice President
EXHIBIT A
FORM OF
AFFILIATE AGREEMENT
FOR STOCKHOLDERS OF
TIMBER LODGE STEAKHOUSE, INC.
THIS AFFIFIATE AGREEMENT (this "Agreement") is made and entered into as
of ______________, 1998, by and between GB FOODS CORPORATION, a Delaware
corporation ("Parent") and the stockholder of TIMBER LODGE STEAKHOUSE, INC. a
Minnesota corporation (the "Company"), identified on the signature page hereto
(the "Affiliate").
RECITALS:
A. Parent and the Company are parties to that certain Agreement and
Plan of Merger, dated as of ____________, 1998 (the "Merger Agreement"), which
provides for the acquisition of the Company by Parent by means of a merger (the
"Merger") of a wholly-owned subsidiary of Parent ("Merger Sub") with and into
the Company (unless otherwise defined herein as the context otherwise requires,
capitalized terms shall have the respective meanings set forth in the Merger
Agreement);
B. Affiliate is the record holder and beneficial owner (as defined in
Rule 13d-3 under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), of and has the right to vote and dispose of the number of shares of the
outstanding capital stock of the Company on the signature page of this Agreement
(the "Company Shares"), which Shares will be converted upon the Effective Time
of the Merger into the right to receive shares of Parent Common Stock (the
"Parent Shares"); and
C. Affiliate understands that, since the Merger will be accounted for
using the "pooling of interests" method and the Affiliate is an "affiliate" of
the Company (within the meaning of Rule 145 under the Securities Act of 1933, as
amended (the "Securities Act"), the Parent Shares may only be disposed of in
conformity with the limitations described herein.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, and intending to be legally bound
hereby, the parties agree as follows:
1. Agreement to Retain Shares.
1.1 Transfer and Encumbrance. Affiliate agrees not to
transfer, sell, exchange, pledge or otherwise dispose of or encumber the Parent
Shares or any New Shares (as defined in Section 1.2 below) or to make any offer
or agreement relating thereto, at any time prior to the Expiration Date. As used
herein, the term " Expiration Date" shall mean the date Parent shall have
publicly released a report including the combined financial results of Parent
and the Company for a period of at least 30 days of combined operations of
Parent and the Company.
1.2 New Shares. Affiliate agrees that any shares of capital
stock of the Company or Parent that Affiliate purchases or with respect to which
Affiliate otherwise acquires beneficial ownership after the date of this
Agreement and prior to the Expiration Date ("New Shares") shall be subject to
the terms and conditions of this Agreement to the same extent as if they
constituted Shares.
2. Tax Treatment; Rule 145. Affiliate understands and agrees that it is
intended that the Merger will be treated as a "reorganization" for federal
income tax purposes. Affiliate further understands and agrees that Affiliate may
be deemed to be an "affiliate" of the Company within the meaning of Rule 145
promulgated by the Securities and Exchange Commission (the "SEC") under the
Securities Act, although nothing contained herein should be construed as an
admission of such fact.
3. Reliance Upon Representations, Warranties and Covenants. Affiliate
has been informed that the treatment of the Merger as a reorganization for
federal income tax purposes requires that a sufficient number of stockholders of
the Company maintain a meaningful continuing equity ownership interest in Parent
after the Merger. Affiliate understands that the representations, warranties and
covenants of Affiliate set forth herein will be relied upon by Parent, the
Company and their respective counsel and accounting firms.
4. Representations. Warranties and Covenants of Affiliate. Affiliate
represents, warrants and covenants as follows:
(a) Affiliate has full power and authority to execute this
Agreement, to make the representations, warranties and covenants herein
contained and to perform Affiliate's obligations hereunder.
(b) Set forth below the signatures below is the number of
Company Shares owned by Affiliate, including all Company Shares as to which
Affiliate has sole or shared voting or investment power to acquire the shares of
capital stock of the Company owned or held by Affiliate.
(c) Affiliate will not sell, transfer, exchange, pledge or
otherwise dispose of, or make any offer or agreement relating to any of the
foregoing with respect to, any Parent Shares that Affiliate may acquire in
connection with the Merger, or any securities that may be paid as a dividend or
otherwise distributed thereon or with respect thereto issued or delivered in
exchange or substitution therefor (all such shares and other securities of
Parent are sometimes collectively referred to as "Restricted Securities"), or
any option, right or other interest with respect to any Restricted Securities,
unless: (i) such transactions is permitted pursuant to Rule 145(c) and 145(d)
under the Securities Act, (ii) counsel representing Affiliate, which counsel is
reasonably satisfactory to Parent, shall have advised Parent in a written
opinion letter satisfactory to Parent and Parent's legal counsel, and upon which
Parent and its legal counsel may rely, that no registration under the Securities
Act would be required in connection with the proposed sale, transfer or other
disposition; (iii) a registration statement under the Securities Act covering
the Parent Shares proposed to be sold, transferred or otherwise disposed of,
describing the manner and terms of the proposed sale, transfer or other
dispositions, and containing a current prospectus, shall have been filed with
the SEC and made effective under the Securities Act; or
(iv) an authorized representative of the SEC shall have rendered written advice
to Affiliate (sought by Affiliate or counsel to Affiliate, with a copy thereof
and all other related communications delivered to Parent) to the effect that the
SEC would take no action, or that the staff of the SEC would not recommend that
the SEC take any action, with respect to the proposed disposition if
consummated.
(d) Affiliate is not aware of, or participating in, any present plan or
intention (a "Plan") on the part of the Company's stockholders to sell,
transfer, exchange, pledge or otherwise dispose of, including a distribution by
a partnership to its partners, or a corporation to its stockholders, or any
other transaction which results in a reduction in the risk of ownership (any of
the foregoing, a "Sale") of Parent Shares to be issued in the Merger such that
the aggregate fair market value, as of the Effective Time of the Merger, of the
Parent Shares subject to such Sales would exceed fifty percent (50%) of the
aggregate fair market value of all shares of outstanding shares of the Company
immediately prior to the Merger. For purposes of the preceding sentence, Parent
Shares (i) which are exchanged for cash in lieu of fractional Parent Shares or
(ii) with respect to which a pre-Merger Sale occurs in a Related Transaction (as
defined below), shall be considered to be Company Shares that are exchanged for
Parent Shares in the Merger and then disposed of pursuant to a Plan. A sale of
Parent Shares shall be considered to have occurred pursuant to a Plan if, among
other things, such Sale occurs in a Related Transaction. For purposes of this
Section 4(d), a "Related Transaction" shall mean a transaction that is in
contemplation of, or related or pursuant to, the Merger or the Merger Agreement.
If any of Affiliate's representations in this subsection (d) cease to be true at
any time prior to the Effective Time of the Merger, Affiliate will deliver to
each of the Company and Parent, prior to the Effective Time of the Merger, a
written statement to that effect, signed by Affiliate.
5. Rules 144 and 145. From and after the Effective Time of the Merger
and for so long as is necessary in order to permit Affiliate to sell the Parent
Shares held by Affiliate pursuant to Rule 145 and, to the extent applicable,
Rule 144 under the Securities Act, Parent will use its reasonable efforts to
file on a timely basis all reports required to be filed by it pursuant to
Section 13 of the Securities Exchange Act of 1934, as amended, referred to in
paragraph (c)(l) of Rule 144 under the Securities Act, in order to permit
Affiliate to sell the Parent Shares held by it pursuant to the terms and
conditions of Rule 145 and the applicable provisions of Rule 144.
6. Limited Resales. Affiliate understands that, in addition to the
restrictions imposed under Section 4 of this Agreement, the provisions of Rule
145 limit Affiliate's public resales of Restricted Securities.
7. Legends. Affiliate also understands and agrees that stop transfer
instructions will be given to Parent's transfer agent with respect to
certificates evidencing the Restricted Securities and that there will be placed
on the certificate evidencing the Restricted Securities legends stating in
substance:
"THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE
OFFERED, SOLD, PLEDGED, EXCHANGED, TRANSFERRED OR OTHERWISE
DISPOSED OF EXCEPT IN ACCORDANCE WITH THE
REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, AND
THE OTHER CONDITIONS SPECIFIED IN THAT CERTAIN AFFILIATE
AGREEMENT DATED AS OF ____________, 1998 BETWEEN THE ISSUE AND
THE STOCKHOLDER, A COPY OF WHICH AFFILIATE AGREEMENT MAY BE
INSPECTED BY THE HOLDER OF THIS CERTIFICATE AT THE PRINCIPAL
OFFICES OF THE ISSUER."
After the Expiration Date, Parent agrees to remove the above legend,
and replace such legend the following legend:
"THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE
OFFERED, SOLD, PLEDGED, EXCHANGED, TRANSFERRED OR OTHERWISE
DISPOSED OF EXCEPT IN ACCORDANCE WITH THE REQUIREMENTS OF THE
SECURITIES ACT OF 1933, AS AMENDED."
Parent agrees to remove promptly such stop transfer instructions and
legend upon full compliance with this Agreement by the undersigned, including,
without limitation, a sale or transfer of Parent Shares permitted under Section
4(c) above.
8. Termination. This Agreement shall be terminated and shall be of no
further force and effect if the Merger Agreement should be terminated in
accordance with the terms thereof prior to the time the Merger becomes
effective.
9. Counterparts. This Agreement shall be executed in one or more
counterparts, each of which shall be deemed an original, and all of which
together shall constitute one instrument.
10. Binding Agreement. This Agreement will inure to the benefit of and
be binding upon and enforceable against the parties and their successors and
assigns, including administrators, executors, representatives, heirs, legatees
and devisees of Affiliate and pledgees holding Restricted Securities as
collateral.
11. Waiver. No waiver by any party hereto of any condition or of any
breach of any provision of this Agreement shall be effective unless in writing
and signed by each party hereto.
12. Governing Law. This Agreement shall be governed by and construed,
interpreted and enforced in accordance with the laws of the State of Delaware.
13. Attorney's Fees. In the event of any legal actions or proceeding to
enforce or interpret provisions hereof, the prevailing party shall be entitled
to reasonable attorney's fees, whether or not the proceeding results in a final
judgment.
14. Effect of Headings. The Section headings herein are for convenience
only and shall not affect the construction or interpretation of this Agreement.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed on the day and year first above written.
GB FOODS CORPORATION
By:
--------------------------------------
Name:
Title:
-----------------------------------------
Name of Affiliate:
Affiliate's Address for Notice:
Company Shares beneficially owned:
Shares of Common Stock:
Shares subject to:
Options:
Warrants:
Other Rights:
EXHIBIT B
FORM OF
AFFILIATE AGREEMENT
FOR STOCKHOLDERS OP
GB FOODS CORPORATION
THIS AFFILIATE AGREEMENT (this "Agreement") is made and entered into as
of _____________, 1998, by and between GB FOODS CORPORATION, a Delaware
corporation ("Parent") and the stockholder of Parent identified on the signature
page hereto (the "Affiliate").
RECITALS:
A. Parent and Timber Lodge Steakhouse, Inc., a Minnesota corporation
(the "Company") are parties to that certain Agreement and Plan of Merger, dated
as of _______________, 1998 (the "Merger Agreement"), which provides for the
acquisition of the Company by Parent by means of a merger (the "Merger") of a
wholly-owned subsidiary of Parent ("Merger Sub") with and into the Company (as
otherwise defined herein as the context otherwise requires, capitalized terms
shall have the respective meanings set forth in the Merger Agreement);
B. Affiliate is the record holder and beneficial owner (as defined in
Rule 13d-3 under the Securities Exchange Act of 1934, as amended (the "Exchange
Act")) of and has the right to vote and dispose of the number of shares of the
outstanding capital stock of the Parent indicated on the signature page of this
Agreement (the "Parent Shares"); and
C. Affiliate understands that, since the Merger will be accounted for
using the "pooling of interests" method, the Parent Shares may only be disposed
of in conformity with the limitations described herein.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, and intending to be legally bound
hereby, the parties agree as follows:
1. Agreement to Retain Shares.
1.1 Transfer and Encumbrance. Affiliate agrees not to
transfer, sell, exchange, pledge or otherwise dispose of or encumber the Parent
Shares or any New Shares (as defined in Section 1.2 below) or to make any offer
or agreement relating thereto, at any time prior to the Expiration Date. As used
herein, the term "Expiration Date" shall mean the date Parent shall have
publicly released a report including the combined financial results of Parent
and the Company for a period of at least 30 days of combined operations of
Parent and the Company.
1.2 New Shares. Affiliate agrees that any shares of capital
stock of Parent that Affiliate purchases or with respect to which Affiliate
otherwise acquires beneficial ownership
after the date of this Agreement and prior to the Expiration Date ("New Shares")
shall be subject to the terms and conditions of this Agreement to the same
extent as if they constituted Parent Shares.
2. Tax Treatment: Rule 145. Affiliate understands and that it is
intended that the Merger will be treated as a "reorganization" for federal
income tax purposes.
3. Termination. This Agreement shall be terminated and shall be of no
further force and effect upon the termination of the Merger Agreement in
accordance with the terms thereof.
4. Counterparts. This Agreement shall be executed in one or more
counterparts, each of which shall be an original, and all of which together
shall constitute one instrument.
5. Binding Agreement. This Agreement will inure to the benefit of and
be binding upon and enforceable against the parties and their successors and
assigns, including administrators, executors, representatives, heirs, legatees
and devisees of Affiliate and pledgees holding Restricted Securities as
collateral.
6. Waiver. No waiver by any party hereto of any condition or of any
breach of any provision of this Agreement shall be effective unless in writing
and signed by each party hereto.
7. Governing Law. This Agreement shall be governed by and construed,
interpreted and enforced in accordance with the laws of the State of Delaware.
8. Attorneys'' Fees. In the event of any Legal actions or proceeding to
enforce or interpret the provisions hereof, the prevailing party shall be
entitled to reasonable attorney's fees, whether or not the proceeding results in
a final judgment.
9. Effect of Headings. The Section headings herein are for convenience
only and shall not effect the construction or interpretation of this Agreement.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed on the day and year first above written.
GB FOODS CORPORATION
By:
--------------------------------------
Name:
Title:
-----------------------------------------
Name of Affiliate:
Affiliate's Address for Notice:
Company Shares beneficially owned:
Shares of Common Stock:
Shares subject to:
Options:
Warrants:
Other Rights: