Notes to Consolidated Financial Statements
December 25, 2016, December 27, 2015, and December 24, 2018
(1)
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Organization and Business
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99 Restaurants, LLC and its wholly owned subsidiaries operate
casual dining restaurants under the tradename Ninety Nine Restaurant & Pub, primarily in the Northeast United States. 99 Restaurants, LLC and Subsidiaries (Ninety Nine or the Company) is a wholly owned business of Fidelity Newport Holdings,
LLC (FNH or the Parent). The Company operated 106, 105, and 104 restaurants as of December 25, 2016, December 27, 2015, and December 28, 2014, respectively.
(2)
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Summary of Significant Accounting Policies
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|
(a)
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Basis of Presentation
|
Throughout the periods included in these consolidated
financial statements, Ninety Nine operated as part of FNH and consisted of several legal entities. The accompanying consolidated financial statements have been prepared on a stand-alone basis in accordance with accounting principles generally
accepted in the United States (GAAP) and are derived from the consolidated financial statements and accounting records of FNH and its subsidiaries. The historical results of operations, financial position and cash flows of Ninety Nine presented in
these consolidated financial statements may not be indicative of what they would have been had Ninety Nine actually been an independent stand-alone entity, nor are they necessarily indicative of Ninety Nines future results of operations,
financial position and cash flows.
The consolidated financial statements include all revenues and costs directly attributable to Ninety
Nine and an allocation of expenses related to FNH corporate functions. These expenses have been allocated to Ninety Nine based on direct usage or benefit where specifically identifiable, with the remainder allocated primarily on a pro rata basis of
revenue, headcount, number of locations, or other measures. Ninety Nine considers these allocations to be a reasonable reflection of the utilization of services or the benefit received. However, the allocations may not be indicative of the actual
expense that would have been incurred had Ninety Nine operated as an independent, stand-alone entity, nor are they indicative of Ninety Nines future expenses. See note 12 for additional information.
The consolidated financial statements include assets and liabilities specifically attributable to Ninety Nine and certain assets and
liabilities that are held by FNH that are specifically identifiable or otherwise attributable to Ninety Nine. FNH uses a centralized approach for managing cash and financing operations with its subsidiaries. Accordingly, a certain portion of Ninety
Nines bank cash balances are transferred to FNH cash management accounts regularly by FNH at its discretion and therefore are not included in the consolidated financial statements. Only cash balances legally owned by Ninety Nine are reflected
in the consolidated balance sheets. The net results of these transfers of cash between Ninety Nine and FNH are reflected as net Parent investment within equity in the accompanying consolidated balance sheets. Ninety Nine is a guarantor of FNHs
long-term debt, but that debt and related interest expense have not been attributed to Ninety Nine for any of the periods presented because FNHs borrowings are neither directly attributable to Ninety Nine nor is Ninety Nine the legal obligor
of such borrowings.
All intercompany transactions and balances within Ninety Nine have been eliminated. Transactions between FNH and
Ninety Nine have been included in these consolidated financial statements and substantially all have been effectively settled for cash at the time the transaction is recorded through FNHs centralized cash management system. Transactions
between Ninety Nine and other businesses of FNH are considered related party transactions. See note 12 for additional information.
F-7
Management believes the assumptions and allocations underlying the consolidated financial
statements are reasonable and appropriate and that the allocation methods were applied consistently for the periods presented and reflects all estimated costs of doing business. See note 12 for additional information.
The Company utilizes a 52/53 week fiscal year where the last
day of the fiscal year is the last Sunday in December. The fiscal years ended December 25, 2016, December 27, 2015, and December 28, 2014 were each comprised of 52 weeks.
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(c)
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Cash and Cash Equivalents
|
Cash and cash equivalents consist primarily of cash on
hand related to Ninety Nine legal entities and amounts in transit from credit and debit card processors, which are considered cash equivalents because they are both short term and highly liquid in nature, and are typically converted to cash within
three to four days of the sales transaction.
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(d)
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Trade Accounts Receivable
|
Trade accounts receivable primarily represent billings
to third party customers of business to business gift card sales, rebates, and tenant improvement allowances. Trade accounts receivable are generally unsecured.
The allowance for doubtful accounts is the Companys best estimate of the amount of probable credit losses related to existing
receivables. The Company determines the allowance based on its historical write off experience and managements judgment regarding the collectability of certain accounts. Account balances and related allowances are removed after management
determines that the potential for recovery is considered remote. The allowance for doubtful accounts was $0.0 million as of December 25, 2016 and December 27, 2015.
Inventory is stated at the lower of cost or market. Cost is determined
using the first in, first out method. Inventory primarily consists of food, beverages, paper products, and supplies.
The Company obtains
the majority of restaurant food products and supplies from one distributor. Although the Company believes alternative vendors could be found in a timely manner, any disruption of these services could potentially have an adverse impact on operating
results.
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(f)
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Property and Equipment, Net
|
The Company records property and equipment,
including internally developed software, at cost less accumulated depreciation. Depreciation expense is calculated using the straight line method. The useful lives of assets are 3 to 15 years for furniture, fixtures, and equipment. Leasehold
improvements are depreciated over the lesser of the useful life or the remaining lease term, inclusive of renewal periods, not to exceed 20 years. Gains or losses are recognized upon the disposal of property and equipment, and the asset and
related accumulated depreciation is removed from the accounts. Maintenance, repairs, and betterments that do not enhance the value of or increase the life of the assets are expensed as incurred. The Company capitalizes all direct external costs
associated with obtaining the land, building, and equipment for each new restaurant, as well as construction period interest. The Company also capitalizes all direct external costs associated with obtaining the dining room and kitchen equipment,
signage, and other assets and equipment. In addition, for each new restaurant and remodeled restaurant, the Company capitalizes a portion of the internal direct costs of its real estate and construction departments.
The Companys intangible assets include trademarks/trade
names. Trademarks/trade names are not subject to amortization, but are tested for impairment annually on the fiscal year end date, or more frequently, if events or changes in circumstances indicate that the asset might be impaired.
F-8
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(h)
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Favorable and Unfavorable Operating Lease Intangibles, Net
|
The favorable
operating lease intangible and unfavorable operating lease intangible represent the difference between the market rates compared to the lease payments on individual operating leases assumed in a business combination. These assets and liabilities are
amortized to rent expense on a straight-line basis over each respective operating lease term. The Company expects to incur $0.4 million amortization expense each year for the next five years.
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(i)
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Impairment of Long Lived Assets
|
Long lived assets, such as property and
equipment and intangible assets subject to amortization, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset or asset group may not be recoverable. Recoverability of assets held for
sale and to be held and used is measured by a comparison of the carrying amount of an asset or asset group to estimated undiscounted future cash flows expected to be generated by the asset or asset group. If the carrying amount of an asset or asset
group exceeds its estimated future cash flows, an impairment charge may be recognized for the amount by which the carrying amount of the asset or asset group exceeds the fair value of the asset or asset group based upon the future highest and best
use of the impaired asset or asset group. The costs associated with asset impairments are recorded in the consolidated income statements in the financial statement line item impairment and disposal charges, net. Fair value is determined by projected
future discounted cash flows for each location or the estimated market value of the assets.
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(j)
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Net Parent Investment
|
Net Parent investment in the consolidated balance sheets
represents FNHs historical investment in Ninety Nine and includes accumulated net earnings attributable to Parent and the net effect of transactions with and cost allocations from Parent.
The Company has land only, building only, and land and building
leases that are recorded as operating leases. Most of the leases have rent escalation clauses and some have rent holiday and contingent rent provisions. The rent expense under these leases is recognized on the straight line basis. Contingent rentals
are accrued each accounting period as the liabilities are incurred utilizing prorated periodic sales targets. The Company uses a lease life or expected lease term that is inclusive of renewal periods, not to exceed 20 years. Based upon the size
of the investment that the Company makes at a restaurant site, the economic penalty incurred by discontinuing use of the leased facility, and its historical experience with respect to the length of time a restaurant operates at a specific location,
the Company has concluded that a 20 year lease term is reasonably assured. The Company begins recognizing rent expense on the date that the Company becomes legally obligated under the lease.
Certain leases provide for rent holidays, which are included in the lease life used for the straight line rent calculation. Rent expense and an
accrued rent liability are recorded during the rent holiday period, during which the Company has possession of and access to the property, including the preopening period during construction, but is typically not required or obligated to, and
normally does not, make rent payments.
Revenues consist of company operated restaurant sales.
Restaurant sales include food and beverage sales and are net of discounts and applicable state and local sales taxes.
Revenue resulting
from the sale of gift cards is recognized in the period in which the gift card is redeemed. A percentage of gift card redemptions, based upon actual experience, is recognized as a reduction in restaurant operating costs for gift cards sold for which
the likelihood of redemption is remote, which is referred to as breakage. The amount recognized as a reduction in restaurant
F-9
operating costs for gift card breakage was $0.7 million, $0.7 million, and $0.6 million for 2016, 2015, and 2014, respectively.
The Company receives vendor rebates from various nonalcoholic
beverage suppliers, and to a lesser extent, suppliers of food products and supplies. Rebates are recognized as reductions to cost of food and beverage in the period in which they are earned.
The Company expenses advertising and marketing costs as
incurred, except for certain advertising production costs that are initially capitalized and subsequently expensed the first time the advertising takes place. During 2016, 2015, and 2014, the Company incurred $8.0 million, $7.8 million, and
$7.7 million of advertising and marketing costs, respectively. These costs are included in selling, general and administrative expenses on the consolidated income statements.
Salaries, personnel training costs, preopening rent, and other
expenses of opening new facilities are charged to expense as incurred.
For purposes of these consolidated financial statements, the income
tax provision of the Company was calculated on a stand-alone basis as though the Company had filed its own tax returns in the applicable tax jurisdictions in which it operates. FNH is a limited liability company. Accordingly, for federal and most
state and local taxing jurisdictions, the revenues, expenses, and credits of a limited liability company are allocated to its members. No income tax provision, assets or liabilities have been recorded in the accompanying consolidated financial
statements for Ninety Nine because these are the tax obligations of its members.
The Company, on a separate return basis, recognizes the
benefits of uncertain tax positions in the financial statements only after determining a more likely than not probability that the uncertain tax positions will withstand challenge, if any, from taxing authorities. When facts and circumstances
change, the Company reassesses these probabilities and records any changes in the financial statements as appropriate. Uncertain tax positions are accounted for by determining the minimum recognition threshold that a tax position is required to meet
before being recognized in the financial statements. This determination requires the use of judgment in assessing the timing and amounts of deductible and taxable items. Tax positions that meet the more likely than not recognition threshold are
recognized and measured as the largest amount of tax benefit that is greater than 50% likely of being realized upon settlement with a taxing authority that has full knowledge of all relevant information. The Company recognizes interest and penalties
accrued related to unrecognized tax benefits as components of income tax expense.
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(q)
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Concentration of Credit Risk
|
The Companys financial instruments that are
potentially exposed to a concentration of credit risk are cash and cash equivalents and receivables. At times, balances may be in excess of FDIC insurance limits. The Company does not believe it is exposed to any significant credit risk with respect
to cash. The Company places its cash in high quality credit institutions. The Company does not enter into financial instruments for trading or speculative purposes. The Company considers the concentration of credit risk within its receivables to be
minimal as a result of payment histories and the general financial condition of its third party customers.
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(r)
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Fair Value of Financial Instruments
|
Disclosure of fair values is required for
most on and off balance sheet financial instruments for which it is practicable to estimate that value. This disclosure requirement excludes certain financial instruments,
F-10
such as trade receivables and payables when the carrying value approximates the fair value, employee benefit obligations, lease contracts, and all nonfinancial instruments, such as land,
buildings, and equipment. The fair values of the financial instruments are estimates based upon current market conditions and quoted market prices for the same or similar instruments.
Management of the Company has made certain estimates and
assumptions relating to the reporting of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the periods to
prepare these consolidated financial statements in conformity with GAAP. Significant items subject to such estimates and assumptions include allocation of expenses related to certain FNH corporate functions, the carrying amount of property and
equipment and intangible assets, gift card breakage, self-insurance reserves, share based compensation and anticipated outcomes of legal proceedings and other contingencies. Actual results could differ from those estimates.
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(t)
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Recently Issued Accounting Pronouncements
|
In May 2014, the Financial Accounting
Standards Board (FASB) issued an accounting standards update that amended accounting guidance on revenue recognition. In August 2015, the FASB deferred adoption of the new standard by one year. Several updates have been issued since to clarify the
implementation guidance including, on principal versus agent considerations and on performance obligations and licensing. The new standard will be effective for fiscal years, and interim periods within those years, beginning after December 15,
2017. The accounting standards update permits the use of either the retrospective or cumulative effect transition method. The Company is continuing to evaluate the approach to use when transitioning to this new guidance. The Company will adopt this
guidance on January 1, 2018.
In February 2016, the FASB issued an accounting standards update which sets out the principles for the
recognition, measurement, presentation and disclosure of leases applicable to both lessors and lessees. The new guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018, with early
adoption permitted. The Company currently evaluating the impact that the adoption of this accounting standards update will have on its financial statements, but it expects this new guidance will have a material impact on the financial statements
since the Company has a significant number of operating lease arrangements for which it is the lessee. The Company plans to adopt this standard on December 31, 2018.
In March 2016, the FASB issued an accounting standards update to simplify several aspects of the accounting for share-based payment
transactions. Amendments in this update are effective for annual periods beginning after December 15, 2017, and interim periods within those annual periods. Early adoption is permitted for any entity in any interim or annual period. If an
entity early adopts the amendments in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. An entity that elects early adoption must adopt all of the amendments in the same
period. The Company expects this new guidance to have an impact on its consolidated financial statements since the Company has share-based compensation arrangements.
The Company is currently evaluating the impact that the adoption of this accounting standards update will have on the financial statements. The
Company will adopt this guidance on January 1, 2018.
F-11
(3)
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Fair Value of Financial Instruments
|
The Company utilizes the following fair value
hierarchy that prioritizes the inputs into valuation techniques used to measure fair value. Accordingly, the Company uses valuation techniques which maximize the use of observable inputs and minimize the use of unobservable inputs when determining
fair value. The three levels of the hierarchy are as follows:
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Level 1
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Defined as observable inputs such as quoted prices in active markets for identical assets or liabilities.
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Level 2
|
|
Defined as observable inputs other than Level 1 prices. These include quoted prices for similar assets or liabilities in an active market, quoted prices for identical assets or liabilities in markets that are not active, or
other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
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Level 3
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Defined as unobservable inputs for which little or no market data exists, therefore requiring an entity to develop its own assumptions about the assumptions that market participants would use in pricing the asset or liability,
including assumptions about risk.
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The recorded amounts for cash, accounts receivable, accounts payable, and accrued expenses approximate fair
value due to their short term nature.
(4)
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Property and Equipment, Net
|
Property and equipment, net consists of the following:
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|
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|
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December 25,
2016
|
|
|
December 27,
2015
|
|
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(in thousands)
|
|
Buildings and improvements
|
|
$
|
50,112
|
|
|
|
43,484
|
|
Equipment
|
|
|
43,125
|
|
|
|
33,103
|
|
Projects in process
|
|
|
48
|
|
|
|
640
|
|
Capitalized lease building
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|
|
1,200
|
|
|
|
1,200
|
|
|
|
|
|
|
|
|
|
|
|
|
|
94,485
|
|
|
|
78,427
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|
Less accumulated depreciation
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|
|
(38,320
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)
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(28,863
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)
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|
|
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Property and equipment, net
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|
$
|
56,165
|
|
|
|
49,564
|
|
|
|
|
|
|
|
|
|
|
For 2016, 2015, and 2014, depreciation expense was $10.6 million, $8.4 million, and $8.0 million,
respectively.
(5)
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Other Noncurrent Assets
|
Other noncurrent assets consist of the following:
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|
|
|
|
|
|
|
|
|
|
December 25,
2016
|
|
|
December 27,
2015
|
|
|
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(in thousands)
|
|
Liquor licenses
|
|
$
|
2,260
|
|
|
|
2,260
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|
Noncurrent receivables
|
|
|
515
|
|
|
|
662
|
|
Other noncurrent assets
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|
|
167
|
|
|
|
158
|
|
|
|
|
|
|
|
|
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Other noncurrent assets
|
|
$
|
2,942
|
|
|
|
3,080
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|
|
|
|
|
|
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F-12
Accrued expenses consist of the following:
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|
|
|
|
|
|
|
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December 25,
2016
|
|
|
December 27,
2015
|
|
|
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(in thousands)
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|
Accrued casualty insurance expenses
|
|
$
|
3,575
|
|
|
|
4,280
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|
Accrued medical and other employee benefits
|
|
|
684
|
|
|
|
643
|
|
Accrued utilities
|
|
|
1,075
|
|
|
|
1,062
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|
Accrued percent rent
|
|
|
155
|
|
|
|
62
|
|
Accrued other expenses
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|
|
512
|
|
|
|
399
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|
|
|
|
|
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Accrued expenses
|
|
$
|
6,001
|
|
|
|
6,446
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|
|
|
|
|
|
|
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(7)
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Other Noncurrent Liabilities
|
Other noncurrent liabilities consist of the following:
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|
|
|
|
|
|
|
|
|
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December 25,
2016
|
|
|
December 27,
2015
|
|
|
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(in thousands)
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|
Deferred rent
|
|
$
|
3,158
|
|
|
|
2,891
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|
Tenant improvement allowance
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|
|
2,379
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|
|
|
1,039
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|
Other noncurrent liabilities
|
|
|
893
|
|
|
|
1,047
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|
|
|
|
|
|
|
|
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Other noncurrent liabilities
|
|
$
|
6,430
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|
|
|
4,977
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|
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|
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The Company is the prime lessee under various land and building leases for
company operated restaurants and other locations. The leases have remaining initial terms ranging from one to 15 years and, in most instances, provide for renewal options ranging from 5 to 10 years. Many leases contain escalation clauses,
either predetermined or based upon inflation. Contingent rentals are accrued each accounting period as the liabilities are incurred utilizing prorated periodic sales targets. Under most leases, the Company is responsible for occupancy costs
including taxes, insurance, and maintenance.
The Company has four separate lease agreements that cover an aggregate of 30 of its
restaurants, each of which contains a minimum fixed charge covenant calculation. Each of the four restaurant groups are subject to a minimum annual fixed charge coverage ratio of 1.50 to 1.00. During 2016, 2015, and 2014, each of the four groups
exceeded the 1.50 to 1.00 minimum.
The following summarizes future minimum lease payments under leases having an initial or remaining
non-cancelable term of one year or more (in thousands):
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|
|
|
|
|
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Operating
leases
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|
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Sublease
rentals
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2017
|
|
$
|
15,483
|
|
|
|
151
|
|
2018
|
|
|
14,836
|
|
|
|
163
|
|
2019
|
|
|
12,977
|
|
|
|
163
|
|
2020
|
|
|
11,026
|
|
|
|
163
|
|
2021
|
|
|
9,909
|
|
|
|
163
|
|
thereafter
|
|
|
11,914
|
|
|
|
90
|
|
|
|
|
|
|
|
|
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Total minimum lease payments
|
|
$
|
76,145
|
|
|
|
893
|
|
|
|
|
|
|
|
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For 2016, 2015, and 2014, straight line base rent expense was $15.4 million, $14.8 million, and
$15.0 million, respectively. Contingent rent expense was $0.1 million for 2016, 2015, and 2014.
F-13
FNH is
self-insured
for a portion of its workers compensation, general liability, and liquor liability losses (collectively, casualty losses) as well as certain other insurable risks. To mitigate the cost of exposures for certain property and casualty losses, FNH
makes annual decisions to either retain the risks of loss up to a certain maximum per occurrence, aggregate loss limits negotiated with the insurance carriers, or fully insure those risks. FNH is also
self-insured
for a portion of its healthcare claims for eligible participating employees subject to certain deductibles and limitations. FNH has accounted for its retained liabilities for casualty losses and
healthcare claims, including reported and incurred but not reported claims, based on information provided by third party actuaries.
The Company is subject to personal property and sales and use
taxes in the United States. The Company is regularly under audit by tax authorities. This is believed to be common for the restaurant industry. Management believes the ultimate disposition of these matters will not have a material adverse effect on
the Companys consolidated financial position or results of operations.
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(c)
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Litigation Contingencies
|
The Company is a defendant from time to time in various
legal proceedings arising in the ordinary course of its business, including individual and purported class action claims alleging violations of federal and state wage and hour laws, claims relating to injury or wrongful death under dram
shop laws, claims relating to workplace, workers compensation and employment matters, discrimination and similar matters, claims resulting from slip and fall accidents, claims relating to lease and contractual obligations,
claims relating to its franchising initiatives, and claims from guests or employees alleging illness, injury or other food quality, health or operational concerns. The Company may also become subject to lawsuits and other proceedings, as well as
card network fines and penalties, arising out of the actual or alleged theft of its customers credit or debit card information.
The
Company does not believe that any of the legal proceedings pending against it as of the date of this report will have a material adverse effect on its liquidity, financial condition or results of operations.
(10)
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Purchase Commitments
|
The Company has unconditional purchase obligations with various
vendors. These purchase obligations are primarily food and beverage obligations with fixed commitments in regards to the time period of the contract and the quantities purchased with annual price adjustments that can fluctuate. The Company used both
historical and projected volume and pricing as of December 25, 2016 to determine the amount of the obligations.
The following table
sets forth the Companys contractual obligation at December 25, 2016:
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Total
|
|
|
2017
|
|
|
2018
|
|
|
2019
|
|
|
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(in thousands)
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|
Unconditional purchase obligations
|
|
$
|
67,540
|
|
|
|
48,000
|
|
|
|
17,340
|
|
|
|
2,200
|
|
(11)
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Employee Benefit Plans
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|
(a)
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Profits Interest Plan
|
A Ninety Nine employee participates in FNHs profit
interest plan. On January 1, 2015, FNH amended and restated its LLC agreement in its entirety. The Third Amended and Restated LLC Agreement establishes two classes of membership units, Class A Units and Class B Units.
Also on January 1, 2015, FNH adopted the 2015 Management Incentive Plan (the Plan), and reserved 6.7 million Class B units
for issuance under the Plan. Each Class B unit is a separate profits interest. Under the Plan, 3.0 million units have been granted, 1.3 million units have been forfeited, and
F-14
1.7 million units are outstanding as of December 25, 2016. The fair value of FNH at the date of grant is otherwise known as the hurdle amount. The applicable hurdle amount for these
Class B Units is $458.2 million or $484.4 million, depending on grant date, and the grants vest over a three year period with 50% becoming vested after two years and the remaining 50% vesting at the end of the third year. The Company has
recorded $0.1 million and $0.3 million, net of forfeitures, for the Companys portion of expense for 2016 and 2015, respectively, which was allocated from FNH based on revenue and specific identification and is included as part of corporate
overhead costs on the consolidated income statements.
Company employees participate in a 401(k) plan
(the 401k Plan) that FNH maintains for the benefit of its employees and their beneficiaries. Under the 401k Plan, employees can make contributions of their compensation, subject to an annual statutory limit. FNH may contribute
annually to the 401k Plan according to the plan document, and may make a contribution at its sole discretion for participants meeting certain eligibility criteria. FNH contributions vest according to a vesting schedule defined in the
401k Plan document. The Company has expensed $0.3 million, $0.2 million, and $0.2 million for employer contributions for 2016, 2015, and 2014, respectively, which was allocated from FNH based on headcount and is included as part of
corporate overhead costs on the consolidated income statements.
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(c)
|
Deferred compensation plan
|
FNH maintains a deferred compensation plan for a
select group of management team members to provide supplemental retirement income benefits through deferrals of salary and bonus. Participants in this plan can contribute, on a
pre-tax
basis, up to 50% of
their base pay and 100% of their annual performance bonuses. FNH contributes annually to this plan an amount equal to a matching formula of each participants deferrals. The Company has recorded approximately $0.1 million for 2016, 2015,
and 2014 for its portion of expense which is included as part of corporate overhead costs on the consolidated income statements.
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(d)
|
Omnibus equity incentive plan
|
During 2013, FNH adopted an Omnibus Equity
Incentive Plan under which the FNHs Board of Managers may grant options, appreciation rights and restricted units to key employees. The maximum aggregate number of units that may be granted under this plan shall not exceed three million
units. To date, FNH has granted 0.9 million restricted units. The restricted units are subject to two vesting requirements with the first vesting requirement based on both passage of time and performance of FNH, and the second vesting
requirement satisfied only upon sale of FNH or units of FNH becoming publicly traded. Because of this second vesting requirement, no restricted units have vested.
(12)
|
Corporate Allocations and Related Party Transactions
|
|
(a)
|
Corporate Allocations
|
The consolidated financial statements reflect allocations
of certain expenses from FNH, including, but not limited to, general corporate expenses such as management, legal, human resources, finance, accounting, financial reporting, tax, information technology, benefits, real estate, compliance, marketing,
corporate employee benefits including cash bonuses and share-based compensation, shared services processing and administration, and depreciation for corporate fixed assets. These costs have been allocated to the Company on the basis of direct usage
when identifiable, with the remainder allocated on a pro-rata basis of revenue, headcount, number of locations, or other systematic measures that reflect utilization of services provided to or benefits received by the Company. The Company considers
the expense allocation methodology and results to be reasonable for all periods presented. The Company has recognized $8.7 million, $8.2 million and $8.3 million in expense related to corporate cost allocations in 2016, 2015, and 2014, respectively,
which have been recorded within
F-15
corporate overhead costs on the consolidated income statements. The financial information in these consolidated financial statements does not necessarily include expenses indicative of those that
would have been incurred by Ninety Nine had it been a separate, stand-alone entity. Actual costs that may have been incurred if Ninety Nine had been a stand-alone company would depend on a number of factors, including the chosen organization
structure and functions outsourced or performed by employees.
|
(b)
|
Related Party Transactions
|
In 2016, 2015, and 2014, related party purchases from
FNH and its subsidiaries were $1.4 million, $1.5 million and $1.5 million, respectively, and are recorded in cost of food and beverage on the consolidated income statements. All related party receivables and payables due from or due to FNH and
its subsidiaries are settled through the intercompany accounts included within the net Parent investment line on the consolidated balance sheets.
On August 3, 2017, Fidelity National Financial Ventures, LLC (FNFV), a majority
Member of FNH, entered into an Agreement and Plan of Merger to merge Ninety Nine with J. Alexanders Holdings, LLC (JAX). The transaction is valued at $199 million.
Subsequent events have been evaluated and disclosed through September 11, 2017, the date at which the financial statements were available to be issued.
F-16
99 RESTAURANTS, LLC AND SUBSIDIARIES
(A BUSINESS OF FIDELITY NEWPORT HOLDINGS, LLC)
Condensed Consolidated Balance Sheets
September 3, 2017 and December 25, 2016
(Unaudited in thousands)
|
|
|
|
|
|
|
|
|
Assets
|
|
September 3,
2017
|
|
|
December 25,
2016
|
|
Current assets:
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
4,317
|
|
|
|
3,798
|
|
Trade and other accounts receivable, less allowance for doubtful accounts of $0 and $0,
respectively
|
|
|
948
|
|
|
|
3,330
|
|
Inventories, net
|
|
|
3,261
|
|
|
|
3,754
|
|
Prepaid expenses and other current assets
|
|
|
1,995
|
|
|
|
1,117
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
10,521
|
|
|
|
11,999
|
|
|
|
|
|
|
|
|
|
|
Noncurrent assets:
|
|
|
|
|
|
|
|
|
Property and equipment, net of accumulated depreciation of $45,579 and
$38,320, respectively
|
|
|
52,679
|
|
|
|
56,165
|
|
Intangible assets
|
|
|
11,840
|
|
|
|
11,840
|
|
Favorable operating lease intangible, net
|
|
|
4,002
|
|
|
|
4,874
|
|
Other noncurrent assets
|
|
|
2,877
|
|
|
|
2,942
|
|
|
|
|
|
|
|
|
|
|
Total noncurrent assets
|
|
|
71,398
|
|
|
|
75,821
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
81,919
|
|
|
|
87,820
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and net Parent investment
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
Trade accounts payable
|
|
$
|
2,877
|
|
|
|
2,558
|
|
Accrued payroll and related expenses
|
|
|
4,951
|
|
|
|
5,056
|
|
Accrued expenses
|
|
|
6,012
|
|
|
|
6,001
|
|
Deferred revenue
|
|
|
1,335
|
|
|
|
8,558
|
|
Accrued taxes
|
|
|
2,979
|
|
|
|
1,698
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
18,154
|
|
|
|
23,871
|
|
|
|
|
|
|
|
|
|
|
Noncurrent liabilities:
|
|
|
|
|
|
|
|
|
Unfavorable operating lease intangible, net
|
|
|
4,571
|
|
|
|
5,336
|
|
Other noncurrent liabilities
|
|
|
6,413
|
|
|
|
6,430
|
|
|
|
|
|
|
|
|
|
|
Total noncurrent liabilities
|
|
|
10,984
|
|
|
|
11,766
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
29,138
|
|
|
|
35,637
|
|
Net Parent investment
|
|
|
52,781
|
|
|
|
52,183
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and net Parent investment
|
|
$
|
81,919
|
|
|
|
87,820
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to condensed consolidated financial statements.
F-17
99 RESTAURANTS, LLC AND SUBSIDIARIES
(A BUSINESS OF FIDELITY NEWPORT HOLDINGS, LLC)
Condensed Consolidated Income Statements
Thirty-six weeks ended September 3, 2017 and September 4, 2016
(Unaudited in thousands)
|
|
|
|
|
|
|
|
|
|
|
Thirty-six
weeks ended
September 3,
2017
|
|
|
Thirty-six
weeks ended
September 4,
2016
|
|
Revenues:
|
|
|
|
|
|
|
|
|
Restaurant sales
|
|
$
|
214,696
|
|
|
|
214,497
|
|
|
|
|
|
|
|
|
|
|
Total net revenue
|
|
|
214,696
|
|
|
|
214,497
|
|
|
|
|
|
|
|
|
|
|
Costs and expenses:
|
|
|
|
|
|
|
|
|
Cost of food and beverage
|
|
|
62,212
|
|
|
|
62,603
|
|
Payroll and benefits
|
|
|
74,910
|
|
|
|
73,305
|
|
Restaurant operating costs
|
|
|
39,547
|
|
|
|
39,297
|
|
|
|
|
|
|
|
|
|
|
Cost of sales, exclusive of depreciation shown separately below
|
|
|
176,669
|
|
|
|
175,205
|
|
Selling, general and administrative expenses
|
|
|
12,996
|
|
|
|
11,981
|
|
Corporate overhead costs
|
|
|
5,382
|
|
|
|
6,519
|
|
Depreciation
|
|
|
8,219
|
|
|
|
6,895
|
|
Preopening costs
|
|
|
85
|
|
|
|
715
|
|
Disposal charges, net
|
|
|
26
|
|
|
|
9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
203,377
|
|
|
|
201,324
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
11,319
|
|
|
|
13,173
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to condensed consolidated financial statements.
F-18
99 RESTAURANTS, LLC AND SUBSIDIARIES
(A BUSINESS OF FIDELITY NEWPORT HOLDINGS, LLC)
Condensed Consolidated Statements of Changes in Net Parent Investment
Thirty-six weeks ended September 3, 2017 and September 4, 2016
(Unaudited in thousands)
|
|
|
|
|
|
|
Net Parent
Investment
|
|
Balance at December 27, 2015
|
|
$
|
48,043
|
|
|
|
|
|
|
Net income
|
|
|
13,173
|
|
Net distributions to Parent
|
|
|
(5,220
|
)
|
|
|
|
|
|
Balance at September 4, 2016
|
|
|
55,996
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Parent
Investment
|
|
Balance at December 25, 2016
|
|
$
|
52,183
|
|
|
|
|
|
|
Net income
|
|
|
11,319
|
|
Net distributions to Parent
|
|
|
(10,721
|
)
|
|
|
|
|
|
Balance at September 3, 2017
|
|
|
52,781
|
|
|
|
|
|
|
See accompanying notes to condensed consolidated financial statements.
F-19
99 RESTAURANTS, LLC AND SUBSIDIARIES
(A BUSINESS OF FIDELITY NEWPORT HOLDINGS, LLC)
Condensed Consolidated Statements of Cash Flows
Thirty-six weeks ended September 3, 2017 and September 4, 2016
(Unaudited in thousands)
|
|
|
|
|
|
|
|
|
|
|
Thirty-six
weeks ended
September 3,
2017
|
|
|
Thirty-six
weeks ended
September 4,
2016
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
11,319
|
|
|
$
|
13,173
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
8,219
|
|
|
|
6,895
|
|
Non cash rent
|
|
|
73
|
|
|
|
362
|
|
Disposal charges, net
|
|
|
23
|
|
|
|
(19
|
)
|
Changes in assets and liabilities:
|
|
|
|
|
|
|
|
|
Trade accounts and other receivables
|
|
|
2,382
|
|
|
|
2,020
|
|
Inventories
|
|
|
493
|
|
|
|
197
|
|
Prepaid expenses and other current assets
|
|
|
(878
|
)
|
|
|
(1,015
|
)
|
Trade accounts payable
|
|
|
319
|
|
|
|
697
|
|
Deferred revenue
|
|
|
(7,223
|
)
|
|
|
(6,046
|
)
|
Accrued payroll, accrued expenses, and accrued taxes
|
|
|
1,187
|
|
|
|
699
|
|
Other long-term assets and liabilities
|
|
|
82
|
|
|
|
23
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
|
15,996
|
|
|
|
16,986
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
Additions to property and equipment
|
|
|
(4,756
|
)
|
|
|
(10,638
|
)
|
Net acquisitions of property and equipment from affiliates
|
|
|
|
|
|
|
(2,238
|
)
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities
|
|
|
(4,756
|
)
|
|
|
(12,876
|
)
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
Net distributions to Parent
|
|
|
(10,721
|
)
|
|
|
(5,220
|
)
|
|
|
|
|
|
|
|
|
|
Net cash used in financing activities
|
|
|
(10,721
|
)
|
|
|
(5,220
|
)
|
|
|
|
|
|
|
|
|
|
Increase (decrease) in cash and cash equivalents
|
|
|
519
|
|
|
|
(1,110
|
)
|
Cash and cash equivalents at beginning of year
|
|
|
3,798
|
|
|
|
4,663
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of year
|
|
$
|
4,317
|
|
|
$
|
3,553
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to condensed consolidated financial statements.
F-20
99 RESTAURANTS, LLC AND SUBSIDIARIES
(A BUSINESS OF FIDELITY NEWPORT HOLDINGS, LLC)
Notes to Unaudited Condensed Consolidated Financial Statements
September 3, 2017 and December 25, 2016
(1)
|
Organization and Business
|
99 Restaurants, LLC and its wholly owned subsidiaries
operate casual dining restaurants under the tradename Ninety Nine Restaurant & Pub, primarily in the Northeast United States. 99 Restaurants, LLC and Subsidiaries (Ninety Nine or the Company) is a wholly owned business of Fidelity Newport
Holdings, LLC (FNH or the Parent). The Company operated 105 and 106 restaurants as of September 3, 2017 and December 25, 2016, respectively.
(2)
|
Summary of Significant Accounting Policies
|
|
(a)
|
Basis of Presentation
|
Throughout the periods included in these unaudited
condensed consolidated financial statements, Ninety Nine operated as part of FNH and consisted of several legal entities. The accompanying unaudited condensed consolidated financial statements have been prepared on a stand-alone basis in accordance
with accounting principles generally accepted in the United States (GAAP) and are derived from the unaudited consolidated financial statements and accounting records of FNH and its subsidiaries. The historical results of operations, financial
position and cash flows of Ninety Nine presented in these unaudited condensed consolidated financial statements may not be indicative of what they would have been had Ninety Nine actually been an independent stand-alone entity, nor are they
necessarily indicative of Ninety Nines future results of operations, financial position and cash flows.
The unaudited condensed
consolidated financial statements include all revenues and costs directly attributable to Ninety Nine and an allocation of expenses related to FNH corporate functions. These expenses have been allocated to Ninety Nine based on direct usage or
benefit where specifically identifiable, with the remainder allocated primarily on a pro rata basis of revenue, headcount, number of locations, or other measures. Ninety Nine considers these allocations to be a reasonable reflection of the
utilization of services or the benefit received. However, the allocations may not be indicative of the actual expense that would have been incurred had Ninety Nine operated as an independent, stand-alone entity, nor are they indicative of Ninety
Nines future expenses. See note 6 for additional information.
The unaudited condensed consolidated financial statements include
assets and liabilities specifically attributable to Ninety Nine and certain assets and liabilities that are held by FNH that are specifically identifiable or otherwise attributable to Ninety Nine. FNH uses a centralized approach for managing cash
and financing operations with its subsidiaries. Accordingly, a certain portion of Ninety Nines bank cash balances are transferred to FNH cash management accounts regularly by FNH at its discretion and therefore are not included in the
unaudited condensed consolidated financial statements. Only cash balances legally owned by Ninety Nine are reflected in the unaudited consolidated balance sheets. The net results of these transfers of cash between Ninety Nine and FNH are reflected
as net Parent investment within equity in the accompanying unaudited consolidated balance sheets. Ninety Nine is a guarantor of FNHs long-term debt, but that debt and related interest expense have not been attributed to Ninety Nine for any of
the periods presented because FNHs borrowings are neither directly attributable to Ninety Nine nor is Ninety Nine the legal obligor of such borrowings.
All intercompany transactions and balances within Ninety Nine have been eliminated. Transactions between FNH and Ninety Nine have been included
in these unaudited condensed consolidated financial statements and substantially all have been effectively settled for cash at the time the transaction is recorded through FNHs centralized cash management system. Transactions between Ninety
Nine and other businesses of FNH are considered related party transactions. See note 6 for additional information.
F-21
Management believes the assumptions and allocations underlying the unaudited condensed
consolidated financial statements are reasonable and appropriate and that the allocation methods were applied consistently for the periods presented and reflects all estimated costs of doing business. See note 6 for additional information.
The accompanying unaudited interim condensed consolidated financial statements have been prepared in accordance with GAAP for interim financial
information. Accordingly, they do not include all of the information and footnote disclosures required by GAAP for complete financial statements.
In the opinion of management, the unaudited interim condensed consolidated financial statements contained in this report reflect all
adjustments, consisting of normal recurring accruals, which are necessary for a fair presentation of the consolidated financial position and the results of operations for the interim periods presented. The results of operations for any interim
period are not necessarily indicative of results for the full year. The Companys fiscal year ends on the last Sunday in December with its first, second, and third quarters consisting of twelve weeks and its fourth quarter consisting of sixteen
weeks each in most years. For further information, please refer to the Consolidated Financial Statements and footnotes thereto for the fiscal year ended December 25, 2016.
The Company utilizes a 52/53 week fiscal year where the last
day of the fiscal year is the last Sunday in December. The Companys first, second and third quarters consist of twelve weeks and its fourth quarter consists of sixteen or seventeen weeks.
For purposes of these unaudited consolidated financial statements,
the income tax provision of the Company was calculated on a stand-alone basis as though the Company had filed its own tax returns in the applicable tax jurisdictions in which it operates. FNH is a limited liability company. Accordingly, for federal
and most state and local taxing jurisdictions, the revenues, expenses, and credits of a limited liability company are allocated to its members. No income tax provision, assets or liabilities have been recorded in the accompanying unaudited
consolidated financial statements for Ninety Nine because these are the tax obligations of its members.
Management of the Company has made certain estimates and
assumptions relating to the reporting of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the unaudited consolidated financial statements and the reported amounts of revenues and expenses during the
periods to prepare these unaudited consolidated financial statements in conformity with GAAP. Significant items subject to such estimates and assumptions include allocation of expenses related to certain FNH corporate functions, the carrying amount
of property and equipment and intangible assets, gift card breakage, self-insurance reserves, share based compensation and anticipated outcomes of legal proceedings and other contingencies. Actual results could differ from those estimates.
|
(e)
|
Recently Issued Accounting Pronouncements
|
In May 2014, the Financial Accounting
Standards Board (FASB) issued an accounting standards update that amended accounting guidance on revenue recognition. In August 2015, the FASB deferred adoption of the new standard by one year. Several updates have been issued since to clarify the
implementation guidance including, on principal versus agent considerations and on performance obligations and licensing. The new standard will be effective for fiscal years, and interim periods within those years, beginning after December 15,
2017. The accounting standards update permits the use of either the retrospective or cumulative effect transition method. The Company has not yet selected a transition method. The Company does not currently have any franchise or similar
arrangements that will need to be evaluated under ASU No. 2014-09, and the Company does not believe that this guidance will materially impact the recognition of revenue from sales within restaurant
F-22
operations. The Company is currently evaluating the impact that ASU No. 2014-09 will have on its recognition of breakage income related to its gift cards, but does not believe that the
adoption of ASU No. 2014-09 in fiscal year 2018 will have a significant effect on the Companys Condensed Consolidated Financial Statements and related disclosures.
In February 2016, the FASB issued ASU No. 2016-02, Leases (ASU No. 2016-02), which supersedes ASC Topic 840, Leases, and creates
a new topic, ASC Topic 842, Leases. This update requires lessees to recognize a lease liability and a lease asset for all leases, including operating leases, with a term greater than 12 months on its balance sheet. The update also
expands the required quantitative and qualitative disclosures surrounding leases. This update is effective for fiscal years beginning after December 15, 2018 and interim periods within those fiscal years, with earlier adoption
permitted. This update will be applied using a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. The Company
anticipates that the adoption of ASU No. 2016-02 will materially increase the assets and liabilities on the Companys Condensed Consolidated Balance Sheets and related disclosures since the Company has a significant number of operating lease
arrangements for which it is the lessee. The Company is still evaluating the impact that the adoption of this ASU will have on the Companys Condensed Consolidated Income Statements. The impact of this ASU is non-cash in nature, and
as such, it is not expected to have a material impact on the Companys cash flows and liquidity.
In May 2017, the FASB issued an
accounting standards update to provide clarity and reduce complexity when an entity has changes to the terms or conditions of a share-based payment award, and when an entity should apply modification accounting. The amendments in this update are
effective for financial statements issued for annual periods beginning after December 15, 2017, including interim periods within those annual periods, and early adoption is permitted for interim or annual periods. The Company is evaluating the
impact that the adoption to his accounting standards update will have on the financial statements and related disclosures. The Company will adopt this guidance on January 1, 2018.
(3)
|
Fair Value of Financial Instruments
|
The Company utilizes the following fair value
hierarchy that prioritizes the inputs into valuation techniques used to measure fair value. Accordingly, the Company uses valuation techniques which maximize the use of observable inputs and minimize the use of unobservable inputs when determining
fair value. The three levels of the hierarchy are as follows:
|
|
|
Level 1
|
|
Defined as observable inputs such as quoted prices in active markets for identical assets or liabilities.
|
|
|
Level 2
|
|
Defined as observable inputs other than Level 1 prices. These include quoted prices for similar assets or liabilities in an active market, quoted prices for identical assets or liabilities in markets that are not active, or
other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
|
|
|
Level 3
|
|
Defined as unobservable inputs for which little or no market data exists, therefore requiring an entity to develop its own assumptions about the assumptions that market participants would use in pricing the asset or liability,
including assumptions about risk.
|
The recorded amounts for cash, accounts receivable, accounts payable, and accrued expenses approximate
fair value due to their short term nature.
F-23
(4)
|
Other Noncurrent Liabilities
|
Other noncurrent liabilities consist of the following:
|
|
|
|
|
|
|
|
|
|
|
September 3,
2017
|
|
|
December 25,
2016
|
|
|
|
(in thousands)
|
|
Deferred rent
|
|
$
|
3,233
|
|
|
|
3,158
|
|
Tenant improvement allowance
|
|
|
2,402
|
|
|
|
2,379
|
|
Other noncurrent liabilities
|
|
|
778
|
|
|
|
893
|
|
|
|
|
|
|
|
|
|
|
Other noncurrent liabilities
|
|
$
|
6,413
|
|
|
|
6,430
|
|
|
|
|
|
|
|
|
|
|
FNH is
self-insured
for a portion of its workers compensation, general liability, and liquor liability losses (collectively, casualty losses) as well as certain other insurable risks. To mitigate the cost of exposures for certain property and casualty losses, FNH
makes annual decisions to either retain the risks of loss up to a certain maximum per occurrence, aggregate loss limits negotiated with the insurance carriers, or fully insure those risks. FNH is also
self-insured
for a portion of its healthcare claims for eligible participating employees subject to certain deductibles and limitations. FNH has accounted for its retained liabilities for casualty losses and
healthcare claims, including reported and incurred but not reported claims, based on information provided by third party actuaries.
The Company is subject to personal property and sales and use
taxes in the United States. The Company is regularly under audit by tax authorities. This is believed to be common for the restaurant industry. Management believes the ultimate disposition of these matters will not have a material adverse effect on
the Companys unaudited consolidated financial position or results of operations.
|
(c)
|
Litigation Contingencies
|
The Company is a defendant from time to time in various
legal proceedings arising in the ordinary course of its business, including individual and purported class action claims alleging violations of federal and state wage and hour laws, claims relating to injury or wrongful death under dram
shop laws, claims relating to workplace, workers compensation and employment matters, discrimination and similar matters, claims resulting from slip and fall accidents, claims relating to lease and contractual obligations,
claims relating to its franchising initiatives, and claims from guests or employees alleging illness, injury or other food quality, health or operational concerns. The Company may also become subject to lawsuits and other proceedings, as well as
card network fines and penalties, arising out of the actual or alleged theft of its customers credit or debit card information.
The
Company does not believe that any of the legal proceedings pending against it as of the date of this report will have a material adverse effect on its liquidity, financial condition or results of operations.
(6)
|
Corporate Allocations and Related Party Transactions
|
|
(a)
|
Corporate Allocations
|
The unaudited condensed consolidated financial
statements reflect allocations of certain expenses from FNH, including, but not limited to, general corporate expenses such as management, legal, human resources, finance, accounting, financial reporting, tax, information technology, benefits, real
estate, compliance, marketing, corporate employee benefits including cash bonuses and share-based compensation, shared services processing and administration, and depreciation for corporate fixed assets. These costs have been allocated to the
Company on the basis of direct usage when identifiable, with the remainder allocated on a pro-rata basis of revenue, headcount, number of locations, or other
F-24
systematic measures that reflect utilization of services provided to or benefits received by the Company. The Company considers the expense allocation methodology and results to be reasonable for
all periods presented. The Company has recognized $5.4 million and $6.5 million in expense related to corporate cost allocations for the thirty-six weeks ended September 3, 2017 and September 4, 2016, respectively, which have been recorded within
corporate overhead costs on the unaudited consolidated income statements. The financial information in these unaudited condensed consolidated financial statements does not necessarily include expenses indicative of those that would have been
incurred by Ninety Nine had it been a separate, stand-alone entity. Actual costs that may have been incurred if Ninety Nine had been a stand-alone company would depend on a number of factors, including the chosen organization structure and functions
outsourced or performed by employees.
|
(b)
|
Related Party Transactions
|
Related party purchases from FNH and its
subsidiaries recorded in cost of food and beverage on the unaudited consolidated income statements were $0.8 million and $1.0 million for the thirty-six weeks ended September 3, 2017 and September 4, 2016, respectively. All related party receivables
and payables due from or due to FNH and its subsidiaries are settled through the intercompany accounts included within the net Parent investment line on the unaudited consolidated balance sheets.
On August 3, 2017, Ninety Nine, FNH and Fidelity National
Financial Ventures, LLC (FNFV), a majority Member of FNH, entered into an Agreement and Plan of Merger to merge Ninety Nine with J. Alexanders Holdings, Inc. (NYSE: JAX) and its subsidiary J. Alexanders Holdings, LLC. The
transaction is valued at $199 million.
Subsequent events have been evaluated and disclosed through November ,
2017, the date at which the financial statements were available to be issued.
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Appendix A
EXECUTION VERSION
AGREEMENT AND PLAN OF MERGER
DATED AS OF AUGUST 3, 2017
BY AND AMONG
J. ALEXANDERS
HOLDINGS, INC.,
J. ALEXANDERS HOLDINGS, LLC,
NITRO MERGER SUB, INC.,
FIDELITY
NATIONAL FINANCIAL VENTURES, LLC,
FIDELITY NEWPORT HOLDINGS, LLC
AND
99 RESTAURANTS, LLC
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TABLE OF CONTENTS
A-2
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AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER is made by and among J. ALEXANDERS HOLDINGS, INC., a Tennessee corporation
(
Parent
), J. ALEXANDERS HOLDINGS, LLC, a Delaware limited liability company and a direct, majority-owned Subsidiary of Parent (the
Purchaser
), NITRO MERGER SUB, INC., a Tennessee corporation and a direct,
wholly-owned Subsidiary of Purchaser (
Merger Sub
), FIDELITY NATIONAL FINANCIAL VENTURES, LLC, a Delaware limited liability company (
FNFV
), FIDELITY NEWPORT HOLDINGS, LLC, a Delaware limited liability company
(
FNH
, and, together with FNFV, the
Sellers
and each, individually, a
Seller
) and 99 RESTAURANTS, LLC, a Delaware limited liability company (the
Company
), as of
August 3, 2017 (this
Agreement
). Certain capitalized terms are defined in Section 11.12.
RECITALS
WHEREAS, following the execution and delivery of this Agreement, and prior to the consummation of the Merger, FNH shall, and shall cause its
Subsidiaries to, effect the Reorganization and FNFV shall effect the Contribution;
WHEREAS, concurrently with the Reorganization and the
Contribution, FNH shall cause, and the Company shall effectuate, the Company Debt Assumption;
WHEREAS, each of the boards of directors of
Parent and Merger Sub, and the managing member of Purchaser, have (i) declared it advisable to enter into this Agreement and transactions contemplated by this Agreement, including the Merger (the
Transactions
) and
(ii) subject to receipt of the Parent Shareholder Approvals, approved this Agreement, the execution, delivery and performance of this Agreement by Parent, Purchaser and Merger Sub, as applicable, and the consummation of the Transactions;
WHEREAS, the board of directors of Parent has (i) directed that this Agreement and the Transactions be submitted for consideration and
approval of and adoption by the Parent Shareholders and (ii) resolved to recommend the adoption of the Transactions and this Agreement by the Parent Shareholders;
WHEREAS, the sole member of the Company as of the date hereof has (i) declared it advisable to enter into this Agreement and
(ii) approved this Agreement, the execution, delivery and performance of this Agreement by the Company, and the consummation of the Transactions;
WHEREAS, for U.S. federal and applicable state and local income tax purposes, the sale and contribution of the Company Membership Interests to
Purchaser contemplated under this Agreement will be consistently treated by the parties as a contribution of such Company Membership Interests to Purchaser in exchange for the Purchaser Units under Section 721 of the Code;
WHEREAS, the Purchaser Entities, the Company and the Sellers desire to make certain representations, warranties, covenants and agreements
specified herein in connection with the Transactions and to prescribe certain conditions to the Transactions; and
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NOW, THEREFORE, in consideration of the foregoing and the representations, warranties, covenants
and agreements set forth in this Agreement, and intending to be legally bound hereby, the parties hereto agree as follows:
ARTICLE I
THE
PRE-CLOSING
TRANSACTIONS; THE MERGER; CERTAIN RELATED MATTERS
Section 1.1
The
Pre-Closing
Transactions
. Immediately
prior to the Closing, (a) FNH shall cause its Subsidiaries to distribute the Company Membership Interest as of the date hereof to each such Subsidiarys sole member, as a result of which the Company shall become a direct, wholly-owned
Subsidiary of FNH (the
Reorganization
), (b) immediately following the Reorganization, FNFV shall contribute to the Company $40,000,000.00 in exchange for membership interest in the Company and FNFV shall be admitted as a member of
the Company, in accordance with the terms of the Company LLC Agreement (the
Contribution
) and (c) FNH shall, and shall cause its Subsidiaries to, assign to the Company, and the Company shall assume, $60,000,000.00 in
principal amount outstanding under the Seller Credit Agreement (the
Company Debt Assumption
and, together with the Reorganization and the Contribution, the
Pre-Closing
Transactions
).
Section 1.2
The Merger
. Following the completion of the
Pre-Closing
Transactions, and upon the terms and subject to the conditions set forth in this Agreement and in accordance with the Tennessee Business Corporation Act (the
TBCA
) and the Delaware
Limited Liability Company Act (the
DLLCA
), at the Effective Time, Merger Sub shall be merged with and into the Company (the
Merger
), whereupon the separate existence of Merger Sub shall cease and the Company
shall continue as the surviving company (the
Surviving Company
) and a direct, wholly-owned Subsidiary of Purchaser.
Section 1.3
Closing
. The closing of the Merger (the
Closing
) will take place at 10:00 a.m., local time, on (a) a date to be specified by Purchaser and the Company, such date to be no later than the second
Business Day after the satisfaction or waiver of all of the conditions set forth in
Article VIII
capable of satisfaction prior to the Closing (
provided
that all of the other conditions set forth in
Article VIII
will be satisfied
at the Closing), at the offices of Bass, Berry & Sims PLC, 150 Third Avenue South, Suite 2800, Nashville, Tennessee 37201 or (b) such other date, time and/or place as is agreed to in writing by Purchaser and the Company. The date upon
which the Closing actually occurs is referred to herein as the
Closing Date
.
Section 1.4
Effective Time
. Subject to the provisions of this Agreement, as soon as
practicable following the Closing on the Closing Date, the parties shall cause the Merger to be consummated by filing articles of merger relating to the Merger (the
Articles of Merger
) with the Secretary of State of the State of
Tennessee and the Secretary of State of the State of Delaware, in such form as required by, and executed and acknowledged in accordance with, the applicable provisions of the TBCA and the DLLCA, and, as soon as practicable on or after the Closing
Date, shall make all other filings required under the TBCA, the DLLCA, or by the Secretary of State of the State of Tennessee or the Secretary of State of the State of Delaware in connection with the Merger. The Merger shall become effective at the
time that the Articles of Merger have been duly filed with the Secretary of State of the State of Tennessee, or at such later time as Parent and the Company shall agree and specify in the Articles of Merger (the time at which the Merger becomes
effective is referred to herein as the
Effective Time
).
Section 1.5
Effects of the Merger
. The Merger shall have the effects set forth in this
Agreement, the Articles of Merger and the applicable provisions of the TBCA and the DLLCA. Without limiting the generality of the foregoing and subject thereto, at the Effective Time, all the property, rights, privileges, immunities, powers and
franchises of the Company and Merger Sub shall vest in the Surviving Company and all debts, liabilities and duties of the Company and Merger Sub shall become the debts, liabilities and duties of the Surviving Company, all as provided under the TBCA,
the DLLCA and other applicable Law.
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Section 1.6
Articles of Organization and Operating
Agreement
. The certificate of formation of the Company in effect immediately prior to the Effective Time will be the certificate of formation of the Surviving Company, until duly amended in accordance with applicable law. The limited liability
company agreement of the Company in effect immediately prior to the Effective Time will be the limited liability company agreement of the Surviving Company, until duly amended in accordance with applicable law.
Section 1.7
Managers and Officers
. The parties hereto shall take all actions necessary so
that, from and after the Effective Time, the managers and officers of the Surviving Company immediately after the Effective Time shall be as designated by the Purchaser, to serve, in both cases, until their successors shall have been elected or
appointed and qualified or until otherwise provided by law and the certificate of formation and limited liability company agreement of the Surviving Company.
Section 1.8
Closing Deliveries
. In addition to any other documents to be delivered under other
provisions of this Agreement, at the Closing:
(a) The Company or the Sellers, as applicable, shall deliver, or cause to be delivered, to
the Purchaser Entities:
(i) the Articles of Merger, executed by the Company;
(ii) a subscription agreement in substantially the form attached hereto as
Exhibit A
(the
Subscription Agreement
),
executed by each Seller;
(iii) a signature page to the Restated Purchaser LLC Agreement, executed by each Seller;
(iv) the Transition Services Agreement, executed by FNH;
(v) a registration rights agreement in substantially the form attached hereto as
Exhibit B
(the
Registration Rights
Agreement
), executed by each Seller;
(vi) a duly executed
non-foreign
affidavit dated
as of the Closing Date from each Seller in form and substance required under Treasury Regulations issued pursuant to Section 1445 of the Code, certifying that such Seller is not a foreign person as defined in Section 1445 of
the Code;
(vii) (A) the articles of organization (or similar Governing Document) of the Company and each of its Subsidiaries, each
certified by the Secretary of State (or similar authority) of the applicable jurisdiction of organization of each such entity as of a date within ten (10) Business Days prior to the Closing Date, and (B) a certificate of good standing (or
similar certification) for the Company and each of its Subsidiaries, from the applicable jurisdiction of organization of each such entity, each dated within ten (10) Business Days prior to the Closing Date;
(viii) consents with respect to the Company Contracts listed on
Section
1.8(a)(viii) of the Company Disclosure
Schedule
attached hereto;
(ix) resignations effective as of the Effective Time of those officers, managers and members of the board
of managers and/or board of directors, if and as applicable, of the Company and its Subsidiaries as designated by the Purchaser prior to the Closing, executed by such individuals;
(x) an assignment agreement executed by Wells Fargo Bank, National Association, FNH and other parties named therein, and the Company providing
for the Company Debt Assumption and, upon repayment of such amount by the Company or its successor, the termination of all security interests under the Seller Credit Agreement with respect to the assets of the Company and its Subsidiaries (including
the authorization of the filing of all necessary
UCC-1
termination statements and other necessary documentation in connection with the termination of such security interests) and any other obligations of the
Company or its Subsidiaries with respect to the Seller Credit Agreement;
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(xi) a funds flow statement in form reasonably acceptable to the Purchaser Entities and the
Company (the
Funds Flow Statement
), executed by the Company; and
(xii) such other documents and instruments as may be
reasonably requested by the Purchaser Entities.
(b) The Purchaser Entities shall deliver, or caused to be delivered, to the Company or
the Sellers, as applicable:
(i) the Articles of Merger, executed by Merger Sub;
(ii) the Subscription Agreements, executed by Parent and Purchaser, as applicable;
(iii) a signature page to the Restated Purchaser LLC Agreement, executed by Purchaser, Parent, and each other member of Purchaser;
(iv) the Transition Services Agreement, executed by Purchaser;
(v) the Registration Rights Agreement, executed by Purchaser and Parent;
(vi) (A) the certificate of formation of Purchaser and the charter of Merger Sub, each certified by the Secretary of State (or similar
authority) of the applicable jurisdiction of organization of each such Purchaser Entity as of a date within ten (10) Business Days of the Closing Date, and (B) certificates of good standing (or similar certification) of each Purchaser
Entity from the jurisdiction of organization of each such Purchaser Entity, each dated within ten (10) Business Days prior to the Closing Date;
(vii) the Funds Flow Statement, executed by the Purchaser Entities;
(viii) a duly executed
non-foreign
affidavit dated as of the Closing Date from Purchaser and each
member of Purchaser in form and substance required under Treasury Regulations issued pursuant to Section 1445 of the Code, certifying that Purchaser and each such member is not a foreign person as defined in Section 1445 of the
Code; and
(ix) such other documents and instruments as may be reasonably requested by the Company.
Section 1.9
Conversion of Merger Sub Capital Stock
. At the Effective Time, by virtue of the
Merger and without any action on the part of any Purchaser Entity or the Sellers, each such share of capital stock, and any issued and outstanding shares of Merger Sub representing such capital stock, immediately prior to the Effective Time will be
converted into and become one fully paid and nonassessable unit of membership interest of the Surviving Company.
Section 1.10
Conversion of Company Membership Interest
.
(a)
Cancellation of Company Membership Interest
. As
of the Effective Time, by virtue of the Merger and without any action on the part of the Purchaser Entities or the Sellers, all Company Membership Interest issued and outstanding immediately prior to the Effective Time shall be cancelled and cease
to exist, and shall be automatically converted into and thereafter represent solely the right to receive the Merger Consideration, and any certificates for such Company Membership Interest shall be canceled and no units or other equity interest of
the Surviving Company shall be exchanged therefor.
(b)
Aggregate Merger Consideration
. Prior to adjustment pursuant to
Section 1.11
, the aggregate merger consideration payable for the Company Membership Interest (the
Merger Consideration
) shall be 16,272,727 units of Class B limited liability company interest in Purchaser pursuant
to the Restated Purchaser LLC Agreement (the
Purchaser Units
). The Merger Consideration will be payable to the Sellers in the manner provided in
Section
1.10(c)
below.
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(c)
Payment of Merger Consideration
. At the Closing, Purchaser shall issue to the Sellers,
in accordance with the Funds Flow Statement, the Purchaser Units issuable pursuant to the terms set forth herein by delivering to the Sellers the Restated Purchaser LLC Agreement with an updated
Schedule I
reflecting each Sellers
ownership of such Purchaser Units.
(d)
Issuance of Parent Class
B Common Stock
. In connection with the payment
of the Merger Consideration, and pursuant to the terms of the Restated Purchaser LLC Agreement, at the Closing, as reflected in the Funds Flow Statement, Parent shall issue to each Seller one share of Parent Class B Common Stock for each
Purchaser Unit issued to such Seller.
(e)
Certain Adjustments
. Notwithstanding anything in this Agreement to the contrary, if,
from the date of this Agreement until the Effective Time, the outstanding shares of
Pre-Closing
Parent Common Stock, units of membership interest of Purchaser or Company Membership Interest shall have been
changed into a different number of shares, units or a different class of equity by reason of any reclassification, share or unit split (including a reverse stock or unit split), recapitalization,
split-up,
combination, exchange of shares or units, readjustment or other similar transaction, or an equity dividend or equity distribution thereon shall be declared with a record date within that period, other than as expressly contemplated by this
Agreement, then the applicable Merger Consideration and/or the applicable Purchaser Unit Price shall be equitably adjusted to provide the Sellers the same economic effect as contemplated by this Agreement prior to that event (but no change will be
made because of the vesting of any Old LLC Units or New LLC Units of Purchaser or exchange of such units for Parent Common Stock). For the avoidance of doubt, nothing in this
Section
1.10(e)
shall be deemed to modify the
Purchaser Entities obligations under
Section
5.2
.
Section 1.11
Adjustment to Merger Consideration
.
(a)
Closing Date Net Working Capital Calculation
.
(i) Within ninety (90) days following the Closing Date, Purchaser shall prepare and deliver to the Sellers a written statement (the
Closing Statement
) setting forth (A) a combined balance sheet of the Company and its Subsidiaries as of the Closing (the
Closing Date Balance Sheet
), and (B) a calculation of the Net Working Capital
Amount as of 11:59 p.m. on the day immediately prior to the Closing Date (the
Closing Date Net Working Capital Amount
). The Closing Date Balance Sheet shall be prepared in accordance with GAAP
and in a manner consistent with the calculation of the Reference Net Working Capital Amount as set forth on
Annex A
. The Sellers and their accountants shall be entitled to review the Closing
Statement, and any working papers, trial balances and similar materials relating to the Closing Statement and the calculation of the Closing Date Net Working Capital Amount prepared by Purchaser or its accountants. Purchaser shall also provide the
Sellers and their accountants with reasonable access, during normal business hours, to Purchasers relevant employees and outside accountants, properties, books and records to the extent involved with or related to the preparation of the
Closing Statement.
(ii) If, within thirty (30) days following delivery of the Closing Statement, the Sellers have not given
Purchaser written notice of their objection to the Closing Date Net Working Capital Amount (which notice shall state in reasonable detail the basis of the Sellers objection), then Purchasers calculation of the Closing Date Net Working
Capital Amount shall be binding and conclusive on the parties for all purposes hereunder.
(iii) If the Sellers give Purchaser such notice
of objection within the thirty
(30)-day
period, and if the Sellers and Purchaser fail to resolve the issues outstanding with respect to Purchasers calculation of the Closing Date Net Working Capital
Amount within thirty (30) days of Purchasers receipt of an objection notice, the Sellers and Purchaser shall submit the issues remaining in dispute to a nationally recognized certified public accounting firm mutually selected by the
Sellers and Purchaser (the
Independent Accountant
), for resolution in accordance with the terms of this Agreement. The review of the Independent Accountant shall be limited solely to the issues remaining in dispute and not
resolved by the Sellers and Purchaser pursuant to the preceding
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sentence. If issues remaining in dispute are submitted to the Independent Accountant for resolution, (A) the Sellers and Purchaser shall furnish or cause to be furnished to the Independent
Accountant such work papers and other documents and information relating to the disputed issues as the Independent Accountant may request and are available to that party or its agents and shall be afforded the opportunity to present to the
Independent Accountant any material relating to the disputed issues and to discuss issues with the Independent Accountant; (B) the determination by the Independent Accountant, as set forth in a notice to be delivered to both Purchaser and the
Sellers within 30 days of the submission to the Independent Accountant of the issues remaining in dispute, shall be final, binding and conclusive on the parties and shall be used in calculation of the Closing Date Net Working Capital Amount; and
(C) the Sellers, on a several basis, and Purchaser will each bear fifty percent (50%) of the fees and costs of the Independent Accountant for such determination.
(iv) If the Closing Date Net Working Capital Amount as finally determined pursuant to this
Section
1.11
exceeds the
Reference Net Working Capital Amount, Purchaser shall, issue to the Sellers (x) an amount of additional Purchaser Units equal to the amount of such excess, divided by the Purchaser Unit Price, with such additional Purchaser Units to be
allocated among the Sellers pro rata in accordance with the Funds Flow Statement and (y) an equivalent number of shares of Parent Class B Common Stock as Purchaser Units received by each Seller. If the Closing Date Net Working Capital
Amount as finally determined pursuant to this
Section
1.11
is less than the Reference Net Working Capital Amount, each Seller shall instruct Purchaser to transfer to Parent such number of Purchaser Units received by such
Seller pursuant to
Section
1.10
above that is equal to such Sellers pro rata portion of the total amount of such shortfall amount, divided by the Purchaser Unit Price, and Purchaser shall thereafter reflect such
transfer on its books and records in accordance with the Restated Purchaser LLC Agreement. All Purchaser Units owed pursuant to this
Section
1.11(iv)
by Purchaser to the Sellers, on the one hand, or by the Sellers to
Purchaser, on the other hand, are referred to as the
Final Adjustment Amount
. Any fractional Purchaser Unit that would otherwise be owed as payment of the Final Adjustment Amount shall be paid in cash by the party obligated to
make the payment and shall be paid by delivery of immediately available funds to the Purchaser, or to the Sellers, as applicable, within five (5) Business Days after the date of final determination. If any Purchaser Units are transferred to
Parent pursuant to this paragraph, in accordance with the Restated Purchaser LLC Agreement, Parent shall cancel an equal number of shares of Parent Class B Common Stock, with any such cancellation reducing equally each Sellers ownership
of Parent Class B Common Stock.
(b)
Treatment for Tax Purposes
. Any payments made under this
Section
1.11
shall be treated by the Purchaser Entities and the Sellers as an adjustment to the Merger Consideration for tax purposes, unless a final determination (which shall include the execution of a Form
870-AD
or successor form) with respect to such payment causes any such payment not to be treated as an adjustment to the Merger Consideration for tax purposes.
Section 1.12
Dissenters Rights
. Dissenters rights under Chapter 23 of the TBCA
are not available to the Parent Shareholders for the Transactions.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth in the disclosure letter delivered by the Company to the Purchaser Entities immediately prior to the execution and
delivery of this Agreement (the
Company Disclosure Schedule
) (it being agreed that disclosure of any item in any section or subsection of the Company Disclosure Schedule shall be deemed disclosure with respect to any section of
this Agreement or any other section or subsection of the Company Disclosure Schedule to which the relevance of such disclosure is reasonably apparent on its face and that the mere inclusion of an item in such Company Disclosure Schedule as an
exception to a representation or warranty shall not be deemed an admission that such item represents a material exception or material fact, event
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or circumstance or that such item has had, would have or would reasonably be expected to have a Company Material Adverse Effect), the Company represents and warrants to the Purchaser Entities as
of the date of this Agreement and as of the Closing, as follows:
Section 2.1
Corporate
Organization
.
(a) Each of the Company and its Subsidiaries is a limited liability company, a corporation or other entity duly
organized, validly existing and, to the extent applicable, in good standing under the Laws of the jurisdiction of its organization and has the requisite corporate or other entity power and authority to own, lease and operate all of its properties
and assets and to carry on the Business as it is now being conducted. Each of the Company and its Subsidiaries is duly licensed or qualified to do business, and is in good standing, in each jurisdiction where the nature of the business conducted by
it or the character or location of the properties and assets owned or leased by it makes such licensing or qualification necessary, except where the failure to be so licensed, qualified or in good standing is not and would not reasonably be expected
to be material to the Company and its Subsidiaries, taken as a whole, or the Business. The copies of the certificate of formation of the Company (the
Company Certificate
) and the limited liability company agreement of the Company
(the
Company LLC Agreement
) as delivered or made available to Purchaser, are true, complete and correct copies of such documents as in effect and as amended as of the date of this Agreement. The Company Certificate and the Company
LLC Agreement are in full force and effect and the Company is not in violation of any of the provisions of the Company Certificate or the Company LLC Agreement. The Company has made available to Purchaser true, complete and correct copies of the
certificates of formation and limited liability company agreements (or comparable Governing Documents) of each of the Companys Subsidiaries, in each case as amended as of the date of this Agreement. Such Governing Documents are in full force
and effect and none of the Companys Subsidiaries is in violation in any material respect of any of the terms of its Governing Documents. The Company has made available to Purchaser the true, complete and correct copies of the minutes (or, in
the case of minutes that have not yet been finalized, drafts thereof) of all meetings of the members of the Company since June 1, 2014.
(b)
Section 2.1(b) of the Company Disclosure Schedule
lists the Company and all of the Subsidiaries of the Company and, for each such
entity, the state of formation or incorporation and each jurisdiction in which such Subsidiary is qualified or licensed to do business. The Company does not own, directly or indirectly, any capital stock of, or voting securities or equity interests
in, any Person other than its Subsidiaries identified in
Section
2.1(b) of the Company Disclosure Schedule
.
Section 2.2
Capitalization
.
(a)
Section 2.2(a) of the Company Disclosure Schedule
sets forth the total number of issued and outstanding Company Membership
Interests as of the date of this Agreement, all of which are held by OCharleys Management Company LLC. The Company Membership Interests have not been issued in violation of, and are not subject to, any preemptive or subscription rights
or rights of first refusal. The Company has not violated the Company LLC Agreement, any other Contract, the Securities Act or other applicable Laws in connection with the offer, sale or issuance of its units or any other ownership interest or equity
securities. All of the issued and outstanding Company Membership Interests are validly issued, fully paid and nonassessable. Immediately prior to the Effective Time, and following consummation of the Reorganization and the Contribution, all issued
and outstanding Company Membership Interests will be held directly by FNH and FNFV.
(b)
Section 2.2(b) of the Company Disclosure
Schedule
sets forth the total number of issued and outstanding units of membership interest of FNH, and with respect to each such class of membership interests, the name and address of each record holder of such membership interest, and the
number and class of membership interest held by each such record holder, in each case, as of the date of this Agreement.
(c)
Section
2.2(c) of the Company Disclosure Schedule
sets forth a true and complete list of (i) each Subsidiary of the Company, listing for each Subsidiary its name, the name of the Company or Subsidiary of the
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Company holding an ownership interest in such Subsidiary, the percentage of equity or ownership interest of such Subsidiary owned by the Company or a Subsidiary of the Company (and, with respect
to any such Subsidiary in which the Company or any Subsidiary of the Company hold less than one hundred percent (100%) of the outstanding ownership interests, the Persons holding the remaining ownership interest and the percentage of equity or
ownership interest held by such Persons) and, for each Subsidiary that is a corporation, the number of authorized and issued and outstanding shares of each class of capital stock of such Subsidiary, and (ii) all other Persons in which the
Company or any Subsidiary of the Company owns, of record or beneficially, any direct or indirect equity or ownership or other similar interest or any right (contingent or otherwise) to acquire the same, listing for each Person its name, the name of
the Company or Subsidiary of the Company holding an ownership interest in such Person, the percentage of stock or other equity or ownership interest of such Person owned by the Company or a Subsidiary of the Company and, for each such Person that is
a corporation, the authorized and outstanding capital stock of each such Person. The units or capital stock or other equity or ownership interests of each Subsidiary of the Company has not been issued in violation of, and is not subject to, any
preemptive or subscription rights or rights of first refusal. No Subsidiary of the Company has violated its Governing Documents, any other Contract, the Securities Act or other applicable Legal Requirements in connection with the offer, sale or
issuance of its equity securities or any ownership interests.
(d) Except as set forth above or in
Section 2.2(d) of the Company
Disclosure Schedule
, as of the date hereof, there are no outstanding subscriptions, securities, options, warrants, calls, rights, commitments, agreements, derivative contracts, forward sale contracts or undertakings of any kind to which the
Company or any of its Subsidiaries is a party, or by which the Company or any of its Subsidiaries is bound, obligating the Company or any of its Subsidiaries to issue, deliver or sell, or cause to be issued, delivered or sold, additional shares of
capital stock, equity interests or other voting securities of the Company or of any Subsidiary of the Company or obligating the Company or any Subsidiary of the Company to issue, grant, extend or enter into any such security, option, warrant, call,
right, commitment, agreement, derivative contract, forward sale contract or undertaking, or obligating the Company or any Subsidiary to make any payment based on or resulting from the value or price of the equity interests of the Company or any
Subsidiary or of any such subscription, security, option, warrant, call, right, commitment, agreement, derivative contract, forward sale contract or undertaking. There are no outstanding contractual obligations of the Company or any of its
Subsidiaries to repurchase, redeem or otherwise acquire any of the capital stock or other equity interests of the Company or any of its Subsidiaries. There are no outstanding or authorized stock appreciation rights, phantom stock awards or other
rights that are linked in any way to the price of the equity interests of the Company or any Subsidiary or the value of the Company, any Subsidiary, or any part thereof. Except as set forth in
Section
2.2(d) of the Company
Disclosure Schedule
, there are no agreements requiring the Company or any of its Subsidiaries to make contributions to the capital of, or lend or advance funds to, any Subsidiary of the Company. There are no bonds, debentures, notes or other
indebtedness or other securities of the Company or any of its Subsidiaries having the right to vote (or convertible into, or exchangeable for, securities having the right to vote) on any matters on which shareholders of the Company may vote. Neither
the Company nor any Subsidiary of the Company is party to any voting agreement with respect to any securities of the Company or any Subsidiary of the Company.
(e) Except as set forth above or in
Section
2.2(e) of the Company Disclosure Schedule
, the Company owns, directly or
indirectly, all of the issued and outstanding shares of capital stock or other equity interests of each of its Subsidiaries, free and clear of any and all liens, pledges, mortgages, charges, encumbrances, adverse rights, restrictions or claims and
security interests of any kind whatsoever (including any restriction on the right to vote or transfer the same), excluding restrictions imposed by securities laws (
Liens
), and all of such shares and equity interests are duly
authorized, validly issued and free of preemptive rights and all such shares are fully paid and nonassessable.
Section 2.3
Corporate Power and Authorization
. The Company has all necessary limited liability company power and authority to execute and deliver this Agreement and all other Transaction Agreements to which it is a party, to
carry out its obligations under the Transaction Agreements and to consummate the Transactions. The execution, delivery and performance by the Company of the Transaction Agreements and the consummation by
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the Company of the Transactions have been duly and validly authorized by the Companys sole member, and no other corporate or limited liability company proceedings on the part of the
Company, or any Subsidiary of the Company, are necessary to authorize the Transaction Agreements or to consummate the Transactions, subject to the filing of the Articles of Merger with the Secretary of State of the State of Tennessee and the
Secretary of State of the State of Delaware in accordance with the TBCA and the DLLCA, respectively. Each of the Transaction Agreements has been or will be duly executed and delivered by the Company or an applicable Affiliate thereof and, assuming
due power and authority of, and due execution and delivery by the Purchaser Entities, constitutes a valid and binding obligation of the Company or Affiliate thereof, enforceable against the Company or such Affiliate in accordance with its respective
terms, subject to bankruptcy, insolvency, fraudulent transfer, moratorium, reorganization or similar Laws affecting the rights of creditors generally and the availability of equitable remedies (regardless of whether such enforceability is considered
in a Proceeding in equity or at Law) (together, the
Bankruptcy and Equity Exception
).
Section 2.4
No Conflicts
. The execution and delivery of the Transaction Agreements by the Company
do not, and the consummation by the Company of the Merger and the other transactions to be consummated at or immediately prior to or after the Effective Time and the compliance by the Company with any of the terms or provisions of the Transaction
Agreements will not, (i) conflict with or violate any provision of the Company Certificate or Company LLC Agreement or any of the similar Governing Documents of any of its Subsidiaries or, (ii) assuming that the authorizations, consents
and approvals referred to in
Section
2.5
are obtained, (x) except as set forth in
Section
2.4 of the Company Disclosure Schedule
, violate, conflict with, result in the loss of any material
benefit under, constitute a default (or an event which, with notice or lapse of time, or both, would constitute a default) under, give rise to the termination of or a right of termination or cancellation under, require consent or notice under,
accelerate the performance required by, or result in the creation of any Lien, other than any Permitted Liens, upon any of the respective properties or assets owned or operated by the Company or any of its Subsidiaries under, any note, bond,
debenture, mortgage, indenture, deed of trust, license, lease, agreement or other contract, agreement, instrument or obligation (each, a
Contract
) to which the Company or any of its Subsidiaries is a party, or by which they or any
of their respective properties or assets are bound or affected or (y) conflict with or violate any Laws applicable to the Company or any of its Subsidiaries or any of their respective properties or assets, other than, in the case of
clause
(ii)(x)
, any such violation, conflict, loss, default, termination, cancellation, acceleration, right or Lien that is not and would not reasonably be expected to be material to the Company and its Subsidiaries, taken as a whole, or the Business
or materially impair the ability of the Company and the Sellers to perform their respective obligations hereunder or prevent or materially impede or delay the consummation of the Transactions by the Company and the Sellers.
Section 2.5
Governmental Approvals
. Other than in connection with or in compliance with
(i) the Hart Scott Rodino Antitrust Improvements Act of 1976, as amended (the
HSR Act
), (ii) the TBCA and the DLLCA or (iii) as otherwise set forth in
Section 2.5 of the Company Disclosure Schedule
, no
consent, approval, waiver, license, permit, franchise, authorization or Order (
Consents
) of, or registration, declaration, notice, report, submission or other filing (
Filings
) with, any Governmental Entity are
necessary in connection with the execution, delivery and performance of the Transaction Agreements by the Company or the consummation of the Transactions by the Company.
Section 2.6
Financial Statements; Controls
.
(a)
Section 2.6 of the Company Disclosure Schedule
sets forth true and complete copies of the following financial statements:
(i) the unaudited combined balance sheet of the Business as of June 11, 2017 (the
Interim
Balance Sheet
) and the related unaudited combined statement of earnings for the twenty-four (24) weeks then ended
(collectively, the
Interim Financial Statements
), and (ii) the unaudited combined balance sheet of the Business as of December 25, 2016, December 27, 2015, and December 28, 2014, and the related unaudited
combined statement of earnings, comprehensive income, changes in equity, and cash flows for the fiscal years ended December 25, 2016, December 27, 2015, and December 28, 2014 (together with the Interim Financial Statements, the
Financial Statements
). The Financial Statements (i) were prepared from and based on the
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financial records of the Company and its Subsidiaries, (ii) were prepared in accordance with GAAP, consistently applied (except for the absence of footnotes and other presentation items),
and (iii) fairly present, on such basis, in all material respects the financial position of the Business as of the date thereof and the combined results of operations of the Business for the time periods indicated, subject, with respect to the
Interim Financial Statements, to normal recurring
year-end
adjustments (none of which, individually or in the aggregate, has been or will be material to the Business).
(b) The Audited Financial Statements, when delivered in accordance with
Section
8.2(f)
, (i) shall have been prepared
from and based on the financial records of the Company and its Subsidiaries, (ii) shall have been prepared in accordance with GAAP, consistently applied, and (iii) shall fairly present, on such basis, in all material respects the financial
position of the Business as of the date thereof and the combined results of operations of the Business for the time periods indicated.
(c) The books of account and other financial records of FNH and the Company related to the Business have been kept accurately in the Ordinary
Course of Business consistent with past practice and consistent with applicable Law, and the revenues, expenses, assets and liabilities of FNH and its Subsidiaries related to the Business have been properly recorded therein in all material respects.
The Company has established and maintains a system of internal control over financial reporting related to the Business sufficient to provide reasonable assurance (i) that transactions are recorded as necessary to permit preparation of
financial statements in conformity with GAAP, consistently applied, (ii) that transactions are executed only in accordance with the authorization of management and FNHs board of managers and (iii) regarding prevention or timely
detection of the unauthorized acquisition, use or disposition of the Companys assets.
(d) Neither the Company nor any of its
Subsidiaries is a party to, or has any commitment to become a party to, any joint venture,
off-balance
sheet partnership or any similar contract, including any contract or arrangement relating to any
transaction or relationship between or among the Company and any of its Subsidiaries, on the one hand, and any unconsolidated Affiliate, on the other hand, including any structured finance, special purpose or limited purpose entity or Person, or any
off-balance
sheet arrangements (as defined in Item 303(a) of Regulation
S-K
of the SEC).
(e) Since February 5, 2012, the Company has existed as an indirect, majority owned Subsidiary of FNF, a United States publicly traded
company that has established and maintains disclosure controls and procedures (as defined in Rules
13a-15(e)
and
15d-15(e)
promulgated by the SEC under the
Exchange Act). Since February 5, 2012, neither FNF nor any member of management of the Company has, in the course of completing such Persons assessment of the effectiveness of FNFs internal control over financial reporting in
compliance with the requirements of Section 404 of SOX, identified any significant deficiency or material weakness that related to the Company or its Subsidiaries, or the Business.
Section 2.7
No Undisclosed Liabilities
. Except as disclosed in
Section
2.7 of the Company Disclosure Schedule
, there are no liabilities or obligations of the Company or any of its Subsidiaries, or otherwise related to the Business, of any nature, whether accrued, contingent, absolute,
known or otherwise, in each case, whether or not required by GAAP to be reflected or reserved against on a balance sheet of the Company and its Subsidiaries, or of the Business, prepared in accordance with GAAP or the notes thereto, other than:
(a) liabilities or obligations as and to the extent reflected or reserved against in the Companys unaudited combined balance sheet as of December 25, 2016, (b) liabilities or obligations that were incurred since December 25,
2016 in the Ordinary Course of Business, (c) liabilities or obligations that, individually or in the aggregate, are not and would not reasonably be expected to be material and adverse to the Company and its Subsidiaries, taken as a whole, or
(d) liabilities or obligations disclosed in the Company Disclosure Schedule.
Section 2.8
Information Supplied
. The information supplied (or to be supplied) in writing by
the Company or any Seller specifically for inclusion or incorporation by reference in (a) the Proxy Statement to be filed with the SEC by Parent in connection with the Transactions will not, at the time the Proxy Statement and any
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amendments or supplements thereto are filed with the SEC, contain any untrue statement of material fact or omit to state any material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they are made, not misleading and (b) the Proxy Statement will not, on the date it is first mailed to the Parent Shareholders and at the time of the Parent Shareholders Meeting,
contain any untrue statement of material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they are made, not misleading;
provided
,
however
, that no representation or warranty is made by the Company with respect to information in the Proxy Statement relating to the Purchaser Entities supplied by the Purchaser Entities or any of their directors, officers, employees,
Affiliates, agents or other Representatives (other than the Company or any Seller) for inclusion or incorporation by reference in any of the foregoing documents.
Section 2.9
Labor Matters
.
(a) Since June 1, 2014, (i) neither the Company nor any of its Subsidiaries or its Affiliates that employ Business Employees is or has
been a party or has any material Liability with respect to any collective bargaining agreement, labor union contract, trade union agreement, or any other labor-related agreements with any labor union, labor organization or works council (each a
Collective Bargaining Agreement
), (ii) no Business Employees are or have been represented by any labor union, labor organization or works council in connection with their employment with the Company or any Subsidiary or Affiliate
of the Company, (iii) to the Companys Knowledge, there currently are no, and there have not been any, activities or proceedings of any labor or trade union to organize any Business Employees, (iv) no Collective Bargaining Agreement
is being or has been negotiated by the Company or any of its Subsidiaries or its Affiliates that employ Business Employees, and (v) there currently is no, and there has not been any, picketing, strike, lockout, slowdown, or work stoppage
against the Company or any of its Subsidiaries or its Affiliates that employ Business Employees pending or, to the Companys Knowledge, threatened that may materially interfere with the Business.
(b) Except as set forth in
Section
2.9(b) of the Company Disclosure Schedule
, the Company and its Subsidiaries and
its Affiliates that employ Business Employees are in compliance with applicable Laws or Orders with respect to hiring, employment, and termination of employment related to the Business (including but not limited to applicable Laws regarding wage and
hour requirements, tips, correct classification of independent contractors and of employees as exempt and
non-exempt,
unfair labor practices, work authorization status, immigration, discrimination in
employment, harassment, retaliation and reasonable accommodation, leaves of absence, terms and conditions of employment, employee health and safety, collective bargaining and the Worker Adjustment and Retraining Notification Act
(
WARN
) and any similar state or local mass layoff or plant closing law), except where the failure to comply is not and would not reasonably be expected to be material to the Company and its Subsidiaries,
taken as a whole, or the Business. There has been no mass layoff or plant closing (as defined by WARN) with respect to the Business since June 1, 2014. Except as is not, and would not reasonably be expected to be
material to the Company and its Subsidiaries, taken as a whole, or the Business, (i) there is no complaint, charge, claim, demand letter or Proceeding based on, arising out of, in connection with, or otherwise relating to the employment or
termination of employment or failure to employ by the Company or any of its Subsidiaries or its Affiliates that employ Business Employees, of any individual now pending or, to the Companys Knowledge, threatened against the Company or any of
its Subsidiaries or its Affiliates that employ Business Employees, before any Governmental Entity or regulatory authority that relates to the Business, and (ii) there is no complaint, charge, claim or Proceeding before any Governmental Entity
or regulatory authority with respect to a violation of any occupational safety or health standards that is now pending or, to the Companys Knowledge, threatened against the Company or any of its Subsidiaries or its Affiliates that employ
Business Employees that relates to the Business.
(c) Except as set forth in
Section
2.9(c) of the Company
Disclosure Schedule
, neither the Company nor any of its Subsidiaries or its Affiliates that employ Business Employees is liable for any payment to any trust or other fund or to any Governmental Entity, with respect to unemployment compensation
benefits, social security or other benefits for Business Employees (other than routine payments to be made in the Ordinary Course of Business).
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Section 2.10
Absence of Certain Changes or
Events
. Since December 25, 2016, except (a) as set forth in
Section
2.10 of the Company Disclosure Schedule
and (b) for liabilities or obligations incurred in connection with the Transactions,
(i) there has not been any event, change, development, occurrence or state of facts that, individually or in the aggregate, is or would reasonably be expected to be material and adverse to the Company and its Subsidiaries, taken as a whole, or
the Business, (ii) the Company and its Subsidiaries have carried on and operated their respective businesses in all material respects in the Ordinary Course of Business and (iii) none of the Company nor any of its Subsidiaries has taken
any action described in
Section
5.1(b)
hereof that, if taken after the date hereof and prior to the Effective Time without the prior written consent of Purchaser, would violate such provision.
Section 2.11
Compliance with Laws
. Other than those violations or allegations that,
individually or in the aggregate, are not and would not reasonably be expected to be material to the Company and its Subsidiaries, taken as a whole, or the Business or as set forth in
Section
2.11 of the Company Disclosure
Schedule
, (a) the Company and its Subsidiaries are not in violation of, and since June 1, 2014 have not violated, any Laws or Orders applicable to the Business and (b) neither the Company nor any of its Subsidiaries has received
any written communication since June 1, 2014 from a Governmental Entity that alleges that the Company or any of its Subsidiaries is not in compliance with any Law applicable to the Business (except for violations that have been resolved).
Section 2.12
Permits
.
(a) The Company and each of its Subsidiaries have all required governmental licenses, franchises, permits, certificates, Consents, Orders,
approvals and authorizations necessary for the conduct of the Business and the use of their properties and assets, as presently conducted and used (the
Permits
), and each of the Permits is valid, subsisting and in full force and
effect, except where the failure to have or maintain any such Permit, individually or in the aggregate, is not and would not reasonably be expected to be material to the Company and its Subsidiaries, taken as a whole, or the Business. All Permits
are registered in the name of the Company or one of its Subsidiaries. The Company and its Subsidiaries are (and since June 1, 2014 have been) in compliance with the terms of all Permits, except where
non-compliance
is not or would not reasonably be expected to be material to the Business. Since June 1, 2014, neither the Company nor any of its Subsidiaries has received written notice to the effect that
a Governmental Entity was considering the amendment, termination, revocation or cancellation of any Permit, except any such amendments, terminations, revocations or cancellations that, individually or in the aggregate, are not and would not
reasonably be expected to be material to the Company and its Subsidiaries, taken as a whole, or the Business. The consummation of the Transactions by the Company, in and of themselves, will not cause the revocation or cancellation of any Permit that
is not a Liquor License, except any such revocations and cancellations that, individually or in the aggregate, are not and would not reasonably be expected to be material to the Company and its Subsidiaries, taken as a whole, or the Business.
(b)
Section 2.12(b) of the Company Disclosure Schedule
sets forth a list as of the date hereof of all liquor licenses (including beer
and wine licenses) (collectively, the
Liquor Licenses
) held or used by the Company and its Subsidiaries in connection with the operation of each Restaurant operated by the Company or any of its Subsidiaries, along with the name
and street, city and state address of each such Restaurant, the holder of record or other responsible person identified on the Liquor License, and the expiration date of each such Liquor License.
(c) As of the date hereof, except as has not been and would not reasonably be expected to be material to the Company and its Subsidiaries,
taken as a whole, or the Business:
(i) to the extent required by applicable Law, each Restaurant possesses a Liquor License;
(ii) each Liquor License is in full force and effect and is adequate for the current conduct of the operations at the Restaurant for which it
is issued;
(iii) neither the Company nor any of its Subsidiaries has received any written notice of any pending or threatened
modification, suspension, or cancellation of a Liquor License or any Proceeding related thereto;
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(iv) since June 1, 2014, there have been no Proceedings relating to any of the Liquor
Licenses; and
(v) there are no pending disciplinary actions, unresolved citations, unsatisfied penalties, or past disciplinary actions
relating to Liquor Licenses that would reasonably be expected to have any impact on any Restaurant or the ability to maintain or renew any Liquor License.
Section 2.13
Litigation
. Except as set forth in
Section
2.13 of the
Company Disclosure Schedule
, there are no Proceedings pending, or threatened in writing and received by the Company or any of its Subsidiaries, against the Company or any of its Subsidiaries or any of their respective properties or assets or any
of their respective officers or directors (in their capacity as officers or directors of the Company or any of its Subsidiaries) before any Governmental Entity (other than insurance claims litigation or arbitration arising in the Ordinary Course of
Business), which, if determined or resolved adversely in accordance with the plaintiffs or claimants demands, individually or in the aggregate, is or would reasonably be expected to be material and adverse to the Business or the Company
and its Subsidiaries, taken as a whole. As of the date of this Agreement, there is no material Order outstanding against the Company or any of its Subsidiaries.
Section 2.14
Taxes
. Except as set forth in
Section 2.14 of the Company Disclosure
Schedule
and as has not had and would not reasonably be expected to have a Company Material Adverse Effect:
(a) All Tax Returns
required by applicable Law to be filed with any Taxing Authority by the Company or any of its Subsidiaries, or on which the operations of the Company or any of its Subsidiaries are properly reported, have been duly and timely filed (including
extensions) in accordance with all applicable Laws, and all such Tax Returns are true, complete and accurate.
(b) The Company and each of
its Subsidiaries have duly and timely paid or have duly and timely withheld and remitted to the appropriate Taxing Authority all Taxes due and payable. All required estimated tax payments sufficient to avoid any underpayment penalties or interest
have been made by or on behalf of the Company and each of its Subsidiaries.
(c) There is no Proceeding in progress, or threatened in
writing and received by the Company or its Subsidiaries, against or with respect to the Company or any of its Subsidiaries in respect of any Tax.
(d) The federal income Tax Returns of the Company and its Subsidiaries for the Tax year ended December 31, 2012 have been examined and
the examinations have been closed or are Tax Returns with respect to which the applicable period for assessment under applicable Law, after giving effect to extensions or waivers, has expired.
(e) Neither the Company nor any of its Subsidiaries nor any other Person on their behalf has (i) agreed to or is required to make any
adjustments pursuant to Section 481(a) of the Code or any similar provision of Law, or has any application pending with any Taxing Authority requesting permission for any changes in accounting methods that relate to the Company or any of its
Subsidiaries, (ii) executed or entered into a closing agreement pursuant to Section 7121 of the Code or any similar provision of Law with respect to the Company or any of its Subsidiaries or (iii) granted any extension for the
assessment or collection of Taxes, which Taxes have not since been paid.
(f) There are no Liens on any of the assets, rights or
properties of the Company or any of its Subsidiaries with respect to Taxes, other than Permitted Liens.
(g) Since January 1, 2015,
neither the Company nor any of its Subsidiaries (i) has been a party to a tax sharing, tax indemnity or tax allocation agreement (other than (A) an agreement exclusively between or among the Company and its Subsidiaries or
(B) customary provisions included in credit agreements, leases, commercial agreements and agreements entered into with employees, in each case, not primarily related to Taxes and entered into in the Ordinary Course of Business), or
(ii) otherwise has any Liability for the Taxes of any other Person as a transferee or successor, by Contract (not described in subparagraph (i)(A) or (B) above), or otherwise.
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(h) Neither the Company nor any of its Subsidiaries has participated in a listed
transaction as defined in Treasury Regulation
§1.6011-4(b)(2).
(i) At all times since
its formation and up until the effective time of the Contribution, the Company and each of its Subsidiaries has been classified as a disregarded entity for U.S. federal income Tax purposes.
Section 2.15
Employee Benefit Plans and Related Matters; ERISA
.
(a)
Section 2.15 of the Company Disclosure Schedule
sets forth a true and complete list of each Company Benefit Plan. With respect to
each Company Benefit Plan, the Company has made available to Purchaser a true and complete copy of such written Company Benefit Plans, and, to the extent applicable, (i) all trust agreements, insurance contracts or policies or other funding
arrangements, (ii) the most recent trust reports for both ERISA funding and financial statement purposes, (iii) the most recent Form 5500 with all attachments filed with the Internal Revenue Service (
IRS
) or the
Department of Labor, (iv) the most recent IRS determination letter (or opinion letter upon which the Company is entitled to rely) and (v) the most recent nondiscrimination testing results with regard to applicable Company Benefit Plans,
(vi) all material correspondence with the Internal Revenue Service, Department of Labor or any other Governmental Entity regarding any Company Benefit Plan, and (vii) all summary plan descriptions and summary of material modifications.
Company Benefit Plan
means any employee benefit plan, program, policy or contract (including any employee benefit plan, as defined in Section 3(3) of the Employee Retirement Income Security Act of 1974
(
ERISA
), and each other pension, profit-sharing or other retirement, bonus, deferred compensation, incentive compensation, stock bonus, stock appreciation, stock purchase, stock ownership, restricted stock, restricted stock unit,
stock option or other equity-based (whether real or phantom), employment, vacation, holiday, sick leave, welfare benefit, paid time off, leave of absence, tax gross up, disability, death benefit, cafeteria, hospitalization, material fringe benefit,
medical, dental, vision, life or other insurance, termination, retention, change in control or severance plan, program, policy or contract) with respect to which the Company or any of its Subsidiaries has any obligation or material Liability,
contingent or otherwise or in which any Business Employee (and/or their spouse or dependents) participates.
(b) Each Company Benefit Plan
intended to be qualified under Section 401(a) of the Code, and the trust (if any) forming a part thereof, has received a favorable determination letter from the IRS (or opinion letter upon which the Company is entitled to rely) that the Company
Benefit Plan is so qualified, and, to the Companys Knowledge, there are no existing circumstances or any events that, individually or in the aggregate, adversely affect or would reasonably be expected to adversely affect the qualified status
of any such plan. Each Company Benefit Plan has been administered and operated in accordance with its terms and with applicable Law, except as has not had or would not reasonably be expected to result in a material Liability to the Company and its
Subsidiaries, taken as a whole. All contributions or other amounts which the Company was required to make to Company Benefit Plans on or prior to the Closing Date have been timely paid or accrued, except where any failure to do so would not
reasonably be expected to be material to the Company and its Subsidiaries, taken as a whole.
(c) No material Liability under Title IV or
Section 302 of ERISA has been incurred by the Company or any ERISA Affiliate that has not been satisfied in full, and, to the Companys Knowledge, no condition exists that presents a material risk to the Company or any ERISA Affiliate of
incurring any such material Liability (exclusive of the Liability to pay insurance premiums to the Pension Benefit Guaranty Corporation (
PBGC
) under Title IV of ERISA).
(d) There are no pending actions or claims with respect to any of the Company Benefit Plans by any employee or otherwise involving any such
plan or the assets of any such plan (other than routine claims for benefits), except as, individually or in the aggregate, does not have and would not reasonably be expected to have a Company Material Adverse Effect.
(e) No Company Benefit Plan is a multiemployer plan within the meaning of Section 4001(a)(3) of ERISA or 3(37) of ERISA or is
a multiple employer plan within the meaning of Section 413 of the Code or
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Section 4063 or 4064 of ERISA or a multiple employer welfare benefit plan within the meaning of Section 3(30) of ERISA. No Company Benefit Plan is an employee pension
benefit plan that is subject to Title IV of ERISA, Section 302 or 303 of ERISA or Section 412 or 436 of the Code.
(f) Except as
set forth in
Section
2.15(f) of the Company Disclosure Schedule
, no Company Benefit Plan provides for or promises medical, surgical, hospitalization, death, disability, life insurance or similar benefits coverage (whether
or not insured) for current or former employees, officers, service providers or directors of the Company for periods extending beyond their retirement, other than coverage mandated by applicable provisions of the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended and the regulations issued thereunder.
(g) Except as provided in this Agreement, as set forth in
Section
2.15(g) of the Company Disclosure Schedule
or as required by applicable Law, the consummation of the Merger and the other transactions to be consummated at or immediately before the Effective Time will not, either
alone or in combination with another event, (i) entitle any Business Employee or any current or former director, officer or employee of the Company or of any of its Subsidiaries to severance pay or any similar payment or (ii) result in any
payment becoming due, accelerate the time of payment, funding or vesting, or increase the amount of compensation due to any such Business Employee, director, officer or employee. Except as set forth in
Section
2.15(g) of the
Company Disclosure Schedule
, the Company is not a party to any contract or arrangement that would result, separately or in the aggregate, in the payment of any excess parachute payments within the meaning of Section 280G of the
Code, and the consummation of the Transactions will not be a factor causing payments to be made by the Company to be
non-deductible
(in whole or in part) under Section 280G of the Code.
(h) This
Section
2.15
contains the sole and exclusive representations and warranties of the Company regarding
Company Benefit Plans or ERISA matters, or liabilities or obligations, or compliance of Laws, relating thereto.
Section 2.16
Material Contracts
.
(a) For purposes of this Agreement, a
Company Material Contract
shall mean any Contract to which the Company or any of its Subsidiaries is a party, or otherwise to which any other Affiliate of the Company is a party and that is material to the Business:
(i) that contains (A) any exclusivity provision, (B) any right to develop or operate a business under any of the Companys or
any of its Subsidiaries brands, (C) any covenant that limits, curtails or restricts (1) in any material respect the ability of the Company or any of its Subsidiaries or in any way any of their respective Affiliates to compete in any
line of business, in any geographic location or with any Person, (2) the Persons to whom the Company or any of its Subsidiaries may sell products or deliver services or (3) the types of products or services that the Company or any of its
Subsidiaries may sell or deliver or (D) any
non-solicitation,
no hire or similar provision which restricts the Company or any of its Subsidiaries from soliciting, hiring, engaging,
retaining or employing such Persons current or former employees in a manner or to an extent that would interfere with the Ordinary Course of Business, in each case other than any such Contracts (1) to purchase inventory and other products
for immediate consumption to be used in the Ordinary Course of Business (unless such Contract is material to the business or the financial condition of the Company and its Subsidiaries, taken as a whole), (2) that may be cancelled without material
Liability to the Company or its Subsidiaries upon notice of thirty (30) days or less, (3) for leased real property entered into in the Ordinary Course of Business that contains customary covenants that prohibit: (x) the Company or any
of its Subsidiaries from using any trade names other than a trade name of the Company or its Subsidiaries, (y) the Company or any of its Subsidiaries from using any leased real property to operate a different restaurant concept than the
restaurant concept currently operated on such leased real property by the Company or its Subsidiary, or (z) the Company or any of its Subsidiaries from operating other restaurant concepts of the Company or its Subsidiaries within a specified
geographic area in relation to an existing Restaurant of the Company or its Subsidiaries, or (4) that are not material to the Company and its Subsidiaries, taken as a whole;
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(ii) entered into after February 5, 2012 (A) relating to the disposition, acquisition
(directly or indirectly) by the Company or any of its Subsidiaries of properties, assets or businesses (whether by merger, purchase or sale of stock or assets or otherwise) with a fair market value in excess of $1,000,000, or (B) pursuant to
which the Company or any of its Subsidiaries will acquire any material interest in any other Person or other business enterprise for an amount in excess, in the aggregate, of $1,000,000, other than the Subsidiaries of the Company;
(iii) relate to an acquisition, divestiture, merger, license or similar transaction and contains representations, covenants, indemnities or
other obligations (including indemnification,
earn-out
or other contingent obligations), that are still in effect and, individually or in the aggregate, would reasonably be expected to result in
payments by the Company or any of its Subsidiaries in excess of $500,000;
(iv) that relates to the formation, creation, operation,
management or control of any legal partnership, strategic alliance or joint venture entity pursuant to which the Company has an obligation (contingent or otherwise) to make a material investment in or material extension of credit to any Person
involving annual payments of at least $500,000;
(v) that involves or relates to indebtedness (including any guarantee thereto) for
borrowed money (whether incurred, assumed, guaranteed or secured by any asset) outside the Ordinary Course of Business or in a principal amount in excess of $2,500,000;
(vi) that is a mortgage, pledge, security agreement, deed of trust, capital lease or similar agreement (other than any lease of real property)
that creates or grants a Lien on any material property or asset of the Company or any of its Subsidiaries, in each case involving annual payments of more than $500,000;
(vii) that is a settlement, conciliation or similar agreement (x) with any Governmental Entity that imposes on the Company any material
obligations after the date of this Agreement, or (y) which would require the Company or any of its Subsidiaries to pay consideration of more than $500,000 after the date of this Agreement;
(viii) with any of the Companys directors or executive officers (including employment agreements), five percent or greater equity
holders of the Company or any of their respective Affiliates (other than the Company or any of its Subsidiaries) or immediate family members of such persons;
(ix) with any labor union, including any Collective Bargaining Agreement;
(x) that (A) contains a standstill or similar agreement pursuant to which the Company or any of its Subsidiaries has agreed not to
acquire (or agreed to cause any other Person not to acquire) assets or securities of a Person or (B) grants to any Person any right of first offer or right of first refusal to purchase, lease, sublease, use, possess or occupy all or a
substantial part of the material assets of the Company or any of its Subsidiaries, taken as a whole;
(xi) that is a voting or
registration rights agreement;
(xii) that is a financial derivatives master agreement or confirmation, or futures account opening
agreement and/or brokerage statement, evidencing financial hedging or similar trading activities;
(xiii) that is a Contract that
expressly restricts or limits the payment of dividends or other distributions on equity securities;
(xiv) to the extent material to the
business or financial condition of the Company and its Subsidiaries, taken as a whole, that is a (A) consulting Contract, (B) Contract that contains requirements of minimum
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purchases by the Company or its Subsidiaries, (C) Contract that provides for the indemnification of any indemnitee outside the Ordinary Course of Business or (D) Contract granting a
right of first refusal or first negotiation to any third party;
(xv) any Contract that relates to the employment of any individual on a
full-time or part-time, consulting or other basis providing annual compensation in excess of $250,000;
(xvi) that by its terms calls for
aggregate payments by or to the Company or any of its Subsidiaries, of more than $500,000 in any
12-month
period, except for any such Contract (A) that is a lease of real property, (B) that is an
insurance policy of the Company entered into in the Ordinary Course of Business or (C) to purchase inventory and other products for immediate consumption to be used in the Ordinary Course of Business;
(xvii) that contains a license or other right granted to the Company or any of its Subsidiaries of any material Intellectual Property (other
than
in-bound
licenses of commercially available,
off-the-shelf
or click wrap Software that by their terms call for
aggregate one time or annual payments by the Company and its Subsidiaries of less than $250,000 per year);
(xviii) that contains a
license or other right granted by the Company or any of its Subsidiaries to a third Person outside the Ordinary Course of Business, pursuant to which such third Person is authorized to use any Company or Subsidiary-owned, proprietary Intellectual
Property;
(xix) any Contract, or group of Contracts with a Person (or group of Affiliated Persons), the termination or breach of which
would have a Company Material Adverse Effect, and is not disclosed pursuant to
clauses (i)
through (
xviii
) above; or
(xx) that contains a commitment or agreement to enter into any of the foregoing.
(b)
Section 2.16 of the Company Disclosure Schedule
contains a complete and accurate list of all Company Material Contracts to or by
which the Company or any of its Subsidiaries is a party as of the date of this Agreement. As of the date hereof, true and complete copies of all Company Material Contracts have been made available to Purchaser, together with any and all amendments
and supplements thereto and material
side letters
and similar documentation relating thereto.
(c) Each Company
Material Contract listed in
Section
2.16 of the Company Disclosure Schedule
is (i) a valid and binding obligation of the Company or its Subsidiary party thereto and enforceable against the Company or its Subsidiary
party thereto in accordance with its terms (except that (A) such enforcement may be subject to a Bankruptcy and Equity Exception and (B) equitable remedies of specific performance and injunctive and other forms of equitable relief may be
subject to equitable defenses and to the discretion of the court before which any Proceeding therefor may be brought) and, to the Companys Knowledge, except as set forth in
Section
2.16 of the Company Disclosure
Schedule
, each other party thereto and (ii) in full force and effect, except in the case of
clauses (i)
and
(ii)
above, as are not and would not reasonably be expected to be material to the Company and its Subsidiaries,
taken as a whole, or the Business. The Company and each of its Subsidiaries has performed its obligations required to be performed by it prior to the date of this Agreement under each Company Material Contract to which it is a party in all material
respects, and no condition exists that, with notice or lapse of time or both, would constitute a default thereunder by the Company and its Subsidiaries party thereto, except in each case as are not and would not reasonably be expected to be material
to the Company and its Subsidiaries, taken as a whole, or the Business. To the Companys Knowledge, each other party to each Company Material Contract has performed its obligations required to be performed by it under such Company Material
Contract in all material respects, and no condition exists that, with notice or lapse of time or both, would constitute a default thereunder by any such other party thereto, except in each case as are not and would not reasonably be expected to be
material to the Company and its Subsidiaries, taken as a whole, or the Business. To the Companys
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Knowledge, since December 27, 2015 none of the Company or any of its Subsidiaries has received written notice of any violation of or default under (or any condition which with the passage of
time or the giving of notice would cause such a violation of or default under) any Company Material Contract to which it is a party or by which it or any of its properties or assets is bound, except for violations or defaults that are not and would
not reasonably be expected to be material to the Company and its Subsidiaries, taken as a whole, or the Business. No party to any Company Material Contract has given the Company or any of its Subsidiaries written notice of its intention to terminate
or cancel any Company Material Contract.
Section 2.17
Intellectual Property; Software
.
(a)
Section 2.17(a) of the Company Disclosure Schedule
sets forth an accurate and complete list of all (A) patents and patent
applications, (B) trademark or service mark applications and registrations, (C) domain name registrations, and (D) copyright registrations and applications, in each case, owned or filed by the Company or any of its Subsidiaries. The
Company or a Subsidiary of the Company owns, free and clear of all Liens (other than Permitted Liens), or has a valid and continuing license or a valid right to use, all Intellectual Property and Software used in connection with the Business as
currently conducted.
(b) Except as is not and would not reasonably be expected to be material to the Company and its Subsidiaries, taken
as a whole, or the Business, (i) the conduct of the Business as currently conducted by the Company and its Subsidiaries does not infringe, misappropriate, dilute or otherwise violate any Persons Intellectual Property, (ii) as of the
date of this Agreement, there is no such claim pending or, to the Companys Knowledge, threatened against the Company or its Subsidiaries, (iii) to the Companys Knowledge as of the date of this Agreement, except as set forth in
Section
2.17(b) of the Company Disclosure Schedule
, no Person has or is infringing, misappropriating or otherwise violating any Intellectual Property owned by the Company or any of its Subsidiaries, and (iv) no such
claims are pending or threatened in writing against any Person by the Company or its Subsidiaries.
(c) The Company and its Subsidiaries
have taken reasonably necessary steps to protect and preserve the confidentiality of all material trade secrets and other material confidential information owned or held by the Company and/or its Subsidiaries.
(d) The Company maintains control of copies of the Software included in the Intellectual Property which the Company or its Subsidiaries
license from third Persons or otherwise use and documentation (including user guides) reasonably necessary to use such Software, and the Company maintains control over the use of source code and/or such other documentation (including user guides and
specifications) for all material proprietary Software developed or created by or on behalf of the Company and/or owned by the Company or any of its Subsidiaries (
Company Proprietary Software
) and/or such documentation (including
user guides and specifications) reasonably necessary to use, maintain and modify the Company Proprietary Software. The Company Proprietary Software and, to the Companys Knowledge, the material Software included in the Intellectual Property
which the Company or its Subsidiaries license from third Persons or otherwise use functions substantially in compliance with applicable written, published documentation and specifications. As used in this Agreement,
Software
means
all computer programs, including any and all software implementations of algorithms, models and methodologies whether in source code, object code or other form, software databases and compilations, including any and all data and collections of data,
descriptions, flow-charts and other work product used to design, plan, organize and develop any of the foregoing. The Company and its Subsidiaries own, lease or license all material Software, hardware, databases, computer equipment and other
information technology necessary for the operations of the Business as currently conducted.
Section 2.18
Real Properties; Personal Properties
.
(a)
Section 2.18(a) of the Company Disclosure Schedule
sets forth a true and complete list, as of the date of this Agreement, of
(i) all real property owned by the Company or any of its Subsidiaries, and (ii) any real
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property owned by any other Affiliates of the Company that is primarily used or held for use in the operation of the Business (the
Owned Real Property
).
(b)
Section 2.18(b) of the Company Disclosure Schedule
sets forth a true and complete list, as of the date of this Agreement, of
(i) all leases of real property under which the Company or any of its Subsidiaries is a tenant or a subtenant and (ii) all leases of real property under which any other Affiliate of the Company is a tenant and that is primarily used or
held for use in the operation of the Business (the
Real Property Leases
).
(c) As of the date of this Agreement, except
as set forth in
Section
2.18(c) of the Company Disclosure Schedule
and except for those matters that, individually or in the aggregate, do not and would not reasonably be expected to be material to the Company and its
Subsidiaries, taken as a whole, or the Business: (i) the Company and each of its Subsidiaries, or an Affiliate of the Company, as applicable, has good, marketable and valid title to, or good and valid leasehold or sublease interests or other
comparable contract rights in or relating to all real property of the Company and its Subsidiaries or otherwise primarily used in the Business free and clear of all Liens, except for Permitted Liens and minor defects in title, recorded easements,
restrictive covenants and similar encumbrances of record that, individually or in the aggregate, do not and would not reasonably be expected to detract from the value of such property, (ii) the Company and each of its Subsidiaries, or an
Affiliate of the Company, as applicable, has complied with the terms of all Real Property Leases and all such leases are in full force and effect, enforceable in accordance with their terms against the Company or any of its Subsidiaries or
Affiliates party thereto and, to the Companys Knowledge, the counterparties thereto and (iii) neither the Company nor any of its Subsidiaries or Affiliates has received or provided any written notice of any event or occurrence that has
resulted or would reasonably be expected to result (with or without the giving of notice, the lapse of time or both) in a default with respect to any such lease.
(d) Except for those matters that do not and would not reasonably be expected to be material to the Company and its Subsidiaries, taken as a
whole, or the Business, the Restaurants owned or leased by the Company or any of its Subsidiaries or otherwise used by the Company or any of its Subsidiaries in connection with the operation of the Business are (as to physical plant and structure)
structurally sound, in good operating condition and repair (ordinary wear and tear excepted), and are adequate for the uses to which they are being put.
(e) Except as does not and would not reasonably be expected to materially interfere with the ability of the Company or any of its Subsidiaries
to conduct the Business, the machinery, equipment, furniture, fixtures, trade fixtures, improvements and other tangible personal property and assets owned, leased or used by the Company or any of its Subsidiaries (the
Company
Assets
) are in good operating condition and repair (ordinary wear and tear excepted) and, in the aggregate, sufficient and adequate to carry on the Business, and, except as set forth in
Section
2.18(e) of the Company
Disclosure Schedule
, the Company and its Subsidiaries are in possession of and have good title to, or valid leasehold interests in or valid rights under contract to use, such Company Assets that are material to the Company and its Subsidiaries,
taken as a whole, free and clear of all Liens other than Permitted Liens.
(f)
Section 2.18(f) of the Company Disclosure Schedule
sets forth all leases of personal property (
Personal Property Leases
) involving annual payments in excess of $500,000 relating to personal property used in the Business as currently conducted or to which the Company or any of its
Subsidiaries is a party or by which the properties or assets of the Company or any of its Subsidiaries is bound.
(g) Each of the Personal
Property Leases is in full force and effect and neither the Company nor any Subsidiary has received or given any written notice of any default or event that with notice or lapse of time, or both, would constitute a default by the Company or any
Subsidiary under any of the Personal Property Leases and, to the Companys Knowledge, no other party is in default thereof.
(h)
Except as set forth above or in
Section
2.18(h) of the Company Disclosure Schedule
, there are no material assets, tangible or intangible, required to operate the Business in substantially the manner conducted on
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the date hereof by the Company and its Subsidiaries that are not owned of record by the Company and its Subsidiaries, or with respect to which the Company or its Subsidiaries have a good and
valid leasehold or sublease interests or other comparable contract rights.
Section 2.19
Environmental Matters
. Except as do not and would not reasonably be expected to
have a Company Material Adverse Effect, individually or in the aggregate:
(a) Since June 1, 2014, the Company and its Subsidiaries
have been and are in compliance with all applicable Environmental Laws, including, but not limited to, obtaining, possessing and complying with all Permits required for its operations under applicable Environmental Laws (
Environmental
Permits
);
(b) There is no pending or, to the Companys Knowledge, threatened claim, investigation, legal or administrative
proceeding against the Company or any of its Subsidiaries under or pursuant to any Environmental Law. Neither the Company nor any of its Subsidiaries has received written notice from any Person, including but not limited to any Governmental Entity,
alleging any current or past violation of any applicable Environmental Law or Environmental Permit or otherwise may be liable under any applicable Environmental Law or Environmental Permit, which violation or material Liability is unresolved.
Neither the Company nor any Subsidiary is a party or subject to any administrative or judicial order or decree pursuant to any Environmental Law;
(c) Neither the Company nor any of its Subsidiaries has caused the release, spill or discharge of any Hazardous Substances, and with respect
to real property that is currently, or, to the Companys Knowledge, formerly owned, leased or operated by the Company or any of its Subsidiaries, there have been no releases, spills or discharges of Hazardous Substances on or underneath any of
such real property that would be reasonably likely to result in a Liability on the part of the Company or any of its Subsidiaries; and
(d) The Company and each of its Subsidiaries have provided Parent with access to all material environmental assessments, audits, reports and
similar material documentation related to environmental matters or potentially material liabilities under any Environmental Law or Environmental Permit, including any related correspondence with Governmental Entities, that are in the possession,
custody or reasonable control of the Company or any of its Subsidiaries.
Section 2.20
Brokers and Finders Fees
. There is no investment banker, financial
advisor, 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 is entitled to any fee, commission or reimbursement of Expenses from the Company or any of its
Subsidiaries in connection with the Transactions.
Section 2.21
Suppliers
.
Section
2.21 of the Company Disclosure Schedule
sets forth the ten (10) largest suppliers of the Company for the twelve (12) month period ending on December 25, 2016. To the Companys Knowledge, since
December 25, 2016, there has not been any material adverse change in the business relationship of the Company or any of its Subsidiaries with any such material supplier, and neither the Company nor any of its Subsidiaries has received any
written communication or notice from any such material supplier to the effect that any such supplier (a) has changed, modified, amended or reduced, or intends to change, modify, amend or reduce, its business relationship with the Company or any
of its Subsidiaries in a manner inconsistent with the Ordinary Course of Business, or (b) will fail to perform in any respect, or intends to fail to perform in any respect, its obligations under any of its Contracts with the Company or any of
its Subsidiaries, except in each case of (a) and (b), as would not reasonably be expected to interfere materially with the ability of the Company or its Subsidiaries to conduct the Business as presently conducted.
Section 2.22
Insurance
.
Section
2.22 of the Company Disclosure
Schedule
sets forth a true, complete and correct list of all insurance policies (including information on the premiums payable in connection therewith and the scope and amount of the coverage provided thereunder) (the
Policies
) maintained by the Company or any
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of its Subsidiaries. Taken as a whole and in all material respects, the Policies of the Company and its Subsidiaries (a) provide coverage for the operations conducted by the Company and its
Subsidiaries as of the date of this Agreement of a scope and coverage consistent with customary practice in the industries in which the Company and its Subsidiaries operate and (b) as of the date of this Agreement are in full force and effect.
Neither the Company nor any of its Subsidiaries is in material breach or default, and neither the Company nor any of its Subsidiaries has taken any action or failed to take any action which, with notice or the lapse of time, would constitute such a
material breach or default, or permit termination or modification, of any of the Policies. No written notice of cancellation or termination has been received by the Company with respect to any of the Policies.
Section 2.23
Quality and Safety of Food and Beverage Products
. Since June 1, 2014, (a)
there have been no recalls of any food or beverage product served by the Business, whether ordered by a Governmental Entity or undertaken voluntarily by the Company or any of its Subsidiaries and (b) to the Knowledge of the Company, none of the
food or beverage products of the Company or any of its Subsidiaries have been adulterated, misbranded, mispackaged, or mislabeled in violation of applicable Law, or pose an inappropriate threat to the health or safety of a consumer when consumed in
the intended manner, except in each case of (a) and (b), as would not reasonably be expected to be material to the Company and its Subsidiaries, taken as a whole, or the Business.
Section 2.24
No Other Representations and Warranties; Disclaimers
.
(a) Except for the representations and warranties made by the Company in this
Article II
, neither the Company nor any other Person
makes any express or implied representation or warranty with respect to the Company or any of its Subsidiaries or their respective businesses, operations, assets, liabilities, condition (financial or otherwise) or prospects, and the Company hereby
disclaims any such other representations or warranties. In particular, without limiting the foregoing disclaimer, except for the representations and warranties made by the Company in this
Article II
, neither the Company nor any other Person
makes or has made any representation or warranty to any Purchaser Entity or any of their Affiliates or Representatives with respect to (i) any financial projection, forecast, estimate, budget or prospect information relating to the Company, any
of its Subsidiaries or their respective businesses or operations or (ii) any oral or written information furnished or made available to any Purchaser Entity or any of their Affiliates or Representatives in the course of their due diligence
investigation of the Company, the negotiation of the Transaction Agreements or the consummation of the Transactions.
(b) Notwithstanding
anything contained in this Agreement to the contrary, the Company acknowledges and agrees that none of the Purchaser Entities or any other Person has made or is making any representations or warranties whatsoever, express or implied, beyond those
expressly made by the Purchaser Entities in
Article IV
hereof, including any implied representation or warranty as to the accuracy or completeness of any information regarding the Purchaser Entities and any of their respective Subsidiaries
furnished or made available to the Company, or any of its Affiliates or Representatives. Without limiting the generality of the foregoing, the Company acknowledges and agrees that no representations or warranties are made with respect to any
projections, forecasts, estimates, budgets or prospect information that may have been made available to the Company or any of its Affiliates or Representatives.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE SELLERS
Except as set forth in the Company Disclosure Schedule, each Seller, on a several basis, and not on a joint and several basis, represents and
warrants to the Purchaser Entities as of the date of this Agreement and as of the Closing, as follows:
Section 3.1
Organization
. Seller is duly organized, validly existing and in good standing
under the Laws of its jurisdiction of incorporation, formation or organization (as applicable).
Section 3.2
Title to Units
. As of the date of this Agreement, FNH owns beneficially all of
the issued and outstanding Company Membership Interests through an indirect, wholly-owned Subsidiary, and such Subsidiary has good and marketable title to such units, free and clear of all Liens. Immediately prior to the Closing, pursuant to the
Reorganization and the Contribution, the Sellers, collectively, shall directly own all issued and outstanding Company Membership Interests. No Person has any agreement, option, right or privilege (whether preemptive or contractual) for the purchase
from FNH or any of its Subsidiaries of all or any part of the Company Membership Interests. Except as set forth in
Section
3.2 of the Company Disclosure Schedule
, neither FNH nor any of its Subsidiaries is, nor will FNFV
be, as of the Closing, a party to any voting trust, proxy, or other agreement or understanding with respect to the voting of any of the Company Membership Interests.
Section 3.3
Power and Authorization
.
(a) Seller has full power and authority to execute, deliver and perform this Agreement and all the other Transaction Agreements to be executed
or delivered by such Seller in connection with the Transactions. The execution and delivery of this Agreement and the other Transaction Agreements by Seller and the performance by it of all of its obligations under this Agreement and the other
Transaction Agreements have been duly authorized prior to the date of this Agreement by all requisite action of its board of managers, members or the like (as the case may be). No other approvals or actions are necessary on the part of Seller to
authorize the execution, delivery and performance of this Agreement and the other Transaction Agreements by Seller and the consummation by Seller of the Transactions herein and therein.
(b) This Agreement has been duly authorized, executed and delivered by Seller and constitutes a legal, valid and binding agreement of Seller,
enforceable against Seller in accordance with its terms, except to the extent enforcement may be affected by the Bankruptcy and Equity Exceptions. The Transaction Agreements to be executed and delivered by Seller will be duly executed and delivered
by Seller and will constitute valid and binding obligations of Seller, enforceable in accordance with their terms, except to the extent enforcement may be affected by the Bankruptcy and Equity Exceptions.
Section 3.4
No Conflicts
. Seller does not need to give any notice to, make any filing with or
obtain any authorization, consent, Order or approval of any Governmental Entity in connection with the execution and delivery of this Agreement and the other Transaction Agreements or the consummation of the Transactions contemplated herein and
therein. Neither the execution, delivery and performance of this Agreement and the other Transaction Agreements, nor the consummation of the Transactions contemplated herein and therein: (a) will conflict with or violate any provision of the
Governing Documents of Seller; (b) will conflict with, result in a breach of, or constitute a default under (whether with or without the passage of time, the giving of notice or both), or create or increase any Liability under, any Contract,
Permit, or other instrument to which Seller is a party or otherwise bound; (c) will violate any Law to which Seller is subject; (d) result in the creation of any Lien upon the Company Membership Interest; (e) give any third party the
right to terminate, modify or to accelerate any obligation of Seller; or (f) require any authorization, consent, approval, exemption or other action by or notice to any court or other Governmental Entity.
Section 3.5
Litigation
. There is no Proceeding pending or, to Sellers knowledge,
threatened by or against Seller before any Governmental Entity which would reasonably be expected to affect Sellers ownership of
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Company Membership Interests, or otherwise could prevent, alter or materially delay any of the Transactions and, to Sellers knowledge, there is no basis for any such Proceeding. Seller is
not subject to any outstanding Order that could affect Sellers ownership of the Company Membership Interests, or otherwise prevent, alter or materially delay any of the Transactions.
Section 3.6
Brokers and Finders Fees
. There is no investment banker, financial advisor,
broker, finder or other intermediary that has been retained by or is authorized to act on behalf of Seller who is entitled to any fee, commission or reimbursement of Expenses from Seller or any of its Affiliates in connection with the Transactions.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER ENTITIES
Except as (x) disclosed in any Parent SEC Documents publicly filed with or furnished to the SEC by Parent on or after September 16,
2015 but prior to the date hereof (but excluding any disclosures set forth under the headings Risk Factors, Forward-looking Statements and any other disclosures in any section contained or referenced in any such Parent SEC
Documents relating to any information, forward-looking statements or factors or risks that are predictive, cautionary or forward-looking in nature in any such Parent SEC Documents) or (y) as set forth in the disclosure letter delivered by
Purchaser to the Company immediately prior to the execution and delivery of this Agreement (the
Purchaser Disclosure Schedule
) (it being agreed that disclosure of any item in any section or subsection of the Purchaser Disclosure
Schedule shall be deemed disclosure with respect to any section of this Agreement or any other section or subsection of the Purchaser Disclosure Schedule to which the relevance of such disclosure is reasonably apparent on its face and that the mere
inclusion of an item in such Purchaser Disclosure Schedule as an exception to a representation or warranty shall not be deemed an admission that such item represents a material exception or material fact, event or circumstance or that such item has
had, would have or would reasonably be expected to have a Purchaser Material Adverse Effect), Parent, Purchaser, and Merger Sub represent and warrant to the Company as of the date of this Agreement and as of the Closing, as follows:
Section 4.1
Corporate Organization
.
(a) Each of Parent and its Subsidiaries is a corporation or other entity duly organized, validly existing and in good standing under the Laws
of the jurisdiction of its organization and has the requisite corporate or other entity power and authority to own, lease and operate all of its properties and assets and to carry on its business as it is now being conducted and as currently
proposed by management to be conducted. Each of Parent and its Subsidiaries is duly licensed or qualified to do business, and is in good standing, in each jurisdiction where the nature of the business conducted by it or the character or location of
the properties and assets owned or leased by it makes such licensing or qualification necessary, except where the failure to be so licensed, qualified or in good standing do not and would not reasonably be expected to be material to the business of
Parent and its Subsidiaries, taken as a whole. Purchaser has delivered or made available to the Company true, complete and correct copies of the Governing Documents of Purchaser, Parent and Merger Sub, as amended as of the date of this Agreement.
The Parent Charter, which shall amend and restate the current charter of Parent, shall have been adopted at and as of the Closing. The Restated Purchaser LLC Agreement, which shall amend and restate the limited liability company agreement of the
Purchaser in effect as of the date of this Agreement, shall have been adopted at and as of the Closing.
(b)
Section 4.1(b) of the
Purchaser Disclosure Schedule
lists the Parent, Purchaser, Merger Sub and all of the Subsidiaries of the Parent and, for each such entity, the state of formation or incorporation and each jurisdiction in which such Subsidiary is qualified or
licensed to do business. The Parent does not own, directly or indirectly, any capital stock of, or voting securities or equity interests in, any Person other than its Subsidiaries identified in
Section
4.1(b) of the Purchaser
Disclosure Schedule
.
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Section 4.2
Capitalization
.
(a) As of the Closing Date, the authorized capital stock of Parent will consist of 100,000,000 shares of capital stock, of which (i)
70,000,000 shares shall be designated Class A Common Stock, par value $0.001 per share (
Parent Class
A Common Stock
), (ii) 20,000,000 shares shall be designated Class B Common Stock, $0.001 par value
per share (
Parent Class
B Common Stock
), and 10,000,000 shares of undesignated preferred stock, $0.001 par value per share, of Parent (
Parent Preferred Stock
). Each share of Parent
Class A Common Stock, Parent Class B Common Stock and Parent Preferred Stock will have the rights, preferences, privileges and restrictions set forth in the Parent Charter.
(b)
Section 4.2(b)(i) of the Purchaser Disclosure Schedule
sets forth as of market close on the last trading day preceding date of this
Agreement, the total number of issued and outstanding shares of capital stock of Parent.
Section
4.2(b)(ii) of the Purchaser Disclosure Schedule
sets forth as of the date of this Agreement, the total authorized, issued and
outstanding Old LLC Units and the name of each record holder of such Old LLC Units. Purchaser directly owns all of the issued and outstanding shares of capital stock of Merger Sub, free and clear of any and all Liens.
(c) Immediately following the Effective Time, (i) no more than 14,695,176 shares of Parent Class A Common Stock will be outstanding,
provided that the foregoing does not include any shares of Parent Class A Common Stock that may be issued between the date hereof and the Effective Time in respect of any security described on
Section
4.2(e)(i) of the
Purchaser Disclosure Schedule
that is or will become exercisable or exchangeable for, or convertible into, shares of
Pre-Closing
Parent Common Stock or Parent Class A Common Stock, (ii) 16,272,727
shares of Parent Class B Common Stock will be outstanding, and (iii) no shares of Parent Preferred Stock will be outstanding. All shares of capital stock of Parent outstanding as of the Closing Date will be, when issued, duly authorized,
validly issued, fully paid and nonassessable and will not be subject to preemptive rights.
(d) Immediately following the Effective Time,
16,272,727 New LLC Units will be outstanding. All membership interests of Purchaser outstanding as of such time will be, when issued, duly authorized, validly issued, fully paid and nonassessable and will not be subject to preemptive rights. Each
New LLC Unit will have the rights, preferences, privileges and restrictions set forth in the Restated Purchaser LLC Agreement.
(e)
Immediately following the Effective Time (i) except as set forth in
Section
4.2(e)(i) of the Purchaser Disclosure Schedule
, there will be no outstanding subscriptions, securities, options, warrants, calls, rights,
commitments, agreements, derivative contracts, forward sale contracts or undertakings of any kind to which Parent or any of its Subsidiaries will be a party, or by which Parent or any of its Subsidiaries will be bound, obligating Parent or any of
its Subsidiaries to issue, deliver or sell, or cause to be issued, delivered or sold, additional shares of capital stock, equity interests or other voting securities of Parent or of any of its Subsidiaries or obligating Parent or any of its
Subsidiaries to issue, grant, extend or enter into any such security, option, warrant, call, right, commitment, agreement, derivative contract, forward sale contract or undertaking, or obligating Parent or any of its Subsidiaries to make any payment
based on or resulting from the value or price of Parent Common Stock, New LLC Units or other equity interests of any Subsidiaries of Parent or of any such subscription, security, option, warrant, call, right, commitment, agreement, derivative
contract, forward sale contract or undertaking and (ii) there will be no outstanding contractual obligations of Parent or any of its Subsidiaries to repurchase, redeem or otherwise acquire any shares of Parent Common Stock, New LLC Units or
other equity interest of any Subsidiary of Parent. There are no agreements requiring Parent any of its Subsidiaries to make contributions to the capital of, or lend or advance funds to, any Subsidiary of Parent. There are no bonds, debentures, notes
or other indebtedness or other securities of Parent or any of their Subsidiaries having the right to vote (or convertible into, or exchangeable for, securities having the right to vote) on any matters on which shareholders of Parent may vote.
Neither Parent, nor any Subsidiary of Parent is party to any voting agreement with respect to any securities of Parent or any Subsidiary of Parent.
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(f)
Section 4.2(f) of the Purchaser Disclosure Schedule
sets forth a true and complete
list of (i) each Subsidiary of Parent, listing for each Subsidiary its name, the name of Parent or Subsidiary of Parent holding an ownership interest in such Subsidiary, the percentage of equity or ownership interest of such Subsidiary owned by
Parent or a Subsidiary of Parent (and, with respect to any such Subsidiary in which Parent or any Subsidiary of Parent holds less than one hundred percent (100%) of the outstanding ownership interests, the Persons holding the remaining ownership
interest and the percentage of equity or ownership interest held by such Persons) and, for each Subsidiary that is a corporation, the number of authorized and issued and outstanding shares of each class of capital stock of such Subsidiary, and
(ii) all other Persons in which Parent or any Subsidiary of Parent owns, of record or beneficially, any direct or indirect equity or ownership or other similar interest or any right (contingent or otherwise) to acquire the same, listing for
each Person its name, the name of Parent or Subsidiary of Parent holding an ownership interest in such Person, the percentage of stock or other equity or ownership interest of such Person owned by Parent or a Subsidiary of Parent and, for each such
Person that is a corporation, the authorized and outstanding capital stock of each such Person. The shares, units or capital stock or other equity or ownership interests of each Subsidiary of Parent has not been issued in violation of, and is not
subject to, any preemptive or subscription rights or rights of first refusal. No Subsidiary of Parent has violated its Governing Documents, any other Contract, the Securities Act or other applicable Legal Requirements in connection with the offer,
sale or issuance of its equity securities or any ownership interests.
Section 4.3
Corporate
Power and Authorization
.
(a) Each of the Purchaser Entities has all necessary corporate or limited liability power and authority to
execute and deliver each of the Transaction Agreements and, subject only to the Parent Shareholder Approvals, to consummate the Transactions. The execution, delivery and performance by each of the Purchaser Entities of the Transaction Agreements,
and the consummation of the Transactions by each of the Purchaser Entities, have been duly and validly authorized and no other corporate or limited liability company proceedings on the part of any Purchaser Entity are necessary to authorize the
Transaction Agreements or to consummate the Transactions, subject to obtaining the Parent Shareholder Approvals and, in the case of the Merger, to the filing of the Articles of Merger with the Secretary of State of the State of Tennessee and the
Secretary of State of the State of Delaware in accordance with the TBCA and the DLLCA, respectively. Each of the Transaction Agreements has been or will be duly executed and delivered by those Purchaser Entities party thereto and, assuming due power
and authority of, and due execution and delivery by, the other parties thereto, constitutes a valid and binding obligation of such Purchaser Entity, enforceable against such Purchaser Entity in accordance with its terms, subject to the Bankruptcy
and Equity Exception.
(b) Parents board of directors, at a meeting duly called and held or in a written consent in lieu thereof (as
applicable), has unanimously adopted resolutions (i) declaring that the Transaction Agreements and the Transactions are advisable, fair to and in the best interest of Parent, Purchaser and its Subsidiaries and the Parent Shareholders,
(ii) adopting this Agreement and approving the other Transaction Agreements, the execution, delivery and performance of the Transaction Agreements by the Purchaser Entities and the consummation of the Transactions, (iii) directing that the
approval of this Agreement be submitted to the Parent Shareholders and (iv) recommending, subject to the ability of Parent to make a Recommendation Withdrawal pursuant to and in accordance with
Section
6.3(c)
, that the
Parent Shareholders approve the Agreement (such recommendation, the
Parent Board Recommendation
). Subject to the ability of Parent to make a Recommendation Withdrawal pursuant to and in accordance with
Section
6.3(c)
, such resolutions remain in effect and have not been rescinded, modified or withdrawn.
(c) The
board of directors of Merger Sub, at a meeting duly called and held or in a written consent in lieu thereof (as applicable), has adopted resolutions declaring it advisable for Merger Sub to enter into the Transaction Agreements and approving the
Transaction Agreements, the execution, delivery and performance of the Transaction Agreements and the consummation by Merger Sub of the Transactions. Purchaser, in its capacity as the sole shareholder of Merger Sub, has adopted resolutions approving
the execution, delivery and performance of this Agreement by Merger Sub and the consummation by Merger Sub of the Merger and the
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other transactions contemplated by this Agreement. Subject to changes made in connection with Parents, Purchasers and Merger Subs exercise of their rights to terminate this
Agreement in accordance with its terms, such resolutions have not been subsequently rescinded, modified or withdrawn.
Section 4.4
No Conflicts
. The execution and delivery of the Transaction Agreements by the Purchaser Entities do not, the consummation of the Transactions by the Purchaser Entities will not, and the compliance by the Purchaser
Entities with any of the terms or provisions of the Transaction Agreements will not, (i) conflict with or violate any provision of the Governing Documents of Parent or its Subsidiaries or, (ii) assuming that the authorizations, consents
and approvals referred to in
Section
4.5
and the Parent Shareholder Approvals are duly obtained, (x) except as set forth in
Section
4.4 of the Purchaser Disclosure Schedule
, violate, conflict
with, result in the loss of any material benefit under, constitute a default (or an event which, with notice or lapse of time, or both, would constitute a default) under, give rise to the termination of or a right of termination or cancellation
under, require consent or notice under, accelerate the performance required by, or result in the creation of any Lien, other than any Permitted Liens, upon any of the respective properties or assets of Parent or its Subsidiaries under, any Contract
to which any of the Purchaser Entities or any of their respective Subsidiaries is a party, or by which Parent or any of its Subsidiaries or any of their respective properties or assets is bound or affected or (y) conflict with or violate any
Laws applicable to Parent or any of its Subsidiaries or any of their respective properties or assets, other than, in the case of
clause (ii)(x)
, any such violation, conflict, loss, default, right or Lien that is not and would not reasonably
be expected to be material to the business of Parent and its Subsidiaries or materially impair the ability of the Purchaser Entities to perform their respective obligations hereunder or prevent or materially impede or delay the consummation of the
Transactions by the Purchaser Entities.
Section 4.5
Governmental Approvals
. Except as
set forth in
Section
4.5 the Purchaser Disclosure Schedule
, other than in connection with or in compliance with (i) the TBCA and the DLLCA, (ii) the Exchange Act, (iii) the Securities Act and any other
applicable federal or state securities Laws or blue sky Laws, (iv) the HSR Act or (v) the rules and regulations of the NYSE, no Consents of, or Filings with, any Governmental Entity are necessary in connection with the
execution, delivery and performance of the Transaction Agreements by the Purchaser Entities or the consummation of the Transactions by the Purchaser Entities.
Section 4.6
Parent SEC Filings; Financial Statements; Controls
.
(a) Parent has filed all reports, schedules, forms, statements and other documents required to be filed by Parent with the SEC pursuant to the
Exchange Act and the Securities Act since September 28, 2015 (collectively, and together with all documents filed on a voluntary basis on Form
8-K
and all documents filed with the SEC after the date
hereof, and in each case including all exhibits and schedules thereto and documents incorporated by reference therein, the
Parent SEC Documents
). None of Parents Subsidiaries is required to file any forms, reports or other
documents with the SEC pursuant to Section 13 or 15 of the Exchange Act. The Parent SEC Documents, as amended, complied as of their respective effective dates (in the case of Parent SEC Documents that are registration statements filed pursuant
to the requirements of the Securities Act) and as of their respective SEC filing dates (in the case of all other Parent SEC Documents) will comply in all material respects with the requirements of applicable Law, including the Exchange Act, the
Securities Act and the Sarbanes-Oxley Act of 2002 (including its rules and regulations,
SOX
), as the case may be, applicable to such Parent SEC Document, and none of the Parent SEC Documents as of such respective dates or, if
amended, as of the date of such amendment, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances
under which they were made, not misleading. As of the date of this Agreement, there are no outstanding or unresolved comments received from the SEC staff with respect to the Parent SEC Documents. To the Purchaser Entities Knowledge, as of the
date of this Agreement, none of the Parent SEC Documents is the subject of ongoing SEC review or investigation.
(b) The consolidated
financial statements (including all related notes and schedules thereto) of Parent (the
Parent SEC Financial Statements
) included in the Parent SEC Documents (if amended, as of the date of the last
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such amendment) comply in all material respects with applicable accounting requirements and the published rules and regulations of the SEC with respect thereto. The Parent SEC Financial
Statements fairly present, in all material respects, the consolidated financial position of Parent and its consolidated Subsidiaries, as at the respective dates thereof, and the consolidated results of their operations and their consolidated cash
flows for the respective periods then ended (subject, in the case of the unaudited statements, to normal recurring
year-end
audit adjustments, none of which, individually or in the aggregate, has been or will
be material to Parent and its Subsidiaries taken as a whole, and to the absence of information or notes not required by GAAP to be included in interim financial statements) in conformity with GAAP (except, in the case of the unaudited statements, as
permitted by the SEC) applied on a consistent basis during the periods involved (except as may be indicated therein or in the notes and schedules thereto).
(c) Neither Parent nor any of its Subsidiaries is a party to, or has any commitment to become a party to, any joint venture,
off-balance
sheet partnership or any similar contract, including any contract or arrangement relating to any transaction or relationship between or among Parent and any of its Subsidiaries, on the one hand, and any
unconsolidated Affiliate, on the other hand, including any structured finance, special purpose or limited purpose entity or Person, or any
off-balance
sheet arrangements (as defined in Item 303(a)
of Regulation
S-K
of the SEC), where the result, purpose or effect of such contract is to avoid disclosure of any material transaction involving, or material liabilities of, Parent or any of its Subsidiaries
in Parents or any of its Subsidiaries published financial statements or any Parent SEC Documents.
(d) Each of the principal
executive officer of Parent and the principal financial officer of Parent (or each former principal executive officer of Parent and each former principal financial officer of Parent, as applicable) has made all certifications required by Rule
13a-14
or
15d-14
under the Exchange Act and Sections 302 and 906 of SOX, in each case, with respect to the Parent SEC Documents, and the statements contained in such
certifications were complete, correct and accurate in all material respects on the date such certifications were made. For purposes of this Agreement, principal executive officer and principal financial officer shall have the
meanings given to such terms in SOX.
(e) Parent has established and maintains a system of internal control over financial
reporting (as defined in Rules
13a-15(f)
and
15d-15(f)
promulgated by the SEC under the Exchange Act) sufficient to provide reasonable assurance (i) that
transactions are recorded as necessary to permit preparation of financial statements in conformity with GAAP, consistently applied, (ii) that transactions are executed only in accordance with the authorization of management or Parents
board of directors and (iii) regarding prevention or timely detection of the unauthorized acquisition, use or disposition of Parents assets.
(f) Parent has established and maintains disclosure controls and procedures (as defined in Rules
13a-15(e)
and
15d-15(e)
promulgated by the SEC under the Exchange Act); such disclosure controls and procedures are reasonably designed to ensure that information (both
financial and
non-financial)
relating to Parent and the Subsidiaries of Parent required to be disclosed in Parents periodic reports filed or submitted under the Exchange Act is made known to
Parents principal executive officer and its principal financial officer by others within those entities, particularly during the periods in which the periodic reports required under the Exchange Act are being prepared. The management of Parent
has completed its assessment of the effectiveness of Parents internal control over financial reporting in compliance with the requirements of Section 404 of SOX for the fiscal year ended January 1, 2017, and no significant deficiency
or material weakness was identified. To Parents Knowledge, there are no facts or circumstances that would prevent its principal executive officer and principal financial officer from giving the certifications and attestations required pursuant
to the rules and regulations adopted pursuant to Section 404 of SOX, without qualification, when next due.
(g) Parent is in
compliance in all material respects with (i) all applicable rules and all current listing and corporate governance requirements of NASDAQ, and (ii) all applicable rules, regulations and requirements of SOX and the SEC.
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Section 4.7
No Undisclosed Liabilities
. Except
as disclosed on
Section
4.7 of the Purchaser Disclosure Schedules
, there are no liabilities or obligations of Parent or any of its Subsidiaries of any nature, whether accrued, contingent, absolute, known or otherwise, in
each case, whether or not required by GAAP to be reflected or reserved against on a consolidated balance sheet of Parent and its Subsidiaries prepared in accordance with GAAP or the notes thereto, other than: (a) liabilities or obligations as
and to the extent reflected or reserved against in Parents audited consolidated balance sheet as of January 1, 2017 included in the Parent SEC Documents or in the notes thereto, (b) liabilities or obligations that were incurred since
January 1, 2017 in the Ordinary Course of Business, (c) liabilities or obligations that, individually or in the aggregate, are not and would not reasonably be expected to be material and adverse to Parent and its Subsidiaries, taken as a
whole, or (d) liabilities or obligations disclosed in the Parent Disclosure Schedule.
Section 4.8
Information Supplied
. The information supplied (or to be supplied) in writing by
the Purchaser Entities specifically for inclusion or incorporation by reference in the Proxy Statement will not, on the date it is first mailed to the Parent Shareholders and at the time of the Parent Shareholders Meeting, contain any untrue
statement of material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they are made, not misleading; provided, however, that no
representation or warranty is made by the Purchaser Entities with respect to information in the Proxy Statement with respect to the Company, the Sellers or the Business supplied in writing by the Company or any of their directors, officers,
employees, Affiliates, agents or other Representatives for inclusion or incorporation by reference in any of the foregoing documents.
Section 4.9
Labor Matters
.
(a) Since June 1, 2014, (i) neither Parent, nor any of its Subsidiaries or
Affiliates is or has been a party or has any material Liability with respect to any Collective Bargaining Agreement, (ii) no employees of Parent or any of its Subsidiaries are or have been represented by any labor union, labor organization or
works council in connection with their employment with Parent or any Subsidiary or any Affiliate of Parent, (iii) to the Purchaser Entities Knowledge, there currently are no, and there have not been any, activities or proceedings of any
labor or trade union to organize any employees of Parent or any of its Subsidiaries, (iv) no Collective Bargaining Agreement is being or has been negotiated by Parent or any of its Subsidiaries or Affiliates, and (v) there currently is no,
and there has not been any, picketing, strike, lockout, slowdown, or work stoppage against Parent or any of its Subsidiaries or Affiliates pending or, to the Purchaser Entities Knowledge, threatened that may materially interfere with the
respective business activities of Parent or any of its Subsidiaries or Affiliates.
(b) Except as set forth in
Section
4.9(b) of the Purchaser Disclosure Schedule
, Parent and its Subsidiaries are in compliance with applicable Laws and Orders with respect to hiring, employment, and termination of employment (including but not limited
to applicable Laws regarding wage and hour requirements, tips, correct classification of independent contractors and of employees as exempt and
non-exempt,
unfair labor practices, work authorization status,
immigration, discrimination in employment, harassment, retaliation and reasonable accommodation, leaves of absence, terms and conditions of employment, employee health and safety, collective bargaining and WARN and any similar state or local
mass layoff or plant closing law), except where the failure to comply is not and would not reasonably be expected be material to Parent and its Subsidiaries, taken as a whole. There has been no mass layoff or
plant closing (as defined by WARN) with respect to Parent or any of its Subsidiaries since June 1, 2014. Except as is not, and would not reasonably be expected to be material to Parent and its Subsidiaries, taken as a whole,
(i) there is no complaint, charge, claim or Proceeding based on, arising out of, in connection with, or otherwise relating to the employment or termination of employment or failure to employ by Parent or any of its Subsidiaries, of any
individual now pending or, to the Purchaser Entities Knowledge, threatened against Parent or any of its Subsidiaries, before any Governmental Entity or regulatory authority, and (ii) there is no complaint, charge, claim or Proceeding
before any Governmental Entity or regulatory authority with respect to a violation of any occupational safety or health standards that is now pending or, to the Purchaser Entities Knowledge, threatened against Parent or any of its
Subsidiaries.
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(c) Neither Parent nor any of its Subsidiaries is liable for any payment to any trust or other
fund or to any Governmental Entity, with respect to unemployment compensation benefits, social security or other benefits for employees (other than routine payments to be made in the Ordinary Course of Business).
Section 4.10
Absence of Certain Changes or Events
. Since January 1, 2017 and except
(a) as disclosed in the Parent SEC Documents filed with or furnished to the SEC prior to the date of this Agreement or as set forth in
Section
4.10 of the Purchaser Disclosure Schedule
and (b) for liabilities or
obligations incurred in connection with the Transactions, (i) there has not been any event, change, development, occurrence or state of facts that, individually or in the aggregate, is or would reasonably be expected to be material and adverse
to Parent and its Subsidiaries, taken as a whole, (ii) Parent and its Subsidiaries have carried on and operated their respective businesses in all material respects in the Ordinary Course of Business and (iii) neither Parent nor any of its
Subsidiaries has taken any action described in
Section
5.2(b)
hereof that, if taken after the date hereof and prior to the Effective Time without the prior written consent of the Company, would violate such provision.
Section 4.11
Compliance with Laws
. Other than those violations or allegations that,
individually or in the aggregate, are not and would not reasonably be expected to be material to Parent and its Subsidiaries, taken as a whole, (a) Parent and its Subsidiaries are not in violation of, and since June 1, 2014 have not
violated, any Laws and Orders applicable to Parent, any of its Subsidiaries or any assets owned or used by any of them and (b) neither Parent nor any of its Subsidiaries has received any written communication since June 1, 2014 from a
Governmental Entity that alleges that Parent or any of its Subsidiaries is not in compliance with any Law (except for violations that have been resolved).
Section 4.12
Permits
.
(a) Parent and each of its Subsidiaries have all required Permits necessary for the conduct of their business and the use of their properties
and assets, as presently conducted and used, and each of the Permits is valid, subsisting and in full force and effect, except where the failure to have or maintain any such Permit, individually or in the aggregate, is not and would not reasonably
be expected to be material to Parent and its Subsidiaries, taken as a whole. Parent and its Subsidiaries are (and since June 1, 2014 have been) in compliance with the terms of all Permits, except where
non-compliance
is not or would not reasonably be expected to be material to Parent and its Subsidiaries, taken as a whole. Since June 1, 2014, neither Parent nor any of its Subsidiaries has received
written notice to the effect that a Governmental Entity was considering the amendment, termination, revocation or cancellation of any Permit, except any such amendments, terminations, revocations or cancellations that, individually or in the
aggregate, is not and would not reasonably be expected to be material to Parent and its Subsidiaries, taken as a whole. The consummation of the Transactions by the Purchaser Entities, in and of themselves, will not cause the revocation or
cancellation of any Permit that is not a Liquor License, except any such revocations and cancellations that, individually or in the aggregate, are not and would not reasonably be expected to be material to Parent and its Subsidiaries, taken as a
whole.
(b)
Section 4.12(b) of the Purchaser Disclosure Schedule
sets forth a list as of the date hereof of all Liquor Licenses
held or used by Parent and its Subsidiaries in connection with the operation of each restaurant operated by Parent or any of its Subsidiaries, along with the name and street, city and state address of each such restaurant, and the expiration date of
each such Liquor License.
(c) As of the date hereof, except as has not been and would not reasonably be expected be material to Parent
and its Subsidiaries, taken as a whole:
(i) to the extent required by applicable Law, each restaurant currently operated by Parent or any
of its Subsidiaries possesses a Liquor License;
(ii) each Liquor License is in full force and effect and is adequate for the current
conduct of the operations at the restaurant for which it is issued;
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(iii) neither Parent nor any of its Subsidiaries has received any written notice of any pending
or threatened modification, suspension, or cancellation of a Liquor License or any Proceeding related thereto;
(iv) since June 1,
2014, there have been no Proceedings relating to any of the Liquor Licenses; and
(v) except as set forth on
Section
4.12(c)(v) of the Purchaser Disclosure Schedule
, there are no pending disciplinary actions, unresolved citations, unsatisfied penalties, or past disciplinary actions relating to Liquor Licenses that would reasonably
be expected to have any impact on any restaurant or the ability to maintain or renew any Liquor License.
Section 4.13
Litigation
. Except as set forth on
Section
4.13 of the
Purchaser Disclosure Schedule
, there are no Proceedings pending, or threatened in writing and received by Parent or any of its Subsidiaries, against Parent or any of its Subsidiaries or any of their respective properties or assets or any of
their respective officers or directors (in their capacity as officers or directors of Parent or any of its Subsidiaries) before any Governmental Entity (other than insurance claims litigation or arbitration arising in the Ordinary Course of
Business), which, if determined or resolved adversely in accordance with the plaintiffs or claimants demands, individually or in the aggregate, is or would reasonably be expected to be material and adverse to Parent and its Subsidiaries,
taken as a whole. As of the date of this Agreement, there is no material Order outstanding against Parent or any of its Subsidiaries.
Section 4.14
Taxes
. Except as has not had and would not reasonably be expected to have a Purchaser Material Adverse Effect:
(a) All Tax Returns required by applicable Law to be filed with any Taxing Authority by, or on behalf of, Parent or any of its Subsidiaries
have been duly and timely filed (including extensions) in accordance with all applicable Laws, and all such Tax Returns are true, complete and accurate.
(b) Parent and each of its Subsidiaries have duly and timely paid or have duly and timely withheld and remitted to the appropriate Taxing
Authority all Taxes due and payable. All required estimated tax payments sufficient to avoid any underpayment penalties or interest have been made by or on behalf of the Parent and each of its Subsidiaries.
(c) The U.S. federal income Tax Returns of Parent and its Subsidiaries through the Tax year ended January 2, 2011 have been examined and
the examinations have been closed or are Tax Returns with respect to which the applicable period for assessment under applicable Law, after giving effect to extensions or waivers, has expired.
(d) There is no Proceeding in progress, or threatened in writing and received by Parent or its Subsidiaries, against or with respect to Parent
or any of its Subsidiaries in respect of any Tax.
(e) Since January 1, 2017, neither Parent nor any of its Subsidiaries has
(i) agreed to or is required to make any adjustments pursuant to Section 481(a) of the Code or any similar provision of Law, or has any application pending with any Taxing Authority requesting permission for any changes in accounting
methods that relate to the Company or any of its Subsidiaries, (ii) executed or entered into a closing agreement pursuant to Section 7121 of the Code or any similar provision of Law with respect to the Company or any of its Subsidiaries or
(iii) granted any extension for the assessment or collection of Taxes, which Taxes have not since been paid.
(f) There are no Liens
on any of the assets, rights or properties of Parent or any of its Subsidiaries with respect to Taxes, other than Permitted Liens.
(g)
Since January 1, 2015, neither the Parent nor any of its Subsidiaries (i) has been a party to a tax sharing, tax indemnity or tax allocation agreement (other than (A) an agreement exclusively between or among the Parent
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and its Subsidiaries or (B) customary provisions included in credit agreements, leases, commercial agreements and agreements entered into with employees, in each case, not primarily related
to Taxes and entered into in the Ordinary Course of Business), or (ii) otherwise has any Liability for the Taxes of any other Person as a transferee or successor, by Contract (not described in subparagraph (i)(A) or (B) above), or
otherwise.
(h) Neither Parent nor any of its Subsidiaries has participated in a listed transaction as defined in Treasury
Regulation
§1.6011-4(b)(2).
(i) At all times since February 25, 2013, Purchaser has
been classified as a partnership for U.S. federal income Tax purposes.
Section 4.15
Employee
Benefit Plans and Related Matters; ERISA
.
(a) Each Purchaser Benefit Plan intended to be qualified under Section 401(a) of the
Code, and the trust (if any) forming a part thereof, has received a favorable determination letter from the IRS (or opinion letter upon which Parent and Subsidiaries are entitled to rely) that the Purchaser Benefit Plan is so qualified, and, to the
Purchaser Entities Knowledge, there are no existing circumstances or any events that, individually or in the aggregate, adversely affect or would reasonably be expected to adversely affect the qualified status of any such plan. Each Purchaser
Benefit Plan has been administered and operated in accordance with its terms and with applicable Law, except as has not had or would not reasonably be expected to result in a material Liability to the Parent and its Subsidiaries, taken as a whole.
All contributions or other amounts which Parent or its Subsidiaries were required to make to Purchaser Benefit Plans on or prior to the Closing Date have been paid or accrued, except where any failure to do so would not reasonably be expected to be
material to Parent and its Subsidiaries, taken as a whole.
(b) No material Liability under Title IV or Section 302 of ERISA has been
incurred by the Purchaser Entities or any of their ERISA Affiliates that has not been satisfied in full, and, to the Purchaser Entities Knowledge, no condition exists that presents a material risk to the Purchaser Entities or any of their
ERISA Affiliates of incurring any such material Liability (exclusive of the liability to pay insurance premiums to the PBGC) under Title IV of ERISA.
(c) There are no pending actions or claims with respect to any of the Purchaser Benefit Plans by any employee or otherwise involving any such
plan or the assets of any such plan (other than routine claims for benefits), except as, individually or in the aggregate, do not have and would not reasonably be expected to have a Purchaser Material Adverse Effect.
(d) No Purchaser Benefit Plan is a multiemployer plan within the meaning of Section 4001(a)(3) of ERISA or 3(37) of ERISA or
is a multiple employer plan within the meaning of Section 413 of the Code or Section 4063 or 4064 of ERISA or a multiple employer welfare benefit plan within the meaning of Section 3(30) of ERISA. No Purchaser
Benefit Plan is an employee pension benefit plan that is subject to Title IV of ERISA, Section 302 or 303 of ERISA or Section 412 or 436 of the Code.
(e) Except as set forth in
Section
4.15(e) of the Purchaser Disclosure Schedule
, no Purchaser Benefit Plan provides
for or promises medical, surgical, hospitalization, death, disability, life insurance or similar benefits coverage (whether or not insured) for current or former employees, officers, service providers or directors of the Purchaser Entities or any of
their Subsidiaries for periods extending beyond their retirement, other than coverage mandated by applicable provisions of the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended and the regulations issued thereunder.
(f) Except as provided in this Agreement, as set forth in
Section
4.15(f) of the Purchaser Disclosure Schedule
or as
required by applicable Law, the consummation of the Transactions at the Effective Time will not, either alone or in combination with another event, (i) entitle any current or former director, officer or employee
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of the Purchaser Entities or of any of their Subsidiaries to severance pay or any similar payment of (ii) result in any payment becoming due, accelerate the time of payment, funding or
vesting, or increase the amount of compensation due to any such director, officer or employee. Except as set forth in
Section
4.15(f) of the Purchaser Disclosure Schedule
, neither Parent nor Purchaser is a party to any
contract or arrangement that would result, separately or in the aggregate, in the payment of any excess parachute payments within the meaning of Section 280G of the Code, and the consummation of the Transactions will not be a factor
causing payments to be made by the Purchaser Entities to be
non-deductible
(in whole or in part) under Section 280G of the Code.
(g) This
Section
4.15
contains the sole and exclusive representations and warranties of the Purchaser Entities
regarding Purchaser Benefits Plans or ERISA matters, or liabilities or obligations, or compliance with Laws, relating thereto.
Section 4.16
Material Contracts
.
(a) For purposes of this Agreement, a
Purchaser Material
Contract
shall mean any Contract to which Parent or any of its Subsidiaries is a party:
(i) that is a material
contract (as such term is defined in Item 601(b)(10) of Regulation
S-K
of the SEC);
(ii)
that contains (A) any exclusivity provision, (B) any right to develop or operate a business under any of the Companys or any of its Subsidiaries brands, (C) any covenant that limits, curtails or restricts (x) in any
material respect the ability of Parent or any of its Subsidiaries or in any way any of their respective Affiliates to compete in any line of business, in any geographic location or with any Person, (y) the Persons to whom Parent or any of its
Subsidiaries may sell products or deliver services or (z) the types of products or services that Parent or any of its Subsidiaries may sell or deliver or (D) any
non-solicitation,
no hire or similar provision which restricts Parent or any of its Subsidiaries from soliciting, hiring, engaging, retaining or employing such Persons current or former employees in a manner or to an extent that would interfere with
the Ordinary Course of Business, in each case other than any such Contracts (1) to purchase inventory and other products for immediate consumption to be used in the Ordinary Course of Business (unless such Contract is material to the business
or the financial condition of Parent and its Subsidiaries, taken as a whole), (2) that may be cancelled without material Liability to Parent or its Subsidiaries upon notice of thirty (30) days or less, (3) any such Contract for leased real
property entered into in the Ordinary Course of Business that contains customary covenants that prohibit: (i) Parent or any of its Subsidiaries from using any trade names other than a trade name of Parent or its Subsidiaries, (ii) Parent
or any of its Subsidiaries from using any leased real property to operate a different restaurant concept than the restaurant concept currently operated on such leased real property by Parent or its Subsidiary, or (iii) Parent or any of its
Subsidiaries from operating other restaurant concepts of Parent or its Subsidiaries within a specified geographic area in relation to an existing restaurant of Parent or its Subsidiaries, or (4) that are not material to Parent and its
Subsidiaries, taken as a whole;
(iii) entered into after June 1, 2014 (A) relating to the disposition, acquisition (directly or
indirectly) by Parent or any of its Subsidiaries of properties, assets or businesses (whether by merger, purchase or sale of stock or assets or otherwise) with a fair market value in excess of $1,000,000, or (B) pursuant to which Parent or any
of its Subsidiaries will acquire any material interest in any other Person or other business enterprise for an amount in excess, in the aggregate, of $1,000,000, other than the Subsidiaries of Parent, other than, in either case of clause (A) or
(B), related to the construction, acquisition or development of new restaurant locations, or improvements or upgrades related to existing restaurant locations;
(iv) relate to a prior acquisition, divestiture, merger, license or similar transaction and contains representations, covenants, indemnities
or other obligations (including indemnification,
earn-out
or other contingent obligations), that are still in effect and, individually or in the aggregate, could reasonably be expected to result in
payments by Parent or any of its Subsidiaries in excess of $500,000;
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(v) that relates to the formation, creation, operation, management or control of any legal
partnership, strategic alliance or joint venture entity pursuant to which the Company has an obligation (contingent or otherwise) to make a material investment in or material extension of credit to any Person involving annual payments of at least
$500,000;
(vi) that involves or relates to indebtedness (including any guarantee thereto) for borrowed money (whether incurred, assumed,
guaranteed or secured by any asset) outside the Ordinary Course of Business or in a principal amount in excess of $2,500,000;
(vii) that
is a mortgage, pledge, security agreement, deed of trust, capital lease or similar agreement (other than any lease of real property) that creates or grants a Lien on any material property or asset of Parent or any of its Subsidiaries, in each case
involving annual payments of more than $500,000;
(viii) that is a settlement, conciliation or similar agreement (x) with any
Governmental Entity that imposes on Parent any material obligations after the date of this Agreement, or (y) which would require Parent or any of its Subsidiaries to pay consideration of more than $500,000 after the date of this Agreement;
(ix) with any of Parent or Purchasers directors or executive officers (including employment agreements), five percent or greater
shareholders of Parent or Purchaser or any of their respective Affiliates (other than Parent or any of its Subsidiaries) or immediate family members;
(x) with any labor union, including any Collective Bargaining Agreement;
(xi) that (A) contains a standstill or similar agreement pursuant to which Parent or any of its Subsidiaries has agreed not to acquire
(or agreed to cause any other Person not to acquire) assets or securities of a Person or (B) grants to any Person any right of first offer or right of first refusal to purchase, lease, sublease, use, possess or occupy all or a substantial part
of the material assets of Parent or any of its Subsidiaries, taken as a whole;
(xii) that is a voting or registration rights agreement;
(xiii) that is a financial derivatives master agreement or confirmation, or futures account opening agreement and/or brokerage statement,
evidencing financial hedging or similar trading activities;
(xiv) that is a Contract that expressly restricts or limits the payment of
dividends or other distributions on equity securities;
(xv) to the extent material to the business or financial condition of Parent and
its Subsidiaries, taken as a whole, that is a (w) consulting Contract, (x) Contract that contains requirements of minimum purchases by Parent or its Subsidiaries, (y) Contract that provides for the indemnification of any indemnitee
outside the Ordinary Course of Business or (z) Contract granting a right of first refusal or first negotiation to any third party;
(xvi) any Contract that relates to the employment of any individual on a full-time or part-time, consulting or other basis providing annual
compensation in excess of $250,000;
(xvii) that by its terms calls for aggregate payments by or to Parent or any of its Subsidiaries, of
more than $500,000 in any
12-month
period, except for any such Contract (x) that is a lease of real property, (y) that is an insurance policy of Parent or any of its Subsidiaries entered into in the
Ordinary Course of Business or (z) to purchase inventory and other products for immediate consumption to be used in the Ordinary Course of Business;
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(xviii) that contains a license or other right granted to Parent or any of its Subsidiaries of
any material Intellectual Property (other than
in-bound
licenses of commercially available,
off-the-shelf
or click
wrap Software that by their terms call for aggregate, one time or annual payments by Parent and its Subsidiaries of less than $150,000 per year);
(xix) that contains a license or other right granted by Parent or any of its Subsidiaries to a third Person outside the Ordinary Course of
Business, pursuant to which such third Person is authorized to use any Parent or Subsidiary-owned, proprietary Intellectual Property;
(xx) any Contract, or group of Contracts with a Person (or group of Affiliated Persons), the termination or breach of which would have a
Purchaser Material Adverse Effect, and is not disclosed pursuant to
clauses (i)
through
(xix)
above; or
(xxi) that
contains a commitment or agreement to enter into any of the foregoing.
(b)
Section 4.16 of the Purchaser Disclosure Schedule
contains a complete and accurate list of all Purchaser Material Contracts to or by which Parent or any of its Subsidiaries is a party as of the date of this Agreement. As of the date hereof, true and complete copies of all Purchaser Material
Contracts have been (i) publicly filed with the SEC or (ii) made available to the Company, together with any and all amendments and supplements thereto and material side letters and similar documentation relating thereto.
(c) Each Purchaser Material Contract listed on
Section
4.16 of the Purchaser Disclosure Schedule
is (i) a valid
and binding obligation of Parent or its Subsidiary party thereto and enforceable against Parent or its Subsidiary party thereto in accordance with its terms (except that (x) such enforcement may be subject to a Bankruptcy and Equity Exception
and (y) equitable remedies of specific performance and injunctive and other forms of equitable relief may be subject to equitable defenses and to the discretion of the court before which any Proceeding therefor may be brought) and, to the
Purchaser Entities Knowledge, except as set forth in
Section
4.16 of the Purchaser Disclosure Schedule
, each other party thereto and (ii) in full force and effect, except in the case of
clauses (i)
and
(ii)
above, as is not and would not reasonably be expected to be material to Parent and its Subsidiaries, taken as a whole. Parent and each of its Subsidiaries has performed its obligations required to be performed by it prior to the date of
this Agreement under each Purchaser Material Contract to which it is a party and no condition exists that, with notice or lapse of time or both, would constitute a default thereunder by Parent and its Subsidiaries party thereto, except in each case
as is not and would not reasonably be expected to be material to Parent and its Subsidiaries, taken as a whole. To the Purchaser Entities Knowledge, each other party to each Purchaser Material Contract has performed its obligations required to
be performed by it under such Purchaser Material Contract, and no condition exists that, with notice or lapse of time or both, would constitute a default thereunder by any such other party thereto except in each case as is not and would not
reasonably be expected to be material to Parent and its Subsidiaries, taken as a whole. To the Purchaser Entities Knowledge, since January 1, 2015 none of Parent or any of its Subsidiaries has received written notice of any violation of
or default under (or any condition which with the passage of time or the giving of notice would cause such a violation of or default under) any Purchaser Material Contract to which it is a party or by which it or any of its properties or assets is
bound, except for violations or defaults that are not and would not reasonably be expected to be material to Parent and its Subsidiaries, taken as a whole. No party to any Purchaser Material Contract has given Parent or any of its Subsidiaries
written notice of its intention to terminate or cancel any Purchaser Material Contract.
Section 4.17
Intellectual Property; Software
.
(a)
Section 4.17(a) of the Purchaser Disclosure Schedule
sets forth an accurate and complete list of all (A) patents and patent
applications, (B) trademark or service mark applications and registrations, (C) domain name registrations, and (D) copyright registrations and applications, in each case, owned or filed by Parent or any of its Subsidiaries. Either
Parent or a Subsidiary of Parent owns, free and clear of all Liens (other than Permitted
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Liens), or has a valid and continuing license or a valid right to use, all Intellectual Property and Software used in connection with the business of Parent and its Subsidiaries as currently
conducted.
(b) Except as is not and would not reasonably be expected to be material to the Parent and its Subsidiaries, taken as a whole,
(i) the conduct of the business as currently conducted by Parent and its Subsidiaries does not infringe, misappropriate, dilute or otherwise violate any Persons Intellectual Property, (ii) as of the date of this Agreement, there is
no such claim pending or, to the Purchaser Entities Knowledge, threatened against Parent or its Subsidiaries, (iii) to the Purchaser Entities Knowledge as of the date of this Agreement no Person has or is infringing,
misappropriating or otherwise violating any Intellectual Property owned by Parent or any of its Subsidiaries, and (iv) no such claims are pending or threatened in writing against any Person by Parent or any of its Subsidiaries.
(c) Parent and its Subsidiaries have taken reasonably necessary steps to protect and preserve the confidentiality of all material trade
secrets and other material confidential information owned by Parent or any of its Subsidiaries.
(d) Parent or its Subsidiaries maintain
control of copies of the Software included in the Intellectual Property which Parent or its Subsidiaries license from third Persons or otherwise use and documentation (including user guides) reasonably necessary to use such Software, and Parent or
its Subsidiaries maintain control over the use of source code and/or such other documentation (including user guides and specifications) for all material proprietary Software developed or created by Parent or its Subsidiaries and owned by Parent or
any of its Subsidiaries (
Purchaser Proprietary Software
) and/or such documentation (including user guides and specifications) reasonably necessary to use, maintain and modify the Purchaser Proprietary Software. The Purchaser
Proprietary Software, and, to the Purchaser Entities Knowledge, the material Software included in the Intellectual Property which Parent or its Subsidiaries license from third Persons or otherwise use functions substantially in compliance with
applicable written, published documentation and specifications. Parent or its Subsidiaries own, lease or license all Software, hardware, databases, computer equipment and other information technology necessary for the operations of Parents and
its Subsidiaries businesses as currently conducted.
Section 4.18
Real Properties; Personal
Properties
.
(a)
Section 4.18(a) of the Purchaser Disclosure Schedule
sets forth a true and complete list, as of the date of
this Agreement, of all real property owned by Parent or any of its Subsidiaries that is used or held for use in the operation of Parents and its Subsidiaries businesses as currently conducted as of the date of this Agreement.
(b)
Section 4.18(b) of the Purchaser Disclosure Schedule
sets forth a true and complete list, as of the date of this Agreement, of all
leases of real property under which Parent or any of its Subsidiaries is a tenant or a subtenant and that is used or held for use in the operation of Parents and its Subsidiaries businesses as currently conducted as of the date of this
Agreement.
(c) As of the date of this Agreement, except for those matters that, individually or in the aggregate, are not and would not
reasonably be expected to be material to Parent and its Subsidiaries, taken as a whole: (i) Parent and each of its Subsidiaries has good marketable and valid title to, or good and valid leasehold or sublease interests or other comparable
contract rights in or relating to all real property of Parent and its Subsidiaries free and clear of all Liens, except for Permitted Liens, Liens securing outstanding indebtedness and minor defects in title, recorded easements, restrictive covenants
and similar encumbrances of record that, individually or in the aggregate, do not and would not reasonably be expected to detract from the value of such property, (ii) Parent and each of its Subsidiaries has complied with the terms of all
leases of real property of Parent and its Subsidiaries and all such leases are in full force and effect, enforceable in accordance with their terms against Parent or any Subsidiary party thereto and, to the Purchaser Entities Knowledge, the
counterparties thereto and (iii) neither Parent nor any of its Subsidiaries has received or provided any written notice of any event or occurrence that has resulted or would reasonably be expected to result (with or without the giving of
notice, the lapse of time or both) in a default with respect to any such lease.
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(d) Except for those matters that are not and would not reasonably be expected to be material to
Parent and its Subsidiaries, taken as a whole, the restaurants owned or leased by Parent or any of its Subsidiaries or otherwise used by Parent or any of its Subsidiaries in connection with the operation of their businesses are (as to physical plant
and structure) structurally sound, in good operating condition and repair (ordinary wear and tear excepted), and are adequate for the uses to which they are being put.
(e) Except as does not and would not reasonably be expected to materially interfere with the ability of Parent and its Subsidiaries to conduct
their businesses as presently conducted, the machinery, equipment, furniture, fixtures, trade fixtures, improvements and other tangible personal property and assets owned, leased or used by Parent or any of its Subsidiaries (the
Purchaser
Assets
) are in good operating condition and repair (ordinary wear and tear excepted) and, in the aggregate, sufficient and adequate to carry on their respective businesses as presently conducted, and Parent and its Subsidiaries are in
possession of and have good title to, or valid leasehold interests in or valid rights under contract to use, such Purchaser Assets that are material to Parent and its Subsidiaries, taken as a whole, free and clear of all Liens other than Permitted
Liens and Liens securing outstanding indebtedness.
(f) Each of Parents and its Subsidiaries personal property leases is in
full force and effect and neither Parent nor any Subsidiary has received or given any written notice of any default or event that with notice or lapse of time, or both, would constitute a default by Parent or any Subsidiary under any such personal
property leases and, to the Purchaser Entities Knowledge, no other party is in default thereof.
Section 4.19
Environmental Matters
. Except as do not and would not reasonably be expected to
have a Purchaser Material Adverse Effect, individually or in the aggregate:
(a) Since June 1, 2014, Parent and its Subsidiaries have
been and are in compliance with all applicable Environmental Laws, including, but not limited to, obtaining, possessing and complying with all Environmental Permits;
(b) There is no pending or, to the Purchaser Entities Knowledge, threatened claim, investigation, legal or administrative Proceeding
against Parent or any of its Subsidiaries under or pursuant to any Environmental Law. Neither Parent nor any of its Subsidiaries has received written notice from any Person, including but not limited to any Governmental Entity, alleging any current
or past violation of any applicable Environmental Law or Environmental Permit or otherwise may be liable under any applicable Environmental Law or Environmental Permit, which violation or material Liability is unresolved. Neither Parent nor any
Subsidiary is a party or subject to any administrative or judicial order or decree pursuant to any Environmental Law;
(c) Neither Parent
nor any of its Subsidiaries has caused the release, spill or discharge of any Hazardous Substances, and with respect to real property that is currently, or, to the Purchaser Entities Knowledge, formerly owned, leased or operated by Parent or
any of its Subsidiaries, there have been no releases, spills or discharges of Hazardous Substances on or underneath any of such real property that would be reasonably likely to result in a material Liability on the part of Parent or any of its
Subsidiaries;
(d) Parent and each of its Subsidiaries have provided the Company with access to all material environmental assessments,
audits, reports and similar material documentation related to environmental matters or potentially material liabilities under any Environmental Law or Environmental Permit, including any related correspondence with Governmental Entities, that are in
the possession, custody or reasonable control of Parent or any of its Subsidiaries.
Section 4.20
Brokers and Finders Fees
. Other than Stephens, Inc., there is no
investment banker, financial advisor, broker, finder or other intermediary that has been retained by or is authorized to act on behalf of Parent or any of its Subsidiaries who is entitled to any fee, commission or reimbursement of Expenses from
Parent or any of its Subsidiaries in connection with the Transactions.
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Section 4.21
Suppliers
.
Section
4.21 of the Purchaser Disclosure Schedule
sets forth the ten (10) largest suppliers of Parent and its Subsidiaries for the twelve (12) month period ending on January 1, 2017 (excluding construction
and capital expenses related to construction and equipment purchases for restaurants opened or under development during such period). To the Purchaser Entities Knowledge, since January 2, 2017, there has not been any material adverse
change in the business relationship of Parent or any of its Subsidiaries with any such material supplier, and neither Parent nor any of its Subsidiaries has received any written communication or notice from any such material supplier to the effect
that any such supplier (a) has changed, modified, amended or reduced, or intends to change, modify, amend or reduce, its business relationship with Parent or any of its Subsidiaries in a manner inconsistent with the Ordinary Course of Business,
or (b) will fail to perform in any respect, or intends to fail to perform in any respect, its obligations under any of its Contracts with Parent or any of its Subsidiaries, except in each case of (a) and (b), as would not reasonably be
expected to interfere materially with the ability of Parent or its Subsidiaries to conduct their businesses as presently conducted.
Section 4.22
Insurance
.
Section
4.22 of the Purchaser Disclosure Schedule
sets forth a true, complete and correct list of all Policies maintained by Parent or any of its Subsidiaries. Taken as a whole
and in all material respects, the Policies of Parent and its Subsidiaries (a) provide coverage for the operations conducted by Parent and its Subsidiaries as of the date of this Agreement of a scope and coverage consistent with customary
practice in the industries in which Parent and its Subsidiaries operate and (b) as of the date of this Agreement are in full force and effect. Neither Parent nor any of its Subsidiaries is in material breach or default, and neither the Company
nor any of its Subsidiaries has taken any action or failed to take any action which, with notice or the lapse of time, would constitute such a material breach or default, or permit termination or modification, of any of the Policies. No written
notice of cancellation or termination has been received by Parent or any of its Subsidiaries with respect to any of the Policies.
Section 4.23
Quality and Safety of Food and Beverage Products
. Since June 1, 2014, (a) there have been no recalls of any food or beverage product of Parent or any of its Subsidiaries, whether ordered by a Governmental
Entity or undertaken voluntarily by Parent or any of its Subsidiaries and (b) none of the food or beverage products of Parent or any of its Subsidiaries have been adulterated, misbranded, mispackaged, or mislabeled in violation of applicable
Law, or pose an inappropriate threat to the health or safety of a consumer when consumed in the intended manner, except in each case of (a) and (b), as would not, reasonably be expected to be material to Parent and its Subsidiaries, taken as a
whole.
Section 4.24
No Other Representations and Warranties; Disclaimers
.
(a) Except for the representations and warranties made by the Purchaser Entities in this
Article IV
, none of the Purchaser Entities or
any other Person makes any express or implied representation or warranty with respect to the Purchaser Entities or any of their respective Subsidiaries or their respective businesses, operations, assets, liabilities, condition (financial or
otherwise) or prospects, and each Purchaser Entity hereby disclaims any such other representations or warranties. In particular, without limiting the foregoing disclaimer, except for the representations and warranties made by the Purchaser Entities
in this
Article IV
, none of the Purchaser Entities or any other Person makes or has made any representation or warranty to the Company or any of its Affiliates or Representatives with respect to (i) any financial projection, forecast,
estimate, budget or prospect information relating to the Purchaser Entities, any of their respective Subsidiaries or their respective businesses or operations or (ii) any oral or written information furnished or made available to the Company or
any of its Affiliates or Representatives in the course of their due diligence investigation of the Purchaser Entities, the negotiation of the Transaction Agreements or in the course of the consummation of the Transactions.
(b) Notwithstanding anything contained in this Agreement to the contrary, each of the Purchaser Entities acknowledges and agrees that neither
the Company nor any other Person has made or is making any representations or warranties whatsoever, express or implied, beyond those expressly made by the Company in
Article II
and the Sellers in
Article III
hereof, including any
implied representation or warranty as to the accuracy or completeness of any information regarding the Company furnished or made available to the Purchaser Entities
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or any of their respective Affiliates or Representatives. Without limiting the generality of the foregoing, each of the Purchaser Entities acknowledges and agrees that no representations or
warranties other than in
Article II
and
Article III
are made with respect to any projections, forecasts, estimates, budgets or prospect information that may have been made available to any Purchaser Entity or any of its Affiliates or
Representatives.
ARTICLE V
CONDUCT OF BUSINESS
Section 5.1
Conduct of the Business by the Company
.
(a) From the date of this Agreement until the earlier of the
Effective Time or the date, if any, on which this Agreement is validly terminated in accordance with
Section
9.1
, except (x) as prohibited or required by applicable Law or by any Governmental Entity, (y) as set
forth in
Section
5.1 of the Company Disclosure Schedule
or (z) as otherwise contemplated, required or expressly permitted by this Agreement, unless Purchaser shall otherwise consent in writing (which consent shall not
be unreasonably withheld, conditioned or delayed), the Company shall, and shall cause each of its Subsidiaries to, conduct the Business in the Ordinary Course of Business in all material respects and, to the extent consistent therewith, use its
commercially reasonable efforts to (i) preserve intact in all material respects the Business and its organization, (ii) preserve the assets, rights and properties owned or used by the Business in good repair and condition,
(iii) retain the services of its current officers, employees and consultants, including all Business Employees and (iv) preserve the goodwill and relationship of the Company and each of its Subsidiaries, or the Business, with customers,
key employees, suppliers, licensors, licensees, lessors and other Persons with which it has material business dealings;
provided
,
however
, that no action or failure to take action by the Company or any of its Subsidiaries with respect
to any matter specifically requiring Purchasers consent under any provision of
Section
5.1(b)
shall constitute a breach under this
Section
5.1(a)
, unless such action or failure to take action
would constitute a breach of such provision of
Section
5.1(b)
.
(b) Without limiting the generality of the
foregoing (except as provided therein), from the date of this Agreement until the earlier of the Effective Time or the date, if any, on which this Agreement is terminated pursuant to
Section
9.1
, except (x) as
prohibited or required by applicable Law or by any Governmental Entity, (y) as set forth in
Section
5.1 of the Company Disclosure Schedule
or (z) as otherwise contemplated, required or permitted by this Agreement,
unless Purchaser shall otherwise consent in writing (which consent shall not be unreasonably withheld, conditioned or delayed), the Company shall not, and shall not permit any of its Subsidiaries to, directly or indirectly:
(i) amend or propose or agree to amend, in any material respect, the Company Certificate or Company LLC Agreement;
(ii) (A) declare, set aside, make or pay any dividend or other distribution (whether in cash, stock and/or property) in respect of any of its
equity or set any record date therefor, except for (1) dividends or distributions by any wholly-owned Subsidiary of the Company to the Company or to any other wholly-owned Subsidiary of the Company or (2) tax distributions by the Company
to its owner to enable it (or its direct or indirect owners) to pay U.S. federal and applicable state and local income tax with respect to the Companys income, (B) adjust, split, combine, subdivide or reclassify any of its equity or issue
or propose or authorize the issuance of any other securities (including options, warrants or any similar security exercisable for, or convertible into, such other security) in respect of, in lieu of, or in substitution for, its outstanding
membership interests, or (C) repurchase, redeem or otherwise acquire any outstanding membership interests of the Company or any of its Subsidiaries, or any other equity interests or any rights, warrants or options to acquire any such interests;
(iii) issue, sell, grant, dispose of, pledge or otherwise encumber, or authorize or propose the issuance, sale, grant, disposition or
pledge or other encumbrance of, any membership interests or other securities
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(including any options, warrants or any similar security exercisable for, or convertible into, such securities) or make any changes (by combination, merger, consolidation, reorganization,
liquidation or otherwise) in the capital structure of the Company or any of its Subsidiaries;
(iv) merge or consolidate with any other
Person or acquire any equity interests in or material assets of any Person, business or division thereof, or make any investment in excess of $500,000 in, any other Person, business or any division thereof (whether through the acquisition of stock,
assets or otherwise);
(v) sell, transfer, assign, abandon, lease, sublease, license, guarantee, subject to a Lien, except for a Permitted
Lien, or otherwise dispose of or encumber, or authorize the sale, transfer, assignment, abandonment, lease, sublease, license, guarantee, Lien, or other disposition or encumbrance of any material properties, rights, assets, product lines or
businesses of the Company or any of its Subsidiaries, or otherwise material to the Business (including capital stock or other equity interests of any Subsidiary) except (A) pursuant to Contracts in effect prior to the execution and delivery of
this Agreement (true and complete copies of which have been provided to Purchaser prior to the date hereof) and renewals or permitted terminations thereof made in the Ordinary Course of Business, (B) any such transaction involving assets of the
Company or any of its Subsidiaries not in excess of $2,000,000 or (C) sales, leases or licenses of inventory, equipment and other assets in the Ordinary Course of Business;
(vi) (A) make any loans, advances or capital contributions to any other Person; (B) create, incur, redeem, repurchase, defease, prepay,
or otherwise acquire or modify the terms of, any indebtedness for borrowed money in excess of $1,000,000 or issue any debt securities or assume, guarantee or endorse, or otherwise become responsible for, the obligation of any Person for borrowed
money, except for, in the case of each of
clause (A)
and
clause (B)
, (1) transactions among the Company and its wholly-owned Subsidiaries or among the Companys wholly-owned Subsidiaries, (2) any draw-down of funds under
an outstanding line of credit agreement (true and complete copies of which have been provided to Purchaser prior to the date hereof) in the Ordinary Course of Business, (3) indebtedness for borrowed money incurred to replace, renew, extend,
refinance or refund any existing indebtedness on no less favorable terms than such existing indebtedness (
provided
no such indebtedness provides for a prepayment penalty) or (4) indebtedness for borrowed money incurred pursuant to
agreements in effect prior to the execution and delivery of this Agreement; (C) make or commit to make any capital expenditure or miscellaneous expenditure related to maintenance and additions in excess of $250,000 individually other than such
expenditures which are set forth in the Companys capital budget for fiscal 2017, a true and complete copy of which was made available to Purchaser prior to the date of this Agreement (
provided
,
however
, that the Company may make
any unscheduled capital expenditure for immediate repair of failed systems or machinery necessary to maintain or keep a Restaurant open or as a result of natural disasters that have adversely affected a Restaurant or are reasonably anticipated to
adversely affect a Restaurant unless such actions are taken); or (D) cancel any material debts of any Person to the Company or any Subsidiary of the Company or waive any claims or rights of material value;
(vii) except as required pursuant to any Company Benefit Plan in effect on the date of this Agreement, (A) increase the compensation or
other benefits payable or provided to the Companys directors or officers, (B) except for the employee salary and bonus review process and related adjustments substantially as conducted each year and promotions in the Ordinary Course of
Business, materially increase the compensation or benefits payable or provided to the Company employees other than the Companys officers, (C) enter into any employment, change of control, severance or retention agreement with any employee
of the Company (except for (1) an agreement with a
non-officer
employee who has been hired to replace a similarly situated
non-officer
employee who was party to
such an agreement, (2) renewals or replacements of existing agreements with current
non-officer
employees upon expiration of the term of the applicable agreement on substantially the same terms as the
previous agreement or (3) for severance agreements entered into with
non-officer
employees in the Ordinary Course of Business in connection with terminations of employment), (D) establish, adopt, enter
into or amend any Collective Bargaining Agreement, Company Benefit Plan or any other plan, trust, fund, policy or arrangement for the benefit of any current or former directors, officers or employees or any of their dependents
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or beneficiaries, except as required to comply with Section 409A of the Code or other applicable Law;
provided
, that a copy of any such amendment shall be provided to Purchaser at
least five (5) Business Days prior to adoption thereof for Purchaser to review and approve (such approval not to be unreasonably withheld or delayed), (E) hire or offer employment to any individual who would be an officer of the Company or any
of its Subsidiaries, or terminate the employment of any officer of the Company or any of its Subsidiaries, or (F) except in the Ordinary Course of Business, hire or offer employment to any individual (other than any individual who would be an
officer of the Company or its Subsidiaries), or terminate the employment of any Business Employee (other than the Companys or its Subsidiaries officers);
(viii) settle, release, waive or compromise (A) any pending or threatened material claim for an amount in excess of the amount of the
specifically corresponding reserve established on the combined balance sheet of the Business as reflected in the Interim Balance Sheet plus any applicable third party insurance proceeds, or (B) any pending or threatened material claim that
entails (x) the incurrence of any obligation (other than the payment of money) to be performed by the Company or its Subsidiaries following the Effective Time that would be, individually or in the aggregate, material to the Company and its
Subsidiaries taken as a whole, or (y) obligations that would impose any material restrictions on the Business or operations of the Company or any of its Subsidiaries, except as already required by any Company Material Contract in effect prior
to the execution and delivery of this Agreement (a true and complete copy of which was provided to Parent prior to the date hereof) in the Ordinary Course of Business;
(ix) (A) enter into a Contract that involves payments to or from the Company or any of its Subsidiaries in excess of $500,000 or that would
otherwise constitute a Company Material Contract hereunder had it been effective as of the date of this Agreement, (B) modify, amend or terminate any such Contract or any Company Material Contract or Real Property Lease, in each case in a
manner that would be material and adverse to the Business, (C) waive, delay the exercise of, release or assign any material rights or claims under any Company Material Contract or Real Property Lease outside the Ordinary Course of Business,
(D) enter into any Contract or Real Property Lease which contains a change of control or similar provision that would require a payment to the other party or parties thereto in connection with the Transactions (including in combination with any
other event or circumstance), or (E) enter into, terminate or amend any Company Material Contract for the purchase of inventory other than a Contract that provides for the purchase of inventory for immediate use or consumption in the Ordinary
Course of Business;
(x) enter into or amend in any material manner any Contract, agreement or commitment (A) with any former or
present director, officer or employee of the Company or any of its Subsidiaries or any Business Employee, or (B) with any Affiliate or associate (as defined under the Exchange Act) of any of the foregoing Persons, in each case, except to the
extent permitted under
paragraph (vii)
above;
(xi) sell, assign, convey, abandon, encumber, transfer, license or otherwise
dispose of, or otherwise extend, amend or modify, any rights to any Intellectual Property material or necessary to carry on the Business (other than license to the Companys Subsidiaries);
(xii) alter or amend in any material respect any existing accounting methods, principles or practices, except as may be required by (or, in
the reasonable good faith judgment of the Company, advisable under) GAAP or applicable Law;
(xiii) make or change any material Tax
election, change (or make a request to any Taxing Authority to change) any material aspect of its method of accounting for Tax purposes, or amend any income or other material Tax Return;
(xiv) settle or compromise any material Tax claim or assessment, or enter into any closing agreement with any Taxing Authority;
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(xv) propose, adopt or enter into a plan of complete or partial liquidation, dissolution,
consolidation, restructuring, recapitalization or other reorganization of the Company or any of its Subsidiaries, except as contemplated by this Agreement;
(xvi) intentionally defer the payment of any accounts payable beyond the date such payable is due without penalty, except where any such
amount payable is being disputed in good faith;
(xvii) permit any Business Employee or other Person to remove any material Company Assets
or assets material to the Business from the corporate office, warehouses, Restaurants of the Company or any of its Subsidiaries facilities other than in connection with the performance of employment responsibilities in the Ordinary Course of
Business;
(xviii) (a) issue any coupons or complimentary rights for dining other than in the Ordinary Course of Business or (b) sell
any coupons or gift certificates at less than eighty percent (80%) of fair value;
(xix) materially increase or decrease the average
restaurant, corporate or warehouse facility inventory of the Company or any of its Subsidiaries other than in the Ordinary Course of Business or otherwise due to seasonality;
(xx) fail to maintain in full force and effect material insurance policies covering the Business, the Company or its Subsidiaries and their
respective properties, assets and businesses in a form and amount consistent with past practice in all material respects;
(xxi) change
its fiscal year;
(xxii) enter into any new line of business outside of its existing business;
(xxiii) implement or announce any material reductions in labor force, mass
lay-offs
or plant closings,
early retirement programs, or new severance programs or policies concerning any Business Employees (excluding routine employee terminations or severance as determined in the sole discretion of the Company);
(xxiv) enter into any
non-compete,
exclusivity,
non-solicitation
or similar agreement that would restrict, in any material respect, the businesses or operations of the Company, the Surviving Company or any of their Subsidiaries or that would in any way
restrict, in any material respect, the businesses or operations of Parent or its other Affiliates, or take any action that may impose new or additional regulatory requirements on Parent or any of its Affiliates;
(xxv) enter into, renew or modify any indemnification agreement with any indemnified Person, except for any agreement to provide
indemnification in connection with any Contract to purchase inventory and other products for immediate consumption in the Ordinary Course of Business and that is not material to the Business; or
(xxvi) authorize or commit or agree to take any of the foregoing actions.
Section 5.2
Conduct of Purchaser Entities
.
(a) From the date of this Agreement until the earlier of the Effective Time or the date, if any, on which this Agreement is validly terminated
in accordance with
Section
9.1
, except (x) as prohibited or required by applicable Law or by any Governmental Entity, (y) as set forth in
Section
5.2 of the Purchaser Disclosure Schedules
or (z) as otherwise contemplated, required or expressly permitted by this Agreement, unless the Sellers or the Company shall otherwise consent in writing (which consent shall not be unreasonably withheld, conditioned or delayed), Parent shall
and shall cause each of its Subsidiaries to, conduct its business in a prudent manner and to use its commercially reasonable efforts to (i) preserve intact in all material respects its business
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organization, (ii) preserve its assets, rights and properties in good repair and condition, (iii) retain the services of its current officers, employees and consultants, and
(iv) preserve the goodwill and relationship of Parent, Purchaser and each of their Subsidiaries with customers, key employees, suppliers, licensors, licensees, lessors and other Persons with which it has material business dealings.
(b) Without limiting the generality of the foregoing (except as provided therein), from the date of this Agreement until the earlier of the
Effective Time or the date, if any, on which this Agreement is terminated pursuant to
Section
9.1
, except (x) as prohibited or required by applicable Law or by any Governmental Entity, (y) as set forth in
Section
5.2 of the Purchaser Disclosure Schedule
or (z) as otherwise contemplated, required or permitted by this Agreement, unless the Sellers or the Company shall otherwise consent (which consent shall not be
unreasonably withheld, conditioned or delayed) in writing, neither Parent, nor Purchaser shall, and Parent and Purchaser shall cause their Subsidiaries not to, directly or indirectly:
(i) amend or propose or agree to amend, in any material respect, any Governing Document, except as expressly contemplated by this Agreement and
the Transactions contemplated hereunder;
(ii) (A) declare, set aside, make or pay any dividend or other distribution (whether in cash,
stock and/or property) in respect of any of its capital stock or set any record date therefor, except for (1) dividends or distributions by any wholly-owned Subsidiary of Parent to Parent or to any other wholly-owned Subsidiary of Parent, or
(2) tax distributions by the Purchaser (consistent with past practice of the Purchaser) to its owners to enable it (or its direct or indirect owners) to pay U.S. federal and applicable state and local income tax with respect to the
Purchasers income, (B) adjust, split, combine, subdivide or reclassify any of its capital stock or issue or propose or authorize the issuance of any other securities (including options, warrants or any similar security exercisable for, or
convertible into, such other security) in respect of, in lieu of, or in substitution for, shares of its capital stock, except with respect to the capital stock or securities of any Subsidiary, in connection with transactions among Parent and
Purchaser and its wholly-owned Subsidiaries or among Parents wholly-owned Subsidiaries, (C) repurchase, redeem or otherwise acquire any shares of the capital stock of Parent or any of its Subsidiaries, or any other equity interests or any
rights, warrants or options to acquire any such shares or interests, except (1) for repurchases of shares of
Pre-Closing
Parent Common Stock or Old LLC Units in connection with the exercise of Parent or
Purchaser options (including in satisfaction of any amounts required to be deducted or withheld under applicable Law), in each case outstanding as of the date of this Agreement, (2) with respect to the capital stock or securities of any
Subsidiary, in connection with transactions among Parent and Purchaser and one or more of its wholly-owned Subsidiaries or among Parents wholly-owned Subsidiaries, or (3) pursuant to any publicly announced share repurchase program;
(iii) issue, sell, grant, dispose of, pledge or otherwise encumber, or authorize or propose the issuance, sale, grant, disposition or pledge
or other encumbrance of, any shares of its capital stock or other securities (including any options, warrants or any similar security exercisable for, or convertible into, such capital stock or similar security) or make any changes (by combination,
merger, consolidation, reorganization, liquidation or otherwise) in the capital structure of Parent, Purchaser or any of their Subsidiaries, except for (A) the issuance of shares of
Pre-Closing
Parent
Common Stock or Old LLC Units pursuant to Contracts in effect prior to the execution and delivery of this Agreement (true and complete copies of which have been provided to the Company prior to the date hereof), (B) issuance of shares of
Pre-Closing
Parent Common Stock in connection with the exercise of Parent or Purchaser options outstanding as of the date of this Agreement, or (C) issuances by a wholly-owned Subsidiary of Parent of capital
stock to such Subsidiarys parent, Parent or another wholly-owned Subsidiary of Parent;
(iv) enter into any agreement with respect
to the voting of its capital stock;
(v) merge or consolidate with any other Person or acquire any equity interests in or material assets
of any Person, business or division thereof, or make any investment in excess of $2,000,000 in, any other Person, business or any division thereof (whether through the acquisition of stock, assets or otherwise);
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(vi) sell, transfer, assign, abandon, lease, sublease, license, guarantee, subject to a Lien,
except for a Permitted Lien, or otherwise dispose of or encumber, or authorize the sale, transfer, assignment, abandonment, lease, sublease, license, guarantee, Lien, or other disposition or encumbrance of any material properties, rights, assets,
product lines or businesses of Parent or Purchaser or any of their Subsidiaries (including capital stock or other equity interests of any Subsidiary) except (A) pursuant to Contracts in effect prior to the execution and delivery of this
Agreement (true and complete copies of which have been provided to the Company prior to the date hereof) and renewals or permitted terminations thereof made in the Ordinary Course of Business, (B) any such transaction involving assets of Parent
or any of its Subsidiaries not in excess of $2,000,000 or (C) sales, leases or licenses of inventory, equipment and other assets in the Ordinary Course of Business;
(vii) (A) make any loans, advances or capital contributions to any other Person; (B) create, incur, redeem, repurchase, defease, prepay,
or otherwise acquire or modify the terms of, any indebtedness for borrowed money in excess of $1,000,000 or issue any debt securities or assume, guarantee or endorse, or otherwise become responsible for, the obligation of any Person for borrowed
money, except for, in the case of each of
clause (A)
and
clause (B)
, (1) transactions among Parent and its wholly-owned Subsidiaries or among Parents wholly-owned Subsidiaries, (2) any draw-down of funds under any
loan agreement in effect prior to the execution and delivery of this Agreement in the Ordinary Course of Business, (3) indebtedness for borrowed money incurred to replace, renew, extend, refinance or refund any existing indebtedness on less
favorable terms than such existing indebtedness (
provided
no such indebtedness provides for a prepayment penalty) or (4) indebtedness for borrowed money incurred pursuant to agreements in effect prior to the execution and delivery of
this Agreement; (C) make or commit to make any capital expenditure or miscellaneous expenditure related to maintenance and additions in excess of $250,000 individually other than such expenditures which are set forth in Parents capital
budget for fiscal 2017, a true and complete copy of which was made available to the Company prior to the date of this Agreement, or in Parents capital budget for fiscal 2018 when approved by Parents board of directors and made available
to the Company (
provided
,
however
, that Parent or Purchaser may make any unscheduled capital expenditure for immediate repair of failed systems or machinery necessary to maintain or keep a restaurant open or as a result of natural
disasters that have adversely affected a restaurant or are reasonably anticipated to adversely affect a restaurant unless such actions are taken); or (D) cancel any material debts of any Person to Parent or any Subsidiary of Parent or waive any
claims or rights of material value;
(viii) other than the settlement, release, waiver or compromise of any pending or threatened claims,
liabilities or obligations in connection with any shareholder litigation against Parent and/or its officers, directors, employees and Representatives relating to the Agreement or the Transactions (which matters, for the avoidance of doubt, are
addressed exclusively in Section 6.13), settle, release, waive or compromise any pending or threatened material claim for an amount in excess of the amount of the specifically corresponding reserve established on the consolidated balance sheet
of Parent as reflected in the most recent applicable Parent SEC Document plus any applicable third party insurance proceeds, or that entails (A) the incurrence of any obligation (other than the payment of money) to be performed by Parent or its
Subsidiaries following the Effective Time that is, individually or in the aggregate, material to Parent and its Subsidiaries, taken as a whole, or (B) obligations that would impose any material restrictions on the business or operations of
Parent, Purchaser or any of their Subsidiaries, except as already required by any Contract in effect prior to the execution and delivery of this Agreement (a true and complete copy of which was provided to the Company prior to the date hereof) in
the Ordinary Course of Business;
(ix) sell, assign, convey, abandon, encumber, transfer, license or otherwise dispose of, or otherwise
extend, amend or modify, any rights to any Intellectual Property material or necessary to carry on Parents and its Subsidiaries business (other than licenses to Parents Subsidiaries);
(x) alter or amend in any material respect any existing accounting methods, principles or practices, except as may be required by (or, in the
reasonable good faith judgment of Parent, advisable under) GAAP or applicable Law;
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(xi) propose, adopt or enter into a plan of complete or partial liquidation, dissolution,
consolidation, restructuring, recapitalization or other reorganization of Parent, Purchaser or any of its Subsidiaries, except as expressly contemplated by this Agreement and the Transactions contemplated hereunder;
(xii) intentionally defer the payment of any accounts payable beyond the date such payable is due without penalty, except where any such
amount payable is being disputed in good faith;
(xiii) permit any employee or other Person to remove any material Purchaser Assets from
the corporate office, warehouses, restaurants of Parent, Purchaser or any of their Subsidiaries facilities other than in connection with the performance of employment responsibilities in the Ordinary Course of Business;
(xiv) (a) issue any coupons or complimentary rights for dining other than in the Ordinary Course of Business or (b) sell any coupons or
gift certificates at less than eighty percent (80%) of fair value;
(xv) materially increase or decrease the average restaurant, corporate
or warehouse facility inventory of Parent, Purchaser or any of their Subsidiaries other than in the Ordinary Course of Business or otherwise due to seasonality;
(xvi) fail to maintain in full force and effect material insurance policies covering Parent and its Subsidiaries and their respective
properties, assets and businesses in a form and amount consistent with past practice in all material respects;
(xvii) change its fiscal
year;
(xviii) enter into any new line of business outside of its existing business;
(xix) implement or announce any material reductions in labor force, mass
lay-offs
or plant closings,
early retirement programs, or new severance programs or policies concerning employees of Parent or any of its Subsidiaries (excluding routine employee terminations or severance as determined in the sole discretion of Parent or Purchaser);
(xx) enter into any
non-compete,
exclusivity,
non-solicitation
or similar agreement that would restrict in any material respect the businesses or operations of Parent, Purchaser, the Surviving Company or any of their Subsidiaries or that would in any way
restrict in any material respect the businesses or operations of the Sellers or their other Affiliates;
(xxi) enter into, renew or modify
any indemnification agreement with any indemnified Person, except for any agreement to provide indemnification in connection with any Contract to purchase inventory and other products for immediate consumption in the Ordinary Course of Business
(that is not material to Parent and its Subsidiaries, taken as a whole);
(xxii) authorize or commit or agree to take any of the foregoing
actions.
ARTICLE VI
ADDITIONAL AGREEMENTS
Section 6.1
Preparation of the Proxy Statement; Parent Shareholders Meeting; Parent Board Recommendation
.
(a) As
soon as practicable following the date of this Agreement (and in any event not later than the later of 45 days following the date hereof or 10 days after the delivery of the Audited Financial Statements pursuant to
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Section
8.2(f)
), Parent shall prepare and file with the SEC the form of proxy statement that will be provided to the Parent Shareholders in connection with the
solicitation of proxies for use at the Parent Shareholder Meeting (collectively, as amended or supplemented from time to time, the
Proxy Statement
). Parent shall provide the Company and its counsel a reasonable opportunity to
review and comment on the Proxy Statement sufficiently prior to the filing thereof with the SEC, and Parent shall give reasonable and good faith consideration to any comments made by the Company and its counsel (it being understood that the Company
and its counsel shall provide any comments thereon as soon as reasonably practicable). The Company shall furnish, or cause to be furnished, all information concerning itself (and its Affiliates, if applicable), the Business and related financial
data, as Parent may reasonably request in connection with the preparation and filing with the SEC of the Proxy Statement. Parent shall use its reasonable best efforts to cause the Proxy Statement to be filed in definitive form with the SEC and to be
mailed to the Parent Shareholders as promptly as practicable thereafter. The Company shall reasonably cooperate with any reasonable request by Parent in respect of such efforts, which may include causing the Company and its Affiliates
employees and independent accountants to cooperate with Parent and its independent accountants in the preparation of any pro forma financial information required to be included in the Proxy Statement. No filing of, or amendment or supplement to the
Proxy Statement will be made by Parent without providing the Company a reasonable opportunity to review and comment thereon, and giving reasonable and good faith consideration to any comments made by the Company and its counsel (it being understood
that the Company and its counsel shall provide any comments thereon as soon as reasonably practicable). If at any time prior to the Effective Time any information relating to Parent, Purchaser or the Company, or any of their respective Affiliates,
directors or officers, should be discovered by Parent or the Company which should be set forth in an amendment or supplement to the Proxy Statement, so that such document 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 prepared and (subject to the preceding sentence) filed with the SEC and, to the extent required by applicable Law, disseminated to the Parent Shareholders. The parties shall (i) notify
each other promptly of the receipt of any communications from the SEC or its staff and of any request by the SEC or its staff for amendments or supplements to the Proxy Statement or for additional information and shall supply each other with copies
of all correspondence between it or any of its Representatives, on the one hand, and the SEC or its staff, on the other hand, with respect to the Proxy Statement or the Transactions, and (ii) provide each other and their counsel a reasonable
opportunity to review and comment on any response to any comments of the SEC or its staff, and such parties shall give reasonable and good faith consideration to any comments made by the other parties and their counsel, including to confirm that the
parties are treating the SECs or its staffs review and comments consistently (it being understood that the other parties and their counsel shall provide any comments thereon as soon as reasonably practicable).
(b) Parent shall, as soon as practicable following the date of this Agreement, (i) in accordance with applicable Law and the Governing
Documents of Parent, (A) establish a record date for, duly call, and give notice of, a special meeting of the Parent Shareholders solely for the purpose of obtaining the Parent Shareholder Approvals (the
Parent Shareholders
Meeting
) and (B) thereafter, convene and hold the Parent Shareholders Meeting and, (ii) subject to the ability of Parent to make a Recommendation Withdrawal pursuant to and in accordance with
Section
6.3(c)
, include in the Proxy Statement the Parent Board Recommendation. The Proxy Statement shall include a copy of the Fairness Opinion and (subject to the ability of Parent to make a Recommendation Withdrawal
pursuant to and in accordance with
Section
6.3(c)
) the Parent Board Recommendation.
(c) Subject to the ability
of Parent to make a Recommendation Withdrawal pursuant to and in accordance with
Section 6.3(c)
, Parent shall take all action that is both reasonable and lawful to solicit from its shareholders proxies in favor of the proposal to adopt
and approve this Agreement, the Merger, and the Transactions, and shall take all other reasonable actions necessary or advisable to secure the vote or consent of the Parent Shareholders that are required by the rules of the NYSE and the TBCA.
Notwithstanding anything to the contrary contained in this Agreement, Parent may adjourn or postpone the Parent Shareholders Meeting, as necessary to ensure that
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any required supplement or amendment to the Proxy Statement is provided to the Parent Shareholders within a reasonable amount of time in advance of the Parent Shareholders Meeting.
Section 6.2
Seller Exclusivity; No Solicitation
. From and after the date hereof, the Sellers
shall, and shall cause their Subsidiaries, Affiliates and Representatives to, (i) immediately cease and terminate any solicitation, encouragement (including by way of providing access to
non-public
information or the business, properties, assets or personnel of the Business, the Company, or any of its Subsidiaries, to any Person and its Representatives, its Affiliates and its prospective equity and debt financing sources), discussions or
negotiations with any Persons that may be ongoing with respect to any inquiry or proposal in respect of any Competing Proposal, and (ii) until the earlier of the Effective Time or the termination of this Agreement in accordance with
Article
IX
, not directly or indirectly (A) initiate, solicit, knowingly facilitate or knowingly encourage (publicly or otherwise) (including by way of providing access to
non-public
information or the
business, properties, assets or personnel of the Business, the Company, or any of its Subsidiaries, to any Person and its Representatives and its Affiliates) any inquiries regarding, or the making, submission or announcement of any proposal or offer
that constitutes, or would reasonably be expected to lead to a Competing Proposal, (B) engage or enter into, or otherwise participate in any discussions or negotiations with respect to, or provide any
non-public
information or data concerning, the Business, the Company, or its Subsidiaries, to any Person relating to, or that would reasonably be expected to lead to, any Competing Proposal or otherwise
cooperate with or assist or participate in, or knowingly facilitate such inquiries, proposals, discussions or negotiations, or (C) otherwise facilitate any such inquiries, proposals, discussion or negotiations or any effort or attempt by any
Person to make a Competing Proposal. A breach by any Subsidiary, Affiliate or Representative of the Sellers of this
Section
6.2
shall constitute a breach by the Sellers of this
Section
6.2
.
Section 6.3
Parent Exclusivity; No Solicitation; Recommendation Withdrawal
.
(a) Except as expressly permitted by this
Section
6.3
(including
Section
6.3(c)
), from and
after the date hereof, Parent and its Subsidiaries and their respective officers and directors shall, and Parent shall cause its Representatives to, (i) immediately cease and terminate any solicitation, encouragement (including by way of
providing access to
non-public
information or the business, properties, assets or personnel of Parent or any of its Subsidiaries to any Person and its Representatives, its Affiliates and its prospective equity
and debt financing sources), discussions or negotiations with any Persons that may be ongoing with respect to any inquiry or proposal in respect of any Alternative Proposal and, to the extent applicable, request such Person to return or destroy
promptly all confidential information concerning Parent and its Subsidiaries, and (ii) until the earlier of the Effective Time or the termination of this Agreement in accordance with
Article IX
, not directly or indirectly
(A) initiate, solicit, knowingly facilitate or knowingly encourage (publicly or otherwise) (including by way of providing access to
non-public
information or the business, properties, assets or personnel
of Parent or any of its Subsidiaries to any Person and its Representatives and its Affiliates) any inquiries regarding, or the making, submission or announcement of any proposal or offer that constitutes, or would reasonably be expected to lead to
an Alternative Proposal, (B) engage or enter into or otherwise participate in any discussions or negotiations with respect to, or provide any
non-public
information or data concerning, Parent or its
Subsidiaries to any Person relating to, or that would reasonably be expected to lead to, any Alternative Proposal or otherwise cooperate with or assist or participate in, or knowingly facilitate such inquiries, proposals, discussions or
negotiations, (C) grant to any Person, to the extent applicable, any waiver, amendment or release under any standstill or confidentiality agreement, rights agreement or any takeover statute (in each case, other than (if Parents board of
directors first determines that the failure to take such action would be inconsistent with Parents directors fiduciary duties under Applicable Law) a limited waiver, amendment or release thereunder, to the extent applicable, for the sole
purpose of allowing any Person or Group to make an Alternative Proposal or an offer that would reasonably be expected to lead to an Alternative Proposal) or (D) otherwise facilitate any such inquiries, proposals, discussion or negotiations or
any effort or attempt by any Person to make an Alternative Proposal. A breach by any Subsidiary, Affiliate or Representative of Parent of this
Section
6.3
shall constitute a breach by Parent of this
Section
6.3
.
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(b) Notwithstanding anything in this Agreement to the contrary but subject to the last sentence
of this
Section
6.3(b)
, at any time following the date hereof and prior to the time the Parent Shareholder Approvals are obtained, if Parent or any of its Subsidiaries obtains an Alternative Proposal from any Person or
Group that did not result from a material breach of this
Section
6.3
:
(i) Parent or its Subsidiaries and its
Representatives may contact such Person or Group solely to clarify the terms and conditions thereof;
(ii) Parent or its Subsidiaries and
its Representatives may provide
non-public
information and data concerning Parent and its Subsidiaries to such Person or Group, their Representatives and their prospective equity and debt financing sources;
provided
that Parent shall make available to the Company (through an electronic data site or otherwise), concurrently with providing such information to any such Person(s), any
non-public
information
concerning Parent or its Subsidiaries that Parent made available to any such Person or Group, their Representatives and their prospective equity and debt financing sources if such information was not previously made available to the Company; and
(iii) Parent or its Subsidiaries and its Representatives may engage or participate in any discussions or negotiations with such Person
regarding such Alternative Proposal;
provided
that, prior to taking any actions described in
clauses (ii)
or
(iii)
above,
(x) such Person first executes a confidentiality agreement with Parent with terms not less restrictive of such Person as the obligations of the Company set forth in
Section
6.4
hereof, and Parents board of
directors determines in good faith (after consultation with its financial advisor and outside counsel) that (A) the failure to take such action would be inconsistent with Parent directors fiduciary duties under Applicable Law and
(B) such Alternative Proposal either constitutes a Superior Proposal or would reasonably be expected to result in a Superior Proposal, (y) Parent provides prompt notice to the Company of each such determination by Parents board of
directors and of its intent to provide such information or engage in such negotiations or discussions, and (z) such Alternative Proposal did not result from a material breach of this
Section
6.3
.
From and after the date hereof and until the Effective Time, or if earlier, the termination of this Agreement in accordance with
Article IX
, Parent
shall notify the Company promptly of any Alternative Proposal received by Parent, its Subsidiaries or any of their Representatives, and such notice shall include the identity of the Person or Group making such Alternative Proposal and the material
terms of any such Alternative Proposal. From and after the date of this Agreement, Parent shall keep the Company and its Representatives reasonably informed of any material developments, discussions or negotiations regarding any Alternative Proposal
on a current basis and shall update the Company on the status and terms of such Alternative Proposal.
(c) Except as set forth in this
Section
6.3(c)
, Parents board of directors shall not (i) (A) change, withhold, withdraw, qualify or modify (or resolve or publicly propose to change, withhold, withdraw, qualify or modify), in a manner adverse to
the Company, the Parent Board Recommendation, (B) fail to include the Parent Board Recommendation in the Proxy Statement, (C) adopt, approve, authorize, declare advisable or recommend to propose to adopt, approve, authorize or declare advisable
(whether publicly or otherwise) any Alternative Proposal, or (D) take formal action, make any recommendation in connection with, or fail to recommend against, any Alternative Proposal subject to Regulation 14D under the Exchange Act in any
solicitation or recommendation statement made on Schedule
14d-9
relating thereto within ten (10) Business Days after the commencement of such Alternative Proposal (any such action, a
Recommendation Withdrawal
); or (ii) approve or recommend, or resolve or publicly propose to approve or recommend, or cause or permit Parent or any of its Subsidiaries to enter into, any letter of intent, memorandum of
understanding, acquisition agreement, merger agreement or similar definitive agreement relating to any Alternative Proposal (other than a confidentiality agreement pursuant to
Section
6.3(b)
) (an
Alternative
Proposal Agreement
).
Notwithstanding anything to the contrary set forth in this Agreement, at any time prior to obtaining the Parent
Shareholder Approvals, but not after, so long as none of Parent, its Subsidiaries or their Representatives have not
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breached in any material respect this
Section
6.3
, the Parents board of directors may, if the Parents board of directors determines in good faith (after
consultation with its financial advisor and outside counsel) that failure to take such action would be inconsistent with its fiduciary duties under applicable Law, (x) effect a Recommendation Withdrawal in response to an Alternative Proposal
that Parents board of directors determines in good faith (after consultation with its financial advisor and outside counsel) is a Superior Proposal made after the date hereof (giving effect to all of the binding written adjustments, if any,
offered by the Company pursuant to
Section
6.3(e)
or otherwise), (y) subject to prior or concurrent payment of the Termination Fee, terminate this Agreement under
Section
9.1(c)(ii)
if
Parents board of directors determines in good faith (after consultation with its financial advisor and outside counsel) that the Alternative Proposal that is the subject of the Alternative Proposal Agreement is a Superior Proposal, or
(z) effect a Recommendation Withdrawal in response to an Intervening Event. For purposes of this Agreement,
Intervening Event
means any event, fact, development or occurrence that affects the business, assets or operations of
Parent that is unknown to, and is not reasonably foreseeable by, Parents board of directors as of the date of this Agreement, that becomes known to Parents board of directors after the date of this Agreement; provided, however, that in
no event shall the receipt, existence or terms of an Alternative Proposal or any matter relating thereto or consequence thereof constitute an Intervening Event.
(d) Nothing contained in this
Section
6.3(d)
shall be deemed to prohibit Parent or Parents board of directors
from (i) complying with its disclosure obligations under United States federal or state law with regard to an Alternative Proposal, including taking and disclosing to the Parent Shareholders a position contemplated by Rule
14d-9
and Rule
14e-2(a)
promulgated under the Exchange Act (or any similar communication to the Parent Shareholders) or (ii) making any
stop-look-and-listen
communication to the Parent Shareholders pursuant to Rule
14d-9(f)
promulgated under the Exchange Act (or any similar communications to
the Parent Shareholders);
provided
, that (x) this
Section
6.3(d)
shall not permit Parents board of directors to make a Recommendation Withdrawal or take any other actions contemplated by this
Section
6.3(d)
, except, in each case, to the extent expressly permitted by, and subject to the terms and conditions of,
Section
6.3
, and (y) in any such disclosure or communication, Parent
publicly states that there has been no change in the Parent Board Recommendation.
(e) Parent shall not be entitled to effect a
Recommendation Withdrawal with respect to a Superior Proposal or an Intervening Event or to terminate this Agreement under
Section
9.1(c)(ii)
unless (i) Parent has provided a written notice to the Company at least five
(5) Business Days in advance (the
Notice Period
), which notice in the case of (A) a Superior Proposal (a
Notice of Superior Proposal
) shall specify that Parent intends to take such action and include
copies of all relevant documents relating to such Superior Proposal (including copies of the then-current form of acquisition or other agreement, together with copies of any commitment letters or similar material documents with respect to any
financing for such Superior Proposal), or if either the Superior Proposal or financing terms were not made in writing, a description of the material terms and conditions of the Superior Proposal or financing, as applicable, that is the basis of such
action (including the identity of the Person making such proposal), or (B) an Intervening Event (a
Notice of Intervening Event
) shall describe in reasonable detail such Intervening Event; (ii) if requested by the
Company, Parent shall, and shall cause its financial advisor and outside counsel to, during the Notice Period, negotiate with the Company and their Representatives in good faith to make amendments to the terms and conditions of this Agreement;
(iii) following the end of the Notice Period, Parents board of directors shall have determined in good faith after consultation with its financial advisor and outside counsel, taking into account any written and complete amendments to the
terms and conditions of this Agreement proposed by the Company that, if accepted by Parent, would be binding upon Parent, Purchaser and Merger Sub in response to the Notice of Superior Proposal, the Notice of Intervening Event or otherwise, that
(1) the Superior Proposal giving rise to the Notice of Superior Proposal continues to constitute a Superior Proposal or (2) such changes would not change the determination of Parents board of directors of the need for a
Recommendation Withdrawal in response to such Intervening Event, as applicable. In the event of any material revisions to such Superior Proposal or material changes related to such Intervening Event, Parent shall be required to deliver a new written
notice to the Company and to comply with the requirements of this
Section
6.3(e)
with respect to such new written notice, except that the deadline for such new written notice shall be reduced to two (2) Business Days.
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Section 6.4
Access to Information; Business Records;
Confidentiality
.
(a) Upon reasonable advance notice and subject to applicable Law, each of Parent and FNH shall, and shall cause each
of their respective Subsidiaries to, afford the Representatives of the other party reasonable access during normal business hours to its and its Subsidiaries properties, books, records, Contracts, Permits, legal counsel, financial advisors,
accountants, consultants and personnel, and shall furnish, and shall cause to be furnished, as promptly as practicable to the other party, all other information concerning Parent or FNH and their respective Subsidiaries business, properties
and personnel as the other party may reasonably request for purposes of diligence, integration planning and facilitating the transfer of the ownership of the Company;
provided
,
however
, the foregoing access in respect of FNH and its
Subsidiaries shall be strictly limited to the books, records, personnel, properties, and such other permitted access as set forth above, of the Business;
provided
,
further
, that each party may restrict the foregoing access to those
Persons who have entered into or are bound by a confidentiality agreement with it and to the extent required by applicable Law or Contract to which Parent or FNH, or their respective Subsidiaries is a party, as applicable (
provided
that such
party uses reasonable efforts to obtain consent from the relevant counterparties and, failing that, redacts sensitive information). All such access shall be subject to reasonable restrictions imposed from time to time with respect to the provision
of privileged communications or any applicable confidentiality agreement with any Person. In conducting any inspection of any properties of Parent or FNH and their respective Subsidiaries, the other party and its Representatives shall not
unreasonably interfere with the business conducted at such property.
(b) As soon as practicable after the Closing Date and in no event
later than ninety (90) days after Closing, as permitted by Law, the Sellers shall use its commercially reasonable efforts to deliver or cause to be delivered to Purchaser all Business Records then in the possession of the Sellers or any
Retained Subsidiary.
(c) The Sellers shall not, and shall cause their Representatives and Retained Subsidiaries not to, directly or
indirectly, for a period of the longer of (a) three (3) years after the Closing Date and (b) until such information no longer constitutes a trade secret under applicable Law, without the prior written consent of Purchaser, disclose to any
third party (other than each other and their respective Representatives) any confidential information concerning the Business, or the business of Parent and its Subsidiaries; provided that the foregoing restriction shall not (x) apply to any
information that (i) is or becomes generally available to, or known by, the public (other than as a result of disclosure in violation of this Section 6.4(c)), (ii) is or becomes generally available to the Sellers from a source other than
Parent, Purchaser or their Affiliates or Representatives, provided that such source is not known by the Sellers to be bound by a duty of confidentiality with Parent, Purchaser or their Affiliates, or (iii) the Sellers can establish was
independently developed by the Sellers or any of their Affiliates (other than by or in connection with the Business prior to the Closing), without use of any confidential information concerning the Business, or the business of Parent and its
Subsidiaries, or (y) prohibit any disclosure (i) required by Law or the rules and regulations of any applicable national securities exchange so long as, to the extent legally permissible, the Sellers provide Purchaser with reasonable prior
notice of such disclosure and a reasonable opportunity to review and discuss with the Sellers such disclosure or (ii) necessary to be made in connection with the enforcement of any right or remedy relating to any of the Transaction Agreements
or the Transactions.
(d) Purchaser shall not, and shall cause its Representatives and Affiliates not to, directly or indirectly, for a
period of the longer of (a) three (3) years after the Closing Date and (b) until such information no longer constitutes a trade secret under applicable Law, without the prior written consent of the Sellers, disclose to any third party
(other than each other and their respective Representatives) any confidential information with respect to the business of the Sellers or their Affiliates (other than the Business and the Company); provided that the foregoing restriction shall not
(x) apply to any information that (i) is or becomes generally available to, or known by, the public (other than as a result of disclosure in violation of this
Section 6.4(d)
or any other confidentiality obligations owed to the
Sellers), (ii) is or becomes generally available to Purchaser from a source other than the Sellers or its Affiliates or Representatives, provided that such source is not known by Purchaser to be bound by a duty of confidentiality with the Sellers or
its Affiliates, or (iii) Purchaser can establish was independently
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developed by Purchaser or any of its Affiliates, without use of any confidential information with respect to the business of the Sellers or their Affiliates (other than the Business and the
Company), or (y) prohibit any disclosure (i) required by Law or the rules and regulations of any applicable national securities exchange so long as, to the extent legally permissible, Purchaser provides the Sellers with reasonable prior
notice of such disclosure and a reasonable opportunity to review such disclosure or (ii) necessary to be made in connection with the enforcement of any right or remedy relating to any of the Transaction Agreements or the Transactions.
(e) Notwithstanding anything to the contrary herein, the Parties acknowledge and agree that either party may disclose confidential information
to any financial institution providing credit to such party or any of its Affiliates or to any Governmental Entity or any rating agency with jurisdiction over such party or any of its Affiliates.
Section 6.5
Consents, Approvals and Filings
.
(a) Upon the terms and subject to the conditions set forth in this Agreement, the parties shall, and shall cause their respective Subsidiaries
to, (i) use reasonable best efforts to cause the conditions set forth in
Article VIII
to be satisfied as promptly as practicable, (ii) use reasonable best efforts to take, or cause to be taken, all actions necessary, proper or
advisable to comply promptly with all legal requirements which may be imposed on such party or its Subsidiaries with respect to the Transactions and, subject to the conditions set forth in
Article
VIII
hereof, to consummate
the Transactions, as promptly as practicable, and (iii) use reasonable best efforts to obtain as promptly as practicable any Consent of, or any exemption or waiver by, any Governmental Entity and any other third-party Consent which is required
to be obtained by the parties or their respective Subsidiaries in connection with the Transactions, and to comply with the terms and conditions of any such Consent,
provided
,
however
, that the foregoing proviso shall not limit any
remedies available to any party for a breach of the obligations under
clause (iii)
of this
Section
6.5(a)
. The parties shall cooperate with the reasonable requests of each other in seeking to obtain as promptly
as practicable any such Consent. Notwithstanding anything to the contrary herein, neither the Sellers nor the Company shall be required to pay, prior to the Effective Time, any consent or similar fee, profit sharing or similar payment or
other consideration (including increased rent or other similar payments or any amendments, supplements or other modifications to (or waivers of) the existing terms of any Contract), or the provision of additional security (including a guaranty) to
obtain the Consent of any Person under any Contract.
(b) Neither the Sellers or the Company, nor any Purchaser Entity shall, and each of
them shall cause its Affiliates not to, after the date hereof until the Effective Time directly or indirectly acquire, purchase, lease or license (or agree to acquire, purchase, lease or license), by merging with or into or consolidating with, or by
purchasing a substantial portion of the assets of or equity in, or by any other manner, any business or any corporation, partnership, association or other business organization or division or part thereof, or any securities or collection of assets,
if doing so would reasonably be expected to: (i) impose any material delay in the obtaining of, or materially increase the risk of not obtaining, any Consent, or approval of any Governmental Entity necessary to consummate the Transactions or
the expiration or termination of any applicable waiting period; (ii) materially increase the risk of any Governmental Entity entering an Order prohibiting the consummation of the Transactions; (iii) materially increase the risk of not
being able to remove any such Order on appeal or otherwise; or (iv) prevent or material impede or delay the consummation of the Transactions.
(c) In furtherance of the foregoing, the parties shall as promptly as practicable following the date of this Agreement make all Filings and
notifications with all Governmental Entities that may be or may become reasonably necessary, proper or advisable under this Agreement and applicable Law to consummate and make effective the Merger and the other transactions contemplated by this
Agreement, including: (i) not later than
twenty-one
(21) days following the date of this Agreement, the Sellers or their Affiliates, as applicable, and Parent making the appropriate Filings,
respectively, of a notification and report form pursuant to the HSR Act with the Federal Trade Commission and the Antitrust Division of the United States Department of Justice with respect to the Merger and the other transactions, if applicable, and
requesting early termination of the initial waiting period under the HSR Act; (ii) the Sellers, their Affiliates, the Company and Parent and their respective
A-54
Subsidiaries each making any other filing that may be required under any other Antitrust Laws or by any Antitrust Authority; and (iii) the Sellers, the Company and Parent and their
respective Subsidiaries making any other filing that may be required under any applicable Law or by any Governmental Entity with jurisdiction over enforcement of any such Law. Each of the Sellers, the Company and Parent agrees to use reasonable best
efforts to supply as promptly as practicable any additional information and documentary material that may be reasonably requested by a Governmental Entity pursuant to the HSR Act or other applicable Law.
(d) The Sellers, the Company and the Purchaser Entities shall (i) furnish each other and, upon request, any Governmental Entity, any
information or documentation concerning themselves, their Affiliates, directors, officers, securityholders and debt financing sources, information or documentation concerning the Transactions and such other matters as may be reasonably requested and
(ii) make available their respective personnel and advisers to each other and, upon request, any Governmental Entity, in connection with (A) the preparation of any statement, filing, notice or application made by or on their behalf to any
Governmental Entity in connection with the Transactions or (B) any review or approval process.
(e) Subject to applicable Law
relating to the sharing of information, each of the Sellers and the Company, on the one hand, and the Purchaser Entities, on the other hand, shall promptly notify the other of any communication it or any of its Affiliates receives from any
Governmental Entity relating to the matters that are the subject of this Agreement and, prior to submitting any substantive written communication, correspondence or Filing by such party or any of its Representatives, on the one hand, to any
Governmental Entity or members of its staff, on the other hand, the submitting party shall permit the other party and its counsel a reasonable opportunity to review in advance, and consider in good faith the views of the other party provided in a
timely manner, in connection with any such communication. Subject to
Section
6.3
, the Sellers, the Company and the Purchaser Entities shall coordinate and cooperate fully with each other in exchanging such information and
providing such assistance as the other party may reasonably request in connection with the foregoing (including in seeking early termination of any applicable waiting periods under the HSR Act). To the extent practicable under the circumstances,
none of the parties to this Agreement shall agree to participate in any substantive meeting with any Governmental Entity in respect of any Filings, investigation (including any settlement of the investigation), litigation, or other inquiry unless it
consults with the other party in advance and, where permitted, allows the other party to participate. Neither party shall be required to comply with any of the foregoing provisions of this Section 6.5(e) to the extent that such compliance would
be prohibited by applicable Law. The parties further covenant and agree not to voluntarily extend any waiting period associated with any Consent of any Governmental Entity or enter into any agreement with any Governmental Entity not to consummate
the Merger and the other transactions, except with the prior written consent of the other party hereto.
(f) Each of the Sellers, the
Company and the Purchaser Entities may, as each deems advisable and necessary, reasonably designate any competitively sensitive material provided to the other under this
Section
6.5
as Antitrust Counsel Only
Material. Such materials and the information contained therein shall be given only to the outside antitrust counsel of the recipient and will not be disclosed by such outside counsel to employees, officers or directors of the recipient unless
express permission is obtained in advance from the source of the materials (the Sellers, the Company or the Purchaser Entities, as the case may be) or its legal counsel. Notwithstanding anything to the contrary in this
Section
6.5
, materials provided to the other party or its outside counsel may be redacted (1) to remove references concerning valuation, (2) as necessary to comply with contractual arrangements, (3) as
necessary to address reasonable attorney-client or other privilege or confidentiality concerns and (4) to remove references concerning pricing and other competitively sensitive terms from an antitrust perspective in the Contracts of the
Sellers, the Company, Parent and their respective Subsidiaries.
Section 6.6
Company Employee
Matters
.
(a) FNH and the Company shall take all steps necessary to cause the employment of the Business Employees to be transferred
to the Company or one of its Subsidiaries effective immediately prior to the Closing,
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without any action required by any such Business Employee. To the extent an offer of employment is required to be made to a Business Employee (each, an
Offered Employee
) under
applicable Law or as a result of any Business Employee having an existing employment agreement with FNH or any of its Subsidiaries (other than the Company or its Subsidiaries) pursuant to the immediately preceding sentence for the transfer of
employment of such Business Employee to be effective upon the Closing, not less than five (5) days prior to the Closing, the Company shall make an offer of employment to each such Business Employee or cause the Company or its Subsidiaries to
assume the employment agreements set forth on
Section
6.6(a) of the Company Disclosure Schedule
for such transfer of employment to be effective immediately prior to the Closing (each (i) Offered Employee (A) who
accepts the Companys offer of employment and commences employment with the Company or another Subsidiary of the Company immediately prior to the Closing or (B) whose employment agreement is set forth on
Section
6.6(a) of the Company Disclosure Schedule
and is assumed by the Company or another Subsidiary of the Company effective immediately prior to the Closing and (ii) other Business Employee whose employment is
transferred to the Company immediately prior to the Closing, a
Transferred Employee
).
(b) Subject and in addition to
the requirements of any applicable Law relating to employees acquired rights, the Companys offer of employment to each Offered Employee shall be for, and the Company shall cause its Subsidiaries to provide to each of the Transferred
Employees immediately prior to the Closing, the same (i) position, title, duties and other terms and conditions of employment in effect for such Transferred Employee immediately prior to their transfer to the Company or its Subsidiaries and
(ii) base salary or base wage rate in effect for such Transferred Employee immediately prior to their transfer to the Company or its Subsidiaries. Notwithstanding the foregoing, except as set forth on
Section
6.6(b) of the
Company Disclosure Schedule
, all Transferred Employees shall be employees
at-will
of the Company or its Subsidiaries, as applicable, and none of the Company, nor any of its Subsidiaries, shall
enter into any employment related agreement between the date hereof and the Closing that will be binding on the Company or Parent, or any of their respective Subsidiaries, following the Closing, without Purchasers express written consent.
(c) FNH shall, at its own expense, give all notices and other information required to be given by FNH to the Transferred Employees and any
applicable Governmental Entity and comply with any obligation to consult with or provide benefits to any Business Employees under the WARN Act, the National Labor Relations Act, the Code, COBRA and other applicable Laws in connection with the
execution of this Agreement or any other Transaction Agreement or the consummation of the employment transfers and their impact on any Business Employee.
(d) Nothing in this
Section
6.6
, express or implied, shall: (i) confer upon any Business Employee, any right to
continue in the employ or service of Purchaser, FNH, the Company or any Affiliate thereof, or any right to any particular term or condition of employment or service, or shall interfere with or restrict in any way the rights of Purchaser, the
Company, FNH or any Affiliate thereof to discharge or terminate the services of any Business Employee, at any time for any or no reason whatsoever, with or without cause; (ii) be deemed to (1) establish, amend, modify or terminate any
Company Benefit Plan or employee benefit plan maintained by Purchaser, the Company, FNH or any Affiliate thereof or any other benefit or compensation plan, program, agreement, policy, contract or arrangement, or (2) alter or limit the ability
of Purchaser, FNH, the Company or any Affiliate thereof, or following the Closing, the Purchaser, Company or any of their Affiliates, to amend, modify, or terminate any particular Company Benefit Plan or employee benefit plan maintained by
Purchaser, the Company or any Affiliate thereof or any other benefit or compensation plan, program, agreement, policy, contract or arrangement after the Closing; or (iii) be intended to or confer upon any person, including any current or former
employee, officer, director, consultant or service provider of the Purchaser, the Company, FNH or any Affiliate thereof (or any of their beneficiaries) any right, benefit or remedy of any nature whatsoever, including any third-party beneficiary
rights, under or by reason of this
Section
6.6
.
Section 6.7
Purchaser Entities Employee Matters
.
(a) For a period of six (6) months following the Effective Time, the Purchaser Entities shall cause the Company or its Subsidiaries to
maintain for all Transferred Employees, subject to their continued employment
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during such period, base salaries and wage rates, as applicable, that are substantially the same as received by such Transferred Employee as of the date hereof. Following the Effective Time, the
Purchaser Entities shall take reasonable efforts to cause the Company or its Subsidiaries to establish and make available to the Transferred Employees, subject to their continued employment, health and welfare benefits that are commercially
reasonable and competitive for the employee marketplace in which the Restaurants compete.
(b) The Purchaser Entities shall use
commercially reasonable efforts, subject to the consent of the applicable insurer, to cause the Company or its Subsidiaries to (i) credit each Transferred Employee with his or her years of service with the Company, its Subsidiaries and any
predecessor entities solely for purposes of eligibility and vesting (and not for the purpose of any benefit accrual) to the same extent as such Transferred Employee was entitled to credit immediately prior to the Effective Time for such service
under any substantially similar Company Benefit Plan, (ii) waive any applicable
pre-existing
condition exclusions and waiting periods with respect to participation and coverage requirements in any
replacement or successor welfare benefit plan of the Purchaser Entities or any of its Subsidiaries that a Transferred Employee is eligible to participate in following the Effective Time to the extent such exclusions or waiting periods were
inapplicable to, or had been satisfied by, such Transferred Employee immediately prior to the Effective Time under the analogous Company Benefit Plan in which such Transferred Employee participated, and (iii) provide each Transferred Employee
with credit for any
co-payments
and deductibles paid during the portion of the applicable plan year prior to the Effective Time (to the same extent such credit was given under the analogous Company Benefit
Plan prior to the Effective Time) in satisfying any applicable deductible or out of pocket requirements.
(c) Nothing in
Section
6.6
and
Section
6.7
, express or implied, shall: (i) confer upon any Business Employee, any right to continue in the employ or service of Purchaser, FNH, the Company or any Affiliate
thereof, or any right to any particular term or condition of employment or service, or shall interfere with or restrict in any way the rights of Purchaser, the Company, FNH or any Affiliate thereof to discharge or terminate the services of any
Business Employee, at any time for any or no reason whatsoever, with or without cause; (ii) be deemed to (1) establish, amend, modify or terminate any Company Benefit Plan or employee benefit plan maintained by Purchaser, the Company, FNH
or any Affiliate thereof or any other benefit or compensation plan, program, agreement, policy, contract or arrangement, or (2) alter or limit the ability of Purchaser, FNH, the Company or any Affiliate thereof, or following the Closing, the
Purchaser, Company or any of their Affiliates, to amend, modify, or terminate any particular Company Benefit Plan or employee benefit plan maintained by Purchaser, the Company or any Affiliate thereof or any other benefit or compensation plan,
program, agreement, policy, contract or arrangement after the Closing; or (iii) be intended to or confer upon any person, including any current or former employee, officer, director, consultant, service provider of the Purchaser, the Company,
FNH or any Affiliate thereof (or any of their beneficiaries) any right, benefit or remedy of any nature whatsoever, including any third-party beneficiary rights, under or by reason of
Section
6.6
and
Section
6.7
.
Section 6.8
Expenses
. Except as otherwise
provided in
Section
9.3
, whether or not the Transactions are consummated, all Expenses incurred in connection with this Agreement and the Transactions shall be paid by the party incurring such Expenses. As used in this
Agreement,
Expenses
includes all
out-of-pocket
expenses (including all fees and expenses of counsel, accountants, investment bankers, experts and
consultants to a party and its Affiliates) incurred by a party or on its behalf in connection with or related to the authorization, preparation, negotiation, execution and performance of the Transaction Agreements and the Transactions.
Section 6.9
Public Announcements
. The initial press releases concerning this Agreement and
the Transactions shall be approved in advance by the Parent and the Company. Following such initial press release and prior to the Effective Time, the Purchaser Entities and the Company, and their respective Representatives, shall consult with each
other before issuing, and give each other the opportunity to review and comment upon, any press release or other public statements with respect to the Transactions and shall not issue any such press release or make any such public statement prior to
such consultation, except as such party may reasonably conclude may be required by applicable Law, court process or by obligations pursuant to any listing agreement with any national securities exchange or national securities quotation system;
provided
,
however
, that the
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restrictions set forth in this
Section
6.9
shall not apply to any release or public statement (a) made or proposed to be made by Parent in accordance with
Section
6.3(d)
or (b) in connection with any dispute between the parties regarding the Transaction Agreements or the Transactions.
Section 6.10
Notification
. The Purchaser Entities shall promptly notify the Company, and the
Company shall promptly notify the Purchaser Entities, of (a) any material notice or other communication received by such party from any Governmental Entity in connection with the Transactions or from any Person alleging that the consent of such
Person is or may be required in connection with the Transactions, (b) any matter that would reasonably be expected to lead to the failure to satisfy any of the conditions to Closing in
Article VIII
or any material breach of any
representation, warranty, covenant or agreement contained in this Agreement and (c) any action, suits, claims, investigations or Proceedings commenced or, to such partys Knowledge, threatened in writing against, relating to or involving
or otherwise affecting such party or any of its Subsidiaries, in each case which relates to the Transactions. This
Section
6.10
shall not constitute a covenant or agreement for purposes of
Article VIII
.
Section 6.11
Intercompany Balances
. FNH shall cause all intercompany balances between and
among the Company and its Subsidiaries, on the one hand, and FNH or any of the Retained Subsidiaries, on the other hand, to be eliminated, by discharge or otherwise, and, except for those transactions contemplated by this Agreement and the other
Transaction Agreements, all intercompany transactions and accounts to be terminated and cancelled, in each case, effective as of the Closing, with no further liability or obligation on the part of FNH, the Retained Subsidiaries, any Purchaser
Entity, the Company or its Subsidiaries.
Section 6.12
Restructuring; Asset
Contributions
. Prior to the Closing, FNH and the Company shall have caused to be completed the assignments, contributions and other restructuring transactions described on
Section
6.12 of the Company Disclosure
Schedule
.
Section 6.13
Parent Shareholder Litigation
. Parent shall provide the
Company with the opportunity (but the Company shall not be obligated) to participate, at the Companys sole expense, in the defense and/or settlement of any shareholder litigation against Parent and/or its directors and/or executive officers
relating to this Agreement or the Transactions, whether commenced prior to or after the execution and delivery of this Agreement, and Parent shall not settle or offer to settle any such litigation without the prior written consent of the Company,
which shall not be unreasonably withheld, conditioned or delayed.
Section 6.14
Charter;
Share Reclassification; Stock Exchange
. Prior to the Closing, the parties shall, and shall use their reasonable best efforts to cause, where applicable, (i) the Parent Charter to be filed and accepted with the Secretary of State of the
State of Tennessee, (ii) the outstanding shares of
Pre-Closing
Parent Common Stock to be reclassified as Parent Class A Common Stock, pursuant to the Parent Charter, (iii) Parents listing
application with the NYSE to be amended such that the shares of Parent Class A Common Stock are approved for listing on the NYSE, and (iv) the satisfaction of any additional requirements of the NYSE with respect to the Transactions and the
issuance of the Parent Class
B Common Stock and the Purchaser Units pursuant to the terms of this Agreement.
Section 6.15
Section 16(b)
. The board of directors of Parent shall, prior to the Effective Time, take all such actions as may be necessary or appropriate to cause the Transactions and any acquisitions of Parent Common Stock and Purchaser Units in
connection with the Transactions by the Sellers to be exempt under Rule
16b-3
promulgated under the Exchange Act.
Section 6.16
Pre-Closing
Transactions
. The Sellers
shall provide to Purchaser copies of all transaction documents, resolutions, and any other documents or instruments reasonably related to the
Pre-Closing
Transactions in draft form at least three
(3) Business Days prior to their scheduled execution and/or effectiveness and shall provide Purchaser and its counsel the reasonable opportunity to review and comment upon such documents. The Sellers shall, and shall cause their respective
Subsidiaries to, effect the
Pre-Closing
Transactions
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as set forth in
Section
1.1
, and shall cause the
Pre-Closing
Transactions to be completed immediately prior to the Closing.
Section 6.17
Post-Closing Parent Board
. The Sellers and Parent shall cause the composition of
the board of directors of Parent to consist of the following individuals immediately following the Closing: Frank R. Martire, Raymond R. Quirk, Timothy T. Janszen, Ronald B. Maggard, Sr., Douglas K. Ammerman, Lonnie J. Stout II and William P. Foley
II.
Section 6.18
Certain Ancillary Agreements
. Each of the parties hereto shall
negotiate and finalize in good faith and in a form mutually acceptable to the parties hereto each of the Transition Services Agreement and Restated Purchaser LLC Agreement prior to the Closing.
ARTICLE VII
TAX MATTERS
The following
provisions shall govern the allocation of responsibility as between Purchaser and the Sellers for certain tax matters following the Closing Date:
Section 7.1
Tax Returns
. Purchaser shall prepare or cause to be prepared and file or cause to
be filed all Tax Returns for the Company and its Subsidiaries for all
Pre-Closing
Tax Periods which are required to be filed after the Closing Date. All such Tax Returns shall be prepared in accordance with
past practice. Purchaser shall submit such Tax Returns to the Sellers for their review and approval no later than twenty (20) days prior to the due date for filing thereof (except where such
20-day
period
is not practical, in which case as soon as practical). Purchaser shall make such revisions to such Tax Returns as are reasonably requested by the Sellers. The Sellers shall reimburse Purchaser for the amount of any
Pre-Closing
Taxes shown as due on any Tax Return filed pursuant to this
Section 7.1
within fifteen (15) days after payment by Purchaser or the Company and its Subsidiaries to the extent such
Taxes (A) are not reflected in the reserve for Tax Liability (rather than any reserve for deferred Taxes established to reflect timing differences between book and Tax income) shown on the face of the Closing Date Balance Sheet and
(B) have not been taken into account in the Final Adjustment Amount.
Section 7.2
Straddle Periods
. In the case of any Straddle Period, the amount of Taxes
attributable to a
Pre-Closing
Tax Period shall be deemed to be: (i) in the case of any Taxes that are imposed on a periodic (such as certain franchise Taxes, or ad valorem, real or personal property
Taxes), the amount of such Taxes for the entire Tax period multiplied by a fraction, the numerator of which is the number of calendar days in the Tax period ending on and including the Closing Date and the denominator of which is the number of
calendar days in the entire Tax period and (ii) in the case of any Tax not described in (i) above (such as Taxes based upon or related to income or receipts) the amount of such Taxes that would be payable if the relevant Tax period ended
on the Closing Date. Any credits relating to a Straddle Period shall be taken into account as though the relevant Tax period ended on the Closing Date. All determinations necessary to give effect to the foregoing allocations shall be made in a
manner consistent with prior practice of the Company and its Subsidiaries.
Section 7.3
Cooperation on Tax Matters
.
(a) Purchaser, the Company and the Sellers shall cooperate fully, as and to the extent reasonably requested by the other party, in connection
with the filing of Tax Returns pursuant to this Section and any audit, litigation or other Proceeding with respect to Taxes. Such cooperation shall include the retention and (upon the other partys request) the provision of records and
information which are reasonably relevant to any such audit, litigation or other Proceeding and making employees available on a mutually convenient basis to provide additional information and explanation of any material provided hereunder. The
Company and the Sellers agree (i) to retain all books and records with respect to Tax matters pertinent to the Business, the Company or its
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Subsidiaries relating to any
Pre-Closing
Tax Period until the expiration of the statute of limitations (and, to the extent notified by Purchaser or the
Sellers, any extensions thereof) of the respective taxable periods, and to abide by all record retention agreements entered into with any Taxing Authority, and (ii) to give the other party reasonable written notice prior to transferring,
destroying or discarding any such books and records and, if the other party so requests, Company or the Sellers, as the case may be, shall allow the other party to take possession of such books and records.
(b) Purchaser and the Sellers further agree, upon request, to use their best efforts to obtain any certificate or other document from any
governmental authority or any other Person as may be necessary to mitigate, reduce or eliminate any Tax that could be imposed (including, but not limited to, with respect to the Transactions).
Section 7.4
Refunds and Tax Benefits
. Any Tax refunds that are received by Purchaser or the
Company, and any amounts credited against Tax to which Purchaser or the Company become entitled, that relate to
Pre-Closing
Tax Periods shall be for the account of the Sellers, and Purchaser shall pay over to
the Sellers any such refund or the amount of any such credit within fifteen (15) days after receipt or entitlement thereto, net of any reasonable costs or Expenses incurred by Purchaser or the Company in securing such refund or credit in each
case to the extent the amount of such refund or credit was not taken into account in determining the Closing Date Net Working Capital Amount. In addition, to the extent that a claim for refund or a Proceeding results in a payment or credit against
Tax by a Taxing Authority to Purchaser or Surviving Company of any amount, Purchaser shall pay such amount to the Sellers within fifteen (15) days after receipt or entitlement thereto.
ARTICLE VIII
CONDITIONS
Section 8.1
Conditions to Each Partys Obligation to Close
. The respective obligations of the Company and the Sellers, on the one hand, and the Purchaser Entities, on the other hand, to effect the Transactions are subject
to the satisfaction or, to the extent permitted by applicable Law, waiver on or prior to the Closing Date of the following conditions:
(a)
Parent Shareholder Approvals
. The Parent Shareholder Approvals shall have been obtained.
(b)
Statutes and Injunctions
. No
(i) temporary restraining order or preliminary or permanent injunction or other Order by any federal or state court or other tribunal of competent jurisdiction preventing consummation of any of the Transactions or (ii) applicable Law
prohibiting consummation of any of the Transactions (
clauses (i)
and (
ii
) collectively, a
Restraint
) shall be in effect.
(c)
HSR Act
. The early termination or expiration of the waiting period required under the HSR Act shall have occurred.
(d)
Charter; Share Reclassification; Stock Exchange
. The Parent Charter shall have been filed and accepted with the Secretary of State
of the State of Tennessee and the outstanding shares of
Pre-Closing
Parent Common Stock shall have been reclassified as Parent Class A Common Stock, pursuant to the Parent Charter, and Parents
listing application with the NYSE shall have been amended such that the shares of Parent Class A Common Stock shall have been approved for listing on the NYSE; and Parent shall have satisfied any additional requirements of the NYSE with respect
to the Transactions and the issuance of the Parent Class B Common Stock and the Purchaser Units pursuant to the terms of this Agreement.
(e)
Pre-Closing
Transactions
. The
Pre-Closing
Transactions shall have been consummated prior to the Closing Date.
(f)
Lender Consent
. ABRH shall have obtained the consent of
the Lenders for the consummation of the Company Debt Assumption and the Transactions.
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Section 8.2
Conditions to the Purchaser
Entities Obligation to Close
. The respective obligations of each Purchaser Entity to effect the Transactions are subject to the satisfaction or, to the extent permitted by applicable Law, waiver on or prior to the Closing Date of the
following conditions:
(a)
Accuracy of Company and Seller Representations and Warranties
. (i) The representations and
warranties of the Company set forth in this Agreement (other than representations and warranties of the Company set forth in
Sections 2.1
,
2.2
,
2.3
and
2.20
) shall be true and correct in all respects (without giving
effect to any materiality or Company Material Adverse Effect qualifier therein), as of the date of this Agreement and as of the Closing Date as though made on or as of such date (or, in the case of representations and warranties that address matters
only as of a particular date, as of such date), except to the extent that breaches thereof, individually or in the aggregate, have not had, and would not reasonably be expected to have, a Company Material Adverse Effect; (ii) each of the
representations and warranties of the Company set forth in
Sections 2.1
,
2.3
and
2.20
and the representations and warranties of the Sellers set forth in
Article III
shall be true and correct in all respects, as of the
date of this Agreement and as of the Closing Date as though made on or as of such date (or in the case of representations and warranties that address matters only as of a particular date, as of such date); and (iii) each of the representations
and warranties of the Company set forth in
Section
2.2
shall be true and correct in all respects (other than de minimis deviations therefrom), as of the date of this Agreement and as of the Closing Date as though made on or
as of such date (or, in the case of representations and warranties that address matters only as of a particular date, as of such date).
(b)
Compliance with Company and Seller Covenants
. Each of the Company and the Sellers shall have performed or complied in all material
respects with all agreements and covenants required to be performed by it under this Agreement at or prior to the Closing Date.
(c)
BKAS Matters
. The BKAS Termination Agreement, entered into as of the date hereof, shall have remained in effect, without amendment or modification, through and as of the Effective Time.
(d)
FNF Waivers
. Parent and FNF shall have entered into a waiver agreement in substantially the form attached hereto as
Exhibit
D
(the
FNF Waiver Agreement
), pursuant to which FNF shall (i) waive all covenants and other provisions of the Tax Matters Agreement that would prohibit or in any way purport to restrict the consummation of the Transaction
in accordance with the terms of this Agreement, including any requirement to obtain any private letter ruling from the IRS or an Unqualified Tax Opinion (as defined in the Tax Matters Agreement) with respect to the Transactions, and (ii) waive,
on behalf of itself and the applicable indemnified parties in the Separation and Distribution Agreement or the Tax Matters Agreement, the right of FNF and any such applicable indemnified party to seek indemnification from or make claims against
Parent under the Separation and Distribution Agreement or the Tax Matters Agreement arising out of any Liability incurred or loss suffered by FNF or any such applicable indemnified party relating to, arising out of or resulting from the
Transactions.
(e)
Audited Financial Statements
. Purchaser shall have received from the Company the audited combined balance sheet
of the Business as of December 25, 2016 and December 27, 2015, and the related audited combined statement of earnings, comprehensive income, changes in equity, and cash flows for the fiscal years ended December 25, 2016 and
December 27, 2015, and the notes thereto (the
Audited Financial Statements
). The financial position and the results of operations and cash flows of the Business, the Company and its Subsidiaries as reflected in the Audited
Financial Statements as of, and for the fiscal period ended, December 25, 2016, shall not deviate in any material and adverse respect from the financial position and the results of operations and cash flows of the Business, the Company and its
Subsidiaries as of such date, and for the fiscal period then ended, as set forth in the unaudited Financial Statements as of, and for the fiscal period ended on, such date set forth in
Section
2.6 of the Company Disclosure
Schedule
.
(f)
Company Closing Certificate
. The Company shall have furnished Purchaser with a certificate dated as of the date
of the Closing Date signed on its behalf by the President of the Company to the effect that the conditions set forth in
clauses (a)
,
(b)
, and
(f)
above have been satisfied.
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(g)
No Company Material Adverse Effect
. Since the date of the Agreement, there shall not
have occurred a Company Material Adverse Effect.
(h)
Closing Deliveries
. The Company or Seller, as applicable, shall have
delivered, or caused to be delivered, the documents and instruments required by
Section
1.8(a)
.
Section 8.3
Conditions to the Companys Obligation to Close
. The
respective obligations of the Company to effect the Transactions are subject to the satisfaction or, to the extent permitted by applicable Law, waiver on or prior to the Closing Date of the following conditions:
(a) Accuracy of the Purchaser Entity Representations and Warranties. (i) The representations and warranties of each of the Purchaser
Entities (other than the representations and warranties of the Purchaser Entities set forth in
Sections 4.1
,
4.2
,
4.3
and
4.20
) shall be true and correct in all respects (without giving effect to any materiality or
Purchaser Material Adverse Effect qualifier therein), as of the date of this Agreement and as of the Closing Date as though made on or as of such date (or, in the case of representations and warranties that address matters only as of a particular
date, as of such date), except to the extent that breaches thereof, individually or in the aggregate, have not had, and would not reasonably be expected to have, a Purchaser Material Adverse Effect; (ii) the representations and warranties of
each of the Purchaser Entities set forth in
Sections 4.1
,
4.3
and
4.20
shall be true and correct in all respects, as of the date of this Agreement and of the Closing Date as though made on or as of such date (or, in the case of
representations and warranties that address matters only as of a particular date, as of such date); and (iii) each of the representations and warranties of the Purchaser Entities set forth in
Section
4.2
shall be true
and correct in all respects (other than de minimis deviations therefrom), as of the date of this Agreement and as of the Closing Date as though made on or as of such date (or, in the case of representations and warranties that address matters only
as of a particular date, as of such date).
(b)
The Purchaser Entity Covenants
. Each of the Purchaser Entities shall have performed
or complied in all material respects with all agreements and covenants required to be performed by it under this Agreement at or prior to the Closing Date.
(c)
The Purchaser Entity Closing Certificates
. Parent shall have furnished the Company with a certificate dated as of the date of the
Closing Date signed on its behalf by an executive officer to the effect that the conditions set forth in
clauses (a)
and
(b)
above have been satisfied.
(d)
No Purchaser Material Adverse Effect
. Since the date of the Agreement, there shall not have occurred a Purchaser Material Adverse
Effect.
(e)
Closing Deliveries
. The Purchaser Entities shall have delivered, or caused to be delivered, the documents and
instruments required by
Section
1.8(b)
.
Section 8.4
Frustration
of Closing Conditions
. None of the Purchaser Entities nor the Company nor any Seller may rely on the failure of any condition set forth in this
Article VIII
to be satisfied if such failure was principally caused by such partys
breach of any material provisions of this Agreement, such partys failure to act in good faith or such partys failure to perform fully its obligations under
Section
6.5
.
ARTICLE IX
TERMINATION
Section 9.1
Termination
. This Agreement may be terminated and the Transactions may be abandoned at any time prior to the Effective Time, whether before or (except as provided below) after obtaining the Parent
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Shareholder Approvals (with any termination by Purchaser also being an effective termination by Parent and Merger Sub):
(a) by mutual written consent of Purchaser and the Company;
(b) by either Purchaser or the Company, if:
(i) the Effective Time shall not have occurred on or prior to 5:00 p.m. New York City time on February 28, 2018 (the
Outside
Date
);
provided
,
however
, that the right to terminate this Agreement pursuant to this
Section
9.1(b)(i)
shall not be available to any party if its action or failure to act constitutes a material
breach or violation of any of its covenants, agreements or other obligations hereunder, and any such material breach or violation or failure has been the principal cause of or directly resulted in the failure of the Effective Time to occur on or
before the Outside Date;
(ii) any final,
non-appealable
Restraint shall be in effect;
provided
,
however
, that the right to terminate this Agreement pursuant to this
Section
9.1(b)(ii)
shall not be available to any party if its action or failure to act constitutes a material breach or violation
of any of its covenants, agreements or other obligations hereunder, and any such material breach or violation or failure has been the principal cause of, or directly resulted in, such Restraint; or
(iii) the Parent Shareholder Approvals shall not have been obtained upon a vote taken thereon at the Parent Shareholders Meeting duly convened
therefor (as such Parent Shareholders Meeting may be adjourned from time to time in accordance with the terms hereof);
(c) by Purchaser,
if:
(i) (A) the Company or the Sellers shall have breached any of their respective representations or warranties contained in this
Agreement or shall have failed to perform all of their respective obligations, covenants or agreements required to be performed under this Agreement, in either case, such that the conditions set forth in
Section
8.2(a)
or
8.2(b)
would not be satisfied; and (B) such breach or failure to perform is incurable or, if curable, is not cured by the earlier to occur of (x) the Outside Date and (y) the date that is thirty (30) days following the
Companys receipt of Purchasers written notice of such breach, which notice shall specify in reasonable detail the nature of such breach;
provided
,
however
, that the right to terminate this Agreement pursuant to this
Section
9.1(c)(i)
shall not be available to Purchaser if the Purchaser Entities shall have breached any of their respective representations or warranties contained in this Agreement or shall have failed to perform all of
their respective obligations, covenants or agreements required to be performed under this Agreement, in either case, such that the conditions set forth in
Section
8.3(a)
or
8.3(b)
would not be satisfied; or
(ii) prior to obtaining the Parent Shareholder Approvals, Parent (A) immediately prior to or concurrently with the termination of this
Agreement, and subject to complying with the terms of this Agreement, including
Section
6.3(c)
, enters into one or more Alternative Proposal Agreements with respect to a Superior Proposal and (B) immediately prior to
or concurrent with such termination pays to the Company or its designees any fees required to be paid pursuant to
Section
9.3
;
(d) by the Company, if
(i) (A)
any of the Purchaser Entities shall have breached any of their representations or warranties contained in this Agreement or shall have failed to perform all of their obligations, covenants or agreements required to be performed under this Agreement,
in either case, such that the conditions set forth in
Section
8.3(a)
or
8.3(b)
would not be satisfied; and (B) such breach or failure to perform is incurable or, if curable, is not cured by the earlier to occur
of (x) the Outside Date and (y) the date that is thirty (30) days following Purchasers receipt of the Companys written notice of such breach, which notice shall specify in reasonable detail the nature of such breach;
provided
,
however
, that the right to terminate this Agreement pursuant to this
Section
9.1(d)(i)
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shall not be available to the Company if it shall have breached any of its representations or warranties contained in this Agreement or shall have failed to perform all of its obligations,
covenants or agreements required to be performed under this Agreement, in either case, such that the conditions set forth in
Section
8.2(a)
or
8.2(b)
would not be satisfied; or
(ii) prior to the Effective Time, Parents board of directors or any committee thereof makes a Recommendation Withdrawal.
Section 9.2
Effect of Termination
. In the event of any termination of this Agreement as
provided in
Section
9.1
, the obligations of the parties shall terminate and there shall be no Liability on the part of any party with respect thereto, except for the confidentiality provisions of
Section
6.4
and the provisions of
Section
6.8
, this
Section
9.2
,
Section
9.3
and
Article
XI
, each of which shall
survive the termination of this Agreement and remain in full force and effect;
provided
,
however
, that none of the Purchaser Entities, Sellers or the Company shall be released from any liabilities or damages arising out of any breach
of any representation or warranty, covenant or agreement under this Agreement or fraud, willful misconduct or intentional misrepresentation, prior to such termination.
Section 9.3
Termination Fee
.
(a) If Purchaser terminates this Agreement pursuant to
Section
9.1(c)(ii)
or the Company terminates this Agreement
pursuant to
Section
9.1(d)(ii)
, Parent shall pay to the Company (or its designee) a termination fee of $4,000,000.00 (the
Termination Fee
).
(b) If (i) the Company terminates this Agreement pursuant to
Section
9.1(d)(i)
or Purchaser or the Company
terminates this Agreement pursuant to
Section
9.1(b)(iii)
; (ii) prior to the date of such termination (but after the date hereof) an Alternative Proposal is publicly announced or is otherwise communicated to Parents
board of directors; and (iii) within twelve (12) months after the date of such termination, Parent or any of its Subsidiaries enter into a definitive agreement with respect to or otherwise consummates any Alternative Proposal, then Parent
shall pay to the Company (or its designee) the Termination Fee no later than two (2) Business Days after the execution of such definitive agreement or consummation of such Alternative Proposal, as the case may be;
provided
, that solely
for purposes of this
Section
9.3(b)
, the term Alternative Proposal shall have the meaning ascribed thereto in
Section
11.12
, except that all references to twenty percent (20%) shall be changed to
fifty percent (50%).
(c) If the Company terminates this Agreement pursuant to
Section
9.1(d)(i)
or Purchaser
terminates this Agreement pursuant to
Section
9.1(c)(i)
, then the
non-terminating
party shall pay to the terminating party (or its designee) as reimbursement for any Expenses incurred
by or on behalf of the terminating party and any of their respective Affiliates, in an aggregate amount not to exceed $500,000 (
Expense Reimbursement
), no later than two (2) Business Days after the date of such termination.
(d) The parties agree and understand that in no event shall Parent be required to pay a Termination Fee pursuant to this
Section
9.3
on more than one occasion. Notwithstanding anything to the contrary in this Agreement, except as set forth in
Section
9.2
, (i) if the Company (or its designee) receives the Termination
Fee and/or Expense Reimbursement from Parent pursuant to this
Section
9.3
, such payment shall be the sole and exclusive remedy of the Company against Parent and its Subsidiaries and their respective former, current or
future officers, directors, partners, shareholders, managers, members, Affiliates and Representatives, and none of Parent, any of its Subsidiaries or any of their respective former, current or future officers, directors, partners, shareholders,
managers, members, Affiliates or Representatives shall have any further Liability or obligation relating to or arising out of the Transaction Agreements or the Transactions, (ii) if the Company (or its designee) receives any Expense
Reimbursement, and thereafter the Company (or its designee) is entitled to receive the Termination Fee under this
Section
9.3
, the amount of such Termination Fee shall be reduced by the aggregate amount of such Expense
Reimbursement, and (iii) if Purchaser (or its designee) receives any Expense
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Reimbursement from the Sellers pursuant to this
Section
9.3
, such payment shall be the sole and exclusive remedy of Purchaser against the Sellers and their respective
Subsidiaries and their respective former, current or future officers, directors, partners, shareholders, managers, members, Affiliates and Representatives, and none of the Sellers, any of their respective Subsidiaries or their respective former,
current or future officers, directors, partners, shareholders, managers, members, Affiliates and Representatives shall have any further Liability or obligation relating to or arising out of the Transaction Agreements or the Transactions. The parties
acknowledge that the agreements contained in this
Section
9.3
are an integral part of the Transactions, and that, without agreements, the parties would not enter into the Transaction Agreements, and that any amounts payable
pursuant to this
Section
9.3
do not constitute a penalty.
Section 9.4
Procedure for Termination
. Termination of this Agreement prior to the Effective
Time shall not require the approval of the Parent Shareholders. A terminating party shall provide written notice of termination to the other parties specifying the Section or Sections pursuant to which such party is terminating the Agreement. If
more than one provision in
Section
9.1
is available to a terminating party in connection with a termination, a terminating party may rely on any or all available provisions in
Section
9.1
for any
termination.
Section 9.5
Waiver
. At any time prior to the Effective Time, each party
hereto may (a) extend the time for the performance of any of the obligations or other acts of any other party hereto or (b) to the extent permitted by applicable Law waive compliance with any of the agreements of any other party or any
conditions to its own obligations;
provided
, that any such extension or waiver shall be binding upon a party only if such extension or waiver is set forth in a writing executed by such party.
ARTICLE X
INDEMNIFICATION
Section 10.1
Survival
. (i) Any obligation of a party to indemnify any other party (A) under
Section
10.2(a)(i)
or
Section
10.2(b)(i)
, respectively, in respect of any
breach of any representation or warranty of the Company set forth in
Article II
, any representation or warranty of the Sellers set forth in
Article III
or any representation or warranty of the Purchaser Entities set forth in
Article
IV
or (B) under
Section
10.2(a)(ii)
or
Section
10.2(b)(ii)
, respectively, in respect of any breach of any covenant or agreement required by its terms to be performed or complied with prior
to the Closing, shall survive the Closing until the date that is twelve (12) months following the Closing Date; and (ii) any obligation of the Sellers to indemnify the Purchaser Indemnitees pursuant to
Section
10.2(a)(iii)
or
Section
10.2(a)(iv)
shall survive the Closing until the date that is thirty (30) days following the expiration of the applicable statute of limitations. All of the
covenants contained in this Agreement that by their nature are required to be performed after the Closing shall survive the Closing until fully performed or fulfilled, unless and to the extent only that
non-compliance
with such covenants or agreements is waived in writing by the party entitled to such performance. Notwithstanding the preceding two sentences, any breach or inaccuracy of any covenant,
agreement, representation or warranty in respect of which indemnity may be sought under this Agreement, and the obligation of a party to indemnify any other party in respect thereof, shall survive the time at which it would otherwise terminate
pursuant to the preceding two sentences, if written notice in accordance with the requirements set forth in
Section
10.3
of the breach or inaccuracy thereof giving rise to such right of indemnity shall have been given to
the party against whom such indemnity may be sought prior to such time. The parties acknowledge and agree that with respect to any claim that any party may have against any other party that is permitted pursuant to the terms of this Agreement, the
survival periods set forth and agreed to in this
Section
10.1
shall govern when any such claim may be brought.
Section 10.2
Indemnification
.
(a) Subject to the provisions of this
Article X
, from and after the Closing, the Sellers shall, on a several basis (and not on a
joint and several basis) to the extent of each such Sellers Pro Rata Share, indemnify Parent,
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Purchaser and their respective Affiliates, directors, officers, employees, successors, permitted assigns, agents and representatives (collectively, the
Purchaser Indemnitees
)
against and agree to hold each of them harmless from any and all Losses incurred or suffered by any Purchaser Indemnitee arising out of or relating to:
(i) any breach of or inaccuracy in any representation or warranty of the Company set forth in
Article II
or of the Sellers set forth in
Article III
;
(ii) any breach of any covenant or agreement made or to be performed by the Sellers, the Company or any of its
Subsidiaries pursuant to this Agreement;
(iii) any and all Taxes (or the nonpayment thereof) of the Company or its Subsidiaries, or
otherwise related to the Business, for all
Pre-Closing
Tax Periods (including, as allocated, with respect to a Straddle Period, in accordance with
Section
7.2
) (
Pre-Closing
Taxes
); and
(iv) any amount for which Parent is responsible under the Tax Matters
Agreement or the Separation and Distribution Agreement arising as a result of or in connection with the transactions contemplated by this Agreement;
provided that (A) the Sellers shall not be liable for any claim for indemnification (x) pursuant to
Section
10.2(a)(i)
or
(ii)
unless and until the aggregate amount of Losses incurred by Purchaser Indemnitees which may be recovered from the Sellers under such subsections in the aggregate exceeds the Deductible, after which only the amount of such Losses
incurred which are in excess of the Deductible shall be recoverable hereunder and (y) pursuant to
Section
10.2
for any and all Taxes (or the nonpayment thereof) of the Company or its Subsidiaries, or otherwise related
to the Business, for any taxable period, or portion thereof, beginning after the Closing Date, and (B) in no event shall the Sellers aggregate Liability arising out of or relating to any claim for indemnification pursuant to
Sections
10.2(a)(i)
and
(ii)
exceed $19,900,000 (the
Seller Cap
).
(b) Subject to the provisions of this
Article X
, from and after the Closing, Purchaser shall indemnify the Sellers and their Affiliates (other than Parent, or its Subsidiaries, including the Company), directors, officers, employees, successors, permitted assigns, agents and
Representatives (collectively, the
Seller Indemnitees
) against and agrees to hold each of them harmless from any and all Losses incurred or suffered by any Seller Indemnitee arising out of or relating to:
(i) any breach of or inaccuracy in any representation or warranty of the Purchaser Entities set forth in
Article IV
; and
(ii) any breach of any covenant or agreement made or to be performed by Parent, Purchaser or any of their Subsidiaries pursuant to this
Agreement;
provided that (A) Purchaser shall not be liable for any claim for indemnification pursuant to
Section
10.2(b)
unless and until the aggregate amount of Losses incurred by Seller Indemnitees which may be recovered from Purchaser exceeds the Deductible, after which only the amount of such Losses incurred which are in excess of the Deductible shall be
recoverable hereunder, and (B) in no event shall Purchasers aggregate Liability arising out of or relating to
Section
10.2(b)
exceed $19,900,000 (the
Purchaser Cap
).
(c) For purposes of determining whether a breach has occurred and for computing the dollar amount of any claim for indemnification resulting
from a breach of any representation or warranty herein, all materiality, material adverse effect and similar qualifications shall be disregarded.
Section 10.3
Procedures
. Claims for indemnification under this Agreement shall be asserted
and resolved as follows:
(a) Any Purchaser Indemnitee or Seller Indemnitee claiming indemnification under this Agreement (an
Indemnified Party
) with respect to any claim asserted against the Indemnified Party by a third party (
Third
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Party Claim
) in respect of any matter that is subject to indemnification hereunder shall promptly notify in writing (such notice, a
Claim Notice
) the Sellers or
Purchaser, as applicable, (the
Indemnifying Party
or
Indemnifying Parties
) of the Third Party Claim within thirty (30) days after receipt by such Indemnified Party of written notice of the Third Party
Claim, which Claim Notice shall describe in reasonable detail the nature of the Third Party Claim, including the basis of the Indemnified Partys request for indemnification under this Agreement and the amount of the Losses arising or in good
faith estimated to arise therefrom (if available);
provided
, that, subject to
Section
10.1
, failure to timely provide such Claim Notice shall not affect the right of the Indemnified Partys indemnification
hereunder, except to the extent the Indemnifying Party is materially prejudiced by such delay or omission.
(b) The Indemnifying Party
shall have the right to participate in the defense of such Third Party Claim at any time and, subject to the limitations contained in this
Section
10.3(b)
, assume and control the defense thereof. If the Indemnifying Party
notifies the Indemnified Party that the Indemnifying Party elects to assume and control the defense of the Third Party Claim at any time and the Indemnifying Party acknowledges in writing that such Third Party Claim is an indemnifiable Loss under
this
Article X
, then the Indemnifying Party shall have the right to defend such Third Party Claim with counsel selected by the Indemnifying Party in all appropriate Proceedings, to a final conclusion or settlement at the discretion of the
Indemnifying Party in accordance with this
Section
10.3(b)
. The Indemnifying Party shall have full control of such defense and Proceedings, including any compromise or settlement thereof; provided, however, that
(i) the Indemnifying Party shall not be entitled to assume or control such defense and Proceedings if such Third Party Claim seeks equitable or other
non-monetary
relief (including any sanction or
restriction upon the conduct or operation of any business of the Indemnified Party) or if the Third Party Claim alleges conduct that would constitute criminal activity, the Third Party Claim relates to Taxes, or if the resolution of such Third Party
Claim in a manner adverse to the Indemnified Party could result in Losses to the Indemnified Party in excess of the amount claimed or expected to be received from the Indemnifying Party, and (ii) the Indemnifying Party shall not enter into any
settlement agreement without the written consent of the Indemnified Party (which consent shall not be unreasonably withheld, conditioned or delayed). Notwithstanding the foregoing, such consent shall not be required if (i) the settlement
agreement contains a complete and unconditional general release by the third party asserting the claim to all Indemnified Parties affected by the claim and (ii) the settlement agreement does not contain any admission by, or sanction or
restriction upon the conduct or operation of any business by, the Indemnified Party or its Affiliates, including any injunction or other equitable relief against the Indemnified Party or its Affiliates. The Indemnified Party may participate in, but
not control, any defense or settlement of any Third Party Claim controlled by the Indemnifying Party pursuant to this
Section
10.3(b)
, and the Indemnified Party shall bear its own costs and expenses with respect to such
participation unless (i) the employment of separate legal counsel has been specifically authorized in writing by the Indemnifying Party, (ii) there exists a material conflict of interest, or (iii) the Indemnifying Party fails to
pursue the defense of such Third Party Claim actively and diligently, in the case of
clause (ii)
or
(iii)
, whereupon the Indemnified Party shall be entitled to retain the defense of such Third Party Claim.
(c) If the Indemnifying Party does not notify the Indemnified Party that the Indemnifying Party has elected to defend the Indemnified Party
pursuant to
Section
10.3(b)
within ten (10) Business Days after receipt of any Claim Notice or is not otherwise entitled to defend such Third Party Claim, then subject to
Section
10.3(b)
the
Indemnified Party shall defend, and be reimbursed for its reasonable cost and expense (but only if the Indemnified Party is actually entitled to indemnification hereunder) in regard to the Third Party Claim with counsel selected by the Indemnified
Party, in all appropriate Proceedings, which Proceedings shall be prosecuted diligently by the Indemnified Party. In such circumstances, the Indemnified Party shall defend any such Third Party Claim in good faith and have full control of such
defense and Proceedings;
provided
, however, that the Indemnified Party may not enter into any compromise or settlement of such Third Party Claim if indemnification is to be sought hereunder, without the Indemnifying Partys consent
(which consent shall not be unreasonably withheld, conditioned or delayed). The Indemnifying Party may participate in, but not control, any defense or settlement controlled by the Indemnified Party pursuant to this
Section
10.3(c)
, and the Indemnifying Party shall bear its own costs and expenses with respect to such participation.
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(d) If requested by the Indemnifying Party, the Indemnified Party agrees, at the sole cost and
expense of the Indemnifying Party, to reasonably cooperate with the Indemnifying Party and its counsel in contesting any Third Party Claim which the Indemnifying Party elects to contest, including providing access to documents, records and
information. In addition, the Indemnified Party will make its personnel available at no cost to the Indemnifying Party for conferences, discovery, Proceedings, hearings, trials or appeals as may be reasonably required by the Indemnifying Party. If
the Indemnifying Party has assumed the defense of a Third Party Claim, the Indemnified Party also agrees to reasonably cooperate with the Indemnifying Party and its counsel in the making of any related counterclaim against the Person asserting the
Third Party Claim or any cross complaint against any Person and executing powers of attorney to the extent necessary unless doing so would materially impair the conduct of the business conducted by the Indemnified Party.
(e) A claim for indemnification for any matter not involving a Third Party Claim shall be asserted by notice to the Indemnifying Party, which
notice shall describe in reasonable detail the nature of the claim, the basis of the Indemnified Partys request for indemnification under this Agreement and the amount of the Losses arising or in good faith estimated to arise therefrom (to the
extent reasonably estimable). Subject to
Section
10.1
, failure to timely provide such notice shall not affect the right of the Indemnified Partys indemnification hereunder, except to the extent the Indemnifying Party
is materially prejudiced by such delay or omission.
Section 10.4
Calculation of Losses
.
Notwithstanding anything to the contrary herein:
(a) no Purchaser Indemnitee or Seller Indemnitee shall be entitled to indemnification to
the extent a Liability or reserve relating to the matter giving rise to such Losses has been included in the final determination of the Final Adjustment Amount;
(b) each Indemnified Party shall, and shall cause their respective Affiliates to, take reasonably prudent steps consistent with customary
business practices to mitigate any Losses arising out of or relating to this Agreement or the transactions contemplated hereby after becoming actually aware of the incurrence of such Losses;
(c) the amount of any Loss for which an Indemnified Party claims indemnification under this Agreement: (i) shall be reduced by any
insurance proceeds actually received from third party insurers with respect to such Loss; (ii) shall be reduced by any reduction in Taxes actually paid (or any increase in any Tax refund actually received) by the Indemnified Party as a result
of the incurrence or payment of such Loss in the taxable year of the incurrence or payment of such Loss, or in any prior taxable year; and (iii) shall be reduced by indemnification or reimbursement payments actually received from third parties
with respect to such Loss, net, in the case of each of clauses (i) and (ii) above, of any reasonable costs associated with the recovery of such amounts. In the event any Indemnified Party actually recovers any insurance proceeds, indemnity
payments or any third-party recoveries in respect of any Losses, in each case at any time subsequent to any indemnification payment pursuant to this
Article X
, such Indemnified Party shall thereafter promptly reimburse the Indemnifying Party
for any indemnity payment made up to the amount actually received by the Indemnified Party (net of any costs, fees or expenses incurred by the Indemnified Party in collecting such amount); and
(d) except with respect to those actually awarded and paid on account of a Third Party Claim, and identified as such in connection with such
award, no party shall be liable for punitive, exemplary, speculative or remote damages, or any damages based on any multiple of earnings or revenue or loss of profits, whether based on contract, tort, strict liability, other Law or otherwise and
whether or not arising from any other partys sole, joint or concurrent negligence, strict liability or other fault.
Section 10.5
Payment of Losses
. In the event any Purchaser Indemnitee or Seller Indemnitee is entitled to indemnification hereunder, the applicable Indemnifying Party or Indemnifying Parties shall pay or cause to be paid to the
Purchaser Indemnitee or Seller Indemnitee, as applicable, an amount in Purchaser Units and corresponding shares of Parent Class B Common Stock equal to the indemnifiable Losses, subject to the limitations set forth in
Section
10.2
;
provided
,
that
, in the case of the Sellers, each Seller shall pay only its Pro
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Rata Share. The date of final determination of Losses shall be the date on which such Losses are agreed by the applicable Indemnifying Party, or the date of a final, nonappealable order of a
court of competent jurisdiction or other arbitrator or arbitral body. The number of Purchaser Units and shares of Parent Class B Common Stock to be paid in connection with the indemnification hereunder shall be equal to the amount of the
applicable Losses divided by the Parent Class A Per Share Price (rounded down to the nearest whole share). For purposes of this Agreement, the term
Parent Class
A Per Share Price
shall mean the average of
the volume weighted averages of the trading prices of Parent Class A Common Stock on the New York Stock Exchange (as reported by Bloomberg L.P. or, if not reported therein, in another authoritative source mutually selected by the parties) on
each of the ten (10) consecutive trading days ending on (and including) the trading day that is two (2) trading days prior to the date of the final determination of the Losses. If any Seller does not comply with its obligations pursuant to
the foregoing within such five (5) Business Day period, Purchaser shall be entitled to, without further action of any party, irrevocably cause the transfer of an amount of Purchaser Units held of record by such Seller to Parent that is equal to
such Sellers Pro Rata Share of the amount of such Losses incurred pursuant to
Section
10.2(a)
, divided by the Parent Class A Per Share Price (rounded down to the nearest whole share), and Purchaser shall
thereafter reflect such transfer on its books and records in accordance with the Restated Purchaser LLC Agreement. Upon delivery of a Claim Notice or other notice of indemnification pursuant to
Section
10.3
by a Purchaser
Indemnitee, Purchaser shall be entitled to place a stop transfer order with respect to, and until final determination of such indemnification claim shall not permit the transfer of, an amount of Purchaser Units (calculated in accordance with the
preceding sentence) held of record by the applicable Seller or Sellers that would be sufficient to satisfy the indemnification obligation of such Seller or Sellers as set forth in such Claim Notice or other notice of indemnification, assuming a
final determination of indemnification in favor of the Purchaser Indemnitee in the amount of Losses set forth in such Claim Notice or other notice of indemnification. If any Purchaser Units are transferred to Parent pursuant to this paragraph, in
accordance with the Restated Purchaser LLC Agreement, Parent shall cancel an equal number of shares of Parent Class B Common Stock, with such cancellations allocated among the applicable Seller in equal number to the number of Purchaser Units
transferred to Parent from such Seller.
Section 10.6
Treatment of Indemnification
Payments
. Any payment made pursuant to the indemnification obligations arising under this
Article X
shall be treated as an adjustment to the Merger Consideration to the extent allowable under applicable Law, including for Tax purposes.
Section 10.7
Exclusive Remedy
. Notwithstanding anything to the contrary in this
Agreement, except (i) with respect to the matters covered by
Section
1.11
and
Section
9.3
, (ii) in the case where a party seeks to obtain specific performance pursuant to
Section
11.10(c)
or (iii) for claims of fraud, willful misconduct or intentional misrepresentation, the parties hereby agree that following the Closing, the sole and exclusive remedy of a party for any breach or
inaccuracy of any representation, warranty, covenant or agreement contained in this Agreement shall be the applicable indemnification rights set forth in this
Article X
.
ARTICLE XI
GENERAL PROVISIONS
Section 11.1
Non-Survival
of Representations, Warranties, Covenants and Agreements
. Except as expressly set forth in
Article X
, none of the representations, warranties, covenants
and other agreements in this Agreement or in any instrument delivered pursuant to this Agreement, including any rights arising out of any breach of such representations, warranties, covenants and other agreements, shall survive the Effective Time,
except for those covenants and agreements contained in this
Article XI
and otherwise contained herein and therein that by their terms apply or are to be performed in whole or in part after the Effective Time and this
Article
XI
.
Section 11.2
Notices
. All notices and other
communications hereunder shall be in writing and shall be deemed duly given (a) on the date of delivery if delivered personally, or by facsimile, upon confirmation of
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receipt, or (b) on the first (1st) Business Day following the date of dispatch if delivered by a recognized
next-day
courier service. All notices
hereunder shall be delivered as set forth below, or pursuant to such other instructions as may be designated in writing by the party to receive such notice:
If to any Purchaser Entity, to:
J. Alexanders Holdings, Inc.
3401 West End Avenue, Suite 260
P.O. Box 24300
Nashville,
Tennessee 37202
Attention: Chief Executive Officer
Facsimile: (615)
269-1939
with a copy to (which shall not constitute notice):
Bass, Berry & Sims PLC
150 Third Avenue South, Suite 2800
Nashville, Tennessee 37201
Attention: F. Mitchell Walker, Jr.
Facsimile No.: (615)
742-2775
If to the Company or the Sellers, to:
c/o Fidelity National Financial Ventures, LLC
1701 Village Center Circle
Las
Vegas, NV 89134
Attention: General Counsel
Facsimile No.: (702)
243-3251
with a copy to (which shall not constitute notice):
Weil, Gotshal & Manges LLP
767 Fifth Avenue
New York, New
York 10153
Attention: Michael J. Aiello and Sachin Kohli
Facsimile No.: (212)
310-8007
Section 11.3
Interpretation; Construction
.
(a) When a reference is made in this Agreement to a Section, clause, Exhibit, Annex or Schedule, such reference shall be to a Section or
clause of or Exhibit, Annex or Schedule to this Agreement unless otherwise indicated. The table of contents and headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of
this Agreement. The phrases the date of this Agreement, the date hereof and terms of similar import, shall be deemed to refer to the date set forth on the first page of this Agreement. Whenever the content of this Agreement
permits, the masculine gender shall include the feminine and neuter genders, and a reference to singular or plural shall be interchangeable with the other.
(b) References to any Person include the successors and permitted assigns of that Person. References to any statute are to that statute, as
amended from time to time, and to the rules and regulations promulgated thereunder. References to $ and dollars are to the currency of the United States. References from or through any date mean, unless otherwise specified,
from and including or through and including, respectively. The words hereby, herein, hereof, hereunder and words of similar import refer to this Agreement as a whole (including any Schedules delivered
herewith) and not merely to the specific section, paragraph or clause in which such word appears. Whenever the words include, or includes or including are used in this Agreement, they shall be deemed to be
followed by the words without limitation.
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(c) The parties have participated jointly in negotiating and drafting this Agreement. In the
event that an ambiguity or a question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the parties, and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the
authorship of any provision of this Agreement.
(d) Any references to an agreement or organizational document herein shall mean such
agreement or organizational document, as may be amended, modified and/or supplemented (and/or as any provision thereunder may be waived) from time to time in accordance with its terms.
(e) No summary of this Agreement or any Exhibit attached hereto or Schedule delivered herewith prepared by or on behalf of any party shall
affect the meaning or interpretation of this Agreement or any such Exhibit or Schedule.
Section 11.4
Counterparts; Effectiveness
. This Agreement may be executed in any number of
counterparts, including by facsimile, .PDF, or other similar electronic transmission, each of which shall be deemed to be an original but all of which shall constitute one and the same instrument. This Agreement shall become effective when each
party has received counterparts thereof signed and delivered (by facsimile, electronic transmission or otherwise) by all of the other parties.
Section 11.5
Entire Agreement; No Third-Party Beneficiaries
.
(a) This Agreement, the Company Disclosure Schedule, the Purchaser Disclosure Schedule, the Exhibits, Annexes and other Schedules attached
hereto, the other Transaction Agreements collectively constitute the entire agreement, and supersede all prior agreements, understandings, representations and warranties, both written and oral, among the parties with respect to the subject matter
hereof and thereof. Each party hereto agrees that, except for the representations and warranties contained in such Transaction Agreements, none of the Purchaser Entities, the Company or the Sellers makes any other representations or warranties, and
each hereby disclaims any other representations or warranties, express or implied, or as to the accuracy or completeness of any other information made by, or made available by, itself or any of its Representatives, with respect to, or in connection
with, the negotiation, execution or delivery of the Transaction Agreements or the Transactions, notwithstanding the delivery or disclosure to the other or the others Representatives of any documentation or other information with respect to any
one or more of the foregoing.
(b) This Agreement shall be binding upon and inure solely to the benefit of each party.
(c) The representations and warranties in this Agreement are the product of negotiations among the parties and are for the sole benefit of the
parties. Any inaccuracies in such representations and warranties are subject to waiver by the parties in accordance with
Section
11.9
without notice or Liability to any other Person. In some instances, the representations
and warranties in this Agreement may represent an allocation among the parties of risks associated with particular matters regardless of the Knowledge of any of the parties. Consequently, Persons other than the parties may not rely upon the
representations and warranties in this Agreement as characterizations of actual facts or circumstances as of the date of this Agreement or as of any other date.
Section 11.6
Severability
. If any term or other provision of this Agreement is invalid,
illegal or incapable of being enforced by any Law or public policy, all other terms and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the Transactions are not affected
in any manner materially adverse to any party. Notwithstanding the foregoing, upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, 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 in order that the Transactions are consummated as originally contemplated to the greatest extent possible.
Section 11.7
Assignment
. Neither this Agreement nor any of the rights, interests or
obligations hereunder shall be assigned by any of the parties, in whole or in part (whether by operation of law or otherwise), without the
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prior written consent of the other parties, and any attempt to make any such assignment without such consent shall be null and void;
provided
, however, that Parent, Purchaser and Merger
Sub are expressly permitted to assign their rights under this Agreement to any Affiliate (including by way of a transfer of shares of capital stock of Purchaser or Merger Sub), and any such Person shall be entitled to assume Parents and/or
Merger Subs obligations under this Agreement;
provided
, that no such assignment and assumption shall release Parent, Purchaser and/or Merger Sub from any of its obligations under this Agreement to the extent not performed. This
Agreement shall be binding upon, inure to the benefit of and be enforceable by the parties and their respective successors and permitted assigns.
Section 11.8
Modification or Amendment
. Subject to the provisions of applicable Laws, at any
time prior to the Effective Time, the parties hereto may modify or amend this Agreement, by written agreement executed and delivered by duly authorized officers of the respective parties.
Section 11.9
Extension; Waiver
. The conditions to each of the parties obligations to
consummate the Transactions are for the sole benefit of such party and may be waived by such party in whole or in part to the extent permitted by applicable Laws. At any time prior to the Effective Time, the parties may, to the extent permitted by
applicable Law, (a) extend the time for the performance of any of the obligations or other acts of the other parties, (b) waive any inaccuracies in the representations and warranties contained herein or in any document delivered pursuant
hereto and (c) waive compliance with any of the agreements or conditions contained herein. Any agreement on the part of a party to any such extension or waiver shall be valid only if set forth in a written instrument signed on behalf of such
party. The failure of any party to this Agreement to assert any of its rights under this Agreement or otherwise shall not constitute a waiver of such rights, nor shall any single or partial exercise by any party to this Agreement of any of its
rights under this Agreement preclude any other or further exercise of such rights or any other rights under this Agreement.
Section 11.10
Governing Law and Venue; Waiver of Jury Trial; Specific Performance
.
(a) This Agreement (and all
claims, controversies and causes of action relating thereto or arising therefrom or in connection therewith, whether in contract, tort or otherwise) shall be deemed to be made in and in all respects shall be interpreted, construed and governed by
and enforced in accordance with the Laws of the State of Tennessee without regard to the conflicts of laws rules thereof.
(b) EACH PARTY
ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE EACH SUCH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT SUCH PARTY MAY HAVE TO A
TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS. EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (i) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (ii) EACH PARTY UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (iii) EACH PARTY MAKES
THIS WAIVER VOLUNTARILY AND (iv) EACH PARTY HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS
SECTION 11.10
.
(c) The parties acknowledge and agree that irreparable harm would occur and that the parties would not have any adequate remedy at law
(i) for any actual or threatened breach of the provisions of this Agreement, or (ii) in the event that any of the provisions of this Agreement are not performed in accordance with their specific terms. It is accordingly agreed that, except
where this Agreement is validly terminated in accordance with
Section
9.1
, the parties shall be entitled to an injunction or injunctions, specific performance or other equitable relief to prevent breaches or threatened
breaches of this Agreement and to specifically enforce the terms and
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provisions of this Agreement and any other agreement or instrument executed in connection herewith. Each of the parties hereby agrees (i) that it shall not oppose the granting of such relief
by reason of there being an adequate remedy at law, (ii) that it hereby irrevocably waives any requirement for the security or posting of any bond in connection with such relief, (iii) that such relief may be granted without the
requirement that the party seeking such relief offer proof of actual damages and (iv) that the prevailing party in any such action or Proceeding shall be entitled to reimbursement of all costs and expenses associated with seeking such relief,
including all attorneys fees. The parties hereby further acknowledge and agree that such relief shall include the right of the Company to cause the Purchaser Entities to consummate the Transactions, in each case, if each of the conditions set
forth in
Section
8.1
and
Section
8.2
have been satisfied or waived (other than conditions which by their nature cannot be satisfied until Closing, but subject to the satisfaction or waiver of those
conditions at Closing). The parties further agree that (x) by seeking the remedies provided for in this
Section
11.10(c)
, a party shall not in any respect waive its right to seek any other form of relief, at law or in
equity, that may be available to a party under this Agreement, including monetary damages in the event that this Agreement has been terminated or in the event that the remedies provided for in this
Section
11.10(c)
are not
available or otherwise are not granted and (y) nothing contained in this
Section
11.10(c)
shall require any party to institute any Proceeding for (or limit any partys right to institute any Proceeding for)
specific performance under this
Section
11.10(c)
before exercising any termination right under
Section
9.1
(and pursuing damages after such termination), nor shall the commencement of any action
pursuant to this
Section
11.10(c)
or anything contained in this
Section
11.10(c)
restrict or limit any partys right to terminate this Agreement in accordance with the terms of
Section
9.1
or pursue any other remedies under this Agreement that may be available then or thereafter; provided, however, that except as otherwise expressly provided in clause (iv) of this
Section
11.10(c)
, in no event shall any party be entitled to monetary damages in the event of an Order of specific performance to close the Transactions,
provided
that such closing occurs.
(d) Each of the parties hereto (i) irrevocably consents to the service of the summons and complaint and any other process in any action
or Proceeding relating to the Transactions, on behalf of itself or its property, in accordance with
Section
11.2
or in such other manner as may be permitted by Law, of copies of such process to such party, and nothing in
this
Section
11.10(d)
shall affect the right of any party to serve legal process in any other manner permitted by Law, (ii) irrevocably and unconditionally consents and submits itself and its property in any action or
Proceeding to the exclusive general jurisdiction of the courts of the State of Tennessee or, if unavailable, the federal court in the State of Tennessee, in each case sitting in the City of Nashville in the State of Tennessee in the event any
dispute arises out of this Agreement or the Transactions, or for recognition and enforcement of any judgment in respect thereof, (iii) agrees that it shall not attempt to deny or defeat such personal jurisdiction by motion or other request for
leave from any such court, (iv) agrees that any actions or Proceedings arising in connection with this Agreement or the Transactions shall be brought, tried and determined only in the Business Court, or if the Business Court is no longer in
existence, the Chancery Court, for the 20th Judicial District, at Nashville, or, if unavailable, the federal court in the State of Tennessee, in each case sitting in Davidson County in the State of Tennessee, (v) waives any objection that it
may now or hereafter have to the venue of any such action or Proceeding in any such court or that such action or Proceeding was brought in an inconvenient court and agrees not to plead or claim the same and (vi) agrees that it shall not bring
any action relating to this Agreement or the Transactions in any court other than the aforesaid courts. Each of the Purchaser Entities and the Company agrees that a final judgment in any action or Proceeding in such court as provided above shall be
conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by Law.
Section 11.11
Transfer Taxes
. All transfer, documentary, sales, use, stamp, registration and other such Taxes and fees (including penalties and interest) (collectively,
Transfer Taxes
) incurred in connection
with the Transactions shall be borne and paid
one-half
(1/2) by the Purchaser Entities and
one-half
(1/2) by the Sellers, on a several basis, when due, and the party
required by applicable Law shall file all necessary Tax Returns and other documentation with respect to such Transfer Taxes.
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Section 11.12
Definitions
. As used in this
Agreement, the following terms and those set forth in the Index of Defined Terms, when used in this Agreement, and the Exhibits, Schedules, and other documents delivered in connection herewith, shall have the meanings specified in this
Section
11.12
:
ABRH
means ABRH, LLC.
Affiliate
of any Person means another Person that directly or indirectly, through one or more intermediaries, controls, is
controlled by, or is under common control with, such first Person, and
control
has the meaning specified in Rule 405 under the Securities Act.
Agreement
has the meaning set forth in the Preamble.
Alternative Proposal
means any bona fide inquiry, proposal or offer from any Person or Group other than the Sellers or any
of their Affiliates for, in one transaction or a series of related transactions, (A) a merger, reorganization, consolidation, share exchange, business combination, recapitalization, liquidation, dissolution or similar transaction involving an
acquisition of Parent or Purchaser, (B) the acquisition in any manner, directly or indirectly, of twenty percent (20%) or more of the equity securities (or securities convertible into twenty percent (20%) or more of the equity securities) or
assets (including capital stock of any Subsidiaries of Parent) of Parent or any of its Subsidiaries representing twenty percent (20%) or more of the consolidated assets of Parent (based on the fair market value thereof, as determined in good faith
by Parents board of directors) or of the consolidated revenues, net income or operating cash flow of Parent and its Subsidiaries, (C) any tender offer or exchange offer that results in or, if consummated, would result in any Person or
Group, directly or indirectly, beneficially owning twenty percent (20%) or more of the equity securities (or securities convertible into twenty percent (20%) or more of the equity securities) of Parent or Purchaser, or (D) any combination of
the foregoing, in the case of each of clauses (A) through (D), other than the Transactions.
Alternative Proposal
Agreement
has the meaning set forth in
Section
6.3(c)
.
Articles of Merger
has the
meaning set forth in
Section
1.4
.
Audited Financial Statements
has the meaning set forth in
Section
8.2(f)
.
Bankruptcy and Equity Exception
has the meaning set forth in
Section
2.3(a)
.
BKAS
means Black Knight Advisory Services, LLC.
BKAS Termination Agreement
means the agreement terminating that certain Management Consulting Agreement, by and between
BKAS and Purchaser, dated as of September 28, 2015, in exchange for a termination fee to be paid by Purchaser to BKAS.
Business
means the business of operating the 99 Restaurants chain of restaurants in the United States, including those
listed on
Section
11.12(a) of the Company Disclosure Schedule
(each, a
Restaurant
, and collectively, the
Restaurants
).
Business Day
means a day except a Saturday, a Sunday or other day on which the SEC or commercial banks in the City of New
York are authorized or required by Law to be closed.
Business Employee
means (i) all Restaurant employees
employed by FNH or its Subsidiaries immediately prior to the Closing; (ii) each employee (other than a Restaurant employee) of FNH or its Subsidiaries whose employment duties immediately prior to the Closing are primarily dedicated to the
performance of services (including administrative or back-office support services) for the Business and only to the extent that such employees are set forth on
Section
11.12(b) of the Company Disclosure Schedule
as of the
date of this Agreement (with such list to account for any terminations after the date of this Agreement and before the Closing Date in accordance with
Section
5.1(b)(vii)
); and (iii) any employees hired by FNH or any
of its Subsidiaries after the date of this Agreement and before the Closing Date in accordance with
Section
5.1(b)(vii)
.
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Business Records
means all files, documents, instruments, papers, books,
reports, records, tapes, microfilms, photographs, letters, advertising and promotional materials, marketing information, recipes, menus, studies, pricing information, customer and supplier data, ledgers, journals, technical documentation (design
specifications, building and construction plans, architectural and engineering plans, surveys, engineering or property condition reports, zoning reports or letters, environmental reports, title insurance policies, functional requirements, operating
instructions, logic manuals, flow charts, etc.), user documentation (installation guides, user manuals, release notes, working papers, etc.), and other similar materials in each case related primarily to the Business, but limited, in the case of any
of the foregoing that are not exclusively related to the Business, solely to the portion thereof related to the Business.
Claim
Notice
has the meaning set forth in
Section
10.3(a)
.
Closing
has the meaning set
forth in
Section
1.3
.
Closing Date
has the meaning set forth in
Section
1.3
.
Closing Date Balance Sheet
has the meaning set forth in
Section
1.11(a)(i)
.
Closing Date Net Working Capital Amount
has the meaning set forth in
Section
1.11(a)(i)
.
Closing Statement
has the meaning set forth in
Section
1.11(a)(i)
.
Code
means the Internal Revenue Code of 1986, as amended.
Collective Bargaining Agreement
has the meaning set forth in
Section
2.9(a)
.
Company
has the meaning set forth in the Preamble.
Company Assets
has the meaning set forth in
Section
2.18(e)
.
Company Benefit Plan
has the meaning set forth in
Section
2.15(a)
.
Company Certificate
has the meaning set forth in
Section
2.1(a)
.
Company Debt Assumption
has the meaning set forth in
Section
1.1
.
Company Disclosure Schedule
has the meaning set forth in
Article II
.
Company LLC Agreement
has the meaning set forth in
Section
2.1(a)
.
Company Material Adverse Effect
means, (1) with respect to any Seller, any event, change, effect, development or
occurrence that, individually or in the aggregate, prevents or materially impedes or delays, or is reasonably likely to prevent or materially impede or delay, the consummation by such Seller of any of the Transactions on a timely basis or the
performance by such Seller of its covenants and obligations hereunder and, (2) with respect to the Business, the Company or any of its Subsidiaries, any event, change, effect, development or occurrence that, individually or in the aggregate,
(a) has or would be reasonably expected to have a material adverse effect on the Business, results of operations or financial condition of the Company and its Subsidiaries, taken as a whole, or (b) prevents or materially impedes or delays,
or is reasonably likely to prevent or materially impede or delay, the consummation by the Company of any of the Transactions on a timely basis or the performance by the Company of its covenants and obligations under any of the Transaction
Agreements;
provided
,
however
, that (subject to the next proviso) no event, change, effect, development or occurrence, shall be deemed (individually or in the aggregate) to constitute, nor shall any of the foregoing be taken into
account in determining whether there has been, a Company Material Adverse Effect as described in
clause (2)(a)
or
(b)
of
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this definition, to the extent that such event, change, effect, development or occurrence results from, arises out of, or relates to: (i) any general United States or global economic
conditions, (ii) any conditions generally affecting the restaurant industry or the upscale casual dining segment of the restaurant industry, (iii) any regulatory, legislative or political conditions or securities, credit, financial, debt
or other capital markets conditions, or the economy in each case in the United States or any foreign jurisdiction, (iv) any failure, in and of itself, by the Business to meet any internal or published projections, forecasts, estimates or
predictions of the Company or FNH, or their Subsidiaries, in respect of revenues, earnings or other financial or operating metrics for any period (it being understood that the foregoing shall not preclude any Purchaser Entity from asserting that the
facts or occurrences giving rise to or contributing to such failure that are not otherwise excluded from the definition of Company Material Adverse Effect should be deemed to constitute, or be taken into account in determining whether there has
been, or would reasonably be expected to be, a Company Material Adverse Effect), (v) the public announcement of the Transaction Agreements or the Transactions or the identity of, or any facts or circumstances relating to, Parent or any of its
Subsidiaries, including the impact of any of the foregoing on the relationships, contractual or otherwise, of the Company or any of its Subsidiaries with customers, suppliers, officers or employees, (vi) any adoption, implementation,
promulgation, repeal, modification, amendment, reinterpretation, change or proposal of any rule, regulation, ordinance, Order, protocol or any other Law of or by any Governmental Entity, (vii) any change in applicable Law, regulation or GAAP
(or authoritative interpretations thereof), (viii) any geopolitical conditions, the outbreak or escalation of hostilities, any acts of war, sabotage or terrorism, or any escalation or worsening of any such acts of war, sabotage or terrorism
threatened or underway as of the date of this Agreement, (ix) any taking of any action at the written request of any Purchaser Entity, (x) any reduction in the credit rating of the Company or any of its Subsidiaries to the extent
attributable to the expected consummation of the Transactions (it being understood and agreed that the foregoing shall not preclude any Purchaser Entity from asserting that the facts or occurrences giving rise to or contributing to such change that
are not otherwise excluded from the definition of Company Material Adverse Effect should be deemed to constitute, or be taken into account in determining whether there has been, or would reasonably be expected to be, a Company Material Adverse
Effect) or (xi) any hurricane, earthquake, flood or other natural disasters, acts of God or any change resulting from weather conditions;
provided
,
however
, that with respect to
clauses (i)
,
(ii)
,
(iii)
,
(vi)
,
(vii)
,
(viii)
or
(xi)
, any such event, change, effect, development or occurrence shall be taken into account if it is disproportionately adverse to the Company and its Subsidiaries, taken as a whole, when compared
to other, similarly-situated Persons operating in the geographies and industry in which the Company and its Subsidiaries operate.
Company Material Contract
has the meaning set forth in
Section
2.16(a)
.
Company Membership Interest
means the outstanding membership interest of the Company.
Company Proprietary Software
has the meaning set forth in
Section
2.17(d)
.
Competing Proposal
shall mean, other than the Transactions, any proposal or offer from any Person or Group other than
Parent, Purchaser or any of their Subsidiaries for or relating to, in one transaction or a series of related transactions, (A) a merger, reorganization, consolidation, share exchange, business combination, recapitalization, liquidation,
dissolution or similar transaction involving an acquisition of the Business, the Company or any of its Subsidiaries; (B) any sale, assignment, license or other transfer of assets involving the Business, the Company or any of its Subsidiaries;
(C) the acquisition in any manner, directly or indirectly, of twenty percent (20%) or more of the equity securities (or securities convertible into twenty percent (20%) or more of the equity securities) or assets (including capital stock of any
Subsidiaries of the Company) of the Company or any of its Subsidiaries representing twenty percent (20%) or more of the consolidated assets of the Business (based on the fair market value thereof) or of the consolidated revenues, net income or
operating cash flow of the Business; (D) the purchase or acquisition, in any manner, directly or indirectly, by any Person or Group of twenty percent (20%) or more of the issued and outstanding equity securities of the Company or any of its
Subsidiaries, or of any other Subsidiary of FNH that owns or controls any material asset of the Business or that employs any material Business Employee; or (E) any combination of the foregoing, in the case of each of
clauses (A)
through
(D)
, other than the Transactions.
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Consents
has the meaning set forth in
Section
2.5
.
Contract
has the meaning set forth in
Section
2.4
.
Contribution
has the meaning set forth in
Section
1.1
.
Deductible
means $1,990,000.
DLLCA
has the meaning set forth in
Section
1.2
.
Effective Time
has the meaning set forth in
Section
1.4
.
Environmental Laws
shall mean all applicable foreign, federal, state and local laws, regulations, rules, ordinances and
other legal requirements (including common law) relating to pollution or protection of the environment and natural resources, including, without limitation, laws relating to exposure to releases or threatened releases of Hazardous Substances into
the environment.
Environmental Permits
has the meaning set forth in
Section
2.19(a)
.
ERISA
has the meaning set forth in
Section
2.15(a)
.
ERISA Affiliate
means any Person which is (or at any relevant time was or will be) a member of a controlled group of
corporations with, under common control with, or member of an unaffiliated service group with the Company as such terms are defined in Section 414(b), (c), (m) or (o) of the Code.
Exchange Act
means the Securities Exchange Act of 1934, as amended.
Expenses
has the meaning set forth in
Section
6.8
.
Expense Reimbursement
has the meaning set forth in
Section
9.3(c)
.
Fairness Opinion
means one or more opinions from Stephens, Inc. to the effect that, as of the date of this Agreement and
based upon and subject to the limitations, qualifications and assumptions set forth therein, the consideration to be given by Parent and Purchaser in the Transaction is fair, from a financial point of view, to Parent and the Parent Shareholders.
Filings
has the meaning set forth in
Section
2.5
.
Final Adjustment Amount
has the meaning set forth in
Section
1.11(a)(iv)
.
Financial Statements
has the meaning set forth in
Section
2.6(a)
.
FNF
means Fidelity National Financial, Inc.
FNF Waiver Agreement
has the meaning set forth in
Section
8.2(e)
.
FNFV
has the meaning set forth in the Preamble.
FNH
has the meaning set forth in the Preamble.
Funds Flow Statement
has the meaning set forth in
Section
1.8(a)(xi)
.
GAAP
means generally accepted accounting principles in the United States.
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Governing Documents
means the agreements and instruments by which any Person
(other than an individual) establishes its legal existence or governs its internal affairs. For example, (a) the Governing Documents of a corporation include its certificate or articles of incorporation and bylaws, (b) the Governing
Documents of a limited partnership include its certificate or articles of limited partnership and its limited partnership agreement, and (c) the Governing Documents of a limited liability company include its certificate or articles of formation
and, if applicable, its limited liability company operating agreement.
Governmental Entity
means any transnational,
domestic or foreign federal, national, state or local, governmental, regulatory, administrative, judicial or quasi-governmental authority, department, court, agency or official, including any political subdivision thereof, and any arbitrator or
arbitral body.
Group
means
group
within the meaning of Section 13(d) of the Exchange Act.
Hazardous Substances
means any chemicals, materials, substances or wastes defined as or included in the definition of
hazardous substances, hazardous wastes, hazardous materials, hazardous constituents, restricted hazardous materials, extremely hazardous substances, toxic
substances, contaminants, pollutants, toxic pollutants, or words of similar meaning and regulatory effect under any applicable Environmental Law including, without limitation, petroleum and asbestos.
HSR Act
has the meaning set forth in
Section
2.5
.
Indemnified Party
has the meaning set forth in
Section
10.3(a)
.
Indemnifying Party
or
Indemnifying Parties
has the meaning set forth in
Section
10.3(a)
.
Independent Accountant
has the meaning set forth in
Section
1.11(a)(iii)
.
Intellectual Property
means all intellectual property rights
throughout the world, including rights in or arising from: (a) patents, patent applications, and the invention and discoveries therein; (b) processes, formulae,
know-how
and other technology,
(c) trade secrets or proprietary confidential information; (d) copyrights and works of authorship (including copyrights in Software, data, databases, applications, code, systems, networks, website content, documentation and related items),
and all registrations, renewals and applications for the foregoing; (e) trademarks, service marks, trade names, brand names, logos, emblems, signs, insignia, trade dress and other source indicators, and the goodwill of the business appurtenant
thereto, and all applications, registrations and renewals in connection with the foregoing; and (f) Internet domain names.
Interim Balance Sheet
has the meaning set forth in
Section
2.6(a)
.
Interim Financial Statements
has the meaning set forth in
Section
2.6(a)
.
Intervening Event
has the meaning set forth in
Section
6.3(c)
.
IRS
has the meaning set forth in
Section
2.15(a)
.
Knowledge
means, with respect to the Company or Purchaser, the actual knowledge of the Persons set forth in
Section
11.12(c) of the Company Disclosure Schedule
or
Section
11.12(d) of the Purchaser Disclosure Schedule
, respectively.
Laws
means, any United States, federal, state or local or any foreign law (in each case, statutory, common or otherwise),
constitution, treaty, convention, ordinance, code, rule, statute, regulation (domestic or foreign), Order or other similar requirement enacted, issued, adopted, promulgated, entered into or applied by a Governmental Entity.
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Lenders
has the meaning ascribed to such term in the Seller Credit Agreement.
Liability
means any direct or indirect liability, cost, expense, debt or obligation of any kind, character, or
description, and whether known or unknown, choate or inchoate, liquidated or unliquidated, accrued, absolute, contingent or otherwise, and regardless of whether or when asserted or by whom.
Liens
has the meaning set forth in
Section
2.2(e)
.
Liquor Licenses
has the meaning set forth in
Section
2.12(b)
.
Losses
means all actual damages, losses, claims, Liabilities, demands, charges, suits, penalties, fines, interest,
payments, costs and expenses (including reasonable attorneys and other professionals fees and disbursements).
Merger
has the meaning set forth in
Section
1.2
.
Merger Consideration
has the meaning set forth in
Section
1.10(b)
.
Merger Sub
has the meaning set forth in the Preamble.
Net Working Capital Amount
means the current assets of the Company and its Subsidiaries minus the current liabilities of
the Company and its Subsidiaries, in each case determined in accordance with GAAP. A sample calculation of Net Working Capital Amount is set forth on
Annex A
.
New LLC Units
means the Units (as defined in the Restated Purchaser LLC Agreement).
Notice of Intervening Event
has the meaning set forth in
Section
6.3(e)
.
Notice of Superior Proposal
has the meaning set forth in
Section
6.3(e)
.
Notice Period
has the meaning set forth in
Section
6.3(e)
.
NYSE
means The New York Stock Exchange.
Offered Employee
has the meaning set forth in
Section
6.6(a)
.
Old LLC Units
means the Units (as defined in that certain Second Amended and Restated Limited Liability Company Agreement,
dated as of September 28, 2015, by and among Purchaser and the Persons identified therein as the members of Purchaser).
Order
means any order, writ, injunction, ruling, decree, judgment, award, injunction, settlement or stipulation issued,
promulgated, made, rendered or entered into by or with any Governmental Entity (in each case, whether temporary, preliminary or permanent).
Ordinary Course of Business
means (i) with respect to the Sellers, the Company or the Business, the usual and ordinary
course of normal
day-to-day
operations of the Business, consistent (in scope, manner, amount and otherwise) with the Sellers, the Companys and their
Subsidiaries past practices through the date of this Agreement, and (ii) with respect to the Purchaser Entities, the usual and ordinary course of normal
day-to-day
operations of the business of Parent and its Subsidiaries (in scope, manner, amount and otherwise) with Parents and its Subsidiaries past practices
through the date of this Agreement.
Outside Date
has the meaning set forth in
Section
9.1(b)(i)
.
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Owned Real Property
has the meaning set forth in
Section
2.18(a)
.
Parent
has the meaning set forth in the Preamble.
Parent Board Recommendation
has the meaning set forth in
Section
4.3(b)
.
Parent Charter
means the Second Amended and Restated Charter of Parent, which shall provide for and include, among other
things, the increase in the number of authorized shares of common stock, the reclassification of the outstanding shares of
Pre-Closing
Parent Common Stock as Parent Class A Common Stock, the authorization
of shares of Parent Class B Common Stock, provisions relating to the cancellation of shares of Parent Class B Common Stock in connection with the exchange, from time to time, of New LLC Units as set forth therein and in the Restated LLC
Agreement, and an amendment to Section 13 of the current Parent charter.
Parent Class
A Common
Stock
has the meaning set forth in
Section
4.2(a)
.
Parent Class
B Common
Stock
has the meaning set forth in
Section
4.2(a)
.
Parent Common Stock
means,
collectively, the Parent Class A Common Stock and the Parent Class B Common Stock.
Parent Preferred Stock
has the meaning set forth in
Section
4.2(a)
.
Parent SEC Documents
has the meaning set forth
in
Section
4.6(a)
.
Parent SEC Financial Statements
has the meaning set forth in
Section
4.6(b)
.
Parent Shareholder Approvals
means (i) to approve the Merger,
(a) the affirmative vote of the holders of a majority of the outstanding shares of
Pre-Closing
Parent Common Stock entitled to vote thereon in accordance with applicable Law, and (b) the affirmative
vote of a majority of the votes cast by a quorum of the holders of the outstanding shares of
Pre-Closing
Parent Common Stock that constitute qualified shares within the meaning of
Section 48-18-704
of the TBCA; (ii) to approve the Parent Charter, (a) to increase Parents authorized capital stock and create a new class of Parent
Class B Common Stock, affirmative vote of the holders of a majority of the outstanding shares of
Pre-Closing
Parent Common Stock entitled to vote thereon in accordance with applicable Law, and (b) to
amend Section 13 (Control Share Acquisitions), the affirmative vote of holders of 66 2/3 percent of the outstanding shares of
Pre-Closing
Parent Common Stock entitled to vote thereon in
accordance with applicable Law; and (iii) in connection with the issuance of the Purchaser Units and the Parent Class B Common Stock to the Sellers as consideration for the Transactions as contemplated hereunder, the affirmative vote of
the Parent Shareholders representing a majority of the votes cast with respect to such approval at the Parent Shareholders Meeting.
Parent Shareholders
means the holders of outstanding shares of
Pre-Closing
Parent
Common Stock.
Parent Shareholders Meeting
has the meaning set forth in
Section
6.1(b)
.
PBGC
has the meaning set forth in
Section
2.15(c)
.
Permits
has the meaning set forth in
Section
2.12(a)
.
Permitted Lien
means (i) any Liens for Taxes (A) not yet due and payable or (B) which are being contested in
good faith by appropriate Proceedings and for which adequate reserves have been taken on the most recent Interim Financial Statements, (ii) carriers, warehousemens, mechanics, materialmens, repairmens or other
similar Liens arising in the Ordinary Course of Business, (iii) pledges or deposits in connection with
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workers compensation, unemployment insurance and other social security legislation, (iv) gaps in the chain of title evident from the records of the applicable Governmental Entity
maintaining such records, easements,
rights-of-way,
covenants, restrictions and other encumbrances of record as of the date of this Agreement that, in the aggregate, are
not material in amount and that do not, in any case, materially detract from the value or the use of the property subject thereto, (v) easements,
rights-of-way,
covenants, restrictions and other encumbrances incurred in the Ordinary Course of Business that, individually or in the aggregate, are not material in amount and that do not, in any case, materially detract from the value or the use of the property
subject thereto, (vi) statutory landlords liens and liens granted to landlords under any lease, (vii) nonexclusive licenses to Intellectual Property granted in the Ordinary Course of Business, (viii) any purchase money security
interests, equipment leases or similar financing arrangements arising in the Ordinary Course of Business, (ix) any Liens which are disclosed on the Interim Balance Sheet and (x) any Liens for amounts not in excess of $100,000 individually
or in the aggregate.
Person
means any 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.
Personal Property Leases
has the meaning set forth in
Section
2.18(f)
.
Policies
has the meaning set forth in
Section
2.22
.
Pre-Closing
Parent Common Stock
means shares of the issued and outstanding Common
Stock, par value $0.001, of Parent, issued and outstanding prior to the Closing.
Pre-Closing
Tax Period
means any Tax period ending on or before the Closing Date
and, with respect to a Straddle Period, the portion of such Tax period ending on and including the Closing Date.
Pre-Closing
Transactions
has the meaning set forth in
Section
1.1
.
Pro Rata Share
of a Seller means an amount equal to the product of (a) the amount of Losses, if any, to which a
Purchaser Indemnitee is entitled under
Section
10.2(a)
, multiplied by (b) such Sellers allocation percentage set forth on the Funds Flow Statement.
Proceeding
means any suit, action, proceeding, arbitration, mediation, audit, hearing, inquiry or, to the Knowledge of the
Person in question, investigation (in each case, whether civil, criminal, administrative, investigative, formal or informal) commenced, brought, conducted or heard by or before, or otherwise involving, any Governmental Entity.
Proxy Statement
has the meaning set forth in
Section
6.1(a)
.
Purchaser
has the meaning set forth in the Preamble.
Purchaser Assets
has the meaning set forth in
Section
4.18(e)
.
Purchaser Benefit Plan
means any employee benefit plan, program, policy or contract (including any employee benefit
plan, as defined in Section 3(3) of ERISA, and each other pension, profit-sharing or other retirement, bonus, deferred compensation, incentive compensation, stock bonus, stock appreciation, stock purchase, stock ownership, restricted
stock, restricted stock unit, stock option or other equity-based (whether real or phantom), employment, vacation, holiday, sick leave, welfare benefit, paid time off, leave of absence, tax gross up, disability, death benefit, cafeteria,
hospitalization, material fringe benefit, medical, dental, vision, life or other insurance, termination, retention, change in control or severance plan, program, policy or contract) with respect to which any Purchaser Entity or any of its
Subsidiaries has any obligation or Liability, contingent or otherwise.
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Purchaser Cap
has the meaning set forth in
Section
10.2(b)
.
Purchaser Disclosure Schedule
has the meaning set forth in
Article
IV
.
Purchaser Entity
means any of Parent, Purchaser, and Merger Sub, as applicable.
Purchaser Entities
means each of Parent, Purchaser, and Merger Sub, as applicable.
Purchaser Indemnitee
has the meaning set forth in
Section
10.2(a)
.
Purchaser Material Adverse Effect
means any event, change, effect, development or occurrence, circumstance or effect, that,
individually or in the aggregate, (a) has or would be reasonably expected to have a material adverse effect on the business, results of operations or financial condition of Parent and its Subsidiaries, taken as a whole or (b) prevents or
materially impedes or delays, or is reasonably likely to prevent or materially impede or delay, the consummation by the Purchaser Entities of any of the Transactions on a timely basis or the performance by the Purchaser Entities of its covenants and
obligations hereunder;
provided
,
however
, that (subject to the next proviso) no event, change, effect, development or occurrence, shall be deemed (individually or in the aggregate) to constitute, nor shall any of the foregoing be taken
into account in determining whether there has been, a Purchaser Material Adverse Effect as described in
clause (a)
or
(b)
of this definition, to the extent that such event, change, effect, development or occurrence results from,
arises out of, or relates to: (i) any general United States or global economic conditions, (ii) any conditions generally affecting the restaurant industry or the upscale casual dining segment of the restaurant industry, (iii) any
decline in the market price or trading volume of
Pre-Closing
Parent Common Stock (it being understood that the foregoing shall not preclude the Company or the Sellers from asserting that the facts or
occurrences giving rise to or contributing to such decline that are not otherwise excluded from the definition of Purchaser Material Adverse Effect should be deemed to constitute, or be taken into account in determining whether there has been, or
would reasonably be expected to be, a Purchaser Material Adverse Effect), (iv) any regulatory, legislative or political conditions or securities, credit, financial, debt or other capital markets conditions, or the economy in each case in the United
States or any foreign jurisdiction, (v) any failure, in and of itself, by Parent or its Subsidiaries to meet any internal or published projections, forecasts, estimates or predictions in respect of revenues, earnings or other financial or
operating metrics for any period (it being understood that the foregoing shall not preclude the Company or the Sellers from asserting that the facts or occurrences giving rise to or contributing to such failure that are not otherwise excluded from
the definition of Purchaser Material Adverse Effect should be deemed to constitute, or be taken into account in determining whether there has been, or would reasonably be expected to be, a Purchaser Material Adverse Effect), (vi) the public
announcement of this Agreement, the Transactions or the identity of, or any facts or circumstances relating to, the Company or the Sellers or their respective Subsidiaries or Affiliates, including the impact of any of the foregoing on the
relationships, contractual or otherwise, of Parent or any of its Subsidiaries with customers, suppliers, officers or employees, (vii) any adoption, implementation, promulgation, repeal, modification, amendment, reinterpretation, change or
proposal of any rule, regulation, ordinance, Order, protocol or any other Law of or by any Governmental Entity, (viii) any change in applicable Law, regulation or GAAP (or authoritative interpretations thereof), (ix) any geopolitical
conditions, the outbreak or escalation of hostilities, any acts of war, sabotage or terrorism, or any escalation or worsening of any such acts of war, sabotage or terrorism threatened or underway as of the date of this Agreement, (x) any taking
of any action at the written request of the Company or the Sellers, (xi) any reduction in the credit rating of Parent or any of its Subsidiaries to the extent attributable to the expected consummation of the Merger (it being understood and
agreed that the foregoing shall not preclude the Company or the Sellers from asserting that the facts or occurrences giving rise to or contributing to such change that are not otherwise excluded from the definition of Purchaser Material Adverse
Effect should be deemed to constitute, or be taken into account in determining whether there has been, or would reasonably be expected to be, a Purchaser Material Adverse Effect) or (xii) any hurricane, earthquake, flood or other natural
disasters, acts of God or any change resulting from weather conditions;
provided
,
however
, that with respect to
clauses (i)
,
(ii)
,
(iv)
,
(vii)
or
(xii)
, any such event, change, effect, development or
occurrence shall be taken into account if it is disproportionately
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adverse to Parent and its Subsidiaries, taken as a whole, when compared to other, similarly-situated Persons operating in the geographies and industry in which Parent and its Subsidiaries
operate.
Purchaser Material Contract
has the meaning set forth in
Section
4.16(a)
.
Purchaser Proprietary Software
has the meaning set forth in
Section
4.17(d)
.
Purchaser Unit Price
means $11.00.
Purchaser Units
has the meaning set forth in
Section
1.10(b)
.
Real Property Leases
has the meaning set forth in
Section
2.18(b)
.
Recommendation Withdrawal
has the meaning set forth in
Section
6.3(c)
.
Reference Net Working Capital Amount
means negative $9,265,000.
Registration Rights Agreement
has the meaning set forth in
Section
1.8(a)(v)
.
Reorganization
has the meaning set forth in
Section
1.1
.
Representatives
means, with respect to the Purchaser Entities, the Company or the Sellers, as applicable, a Persons
respective directors, officers, employees, Affiliates, investment bankers, attorneys, accountants and other advisors or other representatives.
Restated Purchaser LLC Agreement
means the Third Amended and Restated Limited Liability Company Agreement of the Purchaser,
which shall provide, among other things, for the rights of Sellers to exchange, from time to time, all or a portion of their New LLC Units (together with shares of Parent Class B Common Stock) as set forth therein.
Restraint
has the meaning set forth in
Section
8.1(b)
.
Retained Subsidiaries
means all of the direct and indirect Subsidiaries of FNH other than the Company and its direct and
indirect Subsidiaries.
SEC
means the United States Securities and Exchange Commission.
Securities Act
means the Securities Act of 1933, as amended.
Seller
has the meaning set forth in the Preamble.
Seller Cap
has the meaning set forth in
Section
10.2
.
Seller Credit Agreement
means that certain Credit Agreement, dated as of August 19, 2014, by and among Seller, ABRH,
LLC, a Delaware limited liability company, as Borrower, the lenders that are parties thereto and Wells Fargo Bank, National Association, as Administrative Agent for the Lenders, as amended.
Seller Indemnitees
has the meaning set forth in
Section
10.2(b)
.
Separation and Distribution Agreement
means that certain Separation and Distribution Agreement by and between FNF and J.
Alexanders Holdings, Inc. dated as of September 16, 2015.
Software
has the meaning set forth in
Section
2.17(d)
.
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SOX
has the meaning set forth in
Section
4.6(a)
.
Straddle Period
means any taxable period beginning on or before the Closing Date and ending after the Closing Date.
Subsidiary
when used with respect to any party means any corporation, partnership or other organization, whether
incorporated or unincorporated, (i) of which at least a majority of the securities or other interests having by their terms voting power to elect a majority of the board of directors or others performing similar functions with respect to such
corporation or other organization is directly or indirectly beneficially owned or controlled by such party or by any one or more of its Subsidiaries or (ii) that would be required to be consolidated in such partys financial statements
under generally accepted accounting principles as adopted (whether or not yet effective) in the United States.
Subscription
Agreement
has the meaning set forth in
Section
1.8(a)(ii)
.
Superior Proposal
means
a bona fide written Alternative Proposal (with the percentages set forth in the definition of such term changed from twenty percent (20%) to fifty percent (50%)) that did not result from a breach of
Section
6.3
and that
Parents Board of Directors has determined in its good faith judgment, after consultation with outside legal counsel and its financial advisor, is (i) reasonably likely to be, and reasonably capable of being, consummated in accordance with
its terms, and, (ii) if consummated, would be more favorable to Parents shareholders from a financial point of view than the Transactions, taken as a whole (including changes to the terms and conditions of this Agreement proposed in
response to such Alternative Proposal or otherwise by the Company that, if accepted by Parent and Purchaser, would be binding upon the Company), taking into account and without limitation, (a) all financial considerations, (b) the identity
of the Person making the Alternative Proposal, (c) the anticipated timing, conditions and prospects for completion of such Alternative Proposal, (d) the other terms and conditions of such Alternative Proposal and the implications thereof
on Parent, including all relevant legal, regulatory and financial aspects of such Alternative Proposal, and the Person making the proposal, and (e) any other aspects of such Alternative Proposal deemed relevant by Parents board of
directors.
Surviving Company
has the meaning set forth in
Section
1.2
.
Tax
means (i) all income, gross receipts, capital, franchise, sales, use, ad valorem, property, payroll, withholding,
escheat or unclaimed property, excise, severance, transfer, employment, estimated, alternative or
add-on
minimum, value added, stamp, occupation, premium, environmental or windfall profits taxes, and other
taxes, charges, fees, levies, imposts, customs, duties, licenses or other assessments, together with any interest and any penalties (including penalties for failure to file or late filing of any return, report or other filing, and any interest in
respect of such penalties and additions, additions to tax or additional amounts imposed by any and all federal, state, local, foreign or other Taxing Authority) and (ii) any Liability in respect of any item described in
clause
(i)
payable by reason of contract, assumption, successor or transferee liability, operation of Law, Treasury Regulations
Section 1.1502-6(a)
(or any similar provision of Law) or otherwise.
Tax Matters Agreement
means that certain Tax Matters Agreement by and between FNF and J. Alexanders Holdings, Inc.
dated September 16, 2015.
Tax Return
means any statement, report, return, information return or claim for refund
relating to Taxes (including any elections, declarations, schedules or attachments thereto, and any amendments thereof), including, if applicable, any combined, consolidated or unitary return for any group of entities that includes the Company or
any of its Subsidiaries.
Taxing Authority
means, with respect to any Tax, the Governmental Entity that imposes such
Tax, and the agency (if any) charged with the collection of such Tax for such Governmental Entity.
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TBCA
has the meaning set forth in
Section
1.2
.
Termination Fee
has the meaning set forth in
Section
9.3(a)
.
Third Party Claim
has the meaning set forth in
Section
10.3(a)
.
Transaction Agreements
means, with respect to any Person, each of this Agreement and the other agreements, instruments and
documents contemplated to be entered into in connection with, pursuant to or in respect of this Agreement and the transactions thereunder, to which such Person is a party.
Transactions
has the meaning set forth in the Recitals.
Transfer Taxes
has the meaning set forth in
Section
11.11
.
Transferred Employee
has the meaning set forth in
Section
6.6(a)
.
Transition Services Agreement
means a Transition Services Agreement, which shall provide, among other things, for the
services to be provided after the Closing to the Purchaser and the Company by the Sellers and their Affiliates and any mutually agreeable fees and/or reimbursement therefor.
Treasury Regulations
means the income tax regulations promulgated under the Code.
WARN
has the meaning set forth in
Section
2.9(b)
.
[The remainder of this page is left blank intentionally.]
A-85
IN WITNESS WHEREOF, Parent, Purchaser, Merger Sub and the Company have caused this Agreement to
be signed by their respective officers thereunto duly authorized, all as of the date first written above.
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J. ALEXANDERS HOLDINGS, INC.
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By:
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/s/
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Lonnie J. Stout II
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Name:
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Lonnie J. Stout II
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Title:
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President and Chief Executive Officer
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J. ALEXANDERS HOLDINGS, LLC
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By:
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/s/
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Lonnie J. Stout II
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Name:
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Lonnie J. Stout II
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Title:
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Chief Executive Officer, President and Manager
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NITRO MERGER SUB, INC.
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By:
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/s/
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Lonnie J. Stout II
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Name:
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Lonnie J. Stout II
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Title:
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President
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[S
IGNATURE
P
AGE
TO
A
GREEMENT
AND
P
LAN
OF
M
ERGER
]
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FIDELITY NATIONAL FINANCIAL VENTURES, LLC
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By:
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/s/
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Michael L. Gravelle
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Name:
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Michael L. Gravelle
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Title:
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Managing Director and Corporate Secretary
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[S
IGNATURE
P
AGE
TO
A
GREEMENT
AND
P
LAN
OF
M
ERGER
]
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FIDELITY NEWPORT HOLDINGS, LLC
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By:
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/s/
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Gregory A. Hayes
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Name:
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Gregory A. Hayes
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Title:
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Chief Financial Officer
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[S
IGNATURE
P
AGE
TO
A
GREEMENT
AND
P
LAN
OF
M
ERGER
]
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99 RESTAURANTS, LLC
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By:
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/s/
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Gregory A. Hayes
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Name:
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Gregory A. Hayes
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Title:
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Chief Financial Officer
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[S
IGNATURE
P
AGE
TO
A
GREEMENT
AND
P
LAN
OF
M
ERGER
]
Appendix B
FORM OF SECOND AMENDED AND RESTATED CHARTER
OF
J. ALEXANDERS
HOLDINGS, INC.
1.
Name
. The name of the corporation is J. Alexanders Holdings, Inc. (the
Corporation).
2.
For Profit
.
The Corporation is for profit.
3.
Principal Office
.
The street address of the Corporations principal office is:
3401 West End Avenue, Suite 260
Nashville, Tennessee 37203
County of Davidson
4.
Registered Agent and Registered Office
.
(a) The name of the Corporations initial registered agent is:
CT Corporation System.
(b) The
street address of the Corporations initial registered office in Tennessee is:
800 S. Gay Street, Suite 2021
Knoxville, Tennessee 37929
County of Knox
5.
Incorporator
.
The name and address of the incorporator is:
Ryan Hoffman
c/o Bass, Berry & Sims PLC
150 3
rd
Avenue South, Suite 2800
Nashville, TN 37201
6.
Purpose
.
The Corporation is organized to do any and all things and to exercise any and all powers, rights, and privileges that a corporation may now or hereafter be organized to do or to exercise under the Tennessee Business
Corporation Act as the same exists or may hereafter be amended (TBCA).
7.
Stock
.
(a)
Capitalization
. The total number of shares of stock which the Corporation shall have authority to issue is 100,000,000, consisting
of (a) 70,000,000 shares of Class A Common Stock, par value $0.001 per share (the Class A Common Stock), (b) 20,000,000 shares of Class B Common Stock, par value $0.001 per share (the Class B Common Stock
and, together with the Class A Common Stock, the Common Stock) and (c) 10,000,000 shares of Preferred Stock, par value $0.001 per share (the Preferred Stock).
(b)
Reclassifications
. At the time that this Charter becomes effective under the TBCA (the Effective Time) each share of
common stock, par value $0.001 per share, of the Corporation, which was designated as Common Stock in the prior Charter and was authorized, issued and outstanding or held as treasury stock immediately prior to the Effective Time shall, automatically
and without further action by any shareholder, be reclassified into one share of Class A Common Stock.
(c)
Common Stock.
(i)
Voting Rights
.
(A) Each holder of Class A Common Stock, as such, shall be entitled to one vote for each share of Class A Common Stock held of
record by such holder on all matters on which shareholders generally are
B-1
entitled to vote; provided, however, that, except as otherwise required by applicable law, holders of Class A Common Stock, as such, shall not be entitled to vote on any amendment to this
Charter (including any amendment relating to any series of Preferred Stock) that relates solely to the terms of one or more outstanding series of Preferred Stock if the holders of such affected series are entitled, either separately or together with
the holders of one or more other such series, to vote thereon pursuant to this Charter (including any amendment relating to any series of Preferred Stock) or pursuant to the TBCA.
(B) Each holder of Class B Common Stock, as such, shall be entitled to one vote for each share of Class B Common Stock held of
record by such holder on all matters on which shareholders generally are entitled to vote; provided, however, that except as otherwise required by applicable law, holders of Class B Common Stock, as such, shall not be entitled to vote on any
amendment to this Charter (including any amendment relating to any series of Preferred Stock) that relates solely to the terms of one or more outstanding series of Preferred Stock if the holders of such affected series are entitled, either
separately or together with the holders of one or more other such series, to vote thereon pursuant to this Charter (including any amendment relating to any series of Preferred Stock) or pursuant to the TBCA. A holder of one share of Class B
Common Stock, as such, shall be entitled at all times to the same number of vote or votes as a holder of one share of Class A Common Stock, as such, on all matters on which shareholders generally are entitled to vote.
(C) Except as otherwise required in this Charter or by applicable law, the holders of Common Stock shall vote together as a single class on
all matters (or, if any holders of Preferred Stock are entitled to vote together with the holders of Common Stock, as a single class with such holders of Preferred Stock).
(ii)
Dividends
. Subject to applicable law and the rights, if any, of the holders of any outstanding series of Preferred Stock or any
class or series of stock having a preference over or the right to participate with the Class A Common Stock with respect to the payment of dividends, dividends may be declared and paid on the Class A Common Stock out of the assets of the
Corporation that are by law available therefor at such times and in such amounts as the Board of Directors of the Corporation (the Board) in its discretion shall determine. Dividends shall not be declared or paid on the Class B
Common Stock.
(iii)
Liquidation, Dissolution or Winding Up
. In the event of any voluntary or involuntary liquidation, dissolution
or winding up of the affairs of the Corporation, after payment or provision for payment of the debts and other liabilities of the Corporation and of the preferential and other amounts, if any, to which the holders of Preferred Stock shall be
entitled, the holders of all outstanding shares of Class A Common Stock shall be entitled to receive the remaining assets of the Corporation available for distribution ratably in proportion to the number of shares held by each such shareholder.
The holders of shares of Class B Common Stock, as such, shall not be entitled to receive any assets of the Corporation in the event of any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Corporation.
(iv)
Transfer of Class
B Common Stock
.
(A) A holder of Class B Common Stock may only transfer shares of Class B Common Stock to another person if such holder transfers a
corresponding number of Class B Units to such person in accordance with the provisions of the Third Amended and Restated Limited Liability Company Agreement of J. Alexanders Holdings, LLC, a Delaware limited liability company
(Holdings), as such agreement may be amended from time to time in accordance with the terms thereof (the LLC Agreement).
(B) Any purported transfer of shares of Class B Common Stock in violation of the restrictions described in the immediately preceding
paragraph (the Restrictions) shall be null and void. If, notwithstanding the foregoing prohibition, a person shall, voluntarily or involuntarily, purportedly become or attempt to become the purported owner (Purported Owner)
of shares of Class B Common Stock in violation of the Restrictions, then the Purported Owner shall not obtain any rights in or to such shares of Class B Common Stock (the Restricted Shares) and the purported transfer of the
Restricted Shares to the Purported Owner shall not be recognized by the Corporations transfer agent (the Transfer Agent).
B-2
(C) Upon a determination by the Board that a person has attempted or may attempt to transfer or
to acquire Restricted Shares, the Board may take such action as it deems advisable to refuse to give effect to such transfer or acquisition on the books and records of the Corporation, including without limitation to cause the Transfer Agent to
record the Purported Owners transferor as the record owner of the Restricted Shares, and to institute proceedings to enjoin or rescind any such transfer or acquisition.
(D) The Board may, to the extent permitted by law, from time to time establish, modify, amend or rescind, by bylaw or otherwise, regulations
and procedures not inconsistent with the provisions of this Article 7(c)(iv) for determining whether any acquisition of shares of Class B Common Stock would violate the Restrictions and for the orderly application, administration and
implementation of the provisions of this Article 7(c)(iv). Any such procedures and regulations shall be kept on file with the Secretary of the Corporation and with its Transfer Agent and shall be made available for inspection by any prospective
transferee and, upon written request, shall be mailed to any holder of shares of Class B Common Stock.
(E) The Board shall have all
powers necessary to implement the Restrictions, including without limitation the power to prohibit the transfer of any shares of Class B Common Stock in violation thereof.
(F) Upon the redemption of any Class B Units by Holdings for cash or, if the Corporation so chooses at its option, upon the exchange
with the Corporation of any Class B Units for Class A Common Stock, in each case, in accordance with the LLC Agreement, a number of shares of Class B Common Stock held by the owner of the redeemed or exchanged Class B Units
corresponding to the number of Class B Units redeemed or exchanged shall immediately be cancelled on the books and records of the Corporation and shall no longer be deemed to be issued and outstanding capital stock of the Corporation.
(G) As used in this Charter, (i) Class B Units shall mean Class B Units of Holdings, or any successor entity thereto,
issued under the LLC Agreement, (ii) Class C Units shall mean Class C Units of Holdings, or any successor entity thereto, issued under the LLC Agreement, (iii) LLC Units shall mean the Class B Units and
Class C Units, collectively, and (iv) person shall mean any individual, firm, corporation, partnership, limited liability company, trust, joint venture or other enterprise or entity.
(H) In the event of a reclassification or other similar transaction as a result of which the shares of Class A Common Stock are
converted into another security, then a holder of shares of Class B Common Stock shall be entitled to receive upon the cancellation of such shares effected in connection with the exchange of a commensurate number of Class B Units for
Class A Common Stock in accordance with the LLC Agreement, the amount of such security that such holder would have received if such exchange had occurred immediately prior to the record date of such reclassification or other similar
transaction, taking into account any adjustment as a result of any subdivision (by any stock split or dividend, reclassification or otherwise) or combination (by reverse stock split, reclassification or otherwise) of such security that occurs after
the effective time of such reclassification or other similar transaction.
(I) The Corporation covenants that it will at all times
reserve and keep available out of its authorized but unissued shares of Class A Common Stock, solely for the purpose of issuance upon exchange of the outstanding LLC Units for Class A Common Stock, such number of shares of Class A Common
Stock that are issuable upon any such exchange and shall exchange LLC Units for shares of Class A Common Stock pursuant to the LLC Agreement; provided that nothing contained herein shall be construed to preclude the Corporation from satisfying
its obligations in respect of any such exchange by delivery of shares of Class A Common Stock which are held in the treasury of the Corporation; and provided further that nothing contained herein shall be construed to preclude Holdings from
paying cash in redemption of LLC Units in accordance with the LLC Agreement. The Corporation covenants that all shares of Class A Common Stock issued upon any such exchange will, upon issuance, be validly issued, fully paid and
non-assessable.
(d)
Preferred Stock
. With respect to shares designated and classified as
Preferred Stock, the Board of Directors of the Corporation, pursuant to
Section 48-16-102
of the TBCA, are authorized to establish and to
B-3
determine, in whole or in part, to the full extent permitted by Tennessee law and within the limits set forth in
Section 48-16-101
of the TBCA, the preferences, limitations and relative rights of the Preferred Stock or any series of Preferred Stock. Unless and until otherwise
specified by the Board of Directors, the shares classified and designated as Preferred Stock will have a par value of $0.001 per share. The Board of Directors may authorize one or more series of Preferred Stock with preferences, limitations and
relative rights, including, but not limited to:
(i) special, conditional or limited voting rights, or no right to vote, except to the
extent limits or conditions are prohibited by the TBCA;
(ii) characteristics as redeemable or convertible;
(iii) distributions to the shareholders calculated in any manner, including dividends that may be cumulative, noncumulative, or partially
cumulative;
(iv) preferences over any class of shares with respect to distributions, including dividends and distributions, upon
dissolution of this corporation; or
(v) specification and changes in the specification of par values.
In accordance with
Section 48-16-101
of the TBCA, the
foregoing list of designations, preferences, limitations and relative rights is not exhaustive.
(e)
Changes in Common Stock
. If
the Corporation in any manner subdivides or combines the outstanding shares of Class A Common Stock, the outstanding shares of the Class B Common Stock shall be proportionately subdivided or combined, as the case may be. If the Corporation
in any manner subdivides or combines the outstanding shares of Class B Common Stock, the outstanding shares of Class A Common Stock shall be proportionately subdivided or combined, as the case may be.
8.
No Preemptive Rights
.
The shareholders of the Corporation shall not have preemptive rights.
9.
Directors
.
All corporate powers shall be exercised by or under the authority, and the business and affairs of
the Corporation shall be managed under the direction, of a Board of Directors consisting of not less than three nor more than fifteen (15) directors, the exact number of Directors to be determined from time to time by a majority of the Board of
Directors. The Board of Directors shall be divided into three classes, designated Class I, Class II and Class III. Each class shall consist, as nearly as possible, of
one-third
of the total
number of Directors constituting the entire Board of Directors. Each class of Directors shall be elected for a three-year term. The term of the initial Class I directors shall terminate on the date of the 2016 annual meeting of shareholders;
the term of the initial Class II directors shall terminate on the date of the 2017 annual meeting of shareholders and the term of the initial Class III directors shall terminate on the date of the 2018 annual meeting of shareholders. At
each annual meeting of shareholders beginning in 2016, successors to the class of directors whose term expires at that annual meeting shall be elected for a three-year term. If the number of Directors is changed, any increase or decrease shall be
apportioned among the classes so as to maintain the number of Directors in each class as nearly equal as possible, and any additional Director of any class elected to fill a vacancy resulting from an increase in such class shall hold office for a
term that shall coincide with the remaining term of that class, but in no case will a decrease in the number of Directors shorten the term of any incumbent Director.
A Director shall hold office until the annual meeting for the year in which his or her term expires and until his or her successor shall be
elected and shall qualify, subject, however, to prior death, resignation, retirement, disqualification or removal from office. Any vacancy on the Board of Directors, including a vacancy that results from an increase in the number of directors or a
vacancy that results from the removal of a director with cause, may be filled only by a majority of the Directors then in office.
B-4
A person nominated for election as a Director shall be elected by the affirmative vote of a
plurality of the votes cast for the Director nominee in person or by proxy at a meeting for the election of Director at which a quorum is present.
10.
Removal of Directors
.
Subject to the rights of any voting group established either in the Corporations
Bylaws or by any applicable shareholders agreement, any director may be removed from office at any time but only for cause and only by (a) the affirmative vote of the holders of 66
2
⁄
3
percent of the voting power of the shares entitled to vote for the election of directors, considered for this purpose as one class, or (b) the affirmative vote of a majority of the entire Board of Directors
then in office.
11.
Officers
. The officers of the Corporation shall be chosen in such a manner, shall hold their
offices for such terms and shall carry out such duties as are determined solely by the Board of Directors, subject to the right of the Board of Directors to remove any officers at any time with or without cause.
12.
Director Liability and Indemnification
.
(a)
Limitation of Liability
. Any person who is or was a director of the Corporation shall have no liability to the Corporation or its
shareholders for monetary damages for breach of fiduciary duty as a director provided that this Article 12 shall not eliminate or limit liability of a director for (i) any breach of the directors duty of loyalty to the Corporation or its
shareholders; (ii) acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, or (iii) unlawful distributions under
Section 48-18-302
of the TBCA. If the TBCA or any successor statute is amended or other Tennessee law is enacted after adoption of this provision to authorize
corporate action further eliminating or limiting the personal liability of directors, then the liability of a director of the Corporation shall be eliminated or limited to the fullest extent permitted by the TBCA, as so amended from time to time, or
such successor statute or other Tennessee law. Any repeal or modification of this Article 12 or subsequent amendment of the TBCA or enactment of other applicable Tennessee law shall not affect adversely any right or protection of a director of the
Corporation existing at the time of such repeal, modification, amendment or enactment or with respect to events occurring prior to such time.
(b)
Indemnification and Advancement of Expenses
. The Corporation shall indemnify every person who is or was a party or is or was
threatened to be made a party to any action, suit, or proceeding, whether civil, criminal, administrative, or investigative, including without limitation any action, suit or proceeding by or in right of the Corporation, by reason of the fact that he
or she is or was a director or officer or is or was serving at the request of the Corporation as a director, officer, employee, manager, agent, or trustee of another corporation or of a partnership, limited liability company, joint venture, trust,
employee benefit plan, or other enterprise, including service on a committee formed for any purpose (and, in each case, his or her heirs, executors, and administrators), against all expense, liability, and loss (including counsel fees, judgments,
fines, ERISA excise taxes, penalties, and amounts paid in settlement) actually and reasonably incurred or suffered in connection with such action, suit, or proceeding, to the fullest extent permitted by applicable law, as in effect on the date
hereof and as hereafter amended. Such indemnification shall include advancement of expenses in advance of final disposition of such action, suit, or proceeding, subject to the provision of any applicable statute.
(c)
Non-Exclusivity
of Rights
. The indemnification and advancement of expenses provisions of
this Article 12 shall not be exclusive of any other right that any person (and his or her heirs, executors, and administrators) may have or hereafter acquire under any statute, this Charter, the Corporations Bylaws, resolution adopted by the
shareholders, resolution adopted by the Board of Directors, agreement, or insurance, purchased by the Corporation or otherwise, both as to action in his or her official capacity and as to action in another capacity. The Corporation is hereby
authorized to provide for indemnification and advancement of expenses through its Bylaws, resolution of shareholders, resolution of the Board of Directors, or agreement, in addition to that provided by this Charter.
B-5
13.
Control Share Acquisitions
. The provisions of Sections
48-103-301
through
48-103-312
of the TBCA, otherwise collectively known as the Tennessee
Control Share Acquisition Act, as in effect as of the date hereof and any amendment thereto or successor provision thereto, shall not apply to the Corporation and, for the avoidance of doubt, shall not apply to or govern any Control Share
Acquisition of this Corporations shares, as those terms are defined in the Tennessee Control Share Acquisition Act.
1
14.
Business Combinations
.
(a)
Application of the Act.
The provisions of Sections
48-103-201
through
48-103-209
of the TBCA, otherwise known and cited as the
Tennessee Business Combination Act, as in effect as of the date hereof and any amendment thereto or successor provision thereto, shall apply to and govern, to the fullest extent provided by law, any Business Combination, as defined in
the Tennessee Business Combination Act.
(b)
Corporation Not Liable for Resisting Merger, Exchange, Etc.
So long as this
Corporation has a class of voting stock registered or traded on a national securities exchange or registered with the Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934, as amended, neither the Corporation nor its
directors or officers shall be liable at law or equity either for having failed to approve the acquisition of shares by an Interested Shareholder, as defined in the Tennessee Business Combination Act, on or before an Interested Shareholders
share acquisition date, or for seeking to enforce or implement the Tennessee Business Combination Act or the Tennessee Control Share Acquisition Act, or for failing to adopt or recommend any amendment to or provision of the Corporations
Charter and Bylaws then in effect with respect to the Tennessee Business Combination Act or the Tennessee Control Share Acquisition Act, as in effect as of the date hereof and any amendment thereto or successor provision thereto, or for opposing any
proposed merger, exchange, tender offer or significant disposition of assets of the Corporation or any subsidiary because of a good faith belief that the merger, tender offer, exchange or significant disposition of assets would adversely affect the
social, legal, environmental or economic circumstances of the Corporation, its employees, customers or suppliers, or the communities in which the Corporation, or its subsidiaries, operate or are located. In making decisions concerning these matters,
this Corporations officers and directors may also specifically consider any other relevant factors, including, but not limited to, (i) the financial and managerial resources and future prospects of the other party and (ii) the amount
and form of the consideration being offered in relation to the then current market price for the Corporations outstanding shares of capital stock, in relation to the then current value of the Corporation in a freely negotiated transaction and
in relation to the Board of Directors estimate of the future value of the Corporation (including the unrealized value of its properties and assets) as an independent concern.
15.
Reserved
.
16.
Special Meetings
. Special meetings of shareholders may be called at any time, but only by the Chairman of the Board
of Directors, the Chief Executive Officer of the Corporation, or upon a resolution by or affirmative vote of the Board of Directors, and not by the shareholders. Any business transacted at any special meeting of shareholders shall be limited to
matters relating to the purpose or purposes stated in the notice of meeting.
17.
Exclusive Forum
. The Court of
Chancery of the State of Tennessee (the Court of Chancery) shall be the sole and exclusive forum for any shareholder (including a beneficial owner) to bring (i) any derivative action or proceeding brought on behalf of the
Corporation, (ii) any action asserting a claim of breach of a fiduciary duty owed by any director, officer or employee of the Corporation to the Corporation or the Corporations shareholders, (iii) any action asserting a claim against
the Corporation, its directors, officers or employees arising pursuant to any provision of the TBCA or this Charter or the Corporations Bylaws, or (iv) any action asserting a claim against the Corporation, its directors, officers or
employees governed by the internal affairs doctrine. For the avoidance of doubt, any person purchasing or otherwise acquiring any interest in any shares of stock of the
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Corporation shall be deemed to have notice of, and consented to the provisions of, this Article 17. If any provision or provisions of this Article 17 shall be held to be invalid, illegal or
unenforceable as applied to any person or circumstance for any reason whatsoever, then, to the fullest extent permitted by law, the validity, legality and enforceability of such provisions in any other circumstance and of the remaining provisions of
this Article 17 (including, without limitation, each portion of any sentence of this Article 17 containing any such provision held to be invalid, illegal or unenforceable that is not itself held to be invalid, illegal or unenforceable) and the
application of such provision to other persons and circumstances shall not in any way be affected or impaired thereby.
18.
Charter and Bylaws Amendments
. Notwithstanding any other provision of this Charter, the affirmative vote of holders of 66
2
⁄
3
percent of the
voting power of the shares entitled to vote at an election of directors, voting together as a single class, shall be required to reduce the maximum number of shares the Corporation may issue under Article 7(a), and to amend or repeal Articles
7(b)(e), 9, 10, 12, 13, 14, 15, 16, 17 and 18 of this Charter, or to amend, alter, change or repeal, or to adopt any provisions of this Charter or of the Corporations Bylaws in a manner that is inconsistent with the purpose and intent of
the aforementioned Articles.
19.
Corporate Opportunities
. To the maximum extent permitted under the TBCA, the
Corporation renounces any interest or expectancy of the Corporation in, or in being offered an opportunity to participate in, business opportunities that are from time to time presented to its directors who are not employees of the Corporation or
any subsidiary (Outside Directors), other than any such opportunity expressly presented to an Outside Director in such Outside Directors capacity as a director of the Corporation; and no such Outside Director shall be liable to the
Corporation or its shareholders for breach of any fiduciary or other duty by reason of the fact that such Outside Director personally or on behalf of any other person pursues or acquires such business opportunity, directs such business opportunity
to another person or fails to present such business opportunity, or information regarding such business opportunity, to the Corporation or its subsidiaries. For purposes of this Article 19, a director who is the Chairman of the Board of the
Corporation shall not be deemed to be an employee of the Corporation solely by reason of holding such position. No amendment or repeal of this Article 19 shall apply to or have any effect on the liability or alleged liability of any Outside Director
for or with respect to business opportunities of which such Outside Director becomes aware prior to such amendment or repeal. Any person purchasing or otherwise acquiring any interest in any capital stock of the Corporation shall be deemed to have
notice of and to have consented to the provisions of this Article 19.
This Second Amended and Restated Charter of J. Alexanders
Holdings, Inc. will be effective when filed with the Office of the Tennessee Secretary of State.
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Appendix B-1
FORM OF SECOND AMENDED AND RESTATED CHARTER
OF
J. ALEXANDERS
HOLDINGS, INC.
1.
Name
. The name of the corporation is J. Alexanders Holdings, Inc. (the
Corporation).
2.
For Profit
.
The Corporation is for profit.
3.
Principal Office
.
The street address of the Corporations principal office is:
3401 West End Avenue, Suite 260
Nashville, Tennessee 37203
County of Davidson
4.
Registered Agent and Registered Office
.
(a) The name of the Corporations initial registered agent is:
CT Corporation System.
(b) The
street address of the Corporations initial registered office in Tennessee is:
800 S. Gay Street, Suite 2021
Knoxville, Tennessee 37929
County of Knox
5.
Incorporator
.
The name and address of the incorporator is:
Ryan Hoffman
c/o Bass, Berry & Sims PLC
150 3
rd
Avenue South, Suite 2800
Nashville, TN 37201
6.
Purpose
.
The Corporation is organized to do any and all things and to exercise any and all powers, rights, and privileges that a corporation may now or hereafter be organized to do or to exercise under the Tennessee Business
Corporation Act as the same exists or may hereafter be amended (TBCA).
7.
Stock
.
(a)
Capitalization
. The total number of shares of stock which the Corporation shall have authority to issue is
40,000,000
100,000,000
, consisting of (a)
30,000,000
70,000,000
shares of
Class
A
Common Stock, par value $0.001 per share (the
Class
A
Common
Stock),
and
(b)
20,000,000 shares of Class
B Common Stock, par value $0.001 per share (the Class
B Common Stock and, together with the Class
A
Common Stock, the Common Stock) and (c)
10,000,000 shares of Preferred Stock, par value $0.001 per share (the Preferred Stock).
(b)
Reclassifications. At the time that this Charter becomes effective under the TBCA (the Effective Time) each share of
common stock, par value $0.001 per share, of the Corporation, which was designated as Common Stock in the prior Charter and was authorized, issued and outstanding or held as treasury stock immediately prior to the Effective Time shall, automatically
and without further action by any shareholder, be reclassified into one share of Class
A Common Stock.
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(c) Common Stock.
(i)
Voting Rights
.
(A)
Each holder of Class
A Common Stock, as such, shall be entitled to one vote for each share of
Class
A Common Stock held of record by such holder on all matters on which shareholders generally are entitled to vote; provided, however, that, except as otherwise required by applicable law, holders of Class
A
Common Stock, as such, shall not be entitled to vote on any amendment to this Charter (including any amendment relating to any series of Preferred Stock) that relates solely to the terms of one or more outstanding series of Preferred Stock if the
holders of such affected series are entitled, either separately or together with the holders of one or more other such series, to vote thereon pursuant to this Charter (including any amendment relating to any series of Preferred Stock) or pursuant
to the TBCA.
(B)
Each holder of Class
B Common Stock, as such, shall be entitled to one vote for each
share of Class
B Common Stock held of record by such holder on all matters on which shareholders generally are entitled to vote; provided, however, that except as otherwise required by applicable law, holders of
Class
B Common Stock, as such, shall not be entitled to vote on any amendment to this Charter (including any amendment relating to any series of Preferred Stock) that relates solely to the terms of one or more outstanding series
of Preferred Stock if the holders of such affected series are entitled, either separately or together with the holders of one or more other such series, to vote thereon pursuant to this Charter (including any amendment relating to any series of
Preferred Stock) or pursuant to the TBCA. A holder of one share of Class
B Common Stock, as such, shall be entitled at all times to the same number of vote or votes as a holder of one share of Class
A Common
Stock, as such, on all matters on which shareholders generally are entitled to vote.
(C) Except as otherwise required in this
Charter or by applicable law, the holders of Common Stock shall vote together as a single class on all matters (or, if any holders of Preferred Stock are entitled to vote together with the holders of Common Stock, as a single class with such holders
of Preferred Stock).
(ii)
Dividends
. Subject to applicable law and the rights, if any, of the holders of
any outstanding series of Preferred Stock or any class or series of stock
having a preference over or the right to participate with the Class
A Common Stock with respect to the payment of dividends, dividends may be
declared and paid on the Class
A Common Stock out of the assets of the Corporation that are by law available therefor at such times and in such amounts as the Board of Directors of the Corporation (the Board) in its
discretion shall determine. Dividends shall not be declared or paid on the Class
B Common Stock.
(iii)
Liquidation, Dissolution or Winding Up
. In the event of any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Corporation, after payment or provision for payment of the debts and other
liabilities of the Corporation and of the preferential and other amounts, if any, to which the holders of Preferred Stock shall be entitled, the holders of all outstanding shares of Class
A Common Stock shall be entitled to
receive the remaining assets of the Corporation available for distribution ratably in proportion to the number of shares held by each such shareholder. The holders of shares of Class
B Common Stock, as such, shall not be entitled
to receive any assets of the Corporation in the event of any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Corporation.
(iv)
Transfer of Class
B Common Stock
.
(A)
A holder of Class
B Common Stock may only transfer shares of Class
B Common Stock to
another person if such holder transfers a corresponding number of Class
B Units to such person in accordance with the provisions of the Third Amended and Restated Limited Liability Company Agreement of
J.
Alexanders Holdings, LLC, a Delaware limited liability company (Holdings), as such agreement may be amended from time to time in accordance with the terms thereof (the LLC Agreement).
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(B)
Any purported transfer of shares of Class
B Common Stock in
violation of the restrictions described in the immediately preceding paragraph (the Restrictions) shall be null and void. If,
notwithstanding the foregoing prohibition, a person shall, voluntarily or involuntarily, purportedly
become or attempt to become the purported owner (Purported Owner) of shares of Class
B Common Stock in violation of
the Restrictions, then the Purported Owner shall not obtain any rights in or to such shares of
Class
B Common Stock (the Restricted Shares) and the purported transfer of the Restricted Shares to the Purported Owner shall not be recognized by the Corporations transfer agent (the Transfer Agent).
(C)
Upon a determination by the Board that a person has attempted or may attempt to transfer or to acquire Restricted
Shares, the Board may take such action as it deems advisable to refuse to give effect to such transfer or acquisition on the books and records of the Corporation, including without limitation to cause the Transfer Agent to record the Purported
Owners transferor as the record owner of the Restricted Shares, and to institute proceedings to enjoin or rescind any such transfer or acquisition.
(D)
The Board may, to the extent permitted by law, from time to time establish, modify, amend or rescind, by bylaw or otherwise,
regulations and procedures not inconsistent with the provisions of this Article 7(c)(iv) for determining whether any acquisition of shares of Class
B Common Stock would violate the Restrictions and for the orderly application,
administration and implementation of the provisions of this Article 7(c)(iv). Any such procedures and regulations shall be kept on file with the Secretary of the Corporation and with its Transfer Agent and shall be made available for inspection by
any prospective transferee and, upon written request, shall be mailed to any holder of shares of Class
B Common Stock.
(E)
The Board shall have all powers necessary to implement the Restrictions, including without limitation the power to prohibit the
transfer of any shares of Class
B Common Stock in violation thereof.
(F)
Upon the redemption of any
Class
B Units by Holdings for cash or, if the Corporation so chooses at its option, upon the exchange with the Corporation of any Class
B Units for Class
A Common Stock, in each case, in
accordance with the LLC Agreement, a number of shares of Class
B Common Stock held by the owner of the redeemed or exchanged Class
B Units corresponding to the number of Class
B Units redeemed
or exchanged shall immediately be cancelled on the books and records of the Corporation and shall no longer be deemed to be issued and outstanding capital stock of the Corporation.
(G)
As used in this Charter, (i) Class
B Units shall mean Class
B Units of
Holdings, or any successor entity thereto, issued under the LLC Agreement, (ii) Class
C Units shall mean Class
C Units of Holdings, or any successor entity thereto, issued under the LLC Agreement,
(iii) LLC Units shall mean the Class
B Units and Class
C Units, collectively, and (iv) person shall mean any individual, firm, corporation, partnership, limited liability company, trust,
joint venture or other enterprise or entity.
(H)
In the event of a reclassification or other similar transaction as a
result of which the shares of Class
A Common Stock are converted into another security, then a holder of shares of Class
B Common Stock shall be entitled to receive upon the cancellation of such shares effected
in connection with the exchange of a commensurate number of Class
B Units for Class
A Common Stock in accordance with the LLC Agreement, the amount of such security that such holder would have received if such
exchange had occurred immediately prior to the record date of such reclassification or other similar transaction, taking into account any adjustment as a result of any subdivision (by any stock split or dividend, reclassification or otherwise) or
combination (by reverse stock split, reclassification or otherwise) of such security that occurs after the effective time of such reclassification or other similar transaction.
(I)
The Corporation covenants that it will at all times reserve and keep available out of its authorized but unissued shares of
Class
A Common Stock, solely for the purpose of issuance upon exchange of the outstanding LLC Units for Class
A Common Stock, such number of shares of Class
A Common Stock that are issuable upon any such
exchange and shall exchange LLC Units for shares of Class
A Common Stock
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pursuant to the LLC Agreement; provided that nothing contained herein shall be construed to preclude the Corporation from satisfying its obligations in respect of any such exchange by delivery
of shares of Class
A
Common Stock which are held in the treasury of the Corporation; and provided further that nothing contained herein shall be construed to preclude Holdings from paying cash in redemption of LLC Units in
accordance with
the LLC Agreement. The Corporation covenants that all shares of Class
A Common Stock issued upon any such exchange will, upon issuance, be validly issued, fully paid and
non-assessable.
(
b
d
)
Preferred Stock
. With respect to shares
designated and classified as Preferred Stock, the Board of Directors of the Corporation, pursuant to
Section 48-16-102
of the TBCA, are authorized to establish and
to determine, in whole or in part, to the full extent permitted by Tennessee law and within the limits set forth in
Section 48-16-101
of the TBCA, the preferences,
limitations and relative rights of the Preferred Stock or any series of Preferred Stock. Unless and until otherwise specified by the Board of Directors, the shares classified and designated as Preferred Stock will have a par value of $0.001 per
share. The Board of Directors may authorize one or more series of Preferred Stock with preferences, limitations and relative rights, including, but not limited to:
(i) special, conditional or limited voting rights, or no right to vote, except to the extent limits or conditions are prohibited by the TBCA;
(ii) characteristics as redeemable or convertible;
(iii) distributions to the shareholders calculated in any manner, including dividends that may be cumulative, noncumulative, or partially
cumulative;
(iv) preferences over any class of shares with respect to distributions, including dividends and distributions, upon
dissolution of this corporation; or
(v) specification and changes in the specification of par values.
In accordance with
Section 48-16-101
of the TBCA, the
foregoing list of designations, preferences, limitations and relative rights is not exhaustive.
(e)
Changes in Common Stock. If
the Corporation in any manner subdivides or combines the outstanding shares of Class
A Common Stock, the outstanding shares of the Class
B Common Stock shall be proportionately subdivided or combined, as the
case may be. If the Corporation in any manner subdivides or combines the outstanding shares of Class
B Common Stock, the outstanding shares of Class
A Common Stock shall be proportionately subdivided or
combined, as the case may be.
8.
No Preemptive Rights
.
The shareholders of the Corporation shall not have
preemptive rights.
9.
Directors
.
All corporate powers shall be exercised by or under the authority, and the
business and affairs of the Corporation shall be managed under the direction, of a Board of Directors consisting of not less than three nor more than fifteen (15) directors, the exact number of Directors to be determined from time to time by a
majority of the Board of Directors. The Board of Directors shall be divided into three classes, designated Class I, Class II and Class III. Each class shall consist, as nearly as possible, of
one-third
of the total number of Directors constituting the entire Board of Directors. Each class of Directors shall be elected for a three-year term. The term of the initial Class I directors shall
terminate on the date of the 2016 annual meeting of shareholders; the term of the initial Class II directors shall terminate on the date of the 2017 annual meeting of shareholders and the term of the initial Class III directors shall
terminate on the date of the 2018 annual meeting of shareholders. At each annual meeting of shareholders beginning in 2016, successors to the class of directors whose term expires at that annual meeting shall be elected for a three-year term. If the
number of Directors is changed, any increase or decrease shall be apportioned among the classes so as to maintain the number of Directors in each class as nearly equal as possible, and any additional Director of any class elected to fill a vacancy
resulting from an increase in such class shall hold office for a term that shall coincide with the remaining term of that class, but in no case will a decrease in the number of Directors shorten the term of any incumbent Director.
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A Director shall hold office until the annual meeting for the year in which his or her term
expires and until his or her successor shall be elected and shall qualify, subject, however, to prior death, resignation, retirement, disqualification or removal from office. Any vacancy on the Board of Directors, including a vacancy that results
from an increase in the number of directors or a vacancy that results from the removal of a director with cause, may be filled only by a majority of the Directors then in office.
A person nominated for election as a Director shall be elected by the affirmative vote of a plurality of the votes cast for the Director
nominee in person or by proxy at a meeting for the election of Director at which a quorum is present.
10.
Removal of
Directors
.
Subject to the rights of any voting group established either in the Corporations Bylaws or by any applicable shareholders agreement, any director may be removed from office at any time but only for cause and
only by (a) the affirmative vote of the holders of 66
2
⁄
3
percent of the voting power of the shares entitled to vote for the election of directors,
considered for this purpose as one class, or (b) the affirmative vote of a majority of the entire Board of Directors then in office.
11.
Officers
. The officers of the Corporation shall be chosen in such a manner, shall hold their offices for such terms
and shall carry out such duties as are determined solely by the Board of Directors, subject to the right of the Board of Directors to remove any officers at any time with or without cause.
12.
Director Liability and Indemnification
.
(a)
Limitation of Liability
. Any person who is or was a director of the Corporation shall have no liability to the Corporation or its
shareholders for monetary damages for breach of fiduciary duty as a director provided that this Article 12 shall not eliminate or limit liability of a director for (i) any breach of the directors duty of loyalty to the Corporation or its
shareholders; (ii) acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, or (iii) unlawful distributions under
Section 48-18-302
of the TBCA. If the TBCA or any successor statute is amended or other Tennessee law is enacted after adoption of this provision to authorize
corporate action further eliminating or limiting the personal liability of directors, then the liability of a director of the Corporation shall be eliminated or limited to the fullest extent permitted by the TBCA, as so amended from time to time, or
such successor statute or other Tennessee law. Any repeal or modification of this Article 12 or subsequent amendment of the TBCA or enactment of other applicable Tennessee law shall not affect adversely any right or protection of a director of the
Corporation existing at the time of such repeal, modification, amendment or enactment or with respect to events occurring prior to such time.
(b)
Indemnification and Advancement of Expenses
. The Corporation shall indemnify every person who is or was a party or is or was
threatened to be made a party to any action, suit, or proceeding, whether civil, criminal, administrative, or investigative, including without limitation any action, suit or proceeding by or in right of the Corporation, by reason of the fact that he
or she is or was a director or officer or is or was serving at the request of the Corporation as a director, officer, employee, manager, agent, or trustee of another corporation or of a partnership, limited liability company, joint venture, trust,
employee benefit plan, or other enterprise, including service on a committee formed for any purpose (and, in each case, his or her heirs, executors, and administrators), against all expense, liability, and loss (including counsel fees, judgments,
fines, ERISA excise taxes, penalties, and amounts paid in settlement) actually and reasonably incurred or suffered in connection with such action, suit, or proceeding, to the fullest extent permitted by applicable law, as in effect on the date
hereof and as hereafter amended. Such indemnification shall include advancement of expenses in advance of final disposition of such action, suit, or proceeding, subject to the provision of any applicable statute.
(c)
Non-Exclusivity
of Rights
. The indemnification and advancement of expenses provisions of
this Article 12 shall not be exclusive of any other right that any person (and his or her heirs, executors, and administrators) may have or hereafter acquire under any statute, this Charter, the Corporations Bylaws,
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resolution adopted by the shareholders, resolution adopted by the Board of Directors, agreement, or insurance, purchased by the Corporation or otherwise, both as to action in his or her official
capacity and as to action in another capacity. The Corporation is hereby authorized to provide for indemnification and advancement of expenses through its Bylaws, resolution of shareholders, resolution of the Board of Directors, or agreement, in
addition to that provided by this Charter.
13.
Control Share Acquisitions
. The provisions of Sections
48-103-
201
301
through
48-103-
209
312
of the TBCA, otherwise
collectively
known as the Tennessee Control Share
Acquisition Act, as in effect as of the date hereof and any amendment thereto or successor provision thereto,
and explicitly including Sections
48-103-308
and
48-103-309,
shall apply to and govern, to the fullest extent provided by law,
shall not apply to the Corporation and, for the avoidance of doubt, shall
not apply to or govern
any Control Share Acquisition of this Corporations shares, as those terms are defined in the Tennessee Control Share Acquisition Act.
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14.
Business Combinations
.
(a)
Application of the Act.
The provisions of Sections
48-103-201
through
48-103-209
of the TBCA, otherwise known and cited as the
Tennessee Business Combination Act, as in effect as of the date hereof and any amendment thereto or successor provision thereto, shall apply to and govern, to the fullest extent provided by law, any Business Combination, as defined in
the Tennessee Business Combination Act.
(b)
Corporation Not Liable for Resisting Merger, Exchange, Etc.
So long as this
Corporation has a class of voting stock registered or traded on a national securities exchange or registered with the Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934, as amended, neither the Corporation nor its
directors or officers shall be liable at law or equity either for having failed to approve the acquisition of shares by an Interested Shareholder, as defined in the Tennessee Business Combination Act, on or before an Interested Shareholders
share acquisition date, or for seeking to enforce or implement the Tennessee Business Combination Act or the Tennessee Control Share Acquisition Act, or for failing to adopt or recommend any amendment to or provision of the Corporations
Charter and Bylaws then in effect with respect to the Tennessee Business Combination Act or the Tennessee Control Share Acquisition Act, as in effect as of the date hereof and any amendment thereto or successor provision thereto, or for opposing any
proposed merger, exchange, tender offer or significant disposition of assets of the Corporation or any subsidiary because of a good faith belief that the merger, tender offer, exchange or significant disposition of assets would adversely affect the
social, legal, environmental or economic circumstances of the Corporation, its employees, customers or suppliers, or the communities in which the Corporation, or its subsidiaries, operate or are located. In making decisions concerning these matters,
this Corporations officers and directors may also specifically consider any other relevant factors, including, but not limited to, (i) the financial and managerial resources and future prospects of the other party and (ii) the amount
and form of the consideration being offered in relation to the then current market price for the Corporations outstanding shares of capital stock, in relation to the then current value of the Corporation in a freely negotiated transaction and
in relation to the Board of Directors estimate of the future value of the Corporation (including the unrealized value of its properties and assets) as an independent concern.
15.
Action by Shareholders.
Any action required
or permitted to be taken by the shareholders of the Corporation may be effected at a duly called annual or special meeting of the shareholders of the Corporation or by a written resolution in lieu of a meeting signed by shareholders representing the
number of affirmative votes required for such action at a meeting; provided that, if at any time the Corporation ceases to be a controlled company under the corporate governance rules of the New York Stock Exchange, then at such time and
thereafter any action required or permitted to be taken by the shareholders of the Corporation may be effected only at a duly called annual or special meeting of the shareholders of the Corporation, except to the extent that such action may be taken
without a meeting in accordance with Section
48-17-104(a)
of the TBCA.
Reserved
.
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16.
Special Meetings
. Special meetings of shareholders may be called at any
time, but only by the Chairman of the Board of Directors, the Chief Executive Officer of the Corporation, or upon a resolution by or affirmative vote of the Board of Directors, and not by the shareholders. Any business transacted at any special
meeting of shareholders shall be limited to matters relating to the purpose or purposes stated in the notice of meeting.
17.
Exclusive Forum
. The Court of Chancery of the State of Tennessee (the Court of Chancery) shall be the sole and exclusive forum for any shareholder (including a beneficial owner) to bring (i) any derivative action or
proceeding brought on behalf of the Corporation, (ii) any action asserting a claim of breach of a fiduciary duty owed by any director, officer or employee of the Corporation to the Corporation or the Corporations shareholders,
(iii) any action asserting a claim against the Corporation, its directors, officers or employees arising pursuant to any provision of the TBCA or this Charter or the Corporations Bylaws, or (iv) any action asserting a claim against
the Corporation, its directors, officers or employees governed by the internal affairs doctrine. For the avoidance of doubt, any person purchasing or otherwise acquiring any interest in any shares of stock of the Corporation shall be deemed to have
notice of, and consented to the provisions of, this Article 17. If any provision or provisions of this Article 17 shall be held to be invalid, illegal or unenforceable as applied to any person or circumstance for any reason whatsoever, then, to the
fullest extent permitted by law, the validity, legality and enforceability of such provisions in any other circumstance and of the remaining provisions of this Article 17 (including, without limitation, each portion of any sentence of this Article
17 containing any such provision held to be invalid, illegal or unenforceable that is not itself held to be invalid, illegal or unenforceable) and the application of such provision to other persons and circumstances shall not in any way be affected
or impaired thereby.
18.
Charter and Bylaws Amendments
. Notwithstanding any other provision of this Charter, the
affirmative vote of holders of 66
2
⁄
3
percent of the voting power of the shares entitled to vote at an election of directors, voting together as a single
class, shall be required to reduce the maximum number of shares the Corporation may issue under Article 7(a), and to amend or repeal Articles 7(b)(e), 9, 10, 12, 13, 14, 15, 16, 17 and 18 of this Charter, or to amend, alter, change or repeal,
or to adopt any provisions of this Charter or of the Corporations Bylaws in a manner that is inconsistent with the purpose and intent of the aforementioned Articles.
19.
Corporate Opportunities
. To the maximum extent permitted under the TBCA, the Corporation renounces any interest or
expectancy of the Corporation in, or in being offered an opportunity to participate in, business opportunities that are from time to time presented to its directors who are not employees of the Corporation or any subsidiary (Outside
Directors), other than any such opportunity expressly presented to an Outside Director in such Outside Directors capacity as a director of the Corporation; and no such Outside Director shall be liable to the Corporation or its
shareholders for breach of any fiduciary or other duty by reason of the fact that such Outside Director personally or on behalf of any other person pursues or acquires such business opportunity, directs such business opportunity to another person or
fails to present such business opportunity, or information regarding such business opportunity, to the Corporation or its subsidiaries. For purposes of this Article 19, a director who is the Chairman of the Board of the Corporation shall not be
deemed to be an employee of the Corporation solely by reason of holding such position. No amendment or repeal of this Article 19 shall apply to or have any effect on the liability or alleged liability of any Outside Director for or with respect to
business opportunities of which such Outside Director becomes aware prior to such amendment or repeal. Any person purchasing or otherwise acquiring any interest in any capital stock of the Corporation shall be deemed to have notice of and to have
consented to the provisions of this Article 19.
This
Second
Amended and Restated Charter of J. Alexanders Holdings, Inc.
will be effective when filed with the Office of the Tennessee Secretary of State.
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Appendix C
Text of Stephens Inc. Written Opinion
Gentlemen:
You have requested that we provide our opinion regarding the fairness from a financial point of view of the proposed merger of 99
Restaurants LLC (Target) with and into Nitro Merger Sub, Inc. (Company Sub), a wholly owned subsidiary of J. Alexanders Holdings, LLC (Holdings), which is in turn a majority-owned subsidiary of J.
Alexanders Holdings, Inc. (the Company) (collectively, the Transaction). The terms and conditions of the Transaction are more fully set forth in the Agreement and Plan of Merger, dated as of August 3, 2017 (the
Agreement). We understand that the consideration to be given by the Company to acquire the Target under the Agreement consists of the new issuance of 16,272,727 Class B Units of Holdings, 16,272,727 shares of Class B Common Stock of the
Company and the assumption of approximately $20 million of net debt (the Consideration). We also understand that the Class B Units of Holdings and the shares of Class B Common Stock of the Company to be issued in the Transaction are
designed so that each pair consisting of one Class B Unit of Holdings and one share of Class B Common Stock of the Company would be exchangeable for one share of Class A Common Stock of the Company and so that in the aggregate the Class B Units
of Holdings and the shares of Class B Common Stock of the Company to be issued in the Transaction would be exchangeable for 16,272,727 shares of Class A Common Stock of the Company. With your permission, for purposes of our financial analysis
and opinion, we have evaluated the Transaction on an as exchanged basis, as if all of the Class B Units of Holdings and all of the shares of Class B Common Stock of the Company to be issued in the Transaction were exchanged.
For purposes of this letter, the public stockholders of the Company means the holders of outstanding shares of the Companys
common stock that are entitled to vote on the Transaction as disinterested shareholders of the Company, other than Target, Black Knight Advisory Services, LLC and their respective directors, officers and affiliates and the directors, officers, and
subsidiaries of the Company. You have requested our opinion as to whether the Consideration, in the aggregate, to be given by the Company in the Transaction is fair from a financial point of view to the Company and its public stockholders.
In connection with rendering our opinion we have:
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(i)
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reviewed certain publicly available financial statements and reports regarding the Company and the Target and reviewed certain audited financial statements regarding the Company and the Target;
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(ii)
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reviewed certain internal financial statements and other financial and operating data (including financial projections) concerning the Company and the Target prepared by and based on assumptions provided by the
management teams of the Company and the Target;
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(iii)
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analyzed, on a pro forma basis in reliance upon financial projections and other information concerning the Company and the Target prepared by and assumptions provided by the management teams of the Company and the
Target, the effect of the Transaction on the balance sheet, capitalization ratios, earnings and book value both in the aggregate and, where applicable, on a per share basis of the Company;
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(iv)
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reviewed the reported prices and trading activity for the common stock of the Company;
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(v)
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compared the financial performance of the Company and the prices and trading activity of its common stock with that of certain other publicly-traded companies that we deemed relevant to our analysis of the Transaction
and their securities;
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(vi)
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reviewed the financial terms, to the extent publicly available, of certain merger or acquisition transactions that we deemed relevant to our analysis of the Transaction;
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(vii)
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reviewed the most recent draft provided to us of the Agreement and related documents;
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(viii)
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discussed with management of the Company the operations of and future business prospects for the Company and the Target and the anticipated financial consequences of the Transaction to the Company and/or the Target,
including potential cost savings or potential synergies; and
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(ix)
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performed such other analyses and provided such other services as we have deemed appropriate.
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We have relied on the accuracy and completeness of the information and financial data provided to us by the Company and the Target and of the
other information reviewed by us in connection with the preparation of our opinion, and our opinion is based upon such information. We have not assumed any responsibility for independent verification of the accuracy or completeness of any of such
information or financial data. The management of the Company has assured us that they are not aware of any relevant information that has been omitted or remains undisclosed to us. We have not assumed any responsibility for making or undertaking an
independent evaluation or appraisal of any of the assets or liabilities of the Company or of the Target, and we have not been furnished with any such evaluations or appraisals; nor have we evaluated the solvency or fair value of the Company or of
the Target under any laws relating to bankruptcy, insolvency or similar matters. We have not assumed any obligation to conduct any physical inspection of the properties or facilities of the Company or of the Target. With respect to the financial
forecasts prepared by the managements of the Company and the Target, including forecasts of potential cost savings and of potential synergies, we have assumed that such financial forecasts have been reasonably prepared and reflect the best currently
available estimates and judgments of the managements of the Company and the Target as to the future financial performance of the Company and the Target and that the financial results reflected by such projections will be realized as predicted. We
have also assumed that the representations and warranties contained in the Agreement and all related documents are true, correct and complete in all material respects.
As part of our investment banking business, we regularly issue fairness opinions and are continually engaged in the valuation of companies and
their securities in connection with business reorganizations, private placements, negotiated underwritings, mergers and acquisitions and valuations for estate, corporate and other purposes. We are familiar with the Company and the Target and
regularly provide investment banking services to the Company and issue periodic research reports regarding the Companys business activities and prospects and we expect to provide similar services in the future. We have received fees for
providing investment banking services to the Company within the past two years and we may also receive fees for future services. During the two years preceding the date of this letter, we advised the predecessor of the Company regarding its spin-off
from Fidelity National Financial Ventures, LLC (FNFV), a wholly owned subsidiary of Fidelity National Financial, Inc. (FNF). We are entitled to receive a fee from the Company for providing our fairness opinion to the Company.
Our fee is not contingent upon the consummation of the Transaction. The Company has also agreed to reimburse certain expenses and to indemnify us for certain liabilities arising out of our engagement, including certain liabilities that could arise
out of our providing this opinion letter. We expect to pursue future investment banking services assignments from participants in this Transaction. In the ordinary course of business, we and our affiliates at any time may hold long or short
positions, and may trade or otherwise effect transactions as principal or for the accounts of customers, in debt or equity securities or options on securities of the Company or of any other participant in the Transaction.
We are not legal, regulatory, accounting or tax experts, and we have relied solely, and without independent verification, on the assessments
of the Company and its advisors with respect to such matters. We have assumed, with your consent, that the Transaction will not result in any materially adverse legal, regulatory, accounting or tax consequences for the Company or public stockholders
of the Company.
Our opinion is necessarily based upon market, economic and other conditions as they exist and can be evaluated on, and on
the information made available to us as of, the date hereof. It should be understood that subsequent developments may affect this opinion and that we do not have any obligation to update, revise or reaffirm this opinion. We have assumed that the
Transaction will be consummated on the terms of the latest draft of the Agreement provided to us, without material waiver or modification. We have assumed that in the course of
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obtaining the necessary regulatory, lending or other consents or approvals (contractual or otherwise) for the Transaction, no restrictions, including any divestiture requirements or amendments or
modifications, will be imposed that would have a material adverse effect on the contemplated benefits of the Transaction to the Company and public stockholders of the Company. We are not expressing any opinion herein as to the price at which the
common stock or any other securities of the Company will trade following the announcement of the Transaction.
This opinion is for the use
and benefit of the Board of Directors of the Company for purposes of assisting with its evaluation of the Transaction. This opinion is not intended to confer any rights or remedies upon any other person. Our opinion does not address the merits of
the underlying decision by the Company to engage in the Transaction, the merits of the Transaction as compared to other alternatives potentially available to the Company or the relative effects of any alternative Transaction in which the Company
might engage, nor is it intended to be a recommendation to any person as to any specific action that should be taken in connection with the Transaction. This opinion is not an assessment or evaluation of the negotiation process leading to the
Transaction, an evaluation of the business rationale regarding the Transaction, an opinion as to the legal structure of the Transaction, nor a confirmation of, or any form of opinion or assurance (whether audit, review, or compilation) on,
historical or prospective financial statements or any other information provided by or on behalf of the Company or the Target or obtained publicly. In addition, except as explicitly set forth in this letter with respect to fairness to the Company
and the public stockholders, you have not asked us to address, and this opinion does not address, the fairness to, or any other consideration of, the holders of any class of securities, creditors or other constituencies of the Company. We have not
been asked to express any opinion, and do not express any opinion, as to the fairness of the amount or nature of the compensation to any of the Companys officers, directors or employees, or to any group of such officers, directors or
employees, relative to the compensation to other shareholders of the Company. Our fairness opinion committee has approved the opinion set forth in this letter. Neither this opinion nor its substance may be disclosed by you to anyone other than your
advisors without our written permission. Notwithstanding the foregoing, this opinion and a summary discussion of our underlying analyses may be included in communications to shareholders of the Company, provided that we in our reasonable discretion
approve of the content of such disclosures prior to any filing or publication of such shareholder communications.
Based on the foregoing
and our general experience as investment bankers, and subject to the assumptions and qualifications stated herein, we are of the opinion on the date hereof that the Consideration to be given by the Company in the Transaction is fair from a financial
point of view to the Company and its public stockholders.
Very truly yours,
STEPHENS INC.
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PRELIMINARY PROXY CARD SUBJECT TO COMPLETION
EVERY VOTE IS IMPORTANT
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EASY VOTING OPTIONS:
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VOTE ON THE INTERNET
Log on to:
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or scan the QR code
Follow the
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instructions
available 24 hours
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VOTE BY PHONE
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VOTE BY MAIL
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Card and return in the
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VOTE IN PERSON
Loews Vanderbilt Hotel
2100 West End Avenue,
Nashville, Tennessee 37203
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J. ALEXANDERS
®
HOLDINGS, INC.