Exhibit 10.1


 


EXECUTION COPY


 


 


AGREEMENT
AND PLAN OF MERGER


 


dated as of


 


March 17, 2006


 


among


 


BOSTON RESTAURANT ASSOCIATES,
INC.


 


DOLPHIN DIRECT EQUITY PARTNERS,
LP


 


and


 


BRAIDOL ACQUISITION CORP.


 

















 


TABLE OF CONTENTS


 


	
   

  	
   

  	
  PAGE

  
	
   

  	
   

  	
   

  
	
  ARTICLE 1

  	
  DEFINITIONS

  	
  1

  
	
   

  	
   

  	
   

  
	
  SECTION 1.1.

  	
  DEFINITIONS

  	
  1

  
	
   

  	
   

  	
   

  
	
  ARTICLE 2

  	
  THE
  MERGER

  	
  6

  
	
   

  	
   

  	
   

  
	
  SECTION 2.1.

  	
  THE MERGER

  	
  6

  
	
  SECTION 2.2.

  	
  CONSUMMATION

  	
  6

  
	
  SECTION 2.3

  	
  CONVERSION OF SHARES

  	
  7

  
	
  SECTION 2.4.

  	
  SURRENDER AND PAYMENT

  	
  7

  
	
  SECTION 2.5.

  	
  DISSENTING SHARES

  	
  9

  
	
  SECTION 2.6.

  	
  STOCK OPTIONS, WARRANTS AND EMPLOYEE STOCK PURCHASE PLAN

  	
  9

  
	
  SECTION 2.7.

  	
  ADJUSTMENTS

  	
  10

  
	
  SECTION 2.8.

  	
  WITHHOLDING RIGHTS

  	
  10

  
	
  SECTION 2.9.

  	
  LOST CERTIFICATES

  	
  10

  
	
   

  	
   

  	
   

  
	
  ARTICLE 3

  	
  THE
  SURVIVING CORPORATION

  	
  11

  
	
   

  	
   

  	
   

  
	
  SECTION 3.1.

  	
  CERTIFICATE OF INCORPORATION

  	
  11

  
	
  SECTION 3.2.

  	
  BYLAWS

  	
  11

  
	
  SECTION 3.3.

  	
  DIRECTORS AND OFFICERS

  	
  11

  
	
   

  	
   

  	
   

  
	
  ARTICLE 4

  	
  REPRESENTATIONS
  AND WARRANTIES OF THE COMPANY

  	
  11

  
	
   

  	
   

  	
   

  
	
  SECTION 4.1.

  	
  CORPORATE EXISTENCE AND POWER

  	
  11

  
	
  SECTION 4.2.

  	
  CORPORATE AUTHORIZATION

  	
  11

  
	
  SECTION 4.3.

  	
  GOVERNMENTAL AUTHORIZATION

  	
  12

  
	
  SECTION 4.4.

  	
  NON-CONTRAVENTION

  	
  12

  
	
  SECTION 4.5.

  	
  CAPITALIZATION

  	
  13

  
	
  SECTION 4.6.

  	
  SUBSIDIARIES

  	
  14

  
	
  SECTION 4.7.

  	
  SEC FILINGS

  	
  15

  
	
  SECTION 4.8.

  	
  FINANCIAL STATEMENTS

  	
  15

  
	
  SECTION 4.9.

  	
  DISCLOSURE DOCUMENTS

  	
  16

  
	
  SECTION 4.10.

  	
  ABSENCE OF CERTAIN CHANGES

  	
  17

  
	
  SECTION 4.11.

  	
  NO UNDISCLOSED MATERIAL LIABILITIES

  	
  19

  
	
  SECTION 4.12.

  	
  COMPLIANCE WITH LAWS AND COURT ORDERS

  	
  19

  
	
  SECTION 4.13.

  	
  LITIGATION

  	
  20

  
	
  SECTION 4.14.

  	
  FINDERS’ FEES

  	
  20

  
	
  SECTION 4.15.

  	
  OPINION OF FINANCIAL ADVISOR

  	
  20

  
	
  SECTION 4.16.

  	
  TAXES

  	
  20

  



 


i

















 


	
  SECTION 4.17.

  	
  EMPLOYEES AND EMPLOYEE BENEFIT PLANS

  	
  22

  
	
  SECTION 4.18.

  	
  ENVIRONMENTAL MATTERS

  	
  23

  
	
  SECTION 4.19.

  	
  PROPERTY AND LEASES

  	
  24

  
	
  SECTION 4.20.

  	
  INTELLECTUAL PROPERTY

  	
  24

  
	
  SECTION 4.21.

  	
  MATERIAL CONTRACTS

  	
  25

  
	
  SECTION 4.22.

  	
  AFFILIATE TRANSACTIONS

  	
  28

  
	
  SECTION 4.23.

  	
  ANTI-TAKEOVER STATUTES

  	
  28

  
	
  SECTION 4.24.

  	
  INSURANCE

  	
  28

  
	
  SECTION 4.25.

  	
  SUPPLIERS

  	
  28

  
	
  SECTION 4.26.

  	
  COLLECTIVE BARGAINING; LABOR DISPUTES; COMPLIANCE

  	
  28

  
	
  SECTION 4.27.

  	
  PERMITS

  	
  29

  
	
   

  	
   

  	
   

  
	
  ARTICLE 5

  	
  REPRESENTATIONS
  AND WARRANTIES OF PARENT

  	
  29

  
	
   

  	
   

  	
   

  
	
  SECTION 5.1.

  	
  CORPORATE EXISTENCE

  	
  30

  
	
  SECTION 5.2.

  	
  CORPORATE AUTHORIZATION

  	
  30

  
	
  SECTION 5.3.

  	
  GOVERNMENTAL AUTHORIZATION

  	
  30

  
	
  SECTION 5.4.

  	
  NON-CONTRAVENTION

  	
  30

  
	
  SECTION 5.5.

  	
  DISCLOSURE DOCUMENTS

  	
  31

  
	
  SECTION 5.6.

  	
  FINDERS’ FEES

  	
  31

  
	
   

  	
   

  	
   

  
	
  ARTICLE 6

  	
  COVENANTS
  OF THE COMPANY

  	
  31

  
	
   

  	
   

  	
   

  
	
  SECTION 6.1.

  	
  CONDUCT OF THE COMPANY

  	
  31

  
	
  SECTION 6.2.

  	
  STOCKHOLDER MEETING; PROXY MATERIAL

  	
  33

  
	
  SECTION 6.3.

  	
  NO SOLICITATION

  	
  34

  
	
  SECTION 6.4.

  	
  TAX MATTERS

  	
  35

  
	
  SECTION 6.5.

  	
  STOCKHOLDER LITIGATION

  	
  35

  
	
  SECTION 6.6.

  	
  COMPANY FEES AND EXPENSES

  	
  36

  
	
   

  	
   

  	
   

  
	
  ARTICLE 7

  	
  COVENANTS
  OF PARENT AND THE COMPANY

  	
  36

  
	
   

  	
   

  	
   

  
	
  SECTION 7.1.

  	
  CONSENTS

  	
  36

  
	
  SECTION 7.2.

  	
  CERTAIN FILINGS

  	
  36

  
	
  SECTION 7.3.

  	
  PUBLIC ANNOUNCEMENTS

  	
  37

  
	
  SECTION 7.4.

  	
  FURTHER ASSURANCES

  	
  37

  
	
  SECTION 7.5.

  	
  ACCESS TO INFORMATION

  	
  37

  
	
  SECTION 7.6.

  	
  NOTICES OF CERTAIN EVENTS

  	
  37

  
	
  SECTION 7.7.

  	
  INDEMNIFICATION, EXCULPATION AND INSURANCE

  	
  38

  
	
   

  	
   

  	
   

  
	
  ARTICLE 8

  	
  CONDITIONS
  TO THE MERGER

  	
  39

  
	
   

  	
   

  	
   

  
	
  SECTION 8.1.

  	
  CONDITIONS TO OBLIGATIONS OF EACH PARTY

  	
  39

  
	
  SECTION 8.2.

  	
  CONDITIONS TO THE OBLIGATIONS OF PARENT AND MERGER SUBSIDIARY

  	
  39

  



 


ii

















 


	
  SECTION 8.3.

  	
  CONDITION TO THE OBLIGATIONS OF THE COMPANY

  	
  40

  
	
   

  	
   

  	
   

  
	
  ARTICLE 9

  	
  TERMINATION

  	
  40

  
	
   

  	
   

  	
   

  
	
  SECTION 9.1.

  	
  TERMINATION

  	
  40

  
	
  SECTION 9.2.

  	
  EFFECT OF TERMINATION

  	
  42

  
	
   

  	
   

  	
   

  
	
  ARTICLE 10

  	
  MISCELLANEOUS

  	
  42

  
	
   

  	
   

  	
   

  
	
  SECTION 10.1.

  	
  NOTICES

  	
  42

  
	
  SECTION 10.2.

  	
  SURVIVAL OF REPRESENTATIONS AND WARRANTIES

  	
  43

  
	
  SECTION 10.3.

  	
  AMENDMENTS; WAIVERS

  	
  43

  
	
  SECTION 10.4.

  	
  FEES AND EXPENSES

  	
  44

  
	
  SECTION 10.5.

  	
  SUCCESSORS AND ASSIGNS

  	
  44

  
	
  SECTION 10.6.

  	
  PARTIES IN INTEREST

  	
  45

  
	
  SECTION 10.7.

  	
  GOVERNING LAW

  	
  45

  
	
  SECTION 10.8.

  	
  JURISDICTION

  	
  45

  
	
  SECTION 10.9.

  	
  WAIVER OF JURY TRIAL

  	
  45

  
	
  SECTION 10.10.

  	
  COUNTERPARTS; EFFECTIVENESS

  	
  45

  
	
  SECTION 10.11.

  	
  ENTIRE AGREEMENT

  	
  46

  
	
  SECTION 10.12

  	
  CAPTIONS

  	
  46

  
	
  SECTION 10.13.

  	
  SEVERABILITY

  	
  46

  



 


iii

















 


AGREEMENT
AND PLAN OF MERGER


 


AGREEMENT AND PLAN OF MERGER dated as of March 16,
2006 among BOSTON RESTAURANT ASSOCIATES, INC., a Delaware corporation (the “Company”), DOLPHIN DIRECT EQUITY PARTNERS,
LP, a Delaware limited partnership (“Parent”),
and BRAIDOL ACQUISITION CORP., a Delaware corporation (“Merger Subsidiary”).


 


WHEREAS, the Parent and the Company have
agreed to merge Merger Subsidiary and the Company, upon the terms and subject
to the conditions set forth herein (the “Merger”);
and


 


WHEREAS, the Special Committee of the Board
of Directors of the Company (the “Special Committee”) and the Board of Directors of the
Merger Subsidiary each have determined that the Merger is fair to and in the
best interests of their respective stockholders, declared the advisability of,
and approved and adopted, this Agreement and the transactions contemplated
hereby.


 


NOW THEREFORE, in consideration of the
premises and of the mutual covenants, representations, warranties and agreements
herein contained, the parties hereto agree as follows:


 


ARTICLE 1


 


DEFINITIONS


 


SECTION 1.1.  Definitions. 
(a) The following terms, as used herein, have
the following meanings:


 


“Acquisition
Proposal” means, other than the transactions contemplated by this
Agreement, any offer or proposal for, any indication of interest in, or any
submission of inquiries from any Third Party relating to (i) any
acquisition or purchase, direct or indirect, of 25% or more of the consolidated
assets of the Company and its Subsidiaries or over 25% of any class of equity
or voting securities of the Company or any of its Subsidiaries whose assets,
individually or in the aggregate, constitute more than 25% of the consolidated
assets of the Company, (ii) any tender offer  (including a self tender) or exchange offer
that, if consummated, would result in such Third Party’s beneficially owning
25% or more of any class of equity or voting securities of the Company or any
of its Subsidiaries whose assets, individually or in the aggregate, constitute
more than 25% of the consolidated assets of the Company, (iii) a merger,
consolidation, share exchange, business combination, sale of substantially all
the assets, reorganization, recapitalization, liquidation, dissolution or other
similar transaction involving the Company or any of its Subsidiaries whose
assets, individually or in the aggregate, constitute more than 25% of the
consolidated assets of the Company or (iv) any public announcement by any
Third Party of an intention to do any of the foregoing or any agreement to
engage in any of the foregoing.


 


“Affiliate”
means, with respect to any Person, any other Person directly or indirectly
controlling, controlled by, or under common control with such Person; provided
that, with respect to (i) Parent or Merger Subsidiary prior to the
Effective Time, neither the Company nor any of its Subsidiaries shall be deemed
to be an “Affiliate” thereof, (ii) the Company prior to the Effective
Time, neither Parent nor any of its Subsidiaries shall be deemed to be an “Affiliate”


 

















 


thereof and (iii) Parent and its Subsidiaries, only Parent and its
Subsidiaries shall be deemed to be “Affiliates” thereof.


 


“Business Day” means a day, other than Saturday, Sunday or other day on which
commercial banks in New York, New York are authorized or required by law to
close.


 


“Certificate
of Designation” means the Company’s Certificate of Designation for a
Series of Preferred Stock.


 


“Code”
means the Internal Revenue Code of 1986.


 


“Company
Balance Sheet” means the consolidated balance sheet of the Company
as of April 24, 2005 and the footnotes thereto set forth in the Company 10-K.


 


“Company
Balance Sheet Date” means April 24, 2005.


 


“Company
Common Stock” means the common stock, $.01 par value, of the
Company.


 


“Company
Preferred Stock” means the Series A Preferred Stock, $.01 par
value, of the Company.


 


“Company
Stock” means together the Company Common Stock and the Company
Preferred Stock.


 


“Company 10-K”
means the Company’s annual report on Form 10-K for the fiscal year ended April 24,
2005.


 


“Contributing
Stockholders” means the stockholders of the Company listed on Schedule A
hereto.


 


“Delaware
Law” means the General Corporation Law of the State of Delaware.


 


“Employee
Plan” means each material “employee benefit plan,” as defined in Section 3(3) of
ERISA, and each employment,
compensation, deferred compensation, stock option or other stock related
rights, severance, change-in-control, profit-sharing, bonus, incentive,
vacation or other similar agreement, plan, arrangement or policy (written or
oral), which is maintained, administered or contributed to by the
Company or any of its Subsidiaries and covers any employee, former employee,
director or consultant of the Company or any of its Subsidiaries, or with
respect to which the Company or any of its Subsidiaries has any liability.


 


“Environmental
Laws” means any federal, state, local or foreign law in effect and
as interpreted as of the date of this Agreement or as of the Closing Date
(including, without limitation, common law), treaty, judicial decision,
regulation, rule, judgment, order, decree, injunction, permit or governmental
restriction or requirement or any agreement with any Governmental Authority or
other third party, relating to human health and safety, the environment or to
pollutants, contaminants, wastes or chemicals or any toxic, radioactive,
ignitable, corrosive, reactive or otherwise hazardous substances, wastes or
materials.


 


2

















 


“Environmental
Permits” means all permits, licenses, franchises, certificates,
approvals and other similar authorizations of governmental authorities relating
to or required by Environmental Laws and affecting, or relating in any way to,
the business of the Company or any Subsidiary as currently conducted.


 


“ERISA”
means the Employee Retirement Income Security Act of 1974.


 


“ERISA
Affiliate” means any entity that, together with the Company or a
Subsidiary, would be treated as a single employer under Section 414 of the
Code.


 


“Intellectual
Property” means (i) all patents including, without limitation,
United States, non-United States, and international patents, patent
applications and statutory invention registrations, (ii) all trademarks
including, without limitation, all registered and unregistered United States,
non-United States, and international trademarks, service marks, trade dress,
logos, trade names, corporate names and other source identifiers, and
registrations and applications for registration thereof, (iii) all copyrights
including, without limitation, all United States, non-United States, and
international copyrights and registrations and applications for registration
thereof, (iv) all Internet domain name registrations, (v) all
confidential and proprietary information, including trade secrets and know-how,
and (vi) all goodwill associated with any of the foregoing.


 


“Lien”
means, with respect to any property or asset, any mortgage, lien, pledge,
charge, security interest, encumbrance or other adverse claim of any kind in
respect of such property or asset.  For
purposes of this Agreement, a Person shall be deemed to own subject to a Lien
any property or asset that it has acquired or holds subject to the interest of
a vendor or lessor under any conditional sale agreement, capital lease or other
title retention agreement relating to such property or asset.


 


“Material
Adverse Effect” means, with respect to any Person, an event, change,
circumstance or effect that is or is reasonably likely (i) to be
materially adverse to the financial condition, business, liabilities, assets or
results of operations of such Person and its Subsidiaries, taken as a whole or (ii) to
prevent or materially impair or delay the consummation of the transactions
contemplated by this Agreement other than any such event, change, circumstance
or effect (a) relating to general economic, regulatory or political
conditions, except to the extent such event, change, circumstance or effect
disproportionately affects such Person and its Subsidiaries, taken as a whole, (b) relating
to the fast-service, high volume pizzeria industry, or the fast-service
restaurant industry generally, except to the extent such event, change,
circumstance or effect disproportionately affects such Person and its
Subsidiaries, taken as a whole, (c) relating to any change in the trading
price of the common stock of such Person or (d) relating to any
reduction-in-force.


 


“1933 Act”
means the Securities Act of 1933.


 


“1934 Act”
means the Securities Exchange Act of 1934.


 


“Permitted
Encumbrances” means (i) liens for current taxes and other
statutory liens and trusts not yet due and payable or that are being contested
in good faith, (ii) liens that were incurred in the ordinary course of
business, such as carriers’, warehousemen’s, landlords’ and 


 


3

















 


mechanics’ liens and other similar liens arising in the ordinary course
of business, (iii) liens on personal property leased under operating
leases, (iv) liens, pledges or deposits incurred or made in connection
with workmen’s compensation, unemployment insurance and other social insurance
and social security benefits, or securing the performance of bids, tenders,
leases, contracts (other than for the repayment of borrowed money), statutory
obligations, progress payments, surety and appeal bonds and other obligations
of like nature, in each case incurred in the ordinary course of business, (v) pledges
of or liens on manufactured products as security for any drafts or bills of
exchange drawn in connection with the importation of such manufactured products
in the ordinary course of business, (vi) liens under Article 2 of the
Uniform Commercial Code that are special property interests in goods identified
as goods to which a contract refers, and (vii) liens under Article 9
of the Uniform Commercial Code that are purchase money security interests, none
of which are material in the aggregate or individually.


 


“Permits”
mean the material permits, licenses, approvals, certifications and
authorizations from any Governmental Authority, including, without limitation,
those obtained under Regulatory Laws.


 


“Person”
means an individual, corporation, partnership, limited liability company,
association, trust or other entity or organization, including a government or
political subdivision or an agency or instrumentality thereof.


 


“Regulatory
Laws” mean any federal, state, county, municipal, local or foreign
statute, ordinance, rule, regulation, permit, consent, waiver, notice,
approval, registration, finding of suitability, license, judgment, order,
decree, injunction or other authorization applicable to, governing or relating
to the legal or regulatory status or the activities of the Company or its
Subsidiaries, including, without limitation, with respect to alcoholic beverage
control, amusement, health and safety and fire safety.


 


“SEC”
means the Securities and Exchange Commission.


 


“Subsidiary”
with respect to any Person, means any corporation or other organization,
whether incorporated or unincorporated, (i) of which such Person or any
other Subsidiary of such Person is a general partner or (ii) of which at
least 50% of the securities or other interests having by their terms ordinary
voting power to elect at least 50% of the Board of Directors or others
performing similar functions with respect to such corporation or other
organization is directly or indirectly owned or controlled by such Person, by
any one or more of its Subsidiaries, or by such Person and one or more of its
Subsidiaries.


 


“Third Party” means any Person as defined in Section 13(d) of the
1934 Act, other than Parent or any of its Affiliates.


 


Any reference in this Agreement to a statute
shall be to such statute, as amended from time to time, and to the rules and
regulations promulgated thereunder.


 


(b)           Each
of the following terms is defined in the Section set forth opposite such
term:  


 


4

















 


	
  Term

  	
   

  	
  Section

  
	
  Brown Rudnick

  	
   

  	
  6.3(b)

  
	
  Certificates

  	
   

  	
  2.4

  
	
  Charter Amendment

  	
   

  	
  3.1

  
	
  Closing

  	
   

  	
  2.2

  
	
  Common Stock Merger Consideration

  	
   

  	
  2.3(a)

  
	
  Company

  	
   

  	
  Preamble

  
	
  Company Licensed Intellectual Property

  	
   

  	
  4.20

  
	
  Company Owned Intellectual Property

  	
   

  	
  4.20

  
	
  Company Proxy Statement

  	
   

  	
  4.9

  
	
  Company SEC Documents

  	
   

  	
  4.7

  
	
  Company Securities

  	
   

  	
  4.5

  
	
  Company Stockholder Meeting

  	
   

  	
  6.2

  
	
  Company Stock Option

  	
   

  	
  2.6

  
	
  Company Subsidiary Securities

  	
   

  	
  4.6

  
	
  Company Warrant

  	
   

  	
  2.6

  
	
  Confidentiality Agreement

  	
   

  	
  6.3

  
	
  Covered Persons

  	
   

  	
  7.7(c)

  
	
  Dissenting Shares

  	
   

  	
  2.5

  
	
  Effective Time

  	
   

  	
  2.1

  
	
  End Date

  	
   

  	
  9.1

  
	
  Exchange Agent

  	
   

  	
  2.4

  
	
  GAAP

  	
   

  	
  4.8

  
	
  Governmental Authority

  	
   

  	
  4.21

  
	
  Joint Venture

  	
   

  	
  4.6

  
	
  Majority-Minority Vote

  	
   

  	
  4.2(c)

  
	
  Material Contracts

  	
   

  	
  4.21

  
	
  Merger

  	
   

  	
  Recitals

  
	
  Merger Consideration

  	
   

  	
  2.3

  
	
  Merger Fees

  	
   

  	
  6.6

  
	
  Merger Subsidiary

  	
   

  	
  Preamble

  
	
  Multiemployer Plan

  	
   

  	
  4.17

  
	
  Parent

  	
   

  	
  Preamble

  
	
  Preferred Stock Merger Consideration

  	
   

  	
  2.3(b)

  
	
  Sarbanes-Oxley Act

  	
   

  	
  4.7

  
	
  Schedule 13E-3

  	
   

  	
  4.9

  
	
  Special Committee

  	
   

  	
  Recitals

  
	
  Stockholder Vote

  	
   

  	
  4.2

  
	
  Successor Firm

  	
   

  	
  6.6

  
	
  Superior Proposal

  	
   

  	
  6.3

  
	
  Superior Proposal Agreement

  	
   

  	
  9.1

  
	
  Surviving Corporation

  	
   

  	
  2.1

  
	
  Tax Return

  	
   

  	
  4.16

  
	
  Tax or Taxes

  	
   

  	
  4.16

  
	
  Taxing Authority

  	
   

  	
  4.16

  



 


5

















 


ARTICLE 2


 


THE MERGER


 


SECTION 2.1.  The Merger.  (a) Subject
to the terms and conditions of this Agreement, at the Effective Time, Merger
Subsidiary shall be merged with and into the Company in accordance with
Delaware Law, whereupon the separate existence of the Merger Subsidiary shall
cease, and the Company shall be the surviving corporation and continue its
corporate existence under Delaware Law; provided that Parent may, in its
sole discretion, elect instead that, subject to the terms and conditions of
this Agreement, at the Effective Time, the Company shall be merged with and
into Merger Subsidiary, in accordance with Delaware Law, whereupon the separate
existence of the Company shall cease, and Merger Subsidiary shall be the
Surviving Corporation and continue its corporate existence under Delaware Law
provided, however, that no such election shall (i) alter or change the
amount or kind of Merger Consideration, (ii) materially delay receipt of
any approval required for the consummation of the transactions contemplated by
this Agreement, (iii) require the Company to obtain the agreement,
approval or consent of any person whose agreement, approval or consent was not
required when the Merger Subsidiary was to be merged with and into the Company
or reacquire any material consent or approval (unless Parent shall waive the
requirement to obtain such agreement, approval or consent in a manner
satisfactory to the Company), (iv) impair or delay the consummation of the
Merger or any other transaction contemplated hereby or the ability of any party
hereto to perform its obligations hereunder by more than fifteen calendar days;
or (v) cause the Company to breach any representation, warranty, covenant
or agreement (unless Parent shall waive compliance with such representation,
warranty, covenant or agreement in a manner satisfactory to the Company).  The corporation that survives the Merger is
referred to as the “Surviving Corporation.”


 


(b)           As soon as practicable after
satisfaction or, to the extent permitted hereunder, waiver of all conditions to
the Merger, the Company and Merger Subsidiary will file a certificate of merger
executed as provided in the Delaware Law with the Office of the Secretary of State
of the State of Delaware and make all other filings or recordings required by
Delaware Law in connection with the Merger. 
The Merger shall become effective at such time (the “Effective Time”) as the certificate of merger is duly filed
with, and accepted for recording by, the Delaware Secretary of State (or at
such later time as may be agreed upon by the parties to this Agreement and as
specified in the certificate of merger).


 


(c)           From and after the Effective Time,
the Surviving Corporation shall possess all the rights, privileges, powers and
franchises and be subject to all of the restrictions, disabilities and duties
of the Company and Merger Subsidiary, all as provided under Delaware Law.


 


SECTION 2.2.  Consummation.  Unless this Agreement shall
have been terminated and the Merger shall have been abandoned pursuant to Section 9,
the closing of the Merger (the “Closing”) shall take place at 10:00 a.m. on a date to be
specified by the parties, which shall be as soon as practicable (but not more
than five Business Days) after satisfaction or, to the extent permitted
hereunder, waiver of all conditions to the Merger set forth in Article 8,
other than conditions that by their nature are to be satisfied at the Effective
Time and that will in fact be satisfied at the Effective Time, at the office of
Hughes Hubbard &
Reed LLP, One Battery Park


 


6

















 


Plaza, New York, New York, or such other
date and place as shall have been agreed to by the parties.


 


SECTION 2.3        Conversion of Shares.  At
the Effective Time,


 


(a)           except as otherwise provided in Section 2.3(c) or as provided in Section 2.5 with respect to
shares of Company Common Stock as to which appraisal rights have been exercised,
each share of Company Common Stock outstanding immediately prior to the
Effective Time shall be converted into the right to receive in cash from Parent
an amount equal to $0.70, without interest (the “Common Stock  Merger Consideration”);


 


(b)           except
as otherwise provided in Section 2.3(c) or as
provided in Section 2.5 with respect to shares of Company Preferred Stock
as to which appraisal rights have been exercised, each share of Company
Preferred Stock outstanding immediately prior to the Effective Time shall be
converted into the right to receive in cash from Parent an amount in cash equal
to (i) the Series A Preferred Stock Liquidation Preference (as
defined in the Certificate of Designation), without interest  and (ii) the product of (x) the number
of shares of Company Common Stock that such share of Company Preferred Stock is
convertible into immediately prior to the Effective Time and (y) $0.70 (the “Preferred Stock  Merger
Consideration”, together with the Common Stock Merger Consideration,
the “Merger Consideration”)


 


(c)           each share of Company Stock held by
the Company as treasury stock immediately prior to the Effective Time and each
share of Company Stock held by the Contributing Stockholders or Parent
immediately prior to the Effective Time shall be canceled, and no payment shall
be made with respect thereto; provided, however, that shares of
Company Stock held by Contributing Stockholders shall be canceled pursuant to
this subsection (c) only to the extent that the respective
Contributing Stockholder owning such shares has agreed to such cancellation;
and


 


(d)           each
share of common stock, par value $0.01 per share, and each share of preferred
stock, par value $0.01 per share, of Merger Subsidiary outstanding immediately
prior to the Effective Time shall be converted into and become one share of
common stock, par value $0.01 per share and one share of preferred stock, par
value $0.01 per share respectively, of the Surviving Corporation with the same
rights, powers and privileges as the shares so converted and shall constitute
the only outstanding shares of capital stock of the Surviving Corporation.


 


SECTION 2.4.  Surrender and Payment.  (a) Prior
to the Effective Time, Parent or Merger Subsidiary shall appoint an agent (the “Exchange Agent”) for the purpose of
exchanging certificates representing shares of Company Common Stock and Company
Preferred Stock (collectively, the “Certificates”)
for the Merger Consideration.  Parent or
Merger Subsidiary will deposit with the Exchange Agent an amount in cash equal
to the aggregate Merger Consideration to be paid in respect of the shares of
Company Stock.  Promptly after the
Effective Time, Parent or Merger Subsidiary will send, or will cause the
Exchange Agent to send, to each holder of shares of Company Stock at the
Effective Time a letter of transmittal and instructions (which shall specify
that the delivery shall be effected, and risk of loss and title shall pass,
only upon proper delivery of the Certificates to the Exchange Agent) for use in
such exchange.


 


7

















 


(b)           Each holder of shares of Company
Stock that have been converted into the right to receive the Merger
Consideration will be entitled to receive, upon surrender to the Exchange Agent
of a Certificate, together with a properly completed letter of transmittal, the
Merger Consideration in respect of the Company Stock represented by such
Certificate.  Until so surrendered, each
such Certificate shall represent after the Effective Time for all purposes the
right to receive such Merger Consideration.


 


(c)           If
any portion of the Merger Consideration is to be paid to a Person other than
the Person in whose name the Certificate is registered, it shall be a condition
to such payment that the Certificate 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
Certificate or establish to the satisfaction of the Surviving Corporation and
the Exchange Agent that such Tax has been paid or is not payable.


 


(d)           After
the Effective Time, there shall be no further registration of transfers of
shares of Company Stock.  If, after the
Effective Time, Certificates are presented to the Surviving Corporation, they
shall be canceled and exchanged for the Merger Consideration provided for, and
in accordance with the procedures set forth, in this Article.


 


(e)           Any
portion of the Merger Consideration made available to the Exchange Agent
pursuant to Section 2.4(a) that remains
unclaimed by the holders of shares of Company Stock 12 months after the
Effective Time shall be returned to Parent or Surviving Corporation, upon
demand, and any such holder who has not exchanged them for the Merger
Consideration in accordance with this Section prior to that time shall
thereafter look only to Parent or Surviving Corporation for payment of the
Merger Consideration, in respect of such shares without any interest
thereon.  Notwithstanding the foregoing,
neither Parent nor Surviving Corporation shall be liable to any holder of
shares of Company Stock for any amounts paid to a public official pursuant to
applicable abandoned property, escheat or similar laws.  Any amounts remaining unclaimed by holders of
shares of Company Stock two years after the Effective Time (or such earlier
date, immediately prior to such time when the amounts would otherwise escheat
to or become property of any Governmental Authority) shall become, to the
extent permitted by applicable law, the property of Parent or Surviving
Corporation free and clear of any claims or interest of any Person previously
entitled thereto.


 


(f)            Prior to the Effective Time, the
Company shall take all steps reasonably necessary to cause the transactions
contemplated hereby and any other dispositions of equity securities of the
Company (including derivative securities) in connection with this Agreement by
each individual who is a director or officer of the Company, to be exempt under
Rule 16b-3 promulgated under the 1934 Act.


 


SECTION 2.5. 
Dissenting Shares. 
Notwithstanding Section 2.3, shares of Company Stock which are
issued and outstanding immediately prior to the Effective Time and which are
held by a holder who has not voted such shares of Company Stock in favor of the
Merger, who shall have delivered a written demand for appraisal of such shares
of Company Stock in the manner provided by Delaware Law and who, as of the
Effective Time, shall not have effectively withdrawn or lost such right to
appraisal (“Dissenting Shares”)
shall not be converted into a


 


8

















 


right to receive the Merger Consideration.  The holders thereof shall be entitled only to
such rights as are granted by Section 262 of Delaware Law.  Each holder of Dissenting Shares who becomes
entitled to payment for such shares of Company Stock pursuant to Section 262
of Delaware Law shall receive payment therefor from the Surviving Corporation
in accordance with Delaware Law; provided, however,
that (i) if any such holder of Dissenting Shares shall have failed to
establish such holder’s entitlement to appraisal rights as provided in Section 262
of Delaware Law, (ii) if any such holder of Dissenting Shares shall have
effectively withdrawn such holder’s demand for appraisal of such Company Stock
or lost such holder’s right to appraisal and payment for such holder’s shares
of Company Stock under Section 262 of Delaware Law or (iii) if
neither any holder of Dissenting Shares nor the Surviving Corporation shall
have filed a petition demanding a determination of the value of all Dissenting
Shares within the time provided in Section 262 of Delaware Law, such
holder shall forfeit the right to appraisal of such shares of Company Stock and
each such share of Company Stock shall be treated as if it had been converted,
as of the Effective Time, into a right to receive the Merger Consideration,
without interest thereon, from Parent as provided in Section 2.3
hereof.  The Company shall give Parent
prompt notice of any demands received by the Company for appraisal of shares of
Company Stock, and Parent shall have the right to participate in all
negotiations and proceedings with respect to such demands.  The Company shall not, except with the prior
written consent of Parent, make any payment with respect to, or settle or offer
to settle, any such demands.


 


SECTION 2.6.  Stock Options, Warrants and Employee Stock Purchase Plan.  (a) Prior
to the Effective Time, Parent and the Company shall take such action as is
permissible under the applicable agreement to cause each outstanding option to
purchase shares of Company Common Stock under any employee stock option plan,
agreement or arrangement of the Company (a “Company
Stock Option”), whether or not exercisable or vested, to be canceled
and the Surviving Corporation shall pay each such holder promptly after the
Effective Date an amount in cash, if any, determined by multiplying (i) the
excess, if any, of the Merger Consideration over the applicable exercise price
of such Company Stock Option by (ii) the number of shares of Company
Common Stock such holder could have purchased had such holder exercised such
Company Stock Option to the extent vested and exercisable immediately prior to
the Effective Time


 


(b)           Prior to the Effective Time, the
Company shall take such action as is permissible under the applicable agreement
to cause each outstanding warrant to purchase shares of Company Common Stock (a
“Company Warrant”), whether or not
exercisable, to be canceled and the Surviving Corporation shall pay each such
holder promptly after the Effective Date an amount in cash, if any, determined
by multiplying (i) the excess, if any, of the Merger Consideration over
the applicable exercise price of such Company Warrant by (ii) the number
of shares of Company Common Stock such holder could have purchased had such
holder exercised such Company Warrant to the extent exercisable immediately
prior to the Effective Time.


 


(c)           Prior
to the Effective Time, the Company shall (i) obtain any consents from
holders of Company Stock Options and Company Warrants and (ii) make any
amendments to the terms of such Company Stock Options or Company Warrants that
is permissible under the applicable agreements to give effect to the transactions
contemplated by this Section 2.6.  The Company shall take no action to
accelerate the exercisability or vesting of any Company Stock Option or to
provide for a cash-out of any Company Stock Option which by its terms is not


 


9

















 


exercisable
and vested or entitled to such a cash-out. 
The Company shall take no action to accelerate the exercisability of any
Company Warrant or to provide for a cash-out of any Company Warrant which by
its terms is not exercisable or entitled to such a cash-out.


 


(d)           The
Company shall make no
agreement, oral or written, direct or indirect, nor payment with respect to any
Company Stock Option or Company Warrant without the Parent’s prior written
consent, and the Company shall take any action the Parent may reasonably
request in order to provide for the cancellation by the Company of, all or a
portion of, the Company Stock Options and the Company Warrants.  Subject to the foregoing, the Company shall
not be obligated to make any payment with respect to any Company Stock Option
or Company Warrant prior to the Closing.


 


SECTION 2.7.  Adjustments.  If,
during the period between the date of this Agreement and the Effective Time,
the outstanding shares of capital stock of the Company shall have been changed
into a different number of shares as a result of any reclassification,
recapitalization, stock split or combination, exchange or readjustment of
shares, or any stock dividend thereon with a record date during such period,
the Merger Consideration and any other amounts payable pursuant to this
Agreement shall be appropriately adjusted.


 


SECTION 2.8.  Withholding Rights.  Each
of the Exchange Agent, the Surviving Corporation, Merger Subsidiary and Parent
shall be entitled to deduct and withhold from the consideration otherwise
payable to any Person pursuant to this Article such amounts as it is
required to deduct and withhold with respect to the making of such payment
under any provision of federal, state, local or foreign Tax law.  If the Exchange Agent, the Surviving
Corporation, Surviving Corporation or Parent, as the case may be, so withholds
amounts, such amounts shall be treated for all purposes of this Agreement as
having been paid to the holder of the shares of Company Common Stock in respect
of which the Exchange Agent, the Surviving Corporation or Parent, as the case
may be, made such deduction and withholding.


 


SECTION 2.9.  Lost Certificates.  If
any Certificate shall have been lost, stolen or destroyed, upon (i) the
making of an affidavit of that fact by the Person claiming such Certificate to
be lost, stolen or destroyed and, (ii) if reasonably required by the
Surviving Corporation, execution of a written indemnity agreement providing
contractual indemnification (without bond or other security) against any claim
that may be made against the Surviving Corporation with respect to such
Certificate, the Exchange Agent will issue, in exchange for such lost, stolen
or destroyed Certificate, the Merger Consideration to be paid in respect of the
shares of Company Stock represented by such Certificate, as contemplated by
this Article.


 


ARTICLE 3


 


THE SURVIVING
CORPORATION


 


SECTION 3.1.  Certificate of Incorporation.  The
certificate of incorporation of the Surviving Corporation shall be amended at
the Effective Time to read in its entirety as set forth on Exhibit A to
this Agreement (the “Charter Amendment”).


 


10

















 


SECTION 3.2.  Bylaws.  The
bylaws of Merger Subsidiary in effect at the Effective Time shall be the bylaws
of the Surviving Corporation until amended in accordance with applicable law.


 


SECTION 3.3.  Directors and Officers.  From
and after the Effective Time, until successors are duly elected or appointed
and qualified in accordance with applicable law, (i) the directors of
Merger Subsidiary immediately prior to the Effective Time shall be the
directors of the Surviving Corporation and (ii) the officers of the
Company immediately prior to the Effective Time shall be the officers of the
Surviving Corporation.


 


ARTICLE 4


 


REPRESENTATIONS
AND WARRANTIES OF THE COMPANY


 


The Company represents and warrants to Parent
that:


 


SECTION 4.1.  Corporate Existence and Power.  The
Company is a corporation duly incorporated, validly existing and in good
standing under the laws of the State of Delaware and has all corporate powers
and all governmental licenses, authorizations, permits, consents and approvals
required to carry on its business as now conducted, except for those licenses,
authorizations, permits, consents and approvals the absence of which would not
have, individually or in the aggregate, a Material Adverse Effect on the
Company.  The Company is duly qualified
to do business as a foreign corporation and is in good standing in each jurisdiction
where such qualification is necessary, except for those jurisdictions where
failure to be so qualified would not have, individually or in the aggregate, a
Material Adverse Effect on the Company. 
The Company has heretofore delivered to Parent true and complete copies
of the certificate of incorporation and bylaws of the Company and each
Subsidiary thereof as currently in effect.


 


SECTION 4.2.  Corporate Authorization.  (a) The
execution, delivery and performance by the Company of this Agreement and the
consummation by the Company of the transactions contemplated hereby are within
the Company’s corporate powers and, except for the Stockholder Vote, have been
duly authorized by all necessary corporate action on the part of the
Company.  This Agreement has been duly
executed and delivered by the Company and constitutes a valid and binding
agreement of the Company, enforceable against the Company in accordance with
its terms.


 


(b)           (i) 
The Special Committee was duly authorized and constituted on April 22,
2005, (ii) the Special Committee, at a meeting thereof duly called and
held on March 6, 2006, (A) determined that this Agreement and the
Merger are fair to and in the best interests of the Company and its
stockholders (other than Parent, its Subsidiaries and the Contributing
Stockholders), (B) determined that this Agreement and the Merger should be
approved and declared advisable and (C) resolved to recommend to the Board
of Directors of the Company that the Board of Directors of the Company approve
and declare the advisability of this Agreement and the Merger and to recommend
that the stockholders of the Company approve the Merger and adopt this
Agreement, and (iii) the Board of Directors of the Company, at a meeting
thereof duly called and held on March 10, 2006, in reliance upon the
recommendation of the


 


11

















 


Special
Committee (A) determined that this Agreement and the Merger are fair to
and in the best interests of the Company and its stockholders, (B) approved
and declared the advisability of this Agreement and the Merger and (C) resolved
to recommend that the stockholders of the Company approve the Merger and adopt
this Agreement.


 


(c)           Under applicable law and this Agreement, (i) with
respect to the Merger, the affirmative vote of the holders of a majority of the
voting power of the outstanding shares of Company Common Stock and Company
Preferred Stock, voting together as a single class, entitled to vote thereon, (ii) with
respect to the Merger, the affirmative vote of a majority of the shares of
Company Common Stock and Company Preferred Stock, voting together as a single
class, cast and not held by the Contributing Stockholders, Parent or any fund
under common control (the “Majority-Minority
Vote”) and (iii) with respect to the Charter Amendment, the
affirmative vote of the holders of a majority of the voting power of the
outstanding shares of Company Common Stock and Company Preferred Stock, voting
together as a single class, entitled to vote thereon, in each case, outstanding
on the record date established by the Board of Directors of the Company in
accordance with the bylaws of the Company, Delaware law, any other applicable
law and this Agreement, at the Company Stockholders Meeting, are the only votes
of the Company’s stockholders required to approve this Agreement and the
transactions contemplated hereby, including the Merger and Charter Amendment
(collectively, clauses (c)(i), (ii) and (iii) mean the “Stockholder Vote”).


 


SECTION 4.3.  Governmental Authorization.  Except as
set forth on Schedule 4.3, the execution, delivery
and performance by the Company of this Agreement and the consummation by the
Company of the transactions contemplated hereby require no action by or in
respect of, or filing with, any Governmental Authority, other than (i) the
filing of a certificate of merger with respect to the Merger with the Delaware
Secretary of State and appropriate documents with the relevant authorities of
other states in which the Company is qualified to do business, (ii) compliance
with the 1933 Act, the 1934 Act, and any other applicable securities laws,
whether state or foreign and (iii) any actions or filings the absence of
which would not have, individually or in the aggregate, a Material Adverse
Effect on the Company.


 


SECTION 4.4.  Non-contravention.  Except as
set forth on Schedule 4.4, the execution, the
execution, delivery and performance by the Company of this Agreement and the
consummation by the Company of the transactions contemplated hereby do not and
will not (i) contravene, conflict with, or result in any violation or
breach of any provision of the certificate of incorporation or bylaws of the
Company, (ii) assuming compliance with the matters referred to in Section 4.3, materially contravene, conflict with or result in a
material violation or breach of any provision of any applicable law, statute,
ordinance, rule, regulation, judgment, injunction, order or decree applicable
to the Company or any of its Subsidiaries, (iii) require any consent or
other action by any Person under, constitute a default under, or an event that,
with or without notice or lapse of time or both, would constitute a default
under, or cause or permit the termination, cancellation, acceleration or other
change of any right or obligation or the loss of any benefit to which the
Company or any of its Subsidiaries is entitled under any provision of any
agreement or other instrument binding upon the Company or any of its
Subsidiaries or any of their assets or any license, franchise, permit,
certificate, approval or other similar authorization affecting, or relating in
any way to, the assets or business of 
the Company and its Subsidiaries or (iv) result in the creation or
imposition of any Lien on any asset of the Company or any of its


 


12

















 


Subsidiaries, except in the case of clause (iii) for such
defaults, terminations, cancellations, accelerations, changes or losses
referred to in clause (iii) that would not have, individually or in the
aggregate, a Material Adverse Effect on the Company.


 


SECTION 4.5.  Capitalization.  (a) The
authorized capital stock of the Company consists of 25,000,000 shares of
Company Common Stock and 10,000,000 shares of preferred stock.  As of November 22, 2005, there were
7,035,170 outstanding shares of Company Common Stock, 1,147,056 outstanding
shares of Company Preferred Stock, employee stock options to purchase an
aggregate of 1,274,800 shares of Company Common Stock (of which options to
purchase an aggregate of 1,274,800 shares of Company Common Stock are
exercisable as of the date of this Agreement); 1,160,000 shares of Company
Common Stock reserved for the issuance upon conversion of the Variable Rate
Subordinated Convertible Debenture; 500,000 shares of Company Common Stock
issuable upon the exercise of a warrant issued to Management Services, Inc.
f/k/a Jordan American Holdings; 76,000 shares of Company Common Stock issuable
upon the exercise of a warrant issued to Commerce Bank and Trust Company; and 25,000
shares of Company Common Stock issuable upon the exercise of a warrants issued
to Lucille Salhany.  All outstanding
shares of capital stock of the Company have been, and all shares that may be
issued pursuant to outstanding warrants, the 1994 Director Stock Option Plan,
the 1994 Combination Employee Stock Option Plan, the 2002 Combination Stock
Option and Share Reward Plan will be, when issued in accordance with the
respective terms thereof, duly authorized and validly issued and are fully paid
and nonassessable.


 


(b)           Except
as set forth in this Section 4.5 or on Schedule 4.5(b) and
for changes since April 24, 2005 resulting from the exercise of warrants
or employee stock options outstanding on such date, there are no outstanding (i) shares
of capital stock or voting securities of the Company, (ii) securities of
the Company convertible into or exchangeable for shares of capital stock or
voting securities of the Company or (iii) options or other rights to
acquire from the Company, or other obligation of the Company to issue, any
capital stock, voting securities or securities convertible into or exchangeable
for capital stock or voting securities of the Company (the items in clauses
(i), (ii) and (iii) being referred to collectively as the “Company Securities”). 
There are no outstanding obligations of the Company or any of its
Subsidiaries to repurchase, redeem or otherwise acquire any of the Company
Securities.  Except as set forth on Schedule 4.5(b),
there are no contracts, agreements or arrangements to which the Company or any
of its Subsidiaries is a party pursuant to which the Company or any of its
Subsidiaries is or could be required to register any Company Securities or any
other securities of the Company under the 1933 Act.


 


SECTION 4.6.  Subsidiaries.  (a) Each
Subsidiary of the Company is a corporation duly incorporated, validly existing
and in good standing under the laws of its jurisdiction of incorporation, has
all corporate powers and all governmental licenses, authorizations, permits,
consents and approvals required to carry on its business as now conducted,
except for those licenses, authorizations, permits, consents and approvals the
absence of which would not have, individually or in the aggregate, a Material
Adverse Effect on the Company.  Each such
Subsidiary is duly qualified to do business as a foreign corporation and is in
good standing in each jurisdiction where such qualification is necessary,
except for those jurisdictions where failure to be so qualified would not have,
individually or in the aggregate, a Material Adverse Effect on the
Company.  All Subsidiaries of the
Company, their respective jurisdictions of


 


13

















 


incorporation and their respective authorized and outstanding capital stock
are identified on Schedule 4.6 hereto. 
Except as set forth on Schedule 4.6(a), there are no contracts,
agreements or arrangements to which the Company or any of its Subsidiaries is a
party pursuant to which the Company or any of its Subsidiaries is or could be
required to register any Company Subsidiary Securities or any other securities
of any Subsidiary of the Company under the 1933 Act.


 


(b)           All of the outstanding capital stock
of, or other voting securities or ownership interests in, each Subsidiary of
the Company, is owned by the Company, directly or indirectly, free and clear of
any Lien and free of any other limitation or restriction (including any
restriction on the right to vote, sell or otherwise dispose of such capital
stock or other voting securities or ownership interests).  There are no outstanding (i) securities
of the Company or any of its Subsidiaries convertible into or exchangeable for
shares of capital stock or other voting securities or ownership interests in
any Subsidiary of the Company or (ii) options or other rights to acquire
from the Company or any of its Subsidiaries, or other obligation of the Company
or any of its Subsidiaries to issue, any capital stock or other voting
securities or ownership interests in, or any securities convertible into or
exchangeable for any capital stock or other voting securities or ownership
interests in, any Subsidiary of the Company (the items in clauses (i) and (ii) being
referred to collectively as the “Company Subsidiary
Securities”).  There are no
outstanding obligations of the Company or any of its Subsidiaries to
repurchase, redeem or otherwise acquire any of the Company Subsidiary
Securities.


 


(c)           Schedule 4.6(c) hereto
lists all Persons other than the Subsidiaries, in which the Company directly or
indirectly through one or a series of Subsidiaries (describing in detail any
such indirect ownership) owns any equity, voting or similar interest in, or any
interest convertible into or exchangeable or exercisable for any equity, voting
or similar interest in, any Person (any such Person being a “Joint Venture”).  Each
such interest in each Joint Venture is duly authorized, validly issued, fully
paid and nonassessable and, except as set forth on Schedule 4.6(c), each
such interest is owned by the Company or a Subsidiary of the Company, directly
or indirectly, free and clear of any Lien and free of any other limitation or
restriction (including any restriction on the right to vote, sell or otherwise
dispose of such capital stock or other voting securities or ownership
interests).


 


SECTION 4.7.  SEC Filings.  (a) The
Company has delivered or made available to Parent (i) the Company’s annual
reports on Form 10-K for its fiscal years ended 2002, 2003 and 2004, (ii) its
quarterly reports on Form 10-Q for its fiscal quarters ended July 24,
2005, October 23, 2005 and January 22, 2006, (iii) its proxy or
information statements relating to meetings of, or actions taken without a
meeting by, the stockholders of the Company held since April 24, 2004, and
(iv) all of its other reports, statements, schedules and registration
statements filed with the SEC since April 24, 2004 (the documents referred
to in this Section 4.7(a), collectively, the “Company SEC Documents”).


 


(b)           As of its filing date, each Company
SEC Document filed prior to the date of this Agreement complied, and each such
Company SEC Document filed subsequent to the date of this Agreement will
comply, as to form in all material respects with the applicable requirements of
the 1933 Act and the 1934 Act, as the case may be.


 


14

















 


(c)           As of its filing date (or, if amended
or superceded by a filing prior to the date of this Agreement, on the date of
such filing), each Company SEC Document filed prior to the date of this
Agreement pursuant to the 1934 Act did not, and each such Company SEC Document
filed subsequent to the date of this Agreement will 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.


 


(d)           Each Company SEC Document that is a
registration statement, as amended or supplemented, if applicable, filed prior
to the date of this Agreement pursuant to the 1933 Act, as of the date such
registration statement or amendment became effective, did not, and each such
Company SEC Document filed subsequent to the date of this Agreement will not,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein
not misleading.


 


(e)           At the time each Company’s SEC
Document filed after July 30, 2002 was filed with the SEC, such Company
SEC Document included or was accompanied by the certifications required by the
Sarbanes-Oxley Act of 2002 and the rules and regulations promulgated
thereunder (the “Sarbanes-Oxley Act”),
each such certification was true and correct and complied with the
Sarbanes-Oxley Act and each such Company SEC Document otherwise complied in all
material respects with the applicable requirements of the Sarbanes-Oxley Act.


 


SECTION 4.8.  Financial Statements.  (a) The
audited consolidated financial statements and unaudited consolidated interim
financial statements of the Company included in the Company SEC Documents
fairly present in all material respects, in conformity with generally accepted
accounting principles (“GAAP”)
applied on a consistent basis (except as may be indicated in the notes thereto or
as permitted by Form 10-Q of the SEC), the consolidated financial position
of the Company and its consolidated Subsidiaries as of the dates thereof and
their consolidated results of operations and cash flows for the periods then
ended.


 


(b)           The
financial statements of the Company included in the Company SEC Documents at
the time filed (and, in the case of registration statements and proxy
statements, on the dates of effectiveness and the dates of mailing,
respectively) complied as to form in all material respects with all applicable
accounting requirements and with the published rules and regulations of
the SEC with respect thereto, were prepared in accordance with GAAP applied on
a consistent basis during the periods involved (except as may be indicated in
the notes thereto or in the case of unaudited statements, as permitted by Form 10-Q
of the SEC), and fairly present, in all material respects, the consolidated
financial position of the Company and its consolidated subsidiaries as at the
dates thereof and the consolidated results of their operations and cash flows
for the periods then ended.


 


(c)           The
management of the Company has designed disclosure controls and procedures to
ensure that material information relating to the Company and its consolidated Subsidiaries
is made known to the management of the Company by others within those
entities.  In all material respects, the
Company on a consolidated basis maintains a system of internal accounting
controls sufficient to provide reasonable assurance that:  (i) transactions are executed in
accordance with management’s general or specific authorizations; (ii) transactions
are recorded as necessary to permit preparation of financial statements in
conformity with GAAP


 


15

















 


and
to maintain asset accountability; (iii) access to assets is permitted only
in accordance with management’s general or specific authorization; and (iv) the
recorded accountability for assets is compared with the existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.


 


(d)           Since
June 30, 2002, neither the Company nor any of its Subsidiaries nor, to the
knowledge of the Company, any director, officer, employee, auditor, accountant
or representative of the Company has received or otherwise had or obtained
knowledge of any complaint, allegation, assertion or claim, whether written or
oral, regarding the accounting or auditing practices, procedures, methodologies
or methods of the Company or any of its Subsidiaries or their respective
internal accounting controls, including any complaint, allegation, assertion or
claim that the Company has engaged in questionable accounting or auditing
practices.  No attorney representing the
Company or any of its Subsidiaries, whether or not employed by the Company or
any of its Subsidiaries, has reported evidence of a material violation of
securities laws, breach of fiduciary duty or similar violation by the Company
or any of its officers, directors, employees or agents acting on behalf of the
Company or in the Company’s workplace to the Board of Directors of the Company
or any committee thereof or to any director or officer of the Company.


 


(e)           To
the knowledge of the Company, no employee of the Company or any of its Subsidiaries
has provided or is providing information to any law enforcement agency
regarding the commission or possible commission of any crime or the material
violation or possible material violation of any law, rule, regulation, order,
decree or injunction.  Neither the
Company nor any of its Subsidiaries nor, to the knowledge of the Company, any
contractor, subcontractor or agent of the Company or any such Subsidiary of the
Company has discharged, demoted, suspended, threatened, harassed or in any
other manner discriminated against an employee of the Company or any of its
Subsidiaries in the terms and conditions of employment because of any act of
such employee described in 18 U.S.C. §1514A(a), except such actions as are
immaterial in any respect.


 


SECTION 4.9.  Disclosure Documents.  (a) The
proxy or information statement of the Company to be filed with the SEC in
connection with the Merger (the “Company Proxy Statement”)
and any required Schedule 13E-3 filing (the “Schedule 13E-3”)
and any amendments or supplements thereto will, when filed, comply as to form
in all material respects with the applicable requirements of the 1934 Act.  At the time the Company Proxy Statement or
any amendment or supplement thereto is first mailed to stockholders of the
Company, and at the time, if any, the Stockholders Vote is obtained and at the
Effective Time, the Company Proxy Statement, as supplemented or amended, if
applicable, will 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.  The representations and
warranties contained in this Section 4.9(a) will
not apply to statements or omissions included in the Company Proxy Statement or
the Schedule 13E-3 or any amendments or supplements thereto based upon
information furnished to the Company in writing specifically for use therein (A) by
Parent or (B) by the Contributing Stockholder with respect to themselves individually
or in the aggregate.


 


16

















 


(b)           None of the information provided by
the Company for inclusion in the Schedule 13E-3 filing nor any amendment
or supplement thereto, at the time of the filing of the Schedule 13E-3 or
any amendment or supplement thereto and at all times subsequent thereto up to
and including the Effective Time, will contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements made therein, in light of the
circumstances under which there were made, not misleading.


 


SECTION 4.10.  Absence of Certain Changes.  Since
the Company Balance Sheet Date, the business of the Company and its Subsidiaries
has been conducted in the ordinary course consistent with past practices and,
except as set forth in Schedule 4.10 and as
disclosed in the Company SEC Documents filed prior to the date of this
Agreement, there has not been:


 


(a)           any event, occurrence, development or
state of circumstances or facts that has had, individually or in the aggregate,
a Material Adverse Effect on the Company;


 


(b)           any adoption of, or any proposal to
amend, the certificate of incorporation or bylaws or other constituent
documents of the Company or any of its Subsidiaries;


 


(c)           any adoption by the Company or any of
its Subsidiaries of a plan or agreement of complete or partial liquidation,
dissolution, merger, consolidation, restructuring, recapitalization or other
material reorganization (other than a merger or consolidation between
wholly-owned Subsidiaries of the Company) or any acquisition by the Company or
any of its Subsidiaries of a material amount of stock or assets of any other
Person;


 


(d)           any sale, lease, license or other
disposition by the Company or any of its Subsidiaries of any Subsidiary or
assets, securities or property representing 5% or more of the consolidated
assets of the Company;


 


(e)           any issuance, sale, grant,
disposition of, pledge or other encumbrance, or authorization of the issuance,
sale, grant, disposition or pledge or other encumbrance of any Company
Securities or Company Subsidiary Securities, except for the issuance of Company
Stock to Parent or its Subsidiaries or upon exercise of Company Stock Options
or Company Warrants disclosed in the Company SEC Documents;


 


(f)            any redemption, purchase or other
acquisition by the Company or any of its Subsidiaries of, or any proposal by
the Company or any of its Subsidiaries to redeem, purchase or otherwise acquire,
any shares of capital stock or other equity securities of the Company or any of
its Subsidiaries;


 


(g)           any split, combination, subdivision
or reclassification of any shares of capital stock or other equity securities
of the Company or any of its Subsidiaries;


 


(h)           any declaration, setting aside or
payment of any dividend or any other actual, constructive or deemed
distribution (whether in cash, stock or property) in respect of any shares of
capital stock of the Company or any of its Subsidiaries, or any other payments
to stockholders in their capacity as such, other than dividends declared or
paid by any wholly-owned Subsidiary of the Company to any other wholly-owned
Subsidiary of the Company or to the Company;


 


17

















 


(i)            any amendment of any material term
of any outstanding security of the Company or any of its Subsidiaries;


 


(j)            any incurrence, assumption or
guarantee by the Company or any of its Subsidiaries of any indebtedness for
borrowed money or the making by the Company or any of its Subsidiaries of any
loans, advances or capital contributions to, or investments in, any Person
other than (x) the Company’s wholly-owned Subsidiaries and (y) loans, advances,
capital contributions and investments in the ordinary course of business and in
principal amounts not exceeding $25,000 individually and $75,000 in the
aggregate;


 


(k)           any creation or other incurrence by
the Company or any of its Subsidiaries of any material Lien on any asset other
than in the ordinary course of business consistent with past practices and
other than Permitted Encumbrances;


 


(l)            any (i) grant of any severance
or termination pay to (or amendment to any existing arrangement with) any
director, officer or senior-most store employee of the Company or any of its
Subsidiaries, (ii) increase in benefits payable to directors, officers or
employees under any existing severance or termination pay policies or
employment agreements, (iii) entering into any employment, deferred
compensation or other similar agreement (or any amendment to any such existing
agreement) with any director, officer or employee of the Company or any of its
Subsidiaries, (iv) establishment, adoption or amendment (except as
required by applicable law) of any collective bargaining agreement, bonus,
profit-sharing, thrift, pension, retirement, deferred compensation,
compensation, stock option, restricted stock or other benefit plan or
arrangement covering any director, officer or employee of the Company or any of
its Subsidiaries or (v) increase in compensation, bonus or other benefits
payable to any director, officer or employee of the Company or any of its
Subsidiaries;


 


(m)          any relinquishment by the Company or
any of its Subsidiaries of any contract or other right, in either case,
material to the Company and its Subsidiaries, taken as a whole;


 


(n)           any
change in any method of accounting or accounting principles or practice by the
Company or any of its Subsidiaries (including any change in fiscal year),
except for any such change required by reason of a concurrent change in GAAP or
Regulation S-X under the 1934 Act;


 


(o)           any settlement of, or proposal to
settle, any litigation, investigation, arbitration, proceeding or other claim
that is material to the Company and its Subsidiaries, taken as a whole;


 


(p)           any
Tax election made or changed, any annual tax accounting period changed, any
method of tax accounting adopted or changed, any amended Tax Returns or claims
for Tax refunds filed, any closing agreement entered into, any Tax claim, audit
or assessment settled, or any right to claim a Tax refund, offset or other
reduction in Tax liability surrendered;


 


(q)           any
capital expenditure in an amount exceeding $25,000 individually or $75,000 in
the aggregate;


 


(r)            any
making of or change in any investment in cash equivalents or marketable
securities in an amount exceeding $25,000 individually or $75,000 in the
aggregate;


 


18

















 


(s)           any
new line of business entered into by the Company or any of its Subsidiaries;


 


(t)            any
termination or closing of any facility, business or restaurant location;


 


(u)           any damage, destruction or other
casualty loss (whether or not covered by insurance) affecting the business or
assets of the Company or any of its Subsidiaries that has had, individually or
in the aggregate, a Material Adverse Effect on the Company; or


 


(v)           any labor dispute, other than routine
individual grievances, or any activity or proceeding by a labor union or
representative thereof to organize any employees of the Company or any of its
Subsidiaries, or any lockouts, strikes, slowdowns, work stoppages or
threats thereof by or with respect to such employees.


 


SECTION 4.11.  No Undisclosed Material Liabilities.  There are no liabilities or obligations of the Company or any of its
Subsidiaries of any kind whatsoever, whether accrued, contingent, absolute,
determined, determinable or otherwise, and to the knowledge of the Company, there
is no existing condition, situation or set of circumstances that could
reasonably be expected to result in such a liability or obligation, other than:


 


(a)           liabilities
or obligations disclosed and provided for in the Company Balance Sheet or in
the notes thereto; and


 


(b)           liabilities
or obligations arising in the ordinary course of business after the Company
Balance Sheet Date that would not have, individually or in the aggregate, a
Material Adverse Effect on the Company.


 


SECTION 4.12.  Compliance with Laws and Court Orders.  The Company and each of its Subsidiaries is and has been in material compliance
with, and to the knowledge of the Company is not under investigation with
respect to and has not been threatened to be charged with or given notice of
any material violation of, any applicable law, statute, ordinance, rule, regulation,
judgment, injunction, order or decree.


 


SECTION 4.13.  Litigation.  Except as disclosed on Schedule 4.13
and expressly set forth in the Company SEC Documents filed prior to the date of this Agreement, there is no action, suit,
investigation or proceeding pending against, or, to the knowledge of the
Company, threatened against or affecting, the Company, any of its Subsidiaries,
or, to the knowledge of the Company pending or threatened against any present
or former officer, director or employee of the Company or any of its
Subsidiaries or any Person for whom the Company or any Subsidiary may be liable
or any of their respective properties before any Governmental Authority or
arbitrator that, if determined or resolved adversely in accordance with the
plaintiff’s demands, would reasonably be expected to have, individually or in
the aggregate, a Material Adverse Effect on the Company or that in any manner
challenges or seeks to prevent, enjoin, alter or materially delay the Merger.


 


SECTION 4.14.  Finders’ Fees.  Except for BB&T Capital Markets, a copy of whose engagement
agreement has been provided to Parent prior to the date of this Agreement,
there is no investment banker, broker, finder or other intermediary that has
been retained by or is authorized to act on behalf of the Company or any of its
Subsidiaries who might be entitled to


 


19

















 


any fee or commission from
the Company or any of its Affiliates in connection with the transactions
contemplated by this Agreement.


 


SECTION 4.15.  Opinion of Financial Advisor.  The Company has received the written opinion of BB&T Capital
Markets, financial advisor to the Special Committee, to the effect that, as of
the date of this Agreement, the Merger Consideration is fair to the Company’s
stockholders, other than Parent, its Subsidiaries and the Contributing
Stockholders, from a financial point of view. 
A copy of such opinion has been provided to Parent prior to the
execution of this Agreement.


 


SECTION 4.16.  Taxes. 
(a) All Tax Returns required by applicable law to be filed with any
Taxing Authority by, or on behalf of, the Company or any of its Subsidiaries
have been filed when due in accordance in all material respects with all
applicable laws, and all such Tax Returns are, or will be at the time of
filing, true and complete in all material respects.


 


(b)           The Company and
each of its Subsidiaries has paid or has caused to be paid all material Taxes
due and owing by them to the appropriate Taxing Authority except to the extent
such Taxes are being contested in good faith. 
Where payment is not yet due or is being contested in good faith, the
Company and each of its Subsidiaries will establish or cause to be established
in accordance with GAAP on or before the Effective Time an adequate accrual or
reserves for all Taxes through the end of the last period for which the Company
and its Subsidiaries ordinarily record items on their respective books.


 


(c)           To
the knowledge of the Company, there is no claim, audit, action, suit,
proceeding or investigation now pending or threatened against or with respect
to the Company or its Subsidiaries in respect of any Tax or Tax matter.


 


(d)           During the five-year period ending on the date of this Agreement,
neither the Company nor any of its Subsidiaries was a distributing corporation
or a controlled corporation in a transaction intended to be governed by Section 355
of the Code.


 


(e)           Neither the Company nor any of its Subsidiaries owns an interest in
real property in any jurisdiction in which a Tax is imposed, or the value of
the interest is reassessed, on the transfer of an interest in real property and
which treats the transfer of an interest in an entity that owns an interest in
real property as a transfer of the interest in real property.


 


(f)            Neither the Company nor any of its
Subsidiaries has participated in a “reportable transaction” as defined in
Treasury Regulations Section 1.6011-4(b) or is otherwise required to
maintain a list pursuant to Treasury Regulations 301.6112-1 or 301.6112-1T, in
each case after the applicable effective date.


 


(g)           Schedule 4.16
contains a list of all jurisdictions (whether foreign or domestic) in which the
Company or any of its Subsidiaries currently files Tax Returns.  Neither the Company nor any of its Subsidiaries
has received notice from a jurisdiction in which it is not currently filing a
Tax Return that it should be filing a Tax Return in such jurisdiction.


 


(h)           As of April 24, 2005, the
aggregate amount of net operating losses of the Company for federal income tax
purposes is equal to $4,939,000, and the amount thereof not


 


20

















 


limited
as a result of a 1994 acquisition was not less than $4,210,000 by any material
amount.  Except as set forth on Schedule 4.16,
to the knowledge of the Company, the Company has not undergone a change of
ownership within the meaning of Section 382(g) of the Code.


 


(i)            All stock options and warrants were
issued with a strike price no less than fair market value, as determined by the
Company in a manner consistent with proposed Treasury Regulation 1.409A-1(b)(5)(i) and (v) at the date of issuance.


 


(j)            “Tax”
means (i) any tax, governmental fee or other like assessment or charge of
any kind whatsoever (including, but not limited to, withholding on amounts paid
to or by any Person), together with any interest, penalty, addition to tax or
additional amount imposed by any Governmental Authority (a “Taxing Authority”) responsible for the imposition thereof,
and any liability for any of the foregoing as transferee, (ii) in the case
of the Company or any of its Subsidiaries, liability for the payment of any
amount of the type described in clause (i) as a result of being or having
been before the Effective Time a member of an affiliated, consolidated,
combined or unitary group, or a party to any agreement or arrangement, as a
result of which liability of the Company or any of its Subsidiaries to a Taxing
Authority is determined or taken into account with reference to the activities
of any other Person, and (iii) liability of the Company or any of its
Subsidiaries for the payment of any amount as a result of being party to any
Tax sharing agreement or with respect to the payment of any amount imposed on
any Person of the type described in (i) or (ii) as a result of any
existing express or implied agreement or arrangement (including, but not
limited to, an indemnification agreement or arrangement).  “Tax Return”
shall mean any report, return, document, declaration or other information or
filing required to be supplied to any Taxing Authority with respect to Taxes,
including information returns, any documents with respect to or accompanying
payments of estimated Taxes, or with respect to or accompanying requests for
the extension of time in which to file any such report, return, document,
declaration or other information.


 


SECTION 4.17. 
Employees and Employee Benefit Plans. 
(a) The Company has provided to Parent a list providing, separately
by location, the names, job titles and current annual salary or wage rates of
all of the directors, officers and senior-most store
employees of the Company or
any of its Subsidiaries, together with a summary of all bonus, incentive
compensation or other additional compensation or similar benefits paid to such
person for 2005 and paid to date for 2006.


 


(b)           Except as set forth on Schedule 4.17, neither the
Company nor any of its Subsidiaries (i) retains the services of any
individuals performing services in the capacity of independent
contractors, or (ii) has entered into an agreement with a third-party
organization under which employees of such third party organization perform
services for the Company.


 


(c)           Schedule 4.17 contains a correct and complete list identifying
each Employee Plan.  Copies of each
Employee Plan (and, if applicable, related trust or funding agreements or
insurance policies) and all amendments thereto and written interpretations
thereof have been furnished prior to the date of this Agreement to Parent
together with, except as disclosed on Schedule 4.17(f) hereof, the
most recent annual report (Form 5500 including, if applicable, Schedule B
thereto) and tax return (Form 990) prepared in connection with any such
plan or trust.


 


21

















 


(d)           Neither
the Company nor any ERISA Affiliate sponsors, maintains or contributes to, or
has in the six year period ending on the date of this Agreement sponsored,
maintained or contributed to, any “employee benefit plan” (within the meaning
of Section 3(3) of ERISA) which is subject to Title IV of ERISA.


 


(e)           Neither
the Company nor any ERISA Affiliate contributes to, or has in the six year
period ending on the date of this Agreement contributed to, any multiemployer
plan, as defined in Section 3(37) of ERISA (a “Multiemployer Plan”).


 


(f)            Each
Employee Plan which is intended to be qualified under Section 401(a) of
the Code has received a favorable determination letter, or has pending or has
time remaining in which to file, an application for such determination from the
Internal Revenue Service, and the Company is not aware of any reason why any
such determination letter should be revoked. 
The Company has, prior to the date of this Agreement, made available to
Parent copies of the most recent Internal Revenue Service determination letters
with respect to each such Employee Plan. 
Except as disclosed on Schedule 4.17(f) hereof, each Employee
Plan has been maintained in material compliance with its terms and with the
requirements prescribed by any and all statutes, orders, rules and
regulations, including but not limited to ERISA and the Code, which are
applicable to such Employee Plan.  No
material events have occurred with respect to any Employee Plan that could
result in payment or assessment by or against the Company of any material
excise taxes under Sections 4972, 4975, 4976, 4977, 4979, 4980B, 4980D, 4980E
or 5000 of the Code.


 


(g)           Except
as disclosed on Schedule 4.17(g), or as may result from the operation of Section 2.6,
the consummation of the transactions contemplated by this Agreement will not
(either alone or together with any other event) entitle any employee or
independent contractor of the Company or any of its Subsidiaries to retirement,
severance or bonus pay or accelerate the time of payment or vesting or trigger
any payment of funding (through a grantor trust or otherwise) of compensation
or benefits under, increase the amount payable or trigger any other material
obligation pursuant to, any Employee Plan. 
Except as disclosed on Schedule 4.17(g), giving full effect to Section 2.6
hereof, there is no contract, plan or arrangement (written or otherwise)
covering any employee or former employee of the Company or any of its
Subsidiaries that, individually or collectively, would entitle any employee or
former employee to any severance or other payment solely as a result of the
transactions contemplated hereby, or could give rise to the payment of any
amount that would not be deductible pursuant to the terms of Section 280G
or 162(m) of the Code.


 


(h)           Neither
the Company nor any of its Subsidiaries has any liability in respect of
post-retirement health, medical or life insurance benefits for retired, former
or current employees of the Company or any of its Subsidiaries except as
required to avoid excise tax under Section 4980B of the Code.


 


(i)            There
has been no amendment to, written interpretation or announcement (whether or
not written) by the Company or any of its Affiliates relating to, or change in
employee participation or coverage under, an Employee Plan which would increase
materially the expense of maintaining such Employee Plan above the level of the
expense incurred in respect thereof for the fiscal year ended April 24,
2005.


 


22

















 


(j)            Neither
the Company nor any of its Subsidiaries is a party to or subject to, or is
currently negotiating in connection with entering into, any collective
bargaining agreement or other contract or understanding with a labor union or
organization.


 


(k)           All
contributions and payments accrued under each Employee Plan have been
discharged and paid on or prior to the date hereof except to the extent
reflected as a liability on the Company Balance Sheet, as it may be updated in
any Company SEC Documents.


 


(l)            There
is no action, suit, investigation, audit or proceeding pending against or
involving or, to the knowledge of the Company, threatened against or involving,
any Employee Plan before any court or arbitrator or any state, federal or local
governmental body, agency or official.


 


SECTION 4.18.  Environmental Matters.  (a) Except
as set forth in the Company SEC Documents filed prior to the date of this
Agreement and except as would not reasonably be expected to have, individually
or in the aggregate, a Material Adverse Effect on the Company:


 


(i)            no notice, notification, demand,
request for information, citation, summons or order has been received, no
complaint has been filed, no penalty has been assessed, and no investigation,
action, claim, suit, proceeding or review is pending or, to the knowledge of
the Company, is threatened by any Governmental Authority or other Person
against the Company or its Subsidiaries relating to or arising out of any
Environmental Law;


 


(ii)           the Company, its Subsidiaries and, to
the knowledge of the Company, each of the predecessors of the Company or any of
its Subsidiaries, are and have been in compliance with all Environmental Laws
and all Environmental Permits; and


 


(iii)          there are no liabilities of or
relating to the Company, any of its Subsidiaries or, to the knowledge of the
Company, any of the predecessors of the Company or any of its Subsidiaries of
any kind whatsoever, whether accrued, contingent, absolute, determined,
determinable or otherwise arising under or relating to any Environmental Law.


 


(b)           There has been no environmental
investigation, study, audit, test, review or other analysis conducted of which
the Company has knowledge in relation to the current or prior business of the
Company or any of its Subsidiaries or any property or facility now or
previously owned or leased by the Company or any of its Subsidiaries that has
not been delivered to Parent at least five days prior to the date of this
Agreement.


 


SECTION 4.19.  Property and Leases.  (a) The
Company and its Subsidiaries have sufficient title to and right to use their
properties and assets to conduct their respective businesses in all material
respects as currently conducted.  All
assets of the Company and its Subsidiaries necessary for the conduct of the
business of the Company and such Subsidiaries as currently conducted will be
owned or usable by the Surviving Corporation immediately after the Effective
Time.


 


23

















 


(b)           Each
parcel of real property owned, leased, used or held for use or otherwise needed
for the conduct of the business by the Company or any of its Subsidiaries is
listed in Schedule 4.19(b).  All
leases of such real property under which the landlord has a right to consent
arising as a result of the transactions set forth in this Agreement are so
indicated in such Section.  All leases
for such leased real property and all amendments thereto have been made
available to Parent or a representative of Parent prior to the date of this
Agreement and are listed in Schedule 4.19(b).


 


(c)           All
leases of real property leased for the use or benefit of the Company or any of
its Subsidiaries to which the Company or any such Subsidiary is a party, and
all amendments and modifications thereto are valid, binding and in full force
and effect on the Company, and there exists no default under any such lease by
the Company or any of its Subsidiaries or, to the knowledge of the Company, by
the landlord, nor any event which, with notice or lapse of time or both, would
constitute a default thereunder by the Company or the applicable Subsidiary or,
to the knowledge of the Company, by the landlord, except as would not,
individually or in the aggregate, have a Material Adverse Effect on the
Company.


 


SECTION 4.20.  Intellectual Property.  To the
knowledge of the Company, (a) except as listed on Schedule 4.20,
the conduct of the business of the Company and its Subsidiaries as currently
conducted does not materially infringe upon or misappropriate the Intellectual
Property rights of any third party, and no claim has been asserted to the
Company or any of its Subsidiaries in writing or, to the knowledge of the
Company, orally, that the conduct of the business of the Company and its
Subsidiaries as currently conducted infringes upon or may infringe upon or
misappropriate the Intellectual Property rights of any third party; (b) with
respect to each item of Intellectual Property owned by the Company or any of
its Subsidiaries (“Company Owned Intellectual
Property”), the Company or one of its Subsidiaries is the owner of
the entire right, title and interest in and to any Company Owned Intellectual
Property and is entitled to use such Company Owned Intellectual Property in the
operation of its respective business as currently conducted to the extent such
use is material to such business; (c) with respect to each item of
Intellectual Property licensed to the Company or any of its Subsidiaries that
is material to the business of the Company and its Subsidiaries as currently
conducted (“Company Licensed Intellectual
Property”), the Company or one of its Subsidiaries has the right to
use such Company Licensed Intellectual Property in the operation of its
respective business in accordance with the terms of the license agreement
governing such Company Licensed Intellectual Property; (d) the material
Company Owned Intellectual Property is valid and enforceable, and no claim has
been asserted in writing or, to the knowledge of the Company, orally, or
judgment entered that Company Owned Intellectual Property is invalid or
unenforceable in whole or in part; (e) except as listed on Schedule 4.20,
to the knowledge of the Company, no Person is engaging in any activity that
materially infringes upon the Company Owned Intellectual Property; (f) to
the knowledge of the Company, each material license of the Company Licensed
Intellectual Property is valid and enforceable and is binding on the Company
and its Subsidiaries and, to the Company’s knowledge, on all parties to the
licenses, and is in full force and effect; (g) neither the Company nor any
of its Subsidiaries or, to the knowledge of the Company, any other party to any
license of the Company Licensed Intellectual Property is in breach thereof or
default thereunder; (h) none of the Company Owned Intellectual Property has
been the subject of a judicial or administrative finding, opinion or office
action or has been adjudged invalid, unenforceable or unregistrable in whole or
in part; and (i) neither the execution


 


24

















 


of this
Agreement nor the consummation of any transaction contemplated hereby shall
materially adversely affect any of the Company’s rights with respect to the
Company Owned Intellectual Property or the Company Licensed Intellectual
Property.


 


SECTION 4.21.  Material Contracts.  (a) Subsections (i) through (xix) of Schedule 4.21
contain a list of all the following contracts, agreements and arrangements not
otherwise expressly set forth in the Company SEC Documents to which the Company
or any of its Subsidiary is a party (such contracts, agreements and
arrangements as are required to be set forth on Schedule 4.21 being the “Material Contracts”):


 


(i)            each contract and agreement which (A) is
likely to involve consideration of more than $50,000, in the aggregate, per
year or over the remaining term of such contract or (B) has a term longer
than one year, and which cannot be canceled by the Company or its Subsidiary
party thereto without penalty or further payment and without more than 60 days’
notice;


 


(ii)           all broker, distributor, dealer,
manufacturer’s representative, franchise, agency, sales promotion, market
research, marketing consulting and advertising contracts and agreements to
which the Company or any of its Subsidiaries is a party and which is likely to
involve consideration of more than $50,000 in the aggregate per year or over
the remaining term of such contract;


 


(iii)          all management contracts (excluding
contracts for employment) and contracts with other consultants, including any
contracts involving the payment of royalties or other amounts calculated based
upon the revenues or income of the Company or any of its Subsidiaries or income
or revenues related to any product of the Company or any of its Subsidiaries to
which the Company or any Subsidiary is a party and which is likely to involve
consideration of more than $50,000 in the aggregate per year or over the
remaining term of such contract;


 


(iv)          all contracts and agreements
evidencing indebtedness of the Company or any of its Subsidiaries;


 


(v)           all contracts and agreements with any
United States federal, state, county or local or non-United States government, governmental, regulatory or administrative authority,
agency, instrumentality or commission or any court, tribunal, or judicial or
arbitral body (each a “Governmental Authority”)
to which the Company or any of its Subsidiaries is a party;


 


(vi)          all contracts and agreements that
limit, or purport to limit, the ability of the Company or any of its
Subsidiaries, or, following the Effective Time, Parent or any of Parent’s
Affiliates to compete in any line of business or with any Person or in any
geographic area or during any period of time;


 


(vii)         all contracts and agreements providing
for benefits under any Employee Plan;


 


25

















 


(viii)        all material contracts or arrangements
that result in any Person holding a power of attorney from the Company or any
of its Subsidiaries that relates to the Company, any of its Subsidiaries or
their respective businesses;


 


(ix)           all contracts for employment for any
employee of the Company or any of its Subsidiaries;


 


(x)            all contracts, agreements and
constituent documents relating to Joint Ventures;


 


(xi)           all contracts and agreements between
the Company and any of its Subsidiaries on the one hand and any director,
officer, employee, shareholder or Affiliate (or any relative, spouse,
beneficiary or Affiliate of such Person) of the Company or any of its
Subsidiaries on the other hand;


 


(xii)          each operating lease and each capital
lease which (A) is likely to involve consideration of more than $50,000,
in the aggregate, per year or over the remaining term of such contract or (B) has
a term longer than one year; and


 


(xiii)         all other contracts and agreements,
whether or not made in the ordinary course of business, which are material to
the Company and its Subsidiaries or the conduct of their businesses, or the
absence of which would, individually or in the aggregate, have a Material
Adverse Effect.


 


(xiv)        each covenant not to compete or other
contract or agreement restricting the business or operations of the Company or
any Company Subsidiary or, to the knowledge of the Company, restricting any of
their respective executive officers or directors;


 


(xv)         each contract or agreement under which (A) any
person has directly or indirectly guaranteed indebtedness, liabilities or
obligations of the Company or a Company Subsidiary in excess of $50,000 or (B) the
Company or a Company Subsidiary has directly or indirectly guaranteed
indebtedness, liabilities or obligations of any other person (in each case
other than endorsements for the purpose of collection in the ordinary course of
business);


 


(xvi)        each supplier agreement requiring
payments in excess of $50,000 per year;


 


(xvii)       each contract or agreement requiring any
payment upon a change of control of the Company or any Company Subsidiary;


 


(xviii)      each contract or agreement the terms of
which the Company or any Company Subsidiary is or will be bound to share its
profits or pay any royalties;


 


(xix)         any derivative contract (including
swaps, options and forwards).


 


(b)           (i) Each
Material Contract is a legal, valid and binding agreement, and the Company or
the applicable Subsidiary of the Company is in compliance with all of its
material


 


26

















 


obligations contained
therein and none of the Material Contracts is in default by its terms (or with
or without notice or lapse of time or both would result in such a default) or
has been canceled by the other party; (ii) to the Company’s knowledge, no
other party is in breach or violation of, or default under, any Material
Contract; (iii) the Company and its Subsidiaries are not in receipt of any
claim of default under any Material Contract; and (iv) neither the execution
of this Agreement nor the consummation of any transaction contemplated hereby
shall (with or without notice or lapse of time or both) constitute a default,
give rise to cancellation rights, or otherwise adversely affect any of the
Company’s or any of its Subsidiaries’ rights under any Material Contract.


 


(c)           True
and complete copies of all Material Contracts, including all amendments
thereto, have, prior to the date of this Agreement, been made available to
Parent or a representative of Parent.


 


SECTION 4.22.  Affiliate Transactions. Except as disclosed on Schedule 4.22
and expressly set forth in the Company SEC Documents, (a) there are no
liabilities between the Company or any of its Subsidiaries on the one hand, and
any director, officer, employee or Affiliate (or any relative, spouse,
beneficiary or Affiliate of any such Person) of the Company or any of its
Subsidiaries on the other hand, (b) no director, officer, employee or
Affiliate (or any relative, spouse, beneficiary or Affiliate of any such Person)
of the Company or any of its Subsidiaries provides, or causes to be provided,
any goods or services to the Company or any of its Subsidiaries, and (c) neither
the Company nor any of its Subsidiaries provides or causes to be provided goods
or services to any director, officer, employee or Affiliate (or any relative,
spouse, beneficiary or Affiliate of any such Person) of the Company or any of
its Subsidiaries.


 


SECTION 4.23.  Anti-takeover Statutes.  The
Company has taken all action necessary to exempt the Merger, this Agreement and
the transactions contemplated hereby from any anti-takeover or similar statute
or regulation that applies or purports to apply to any such transactions.  Without limiting the generality of the
foregoing, the restrictions on “business combinations” (as defined in Section 203
of the Delaware Law) are inapplicable to the Merger, this Agreement and the
transactions contemplated by this Agreement.


 


SECTION 4.24.  Insurance.  Each of the Company and its
Subsidiaries maintains insurance policies (the “Insurance Policies”) against
all risks of a character and in such amounts as are usually insured against by
similarly situated companies in the same or similar businesses.  Each Insurance Policy is in full force and
effect and is valid, outstanding and enforceable, and all premiums due thereon
have been paid in full.  None of the
Insurance Policies will terminate or lapse (or be affected in any other
materially adverse manner) by reason of the transactions contemplated by this
Agreement.  Each of the Company and its
Subsidiaries has complied in all material respects with the provisions of each
Insurance Policy under which it is the insured party.  No insurer under any Insurance Policy has
cancelled or generally disclaimed liability under any such policy or, to the
Company’s knowledge, indicated any intent to do so or not to renew any such
policy.  All material claims under the
Insurance Policies have been filed in a timely fashion.  To the knowledge of the Company, since January 1,
2003, there have been no historical gaps in insurance coverage of the Company
or any of its Subsidiaries.


 


27

















 


SECTION 4.25.  Suppliers.  Set forth in Schedule 4.25 is a list of
the ten largest suppliers of the Company on a consolidated basis based on the
dollar value of materials, products or service purchased by the Company or any
of its Subsidiaries for the most recently ended fiscal year.  Since such date, there has not been, nor as a
result of the Merger is there anticipated to be, any change in relations with
any of the major suppliers of the Company or its Subsidiaries that,
individually or in the aggregate, would reasonably be expected to result in a
Material Adverse Effect.  The existing
suppliers of the Company and its Subsidiaries are adequate for the operation of
the Company’s business as operated on the date hereof.


 


SECTION 4.26.  Collective
Bargaining; Labor Disputes; Compliance.  There are
no collective bargaining agreements to which the Company or any of its
Subsidiaries is a party or under which it is bound.  No employee of the Company or its
Subsidiaries is represented by a union. 
Neither the Company nor any of its Subsidiaries is currently, nor has
been during the past three years, the subject of any union organizing campaign
or drive.  Neither the Company nor any of
its Subsidiaries is currently, nor has been during the past five years, the
subject of any strike, dispute, walk-out, work stoppage, slow down or lockout
involving the Company or any of its Subsidiaries nor, to the knowledge of the
Company, is any such activity threatened. 
Except as would not reasonably be expected to result in a Material
Adverse Effect, (i) each of the Company and each of its Subsidiaries has
complied with all laws relating to the employment and safety of labor,
including the National Labor Relations Act and other provisions relating to
wages, hours, benefits, collective bargaining and all applicable occupational
safety and health acts and laws, (ii) neither the Company nor any of its
Subsidiaries has engaged in any unfair labor practice or discriminated on the
basis of race, age, sex, disability or any other protected category in its
employment conditions or practices with respect to its employees, customers or
suppliers, and (iii) no action, suit, complaint, charge, grievance,
arbitration, employee proceeding or, to the knowledge of the Company,
investigation by or before any Governmental Authority brought by or on behalf
of any employee, prospective employee, former employee, retired employee, labor
organization or other representative of the Company’s and its Subsidiaries’
employees is pending or, to the knowledge of the Company, threatened against
the Company or any of its Subsidiaries. 
Neither the Company nor any of its Subsidiaries is a party to or
otherwise bound by any consent decree with or citation by any Governmental
Authority relating to the Company’s or its Subsidiaries’ employees or
employment practices relating to the Company’s or its Subsidiaries’ employees.  The Company and its Subsidiaries are and have
been in compliance in all material respects with all notice and other
requirements under the Worker Adjustment and Retraining Notification Act of
1988 (the “WARN Act”) and any similar foreign, state or local law relating to
plant closings and layoffs.  None of the
employees of the Company and any of its Subsidiaries has suffered an “employment
loss” (as defined in the WARN Act) within the three month period prior to the
date of this Agreement.


 


SECTION 4.27.  Permits.  The Company and the Company
Subsidiaries have in effect all Permits necessary for them to own, lease or
operate their properties and assets and to carry on their businesses as now
conducted, except for such Permits, the lack of which, individually or in the
aggregate, do not have, and would not reasonably be expected to have, a
Material Adverse Effect on the Company. 
There has occurred no violation of, default (with or without notice or
lapse of time or both) under, or event giving to others any right of
termination, amendment or cancellation of, with or without notice or lapse of
time or both, any such Permit, except for any termination, amendment or
cancellation of any Permit that, individually or in the aggregate, does


 


28

















 


not have,
and would not reasonably be expected to have, a Material Adverse Effect on the
Company.  Schedule 4.27 sets forth
all the licenses in which the Company or any Subsidiary has an interest.


 


ARTICLE 5


 


REPRESENTATIONS AND WARRANTIES OF PARENT


 


Parent
represents and warrants to the Company that:


 


SECTION 5.1.  Corporate Existence.  The
Parent is a limited partnership duly formed, validly existing and in good
standing under the laws of the State of Delaware.  The Merger Subsidiary is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of Delaware.


 


SECTION 5.2.  Corporate Authorization.  The
execution, delivery and performance by Parent and Merger Subsidiary of this
Agreement and the consummation by Parent and Merger Subsidiary of the
transactions contemplated hereby are within the limited liability partnership
powers of Parent and corporate powers of Merger Subsidiary and have been duly
authorized by all necessary limited liability partnership action on the part of
Parent and corporate action on the part of Merger Subsidiary.  This Agreement has been duly executed and
delivered by Parent and Merger Subsidiary and constitutes a valid and binding
agreement of each of Parent and Merger Subsidiary, enforceable against each in
accordance with its terms.


 


SECTION 5.3.  Governmental Authorization.  The
execution, delivery and performance by Parent and Merger Subsidiary of this
Agreement and the consummation by Parent and Merger Subsidiary of the
transactions contemplated hereby require no action by or in respect of, or
filing with, any Governmental Authority, other than (i) the filing of a
certificate of merger with respect to the Merger with the Delaware Secretary of
State and appropriate documents with the relevant authorities of other states
in which Merger Subsidiary is qualified to do business, (ii) compliance
with any applicable requirements of the 1933 Act, the 1934 Act and any other
applicable securities laws, whether state or foreign, and (iii) any
actions or filings the absence of which would not have, individually or in the
aggregate, a Material Adverse Effect on Parent.


 


SECTION 5.4.  Non-contravention.  The
execution, delivery and performance by Parent and Merger Subsidiary of this
Agreement and the consummation by Parent and Merger Subsidiary of the
transactions contemplated hereby do not and will not (i) contravene,
conflict with, or result in any violation or breach of any provision of the
limited partnership agreement of Parent or the certificate of incorporation or
bylaws of Merger Subsidiary, (ii) assuming compliance with the matters
referred to in Section 5.3, contravene,
conflict with or result in a violation or breach of any provision of any
applicable law, statute, ordinance, rule, regulation, judgment, injunction,
order or decree applicable to Parent or Merger Subsidiary, (iii) require
any consent or other action by any Person under, constitute a default under, or
an event that, with or without notice or lapse of time or both, would
constitute a default, under, or cause or permit the termination, cancellation,
acceleration or other change of any right or obligation or the loss of any
benefit to which Parent or any of its Subsidiaries is entitled under any
provision of any agreement or other instrument binding upon Parent or any of its
Subsidiaries or any of their


 


29

















 


assets or any
license, franchise, permit, certificate, approval or other similar
authorization affecting, or relating in any way to, the assets or business of
the Parent and its Subsidiaries or (iv) result in the creation or
imposition of any Lien on any asset of the Parent or any of its Subsidiaries,
except for such contraventions, conflicts and violations referred to in clause (ii) and
for such failures to obtain any such consent or other action, defaults,
terminations, cancellations, accelerations, changes or losses referred to in
clause (iii) that would not have, individually or in the aggregate, a
Material Adverse Effect on Parent.


 


SECTION 5.5.  Disclosure Documents.  None
of the information provided by Parent in writing expressly for inclusion in the
Company Proxy Statement and Schedule 13E-3 or any amendment or supplement
thereto, at the time the Company Proxy Statement or any amendment or supplement
thereto is first mailed to stockholders of the Company and at the time the
stockholders vote on adoption of this Agreement and approval of the Merger and
at the Effective Time, will 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.


 


SECTION 5.6.  Finders’ Fees.  There
is no investment banker, broker, finder or other intermediary that has been
retained by or is authorized to act on behalf of Parent who might be entitled
to any fee or commission from the Company or any of its Affiliates in
connection with the transactions contemplated by this Agreement.


 


ARTICLE 6


 


COVENANTS OF THE COMPANY


 


SECTION 6.1.       Conduct of the Company.  From
the date of this Agreement until the Effective Time, the Company shall, and
shall cause its Subsidiaries to (i) conduct their business in the ordinary
course consistent with past practice and (ii) use their commercially
reasonable efforts to preserve intact their business organizations and
relationships with third parties and to keep available the services of their
present officers and employees.  Without
limiting the generality of the foregoing, from the date of this Agreement until
the Effective Time, except as set forth on Schedule 6.1, the Company shall
not, and shall not permit any of its Subsidiaries to:


 


(a)           adopt or propose any change to its
certificate of incorporation or bylaws or other constituent documents;


 


(b)           adopt a plan or agreement of complete
or partial liquidation, dissolution, merger, consolidation, restructuring,
recapitalization or other material reorganization (other than a merger or
consolidation between wholly owned Subsidiaries of the Company) or merge or
consolidate with any other Person or acquire a material amount of stock or
assets of any other Person;


 


(c)           sell, lease, license or otherwise
dispose of any Subsidiary or any assets, securities or property representing 5%
or more of the consolidated assets of the Company;


 


(d)           issue,
sell, grant, dispose of, pledge or otherwise encumber, or authorize the
issuance, sale, grant, disposition or pledge or other encumbrance of any
Company Securities or Company Subsidiary Securities, except for the issuance of
Company Common Stock to Parent or


 


30

















 


its Affiliates or upon
exercise of Company Stock Options or Company Warrants disclosed in Company SEC
Documents;


 


(e)           redeem, purchase or otherwise
acquire, or propose to redeem, purchase or otherwise acquire, any of its shares
of capital stock or other equity securities;


 


(f)            other
than the redemption of the Company Preferred Stock, split, combine, subdivide
or reclassify any shares of its capital stock or other equity securities;


 


(g)           declare,
set aside for payment or pay any dividend, or make any other actual,
constructive or deemed distribution (whether in cash, stock or property or any
combination thereof) in respect of any of its capital stock or otherwise make
any payments to stockholders in their capacity as such, other than dividends
declared or paid by any wholly owned Subsidiary of the Company to any other
wholly owned Subsidiary of the Company or to the Company;


 


(h)           amend
any term of any of its outstanding securities;


 


(i)            incur,
assume or guarantee any indebtedness for borrowed money or guarantee any such
indebtedness or make any loans, advances or capital contributions to, or
investments in, any Person other than the Company’s wholly owned Subsidiaries
in an amount exceeding $25,000 individually or $75,000 in the aggregate;


 


(j)            create,
incur or permit the creation or incurrence of any Lien on any asset other than
in the ordinary course of business consistent with past practices and other
than Permitted Encumbrances;


 


(k)           except
as required by applicable law or pursuant to the terms of written binding
agreements in effect on the date of this Agreement:  (i) grant any severance or termination
pay to (or amendment to any existing arrangement with) any director, officer or
senior-most store employee of the Company or any of its Subsidiaries; (ii) increase
benefits payable to any director, officer or senior-most store employee under
any existing severance or termination pay policies or employment agreements; (iii) enter
into any employment, deferred compensation or other similar agreement (or amend
any such existing agreement) with any director, officer or senior-most store
employee of the Company or any of its Subsidiaries; (iv) establish, adopt
or amend (except as required by applicable law) any collective bargaining
agreement, bonus, profit-sharing, thrift, pension, retirement, deferred
compensation, compensation, stock option, restricted stock or other benefit
plan or arrangement covering any director, officer or senior-most store
employee of the Company or any of its Subsidiaries; or (v) increase any
compensation, bonus or other benefits payable to any director, officer or
senior-most store employee of the Company or any of its Subsidiaries;


 


(l)            enter
into any transaction, commitment, contract or agreement relating to its assets
or business (including the acquisition or disposition of any assets) or
relinquish any contract or other right outside the ordinary course of business
that is material to the Company and its Subsidiaries taken as a whole;


 


31

















 


(m)          change
its method of accounting or accounting principals or practice (including any
change in fiscal year), except for any such change required by reason of a
concurrent change in GAAP or Regulation S-X under the 1934 Act;


 


(n)           settle,
or propose to settle, any litigation, investigation, arbitration, proceeding or
other claim that is material to the Company and its Subsidiaries, taken as a
whole;


 


(o)           make
any capital expenditure in an amount exceeding $25,000 individually or $75,000
in the aggregate;


 


(p)           make
or change any investment in cash equivalents or marketable securities in an
amount exceeding $25,000 individually or $75,000 in the aggregate;


 


(q)           enter
into any new line of business;


 


(r)            (i) knowingly
take any action or permit any Subsidiary to take any action that would make any
representation and warranty of the Company made in or pursuant to this Agreement
inaccurate in any respect at, or as of any time prior to, the Effective Time or
(ii) knowingly omit to take any action or permit any Subsidiary to omit
taking any action necessary to prevent any such representation or warranty from
being inaccurate in any respect at any such time; and


 


(s)           agree
or commit to do any of the foregoing.


 


SECTION 6.2.  Stockholder Meeting; Proxy Material. 
Unless and until this Agreement is terminated in accordance with Article 9,
the Company shall cause a meeting of its stockholders (the
“Company Stockholder Meeting”) to
be duly called and held as soon as practicable for the purpose of obtaining the
Stockholder Vote, even if the Board of Directors of the Company or the Special
Committee determines at any time after the date of this Agreement that this
Agreement is no longer advisable or recommends that the stockholders of the
Company vote against its adoption. 
Subject to Section 6.3(b)(iii), the
Company Proxy Statement shall include disclosure of the approval and declaration
of advisability by the Board of Directors of this Agreement and the Merger and
the recommendation of the Board of Directors of the Company and the Special
Committee to the Company’s stockholders that they vote in favor of the approval
and adoption of this Agreement and the Merger. 
In connection with such meeting, the Company will (i) promptly
prepare and file with the SEC, use its reasonable best efforts to have cleared
by the SEC and thereafter mail to its stockholders as promptly as practicable
the Company Proxy Statement and all other proxy materials for such meeting, (ii) solicit
from its stockholders proxies in favor of the approval and adoption of this
Agreement and the Merger and use its reasonable best efforts to obtain the
necessary approvals by its stockholders of this Agreement and the transactions
contemplated hereby and (iii) otherwise comply with all legal requirements
applicable to such meeting.  The Company
shall permit Parent and Merger Subsidiary and their counsel to review and
provide comments to the Company Proxy Statement before it is filed with the
SEC.  The Company will incorporate any
such comments that are reasonable into the Company Proxy Statement.  In addition, the Company shall provide Parent
and Merger Subsidiary and their counsel any comments or other communications,
whether written or oral, that the Company may receive from time to time from
the SEC or its staff with respect to the


 


32

















 


Company Proxy
Statement promptly after the receipt of such comments or other communications
and shall give Parent and Merger Subsidiary and their counsel a reasonable
opportunity to review and suggest responses to such comments or other
communications.  After the Company
Stockholder Meeting has been duly noticed by the Company, it will not adjourn
or postpone the Company Stockholder Meeting (other than an adjournment for lack
of a quorum) without the prior written consent of Parent.


 


SECTION 6.3.  No
Solicitation.  (a) Except
to the extent provided in Section 6.3(b), neither the Company nor any of
its Subsidiaries shall, nor shall the Company or any of its Subsidiaries
authorize any of its or their officers, directors, employees, investment
bankers, attorneys, accountants, consultants, representatives or other agents
or advisors to, directly or indirectly, (i) solicit, initiate or knowingly
take any action to facilitate or encourage the submission of any Acquisition
Proposal, (ii) enter into or participate in any discussions or
negotiations with, furnish any information relating to the Company or any of
its Subsidiaries or afford access to the business, properties, assets, books or
records of the Company or any of its Subsidiaries to, otherwise cooperate in
any way with, or assist, participate in, facilitate or encourage any effort by
any Third Party that is seeking to make, or has made, an Acquisition Proposal, (iii) enter
into any agreement, assignment or understanding requiring it to abandon,
terminate or fail to consummate the Merger or any other transactions
contemplated by this Agreement or (iv) grant any waiver or release under
any standstill or similar agreement with respect to any class of equity
securities of the Company or any of its Subsidiaries.


 


(b)           Prior to the Company Stockholder
Meeting, the Company may (i) engage in negotiations or discussions with
any Third Party that, subject to the Company’s compliance with Section 6.3(a), has made a Superior Proposal, (ii) furnish
to such Third Party nonpublic information relating to the Company or any of its
Subsidiaries pursuant to a confidentiality agreement with terms no less
favorable to the Company than those contained in the Confidentiality Agreement
dated as of January 6, 2006 between the Company and Parent (the “Confidentiality Agreement”) (a copy of which shall be
provided for informational purposes only to Parent), and (iii) following
receipt of such Superior Proposal, fail to make, withdraw, or modify in a
manner adverse to Parent the recommendation of the Board of Directors of the
Company and the Special Committee to the Company’s stockholders referred to in Section 6.2 hereof, but in each case referred to in the
foregoing clauses (i), (ii) and (iii) only if the Special Committee
determines in good faith by a majority vote, on the basis of advice from any
nationally recognized law firm (which shall include Brown Rudnick Berlack
Israels LLP (“Brown Rudnick”)),
that it is advisable to take such action to comply with its fiduciary duties
under applicable law.


 


(c)           Neither the Board of Directors of the
Company nor the Special Committee shall take any of the actions referred to in
clauses (i) through (iii) of the first sentence of the preceding subsection unless
the Company shall have delivered to Parent a prior written notice advising
Parent that it intends to take such action. 
In addition, the Company shall notify Parent promptly (but in no event
later than 24 hours) after receipt by the Company (or any of its advisors) of
any Acquisition Proposal, any indication that a Third Party is considering
making an Acquisition Proposal or of any request for information relating to
the Company or any of its Subsidiaries or for access to the business,
properties, assets, books or records of the Company or any of its Subsidiaries
by any Third Party that may be considering making, or has made, an Acquisition


 


33

















 


Proposal.  The Company shall provide such notice orally
and in writing and shall identify the Third Party making, and the terms and
conditions of, any such Acquisition Proposal, indication or request and the
status of any such negotiations or discussions. 
The Company shall keep Parent fully informed, on a current basis, of the
status and details of any such Acquisition Proposal, indication or request, and
shall provide immediately to Parent a copy of any information provided to any
Third Party pursuant to Section 6.3(b)(ii) which has not previously
been provided to Parent.  The Company
shall, and shall cause its Subsidiaries and the directors, advisors, employees
and other agents of the Company and any of its Subsidiaries to, cease
immediately and cause to be terminated any and all existing activities,
discussions or negotiations, if any, with any Third Party conducted prior to
the date of this Agreement with respect to any Acquisition Proposal and shall
request any such Party (or its agents or advisors) in possession of
confidential information about the Company that was furnished by or on behalf
of the Company to return or destroy all such information.


 


(d)           Nothing
contained in this Section 6.3 shall prohibit the Board of Directors of the
Company from complying with Rule 14e-2 promulgated under the 1934 Act with
regard to a tender or exchange offer or making any disclosure required under
applicable law.


 


(e)           “Superior Proposal” means any bona fide, unsolicited written
Acquisition Proposal for at least a majority of the outstanding shares of
Company Common Stock or substantially all of the Company’s assets on terms that
the Special Committee determines in good faith by a majority vote, on the basis
of the advice of a financial advisor of nationally recognized reputation (which
shall include BB&T Capital Markets) and taking into account all the terms
and conditions of the Acquisition Proposal, including any break-up fees,
expense reimbursement provisions and conditions to consummation and based on
such other matters as it deems relevant, are more favorable and provide greater
value to all the Company’s stockholders (other than Parent, its Subsidiaries
and the Contributing Stockholders) than as provided hereunder, for which
financing, to the extent required, is then fully committed or reasonably
determined to be available by the Special Committee.


 


SECTION 6.4.  Tax Matters.  (a) Neither
the Company nor any of its Subsidiaries shall make or change any Tax election,
change any annual tax accounting period, adopt or change any method of tax
accounting, file any amended Tax Returns or claims for Tax refunds, enter into
any closing agreement, surrender any Tax claim, audit or assessment, surrender
any right to claim a Tax refund, offset or other reduction in Tax liability
surrendered, consent to any extension or waiver of the limitations period
applicable to any Tax claim or assessment or take or omit to take any other action, if any such action or omission
would have the effect of increasing the Tax liability or reducing any Tax asset
in any material respect of the Company or any of its Subsidiaries.


 


(b)           The Company and each of its
Subsidiaries will establish or cause to be established in accordance with GAAP
on or before the Effective Time an adequate accrual for all Taxes due with
respect to any period ending prior to or as of the Effective Time.


 


(c)                
All transfer, documentary,
sales, use, stamp, registration, value added and other such Taxes and fees
(including any penalties and interest) incurred in connection with the Merger
(including any real property transfer tax and any similar Tax) shall be paid by
the


 


34

















 


Company
when due, and the Company will, at its own expense, file all necessary Tax
returns and other documentation with respect to all such Taxes and fees, and,
if required by applicable law, the Company will, and will cause its Affiliates
to, join in the execution of any such Tax returns and other documentation.


 


SECTION 6.5. 
Stockholder Litigation.  The
Company shall keep Parent informed of the defense or settlement of, any
stockholder litigation against the Company or its directors relating to the
transactions contemplated by this Agreement. 
The Company shall not enter into, or agree to, any settlement of such
stockholder litigation against the Company or its directors without the consent
of Parent.


 


SECTION 6.6. 
Company Fees and Expenses.  All fees of Brown Rudnick and of any law firm
engaged to perform the services for which Brown Rudnick is currently engaged (a
“Successor Firm”) and of the
Company’s and the Special Committee’s accountants and financial advisors
incurred prior to and through the Closing in connection with this Agreement or
the transactions contemplated hereby, but excluding the out-of-pocket expenses
and disbursements of such agents (the “Merger
Fees”), in the aggregate shall not exceed $625,000.  Without limiting the generality of the
foregoing, the Merger Fees incurred with respect to the services of Brown
Rudnick and any Successor Firm shall not exceed $265,000.  Except as would in the reasonable opinion of
the Special Committee infringe upon its fiduciary duties to the stockholders of
the Company, neither the Company nor the Special Committee shall incur or
commit to incur in connection with this Agreement or the transactions
contemplated hereby any legal, financial printing and document production,
transfer agent, solicitation agent, filing fees and additional accounting
expenses without the Parent’s
prior written consent, which
consent shall not be unreasonably withheld.


 


ARTICLE 7


 


COVENANTS OF
PARENT AND THE COMPANY


 


SECTION 7.1.  Consents.  Subject
to the terms and conditions of this Agreement, Company and Parent will use
their commercially reasonable efforts to take, or cause to be taken, all
actions and to do, or cause to be done, all things necessary, proper or
advisable under applicable laws and regulations to consummate the transactions
contemplated by this Agreement; provided that neither Parent nor Merger
Subsidiary or any of their affiliates shall be required by this Section 7.1
to: (A) pay any consideration, (B) surrender, modify or amend in any
substantive respect any license or contract (including this Agreement), (C) hold
separately (in trust or otherwise) or divest itself of, any of its assets, (D) agree
to any limitations on any such Person’s freedom of action with respect to
future acquisitions of assets or with respect to any existing or future
business or activities or on the enjoyment of the full rights or ownership,
possession and use of any asset now owned or hereafter acquired by any such
Person, or (E) agree to any of the foregoing or any other conditions or
requirements of any Governmental Authority or other Person that are materially
adverse or burdensome.


 


SECTION 7.2.       Certain Filings.  The
Company and Parent shall cooperate with one another (i) in connection with
the preparation of the Company Proxy Statement and the Schedule 13E-3, (ii) in
determining whether any action by or in respect of, or filing with, any


 


35

















 


Governmental Authority is required, in connection with the consummation
of the transactions contemplated by this Agreement, and (iii) in taking
such actions or making any such filings, furnishing information required in
connection therewith or with the Company Proxy Statement or the Schedule 13E-3
and seeking timely to obtain any such actions, consents, approvals or
waivers.  If, at any time prior to the
Effective Time, any information relating to the Company or Parent, or any of
their respective Affiliates, officers or directors, is discovered by a party
hereto which should be set forth in an amendment or supplement to the Company
Proxy Statement or the Schedule 13E-3, so that any of such documents would
not include any misstatement of a material fact or omit to state any material
fact necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading, the party which discovers such
information shall promptly notify the other parties hereto and an appropriate
amendment or supplement describing such information shall be promptly filed
with the SEC and, to the extent required by law, disseminated to the
stockholders of the Company.


 


SECTION 7.3.       Public Announcements.  Parent
and the Company will consult with each other before issuing any press release
or making any public statement with respect to this Agreement or the
transactions contemplated hereby and, except as may be required by applicable
law or any listing agreement with any national securities exchange, Parent will
not issue any such press release or make any such public statement prior to
such consultation and the Company will not issue any such press release or make
any such public statement without Parent’s prior approval.


 


SECTION 7.4.       Further Assurances.  At
and after the Effective Time, the officers and directors of the Surviving
Corporation will be authorized to execute and deliver, in the name and on
behalf of the Company or Merger Subsidiary, any deeds, bills of sale,
assignments or assurances and to take and do, in the name and on behalf of the
Company or Merger Subsidiary, any other actions and things to vest, perfect or
confirm of record or otherwise in the Surviving Corporation any and all right,
title and interest in, to and under any of the rights, properties or assets of
the Company acquired or to be acquired by the Surviving Corporation as a result
of, or in connection with, the Merger.


 


SECTION 7.5.  Access to Information.  From
the date hereof until the Effective Time and subject to applicable law and the
Confidentiality Agreement, the Company shall (i) give to Parent, its
counsel, financial advisors, auditors and other authorized representatives
reasonable access upon prior notice to the offices, properties, books and
records of the Company and its Subsidiaries, (ii) furnish to Parent, its
counsel, financial advisors, auditors and other authorized representatives such
financial and operating data and other information as such Persons may
reasonably request and (iii) instruct its employees, counsel, financial
advisors, auditors and other authorized representatives to cooperate with
Parent in its investigation.  Any
investigation pursuant to this Section shall be conducted in such manner
as not to interfere unreasonably with the conduct of the business of the
Company.  No information or knowledge
obtained in any investigation pursuant to this Section shall affect or be
deemed to modify any representation or warranty made by any party hereunder.


 


SECTION 7.6.       Notices of Certain Events.  (a) Each of the Company and Parent shall
promptly notify the other of:


 


36

















 


(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)           the
occurrence or nonoccurrence of any event the occurrence or nonoccurrence of
which would be likely to cause (A) any of its representations or
warranties contained in this Agreement to be untrue or inaccurate in any
material respect or (B) any of its material covenants, conditions or
agreements contained herein not to be complied with or satisfied; and


 


(iii)          any
notice or other communication from any governmental or regulatory agency or
authority in connection with the transactions contemplated by this Agreement
(including the Schedule 13E-3 and the Company Proxy Statement).


 


(b)           The
Company shall promptly notify Parent of any actions, suits, claims,
investigations or proceedings commenced or, to its knowledge, threatened
against, relating to or involving or otherwise affecting the Company or any of
its Subsidiaries that, if pending on the date of this Agreement, would have
been required to have been disclosed pursuant to Article 4 or that relate
to the consummation of the transactions contemplated by this Agreement.


 


SECTION 7.7.       Indemnification, Exculpation and Insurance. 


 


(a)           The
Surviving Corporation shall (i) maintain in effect in accordance with
their terms all rights to indemnification, exculpation from liabilities and
reimbursement of expenses for acts or omissions occurring at or prior to the
Effective Time now existing in favor of the current or former directors or
officers of the Company and its Subsidiaries as provided in their
organizational documents and (ii) honor any indemnification contracts
between such Persons and their respective current or former directors and
officers.


 


(b) In the event that the Surviving Corporation
or its successor or assign (i) consolidates with or merges into any other
person and is not the continuing or surviving corporation or Person of such
consolidation or merger or (ii) transfers or conveys all or substantially
all of its properties and assets to any Person, then, and in each such case,
proper provision will be made so that such successors or assigns assumes the
obligations set forth in this Section.


 


(c) Additionally, the Surviving Corporation or
any successor thereto shall maintain in effect directors’ and officers’
liability insurance with respect to claims asserted during the six (6) year
period following the Effective Date, in respect of acts and omissions occurring
on or prior to the Effective Time covering those persons who are currently
covered by the Company’s directors’ and officers’ liability insurance policy (a
copy of which has been made available to Parent) (the “Covered Persons”) on terms that are
comparable to the terms now applicable to directors and officers of the Company
under the Company’s current policies, and with insurers of financial standing
comparable to that of the insurers that have issued the Company’s current
policies.


 


37

















 


(d) The provisions of this Section 7.7 are
intended to be for the benefit of, and will be enforceable by, each indemnified
party and Covered Person, his or her heirs and his or her representatives.  This Section 7.7 shall survive the
Merger.


 


ARTICLE 8


 


CONDITIONS TO
THE MERGER


 


SECTION 8.1.       Conditions to 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 Company shall have obtained the
Stockholder Vote;


 


(b)           the
Company shall have filed the Charter Amendment with the Secretary of State of
the State of Delaware; and


 


(c)           no provision of any applicable law or
regulation and no judgment, injunction, order or decree shall prohibit the
consummation of the Merger.


 


SECTION 8.2.       Conditions to the Obligations of Parent and Merger Subsidiary.  The
obligations of Parent and Merger Subsidiary to consummate the Merger are
subject to the satisfaction or express waiver in writing by Parent of the
following further conditions:


 


(a)           (i) the Company shall have
performed in all material respects all of its obligations hereunder required to
be performed by it at or prior to the Effective Time, (ii) each of the
representations and warranties of the Company contained in this Agreement that
is qualified as to materiality or Material Adverse Effect shall be true and
correct, and each of the representations and warranties of the Company
contained in this Agreement that is not so qualified shall be true and correct
in all material respects, in each case, at and as of the date of this Agreement
and the Effective Time as if made at and as of such times (except to the extent
expressly made as of an earlier date, in which case as of such date) and (iii) Parent
shall have received a certificate signed by an officer of the Company to the
foregoing effect;


 


(b)           there
shall not be pending any action or proceeding (or any investigation or other
inquiry that is reasonably likely to result in such action or proceeding) by or
before any court, arbitrator, or other Governmental Authority (i) seeking
to restrain or prohibit Parent’s ownership or operation (or that of its
Subsidiaries or Affiliates) of all or any material portion of the business or
assets of the Company or any of its Subsidiaries, or of Parent or any of its
Subsidiaries or Affiliates, or to compel Parent or any of its Subsidiaries or
Affiliates to dispose of or hold separate all or any of the business or assets
of the Company or any of its Subsidiaries, or of Parent or any of its
Subsidiaries or Affiliates, or (ii) that otherwise is reasonably likely to
have a Material Adverse Effect on the Company;


 


(c)           the Company shall have delivered a
certification in the form attached as Exhibit B to this Agreement dated
not more than 30 days prior to the Effective Time and signed by the Company to
the effect that the Company is not, nor has it been within five years of the
date of


 


38

















 


the certification, a “United States real
property holding corporation” as defined in Section 897 of the Code;


 


(d)           all other authorizations, consents,
waivers, orders or approvals for the Merger required to be obtained, and all
other filings, notices or declarations required to be made, by the Merger
Subsidiary or the Company prior to the consummation of the Merger and the
transactions contemplated hereby, shall have been obtained from and/or made
with, any Governmental Authorities and all third parties except for such
authorizations, consents, waivers, orders, approvals, filings, notices or
declarations the failure to obtain or make which would not, individually or in
the aggregate have a Material Adverse Effect on the Company;


 


(e)           the Merger Fees in the aggregate
shall not have exceeded $625,000 and the Merger Fees incurred with
respect to the services of Brown Rudnick and any Successor Firm in the
aggregate shall not have exceeded $265,000; and


 


(f)            all the consents contemplated
by Schedule 4.4 shall have been obtained and shall be in form and
substance reasonably satisfactory to the Company and its counsel.


 


SECTION 8.3.       Condition to the Obligations of the Company.  The obligations of the Company to consummate the Merger are subject
to the satisfaction or express waiver in writing of the following further
conditions:


 


(a)(i) each of Parent
and Merger Subsidiary shall have performed in all material respects all of its
obligations hereunder required to be performed by it at or prior to the
Effective Time, (ii) each of the representations and warranties of Parent
contained in this Agreement that is qualified as to materiality
or Material Adverse Effect shall be true and correct, and each of the
representations and warranties of Parent contained in this Agreement that is
not so qualified shall be true and correct in all material respects, in each
case, at and as of the
date of this Agreement and the Effective Time as if made at and as of such times,
(except to the extent expressly made as of an earlier date, in which case as of
such date) and (iii) the Company shall have received a certificate signed by
a senior executive officer of Parent to the foregoing effect; and


 


(b) during the period between the date
of this Agreement and the Effective Time, inclusive, no claim, action, suit,
proceeding or investigation shall have been instituted or threatened in writing
pursuant to which an unfavorable judgment, order, decree, stipulation or
injunction sought by any person other than the parties to this Agreement or
their respective affiliates would reasonably be expected to (i) prevent
consummation of any of the material transactions contemplated by this Agreement
or (ii) cause any of the material transactions contemplated by this
Agreement to be rescinded following the consummation thereof.


 


ARTICLE 9


 


TERMINATION


 


SECTION 9.1.  Termination.  This Agreement may be terminated and the Merger may be abandoned at
any time prior to the Effective Time (notwithstanding any approval of this
Agreement by the stockholders of the Company):


 


39

















 


(a)           by
mutual written agreement of the Company and Parent;


 


(b)           by
either the Company or Parent, if:


 


(i)            the
Merger has not been consummated on or before the date six months following the
date hereof (the “End Date”);


 


(ii)           there
shall be any law or regulation that makes consummation of the Merger illegal or
otherwise prohibited or there shall be entered any judgment, injunction, order
or decree of any court or governmental body having competent jurisdiction
enjoining or otherwise prohibiting Company or Parent from consummating the
Merger and such judgment, injunction, judgment or order shall have become final
and nonappealable;


 


(iii)          this
Agreement and the Merger shall not have been approved and adopted in accordance
with Delaware Law by the Company’s stockholders; or


 


(iv)          the Stockholder Vote shall not have
been obtained at the Company Stockholder Meeting (or any permitted adjournment
or postponement thereof);


 


(c)           by
Parent, if a breach of or failure to perform any representation, warranty,
covenant or agreement on the part of the Company set forth in this Agreement
shall have occurred that would cause the condition set forth in Section 8.2(a) not to be satisfied, and such condition is
incapable of being satisfied by the End Date;


 


(d)           by
the Company, if a breach of or failure to perform any representation, warranty,
covenant or agreement on the part of the Parent or Merger Subsidiary set forth
in this Agreement shall have occurred that would cause the condition set forth
in Section 8.3 not to be satisfied, and such
condition is incapable of being satisfied by the End Date;


 


(e)           by
Parent, if (i) the Board of Directors of the Company or the Special
Committee shall have failed to make or shall have withdrawn or modified in a
manner adverse to Parent its approval or recommendation to the Company’s
stockholders referred to in Section 6.2 or (ii) the Company shall
have breached any of its obligations under Sections 6.3; or


 


(f)            by
the Company but only prior to the time the Stockholder Vote is
obtained at the Company Stockholder Meeting,
if (i) the Special Committee authorizes the Company,
subject to complying with the terms of this Agreement, to enter into a binding
written agreement concerning a transaction that constitutes a Superior Proposal
(a “Superior Proposal Agreement”)
and the Company notifies Parent, in writing, promptly and at least
48 hours prior to such termination, of its intention to enter into such a
Superior Proposal Agreement, attaching the most current draft of such Superior
Proposal Agreement (or a description of all material terms and conditions
thereof), (ii) Parent does not make, within 48 hours of receipt of such
written notification, an offer that the Special Committee determines, in good
faith, after consultation with its financial advisers, is at least as favorable
to the stockholders of the Company as such Superior Proposal and (iii) the
Company prior to such termination pursuant to this Section 9.1(f) pays
to Parent in immediately available funds the amounts required to be paid
pursuant to Section 10.4(b) and (c), which shall not exceed $325,000.


 


40

















 


The party desiring to terminate this Agreement
pursuant to this Section 9.1 (other than pursuant to Section 9.1(a))
shall give notice of such termination to the other party.


 


SECTION 9.2.  Effect of Termination.  Subject to the provisions of Section 10.4,
if this Agreement is terminated pursuant to Section 9.1, this Agreement
shall become void and of no effect without liability of any party (or any
stockholder, director, officer, employee, agent, consultant or representative
of such party) to the other party hereto; provided
that, if such termination shall result from the willful failure of either party
to perform in all material respects any of its covenants contained in this
Agreement, such party shall be fully liable for any and all liabilities and
damages incurred or suffered by the other party as a result of such failure.  The provisions of this Section 9.2 and
Sections 10.1, 10.4, 10.5, 10.6, 10.7, 10.8, 10.9, 10.10 and 10.12 shall
survive any termination hereof pursuant to Section 9.1.


 


ARTICLE 10


 


MISCELLANEOUS


 


SECTION 10.1.  Notices.  All notices, requests and other communications to any party hereunder
shall be in writing (including facsimile transmission) and shall be given,


 


if to Parent or Merger
Subsidiary, to:


 


Dolphin
Direct Equity Partners, LP

c/o Dolphin Asset Management Corp.

129 East 17th Street

New York, NY 10003

Attention: Carlos P. Salas

Fax:  (212) 202-3817


 


with a copy to:


 


Hughes Hubbard & Reed LLP

One Battery Park Plaza

New York, NY  10004

Attention: Gary J. Simon

Fax:  (212) 422-4726


 


if to the Company, to:


 


Boston Restaurant Associates, Inc.

999 Broadway, Suite 400

Saugus, MA 01906

Attention: George R. Chapdelaine

Fax:  (781) 231-5225


 


41

















 


with
a copy to:


 


Brown Rudnick Berlack Israels LLP


One Financial Center


Boston, MA 02111


Attention: Samuel P. Williams

Fax: (617) 856-8201


 


if to the Special Committee, to:


 


Brown Rudnick Berlack Israels LLP


One Financial Center


Boston, MA 02111


Attention: Samuel P. Williams

Fax: (617) 856-8201


 


or to such other
address or facsimile number as such party may hereafter specify for the purpose
by notice to the other parties hereto. 
All such notices, requests and other communications shall be deemed
received on the date of receipt by the recipient thereof if received prior to 5 p.m.,
and such day is a business day, in the place of receipt.  Otherwise, any such notice, request or
communication shall be deemed not to have been received until the next
succeeding business day in the place of receipt.


 


SECTION 10.2.  Survival of Representations and Warranties.  The representations and warranties contained herein and in any
certificate or other writing delivered pursuant hereto shall not survive the
Effective Time.


 


SECTION 10.3.  Amendments; Waivers.  (a) Any provision of this Agreement may be amended or waived
prior to the Effective Time if, but only if, such amendment or waiver is in
writing and is signed, in the case of an amendment, by each party to this
Agreement or, in the case of a waiver, by each party against whom the waiver is
to be effective, provided that, no amendment or waiver by the Company
shall be effective unless first approved in writing by the Special Committee
and provided, further, that, after the adoption of this Agreement by the
stockholders of the Company and without their further approval, no such
amendment or waiver shall reduce the amount or change the kind of consideration
to be received in exchange for any shares of capital stock of the Company or
effect any other change not permitted by Section 251(d) of Delaware
Law.


 


(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.


 


SECTION 10.4.  Fees and Expenses.  (a) Except as otherwise provided in this Section, all costs and
expenses incurred in connection with this Agreement shall be paid by the party
incurring such cost or expense.


 


42

















 


(b)           Upon
termination of this Agreement pursuant to Sections 9.1(b)(i), (iii)(but only if
all shares owned by Parent or by a fund under common control are voted in favor
of the Merger), (iv)(only with regard to the Majority-Minority Vote), (e) or
(f), the Company shall pay Parent (by wire transfer of immediately available
funds), no later than two Business Days after such termination, a break-up fee
in the amount of $325,000 reduced by the aggregate amount paid prior to such
termination pursuant to that certain letter from Parent to the Company dated January 5,
2006.


 


(c)           Upon any termination of this
Agreement for any reason (other than Sections 9.1(d) or a termination that
could not have occurred but for the failure of Parent or Merger Subsidiary to
fulfill its or their obligations hereunder), the Company shall reimburse Parent
and its Affiliates (by wire transfer of immediately available funds), no later
than two Business Days after such termination, for 100% of the reasonable fees
and expenses (including reasonable fees and expenses of their counsel) incurred
by them in connection with this Agreement and the transactions contemplated
hereby ) less the aggregate amount paid prior to such termination pursuant to
that certain letter from the Parent to the Company dated January 5, 2006
and in any event, not exceeding $325,000 in the aggregate.  The Company further agrees to
immediately pay all expenses of collection relating to Sections 10.4(b) and
(c).


 


(d)           In
addition to any amounts payable pursuant to Sections 10.4 (b) and (c), if
this Agreement is terminated pursuant to Section 9.1 and such termination
shall result from the (i) failure of either party to fulfill a condition
to the performance of the obligations of the other party, (ii) failure of
either party to perform any of its covenants contained in this Agreement, or (iii) breach
by either party of any of its representations or warranties contained herein, such
party shall be fully liable for any and all liabilities and damages incurred or
suffered by the other party as a result of such failure or breach.


 


(e)           In
no event shall total payments under Section 10.4(b) and (c) exceed
$325,000.


 


(f)            The
Company acknowledges that the agreements contained in this Section 10.4
are an integral part of the transactions contemplated by this Agreement and
that, without these agreements, Parent and Merger Subsidiary would not enter
into this Agreement.  Accordingly, if the
Company fails promptly to pay any amount due to Parent pursuant to this Section 10.4,
it shall also pay any costs and expenses incurred by Parent or Merger
Subsidiary in connection with a legal action to enforce this Agreement that
results in a judgment against the Company for such amount.


 


SECTION 10.5.  Successors and Assigns.  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 each other party
hereto, except that Parent or Merger Subsidiary may transfer or assign, in
whole or from time to time in part, to one or more of their Affiliates, the
right to enter into the transactions contemplated by this Agreement, but any
such transfer or assignment will not relieve Parent or Merger Subsidiary of its
obligations hereunder.  Any attempted
assignment in violation of this Section 10.5 shall be null and void and
shall have no effect.


 


43

















 


SECTION 10.6. 
Parties in Interest.  This
Agreement shall be binding upon and inure solely to the benefit of each party
hereto, and nothing in this Agreement, express or implied, is intended to or
shall confer upon any other person any right, benefit or remedy of any nature
whatsoever under or by reason of this Agreement, including, without limitation,
by way of subrogation, other than Section 7.7 (which is intended to be for
the benefit of the parties specified therein and may be enforced by such
parties) and rights given under this Agreement to the Special Committee (which
are intended to be for the benefit of the stockholders of the Company other than
Parent and Contributing Stockholders and their Affiliates and may be enforced
by the Special Committee).


 


SECTION 10.7.  Governing Law.  This Agreement shall be governed by and construed in accordance with
the laws of the State of Delaware.


 


SECTION 10.8.  Jurisdiction.  The parties agree that any suit, action or proceeding seeking
to enforce any provision of, or based on any matter arising out of or in
connection with, this Agreement or the transactions contemplated hereby shall
be exclusively brought in any federal court located in the State of Delaware or
any Delaware state court, and each of the parties hereby irrevocably consents
to the jurisdiction of such courts (and of the appropriate appellate courts
therefrom) in any such suit, action or proceeding and irrevocably waives, to
the fullest extent permitted by law, any objection that it may now or hereafter
have to the laying of the venue of any such suit, action or proceeding in any
such court or that any such suit, action or proceeding brought in any such
court has been brought in an inconvenient forum.  Process in any such suit, action or
proceeding may be served on any party anywhere in the world, whether within or
without the jurisdiction of any such court. 
Without limiting the foregoing, each party agrees that service of
process on such party as provided in Section 10.1
shall be deemed effective service of process on such party.


 


SECTION 10.9.  WAIVER OF JURY TRIAL.  EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ANY AND ALL
RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATED TO
THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.


 


SECTION 10.10.  Counterparts; Effectiveness.  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.  No provision of
this Agreement is intended to confer any rights, benefits, remedies,
obligations or liabilities hereunder upon any Person other than the parties
hereto and their respective successors and assigns.


 


SECTION 10.11.  Entire Agreement.  This Agreement and the Confidentiality Agreement constitute the
entire agreement between the parties with respect to the subject matter of this
Agreement and supersede all prior agreements and understandings, both oral and
written, between the parties with respect to the subject matter of this
Agreement.


 


SECTION 10.12  Captions.  The captions herein are included for convenience of reference only
and shall be ignored in the construction or interpretation hereof.


 


44

















 


SECTION 10.13.  Severability.  If any term, provision, covenant or restriction of this Agreement is
held by a court of competent jurisdiction or other authority 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 so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
materially adverse to any party.  Upon
such a determination, the parties shall negotiate in good faith to modify this
Agreement so as to effect the original intent of the parties as closely as
possible in an acceptable manner so that the transactions contemplated hereby
be consummated as originally contemplated to the fullest extent possible.


 


45

















 


IN WITNESS WHEREOF, the parties hereto have
caused this Agreement and Plan of Merger to be duly executed by their
respective authorized officers as of the day and year first above written.


 


 


	
   

  	
  BOSTON RESTAURANT ASSOCIATES,

  INC.

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  George R. Chapdelaine

  	
   

  
	
   

  	
  Chief Executive Officer

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  DOLPHIN DIRECT EQUITY PARTNERS, 

  LP

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  Dolphin Advisors, LLC

  	
   

  
	
   

  	
   

  	
  its managing general partner

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Carlos P. Salas

  	
   

  
	
   

  	
   

  	
  Authorized Signatory

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  BRAIDOL ACQUISITION CORP.

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Carlos P. Salas

  	
   

  
	
   

  	
   

  	
  President