UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
SCHEDULE
14A
Proxy
Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934 (Amendment No. ___)
Filed
by the Registrant ☒
Filed
by a Party other than the Registrant ☐
Check
the appropriate box:
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☒
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Preliminary
Proxy Statement
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Confidential,
for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
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☐
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Definitive
Proxy Statement
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Definitive
Additional Materials
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Soliciting
Material Pursuant to §240.14a-12
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LUBY’S,
INC.
(Name
of Registrant as Specified In Its Charter)
(Name
of Person(s) Filing proxy statement, if other than the Registrant)
Payment
of Filing Fee (Check the appropriate box):
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☐
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Fee
computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
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(1)
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Title
of each class of securities to which transaction applies:
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(2)
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Aggregate
number of securities to which transaction applies:
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(3)
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Per
unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
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(4)
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Proposed
maximum aggregate value of transaction:
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Fee
computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
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☐
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Check
box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of
its filing.
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(1)
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Amount
Previously Paid:
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(2)
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Form,
Schedule or Registration Statement No.:
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Luby’s,
Inc.
13111
Northwest Freeway, Suite 600
Houston,
Texas 77040
,
2020
Dear
Fellow Stockholder:
You
are cordially invited to attend a special meeting of stockholders (the “Special Meeting”) of Luby’s, Inc. to
be held on , 2020, at , Houston time, at 13111 Northwest Freeway, Suite 300, Houston, Texas 77040. Each stockholder of record
at the close of business on , 2020 is entitled to receive notice of, attend and vote at the Special Meeting.
Matters
on which action will be taken at the Special Meeting are explained in detail in the attached Notice of Special Meeting of Stockholders
and proxy statement. We encourage you to read the entire proxy statement, including all annexes attached thereto, because it contains
important information for voting your shares.
Your
vote is important. Regardless of whether you attend the Special Meeting, it is important that your shares be represented.
If you are a stockholder of record, you may submit your proxy over the Internet, by phone or by mail as described on the proxy
card. If you hold your shares through a broker or other nominee, please follow the instructions that you receive from your broker
or other nominee to ensure that your shares are voted. Submitting your proxy will not prevent you from attending the Special Meeting.
Thank
you for your support.
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Sincerely,
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Christopher J. Pappas
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President and Chief Executive Officer
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Luby’s,
Inc.
13111
Northwest Freeway, Suite 600
Houston,
Texas 77040
Notice
of Special Meeting of Stockholders
To
Be Held on , 2020
NOTICE
IS HEREBY GIVEN that the Board of Directors of Luby’s, Inc., a Delaware corporation (the “Company”), has called
a special meeting of stockholders (the “Special Meeting”) to be held on , 2020, at , Houston time, at 13111
Northwest Freeway, Suite 300, Houston, Texas 77040 for the purposes provided below.
The
purposes of the Special Meeting are to:
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1.
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approve
the voluntary liquidation and dissolution of the Company pursuant to a plan of liquidation
and dissolution;
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2.
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ratify
the rights agreement, dated as of February 15, 2018, as amended on February 11, 2019
and February 14, 2020, by and between the Company and American Stock Transfer &
Trust Company, LLC;
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3.
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approve
an amendment to the Company’s Amended and Restated Certificate of Incorporation
(the “Amended Charter”) to reduce the minimum and maximum number of directors;
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4.
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approve
an amendment to the Amended Charter to allow stockholders to act by written consent;
and
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5.
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approve
the adjournment of the Special Meeting, if necessary or appropriate, including to solicit
additional proxies if there are insufficient votes at the time of the special meeting
to approve the Dissolution Proposal or in the absence of a quorum.
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The
Company will transact no other business at the Special Meeting except such business as may properly be brought before the Special
Meeting. The matters on which stockholders will act at the Special Meeting are more fully described in the proxy statement (including
all annexes attached hereto, the “Proxy Statement”) accompanying this Notice of Special Meeting of Stockholders. You
should carefully read the entire Proxy Statement, including the information included under the caption “Risk Factors”
beginning on page 12 of the Proxy Statement.
Each
stockholder of record at the close of business on , 2020 (the “record date”) is entitled to receive notice of, attend
and vote at the Special Meeting.
A
complete list of stockholders of record entitled to vote at the Special Meeting will be on file at the Company’s corporate
office at 13111 Northwest Freeway, Suite 600, Houston, Texas, 77040 for a period of ten days prior to the Special Meeting. During
such time the stockholders list will be open to examination by any stockholder during ordinary business hours for any purpose
germane to the Special Meeting.
Your
vote is important. Regardless of whether you attend the Special Meeting, it is important that your shares be represented.
If you are a stockholder of record, you may submit your proxy over the Internet, by phone or by mail as described on the proxy
card. If you hold your shares through a broker or other nominee, please follow the instructions that you receive from your broker
or other nominee to ensure that your shares are voted. Submitting your proxy will not prevent you from attending the Special Meeting.
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By Order of the Board of Directors,
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, 2020
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Michael Racusin
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General Counsel and Corporate Secretary
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IMPORTANT NOTICE REGARDING THE AVAILABILITY
OF PROXY MATERIALS FOR THE SPECIAL MEETING OF STOCKHOLDERS TO BE HELD ON , 2020: A complete set of proxy materials relating
to the Special Meeting are also available on the Internet at www.lubysinc.com/investors/filings.
Luby’s,
Inc.
13111
Northwest Freeway, Suite 600
Houston,
Texas 77040
PROXY
STATEMENT
For
the special meeting OF STOCKHOLDERS
To
be Held on , 2020
This
proxy statement (including all annexes attached hereto, this “Proxy Statement”) and the accompanying proxy card are
being provided to you in connection with the solicitation of proxies by the Board of Directors (the “Board”) of Luby’s,
Inc., a Delaware corporation (the “Company”), for use at a special meeting of stockholders of the Company to be held
on , 2020 (including any adjournment or postponement thereof (the “Special Meeting”)). The purposes of the Special
Meeting are to:
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1.
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approve
the voluntary liquidation and dissolution (the “dissolution”) of the Company
pursuant to a plan of liquidation and dissolution (the “Plan of Dissolution”)
in the form attached to this Proxy Statement as Annex A (the “Dissolution Proposal”);
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2.
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ratify
the rights agreement, dated as of February 15, 2018, as amended on February 11, 2019
and February 14, 2020, by and between the Company and American Stock Transfer &
Trust Company, LLC, as rights agent (the “Rights Agreement”), a conformed
copy of which is attached as Annex B to this Proxy Statement;
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3.
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approve
an amendment to the Company’s Amended and Restated Certificate of Incorporation
(the “Amended Charter”) to reduce the minimum and maximum number of directors
in the form attached to this Proxy Statement as Annex C (the “Board Size Amendment”);
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4.
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approve
an amendment to the Amended Charter to allow stockholders to act by written consent in
the form attached to this Proxy Statement as Annex D (the “Written Consent Amendment”);
and
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5.
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approve
the adjournment of the Special Meeting, if necessary or appropriate, including to solicit
additional proxies if there are insufficient votes at the time of the special meeting
to approve the Dissolution Proposal or in the absence of a quorum (the “Adjournment
Proposal”).
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Under
Delaware law and our governing documents, the Company will transact no other business at the Special Meeting except such business
as may properly be brought before the Special Meeting. As of the date of this Proxy Statement, the Board knows of no business
other than that set forth above to be transacted at the Special Meeting, but if other matters requiring a vote do arise, it is
the intention of the persons named in the proxy card, to whom you are granting your proxy and to whom such proxy confers discretionary
authority to vote on any unanticipated matters, to vote in accordance with their best judgment on such matters.
Your
vote is important. Regardless of whether you attend the Special Meeting, it is important that your shares be represented.
If you are a stockholder of record, you may submit your proxy over the Internet, by phone or by mail as described on the proxy
card. If you hold your shares through a broker or other nominee, please follow the instructions that you receive from your broker
or other nominee to ensure that your shares are voted. Submitting your proxy will not prevent you from attending the Special Meeting.
The
Notice of Special Meeting of Stockholders, this Proxy Statement and the accompanying proxy card are first being mailed to stockholders
on or about , 2020.
The
Company has elected to provide access to the proxy materials relating to the Special Meeting both by sending you this full set
of proxy materials, including a Notice of Special Meeting of Stockholders and a proxy card, and by notifying you of the availability
of the proxy materials on the Internet. The Notice of Special Meeting of Stockholders, Proxy Statement and proxy card are available
at www.lubysinc.com/investors/filings.
TABLE
OF CONTENTS
SUMMARY
TERM SHEET
This
summary term sheet, together with the section entitled “Questions and Answers” summarizes certain information contained
in this Proxy Statement related to the Dissolution Proposal and the Plan of Dissolution, but does not contain all of the information
relating to such proposal that is important to you. To more fully understand the Dissolution Proposal, including the Plan of Dissolution,
you should carefully read this entire Proxy Statement, including the Plan of Dissolution attached as Annex A to this Proxy Statement.
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The
Company
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We
are a multi-branded company operating in the restaurant industry and in the contract food services industry. Our primary
brands include Luby’s Cafeteria, Fuddruckers - World’s Greatest Hamburgers® (“Fuddruckers”)
and Luby’s Culinary Contract Services (“Culinary Contract Services”).
As
of August 26, 2020, we operated 82 restaurants, of which 58 are Luby’s Cafeteria restaurants and 24 are Fuddruckers
restaurants. Included in the 82 restaurants that we operated are 10 restaurants located at five property locations where
we operate a side-by-side Luby’s Cafeteria and Fuddruckers on the same property.
As
of August 26, 2020, we operated 26 Culinary Contract Services locations, of which 19 are located in the Houston, Texas
area, two in Dallas, Texas, one in San Antonio, Texas, one in the Texas Lower Rio Grande Valley, one in Kansas, one in
North Carolina, and one in New Mexico. Culinary Contract Services currently provides food service management to hospitals,
corporate dining facilities, sports stadiums, and a senior care facility.
As
of August 26, 2020, we had 32 franchise owners operating 85 Fuddruckers restaurants. Our largest five franchise owners
own five to 12 restaurants each and 11 franchise owners each own two to four restaurants. The 16 remaining franchise owners
each own one restaurant.
As
of August 26, 2020, we owned 69 properties, consisting of the underlying land and buildings thereon, most of which operate,
or have operated in the past, Luby’s Cafeterias and/or Fuddruckers operations. The estimated value of those properties
as of August 26, 2020, was $191.5 million.
Our
principal executive office is located at 13111 Northwest Freeway, Suite 600, Houston, Texas 77040, and our telephone number
at that address is (713) 329-6800. You can find more information about us in the documents that are incorporated by reference
into this Proxy Statement. See “Other Matters—Where You Can Find More Information; Documents Incorporated
by Reference.”
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The
Special Meeting
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We
are holding the Special Meeting on , 2020, at which you will
be asked to consider and vote upon proposals to: (1) approve the Dissolution Proposal; (2) ratify the Rights Agreement; (3)
approve the Board Size Amendment; (4) approve the Written Consent Amendment; and (5) if necessary or appropriate, approve
the Adjournment Proposal.
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Reasons
for Dissolution
(page 26)
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After
carefully considering the risks, timing, viability and potential impact on stockholders of the alternatives potentially available
to the Company, as well as the recommendation of the Special Committee of the Board (the “Special Committee”),
and in consultation with the Special Committee’s and the Company’s legal, financial and tax advisors, the Board
determined that the dissolution of the Company pursuant to the Plan of Dissolution is advisable and in the best interests
of the Company and its stockholders. For further discussion of the background and reasons for the dissolution,
see “Proposal 1: Approval of the Liquidation and Dissolution of the Company Pursuant to a Plan of Liquidation and Dissolution—Background
of the Proposed Dissolution” and “Proposal 1: Approval of the Liquidation and Dissolution of the Company Pursuant
to a Plan of Liquidation and Dissolution—Reasons for the Dissolution.”
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The
Plan of Dissolution
(page 19)
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At
the Special Meeting, stockholders will be asked to approve the Dissolution Proposal,
which seeks the approval by stockholders of the dissolution of the Company pursuant to
the Plan of Dissolution. Delaware law provides that a corporation may dissolve upon the
determination by the board of directors of such corporation that such dissolution is
advisable and in the best interests of the corporation and its stockholders and the subsequent
approval of the dissolution by the corporation’s stockholders. On September 4,
2020, the Board, upon the recommendation of the Special Committee, determined that the
dissolution of the Company is advisable and in the best interests of the Company and
its stockholders and approved and adopted the Plan of Dissolution.
If
the Dissolution Proposal is approved by stockholders, we expect to:
● continue
to work to sell all of our assets, including our primary operating segments—Luby’s Cafeterias, Fuddruckers
and Culinary Contract Services—their operations and our portfolio of real estate assets (our “monetization
strategy”);
● repay
our existing indebtedness with proceeds received from the sale of our assets pursuant to our monetization strategy;
● make
pre-effective date liquidating distributions to stockholders contingent on the successful implementation of our monetization
strategy and retaining sufficient assets to ensure our ability to satisfy or make adequate provision for all of our liabilities;
● file
a Certificate of Dissolution with the Secretary of State of the State of Delaware (the “Delaware Secretary of State”),
the timing of such filing will be determined in the sole discretion of the Board, at which time, or a later date as specified
in the Certificate of Dissolution, we will close our stock transfer books and shares of common stock will cease to be
traded on the New York Stock Exchange (the “NYSE”), which cessation of trading on the NYSE may become effective
prior to us closing our stock transfer books in the event the dissolution becomes effective at a later date as specified
in the Certificate of dissolution;
● from
and after the date the Certificate of Dissolution is filed with the Delaware Secretary of State or such later date and
time that is stated in the Certificate of Dissolution, which date will be no later than 90 days after the filing of the
Certificate of Dissolution (such date, the “effective date”), limit our operations and activities to those
required to wind up our business and affairs as required by law; and
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● follow
the “safe harbor” procedures (the “Safe Harbor Procedures”) under Sections 280 and 281(a) of the General
Corporation Law of the State of Delaware (the “DGCL”) to obtain an order from the Delaware Court of Chancery establishing
the amount and form of security for contested known, contingent and potential future claims that are likely to arise or become
known within five years of the effective date (or such longer period of time, not to exceed ten years, as the Delaware Court
of Chancery may determine).
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Effective
Date of Dissolution
(page 36)
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We
expect the Certificate of Dissolution to be filed following the full implementation of
our monetization strategy, which may take one or more years to complete, or such other
earlier time as the Board determines that the disposition of our remaining assets or
a sale of the Company is unlikely to maximize the value that can be returned to stockholders
from our monetization strategy. Under the Plan of Dissolution, the timing of the filing
of the Certificate of Dissolution will be determined in the sole discretion of the Board.
Notwithstanding
stockholder approval of the Dissolution Proposal, we intend to continue to implement our monetization strategy and explore
alternatives for returning capital to stockholders in a manner intended to maximize value prior to the effective date.
If the Board determines that any such alternative would be advisable and in the best interests of the Company and its
stockholders, it may abandon the dissolution and the Plan of Dissolution without further action by the stockholders in
accordance with Delaware law.
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Estimated
Liquidating Distributions to Stockholders
(page 30)
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We
estimate, assuming the sale of our assets pursuant to our monetization strategy, we could
make aggregate liquidating distributions to stockholders, including any pre-effective
date liquidating distributions, ranging between approximately $92 million to $123 million
(approximately $3.00 and $4.00 per share of common stock, respectively), based on 30,752,470
shares of common stock outstanding as of September 2, 2020. This amount may be paid in
one or more distributions. We cannot predict the timing or amount of any such distributions,
as uncertainties exist as to the value we may receive upon the sale of our assets pursuant
to our monetization strategy, the net value of any remaining assets after such sales
are completed, the ultimate amount of expenses associated with implementing our monetization
strategy, liabilities, operating costs and amounts to be set aside for claims, obligations
and provisions during the liquidation and winding-up process and the related timing to
complete such transactions.
We
intend to make one or more pre-effective date liquidating distributions in accordance Delaware law and any such liquidating
distributions will be contingent on the successful implementation of our monetization strategy and retaining sufficient
assets to ensure our ability to satisfy or make adequate provision for all of our liabilities, including the potential,
contingent and future liabilities we would be required to provide for in the context of a dissolution and winding up in
accordance with the Safe Harbor Procedures. Before making any pre-effective date liquidating distribution, we intend to
hold back an amount of assets that the Board estimates will be sufficient to cover the maximum potential reserves that
might be required by the Delaware Court of Chancery to satisfy our known, contingent and potential future liabilities.
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Our
estimates of the anticipated liquidating distribution amounts are preliminary and subject
to change and many of the factors that are necessary to determine how much, if any, we
will be able to distribute to stockholders in liquidation are subject to change and outside
of our control. The foregoing estimates are qualified by the assumptions described in
this Proxy Statement, are subject to numerous uncertainties, and may not reflect the
total range of possible outcomes; actual amounts may differ materially from such estimates.
We have attempted to make reasonable estimates and assumptions, but if any of such estimates
or assumptions is inaccurate, the actual amount we distribute to stockholders may be
lower or higher than the estimated range. It is possible that the aggregate liquidating
distributions that would be paid to a stockholder under the Plan of Dissolution would
not exceed the amount that such stockholder could have received upon sales of its shares
of common stock in the open market. It is not possible to predict with certainty what
the amount of aggregate liquidating distributions ultimately will be. While we intend
to pursue matters related to our liquidation and winding up as quickly as possible after
completion of the sale of our assets pursuant to our monetization strategy, the timing
thereof is also subject to numerous risks and uncertainties.
See
“Proposal 1: Approval of the Liquidation and Dissolution of the Company Pursuant to a Plan of Liquidation and Dissolution—Dissolution
under Delaware Law—Winding-Up Procedures” and “Proposal 1: Approval of the Liquidation and Dissolution of the
Company Pursuant to a Plan of Liquidation and Dissolution—Estimated Liquidating Distributions to Stockholders.”
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Amendment,
Modification or Revocation
(page 38)
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The
Board may amend or modify the Plan of Dissolution at any time, notwithstanding stockholder
approval of the Plan of Dissolution, if the Board determines that such action would be
advisable and in the best interests of the Company and its stockholders. Under the Plan
of Dissolution, the Board will have the authority to make any such amendment or modification
to the Plan of Dissolution without further stockholder approval. Prior to the effective
date, the Board may abandon the Plan of Dissolution altogether without further stockholder
approval in accordance with Delaware law.
After
the effective date, the Board cannot abandon the Plan of Dissolution without stockholder approval and would need to seek
stockholder approval to revoke the dissolution of the Company on the records of the Delaware Secretary of State.
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Appraisal
Rights
(page 39)
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Stockholders
are not entitled to assert appraisal rights in connection with the dissolution, and we do not intend to independently provide
stockholders with any such right.
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Interests
of the Board and Management in the Dissolution of the Company
(page 40)
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Members
of the Board and executive officers of the Company may have interests in the approval of the Dissolution Proposal that are
different from, or are in addition to, the interests of stockholders generally. These potential interests include
the acceleration of vesting of certain equity awards, the payment of severance compensation to certain executive officers
and/or our continuing indemnification obligations to directors and officers. The Board was aware of theses interests
and considered them, among other matters, in approving the Plan of Dissolution.
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Reporting
Requirements; Delisting and Lack of Market for Trading
(page 42)
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Whether
or not the Dissolution Proposal is approved, we have an obligation to continue to comply
with the applicable reporting requirements of the Securities Exchange Act of 1934, as
amended (the “Exchange Act”), even though compliance with such reporting
requirements may be economically burdensome and of minimal value to stockholders. If
stockholders approve the Dissolution Proposal and after full implementation of our monetization
strategy, in order to curtail expenses, we intend, on or about the effective date, to
seek relief from the U.S. Securities and Exchange Commission (the “SEC”)
to suspend our reporting obligations under the Exchange Act, and ultimately to terminate
the registration of our common stock. The SEC may not grant us the requested relief.
If we are unable to suspend our obligation to file periodic reports with the SEC, we
will be obligated to continue complying with the applicable reporting requirements of
the Exchange Act and will be required to continue to incur the expenses associated with
these reporting requirements, including legal and accounting expenses, which will reduce
the cash available for distribution to stockholders.
We
anticipate that, upon the filing of the Certificate of Dissolution, trading in shares of common stock will be suspended
on the NYSE, and the shares will thereafter be delisted.
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Material
U.S. Federal Income Tax Consequences (page 43)
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For
a discussion of certain material U.S. federal income tax consequences of a dissolution
to stockholders, please read “Material U.S. Federal Income Tax Consequences of
the Proposed Dissolution,” beginning on page 43 of this Proxy Statement.
Stockholders
are urged to carefully review this discussion and to consult their own tax advisors as to the specific tax consequences
of any distributions made to them and of the Company’s dissolution and liquidation pursuant to the Plan of Dissolution.
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Required
Vote (page 48)
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The
affirmative vote of the holders of a majority of the shares of common stock outstanding as of the record date and entitled
to vote thereon is required to approve the Dissolution Proposal. Abstentions and broker non-votes will be counted
towards the tabulation of votes cast on the Dissolution Proposal and will have the same effect as a vote against the Dissolution
Proposal.
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Recommendation
of the Board
(page 54)
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The
Board recommends a vote “FOR” the Dissolution Proposal to approve the liquidation and dissolution
of the Company pursuant to a plan of liquidation.
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Risk
Factors
(page 12)
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The
Plan of Dissolution involves a number of risks. In addition, if stockholders vote against
the Dissolution Proposal, we may pursue other alternatives, but there can be no assurance
that any of these alternatives would result in greater stockholder value than the proposed
dissolution, and any alternative we select may involve additional risks.
You
should carefully review risks discussed under the caption “Risk Factors” beginning on page 12 of this
Proxy Statement for a discussion of risks related to the dissolution.
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QUESTIONS
AND ANSWERS
The
following questions and answers are intended to address briefly some commonly asked questions regarding the Special Meeting, including
the proposals to be voted on by stockholders, voting and other matters. These questions and answers may not address all questions
that may be important to you as stockholder. Please refer to the additional information contained elsewhere in this Proxy Statement,
the annexes to this Proxy Statement and the documents referred to in this Proxy Statement.
Questions
and Answers About the Special Meeting and Voting
Who
is entitled to attend and vote at the Special Meeting?
Stockholders
of record at the close of business on , 2020
(the “record date”), are entitled to attend and vote on the matters presented at the Special Meeting. At the
close of business on the record date, shares
of the Company’s common stock, par value $0.32 per share (the “common stock”), were outstanding. Each share
of common stock is entitled to one vote.
What
constitutes a quorum for the Special Meeting?
The
presence in person or represented by proxy of the holders of a majority of the outstanding shares of common stock on the record
date and entitled to vote will constitute a quorum for the transaction of business at the Special Meeting.
What
vote is required to approve to each proposal and what is the recommendation of the Board?
The
table below summarizes the recommendation of the Board, the vote required and the effect of abstentions and broker non-votes with
respect to each proposal at the Special Meeting:
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Proposal
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Board
Recommendation
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Vote
Requirement When a
Quorum is Present
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Effect
of Abstentions and
Broker Non-Votes
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Proposal
1 Approval of the Dissolution Proposal
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FOR the approval of the Dissolution Proposal
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The
affirmative vote of the holders of a majority of the shares of common stock outstanding as of the record date and entitled
to vote thereon is required to approve the Dissolution Proposal.
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Same
effect as a vote against this proposal
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Proposal
2 Ratification of the Rights Agreement
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FOR the ratification of the Rights Agreement
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The
affirmative vote of the holders of a majority of the votes cast by the shares of common stock present in person or represented
by proxy and entitled to vote thereon is required to ratify the Rights Agreement.
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No
effect on the proposal
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Proposal
3 Approval of the Board Size Amendment
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FOR the approval of the Board Size Amendment
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The
affirmative vote of the holders of at least 80% of the shares of common stock outstanding as of the record date and entitled
to vote thereon is required to approve the Board Size Amendment.
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Same
effect as a vote against this proposal
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Proposal
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Board
Recommendation
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Vote
Requirement When a
Quorum is Present
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Effect
of Abstentions and
Broker Non-Votes
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Proposal
4 Approval of the Written Consent Amendment
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FOR the approval of the Written Consent Amendment
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The
affirmative vote of the holders of a majority of the shares of common stock outstanding as of the record date and entitled
to vote thereon is required to approve the Written Consent Amendment.
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Same
effect as a vote against this proposal
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Proposal
5
Approval of the Adjournment Proposal
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FOR the approval of the Adjournment Proposal
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The
affirmative vote of the holders of a majority of the votes cast by the shares of common stock present in person or represented
by proxy and entitled to vote thereon is required to approve the Adjournment Proposal.
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No
effect on the proposal
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How
do I vote my shares?
Voting
Before the Special Meeting
If
you are a stockholder of record as of the record date, you may vote by any of the following methods:
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Voting
by Internet – You may vote via the Internet by signing on to the website identified
on your proxy card and following the procedures described on the website. Internet voting
is available 24 hours a day, and the procedures are designed to authenticate votes cast
by using a personal identification number located on your proxy card. To be valid, a
submission via the Internet must be received by 11:59 p.m., Eastern daylight time, on
, , 2020. If you vote via the Internet, you should not return your proxy card.
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Voting
by Telephone – You may vote your shares by telephone by calling the toll-free
telephone number provided on your proxy card. Telephone voting is available 24 hours
a day, and the procedures are designed to authenticate votes cast by using a personal
identification number located on your proxy card. The procedures permit you to give a
proxy to vote your shares and to confirm that your instructions have been properly recorded.
To be valid, a submission by telephone must be received by 11:59 p.m., Eastern daylight
time, on , , 2020. If you vote by telephone, you should not return your proxy card.
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Voting
by Mail – If you choose to vote by mail, simply complete the enclosed proxy
card, date and sign it, and return it in the postage-paid envelope provided. Your shares
will be voted in accordance with the instructions on your proxy card. To be valid, a
submission by mail must be received by 5:00 p.m., Eastern daylight time, on , , 2020.
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If
you hold your shares in “street name” through an account with a bank or broker, you will receive voting instructions
from your bank or broker.
Voting
at the Special Meeting
If
you are a stockholder of record as of the record date, you may vote your shares at the Special Meeting if you attend in person.
If you intend to vote your shares at the Special Meeting, you will need to bring valid picture identification with you. We will
confirm that you were a stockholder of record on the record date and will provide you with a blank proxy card, which will serve
as a ballot on which to record your vote.
If
you hold your shares in “street name,” you must obtain a legal proxy from your bank or broker in order to vote at
the Special Meeting. A legal proxy is an authorization from your bank or broker to vote the shares it holds in its name. In addition
to a legal proxy, you will need to bring with you valid picture identification and a recent account statement from your bank or
broker, confirming your holdings on the record date. We will use these documents to confirm that you have proper authority to
vote and, upon confirmation, will provide you with a blank proxy card to serve as a ballot.
Even
if you plan to attend the Special Meeting, we encourage you to vote your shares before the meeting via the Internet, by telephone
or by mail.
Can
I change my vote or revoke my proxy?
Yes.
You can revoke your proxy and change your vote at any time before the polls close for voting at the Special Meeting.
If
you are the record holder of your shares, you may change your vote or revoke your proxy by:
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signing
and returning a later-dated proxy card, or entering a new vote via the Internet or by
telephone pursuant to the instructions given in the enclosed proxy card;
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providing
timely written notice that you are revoking your proxy to our Secretary at: Luby’s,
Inc., Attention: Corporate Secretary, 13111 Northwest Freeway, Suite 600 Houston, Texas
77040; or
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attending
the Special Meeting and voting in person.
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Any
written notice of revocation or later dated proxy that is mailed must be received before the close of business on , 2020. Alternatively,
you may hand deliver a written revocation notice or a later dated proxy to our Secretary at the Special Meeting before the polls
are open.
If
your shares are held by your broker or bank as a nominee or agent, you should follow the instructions provided by your broker
or bank.
Only
the latest validly executed proxy that you submit will be voted at the Special Meeting.
Is
the effectiveness of any of the proposals conditioned on the approval of another proposal?
None
of the proposals submitted to stockholders are conditioned on the approval of another proposal, including Proposals 3 and 4, each
of which contemplate different amendments to the Amended Charter.
What
if I return a proxy card but do not make specific choices?
If
you return a signed and dated proxy card without marking any vote selections, your shares will be voted “FOR”
each of the proposals. If any other matter is properly presented at the Special Meeting, your proxyholder (one of the individuals
named on your proxy card) will vote your shares using his or her best judgment.
What
does it mean if I receive more than one proxy card?
If
you receive more than one proxy card, it generally means your shares are registered differently or are in more than one account.
To ensure that all of your shares are represented at the Special Meeting, we recommend that you provide voting instructions for
each proxy card or, if you submit your proxy via the Internet or by telephone, submit your proxy for each proxy card you receive
to ensure that all of your shares are voted.
Who
will bear the cost of soliciting proxies for the Special Meeting?
We
will pay for the costs of the Special Meeting, including any cost for mailing the Notice of Special Meeting of Stockholders and
this Proxy Statement. We will reimburse brokers, custodians, nominees and other fiduciaries for the reasonable out-of-pocket fees
and expenses they incur to forward the Company’s solicitation materials to stockholders. In addition to solicitation by
mail, our officers, directors and employees may solicit proxies personally or by telephone, facsimile or electronic means. These
officers, directors and employees will not receive any extra compensation for these services.
We
have retained for
an estimated fee of up to $ to assist us in the mailing, collection and
administration of proxies.
expects that approximately
of
its employees will assist in the solicitation. We also request brokers, nominees, and fiduciaries holding stock in their
names for the benefit of others, or holding stock for others who have the right to give voting instructions, to forward proxy
material to their principals and to request authority for the execution of the proxy, and we will reimburse such persons for
their reasonable expenses. Except as set forth in this Proxy Statement, neither the Company nor any person acting on its
behalf has employed, retained or agreed to compensate any person to make solicitations or recommendations to stockholders
concerning the proxy solicitation.
Who
should I contact if I have any questions or need assistance in voting my shares, or if I need additional copies of the proxy materials?
If
you have any questions or need assistance in voting your shares, or if you need additional copies of the proxy materials, please
contact: .
Questions
and Answers About the Dissolution and the Plan of Dissolution
What
does the Plan of Dissolution entail?
The
Plan of Dissolution provides an outline of the steps for the dissolution of the Company. The Plan of Dissolution provides that
we will file the Certificate of Dissolution following the required stockholder approval and full implementation of our monetization
strategy, or such other earlier time as the Board determines, in its sole discretion, that the disposition of any remaining assets
is unlikely to maximize the value that can be returned to stockholders from our monetization strategy. The timing of the filing
of the Certificate of Dissolution is in the sole discretion of the Board.
Why
is the Board recommending approval of the dissolution of the Company pursuant to the Plan of Dissolution?
After
carefully considering the risks, timing, viability and potential impact on stockholders of the alternatives potentially available
to the Company, as well as the recommendation of the Special Committee, and in consultation with their and our legal, financial
and tax advisors, the Board determined that the dissolution of the Company pursuant to the Plan of Dissolution is advisable and
in the best interests of the Company and its stockholders. For further discussion of the background and reasons for the dissolution,
see “Proposal 1: Approval of the Liquidation and Dissolution of the Company Pursuant to a Plan of Liquidation and Dissolution—Background
of the Proposed Dissolution” and “Proposal 1: Approval of the Liquidation and Dissolution of the Company Pursuant
to a Plan of Liquidation and Dissolution—Reasons for the Dissolution.”
What
will happen if the Dissolution Proposal is approved?
If
the Dissolution Proposal is approved by stockholders, we will continue to implement our monetization strategy and anticipate making
one or more pre-effective date liquidating distributions to stockholders. Following the full implementation of our monetization
strategy, which may take one or more years to complete, we expect to file the Certificate of Dissolution with the Delaware Secretary
of State, or such other earlier time as the Board determines that the disposition of any remaining assets is unlikely to maximize
the value that can be returned to stockholders from our monetization strategy. The timing of the filing of the Certificate of
Dissolution will be in the sole discretion of the Board. The effective date of the dissolution will be when the Certificate of
Dissolution is filed with the Delaware Secretary of State or such later date and time that is stated in the Certificate of Dissolution,
which date will be no later than 90 days after the filing of the Certificate of Dissolution. Prior to filing the Certificate of
Dissolution, we will provide notice of the Board’s decision to proceed with the dissolution and the anticipated filing date
of the Certificate of Dissolution and the anticipated effective date, if different.
What
will happen if the Dissolution Proposal is not approved?
If
stockholders do not approve the Dissolution Proposal, we will continue our corporate existence and the Board will continue to
explore alternatives for returning capital to stockholders in a manner intended to maximize value. In addition, the Board may
determine that it is advisable and in the best interests of the Company and its stockholders to resubmit the Plan of Dissolution
to stockholders for reconsideration in the future.
When
do you expect the dissolution and winding-up process to be completed?
Assuming
the Dissolution Proposal is approved by stockholders, we expect the Certificate of Dissolution to be filed following the full
implementation of our monetization strategy, which may take one or more years to complete, or such other earlier time as the Board
determines that the disposition of any remaining assets or a sale of the Company is unlikely to maximize the value that can be
returned to stockholders from our monetization strategy, although such filing may be delayed by the Board in its sole discretion.
Pursuant to Delaware law, our corporate existence will continue for a period of at least three years, subject to extension in
certain circumstances, following the effective date for the purpose of prosecuting and defending suits, winding up the Company
and making distributions to stockholders, but not for the purpose of continuing to engage in any business for which the Company
was organized. As a result, the winding-up process could extend beyond three years after dissolution, and it is difficult to estimate
when it will be completed.
Will
I receive any liquidating distributions before the Certificate of Dissolution is filed?
We
intend to make one or more pre-effective date liquidating distributions contingent on the successful implementation of our monetization
strategy and retaining sufficient assets to ensure our ability to satisfy or make adequate provision for all of our liabilities,
including the potential, contingent and future liabilities we would be required to provide for in the context of a dissolution
and winding up in accordance with the Safe Harbor Procedures. The amount of any pre-effective date liquidating distribution would
be dependent on our surplus and net assets before and after making any such distribution, in accordance with Delaware law. The
amount and timing of any pre-effective date liquidating distributions will be determined by the Board in its sole discretion.
There is no assurance regarding whether or when any pre-effective date liquidating distribution will be made. If the Board determines
to make a pre-effective date liquidating distribution, only stockholders of record as of the record date set by the Board for
such distribution will be entitled to receive such distribution. See “—Estimated Liquidating Distributions to Stockholders—Pre-Effective
Date Liquidating Distributions” below.
Why
is stockholder approval being sought for the Dissolution Proposal, and will additional stockholder approval be sought prior to
the effective date of the dissolution for the sale of all or substantially all of the Company’s assets pursuant to the Company’s
monetization strategy?
Under
Delaware law, stockholder approval by the holders of a majority of the outstanding shares of stock of the corporation entitled
to vote thereon is required for certain fundamental corporate transactions, such as a transaction involving the sale of all or
substantially all of the assets of the Company, the complete liquidation of the Company or the dissolution of the Company. The
Dissolution Proposal contemplates the dissolution of the Company, winding up of its affairs after liquidation and distribution
of any remaining assets pursuant to the Plan of Dissolution. Therefore, under the DGCL, the Dissolution Proposal requires stockholder
approval.
The
Plan of Dissolution gives the Board, to the fullest extent permitted by law, the authority to liquidate all of our assets in the
manner that the Board determines is advisable and in the best interests of the Company and its stockholders after the effective
date without further stockholder approval. However, in accordance with Section 271 of the DGCL, the sale of all or substantially
all of our assets prior to the effective date will require additional approval of stockholders. Under the DGCL, stockholders will
not be required to approve or reject a sale of all or substantially all of our assets after the effective date. We are unable
to determine at this time whether any such stockholder approval will be required in connection with the disposition of our assets
prior to the dissolution.
SPECIAL
NOTE REGARDING FORWARD LOOKING-STATEMENTS
This
Proxy Statement contains “forward-looking statements” within the meaning of Section 27A of the Securities Act
of 1933, as amended, and Section 21E of the Exchange Act. All statements other than statements of historical facts are “forward-looking
statements” for purposes of these provisions, including statements concerning the proposed dissolution pursuant to the Plan
of Dissolution, all statements regarding the amount and timing of distributions made to stockholders, if any, in connection with
the dissolution, any statements of the plans and objectives of management for future operations, any statements concerning the
timing, implementation or success of our monetization strategy and/or Plan of Dissolution, any statements regarding future economic
conditions or performance, and any statement of assumptions underlying any of the foregoing. These statements involve known and
unknown risks, uncertainties and other important factors that may cause our actual results, performance or achievements to be
materially different from any future results, performance or achievements expressed or implied by the forward-looking statements.
In some cases, forward-looking statements can be identified by the use of terminology such as “may,” “will,”
“intends,” “plans,” “believes,” “targets,” “anticipates,” “expects,”
“estimates,” “predicts,” “potential,” “continue” or “opportunity,”
or the negative thereof or other comparable terminology. The forward-looking statements in this Proxy Statement are only predictions.
Although we believe that the expectations presented in the forward-looking statements contained herein are reasonable at the time
of filing, there can be no assurance that such expectations or any of the forward-looking statements will prove to be correct.
These forward-looking statements, including with respect to the timing and success of our monetization strategy and the dissolution
pursuant to the Plan of Dissolution, are subject to inherent risks and uncertainties, including, among other things: the availability,
timing and amount of liquidating distributions, including any pre-effective date liquidating distribution; the amounts that will
need to be set aside by us; the adequacy of such reserves to satisfy our obligations; our ability to favorably resolve certain
potential tax claims, litigation matters and other unresolved contingent liabilities; the amount of proceeds that might be realized
from the sale or other disposition of our assets pursuant to our monetization strategy; the effects of the COVID-19 pandemic on
our ability to implement our monetization strategy; the application of, and any changes in, applicable tax laws, regulations,
administrative practices, principles and interpretations; the incurrence by us of expenses relating to the dissolution; and the
ability of the Board to abandon, modify or delay implementation of the Plan of Dissolution, even after stockholder approval.
Further
information regarding the risks, uncertainties and other factors that could cause actual results to differ from the results in
these forward-looking are discussed under the section “Risk Factors” set forth below, and for the reasons described
elsewhere in this Proxy Statement. Please carefully consider these factors, as well as other information contained herein and
in our periodic reports and documents filed with the SEC. All forward-looking statements and reasons why results may differ included
in this Proxy Statement are made as of the date hereof. New risk factors and uncertainties may emerge from time to time, and it
is not possible for management to predict all risk factors and uncertainties. Except as required by applicable law, we do not
plan to publicly update or revise any forward-looking statements contained herein, whether as a result of any new information,
future events, changed circumstances or otherwise.
RISK
FACTORS
You
should carefully consider and evaluate all of the information included in this Proxy Statement, including the risk factors listed
below and the risks described in our filings with the SEC which are incorporated by reference herein. Any of these risks, as well
as other risks and uncertainties, could materially and adversely affect our business, results of operations and financial condition,
which in turn could materially and adversely affect the trading price of shares of our common stock and the amount and timing
of distributions, if any, that may be made to stockholders. Stockholders should keep in mind that the risks below are not the
only risks that are relevant to your voting decision. Additional risks not currently known or currently material to us may also
harm our business.
Risks
Related to the Plan of Dissolution
We
cannot assure you as to the amount or timing of liquidating distributions, if any, to be made to stockholders.
If
the Dissolution Proposal is approved by stockholders, we estimate, assuming the sale of our assets pursuant to our monetization
strategy, we could make aggregate liquidating distributions to stockholders, including any pre-effective date liquidating distributions,
ranging between approximately $92 million to $123 million (approximately $3.00 and $4.00 per share of common stock, respectively),
based on 30,752,470 shares of common stock outstanding as of September 2, 2020. This amount may be paid in one or more distributions.
We cannot predict the timing or amount of any such distributions, as uncertainties exist as to the value we may receive upon the
sale of our assets pursuant to our monetization strategy, the net value of any remaining assets after such sales are completed,
the ultimate amount of our expenses associated with implementing our monetization strategy, liabilities, the operating costs and
amounts to be set aside for claims, obligations and provisions during the liquidation and winding-up process, and the related
timing to complete such transactions. These and other factors make it impossible to predict with certainty the actual net cash
amount that will ultimately be available for distribution to stockholders or the timing of any such distributions.
We
cannot assure you of the amount or timing of any pre-effective date liquidating distributions.
We
intend to make one or more pre-effective date liquidation distributions contingent on the successful implementation of our monetization
strategy and retaining sufficient assets to ensure our ability to satisfy or make adequate provision for all of our liabilities,
including the potential, contingent and future liabilities we would be required to provide for in the context of a dissolution
and winding up in accordance with the Safe Harbor Procedures. Before making any pre-effective date liquidating distribution, we
intend to hold back an amount of assets that the Board estimates will be sufficient to cover the maximum potential reserves that
might be required by the Delaware Court of Chancery to satisfy our known, contingent and potential future liabilities.
Under
Delaware law, we may not make a pre-effective date liquidating distribution except (i) out of “surplus,” which is
defined as the amount by which our “net assets” (i.e., the amount by which our total assets exceed our total
liabilities) exceed our “capital” (i.e., the sum of the aggregate par value of all of shares of common stock
issued), or (ii) in the case in which there is insufficient “surplus,” out of our “net profits” for the
fiscal year in which such distribution is declared and/or the preceding fiscal year. Moreover, we may not make a pre-effective
date liquidating distribution if doing so would render us insolvent (i.e., if our liabilities exceed our assets, or if
we are unable to pay our debts as they come due) or if such distribution constitutes a fraudulent transfer. Accordingly, the amount
of any pre-effective date liquidating distribution would be dependent on our surplus and net assets before and after making such
distribution.
Factors
that could impact the amount of assets that the Board estimates will be sufficient to cover the maximum potential reserves that
might be required by the Delaware Court of Chancery to satisfy our known, contingent and potential future liabilities, include,
among others:
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whether
any existing or potential liabilities are resolved prior to the payment of any pre-effective
date liquidation distribution;
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whether,
in light of new facts and circumstances, any potential claims that were previously taken
into account by the Board in determining the holdback amount would no longer result in
any actual liabilities; and
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whether
new liabilities that were not expected by the Board arise, which would require an increase
in the holdback amount.
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Given
these uncertainties, it is not possible to predict with certainty the amount that will be ultimately available for any pre-effective
date liquidating distribution.
We
cannot assure you of the amount or timing of any post-effective date liquidating distributions.
Under
the DGCL, before a dissolved corporation may make any distribution to its stockholders, it must pay or make reasonable provision
to pay all of its claims and obligations, including all contingent, conditional or unmatured contractual claims known to the corporation.
We intend to rely on the Safe Harbor Procedures to, among other things, obtain a court order establishing the amount and form
of security for contested known, contingent and potential future claims that are likely to arise or become known within five years
of the effective date (or such longer period of time, not to exceed ten years, as the Delaware Court of Chancery may determine)
(the “Court Order”), and pay or make reasonable provision for our uncontested known claims and expenses and establish
reserves for other claims as required by the Court Order and the DGCL. However, the Board expressly reserves the right, in its
sole discretion, to follow other statutory procedures provided in the DGCL to wind-up the Company’s business and affairs.
We expect to distribute all of our remaining assets in excess of the amount to be used by us to pay claims and fund the reserves
required by the Court Order and pay our operating expenses through the completion of the dissolution and winding-up process to
stockholders.
The
Court Order will reflect the Delaware Court of Chancery’s own determination as to the amount and form of security reasonably
likely to be sufficient to provide compensation for all known, contingent and potential future claims against us. There can be
no assurances that the Delaware Court of Chancery will not require us to withhold additional amounts in excess of the amounts
that we believe are sufficient to satisfy our potential claims and liabilities. As a result, we anticipate a substantial period
of time may transpire between the effective date and any liquidating distributions to stockholders.
There
are numerous factors that could impact the amount of the reserves to be determined by the Court Order, and consequently the amount
of cash initially available for distribution, if any, to stockholders following the effective date, including without limitation:
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whether
any potential liabilities are resolved prior to the effective date;
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whether
any claim is resolved or barred pursuant to Section 280 of the DGCL;
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unanticipated
costs relating to the defense, satisfaction or settlement of existing or future lawsuits
or other claims threatened against us;
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whether
unforeseen claims are asserted against us, in which case we would have to defend or resolve
such claims and/or be required to establish additional reserves to provide for such claims;
and
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whether
any of the expenses incurred in the winding-up process, including expenses of required
personnel and other operating expenses (including legal, accounting and other professional
fees) necessary to dissolve and liquidate the Company, are more or less than our estimates.
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In
addition, as we wind down, we will continue to incur expenses from operations, such as operating costs, salaries, rental payments,
directors’ and officers’ insurance, payroll and local taxes and other legal, accounting and financial advisory fees,
which will reduce any amounts available for distribution to stockholders.
As
a result of these and other factors, we cannot assure you as to the timing of or any amounts to be distributed to stockholders
if the Board proceeds with the dissolution. If stockholders do not approve the Dissolution Proposal, no liquidating distributions
will be made. See “Proposal 1: Approval of the Liquidation and Dissolution of the Company Pursuant to a Plan of Liquidation
and Dissolution—Estimated Liquidating Distributions to Stockholders” beginning on page 30 of this Proxy Statement
for a description of the assumptions underlying and sensitivities of our estimate of the total cash distributions to stockholders
in the dissolution.
The
amount of cash available to distribute to stockholders depends on our ability to successfully execute our monetization strategy
and dispose of all or substantially all of our assets.
Our
efforts to enhance stockholder value through our monetization strategy may not be successful, which would significantly reduce
the cash available for distribution to stockholders. We cannot assure you that our efforts to enhance stockholder value through
the conduct of our monetization strategy will succeed. There will be risks associated with any potential divestiture transaction,
including whether we will attract potential acquirers for the Company’s businesses or its assets, and whether offers made
by such potential acquirors, if any, will be at valuations that we deem reasonable. Moreover, we are not able to predict how long
it will take to implement our monetization strategy, the delay of which may impact the timing of the dissolution. The timing and
terms of any transaction in furtherance of our monetization strategy will depend on a variety of factors, many of which are beyond
our control. A delay in, or failure to complete, any such transaction could have a material effect on our stock price and the
amount of any potential distributions to stockholders.
In
addition, our ability to successfully complete our monetization strategy could be materially negatively affected by economic conditions
generally, including public health risks related to COVID-19. We are exploring and evaluating potential transactions, the success
or timing of which may be impacted by the effects of the COVID-19 pandemic. In order to successfully monetize our assets, we must
identify and complete one or more transactions with third parties. Our businesses and assets and the availability of potential
buyers of our businesses and assets may be significantly impacted by public health issues or pandemics, including COVID-19. For
example, the shutdown orders across the various jurisdictions in which we or our franchises operate and other effects of COVID-19
have resulted in, and may continue to cause, decreased demand, and consequently decreased revenues, from the operation of our
businesses. The uncertain severity and impact of COVID-19 could result in reduced demand to purchase our businesses and assets
by third parties or reduced values such parties may ascribe to our businesses and assets.
Even
if we are able to identify potential transactions in furtherance of our monetization strategy, such buyers may be operationally
constrained or unable to locate financing on attractive terms or at all, which risk may be heightened due to the uncertainty of
COVID-19 and its impact. If financing is unavailable to potential buyers of our businesses or assets, or if potential buyers are
unwilling to engage in transactions due to the uncertainty in the market, our ability to complete such transactions would be significantly
impaired.
Any
negative impact on such third parties due to any of the foregoing events could cause costly delays and have a material adverse
effect on our ability to return value to stockholders, including our ability to realize full value from a sale or other disposition
of our businesses and assets as part of our monetization strategy. Any such negative impacts could also reduce the amount of cash
we are able to distribute to stockholders.
The
dissolution may be disrupted and adversely impacted by the effects of natural disasters, political crises, public health crises,
and other events outside of our control.
Natural
disasters, such as adverse weather, fires, earthquakes, power shortages and outages, political crises, such as terrorism, war,
political instability, or other conflict, criminal activities, public health crises, such as the COVID-19 pandemic and other disease
epidemics and pandemics, and other disruptions or events outside of our control could negatively affect our operations. Any of
these events may cause a delay in our targeted timing to file the Certificate of Dissolution with the Delaware Secretary of State.
In addition, as discussed above under the heading “—The amount of cash available to distribute to stockholders depends
on our ability to successfully execute our monetization strategy and dispose of all or substantially all of our assets”,
the effects of COVID-19 may materially impact the amount of cash available to distribute to stockholders, including the amounts
we may receive upon the execution of our monetization strategy and the disposition of all or substantially all of our assets.
The
Board may determine not to proceed with the dissolution or may amend or modify the Plan of Dissolution without further stockholder
approval.
Even
if the Dissolution Proposal is approved by stockholders, the Board may determine, in the exercise of its fiduciary duties, not
to proceed with the dissolution or to amend or modify the Plan of Dissolution to the extent permitted by Delaware law without
the necessity of further stockholder approval. If the Board elects to pursue any alternative to the Plan of Dissolution, stockholders
may not receive any of the funds that might otherwise be available for distribution to stockholders. Similarly, pursuant to our
monetization strategy, the Board may ultimately determine that the sale of the whole Company is advisable and in the best interests
of the Company and its stockholders. We cannot assure you that the sale of the whole Company will result in the same amount of
distributable cash proceeds to stockholders compared to the dissolution. After the effective date, revocation of the dissolution
would require stockholder approval under the DGCL.
If
we fail to retain sufficient funds to pay the liabilities actually owed to our creditors, each stockholder receiving liquidating
distributions could be liable for payment to our creditors for such stockholders pro rata share of any shortfall, up to the amount
actually distributed to such stockholder in connection with the dissolution.
Under
Delaware law, in the event we fail to retain sufficient funds to pay the expenses and liabilities actually owed to our creditors,
each stockholder could be held liable for payment to our creditors for claims brought during the three-year period after the effective
date (or, if we choose the unsupervised, “default” procedures under Section 281(b) of the DGCL (the “Default
Procedures”), for claims brought before or after such three-year period), up to the lesser of (1) such stockholder’s
pro rata share of amounts owed to creditors in excess of the contingency reserve and (2) the amounts previously received by such
stockholder in dissolution from us and from any liquidating trust or trusts. Accordingly, in such event, a stockholder could be
required to return part or all of the distributions previously made to such stockholder in the dissolution, and a stockholder
could receive nothing from us under the Plan of Dissolution, but no stockholder will be liable for claims against the Company
in excess of the amounts distributed to such stockholder. Moreover, in the event a stockholder has paid taxes on amounts previously
received, a repayment of all or a portion of such amount could result in a stockholder incurring a net tax cost if the stockholder’s
repayment of an amount previously distributed does not cause a commensurate reduction in taxes payable.
Liquidating
distributions to stockholders could be substantially reduced and/or delayed due to uncertainty regarding the resolution of certain
potential tax claims, litigation matters and other unresolved contingent liabilities of the Company.
We
intend to rely on the Safe Harbor Procedures to, among other things, obtain the Court Order establishing the amount and form of
security for contested known, contingent and potential future claims that are likely to arise or become known within five years
of the effective date (or such longer period of time, not to exceed ten years, as the Delaware Court of Chancery may determine)
as required by the Court Order and the DGCL. Whether any remaining assets or cash of the Company can be used to make liquidating
distributions to stockholders would depend on whether claims for which we have set aside reserves are resolved or satisfied at
amounts less than such reserves and whether a need has arisen to establish additional reserves. We cannot assure stockholders
that our liabilities can be resolved for less than the amounts we have reserved, or that unknown liabilities that have not been
accounted for will not arise. As a result, we may continue to hold back funds and delay additional liquidating distributions to
stockholders.
The
precise amount and timing of any distributions to stockholders will depend on and could be delayed or diminished due to many factors,
including without limitation:
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whether
a claim is resolved for more than the amount of reserve established for such claim pursuant
to the Court Order;
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whether
we are unable to resolve claims with creditors or other third parties, or if such resolutions
take longer than expected;
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whether
a creditor or other third party seeks an injunction against the making of additional
distributions to stockholders on the basis that the amounts to be distributed are needed
to satisfy our liabilities or other obligations to the extent not previously reserved
for;
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whether
due to new facts and developments, a new claim, as the Board reasonably determines, requires
additional funds to be reserved for its satisfaction; and
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whether
the expenses we incur in the winding-up process, including expenses of personnel required
and other operating expenses (including legal, accounting and other professional fees),
necessary to dissolve and liquidate the Company are more than anticipated.
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As
a result of these and other factors, it might take significant time to resolve these matters, and as a result we are unable to
predict the timing of distributions, if any are made, to stockholders.
Stockholders
may not be able to recognize a loss for U.S. federal income tax purposes until they receive a final distribution from us, which
could occur years from now.
As
a result of the dissolution, for U.S. federal income tax purposes, U.S. Holders (as defined in “Material U.S. Federal Income
Tax Consequences of the Proposed Dissolution” beginning on page 43 of this Proxy Statement) will recognize gain or loss
equal to the difference between (a) the sum of the amount of cash distributed to them and the aggregate fair market value of any
property (other than cash) distributed to them, and (b) their tax basis for their shares of Company common stock. A stockholder’s
tax basis in shares of Company common stock will depend upon various factors, including the stockholder’s cost and the amount
and nature of any distributions received with respect thereto. Any loss generally will be capital loss and will be recognized
only when the final distribution from us has been received, which may be years after our dissolution. The deductibility of capital
losses is subject to limitations.
The
tax treatment of any liquidating distributions may vary from stockholder to stockholder, and the discussions in this Proxy Statement
regarding such tax treatment are general in nature. You should consult your own tax advisor instead of relying on the discussions
of tax treatment in this proxy for tax advice.
The
Company has not requested a ruling from the IRS with respect to the anticipated tax consequences of the Plan of Dissolution, and
will not seek an opinion of counsel with respect to the anticipated tax consequences of any liquidating distributions. If any
of the anticipated tax consequences of the Plan of Dissolution described in the proxy statement proves to be incorrect, the result
could be increased taxation at the Company and/or stockholder level, thus reducing the benefit to stockholders and the Company
from the liquidation and distributions. Tax considerations applicable to particular stockholders may vary with and be contingent
upon such stockholder’s individual circumstances. For a more detailed discussion, see “Proposal 1: Approval of the
Liquidation and Dissolution of the Company Pursuant to a Plan of Liquidation and Dissolution—Material U.S. Federal Income
Tax Consequences of the Proposed Dissolution” beginning on page 43 of this Proxy Statement. You should consult your tax
advisor as to the particular tax consequences of the dissolution to you, including the applicability of any U.S. federal, state,
local and non-U.S. tax laws.
We
can abandon or revoke the dissolution and this may cause prior distributions made in liquidation to be treated as dividends.
By
approving the Dissolution Proposal, stockholders will also be granting the Board the authority, notwithstanding stockholder approval
of the Dissolution Proposal, to abandon the dissolution prior to the effective date without further stockholder action, if the
Board determines that the dissolution is no longer advisable and in the best interests of the Company and its stockholders.
Prior
to the expiration of three years following the effective date (or longer period as the Delaware Court of Chancery may direct),
the Company may revoke the dissolution if holders of a majority of the shares of stock of the corporation that was outstanding
and entitled to vote on the Dissolution Proposal at the time of the dissolution approve a resolution adopted by the Board recommending
such revocation of the dissolution. If the dissolution is abandoned or revoked, stockholders could, depending on their particular
circumstances, incur an increased stockholder-level U.S. federal income tax liability if cash or property distributed to stockholders
is characterized as a dividend for U.S. federal income tax purposes. See “Proposal 1: Approval of the Liquidation and Dissolution
of the Company Pursuant to a Plan of Liquidation and Dissolution—Material U.S. Federal Income Tax Consequences of the Proposed
Dissolution” beginning on page 43 of this Proxy Statement.
Transfers
of our common stock may limit our ability to utilize our net operating loss and tax credit carryforwards to offset income or gain
from the sale of our assets in future years.
Under
Sections 382 and 383 of the Code, a corporation that undergoes an “ownership change” is subject to limitations on
its ability to utilize net operating losses (“NOLs”) and certain tax credits arising from before the ownership change
to offset taxable income and tax after the ownership change. In general, an ownership change occurs if there is a cumulative change
in a corporation’s equity ownership by certain stockholders that exceeds 50% over a three-year period. We have NOL carryforwards
of approximately $26.4 million and tax credit carryforwards of approximately $12.5 million as of August 28, 2019. Any ownership
change could limit our ability to utilize our NOL and tax credit carryforwards to offset income or gain from the sale of our assets,
which will reduce any amounts available for distribution to stockholders.
From
and after the effective date, further stockholder approval will not be required under the DGCL in connection with the implementation
of the Plan of Dissolution, including the sale or disposition of all or substantially all of the Company’s assets.
The
approval of the Dissolution Proposal by the requisite vote of stockholders will grant full and complete authority to the Board
and officers of the Company to proceed, without further stockholder action, with the dissolution in accordance with any applicable
provision of the DGCL. However, prior to the effective date, we intend to continue to explore alternatives for returning capital
to stockholders in a manner intended to maximize value and in accordance with our monetization strategy. In accordance with Section
271 of the DGCL, a transaction involving the sale of all or substantially all of our assets prior to the effective date would
require additional approval of stockholders. We are unable to determine at this time whether any such stockholder approval would
be required in connection with the disposition of our assets prior to dissolution. Under the DGCL, following the effective date,
we may sell, distribute or otherwise dispose of our remaining non-cash assets without further stockholder approval. As a result,
the Board may, in order to maximize value for stockholders and creditors, authorize actions in implementing the Plan of Dissolution,
including the specific terms and prices for the sales and dispositions of its remaining assets, with which stockholders may not
agree.
The
directors and officers of the Company will continue to receive benefits from the Company following the dissolution.
Following
the effective date, we will continue to indemnify each of our current and former directors and officers to the extent permitted
under the DGCL, the Amended Charter, the Company’s bylaws (as amended from time to time, the “Bylaws”) and agreements
as in effect at the effective date. In addition, we intend to maintain directors’ and officers’ insurance coverage
throughout the wind down period. As described more fully below under “Proposal 1: Approval of the Liquidation and Dissolution
of the Company Pursuant to a Plan of Liquidation and Dissolution—Interests of Directors and Executive Officers Management
in Approval of the Dissolution,” our executive officers will receive compensation in addition to their interests as stockholders.
We
will continue to incur the expenses of complying with public company reporting requirements.
We
have an obligation to continue to comply with the applicable reporting requirements of the Exchange Act, even though compliance
with such reporting requirements is economically burdensome. In order to curtail expenses, we currently intend, after the filing
of the Certificate of Dissolution, to seek relief from the SEC from the reporting requirements under the Exchange Act. However,
the SEC may not grant any such relief, in which case we would be required to continue to bear the expense of being a public reporting
company.
Stockholders
will not be able to buy or sell shares of common stock after we close our stock transfer books at the effective date.
If
the Board determines to proceed with the dissolution, following the full implementation of our monetization strategy, which may
take one or more years to complete, we expect to file the Certificate of Dissolution with the Delaware Secretary of State, or
such other earlier time as the Board, in its sole discretion, determines that the disposition of any remaining assets is unlikely
to maximize the value that can be returned to stockholders from our monetization strategy, or at such later time as specified
in the Certificate of Dissolution, at which time we will close our stock transfer books and discontinue recording transfers of
our common stock. After we close our stock transfer books, we will not record any further transfers of common stock on our books,
except by will, intestate succession or operation of law. Therefore, shares of common stock will not be freely transferable after
the effective date. As a result of the closing of the stock transfer books, all liquidating distributions from a liquidating trust,
if any, or from us after the effective date will be made pro rata to the same stockholders of record as the stockholders of record
as of the effective date.
Risks
Related to Our Continuing Business if the Plan of Dissolution is Not Approved by Stockholders
If
stockholders vote against the Dissolution Proposal, we may pursue other alternatives, but there can be no assurance that any of
these alternatives would result in greater stockholder value than the proposed dissolution, and any alternative we select may
involve additional risks.
If
stockholders do not approve the Dissolution Proposal, the Company will continue its corporate existence and the Board will continue
to explore what, if any, alternatives are available to return capital to stockholders in a manner intended to maximize value.
There can be no assurance that any of these alternatives would result in greater stockholder value than the proposed dissolution.
Further, resulting distributions, if any, to stockholders will be treated as non-liquidating distributions taxable as dividends
for U.S. federal income tax purposes to the extent paid out of the Company’s current or accumulated earnings and profits.
Moreover, any alternative we select may involve additional risks. In addition to the risks described in this Proxy Statement,
you should carefully consider the risks described in Item 1A, “Risk Factors” in our Annual Report on Form 10-K for
the fiscal year ended August 28, 2019 (the “2019 Annual Report”), our Quarterly Reports on Form 10-Q, our Current
Reports on Form 8-K and other documents we file with the SEC, which are incorporated by reference herein.
We
have a history of incurring operating losses and have no available capacity for borrowings under our credit agreement. We do not
believe that we will be able to secure additional capital and if we continue to incur operating losses, we will not have enough
cash to fund our operations and may be required to seek bankruptcy protection.
We
have incurred operating losses in every fiscal year since fiscal year 2014 and we may never regain profitability. In fiscal year
2019, we sustained a net loss of $15.2 million and cash flow from operations was a use of cash of $13.1 million. In the first
two quarters of fiscal year 2020 (part of which was prior to the COVID-19 pandemic), we sustained a net loss of $12.1 million
and cash flow from operations was a use of cash of $5.9 million and in the third quarter of fiscal year 2020, we sustained a net
loss of $25.0 million and cash flow from operations was a use of cash of $14.1 million. Additionally, as of the date of this Proxy
Statement, we had no undrawn borrowing capacity under our credit agreement. While we have been able to secure additional capital
in the past, we do not currently believe that we will be able to secure additional capital on terms acceptable to us. Accordingly,
if the Dissolution Proposal is not approved by stockholders, we may be required to seek protection or liquidation under applicable
bankruptcy laws.
There
is substantial doubt about our ability to continue as a going concern.
In
evaluating whether there are conditions or events, considered in the aggregate, that raise substantial doubt about our ability
to continue as a going concern within one year after the date that the financial statements are issued, our management considered
our current financial condition and liquidity sources and forecasted future cash flows over the next months. Our management considered
the operating losses we have incurred during fiscal year 2020, no available borrowing capacity under our credit agreement and
the uncertainty of full extent and duration the impact of the COVID-19 pandemic on our operations and financial performance. As
a result of the foregoing factors, management concluded there is substantial doubt about our ability to continue as a going concern.
Our continuation as a going concern is dependent on our ability to generate sufficient cash flows from operations to meet our
obligations.
PROPOSAL
1:
APPROVAL OF THE LIQUIDATION AND DISSOLUTION OF THE COMPANY PURSUANT TO
A PLAN OF LIQUIDATION AND DISSOLUTION
Overview
The
Board is submitting for stockholder approval the Dissolution Proposal to approve the liquidation and dissolution of the Company
pursuant to Section 275 of the DGCL and the Plan of Dissolution. The Plan of Dissolution was approved and adopted by the Board,
subject to stockholder approval, on September 4, 2020. A copy of the Plan of Dissolution is attached as Annex A to this Proxy
Statement. You should carefully read this entire Proxy Statement, including the Plan of Dissolution attached as Annex A to
this Proxy Statement, for a more complete understanding of the Plan of Dissolution.
If
the Dissolution Proposal is approved by stockholders, we intend to continue to implement our monetization strategy and anticipate
making pre-effective date liquidating distributions to stockholders. See “—Estimated Liquidating Distributions to
Stockholders—Pre-Effective Date Liquidating Distributions” below for a description of the proposed pre-effective date
liquidating distribution, including the potential amount and timing of such distribution. Following the full implementation of
our monetization strategy, which may take one or more years to complete, or at such other earlier time as the Board determines
that the disposition of any remaining assets is unlikely to maximize the value that can be returned to stockholders from our monetization
strategy, we expect to file the Certificate of Dissolution with the Delaware Secretary of State. The timing of the filing of the
Certificate of Dissolution will be in the sole discretion of the Board. The effective date of the dissolution will be when the
Certificate of Dissolution is filed with the Delaware Secretary of State or such later date and time that is stated in the Certificate
of Dissolution, which date will be no later than 90 days after the filing of the Certificate of Dissolution. Prior to filing the
Certificate of Dissolution, we will provide notice of the Board’s decision to proceed with the dissolution and the anticipated
filing date of the Certificate of Dissolution and the anticipated effective date, if different.
After
the effective date, in accordance with the applicable provisions of the DGCL, the Board will proceed to wind up our affairs. We
intend to rely on the Safe Harbor Procedures to among other things, obtain the Court Order establishing the amount and form of
security for contested known, contingent and potential future claims that are likely to arise or become known within five years
of the effective date (or such longer period of time, not to exceed ten years, as the Delaware Court of Chancery may determine).
See “—Dissolution under Delaware Law” for additional information regarding the dissolution and winding-up procedures
under Delaware law.
If
stockholders do not approve the Dissolution Proposal, we will continue our corporate existence and the Board will need to explore
alternatives for the Company to maximum value for stockholders.
Background
of the Proposed Dissolution
Over
the past several years, the Company has struggled to restore profitability as a result of operational challenges, declining sales
and, more recently, the Company has been negatively impacted by the COVID-19 pandemic. Beginning in fiscal year 2018, the Company
started to implement a turnaround plan to improve the Company’s financial results and operating performance. The Company’s
turnaround strategy included evaluating ways to increase sales, lower costs, improve operations and steps to significantly reduce
the Company’s debt with the aim of reestablishing a solid foundation from which profitability could be restored. While focusing
on operational challenges, the Board also began considering various alternatives to pursue in the event the Company’s turnaround
plan did not meet the Board’s expectations.
In
July 2018, the Company retained Cowen and Company, LLC (“Cowen”) as its financial advisor to assist the Company in
refinancing its existing indebtedness.
Throughout
the first quarter of fiscal 2019, the Company worked with Cowen during the debt refinancing process, which resulted in the Company
successfully refinancing its indebtedness and entering into a five year credit agreement with MSD PCOF Partners IV, LLC (“MSD”).
The new credit agreement with MSD, along with the proceeds from the sale of certain real estate assets, was intended to provide
the necessary liquidity as the Company worked on implementing its turn-around plan.
In
addition, Cowen assisted the Company in evaluating various strategic alternatives during the second quarter of fiscal 2019, including
analyzing the business and operations of the Company.
In
November 2018, Bandera Partners LLC (“Bandera”) commenced a proxy contest to replace four incumbent directors. In
January 2019, Twila Day was added as an independent director of the Company. At the annual meeting of stockholders held on January
25, 2019, each of the Company’s director nominees was elected to the Board, with Frank Markantonis and Joe McKinney each
receiving less than a majority of the votes cast at the annual meeting, but more votes than each director candidate of Bandera.
At the annual meeting of stockholders held on February 2020, each current member of the Board was reelected as a director to serve
until the next annual meeting of stockholders.
In
January 2019, as part of the Board’s commitment to strong corporate governance, the Company announced that it would add
two new independent directors to replace two retiring incumbent directors and would elect a new independent chairman of the Board.
Gerald Bodzy was elected to serve as the new independent chairman of the Board on August 19, 2019 and John Morlock and Randolph
Read were added as independent directors of the Company on July 30, 2019 and August 19, 2019, respectively.
In
March 2019, the Company engaged Alvarez & Marsal Corporate Performance Improvement, LLC (“A&M”) to assist
the Company in analyzing its selling, general and administrative costs opportunities. The Company worked with A&M to identify
performance improvement opportunities and to identify certain selling, general and administrative costs that could be reduced
or eliminated. At that time, A&M identified several potential selling, general and administrative cost reduction opportunities,
including outsourcing key information technology, finance and facilities functions and rightsizing the remaining cost structure
to align with the current size of the Company. In early calendar year 2020, the Company implemented cost reduction measures, including
the transition to a third-party provider for certain accounting and payroll functions. Furthermore, in April 2020 through June
2020, the Company continued to review all corporate service providers, information technology needs and personnel requirements
to support a reduced level of operations and implemented additional significant expense reductions.
On
May 2, 2019, in considering potential strategic alternatives available to the Company and upon the recommendation of the Finance
and Audit Committee, the Board retained Brookwood Associates, L.L.C. (“Brookwood”) to serve as the exclusive financial
advisor to the Company with respect to a sale of all or substantially all of the Fuddruckers Company operated restaurants and
its franchise and real estate assets.
On
August 27, 2019, the Finance and Audit Committee met telephonically to discuss, among other things, the Board’s consideration
of the strategic alternatives available for the Company and the optimal structure for the Board to address those alternatives,
including whether the Board should form a special committee of the Board to address the alternatives. The Finance and Audit Committee
discussed the operational challenges and financial issues faced by the Company, the consideration of strategic alternatives available
to the Company, the benefits of using a special committee of the Board to consider strategic alternatives and the issues surrounding
potential involvement of management in a strategic alternatives process. After discussion, the Finance and Audit Committee recommended
to the Board that it form a special committee made up of independent members of the Board to initiate a strategic review process
to identify, examine and consider a range of strategic alternatives available to the Company with the objective of maximizing
stockholder value. The Finance and Audit Committee also directed Mr. McKinney to request a revised budget from management that
would address various key issues articulated in the Finance and Audit Committee discussions.
On
September 10, 2019, the Board formed the Special Committee, consisting solely of independent directors, with the purpose of establishing
a strategic review process to identify, examine and consider a range of strategic alternatives available to the Company with the
objective of maximizing stockholder value. The Special Committee consists of Gasper Mir, III, Messrs. Bodzy, McKinney, Morlock
and Read and Ms. Day, and is Co-Chaired by Messrs. Bodzy and Read. The Board also directed Brookwood to report to the Special
Committee in connection with its engagement to sell all or substantially all of the Fuddruckers Company operated restaurants and
its franchise and real estate assets.
The
following chronology summarizes the key meetings, events, and activities that led to the (i) Special Committee’s recommendation
that the Board adopt the Plan of Dissolution and (ii) Board’s adoption of the Plan of Dissolution.
Beginning
with the formation of the Special Committee and throughout the process, Messrs. Bodzy and Read, with continued input from various
Special Committee members, analyzed certain strategic alternatives available to the Company. Some of those alternatives included:
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continuing
the existing operations of the Company as an independent public company;
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selling
the Company as a whole;
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selling
the individual assets and operations, including the real estate, in separate transactions
followed by the distribution of the net proceeds from such sales to stockholders after
the payment of the Company’s indebtedness and other obligations; and
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selling
the restaurant operations while retaining the real estate and converting the Company
to real estate investment trust.
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Over
the course of its analysis, members of the Special Committee consulted with and considered the input of multiple investment banking
firms, including a number of firms specializing in real estate and restaurants, two real estate appraisers and several law firms
and accounting firms. Throughout the process, management and the Board, including its committees, reviewed and considered the
long-term outlooks for the Company’s brands.
On
October 30, 2019, the Special Committee met telephonically, with representatives of Brookwood in attendance, to receive an update
regarding the process of identifying potential parties interested in pursuing a transaction involving Fuddruckers. Representatives
of Brookwood provided the Special Committee with an update on the process of identifying potential parties interested in pursuing
a transaction involving Fuddruckers and on the letters of intent that had been received prior to the meeting. The Special Committee
discussed proposed responses to the letters of intent and, following such discussion, instructed Brookwood to follow up with the
interested parties.
On
November 14, 2019, the Special Committee met telephonically to discuss possible options the Company might pursue in order to maximize
value for stockholders over time. The discussion covered a draft strategic options analysis based on the process described above,
including discussions with various Special Committee members throughout the process, which had been provided to members of the
Special Committee prior to such meeting. In addition, Mr. Read discussed information received from his discussions with several
restaurant and real estate investment banking professionals regarding the potential value of each of the Company’s operating
businesses, the Company’s real property portfolio and the Company as a whole. Mr. Read also discussed conversations he had
with attorneys and accountants regarding legal and accounting considerations of various options the Company might consider. The
Special Committee discussed issues surrounding the potential of selling the real property in a single transaction, in multiple
transactions or individually, and which of these alternatives would result in the best value for stockholders. The Special Committee
members also discussed their view that the Company’s diverse restaurant operations would unlikely yield their greatest value
from a single buyer. Mr. Read then updated the Special Committee on Brookwood’s efforts to sell Fuddruckers.
On
November 18 and 19, 2019, Messrs. Bodzy, McKinney and Read, on behalf of the Special Committee, and Christopher J. Pappas, a director
and President and Chief Executive Officer of the Company, met, with representatives of Brookwood in attendance, with two potential
purchasers of Fuddruckers and discussed their bids for the division.
On
November 22, 2019, the Special Committee met telephonically to approve a recommendation to the Board that the Company enter into
a letter of intent for the sale of Fuddruckers and to approve the engagement of legal counsel for the Special Committee. Mr. Read
presented details of the meetings and negotiations with the two potential counterparties to acquire Fuddruckers. Following discussion
of the two proposals, the Special Committee approved a recommendation that the Board enter into a letter of intent with Party
A (the “Party A Letter”). The Co-Chairmen then discussed that they and Mr. McKinney had interviewed a number of law
firms that could serve as legal counsel for the Special Committee. After interviewing several law firms, the Special Committee
approved the engagement of Gibson, Dunn & Crutcher LLP (“Gibson Dunn”) as legal counsel to the Special Committee.
The Special Committee engaged Gibson Dunn because of Gibson Dunn’s knowledge, expertise and experience with respect to special
committee engagements and merger and acquisition transactions. The Special Committee also noted Gibson Dunn did not have any conflicts
of interest or other issues with regards to serving as legal counsel to the Special Committee. The Special Committee instructed
Messrs. Bodzy and Read to work with Brookwood and Sidley Austin LLP, counsel to the Company (“Sidley”), on a purchase
agreement with Party A.
On
December 8, 2019, the Special Committee met telephonically to consider the potential engagement of investment banks to assist
the Special Committee. Messrs. Bodzy and Read noted that they had contacted 15 investment banks regarding the potential assignment
and received six proposals. Messrs. Bodzy, McKinney and Read collectively spoke with three of the leading candidates and commenced
negotiating fee proposals with each of those banks. After discussion of the three investment banks, their proposals, their capabilities
and whether it would be in the best interests of the Company if the assignment were given to one bank or separated into separate
assignments, the Special Committee selected Duff & Phelps Securities, LLC (“Duff & Phelps”) to serve as financial
advisor to the Special Committee in connection with the possible sales of Luby’s Cafeterias and Culinary Contract Services
businesses and, at the request of the Special Committee, to provide the Special Committee and the Board a written evaluation of
strategic alternatives for the Company. The Special Committee engaged Duff & Phelps based on its experience and qualifications,
including with respect to merger and acquisition transactions and restructurings in the restaurant, food and consumer industries.
The Special Committee also noted that Duff & Phelps did not have any conflicts of interest or other issue with regard to the
possible sale of Luby’s Cafeterias and Culinary Contract Services.
On
January 7, 2020, the Special Committee met telephonically to discuss the status of negotiations regarding the proposed acquisition
of Fuddruckers by Party A under the Party A Letter. Mr. Read reported on the failure of Party A to meet certain requirements under
the Party A Letter. The Special Committee discussed proposed responses to Party A, the feasibility of Party A meeting certain
requirements in the future and whether to approach other potential purchasers. The Special Committee instructed representatives
of Brookwood to hold follow-up discussions with Party A regarding the Party A Letter. Messrs. Read and Bodzy also provided the
Special Committee with an update regarding Special Committee activities, including discussions with accounting advisors regarding
potential business structures such as a real estate investment trust or a master limited partnership. Mr. Read also provided the
Special Committee with an update on the expected timing of Duff & Phelps’s review of potential strategic alternatives
available to the Company.
Following
the January 7, 2020 Special Committee meeting, Party A was unable to raise the financing needed to consummate the transaction
contemplated by the Party A Letter. In addition, beginning in March 2020, the effects of the COVID-19 pandemic began to significantly
impact the processes to sell the Company’s assets.
On
March 20, 2020, non-executive Board members Jill Griffin, Frank Markantonis and the members of the Special Committee (the “Non-Executive
Board Members”), met telephonically to review and discuss plans to address the effects of the COVID-19 pandemic that may
have been needed to be implemented at the Company. The Non-Executive Board Members discussed the need for maximum cash availability.
Following discussion, the Non-Executive Board Members determined the Company should take all actions discussed to maximize the
availability of cash for the Company.
On
April 1, 2020, the Board met telephonically, with representatives of the Company’s management in attendance. Members of
the Company’s management provided the Board with an update on the impact of the COVID-19 pandemic on the Company’s
operations, including that as a result of state and local government mandates, many of the Company’s restaurant dining rooms
were temporarily closed and the impact of the closures on various financial metrics. The Board discussed the Company’s credit
availability and need to access additional liquidity as a result the negative impact of the COVID-19 pandemic on the Company’s
revenue. Messrs. Pappas and Bodzy provided the Board with an update on their discussions with MSD regarding the Company seeking
a loan under the Payroll Protection Program of the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”).
After discussion, the Board determined that it was advisable and in the best interests of the Company to apply for a loan of up
to $10 million under the Payroll Protection Program to ensure the availability of liquidity to meet the Company’s forecasted
capital needs.
On
April 20, 2020, the Special Committee met telephonically, with representatives of Duff & Phelps in attendance, to discuss
the marketing process for the potential sale of Culinary Contract Services. The Special Committee discussed the marketing materials
that had been prepared by management with the assistance of Duff & Phelps and the proposed timing of the marketing process
in light of the COVID-19 pandemic. After discussion, the Special Committee instructed Duff & Phelps to begin the marketing
of Culinary Contract Services as soon as possible. Messrs. Read and Bodzy then updated the Special Committee on various discussions
they had with Party A regarding efforts to restructure the transaction and Party A’s continued interest in acquiring Fuddruckers
on revised terms, and the Special Committee provided input with respect to continuing these discussions. The Special Committee
also discussed, among other issues, the Company’s cash flow issues, the general slowdown in merger and acquisition activity
as a result of the COVID-19 pandemic, the impact of current economic conditions on the Company and a proposed store reopening
plan.
On
April 21, 2020, the Company entered into a promissory note with Texas Capital Bank, N.A., effective as of April 12, 2020, that
provided for a $10 million loan pursuant to the Paycheck Protection Program under the CARES Act. In connection with entering into
the promissory note, the Company also amended its credit agreement with MSD to permit the Company to incur indebtedness in the
form of the promissory note and to terminate the $5 million undrawn portion of the delayed term loan under the credit agreement
with MSD.
On
May 5, 2020, the Special Committee met telephonically to discuss the previously circulated information regarding a proposed Fuddruckers
transaction and the marketing process for the potential sale of Culinary Contract Services. The discussion of the proposed Fuddruckers
transaction with Party A included a review of various alternative options. After the discussion, the Special Committee agreed
the Company should proceed in negotiations with Party A and that such transaction would be brought to the Special Committee and
the Board for final approval if concluded successfully. Mr. Read then discussed the progress made on the marketing of Culinary
Contract Services and Duff & Phelps’s views on delaying the marketing plan for Luby’s Cafeterias. Mr. Bodzy also
discussed moving forward with the draft plan of liquidation for the Company circulated prior to the meeting as the best way to
maximize value for stockholders, taking into account the current and forecasted severe economic impact of COVID-19 on the Company’s
operations and the restaurant sector in general. Mr. Bodzy emphasized the urgency of pursuing asset sales as soon possible given
the effects of COVID-19. It was agreed that a revised plan of liquidation and related documents would be distributed to the Special
Committee members for review.
On
May 13, 2020, the Special Committee met telephonically to receive an update regarding the activities of the Co-Chairmen and to
consider which approach to recommend to the Board: (i) adopting a formal plan of liquidation and dissolution of the Company and
submitting such plan to the stockholders for approval or (ii) approving the exploration of potential sale transactions to monetize
the assets of Company, which would likely be followed at a later date by the adoption by the Board of a formal plan of liquidation
and dissolution. Mr. Read reviewed and discussed a draft strategic options analysis that had been provided to the Special Committee
members. He noted selling the individual component operations of the Company and its real estate appeared to be the best way to
maximize value for stockholders. Among other things, the analysis considered the impact of the COVID-19 pandemic on the Company’s
business and assets, the ongoing consumption of capital by the Company’s business and its lack of borrowing availability.
Mr. Read also reviewed his discussion with representatives of Gibson Dunn and Sidley of various issues regarding a plan of liquidation.
Representatives of Gibson Dunn provided the Special Committee with a discussion of the Special Committee process, including the
benefits of the process and the duties of the Special Committee, and the legal implications of the two approaches being considered.
Mr. Read next provided an update regarding the potential sale of Fuddruckers to Party A. Specifically, while Party A continued
to be interested in the transaction, it had been unable to meet the terms established by the parties up to that point. Based on
discussions with financial advisors, Messrs. Read and Bodzy advised the Special Committee they did not believe there was a better
alternative available to Party A’s proposal for Fuddruckers at that time. Mr. Read also noted the Company’s engagement
with Brookwood had expired, explained Brookwood’s continuing rights to compensation should a transaction for Fuddruckers
be consummated and noted he and Mr. Bodzy were in discussions with Brookwood to renew or extend their engagement. Mr. Read then
discussed the Culinary Contract Services sales process, including the parties that had been contacted in the process and that
indications of interest were not expected until mid-June. Mr. Read also discussed that the process to sell Luby’s Cafeterias
had not yet commenced. He indicated the Luby’s Cafeterias sales process under current market conditions, including government
restrictions on restaurants during the COVID-19 pandemic, would be challenging. The Special Committee discussed in detail the
ongoing sales processes and the two approaches, including applicable stockholder approval requirements. After discussion, the
Special Committee agreed to recommend that the Board approve the exploration of potential sales transactions to monetize the assets
of Company, including selling the Company’s primary operating segments, Luby’s Cafeterias, Fuddruckers and Culinary
Contract Services, as well as its real estate portfolio, or selling the Company in its entirety and to not adopt a plan of liquidation
at that time.
On
May 27, 2020, the Special Committee entered into a new engagement letter with Brookwood to serve as the exclusive financial advisor
to the Company until December 31, 2020 with respect to a sale of all or substantially all of the Fuddruckers Company operated
restaurants and its franchise and real estate assets. The new engagement letter directed Brookwood to report to and take instructions
from the Special Committee in connection with the engagement.
On
May 30, 2020, the Special Committee met telephonically to, among other things, reconsider the two approaches considered on May
13, 2020 given new accounting treatment information available to the Special Committee. The Special Committee discussed the two
approaches at length. Following discussion, the Special Committee reaffirmed its May 13, 2020 decision.
Later
on May 30, 2020, the Board met telephonically to receive the recommendation of the Special Committee regarding strategic options
for the Company. Messrs. Bodzy and Read provided a detailed discussion of the Special Committee’s process and its recommendation
that the Company sell its operating divisions and assets (Luby’s Cafeterias, Fuddruckers, Culinary Contract Services, and
the Company’s real estate assets) in one or more transactions and not adopt a formal plan of liquidation at this time. After
discussion the Board approved that recommendation of the Special Committee.
On
June 3, 2020, the Company issued a press release announcing that, after a comprehensive review of the Company’s operations
and assets led by the Special Committee, the Company would immediately pursue the sale of its operating divisions and assets,
including its real estate assets, and distribute the net proceeds to its stockholders after payment of debt and other obligations.
On
June 30, 2020, the Special Committee met telephonically, with representatives of Brookwood in attendance, to review the indications
of interest Brookwood received for Fuddruckers. Representatives of Brookwood presented the details of the proposals and the Special
Committee discussed responses to each of the parties, including requesting letters of intent from certain parties after arranging
virtual management presentations to said parties. The Special Committee and the representatives of Brookwood also discussed the
Company’s proposed plans to sell certain of the Company’s real estate properties. Mr. Read then updated the Special
Committee on next steps in the marketing of Culinary Contract Services and Luby’s Cafeterias, including a discussion of
the preparations for Culinary Contract Services management presentations.
On
July 29, 2020, the Special Committee met telephonically, with representatives of Brookwood, Duff & Phelps and Gibson Dunn
in attendance. Representatives of Duff & Phelps discussed the letters of intent received to date for the purchase of Culinary
Contract Services. The Special Committee discussed the details of the proposals and proposed responses. It was agreed the Co-Chairmen
of the Special Committee would take into account the input provided by Special Committee members and then discuss further responses
to the parties interested in a transaction involving Culinary Contract Services. Representatives of Duff & Phelps then discussed
the Luby’s Cafeterias sales process, including the parties that had been contacted for indications of interest and that
formal indications of interest would be due on or about August 13, 2020.
At
the same meeting, representatives of Brookwood presented details on the status of parties’ interests in a potential transaction
involving Fuddruckers and advised that final bids/letters of intent would be due on August 11, 2020. Bill Gordon, Vice President
of Real Estate of the Company, discussed various aspects of the Company’s real estate and the sales process that had begun
with respect to certain of the Company’s real estate assets.
Furthermore,
at the same meeting, a representative of Deloitte Tax LLP, tax advisor to the Company (“Deloitte”), presented
information on tax matters with respect to the proposed sales and the structure for the Company going forward. At the request
of the Special Committee, representatives of Duff & Phelps summarized the results of its evaluation of strategic
alternatives. The alternatives reviewed included the following, which were based on discussions with, and with the approval
of, the Special Committee: (i) the continued implementation of the Company’s current operating strategy and cost
reduction measures while funding near term losses with asset sales (“Status Quo Alternative”); (ii) a sale
of the Company in its entirety (“Company Sale Alternative”); (iii) a sale of the Company’s operating
business while retaining the Company’s real estate assets, combined with the conversion of the Company’s
structure to a real estate investment trust (“REIT Alternative”); and (iv) a liquidation of the Company. This
summary was based on Duff & Phelps’ assessment of process considerations, including likely execution risk and
process timing, and potential strategic impact, based on the potential equity upside of each alternative assuming it was
executed successfully. Duff & Phelps’ evaluation indicated: (i) the Status Quo Alternative was likely most
favorable with respect to execution risk and process timing and least favorable with respect to potential equity upside;
(ii) the Company Sale Alternative was neutral with respect to execution risk and process timing and less favorable with
respect to potential equity upside; (iii) the REIT Alternative was least favorable with respect to execution risk,
neutral with respect to process timing and neutral with respect to potential equity upside; and (iv) the liquidation
alternative was neutral with respect to execution risk, less favorable with respect to process timing and more favorable with
respect to equity upside. In its evaluation of the liquidation alternative, Duff & Phelps noted a reference range of
aggregate potential liquidation proceeds available to holders of Luby’s common stock from $127.0 million to $172.1
million or $4.15 to $5.62 per share of Luby’s common stock, based on an estimated 30,625,470 shares of common stock
outstanding and the Company’s estimates of value for its owned real estate. Gibson Dunn discussed various legal aspects of the alternatives being considered by the Special Committee. The
Special Committee and its advisors then engaged in a lengthy discussion regarding the various alternatives being considered
for recommendation to the Board. Following discussion, the Special Committee unanimously adopted resolutions recommending the
Board adopt and approve the Plan of Dissolution and the related documents which had been previously circulated to the members
of the Special Committee, including obtaining stockholder approval of same.
On
September 1, 2020, the Special Committee met telephonically to review a draft of the proxy statement that would be filed with
the SEC if the Board approved the Plan of Dissolution, which had been circulated to the Special Committee members prior to the
meeting. The Special Committee discussed at length the estimated range of aggregate amounts that would be available for distribution
to stockholders and included in the proxy statement, including the reference range noted in the Duff & Phelps evaluation discussed
above. The Special Committee also reviewed an updated analysis provided to the Committee prior to the meeting, which reflected
then current information provided by management and informed by indications of interest provided by third parties for various
assets of the Company.
After
discussion, the Special Committee unanimously adopted a resolution recommending to the Board an estimated range of $90 million
to $115 million (approximately $2.94 to $3.75 per share of common stock, respectively, based on 30,625,470 shares of common stock
outstanding as of July 15, 2020) as the estimated range of the aggregate amount that could be distributed to stockholders under
the Plan to be included in the proxy statement. The Special Committee (which focused its attention more on the aggregate dollar
range than on the per common share range) recommended an estimated aggregate dollar range that was lower than the reference range
noted in the Duff & Phelps evalutation based on an updated real estate inventory list which showed fewer properties available
for sale due to interim real estate sales (the proceeds of which were used in part to pay down debt), lower potentially realizable
real estate values at the upper end of the range and the impact of the COVID-19 pandemic on the value of the Company’s real
estate and operating businesses. Messrs. Read and Bodzy then reviewed the substance and timing of the various asset sales activities
in process for Fuddruckers, Culinary Contract Services, Luby’s Cafeterias and the Company.
On
September 4, 2020, the Board met to review and consider the proposed dissolution. Representatives of the Special Committee provided
the Board with a summary of the Special Committee’s recommendation and the factors considered by the Special Committee in
determining to recommend that the Board approve and adopt the Plan of Dissolution and the related documents. During the meeting,
the Board considered and discussed at length the Special Committee’s recommendation to the Board that the Company include
an estimated range of potential distributions to stockholders in the proxy statement. Such discussion included updated information
considered by the Special Committee as compared to the reference range included in the earlier Duff & Phelps evaluation. In
considering the issue, the Board focused its attention on the per share of common stock distribution range, as well as on the
aggregate dollar range of such distributions. After considering the benefits and risks of the proposed dissolution and other relevant
factors, including the Special Committee’s recommendation, the Board unanimously: (i) determined that the dissolution of
the Company pursuant to the Plan of Dissolution was advisable and in the best interests of the Company and its stockholders; (ii)
approved the dissolution, the Plan of Dissolution, the associated dissolution documents and the transactions contemplated thereby;
(iii) directed that the dissolution, the Plan of Dissolution, the associated dissolution documents and the transactions contemplated
thereby be submitted to stockholders for their consideration and approval; and (iv) recommended to stockholders that they vote
in favor of the Dissolution Proposal. In addition, the Board determined the Company would include in the proxy statement an estimated
range of $92 million to $123 million (approximately $3.00 to $4.00 per share of common stock, respectively, based on 30,752,470
shares of common stock outstanding as of September 2, 2020), of potential aggregate distributions to stockholders.
Reasons
for Dissolution
On
July 29, 2020 the Special Committee unanimously recommended that the Board adopt and approve the Plan of Dissolution and the related
documents. Based on the Special Committee’s recommendation and all of the information made available to the Board and upon
other relevant factors, on September 4, 2020, the Board unanimously determined that the dissolution of the Company was advisable
and in the best interests of the Company and its stockholders and approved and adopted the Plan of Dissolution. The Board also
unanimously recommended that stockholders vote in favor of the Dissolution Proposal.
In
arriving at its recommendation, the Special Committee considered many factors, including, among others, the risks, timing, viability
and potential impact on stockholders of the Plan of Dissolution and alternatives available to the Company and consulted with financial
and legal advisors.
In
recommending the Board adopt and approve the Plan of Dissolution, the Special Committee considered a variety of factors, including
the following (not necessarily presented in order of relative importance):
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the
sale of the Company’s assets pursuant to the Company’s monetization strategy
and the dissolution provide stockholders with an opportunity to potentially monetize
their investment in the Company and allows the distribution of the maximum amount of
cash to stockholders;
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the
belief that the Plan of Dissolution was the most likely option considered by the Special
Committee to be successfully implemented;
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the
difficulty for the Company to grow its business in the current business environment;
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the
difficulty in the Company raising outside capital and the likely high cost to stockholders
in doing so;
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the
evaluation prepared by Duff & Phelps for the Special Committee of potential strategic
alternatives available to the Company;
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the
terms and conditions of the Plan of Dissolution, including the provisions that permit
the Board to modify or abandon the Plan of Dissolution before the effective date without
further action by stockholders.
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the
Company’s seven years of operating losses on its operations along with recent negative
cash flows;
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the
Company’s history of high selling, general and administrative costs relative to
the size of the Company’s operations;
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the
costs associated with the Company’s ongoing operations, including accounting, legal
and other expenses in connection with required filings with the SEC and required to support
the day-to-day operations of the Company;
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the
ability of the Company to continue as a going as a going concern if the Plan of Dissolution
is not approved, including that that Company may need to seek bankruptcy protection;
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the
Company’s history of incurring operating losses and limited to no access to capital;
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the
ability of the Company to pursue other alternatives if the Plan of Dissolution is not
approved by stockholders and the additional risks associated with any such other alternatives;
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the
viability of the Company’s operating business model given the COVID-19 pandemic
and the resulting current economic conditions.
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The
Special Committee also considered potential negative factors relating to the Plan of Dissolution, including the uncertainty of
the timing and the amount of distributions to stockholders, that stockholders will lose the opportunity to capitalize on potential
future business opportunities and possible future growth of the Company’s business and that under applicable law stockholders
could be required to return to creditors some or all of the distributions made to stockholders in the liquidation. In addition,
the Special Committee considered the other factors described in the section entitled “Risks Factors” in this Proxy
Statement, in our 2019 Annual Report and the other documents we file or furnish to the SEC.
The
foregoing discussion of the information and positive and negative factors considered and given weight by the Special Committee
is not intended to be exhaustive, but includes the principal factors considered by the Special Committee. In view of the variety
of factors considered in connection with its evaluation of the Plan of Dissolution, the Special Committee did not find it practicable
to, and did not, quantify or otherwise assign relative weights to the specific factors considered in reaching its recommendation.
Rather, the Special Committee made its recommendation based on the totality of the information presented to it and the investigations
conducted by it. In addition, each of the members of the Special Committee may have given differing weights to different factors.
The
Special Committee reached its unanimous decision to recommend that the Board adopt and approve the Plan of Dissolution and the
related documents in light of various factors described above and other factors that each member of the Special Committee believed
were appropriate.
In
addition to the negative factors considered by the Special Committee, the Board also considered additional negative factors in
arriving at its conclusion that the dissolution of the Company is advisable and in the best interests of the Company and its stockholder,
including, among others:
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it
is possible that the aggregate liquidating distributions that would be paid to a stockholder
under the Plan of Dissolution would not exceed the amount that such stockholder could
have received upon sales of its shares of common stock in the open market; and
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the
Board and the Company’s officers may have interests in the Plan of Dissolution
that are different from, or in addition to, the interests of stockholders generally.
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Based
in part on the Special Committee’s recommendation, the positive and negative factors considered by the Special Committee
and the additional factors considered by the Board, the Board unanimously (i) determined that the dissolution of the Company pursuant
to the Plan of Dissolution was advisable and in the best interests of the Company and its stockholders; (ii) approved the dissolution,
the Plan of Dissolution, the associated dissolution documents and the transactions contemplated thereby; (iii) directed that the
dissolution, the Plan of Dissolution, the associated dissolution documents and the transaction contemplated thereby be submitted
to stockholders for their consideration and approval; and (iv) recommended to stockholders that they vote in favor of the Dissolution
Proposal.
Evaluation
of the Financial Advisor to the Special Committee
On
July 29, 2020, Duff & Phelps reviewed with the Special Committee its evaluation of strategic alternatives potentially available
to the Company. The evaluation was subject to the assumptions, qualifications, limitations and other matters considered by Duff
& Phelps in connection with the preparation thereof.
Duff
& Phelps’ evaluation was furnished for the benefit of the Special Committee (in its capacity as such) in connection
with the Special Committee’s consideration of strategic alternatives that may be available to the Company, and is not intended
to, and does not, confer any rights or remedies upon any other person, and is not intended to be used, and may not be used, by
any other person or for any other purpose, without Duff & Phelps’ express consent. Neither Duff & Phelps’
evaluation nor the summary of its evaluation and the related analyses set forth in this proxy statement is intended to be, or
constitutes, a recommendation to the Special Committee, the Board or any stockholder of the Company as to how to vote or act with
respect to the proposed dissolution or any other transaction or alternative that may be available to the Company.
An
evaluation of strategic alternatives is inherently subjective; reasonable professionals or individuals reviewing the same information
could reach different conclusions. The decision as to whether to proceed with the proposed dissolution or any other transaction
or alternative may depend on an assessment of factors unrelated to the financial analysis and other considerations set forth in
Duff & Phelps’ evaluation. The decision regarding whether to proceed with the proposed dissolution or any other transaction
or alternative is solely that of the Special Committee and the Board.
The
information utilized by Duff & Phelps in preparing its evaluation was obtained from the Special Committee, Company management,
public sources and other sources. Duff & Phelps made no representation or warranty, express or implied, as to the accuracy
or completeness of such information. Duff & Phelps was under no obligation to, and did not, independently verify such information.
Duff & Phelps relied upon and assumed, without assuming any responsibility for independent verification, the accuracy and
completeness of all legal, regulatory, tax, accounting and other information provided to, discussed with or reviewed by Duff &
Phelps, and Duff & Phelps did not assume any liability for any such information.
In
connection with its evaluation, Duff & Phelps made such reviews, analyses and inquiries as it deemed necessary and appropriate
under the circumstances. Duff & Phelps’ procedures, investigations, and financial analysis with respect to the preparation
of its evaluation included, but were not limited to, the items summarized below:
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reviewed
certain publicly available business and financial information relating to the Company;
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reviewed
certain other business, financial and operating information relating to the Company prepared
and provided to Duff & Phelps by the Special Committee and Company management;
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spoke
with the Special Committee and certain members of the management of the Company and its
advisors regarding the business and prospects of the Company;
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reviewed
certain financial data for the Company and compared that data with similar data for companies
with publicly traded equity securities that Duff & Phelps deemed relevant;
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reviewed
the publicly available financial terms of certain M&A transactions involving target
companies that Duff & Phelps deemed relevant; and
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conducted
such other analyses and considered such other factors as Duff & Phelps deemed appropriate.
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Duff
& Phelps did not perform a discounted cash flow analysis of the Company or take into account forward-looking financial information
in its selected companies analysis of the Company, because, due to the significant uncertainty caused by the COVID-19 pandemic,
Company management did not provide Duff & Phelps with financial projections.
In
addition, the credit, financial and stock markets had been experiencing unusual volatility as a result of COVID-19 and other factors.
Accordingly, Duff & Phelps expressed no opinion or view as to any potential effects of COVID-19 or the current volatility
of the credit, financial and stock markets on the Company.
Assumptions,
Qualifications and Limiting Conditions
In
performing its analyses with respect to its evaluation of strategic alternatives, Duff & Phelps, with the Company’s
consent:
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relied
upon the accuracy, completeness and fair presentation of all information, data, advice,
opinions and representations obtained from public sources or provided to it from private
sources, including the Special Committee and Company management, and did not independently
verify such information;
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assumed
that any estimates, evaluations, forecasts and projections furnished to Duff & Phelps
were reasonably prepared and based upon the best currently available information and
good faith judgment of the person furnishing the same, and Duff & Phelps expressed
no opinion with respect to any such estimates, evaluations, forecasts or projections
or the respective assumptions on which they were based;
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assumed
that information supplied and representations made by the Special Committee and Company
management were substantially accurate regarding the Company;
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assumed
that there had been no material change in the assets, liabilities, financial condition,
results of operations, business, or prospects of the Company since the date of the information
made available to Duff & Phelps, and that there was no information or facts that
would make the information reviewed by Duff & Phelps incomplete or misleading; and
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assumed
that all governmental, regulatory or other consents and approvals necessary for the consummation
of the potential transactions relating to the strategic alternatives considered by Duff
& Phelps in its evaluation would be obtained without any adverse effect on the Company.
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To
the extent that any of the foregoing assumptions or any of the facts on which Duff & Phelps’ evaluation is based prove
to be untrue in any material respect, the evaluation cannot and should not be relied upon. Furthermore, in Duff & Phelps’
analysis and in connection with the preparation of its evaluation, Duff & Phelps made numerous assumptions with respect to
industry performance, general business, market and economic conditions and other matters, many of which are beyond the control
of any party involved in the proposed dissolution.
Duff
& Phelps prepared its evaluation effective as of the date of such evaluation. Duff & Phelps’ evaluation was necessarily
based upon market, economic, financial and other conditions as they existed and could be evaluated as of the date of the evaluation,
and Duff & Phelps disclaimed any undertaking or obligation to advise any person of any change in any fact or matter affecting
its evaluation which may come or be brought to the attention of Duff & Phelps after the date of the evaluation.
Duff
& Phelps did not evaluate the solvency of the Company or conduct an independent appraisal or physical inspection of any specific
assets or liabilities (contingent or otherwise). Duff & Phelps did not express any opinion as to the market price or value
of the Company’s common stock (or anything else) after the announcement of the proposed dissolution. Duff & Phelps’
evaluation should not be construed as a valuation opinion, credit rating, solvency opinion, fairness opinion, an analysis of the
Company’s or any other party’s credit worthiness, as tax advice or as accounting advice. Duff & Phelps did not
make, and assumed no responsibility to make, any representation, or render any opinion, as to any legal matter.
Duff
& Phelps was retained by the Special Committee as the exclusive financial advisor to the Special Committee in connection with
the possible sale of each of Luby’s Cafeteria and Culinary Contract Services and to provide the Special Committee with an
evaluation of strategic alternatives. Pursuant to the terms of its engagement, Duff & Phelps became entitled to a fee of $100,000
on the date it was retained by the Company and $100,000 upon the delivery of its evaluation of strategic alternatives. Duff &
Phelps is also entitled to a transaction fee upon the consummation of any sale of Luby’s Cafeteria or any sale of Culinary
Contract Services, each of which will be based upon the value of the applicable transaction and contingent upon the consummation
of the applicable transaction. The Company has also agreed to reimburse Duff & Phelps for its out-of-pocket expenses and reasonable
fees and expenses of counsel, consultants and advisors retained by Duff & Phelps in connection with the engagement. The Company
has also agreed to indemnify Duff & Phelps for certain liabilities arising out of its engagement.
Estimated
Liquidating Distributions to Stockholders
Amount
We
estimate, assuming the sale of our assets pursuant to our monetization strategy, we could make aggregate liquidating distributions
to stockholders, including any pre-effective date liquidating distributions, ranging between approximately $92 million to $123
million (approximately $3.00 and $4.00 per share of common stock, respectively), based on 30,752,470 shares of common stock outstanding
as of September 2, 2020. This amount may be paid in one or more distributions. We cannot predict the timing or amount of any such
distributions, as uncertainties exist as to the value we may receive upon the sale of our assets pursuant to our monetization
strategy, the net value of any remaining assets after such sales are completed, the ultimate amount of our expenses associated
with implementing our monetization strategy liabilities, the operating costs and amounts to be set aside for claims, obligations
and provisions during the liquidation and winding-up process, and the related timing to complete such transactions.
Calculating
the estimated amount of cash distributable to stockholders is inherently uncertain and requires that we make a number of assumptions
regarding future events, many of which are unlikely to ultimately be true and are not known at this time. We used the following
assumptions when calculating the range of estimated distributable value of cash: (1) we file the Certificate of Dissolution and
implement the Plan of Dissolution shortly after closing of the sale of all or substantially all of our assets; (2) there are no
currently unknown or unanticipated material liabilities, and no such liabilities arise or are identified after the filing of the
Certificate of Dissolution (or if the effective date is at a later date, then the effective date); (3) the estimate of the Company’s
known, contingent or future liabilities is reasonable and materially accurate; (4) the accounting for our liabilities, including
those that are presently unknown, involves estimates that are reasonable and materially accurate; and (5) the number of employees
will be reduced substantially as we dispose of our assets in accordance with our monetization strategy and following the effective
date.
Further,
we made a number of assumptions regarding the future value of the sale of our assets pursuant to our monetization strategy prior
to the effective date, including: (1) the sales of our assets may be made in one or more transactions; (2) the Board’s estimate
of the transaction-related costs in connection with the sale of our assets pursuant to our monetization strategy is reasonable
and materially accurate; (3) the timing and value realized upon sale of any of our assets would not be subject to material delay
or other limitations, including as a result of the COVID-19 pandemic; (4) the Board’s estimate as to the impact on the valuation
of our assets as a result of the COVID-19 pandemic, including any potential discount applied to the Board’s estimate of
realizable proceeds or value that may be obtained upon disposition as a result thereof, is reasonable and materially accurate;
and (5) the Board’s estimate of the net proceeds to be received from the sale of our assets pursuant to our monetization
strategy is reasonable and materially accurate.
Our
estimates of the anticipated distribution amounts are preliminary and subject to change and many of the factors that are necessary
to determine how much, if any, we will be able to distribute to stockholders in liquidation are subject to change and outside
of our control. The foregoing estimates are qualified by the assumptions set forth above, are subject to numerous uncertainties,
and may not reflect the total range of possible outcomes; actual amounts may differ materially from such estimates. We have attempted
to make reasonable estimates and assumptions, but if any of such estimates or assumptions are inaccurate, the actual amount we
distribute to stockholders may be lower or higher than the estimated range. It is possible that the aggregate liquidating distributions
that would be paid to a stockholder would not exceed the amount that the stockholder could have received upon sales of its shares
of common stock in the open market. It is not possible to predict with certainty what the amount of aggregate liquidating distributions
ultimately will be. While we intend to pursue matters related to our liquidation and winding up as quickly as possible after completion
of the sale of our assets pursuant to our monetization strategy, the timing thereof is also subject to numerous risks and uncertainties.
Although
there may be more clarity regarding the estimated amounts available for distribution to stockholders at a later date, we are seeking
stockholder approval of the Plan of Dissolution now in part because it would allow us to gauge the stockholders’ agreement
with the Board’s approach to unlocking stockholder value through effecting the dissolution as opposed to another alternative.
Additionally, in accordance with Section 271 of the DGCL, if we enter into a transaction to sell all or substantially all
of our assets before the effective date, stockholders would have the opportunity to approve or reject that transaction. If stockholders
do not approve the Dissolution Proposal, we will continue our corporate existence and the Board will need to explore alternatives
for the Company to maximize value for the stockholders.
For
a discussion of risks related to the dissolution and the estimates, assumptions and uncertainties related thereto, stockholders
are urged to review the risk factors set forth under the caption “Risk Factors” in this Proxy Statement, in our 2019
Annual Report and the other documents we file with or furnish to the SEC.
Pre-Effective
Date Liquidating Distributions
We
intend to make one or more pre-effective date liquidating distributions contingent on the successful implementation of our monetization
strategy, the repayment of our outstanding indebtedness and retaining sufficient assets to ensure our ability to satisfy or make
adequate provision for all of our liabilities, including the potential, contingent and future liabilities we would be required
to provide for in the context of a dissolution and winding up in accordance with the Safe Harbor Procedures. The amount of any
pre-effective date liquidating distribution would be dependent on our surplus and net assets before and after making any such
distribution, in accordance with Delaware law. The amount and timing of any pre-effective date liquidating distributions will
be determined by the Board in its sole discretion. There is no assurance regarding whether or when any pre-effective date liquidating
distribution will be made.
Under
Delaware law, we may not make a pre-effective date liquidating distribution except (i) out of “surplus,” which is
defined as the amount by which our “net assets” (i.e., the amount by which our total assets exceed our total
liabilities) exceed our “capital” (i.e., the sum of the aggregate par value of all of shares of common stock
issued), or (ii) in the case in which there is insufficient “surplus,” out of our “net profits” for the
fiscal year in which such distribution is declared and/or the preceding fiscal year. Moreover, we may not make a pre-effective
date liquidating distribution if doing so would render us insolvent (i.e., if our liabilities exceed our assets, or if
we are unable to pay our debts as they come due) or if such distribution constitutes a fraudulent transfer. Accordingly, the amount
of any pre-effective date liquidating distribution would be dependent on our surplus and net assets before and after making such
distribution. Any pre-effective date liquidating distribution will also be conditioned on the prior sale of our assets.
In
addition, in light of the fact that the Board has adopted the Plan of Dissolution and anticipates entering into a dissolution
and winding-up process, in determining the amount of our assets that would be available for a pre-effective date liquidating distribution,
the Board intends to retain sufficient assets to ensure our ability to satisfy or make adequate provision for all of our liabilities,
including the potential, contingent and future liabilities we would be required to provide for in the context of a dissolution
and winding up in accordance with the Safe Harbor Provisions. Accordingly, before making a pre-effective date liquidating distribution,
we intend to hold back an amount of assets that the Board estimates will be sufficient to cover the maximum potential reserves
that might be required by the Delaware Court of Chancery to satisfy our known, contingent and potential future liabilities.
Post-Effective
Date Liquidating Distributions
We
intend to make an initial post-effective date liquidating distribution to stockholders on our transfer books as of the effective
date as soon as practicable following entry of the Court Order. Under the DGCL, the post-effective date liquidating distribution
may not be made before the expiration of a period of 150 days from the date of the last notice of rejection given by us with respect
to known claims. The timing of the initial post-effective date liquidating distribution is subject to many factors outside of
our control and, therefore, we are unable to estimate when we would be able to begin making any post-effective date liquidating
distribution to stockholders. See “—Dissolution under Delaware Law.”
In
the initial post-effective date liquidating distribution, we intend to distribute all of our remaining cash in excess of the amount
to be used by us to pay claims and fund the reserves required by the Court Order and pay our operating expenses through the completion
of the dissolution and winding-up process to stockholders. The timing and amount of the initial post-effective date liquidating
distribution would depend on, among other things, the amount that was paid to stockholders in any pre-effective date liquidating
distribution and the actual amount of the reserves that we are required to establish pursuant to the Court Order. We are unable
to currently determine the amount of all liabilities and obligations that we will owe, or the amount of the reserve we will be
required to establish pursuant to the Court Order. The Court Order will reflect the Delaware Court of Chancery’s own determination
as to the amount and form of security reasonably likely to be sufficient to provide compensation for all known, contingent and
potential future claims against us. There can be no assurances that the Delaware Court of Chancery will not require us to withhold
additional amounts in excess of the amounts that we believe are sufficient to satisfy our potential claims and liabilities. As
a result, we anticipate a substantial period of time may transpire between the effective date and any post-effective date liquidating
distribution to stockholders.
To
the extent that claims for which we have set aside reserves are resolved or satisfied at amounts less than such reserves, and
assuming no need has arisen to establish additional reserves, we would make additional post-effective date liquidating distributions
to stockholders of any portion of the reserves established pursuant to the Court Order that the Board determines is no longer
required because the relevant claim has been resolved or satisfied. However, if the Delaware Court of Chancery requires us to
reserve an amount for potential liabilities that are not resolved prior to the issuance of the Court Order, stockholders may not
receive post-effective date liquidating distribution of any excess reserve amounts for a substantial period of time.
Under
Delaware law, in the event we fail to retain sufficient funds to pay the expenses and liabilities actually owed to our creditors,
each stockholder could be held liable for the repayment to those creditors who file claims before the end of the winding-up period,
out of the amounts previously received by such stockholder from us or from any liquidating trust or trusts, of such stockholder’s
pro rata share of such excess liability (up to the full amount actually received by such stockholder). However, under the Safe
Harbor Procedures, the liability of a stockholder for any claim against us is generally limited to such stockholder’s pro
rata share of such claim or the amount distributed to such stockholder in the dissolution, whichever is less, and is limited in
the aggregate to the amount distributed to such stockholder in the dissolution. The Safe Harbor Procedures further limit stockholder
liability by providing that stockholders have no liability for any claim commenced after the expiration of the winding-up period.
Dissolution
under Delaware Law
Generally
Delaware
law provides that a corporation may dissolve if deemed advisable and approved by a corporation’s board of directors followed
by the affirmative vote of the holders of a majority of the outstanding shares of stock of the corporation entitled to vote thereon,
or without the approval of the corporation’s board of directors in acting by unanimous stockholder consent in writing. Following
such approvals, the dissolution is effected by filing a Certificate of Dissolution with the Delaware Secretary of State. The corporation
is dissolved upon the effective date of its Certificate of Dissolution.
Dissolution
ends a corporation’s legal existence. It does not, however, extinguish pending litigation nor prevent the filing of suits
against the dissolved corporation. Rather, a dissolved corporation can sue or be sued for up to three years after dissolution,
or a longer period as determined by the Delaware Court of Chancery. In fact, Section 278 of the DGCL mandates the continued legal
existence of corporations for three years after dissolution, or longer if ordered by the Delaware Court of Chancery, for the purpose
of prosecuting and defending suits, whether civil, criminal or administrative, by or against them, and of enabling corporations
gradually to settle and close their business, to dispose of and convey their property, to discharge their liabilities and to distribute
to their stockholders any remaining assets, but not for the purpose of continuing the business for which the corporation was organized.
The Delaware Court of Chancery may prolong the period of continued corporate life beyond three years if an application is made
before the three-year period expires. The time period is also automatically extended by statute for any proceeding commenced prior
to dissolution or prior to the end of the three-year period but not completed within the allotted period. As a result, dissolution
does not function as a statute of limitations, and actions commenced against a corporation prior to dissolution or during the
three-year statutory winding-up period do not abate by reason of dissolution or on the expiration of the winding-up period.
To
fulfill the purpose of winding up a dissolved corporation’s affairs, the DGCL offers two alternative pathways: (1) the elective,
court-supervised “safe harbor” procedures under Sections 280 and 281(a) of the DGCL; or (2) the unsupervised, “default”
procedures under Section 281(b) of the DGCL. The Board expects that it will follow the Safe Harbor Procedures. For a description
of those procedures, see below “—Winding-Up Procedures.”
At
any time prior to the expiration of the three-year statutory winding-up period following the dissolution of a corporation, or
such longer period as may have been directed by the Delaware Court of Chancery pursuant to Section 278 of the DGCL, the corporation
may revoke the dissolution if (1) its board of directors adopts a resolution recommending that the dissolution be revoked, (2)
the holders of a majority of the shares of stock of the corporation which was outstanding and entitled to vote upon a dissolution
at the time of the corporation’s dissolution vote for the resolution to revoke the dissolution, and (3) the corporation
files a Certificate of Revocation with the Delaware Secretary of State and takes certain other actions specified by the DGCL.
Winding-Up
Procedures
After
the effective date, we would exist solely for purposes of prosecuting and defending suits and winding up our affairs. We expect
to follow the Safe Harbor Procedures because following such procedures would afford greater protection to our directors and stockholders
than the Default Procedures. The provisions of the Safe Harbor Procedures would protect our directors from liability to claimants
for failing to make adequate provision for our actual and potential liabilities by providing for judicial determination of the
amount and form of reserves to be set aside for pending, contingent or potential future claims and by providing that, in the absence
of fraud, the judgment of our directors is conclusive as to the provision made for payment of all other claims that are mature,
known and uncontested or that have been finally determined to be owing by us. However, the Plan of Dissolution provides that the
Board reserves the right to follow the Default Procedures, which determination the Board will make in its sole discretion.
Safe
Harbor Procedures
Following
the effective date, we would provide a notice of our dissolution containing the information required by DGCL by certified or registered
mail, return receipt requested, to: (1) all persons known to have a claim against us (“known claims”); (2) all persons
with claims asserted against us in a pending action, suit or proceeding to which we are a party (“pre-existing litigation
claims”); and (3) all persons with contractual claims contingent upon the occurrence or nonoccurrence of future events or
otherwise conditional or unmatured (“contingent contractual claims”). We would also publish such notice at least once
a week for two consecutive weeks in a newspaper of general circulation in the county in which the office of our last registered
agent in Delaware is located and in our principal place of business and at least once in all editions of a daily newspaper with
a national circulation.
Any
known claim (other than pre-existing litigation claims) is barred if the relevant claimant received actual notice and does not
present such claim by the bar date referred to in the notice. Within 90 days following receipt of any known claim made pursuant
to the above notice (and at least 150 days before the end of the three-year statutory winding-up period), we may reject any known
claim (other than pre-existing litigation claims), in whole or in part. Any such known claim is barred if the claimant whose claim
is rejected by us does not commence an action, suit or proceeding with respect to the claim within 120 days after we mail the
notice of rejection.
We
will also give notice of the dissolution to persons with contingent contractual claims. Such notice will be in substantially the
same form and sent and published in the same manner discussed above. Within 90 days following receipt of any contingent contractual
claim made pursuant to the above notice (and at least 150 days before the end of the three-year statutory winding-up period),
we must offer the relevant claimant such security as we determine would be sufficient to provide compensation to the claimant
if the claim matures. Any security offered with respect to a contingent contractual claim is deemed accepted if the relevant claimant
does not reject the security within 120 days after the receipt of such offer of security.
We
then would petition the Delaware Court of Chancery to determine the amount and form of reserves that:
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will
be reasonably likely to be sufficient to provide compensation for pre-existing litigation
claims and rejected known claims as to which the claimant commenced an action suit or
proceeding within 120 days after we mailed the notice of rejection (such claims, together
with the pre-existing litigation claims, “litigation claims”);
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will
be sufficient to provide compensation for contingent contractual claims for which offered
security is rejected by the applicable claimants; and
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will
be reasonably likely to be sufficient to provide compensation for claims that have not
been made known to us or that have not arisen but that, based on facts known to us, are
likely to arise or to become known to us within five years after the effective date or
such longer period of time, as the Delaware Court of Chancery may determine, not to exceed
ten years after the effective date (“uncertain claims” and, together with
the litigation claims and the contingent contractual claims for which offered security
is rejected by the applicable claimants, the “petitioned claims”).
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Our
petition would include the amount and form of reserves the Board believes in good faith is reasonably likely to be sufficient
to provide compensation for the claims against the Company. All of the claimants whose claims are the subject of our petition
would have an opportunity to appear before the Delaware Court of Chancery and present their positions with respect to such claims.
Upon
completion of the adjudication process, the Delaware Court of Chancery would enter the Court Order determining the amount and
form of reserves we are required to establish with respect to the petitioned claims. We intend to proceed expeditiously after
the effective date to wind up our affairs, settle our liabilities and obtain the Court Order, after which we intend to distribute
any available assets to stockholders. We expect the Court Order to be issued within one to two years following the effective date,
although there can be no assurance regarding the timing of the Court Order. In order to ensure the maximum protection of the Safe
Harbor Procedures, we do not intend to make any liquidating distributions between the effective date and the date when the Court
Order is issued, although we reserve the right to do so. There can be no assurance as to the amount that the Delaware Court of
Chancery will ultimately determine is required to be held back by us. In our petition to the Court, we will provide our view as
to the amount of claims and liabilities that is reasonably likely to be payable by us with respect to the petitioned claims. The
Delaware Court of Chancery will then make its own determination as to the amount and form of security reasonably likely to be
sufficient to provide compensation for the petitioned claims. As a result, we may be required to withhold up the maximum potential
amount of each potential claim and liability. Such reserves may exceed the amounts ultimately payable with respect to such contingent
liabilities and stockholders may not receive distributions of these excess amounts for a substantial period of time.
After
receiving the Court Order, we would:
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pay
known claims that are not rejected by us;
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post
the security offered for contingent contractual claims and not rejected by the claimants;
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post
any security ordered by the Delaware Court of Chancery for other petitioned claims; and
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pay
or make provision for all other claims that are mature, known and uncontested or that
have been finally determined to be owing by us (such claims, “additional uncontested
claims”). Under the DGCL, in the absence of actual fraud, the judgment of our directors
as to the provision made for payment of additional uncontested claims would be conclusive.
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To
the extent that our actual liabilities and expenses are less than the amounts required to be held as security pursuant to the
Court Order, the excess will be available to be distributed to stockholders in one or more post-dissolution liquidating distributions.
Subject to our compliance with the Court Order, all determinations as to the timing, amount and kind of distributions will be
made by the Board in its absolute discretion and in accordance with the Plan of Dissolution. However, no assurances can be given
either as to the ultimate amounts available for distribution to stockholders or as to the timing of any distributions.
Default
Procedures
If
a dissolved corporation does not elect to follow the Safe Harbor Procedures, it must adopt a plan of distribution pursuant to
which it will (1) pay or make reasonable provision to pay all claims and obligations, including all contingent, conditional or
unmatured contractual claims known to the dissolved corporation, (2) make such provision as will be reasonably likely to be sufficient
to provide compensation for any claim against the dissolved corporation that is the subject of a pending action, suit or proceeding
to which the dissolved corporation is a party and (3) make such provision as will be reasonably likely to be sufficient to provide
compensation for claims that have not been made known to the dissolved corporation or that have not arisen but that, based on
facts known to the dissolved corporation, are likely to arise or to become known to the dissolved corporation within ten years
after the date of dissolution. If there are insufficient assets, such plan will provide that such claims and obligations will
be paid or provided for according to their priority and, among claims of equal priority, ratably to the extent of assets legally
available therefor. All remaining assets will be distributed to the dissolved corporation’s stockholders.
Liabilities
of Stockholders and Directors
Under
Section 281(c) of the DGCL, directors of a dissolved corporation that has complied with either the Safe Harbor Procedures or the
Default Procedures are not personally liable to the claimants of the dissolved corporation. However, whether directors have “complied”
with the relevant procedures may be more open to challenge for corporations wound up under the Default Procedures without the
oversight of the Delaware Court of Chancery. To the extent the directors are found not to have complied with the relevant procedures,
they would not be afforded the benefit of Section 281(c) of the DGCL.
Regarding
stockholders, Section 282 of the DGCL provides a monetary limitation on the liability of stockholders and, if the Safe Harbor
Procedures are used, a time limit on such liability. If a corporation complies with the Safe Harbor Procedures or the Default
Procedures, stockholder liability is limited to a pro rata share of corporate liability or the amount distributed, whichever is
less. In addition, a stockholder will not be liable to creditors of a dissolved corporation in an aggregate amount exceeding the
amount of assets distributed to such stockholder. The Safe Harbor Procedures further limit stockholder liability by providing
that stockholders have no liability for any claim commenced after the expiration of the winding-up period, and thus, stockholders
are fully released of all claims not filed prior to that time.
Description
of the Plan of Dissolution
The
following summary of the Plan of Dissolution does not purport to be complete and is qualified in its entirety by reference to
the full text of the Plan of Dissolution, which is attached as Annex A to this Proxy Statement. You should carefully read this
entire Proxy Statement, including the Plan of Dissolution attached as Annex A to this Proxy Statement, for a more complete understanding
of the Plan of Dissolution.
Approval
and Adoption
In
order for the Plan of Dissolution to become effective, the Dissolution Proposal must be approved by the affirmative vote of the
holders of a majority of the shares of common stock outstanding as of the record date and entitled to vote thereon. The approval
of the Dissolution Proposal by the requisite vote of stockholders will grant full and complete authority to the Board and our
officers, without further stockholder action, to proceed with the dissolution pursuant to the Plan of Dissolution in accordance
with any applicable provision of Delaware law.
Effective
Date of Dissolution
The
effective date of the dissolution will be when the Certificate of Dissolution is filed with the Delaware Secretary of State or
such later date and time that is stated in the Certificate of Dissolution, which date will be no later than 90 days after the
filing of the Certificate of Dissolution. We expect the Certificate of Dissolution to be filed following the full implementation
of our monetization strategy, which may take one or more years to complete, or such other earlier time as the Board determines
that the disposition of our remaining assets or a sale of the Company is unlikely to maximize the value that can be returned to
stockholders from our monetization strategy. Under the Plan of Dissolution, the timing of the filing of the Certificate of Dissolution
will be in the sole discretion of the Board. Prior to filing the Certificate of Dissolution, we will provide notice of the Board’s
decision to proceed with the dissolution and the anticipated filing date of the Certificate of Dissolution and the anticipated
effective date, if different.
Notwithstanding
stockholder approval of the Dissolution Proposal and prior to the effective date, we intend to continue to explore alternatives
for returning capital to stockholders in a manner intended to maximize value and in accordance with our monetization strategy.
If the Board determines that any such alternative would be advisable and in the best interests of the Company and its stockholders,
it may abandon the dissolution and the Plan of Dissolution without further action by stockholders in accordance with Delaware
law.
The
timing and success of our monetization strategy is subject to numerous risks and uncertainties, including, without limitation,
the risk factors set forth under the caption “Risk Factors” of this Proxy Statement, in the 2019 Annual Report and
other documents we file with the SEC.
Liquidation
and Dissolution Period
The
Plan of Dissolution contemplates that the Board may elect to comply with either the Safe Harbor Procedures or the Default Procedures.
The Board expects that it will follow the Safe Harbor Procedures. For a description of those procedures, see “—Dissolution
under Delaware Law—Winding-Up Procedures” above. After the effective date, the Board intends to take the steps set
forth below at such times as the Board, in its absolute discretion and in accordance with Delaware law, deems necessary, appropriate
or advisable for us to maximize the value of our assets upon liquidation:
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the
completion of all actions that may be necessary, appropriate or desirable to dissolve
and terminate our corporate existence, including any filings with or notices to the SEC,
the NYSE and any other relevant regulatory authority;
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the
cessation of all of our business activities and the withdrawal from any jurisdiction
in which we are qualified to do business, except as necessary to preserve the value of
our assets, wind up our business affairs and distribute our assets;
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the
negotiation and consummation of sales of all of the our assets and properties, including
the assumption by any purchaser of any or all of our liabilities;
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the
giving of notice of the dissolution to all persons having a claim against us and the
rejection of any such claims;
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the
offering of security to any claimant on a contract whose claim is contingent, conditional
or unmatured in an amount we determines is sufficient to provide compensation to the
claimant if the claim matures, and the petitioning of the Delaware Court of Chancery
to determine the amount and form of security sufficient to provide compensation to any
such claimant who has rejected such offer;
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the
petitioning of the Delaware Court of Chancery to determine the amount and form of security
which would be reasonably likely to be sufficient to provide compensation for (1) claims
that are the subject of pending litigation against the Company, and (2) claims that have
not been made known to the Company or that have not arisen, but are likely to arise or
become known within five years after the date of dissolution (or longer in the discretion
of the Delaware Court of Chancery);
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the
payment, or the making of adequate provision for payment, of all claims made against
us and not rejected, including all expenses of the sale of assets and of the liquidation
and dissolution provided for by the Plan of Dissolution;
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the
posting of all security offered and not rejected and all security ordered by the Delaware
Court of Chancery; and
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the
distribution of the remaining funds and the distribution of remaining unsold assets,
if any, to its stockholders.
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Authority
of Officers and Directors
After
the effective date, we expect that the Board and some of our officers will continue in their positions for the purpose of winding
up our business and affairs. The Board may appoint new officers, hire employees and retain independent contractors and agents
in connection with the winding up process, and is authorized to pay compensation to or otherwise compensate our directors, officers,
employees and independent contractors above their regular compensation in recognition of the extraordinary efforts they may be
required to undertake in connection with the successful implementation of the Plan of Dissolution. Approval of the Dissolution
Proposal will constitute approval by stockholders of any such compensation.
The
approval of the Dissolution Proposal also will authorize, without further stockholder action, the Board to do and perform, or
to cause our officers to do and perform, any and all acts and to make, execute and deliver any and all agreements, conveyances,
assignments, transfers, certificates and other documents of every kind that the Board deems necessary, appropriate or advisable
to implement the Plan of Dissolution and the transactions contemplated thereby, including, without limitation, all filings or
acts required by any state or federal law or regulation to wind up its affairs.
Sale
of All or Substantially All of Assets
After
the effective date, the Plan of Dissolution gives the Board the authority to sell or otherwise dispose of all or substantially
all of our assets without further stockholder approval. The Plan of Dissolution does not specify the manner or timing in which
we may sell or otherwise dispose of our assets and any such sales or other dispositions will be made on such terms and at such
time as the Board may determine to be advisable and in the best interests of the Company and its stockholders. Approval of the
Dissolution Proposal at the Special Meeting will constitute stockholder approval of any such sales or dispositions. After the
effective date, under the DGCL, we will not be required to obtain any further stockholder approval with respect to specific terms
of any particular sales or dispositions of assets approved by the Board. In addition, the Plan of Dissolutions provides that we
will not be required to obtain appraisals, fairness opinions or other third-party opinions as to the value of our assets in connection
with the dissolution.
The
Plan of Dissolution is not intended as a “going private transaction” within the meaning of Rule 13e-3 under the
Exchange Act. In the event that our plans change, and we engage in a transaction identified in Rule 13e-3 with an affiliate,
we would comply with the requirements of Rule 13e-3, including filing a Schedule 13e-3.
Professional
Fees and Expenses
It
is specifically contemplated that the Board may authorize the payment of a retainer fee to a law firm or law firms for our legal
fees and expenses, including, among other things, to cover any costs payable pursuant to the indemnification of our directors
and officers provided by the Company pursuant to the Amended Charter and Bylaws, the DGCL or otherwise.
In
addition, in connection with and for the purpose of implementing and ensuring completion of the Plan of Dissolution, we may, in
the sole and absolute discretion of the Board, pay any brokerage, agency and other fees and expenses of persons rendering services
to us in connection with the collection, sale, exchange or other disposition of our assets and the implementation of the Plan
of Dissolution.
Liquidating
Trust
Under
the Plan of Dissolution, the Board may, but is not required to, establish a liquidating trust and distribute assets of the Company
to the liquidating trust. The Board may determine to transfer assets to a liquidating trust in circumstances where the nature
of an asset is not susceptible to distribution (for example, interests in intangibles) or where the Board determines that it would
not be advisable and in the best interests of the Company, its creditors and its stockholders for such assets to be distributed
directly to stockholders at such time. If all of our assets are not sold or distributed prior to the third anniversary of the
effective date, we would expect either to seek an extension of the three-year winding-up period from the Delaware Court of Chancery
or to transfer in final distribution such remaining assets to a liquidating trust. The Board may also elect in its discretion,
as applicable, to transfer the reserves, if any, or any portion thereof, to such a liquidating trust. We do not intend to transfer
any of our assets to a liquidating trust prior to the issuance of the Court Order and until after we have reduced our remaining
assets to cash and distributed substantially all of its assets.
The
purpose of a liquidating trust would be to distribute such property, or to sell such property on terms satisfactory to the liquidating
trustee(s) and distribute the proceeds of such sale, after paying our liabilities, if any, assumed by the trust, to stockholders,
based on their proportionate ownership interest in the trust. Any liquidating trust acquiring all of our unsold assets will assume
all of our liabilities and obligations and will be obligated to pay any of our expenses and liabilities that remain unsatisfied.
If the reserves transferred to the liquidating trust are exhausted, such expenses and liabilities will be satisfied out of the
liquidating trust’s other unsold assets.
The
Plan of Dissolution authorizes the Board to select one or more trustees and to enter into a liquidating trust agreement with such
trustee or trustees in the form and substance determined by the Board. It is anticipated that the Board would select such trustee
or trustees on the basis of the experience of such individual or entity in administering and disposing of assets and discharging
liabilities of the kind to be held by the liquidating trust or trusts and the ability of such individual or entity to serve the
best interests of our creditors and stockholders.
The
trust would be evidenced by a trust agreement between the Company and the trustees. Pursuant to the trust agreement, the trust
property would be transferred to the trustees immediately prior to the distribution of interests in the trust to stockholders,
to be held in trust for the benefit of the stockholder beneficiaries subject to the terms of the trust agreement. It is anticipated
that the interests would be evidenced only by the records of the trust, there would be no certificates or other tangible evidence
of such interests and no holder of shares of common stock would be required to pay any cash or other consideration for the interests
to be received in the distribution or to surrender or exchange shares of common stock in order to receive the interests.
Liquidating
Distributions
Liquidating
distributions, in cash or in kind, may be made from time to time to the holders of record of shares of common stock outstanding
at the close of business on the effective date, pro rata in accordance with the respective number of shares then held of record;
provided that, in the opinion of the Board, provision has been made for the payment of the obligations of the Company to the extent
required by law. All determinations as to the time for and the amount and kind of liquidating distributions shall be made in the
exercise of the absolute discretion of the Board and in accordance with Section 281 of the DGCL. The Plan of Dissolution provides
that distributions made pursuant to the Plan of Dissolution shall be treated as made in complete liquidation of the Company within
the meaning of the Code and the U.S. Treasury regulations promulgated thereunder (the “Treasury Regulations”).
Amendment,
Modification or Revocation
Once
the dissolution of the Company becomes effective, it cannot be revoked without stockholder approval. In general, however, the
Plan of Dissolution, as the blueprint for the liquidation of the Company following its dissolution, is subject to amendment or
modification by the Board without stockholder approval, if the Board determines that such action would be advisable and in the
best interests of the Company and its stockholders and stockholder approval is not required under the federal securities laws.
The Board may determine, in its sole discretion, to submit any amendment or modification to the stockholders for approval.
If
for any reason the Board determines after the effective date that revocation of the dissolution would be advisable and in the
best interests of the Company and its stockholders, the Board may, in its sole discretion, at any time before the cessation of
our corporate existence, adopt a resolution recommending that the dissolution be revoked and directing that the question of the
revocation of our dissolution be submitted to the stockholders for approval. If the holders of a majority of the shares of common
stock outstanding and entitled to vote upon a dissolution at the time of the Company’s dissolution approve the revocation
of the dissolution, we would, among other things, file a Certificate of Revocation with the Delaware Secretary of State, which
would become effective upon filing. The Plan of Dissolution would be void upon the effective date of any such revocation.
Cancellation
of Stock and Stock Certificates
We
will close our stock transfer books and no longer permit transfers of any shares of common stock after the effective date, except
by will, intestate succession or operation of law, and the common stock and any stock certificates evidencing common stock will
be treated as no longer being outstanding. Upon the final liquidating distribution of all of the remaining assets to stockholders,
all of the outstanding shares of common stock will be cancelled. As a condition to receipt of any liquidating distribution to
any holder of shares of common stock represented by a certificate, the Board, in its absolute discretion, may require such holder
to (1) surrender its certificates evidencing common stock to the Company or its agents for recording of such distributions thereon
or (2) furnish the Company with evidence satisfactory to the Board of the loss, theft or destruction of its certificates evidencing
the common stock, together with such surety bond or other security or indemnity as may be required by and satisfactory to the
Board. As a condition to receipt of any distribution to any holder of common stock that is not represented by a certificate, the
Board may require such holder to provide such evidence of ownership of common stock as the Company may require.
Liquidation
under Code Sections 331 and 336 and Filing of Tax Forms
It
is intended that the Plan of Dissolution constitute a plan of complete liquidation of the Company within the meaning of Sections
331 and 336 of the Code. The Plan of Dissolution will be deemed to authorize the taking of such action as, in the opinion of counsel
for the Company, may be necessary to conform with the provisions of Sections 331 and 336 of the Code and the Treasury Regulations,
including, without limitation, the making of any elections thereunder, if applicable.
The
Plan of Dissolution authorizes our officers to make such elections for tax purposes as are deemed necessary or appropriate. The
Plan of Dissolution directs us to file an appropriate statement of corporate dissolution with the U.S. Internal Revenue Service
(the “IRS”), to notify all jurisdictions of any withdrawals related to qualification to do business, to file final
tax returns and reports, as required, and to file the proper IRS forms related to the reporting of liquidating distributions to
stockholders.
Absence
of Appraisal Rights
Under
Delaware law, stockholders are not entitled to appraisal rights for their shares of common stock in connection with the transactions
contemplated by the Plan of Dissolution.
Abandoned
Property
If
any distribution to a stockholder cannot be made, whether because the stockholder cannot be located, has not surrendered certificates
evidencing capital stock as required under the Plan of Dissolution or for any other reason, the distribution to which such stockholder
is entitled will be transferred, at such time as the final liquidating distribution is made by us, to the official of such state
or other jurisdiction authorized by applicable law to receive the proceeds of such distribution. The proceeds of such distribution
will thereafter be held solely for the benefit of and for ultimate distribution to such stockholder as the sole equitable owner
of the distribution and will be treated as abandoned property and escheat to the applicable state or other jurisdiction in accordance
with applicable law. In no event will the proceeds of any such distribution revert to or become our property.
Interests
of Directors and Executive Officers in Approval of the Dissolution
Our
directors and executive officers may have interests in the approval of the Dissolution Proposal that are different from, or are
in addition to, the interests of stockholders generally. These potential interests include the payment of equity awards under
the Company’s stock plans, the payment of severance compensation to certain of our executive officers and our continuing
indemnification obligations to our directors and officers. The Board was aware of these interests and considered them, among other
matters, in approving the Plan of Dissolution.
Stock
Ownership and Equity Awards
Our
directors and executive officers own, as of , 2020, an aggregate of
shares of
common stock, including
unvested shares underlying equity awards pursuant to the Company’s stock plans. In connection with any liquidating
distributions, our directors and executive officers will be entitled to the same pro rata cash distributions as stockholders
based on their ownership of shares of common stock.
The
table below sets forth the shares of common stock, including unvested shares underlying equity awards granted under our stock
plans, held by members of the Board and executive officers of the Company, as of
,
2020.
|
Name of Executive Officer or Director
|
|
Number of Shares
|
|
|
Gerald W. Bodzy
|
|
|
|
|
|
Benjamin T. Coutee
|
|
|
|
|
|
Twila Day
|
|
|
|
|
|
Steven Goodweather
|
|
|
|
|
|
Jill Griffin
|
|
|
|
|
|
Frank Markantonis
|
|
|
|
|
|
Joe C. McKinney
|
|
|
|
|
|
Gasper Mir, III
|
|
|
|
|
|
John Morlock
|
|
|
|
|
|
Christopher J. Pappas
|
|
|
|
|
|
Randolph C. Read
|
|
|
|
|
|
Philip J. Rider
|
|
|
|
|
|
Total
|
|
|
|
|
See
“—Payment of Equity Awards under Our Stock Plans” below for additional information regarding our stock plans
and “Security Ownership of Certain Beneficial Owners and Management” for additional information regarding the beneficial
ownership of common stock by our directors, executive officers and other stockholders.
Retention
Awards
In
August 2020, the Board, upon the recommendation of the Compensation Committee of the Board, approved a severance agreement and
a bonus opportunity agreement, pursuant to which certain executive officers and certain other senior level employees (the “key
employees”) will receive separation payments upon the occurrence of certain events and will be eligible to receive both
a cash and a restricted stock award bonus (collectively, the “retention awards”). The retention awards were designed
to retain the key employees in their roles with us and to carry out the sale of our assets pursuant to our monetization strategy
and implement the Plan of Dissolution. Christopher J. Pappas, President and Chief Executive Officer of the Company, did not receive
a retention award.
Pursuant
to the severance agreements, each recipient is eligible to receive a separation payment, based on a percentage of such recipient’s
current annual base salary, if such recipient is terminated without cause, resigns for good reason, or is not hired by a successor
or buyer of our assets. The table below set forth the separation payment amount for the following executive officers:
|
Name
|
|
Separation
Payment Amount
(percentage
of annual base salary)
|
|
|
Base
Salary
|
|
|
Benjamin
T. Coutee
Chief
Operating Officer
|
|
|
100.0
|
%
|
|
$
|
283,000
|
|
|
Steven
Goodweather
Chief
Financial Officer and Treasurer
|
|
|
100.0
|
%
|
|
$
|
215,000
|
|
Philip J. Rider
Chief Accounting Officer and Controller
|
|
|
83.3
|
%
|
|
$
|
205,000
|
|
The
bonus opportunity for the key employees is designed to incentivize each recipient to complete the sale of our operations and assets.
Each recipient is eligible to earn the target bonus amount, consisting of both a cash bonus and a portion of a restricted stock
award granted under the Employee Incentive Stock Plan. The restricted stock to be granted to each recipient was issued upon entering
into the bonus opportunity agreement and is subject to being both earned upon the occurrence of a triggering event (as defined
below) and vesting. Upon the closing of the contemplated sales of each of: (1) our Fuddruckers brand; (2) our Culinary Contract
Services brand; and (3) at least 30 of our Luby’s cafeterias (each, a “triggering event”), each recipient will
receive the cash portion of the bonus and will earn a portion of the restricted stock granted to such recipient, subject to time-based
vesting conditions. The following table sets forth the target bonus amounts per triggering event for the following executive officers:
|
|
|
Per Triggering Event
Target Bonus Amount
|
|
|
Maximum Target Bonus Amount
|
|
|
Name
|
|
Cash
|
|
|
Earned Shares of Restricted Stock
|
|
|
Cash
|
|
|
Earned Shares of Restricted Stock
|
|
|
Benjamin T. Coutee
Chief Operating Officer
|
|
$
|
15,000
|
|
|
|
10,000
|
|
|
$
|
45,000
|
|
|
|
30,000
|
|
|
Steven Goodweather
Chief Financial Officer and Treasurer
|
|
$
|
12,500
|
|
|
|
8,000
|
|
|
$
|
37,500
|
|
|
|
24,000
|
|
Philip J.Rider
Chief Accounting Officer and Controller
|
|
$
|
12,500
|
|
|
|
8,000
|
|
|
$
|
37,500
|
|
|
|
24,000
|
|
Payment
of Equity Awards under Our Stock Plans
Luby’s
Incentive Stock Plan
Under
the Employee Stock Plan, in the event of a “change of control” (as defined in the Employee Stock Plan), the Board
may, it is discretion, take any of the following actions as a result of, or in anticipation of, any such change of change of control,
which actions may vary among individual holders and which may vary among awards outstanding under the Employee Stock Plan: (i)
remove any applicable forfeiture restrictions on any award; (ii) accelerate the vesting of, or the time at which the restrictions
will lapse, to a specific date, before or after such change of control; (iii) require mandatory surrender to the Company by selected
holders of some or all of the outstanding awards held by such holders as of a specific date, before or after such change of control,
on which event the Board will cancel such awards and pay to each such holder an amount of cash per share equal to the “change
of control price” (as defined in the Employee Stock Plan); or (iv) make adjustments to outstanding awards as the Board deems
appropriate to reflect such a change of control.
A
“change of control” under the Employee Stock Plan occurs when, among other events, the Company sells, leases, exchanges
or otherwise transfers (in one transaction or a series of related transactions) of all or substantially all the assets of the
Company (except such a transfer to a corporation which is wholly owned, directly or indirectly, by the Company), or the complete
liquidation of the Company.
Pursuant
to the Employee Stock Plan, the “change of control price” equals the amount determined in the following clauses (1),
(2), (3), (4) or (5), whichever is applicable: (1) the per share price offered to holders of common stock in any merger or consolidation;
(2) the per share value of the common stock immediately before the change of control without regard to assets sold in the change
of control and assuming the Company has received the consideration paid for the assets in the case of a sale of the assets; (3)
the amount distributed per share in a dissolution transaction; (4) the price per share offered to holders of common stock in any
tender offer or exchange offer whereby a change of control takes place; or (5) if such change of control occurs other than pursuant
to a transaction described in clauses (1), (2), (3), or (4) above, the fair market value per share of the common stock that may
otherwise be obtained with respect to such awards, as determined by the Board as of the date determined by the Board to be the
date of cancellation and surrender of such awards. In the event that the consideration offered to stockholders of the Company
in any transaction described in any change of control consists of anything other than cash, the Board shall determine the fair
cash equivalent of the portion of the consideration offered which is other than cash.
Luby’s,
Inc. Second Amended and Restated Nonemployee Director Stock Plan
Under
the Nonemployee Stock Plan, upon the occurrence of a “change of control” (as defined in the Nonemployee Stock Plan),
any and all outstanding options will become immediately vested and exercisable and any and all stock certificates representing
shares of common stock awarded to a nonemployee directors as restricted stock will be transferred to such nonemployee director.
A
“change of control” under the Nonemployee Stock Plan occurs when, among other events, the stockholders of the Company
approve and the Company sells, or otherwise disposes of, all or substantially all of the Company’s property and assets,
or the Company liquidates or dissolves.
Luby’s,
Inc. Amended and Restated Nonemployee Director Phantom Stock Plan
Under
the Nonemployee Phantom Stock Plan, if a director who holds shares of phantom stock granted ceases to be a director of the Company,
the shares of phantom stock held by such director are converted into an equivalent number of shares of common stock.
Indemnification
and Insurance
Pursuant
to the Plan of Dissolution, we will continue to indemnify our directors and officers to the maximum extent permitted in accordance
with applicable law, the Amended Charter, the Bylaws and any contractual arrangements, for actions taken in connection with the
Plan of Dissolution and the winding up of our business and affairs. The Board is authorized to obtain and maintain insurance as
may be necessary, appropriate or advisable to cover such indemnification obligations, including seeking an extension in time and
coverage of our insurance policies currently in effect.
Reporting
Requirements; Delisting and Lack of Market for Trading
Whether
or not the Dissolution Proposal is approved, we have an obligation to continue to comply with the applicable reporting requirements
of the Exchange Act, even though compliance with such reporting requirements may be economically burdensome and of minimal value
to stockholders. If stockholders approve the Dissolution Proposal, in order to curtail expenses, we intend, on or about the effective
date, to seek relief from the SEC to suspend our reporting obligations under the Exchange Act, and ultimately to terminate the
registration of our common stock. The SEC may not grant us the requested relief. If we are unable to suspend our obligation to
file periodic reports with the SEC, we will be obligated to continue complying with the applicable reporting requirements of the
Exchange Act and will be required to continue to incur the expenses associated with these reporting requirements, including legal
and accounting expenses, which will reduce the cash available for distribution to stockholders.
If
the Dissolution Proposal is approved by stockholders, while we are implementing our monetization strategy and prior to the filing
of the Certificate of Dissolution, we intend to maintain the listing of the common stock on the NYSE. In order for the common
stock to be eligible for continued listing on the NYSE, we must, among other things, continue to meet the minimum listing standards
of the NYSE. There can be no assurances that we will be able to maintain the listing of the common stock on the NYSE. If the NYSE
were to proceed with delisting the common stock prior to the filing of the Certificate of Dissolution, we expect that the common
stock would trade in the over-the-counter markets, however, there can be no assurance the common stock will be listed on any over-the-counter
market.
We
anticipate that, upon the filing of the Certificate of Dissolution, trading in shares of common stock will be suspended on the
NYSE, and the shares will thereafter be delisted. Under NYSE rules, the NYSE has discretionary authority to suspend or terminate
the listing of a company that has authorized a liquidation and the company is committed to proceed, even if the shares of common
stock otherwise meet all enumerated criteria for continued listing on the NYSE. Prior to filing the Certificate of Dissolution,
we will provide notice of the Board’s decision to proceed with the dissolution and the anticipated filing date of the Certificate
of Dissolution, and the anticipated effective date, if different.
In
addition, we will close our stock transfer books and discontinue recording transfers on the effective date. Thereafter, record
holders of shares of common stock generally will be prohibited from transferring record ownership of their shares following the
effective date, except by will, intestate succession or operation of law. We will, however, request that, following the effective
date, The Depository Trust Company (“DTC”), as a record holder of shares of common stock through its nominee, Cede
& Co., maintain records representing the right to receive any post-dissolution liquidating distributions in accordance with
the Plan of Dissolution, including any transfers of such rights. Consequently, we expect that any transfers of such rights will
be tracked by DTC. To the extent that a stockholder’s shares of common stock are not held by a DTC participant as of the
effective date, it could be more difficult for such stockholder to transfer such stockholder’s rights to receive any post-dissolution
liquidating distributions.
After
the delisting from the NYSE, brokers may make a market for interests in the common stock representing the right to receive any
post-dissolution liquidating distributions in the “over-the-counter” market. There is no assurance that such market
will arise or, if one does arise, for how long it will be maintained or how actively such interests in the common stock will trade.
Both trading prices and volumes in any such “over-the-counter” market could be volatile and erratic.
It
is anticipated that the interests in the liquidating trust, if one is created, will not be transferable. Even if transferable,
any such interests are not expected to be listed on a national securities exchange or quoted through the NYSE, and the extent
of any trading market therein cannot be predicted. Moreover, the interests may not be accepted by commercial lenders as security
for loans as readily as more conventional securities with established trading markets.
Because
stockholders will be deemed to have received a liquidating distribution equal to their pro rata share of the value of the net
assets distributed to an entity which is treated as a liquidating trust for tax purposes, the distribution of non-transferable
interests could result in tax liability to the interest holders without their being readily able to realize the value of such
interests to pay such taxes or otherwise.
Regulatory
Approvals
Except
for the filings required under the DGCL and the rules and regulations of the SEC and the Code, we are not aware of any United
States federal or state regulatory requirements to be complied with or approvals to be obtained in connection with the dissolution
pursuant to the Plan of Dissolution.
Material
U.S. Federal Income Tax Consequences of the Proposed Dissolution
The
following discussion is a summary of the material U.S. federal income tax consequences of the dissolution to U.S. Holders and
Non-U.S. Holders (each as defined below), but does not purport to be a complete analysis of all potential tax effects. The effects
of other U.S. federal tax laws, such as estate and gift tax laws, and any applicable state, local or non-U.S. tax laws are not
discussed. This discussion is based on the Code, the Treasury Regulations judicial decisions, and published rulings and administrative
pronouncements of the IRS, in each case in effect as of the date hereof. These authorities may change or be subject to differing
interpretations. Any such change or differing interpretation may be applied retroactively in a manner that could adversely affect
a U.S. Holder or Non-U.S. Holder of our common stock. We have not sought and will not seek any rulings from the IRS regarding
the matters discussed below. There can be no assurance the IRS or a court will not take a contrary position to that discussed
below.
This
discussion is limited to U.S. Holders and Non-U.S. Holders that hold our common stock as a “capital asset” within
the meaning of Section 1221 of the Code (generally, property held for investment). This discussion does not address all U.S.
federal income tax consequences relevant to a holder’s particular circumstances, including the impact of the Medicare contribution
tax on net investment income or the alternative minimum tax. In addition, it does not address consequences relevant to holders
subject to special rules, including, without limitation:
|
|
●
|
U.S.
expatriates and former citizens or long-term residents of the United States;
|
|
|
●
|
U.S.
Holders whose functional currency is not the U.S. dollar;
|
|
|
●
|
persons
who hold our common stock as part of a hedge, straddle or other risk reduction strategy
or as part of a conversion transaction or other integrated investment;
|
|
|
●
|
banks,
insurance companies, and other financial institutions;
|
|
|
●
|
real
estate investment trusts or regulated investment companies;
|
|
|
●
|
brokers,
dealers or traders in securities;
|
|
|
●
|
“controlled
foreign corporations,” “passive foreign investment companies,” and
corporations that accumulate earnings to avoid U.S. federal income tax;
|
|
|
●
|
S
corporations, partnerships or other entities or arrangements treated as partnerships
for U.S. federal income tax purposes (and investors therein);
|
|
|
●
|
tax-exempt
organizations or governmental organizations;
|
|
|
●
|
persons
deemed to sell our common stock under the constructive sale provisions of the Code;
|
|
|
●
|
persons
who hold or receive our common stock pursuant to the exercise of any employee stock option
or otherwise as compensation;
|
|
|
●
|
tax-qualified
retirement plans;
|
|
|
●
|
“qualified
foreign pension funds” as defined in Section 897(l)(2) of the Code and entities
all of the interests of which are held by qualified foreign pension funds; and
|
|
|
●
|
persons
subject to special tax accounting rules as a result of any item of gross income with
respect to our common stock being taken into account in an applicable financial statement.
|
If
an entity treated as a partnership for U.S. federal income tax purposes holds our common stock, the tax treatment of a partner
in the partnership will depend on the status of the partner, the activities of the partnership and certain determinations made
at the partner level. Accordingly, partnerships holding our common stock and the partners in such partnerships should consult
their tax advisors regarding the U.S. federal income tax consequences to them.
THIS
DISCUSSION IS FOR INFORMATION PURPOSES ONLY AND IS NOT TAX ADVICE. HOLDERS SHOULD CONSULT THEIR TAX ADVISORS WITH RESPECT TO THE
APPLICATION OF THE U.S. FEDERAL INCOME TAX LAWS TO THEIR PARTICULAR SITUATIONS AS WELL AS ANY TAX CONSEQUENCES OF THE DISSOLUTION
ARISING UNDER THE U.S. FEDERAL ESTATE OR GIFT TAX LAWS OR UNDER THE LAWS OF ANY STATE, LOCAL OR NON-U.S. TAXING JURISDICTION OR
UNDER ANY APPLICABLE INCOME TAX TREATY.
Definitions
of U.S. Holder and Non-U.S. Holder
For
purposes of this discussion, a “U.S. Holder” is a beneficial owner of our common stock that, for U.S. federal income
tax purposes, is or is treated as:
|
|
●
|
an
individual who is a citizen or resident of the United States;
|
|
|
●
|
a
corporation created or organized under the laws of the United States, any state thereof,
or the District of Columbia;
|
|
|
●
|
an
estate, the income of which is subject to U.S. federal income tax regardless of its source;
or
|
|
|
●
|
a
trust that (1) is subject to the primary supervision of a U.S. court and the control
of one or more “United States persons” (within the meaning of Section 7701(a)(30)
of the Code), or (2) has a valid election in effect to be treated as a United States
person for U.S. federal income tax purposes.
|
For
purposes of this discussion, a “Non-U.S. Holder” is any beneficial owner of our common stock that is neither a U.S.
Holder nor an entity treated as a partnership for U.S. federal income tax purposes.
U.S.
Federal Income Tax Consequences of the Dissolution to the Company
We
intend for distributions made pursuant to the Plan of Dissolution to be treated as a series of distributions in complete liquidation
of the Company, and this discussion assumes this treatment will be respected. In accordance with such treatment, each stockholder
will be treated as receiving its portion of such distributions in exchange for its shares of our common stock. If a stockholder
holds different blocks of shares of our common stock (generally, shares of our common stock purchased or acquired on different
dates or at different prices), the holder’s portion of such distributions must be allocated among the several blocks of
shares in the proportion that the number of shares in a particular block bears to the total number of shares owned by the holder.
If
we distribute any property other than cash pursuant to the Plan of Dissolution to the stockholders (or to a liquidating trust
in connection with the dissolution), we will recognize gain or loss as if such property were sold to the stockholders at its fair
market value. Accordingly, the Company may be subject to U.S. federal income tax on a distribution of property (other than cash),
which may reduce the amount of cash available to distribute to stockholders. If any property distributed by us is subject to a
liability or if a stockholder assumes a liability of the Company in connection with the distribution of property, the fair market
value of such distributed property shall be treated as not less than the amount of such liability. After the close of the taxable
year during which a liquidating distribution was made, we will provide stockholders and the IRS with a statement of the amount
of cash distributed to the stockholders and our best estimate as to the value of any property distributed during that year. There
is no assurance that the IRS will not challenge our valuation of any property. As a result of such a challenge, the amount of
gain or loss recognized by us on the distribution might change.
Until
all of our remaining assets have been distributed to stockholders or a liquidating trust and the liquidation is complete, we will
continue to be subject to U.S. federal income tax on our income.
Notwithstanding
our position that the distributions made pursuant to the Plan of Dissolution will be treated as a series of distributions in complete
liquidation of the Company, it is possible that the IRS or a court could determine that any of these distributions is a current
distribution. In addition, if the dissolution is abandoned or revoked, these distributions would be treated as current distributions.
A current distribution would be treated as a dividend for U.S. federal income tax purposes to the extent of our current and accumulated
earnings and profits. Amounts not treated as dividends for U.S. federal income tax purposes would constitute a return of capital
and first be applied against and reduce a holder’s adjusted tax basis in its shares of our common stock, but not below zero.
Any excess would be treated as capital gain.
U.S.
Federal Income Tax Consequences of Distributions Made Pursuant to the Plan of Dissolution to U.S. Holders
Distributions
made pursuant to the Plan of Dissolution to a U.S. Holder will be treated as received by the U.S. Holder in exchange for the U.S.
Holder’s shares of our common stock. As a result of the dissolution, a U.S. Holder generally will recognize gain or loss
equal to the difference between (a) the sum of the amount of cash and the fair market value (at the time of distribution) of any
other property distributed to the U.S. Holder (including distributions to any liquidating trust, as discussed below), less any
known liabilities assumed by the U.S. Holder or to which the distributed property is subject, and (b) the U.S Holder’s adjusted
tax basis in the shares of the common stock. If a U.S. Holder owns shares acquired at different times or for different prices,
gain or loss is calculated separately for each such block of shares.
Liquidating
distributions are first applied against, and reduce, the U.S. Holder’s adjusted tax basis in their shares, or block of shares,
of the common stock before recognizing any gain or loss. If we make more than one liquidating distribution, a U.S. Holder will
recognize gain to the extent the aggregate liquidating distributions (including a constructive distribution in the case of a transfer
of assets to a liquidating trust) allocated to a share, or block of shares, of common stock exceed the U.S. Holder’s adjusted
tax basis with respect to that share or block of shares. Any loss will generally be recognized only when the final distribution
from us has been received. Gain or loss recognized by a U.S. Holder will be capital gain or loss, and will be long-term capital
gain or loss if the shares have been held for more than one year. The deductibility of capital losses is subject to certain limitations.
If
we make a distribution of property other than cash to U.S. Holders, the U.S Holder’s tax basis in such property immediately
after the distribution will be the fair market value of such property at the time of distribution. If the IRS challenges our valuation
of property, the amount of gain or loss recognized by U.S. Holders might change. Distributions of property other than cash to
the U.S. Holders could result in tax liability exceeding the amount of cash received, requiring the U.S. Holder to meet the tax
obligations from other sources or by selling all or a portion of the assets received.
U.S.
Federal Income Tax Consequences of Distributions Made Pursuant to the Plan of Dissolution to Non-U.S. Holders
Distributions
made pursuant to the Plan of Dissolution to a Non-U.S. Holder will be treated as received by the Non-U.S. Holder in exchange for
the Non-U.S. Holder’s shares of our common stock. The amount of any such distribution allocable to a block of shares of
our common stock owned by the Non-U.S. Holder will reduce the Non-U.S. Holder’s tax basis in such shares, but not below
zero. Any excess amount allocable to such shares will be treated as capital gain. A Non-U.S. Holder will not be subject to U.S.
federal income tax on any such gain unless:
|
|
●
|
the
gain is effectively connected with the Non-U.S. Holder’s conduct of a trade or
business within the United States (and, if required by an applicable income tax treaty,
the Non-U.S. Holder maintains a permanent establishment in the United States to which
such gain is attributable);
|
|
|
●
|
the
Non-U.S. Holder is a nonresident alien individual present in the United States for 183
days or more during the taxable year of the disposition and certain other requirements
are met; or
|
|
|
●
|
our
common stock constitutes a U.S. real property interest by reason of our status as a U.S.
real property holding corporation (“USRPHC”) for U.S. federal income tax
purposes.
|
Gain
described in the first bullet point above generally will be subject to U.S. federal income tax on a net income basis at the regular
graduated rates. A Non-U.S. Holder that is a corporation also may be subject to a branch profits tax at a rate of 30% (or such
lower rate specified by an applicable income tax treaty) on such effectively connected gain, as adjusted for certain items.
Gain
described in the second bullet point above will be subject to U.S. federal income tax at a rate of 30% (or such lower rate specified
by an applicable income tax treaty), which may be offset by U.S. source capital losses of the Non-U.S. Holder (even though the
individual is not considered a resident of the United States), provided the Non-U.S. Holder has timely filed U.S. federal income
tax returns with respect to such losses.
With
respect to the third bullet point above, generally, a corporation is a USRPHC if the fair market value of its U.S. real property
interests equals or exceeds 50% of the sum of the fair market value of its worldwide real property interests and its other assets
used or held for use in a trade or business. We have not made a determination of whether we are a USRPHC. Because the determination
of whether we are a USRPHC depends on the relative fair market values of our assets, there can be no assurance we currently are
not a USRPHC or will not become one in the future. If we are or were to become a USRPHC, gain arising from the distribution will
not be subject to U.S. federal income tax so long as our common stock continues to be regularly traded on an established securities
market and a Non-U.S. Holder does not actually or constructively own at any time during the shorter of the five-year period ending
on the date of the distribution or the Non-U.S. Holder’s holding period for the common stock, more than 5% of our common
stock. After we file our Certificate of Dissolution with the Delaware Secretary of State, our common stock will be delisted from
the NYSE, likely causing us to no longer be treated as regularly traded on an established securities market for purposes of this
analysis. If our common stock ceased to be regularly traded on an established securities market prior to the beginning of the
calendar year in which the relevant distribution occurred, or if a Non-U.S. Holder actually or constructively owns more than 5%
of our common stock during the relevant holding period, then such Non-U.S. Holders generally would be subject to U.S. federal
income tax on gain arising from the disposition of our common stock in the same manner as if such Non-U.S. Holder were a United
States person as defined in the Code, and a 15% withholding tax would apply to the gross proceeds from the disposition of our
common stock by such Non-U.S. Holders.
Non-U.S.
Holders are urged to consult their tax advisors regarding the U.S. federal, state, local and non-U.S. income and other tax consequences
of the dissolution to it.
Information
Reporting and Backup Withholding
U.S.
Holders
A
U.S. Holder may be subject to information reporting and backup withholding when such holder receives a distribution made pursuant
to the Plan of Dissolution. Certain U.S. Holders are exempt from backup withholding, including corporations and certain tax-exempt
organizations. A U.S. Holder will be subject to backup withholding if such holder is not otherwise exempt and:
|
|
●
|
the
holder fails to furnish the holder’s taxpayer identification number, which for
an individual is ordinarily his or her social security number;
|
|
|
●
|
the
holder furnishes an incorrect taxpayer identification number;
|
|
|
●
|
the
applicable withholding agent is notified by the IRS that the holder previously failed
to properly report payments of interest or dividends; or
|
|
|
●
|
the
holder fails to certify under penalties of perjury that the holder has furnished a correct
taxpayer identification number and that the IRS has not notified the holder that the
holder is subject to backup withholding.
|
Backup
withholding is not an additional tax. Any amounts withheld under the backup withholding rules may be allowed as a refund or a
credit against a U.S. Holder’s U.S. federal income tax liability, provided the required information is timely furnished
to the IRS. U.S. Holders should consult their tax advisors regarding their qualification for an exemption from backup withholding
and the procedures for obtaining such an exemption.
Non-U.S.
Holders
A
distribution made pursuant to the Plan of Dissolution and received within the United States or through certain U.S.-related brokers
generally will not be subject to backup withholding or information reporting, if the applicable withholding agent does not have
actual knowledge or reason to know the holder is a United States person and the holder either certifies its non-U.S. status, such
as by furnishing a valid IRS Form W-8BEN, W-8BEN-E or W-8ECI, or otherwise establishes an exemption. Proceeds from a distribution
made pursuant to the Plan of Dissolution and received through a non-U.S. office of a non-U.S. broker generally will not be subject
to backup withholding or information reporting.
Copies
of information returns that are filed with the IRS may also be made available under the provisions of an applicable treaty or
agreement to the tax authorities of the country in which the Non-U.S. Holder resides or is established.
Backup
withholding is not an additional tax. Any amounts withheld under the backup withholding rules may be allowed as a refund or a
credit against a Non-U.S. Holder’s U.S. federal income tax liability, provided the required information is timely furnished
to the IRS.
U.S.
Federal Income Tax Consequences of a Liquidating Trust
We
may transfer our remaining assets and obligations to a liquidating trust if our Board determines that such a transfer is advisable
and in the best interests of the Company and its stockholders. Under applicable Treasury Regulations, a trust will be treated
as a liquidating trust if it is organized for the primary purpose of liquidating and distributing the assets transferred to it,
and if its activities are all reasonably necessary to and consistent with the accomplishment of that purpose. However, if the
liquidation is unreasonably prolonged or if the liquidation purpose becomes so obscured by business activities that the declared
purpose of the liquidation can be said to be lost or abandoned, the trust will no longer be considered a liquidating trust. Although
neither the Code nor the Treasury Regulations thereunder provide any specific guidance as to the length of time a liquidating
trust may last, the IRS’s guidelines for issuing rulings with respect to liquidating trust status call for a term not to
exceed three years, which period may be extended to cover the collection of installment obligations.
Assuming
that the liquidating trust is treated as a “liquidating trust” for U.S. federal income tax purposes, we intend that
the liquidating trust would be treated as a “grantor trust” for U.S. federal income tax purposes. In general, this
treatment would mean that the stockholders would be the beneficial owners of the assets and income of the liquidating trust. The
transfer of assets by us to a liquidating trust will be treated as a distribution in liquidation of the stockholders’ shares
of common stock. If we have made any liquidating distributions prior to transferring assets to a liquidating trust, the transfer
of assets will be considered the final distribution to the stockholders. The stockholders will be treated for U.S. federal income
tax purposes as having received a liquidating distribution at the time we transfer assets to the liquidating trust equal to their
pro rata shares of cash, and, as applicable, the fair market value of property other than cash, transferred to the liquidating
trust, reduced by the amount of known liabilities assumed by the liquidating trust or to which the property transferred is subject,
and then having contributed the cash and property to the liquidating trust. The U.S. federal income tax consequences of the constructive
distribution to a stockholder are the same as those described above.
The
liquidating trust will not be subject to U.S. federal income tax. The stockholders will be treated as owners of the liquidating
trust. As owners of the trust, the stockholders must take into account for U.S. federal income tax purposes their allocable portion
of any income, gain, expense or loss recognized by the liquidating trust, whether or not they receive any actual distributions
from the liquidating trust. The stockholders, however, will not be subject to tax when distributions are actually made by the
liquidating trust.
Holders
should consult their tax advisors regarding the tax consequences that would apply to them if we were to transfer assets to a liquidating
trust.
Accounting
Treatment
If
the Dissolution Proposal is approved by stockholders, the Company will change its basis of accounting to the liquidation basis
of accounting effective on the date stockholders approve the Dissolution Proposal. Under the liquidation basis of accounting,
assets are stated at their estimated net realizable values, and liabilities are stated at their estimated settlement amounts.
Recorded liabilities will include the estimated expenses associated with carrying out the Plan of Dissolution. For periodic reporting
periods ending after the Dissolution Proposal is approved by stockholders, the Company will prepare a statement of net assets
in liquidation, which will summarize the liquidation value per outstanding share of common stock and a statement of changes in
net assets in liquidation, which will present the changes during the period in net assets available for distribution to investors
and other claimants during the liquidation. Valuations presented in the statement will represent management’s estimates,
based on present facts and circumstances, of the net realizable values of assets, satisfaction amounts of liabilities, and expenses
associated with carrying out the Plan of Dissolution based upon management assumptions.
The
valuation of assets and liabilities will necessarily require many estimates and assumptions, and there will be substantial uncertainties
in carrying out the provisions of the Plan of Dissolution. Ultimate values realized for our assets and ultimate amounts paid to
satisfy our liabilities are expected to differ from estimates historically recorded under the going concern basis of U.S. generally
accepted accounting principles in our annual or interim financial statements.
Required
Vote
The
affirmative vote of the holders of a majority of the shares of common stock outstanding as of the record date and entitled to
vote thereon is required to approve the Dissolution Proposal. Abstentions and broker non-votes will be counted towards the tabulation
of votes cast on the Dissolution Proposal and will have the same effect as a vote against the Dissolution Proposal.
If
stockholders do not approve the Dissolution Proposal, we will continue our corporate existence, and the Board will need to explore
alternatives to maximize value for stockholders.
THE
Board recommends THAT YOU vote FOR the approvAL OF the Liquidation AND dissolution OF THE COMPANY PURSUANT TO A
Plan of DISSOLUTION.
PROPOSAL
2:
RATIFICATION OF THE RIGHTS AGREEMENT
Overview
The
Board is submitting for stockholder ratification a proposal to ratify the adoption by the Board of the Rights Agreement. Stockholder
ratification of the Rights Agreement is not required by applicable law, or by the Amended Charter, Bylaws or other governing documents.
Nonetheless, the Board has determined to request stockholder ratification of the adoption of the Rights Agreement to determine
the viewpoint of stockholders as to the advisability of the Rights Agreement and as a matter of good corporate governance.
The
Board initially adopted the Rights Agreement in February 2018 to protect the interests of the Company and its stockholders by
reducing the likelihood that any person or group could gain control of the Company through open market purchases or other private
transactions without appropriately compensating all of the Company’s stockholders for such control.
On
February 15, 2018, the Board declared a dividend distribution of one right (a “Right”) for each outstanding share
of common stock to stockholders of record at the close of business on February 28, 2018 (the “Rights Agreement Record Date”).
Each Right entitles its holder, under the circumstances described below, to purchase from the Company one half of a share of common
stock. The purchase price for each whole share of common stock pursuant to the exercise of a Right is initially $12.00 (equivalent
to $6.00 for each half of a share of common stock), subject to adjustment. The Rights Agreement was initially set to expire on
February 15, 2019, but was subsequently amended on February 11, 2019 to extend the expiration date to February 15, 2020 and on
February 14, 2020 to extend the expiration time to February 15, 2021. The Rights Agreement will expire automatically at the close
of business on February 15, 2021, unless the Rights are exercised, exchanged, amended or redeemed prior to such date. The Company’s
financial condition, operations and earnings per share were not be affected by the adoption of the Rights Agreement.
In
connection with the Company’s announcement of an extension of the expiration date of the Rights Agreement in January 2020,
the Board disclosed its intent to submit the Rights Agreement to a vote at a meeting of the Company’s stockholders.
Summary
of the Rights Agreement
The
following summary of the Rights Agreement does not purport to be complete and is qualified in its entirety by reference to the
full text of the Rights Agreement, a conformed copy of which is attached as Annex B to this Proxy Statement. You should carefully
read this entire Proxy Statement, including the conformed copy of the Rights Agreement attached as Annex B to this Proxy Statement,
for a more complete understanding of the Rights Agreement.
The
Rights
The
Board authorized the issuance of a Right with respect to each outstanding share of common stock on February 28, 2018. Initially,
the Rights are associated with the common stock and evidenced by common stock certificates or, in the case of uncertificated shares
of common stock, the book-entry account that evidences record ownership of such shares, which will contain a notation incorporating
the Rights Agreement by reference, and are transferable with and only with the underlying shares of common stock. New Rights will
attach to any shares of common stock that become outstanding after the Rights Agreement Record Date and prior to the earlier of
the distribution time (as defined below) and the expiration time (as described below).
Separation
and Distribution of Rights; Exercisability
Subject
to certain exceptions, the Rights become exercisable and trade separately from the common stock only upon the “distribution
time,” which occurs upon the earlier of:
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|
●
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the
close of business on the tenth day after the first date (the “stock acquisition
date”) of public announcement that a person or group of affiliated or associated
persons has acquired, or obtained the right or obligation to acquire, beneficial ownership
of 10% or more of the outstanding shares of common stock, including in the form of synthetic
ownership through derivative positions, (any such person or group of affiliated or associated
persons being referred to herein as an “acquiring person”); and
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|
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●
|
the
close of business on the tenth business day, or a later date if determined by the Board
prior to such time as any person or group becomes an acquiring person, following the
commencement of a tender offer or exchange offer which, if consummated, would result
in a person or group becoming an acquiring person.
|
An
acquiring person does not include:
|
|
●
|
any
subsidiary of the Company;
|
|
|
●
|
any
employee benefit plan of the Company or of any subsidiary of the Company;
|
|
|
●
|
any
person organized, appointed or established by the Company for or pursuant to the terms
of any such plan; or
|
|
|
●
|
any
person who or which, as of immediately prior to the first public announcement of the
adoption of the Rights Agreement, beneficially owned 10% or more of the outstanding shares
of common stock, including in the form of synthetic ownership through derivative positions.
Notwithstanding the foregoing, such person would be an “acquiring person”
if such person, at any time after the first public announcement of the adoption of the
Rights Agreement, beneficially owns any shares of common stock (with certain exceptions)
in addition to the shares of common stock beneficially owned by such person as of immediately
prior to the first public announcement of the adoption of the Rights Agreement.
|
In
addition, Harris J. Pappas, Christopher J. Pappas and their respective spouses, descendants, personal estate representatives,
affiliates or associates (collectively, the “Exempt Persons”) will not be acquiring persons provided that all of the
Exempt Persons do not beneficially own, in the aggregate, more than 35.5% of the shares of common stock then outstanding. Also,
if the Board determines in good faith that a person who would otherwise be an acquiring person has become such inadvertently and
such person divests as promptly as practicable a sufficient number of shares of common stock so that such person would no longer
be an acquiring person, then such person will not be deemed to be an acquiring person.
Until
the distribution time, the surrender for transfer of any shares of common stock outstanding will also constitute the transfer
of the Rights associated with those shares.
As
soon as practicable after the distribution time, separate Rights certificates will be mailed to holders of record of common stock
as of the close of business at the distribution time. From and after the distribution time, the separate Rights certificates alone
will represent the Rights. Except as otherwise provided in the Rights Agreement, only shares of common stock issued prior to the
distribution time will be issued with Rights.
The
Rights are not exercisable until the distribution time.
Expiration
Time
Unless
earlier redeemed or exchanged by the Company as described below, the Rights will expire at the close of business on February 15,
2021.
Flip-in
Event
In
the event that a person or group becomes an acquiring person (a “flip-in event”), each holder of a Right, other than
any acquiring person and certain related parties, whose Rights automatically become null and void, will have the right to receive,
upon exercise, a number of shares of common stock (or, in certain circumstances, cash, property or other securities of the Company)
having a value equal to two times the exercise price of the Right. The Rights may not be exercised following a flip-in event while
the Company has the ability to cause the Rights to be redeemed, as further described below.
For
example, at an exercise price of $6.00 per Right (equivalent to $12.00 for each whole share of common stock), each Right not owned
by an acquiring person (or by certain related parties) following a flip-in event would entitle its holder to purchase $24.00 worth
of common stock (or other consideration, as noted above) for $12.00. Assuming that common stock had a per share value of $4.00
at that time, the holder of each valid Right would be entitled to purchase six shares of common stock for $12.00.
Flip-over
Event
In
the event that, at any time following the stock acquisition date, any of the following occurs (each, a “flip-over event”):
|
|
●
|
the
Company consolidates with or merges with and into any other entity and the Company is
not the continuing or surviving corporation;
|
|
|
●
|
any
entity engages in a share exchange with or consolidates with, or merges with or into,
the Company, and the Company is the continuing or surviving corporation and, in connection
with such share exchange, consolidation or merger, all or part of the outstanding shares
of common stock are changed into or exchanged for stock or other securities of any other
entity or cash or any other property; or
|
|
|
●
|
the
Company sells or otherwise transfers, in one transaction or a series of related transactions,
more than 50% of the assets, cash flow or earning power of the Company and its subsidiaries,
taken as a whole,
|
each
holder of a Right (except Rights which previously have been voided as described above) will have the right to receive, upon exercise,
common stock of the acquiring company having a value equal to two times the exercise price of the Right.
Anti-dilution
Adjustments
The
exercise price payable, and the number of shares of common stock or other securities or property issuable, upon exercise of the
Rights are subject to adjustment from time to time to prevent dilution:
|
|
●
|
in
the event of a stock dividend on, or a subdivision, combination or reclassification of,
common stock;
|
|
|
●
|
if
holders of common stock are granted certain rights, options or warrants to subscribe
for common stock or convertible securities at less than the current market price of common
stock; or
|
|
|
●
|
upon
the distribution to holders of common stock of evidences of indebtedness or assets (excluding
regular quarterly cash dividends) or of subscription rights or warrants (other than those
referred to above).
|
With
certain exceptions, no adjustment in the exercise price will be required until cumulative adjustments amount to at least 1% of
the exercise price. No fractional shares of common stock will be issued, and, in lieu thereof, an adjustment in cash will be made
based on the market price of common stock on the last trading day prior to the date of exercise.
Redemption;
Exchange
In
general, the Company may redeem the Rights in whole, but not in part, at a price of $0.01 per Right (subject to adjustment and
payable in cash, common stock or other consideration deemed appropriate by the Board) at any time until ten days following the
stock acquisition date. Immediately upon the action of the Board authorizing any redemption, the Rights will terminate and the
only right of the holders of Rights will be to receive the redemption price.
At
any time after there is an acquiring person and prior to the acquisition by the acquiring person of 50% or more of the outstanding
shares of common stock, the Company may exchange the Rights (other than Rights which previously have been voided as described
above), in whole or in part, at an exchange ratio of one share of common stock per Right (subject to adjustment).
No
Rights as Stockholder
Until
a Right is exercised, its holder will have no rights as a stockholder of the Company, including, without limitation, the right
to vote or to receive dividends.
Amendment
of the Rights Agreement
The
Company and the rights agent may, from time to time, amend or supplement the Rights Agreement without the consent of the holders
of the Rights. After the stock acquisition date, however, no amendment can materially adversely affect the interests of the holders
of the Rights (other than the acquiring person, any affiliate or associate thereof or any transferee of the acquiring person or
any affiliate or associate thereof).
Required
Vote
The
affirmative vote of the holders of a majority of the votes cast by the shares of common stock present in person or represented
by proxy and entitled to vote thereon is required to ratify the Rights Agreement.
Stockholder
ratification of the Rights Agreement is not required by applicable law, or by the Amended Charter, Bylaws or other governing documents.
However, the Board has determined to request stockholder ratification of the adoption of the Rights Agreement to determine the
viewpoint of stockholders as to the advisability of the Rights Agreement and as a matter of good corporate governance. If the
stockholders do not ratify the adoption of the Rights Agreement, the Board currently intends to terminate the Rights Agreement,
but will consider whether to allow Rights Agreement to continue in its current form, to amend one or more of provisions of the
Rights Agreement or to allow the Rights Agreement to expire by its terms. In weighing such alternatives, the Board will likely
take into account a number of factors, including the nature of stockholders’ objections to the Rights Agreement (to the
extent discernable), the then current market conditions, whether the Board believes there is a need to defend the ability of its
stockholders to fairly and equally participate in a potential change-of-control transaction, whether a majority of disinterested
stockholders (excluding Exempt Persons) ratified the Rights Agreement, and whether the Board believes that, despite the failure
of stockholders to ratify the Rights Agreement, in the exercise of its fiduciary duties, it is advisable and in the best interests
of the Company and its stockholders to continue the Rights Agreement.
Although
the Board will carefully consider the stockholders’ vote as expressed at the Special Meeting, because the Board owes fiduciary
duties to all stockholders, it must make an independent decision in the exercise of its fiduciary duties whether it is advisable
and in the best interests of the Company and all of its stockholders to terminate the Rights Agreement, and may not rely solely
on the stockholder vote in making this decision. Accordingly, the Board may decide that its fiduciary duties require it to leave
the Rights Agreement in place, with or without amending one or more of its provisions, notwithstanding the failure of stockholders
to ratify its adoption. Likewise, even if stockholders ratify the adoption of the Rights Agreement, the Board may, at any time
during the term of the Rights Agreement, determine, in the exercise of its fiduciary duties, that the Rights Agreement should
be terminated or amended. If the Board terminates the Rights Agreement, the Board may decide in the future that its fiduciary
duties require it to enter into another stockholder rights.
The
Board recommends that you vote FOR the Ratification of the rights agreement.
PROPOSAL
3:
APPROVAL OF PROPOSED AMENDMENT TO THE AMENDED AND RESTATED CERTIFICATE OF INCORPORATION TO REDUCE THE MINIMUM AND MAXIMUM NUMBER
OF DIRECTORS
Overview
The
Board is submitting for stockholder approval the Board Size Amendment, which, if approved, would amend the Amended Charter to
reduce the minimum and maximum number of directors.
Currently,
the Amended Charter provides that the business and affairs of the Company shall be managed by a board of directors, which shall
consist of not less than nine nor more than 15 persons. The Board previously submitted the Board Size Amendment for stockholder
approval at the Company’s 2020 annual meeting, which was not approved by stockholders.
On
the recommendation of the Nominating and Corporate Governance Committee, the Board unanimously declared advisable and approved,
subject to approval by stockholders, the Board Size Amendment. The Board Size Amendment is the result of the Board’s ongoing
review of its corporate governance principles. This proposed amendment would allow the Board to adjust its size consistent with
the changing needs of the Company. The Board has considered the appropriate makeup and number of directors to properly represent
stockholders and manage the business and affairs of the Company and have determined that it is advisable and in the best interests
of the Company and all of its stockholders to reduce the minimum and maximum limits pursuant to the Board Size Amendment. Furthermore,
a reduction in the size of the Board will limit administrative costs as the Company implements the Plan of Dissolution.
Approval
of the Board Size Amendment is not conditioned on approval or disapproval of the Written Consent Amendment described in Proposal
4 or any other proposal, which means that the effects of approval or disapproval of the Board Size Amendment are not effected
by approval or disapproval of the Written Consent Amendment or any other proposal.
Summary
of the Board Size Amendment
The
following summary of the Board Size Amendment does not purport to be complete and is qualified in its entirety by reference to
the full text of the Board Size Amendment, which is attached as Annex C to this Proxy Statement. You should carefully read
this entire Proxy Statement, including the Board Size Amendment attached as Annex C to this Proxy Statement, for a more complete
understanding of the Board Size Amendment.
The
Board Size Amendment that is proposed to be included in the Amended Charter provides for the reduction of the minimum and maximum
number of directors from not less than nine nor more than 15 to not less than five nor more than 13. Additionally, the Board Size
Amendment removes language related to the phaseout of our previously classified board, which has been rendered moot by the completion
of the phaseout.
Required
Vote
The
affirmative vote of the holders of at least 80% of the shares of common stock outstanding as of the record date and entitled to
vote thereon is required to approve the Board Size Amendment. Abstentions and broker non-votes will be counted towards the tabulation
of votes cast on the Board Size Amendment and will have the same effect as a vote against the Board Size Amendment.
If
the Board Size Amendment is approved by stockholders, we will promptly file with the Delaware Secretary of State a Certificate
of Amendment setting forth the Board Size Amendment, which Certificate of Amendment will also include the Written Consent Amendment
if Proposal 4 is approved by stockholders. The Board Size Amendment will be effective upon such filing. The Board Size Amendment
would not shorten the term of any director in the event the size of the Board is reduced below its current size. If the Board
Size Amendment is not approved by the requisite vote, the Board Size Amendment will not be implemented and the current minimum
and maximum number of directors will apply.
If
the Board Size Amendment is approved by stockholders, the Board will approve a corresponding amendment to the Bylaws that would
also reduce the minimum and maximum number of directors thereunder.
THE
BOARD RECOMMENDS THAT YOU VOTE FOR THE PROPOSED AMENDMENT TO THE AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
TO REDUCE THE MINIMUM AND MAXIMUM NUMBER OF DIRECTORS.
PROPOSAL
4:
APPROVAL OF AN AMENDMENT TO THE COMPANY’S AMENDED AND RESTATED CERTIFICATE OF INCORPORATION TO Allow STOCKHOLDERS TO ACT
BY WRITTEN CONSENT
Overview
The
Board is submitting for stockholder approval the Written Consent Amendment, which, if approved, would amend the Amended Charter
to allow stockholders to act by written consent.
Currently,
Article THIRTEENTH of the Amended Charter prohibits stockholder action by written consent. Under the provisions of Section 228
of the DGCL, any action required or permitted to be taken at an annual or special meeting of stockholders may be taken by the
written consent of holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize
or take such action at a meeting at which all shares entitled to vote thereon were present and voted, unless otherwise specified
in the certificate of incorporation. If the Written Consent Amendment is approved by stockholders, upon implementation, stockholders
would be permitted to take action by written consent in accordance with Section 228 of the DGCL.
Approval
of the Written Consent Amendment is not conditioned on approval or disapproval of the Board Size Amendment described in Proposal
3 or any other proposal, which means that the effects of approval or disapproval of the Written Consent Amendment are not effected
by approval or disapproval of the Board Size Amendment or any other proposal.
The
Written Consent Amendment
The
following summary of the Written Consent Amendment does not purport to be complete and is qualified in its entirety by reference
to the full text of the Written Consent Amendment, which is attached as Annex D to this Proxy Statement. You should carefully
read this entire Proxy Statement, including the Written Consent Amendment attached as Annex D to this Proxy Statement, for a more
complete understanding of the Board Size Amendment.
After
careful consideration, the Board declared advisable and approved the Written Consent Amendment. The Written Consent Amendment
will allow the Company, in situations where approval by stockholders is required, to take prompt action by obtaining the requisite
stockholder consent in writing, without the delay and expense of convening a stockholder meeting for the purpose of approving
the action. The Board believes that in such cases where stockholders representing the requisite number of votes necessary to authorize
an action have already consented to a given action, the stockholder meeting becomes a formality that utilizes time and resources
that are better spent on other corporate functions, including, if approved, implementing the Plan of Dissolution.
Required
Vote
The
affirmative vote of the holders of a majority of the shares of common stock outstanding as of the record date and entitled to
vote thereon is required to approve the Written Consent Amendment. Abstentions and broker non-votes will be counted towards the
tabulation of votes cast on the Written Consent Amendment and will have the same effect as a vote against the Written Consent
Amendment.
If
the Written Consent Amendment is approved by stockholders, we will promptly file with the Delaware Secretary of State a Certificate
of Amendment, setting forth the Written Consent Amendment, which Certificate of Amendment will also include the Board Size Amendment
if Proposal 3 is approved by stockholders. The Written Consent Amendment will be effective upon such filing. If the Written Consent
Amendment is not approved by the requisite vote, the Written Consent Amendment will not be implemented and the current prohibition
on stockholder action by written consent will remain.
If
the Written Consent Amendment is approved by stockholders, the Board may approve an amendment to the Bylaws that would establish
procedures for acting by written consent pursuant to new Article THIRTEENTH.
The
Board recommends that you vote FOR the proposed amendment to the Amended and Restated Certificate of Incorporation
to allow stockholders to act by written consent.
PROPOSAL
5:
APPROVE THE ADJOURNMENT OF THE SPECIAL MEETING, IF NECESSARY OR APPROPRIATE
Overview
The
Board is submitting for stockholder approval the Adjournment Proposal, which will give the Board authority to adjourn the Special
Meeting, if necessary or appropriate, including to solicit additional proxies if there are not sufficient votes at the time of
the Special Meeting to adopt the Dissolution Proposal or in the absence of a quorum. If stockholders approve the Adjournment Proposal,
the Special Meeting could be adjourned by the Board to any date and the Company could use the additional time to solicit additional
proxies, including soliciting proxies from stockholders who have previously voted. If the Special Meeting is adjourned for the
purpose of soliciting additional proxies, stockholder who have already submitted their proxies will be able to revoke them at
any time before their use.
The
Company does not intend to call a vote on the adjournment proposal if the Dissolution Proposal is approved at the Special Meeting.
Required
Vote
The
affirmative vote of the holders of a majority of the votes cast by the shares of common stock present in person or represented
by proxy and entitled to vote thereon is required to approve the Adjournment Proposal.
The
Board recommends that you vote FOR the approval of the adjournment of the special meeting, if necessary or appropriate.
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Security
Ownership of Executive Officers and Directors
The
following table sets forth information regarding the beneficial ownership of common stock as of August 26, 2020,
for each of the Company’s named executive officers, directors and all executive officers and directors as a group.
|
Name(1)
|
|
Shares Beneficially Owned(1)
|
|
|
Percent of Outstanding(2)
|
|
|
Gerald W. Bodzy(3)
|
|
|
214,510
|
|
|
|
*
|
|
|
Benjamin T. Coutee(4)
|
|
|
250,730
|
|
|
|
*
|
|
|
Twila Day(5)
|
|
|
93,306
|
|
|
|
*
|
|
|
K. Scott Gray(6) (former officer)
|
|
|
408,748
|
|
|
|
1.31
|
%
|
|
Jill Griffin(7)
|
|
|
120,000
|
|
|
|
*
|
|
|
Steven Goodweather(8)
|
|
|
82,386
|
|
|
|
*
|
|
|
Frank Markantonis(9)
|
|
|
294,954
|
|
|
|
*
|
|
|
Joe C. McKinney(10)
|
|
|
296,970
|
|
|
|
*
|
|
|
Gasper Mir, III(11)
|
|
|
259,371
|
|
|
|
*
|
|
|
John Morlock(12)
|
|
|
11,498
|
|
|
|
*
|
|
|
Christopher J. Pappas(13)
|
|
|
5,624,539
|
|
|
|
18.06
|
%
|
|
Randolph C. Read(14)
|
|
|
106,192
|
|
|
|
*
|
|
|
Philip J. Rider(15)
|
|
|
24,000
|
|
|
|
*
|
|
|
All executive officers and directors as a group (13 persons)(16)
|
|
|
7,787,204
|
|
|
|
25.00
|
%
|
|
|
(1)
|
Except
as indicated in these notes and subject to applicable community property laws, each person named in the table owns directly the
number of shares indicated and has the sole power to vote and to dispose of such shares. Shares of phantom stock held by a nonemployee
director convert into an equivalent number of shares of common stock when the nonemployee director ceases to be a director of
the Company due to resignation, retirement, death, disability, removal, or any other circumstance. The shares of common stock
payable upon conversion of the phantom stock are included in this table because it is possible for the holder to acquire the shares
of common stock within 60 days if his or her directorship were to be terminated. Under the Company’s Nonemployee Director
Stock Plan, restricted stock awards may become unrestricted when a nonemployee director ceases to be a director of the Company.
Unless otherwise specified, the mailing address of each person named in the table is 13111 Northwest Freeway, Suite 600, and Houston,
Texas 77040.
|
|
|
(2)
|
Percentage
is based on 31,125,470 shares of common stock outstanding as of August 26, 2020. Shares to which the person or group has the right
to acquire within 60 days after August 26, 2020, are deemed to be outstanding in calculating the share ownership of the person
or group but are not deemed to be outstanding as to any other person or group.
|
|
|
(3)
|
The
shares shown for Mr. Bodzy include 29,441 shares held for his benefit in a custodial account and 185,069 shares of restricted
stock.
|
|
|
(4)
|
The
shares shown for Mr. Coutee include 43,026 shares held for his benefit in a custodial account, 30,000 shares of restricted stock
and 177,704 shares that he has a right to acquire within 60 days under the Employee Stock Plan.
|
|
|
(5)
|
The
93,306 shares shown for Ms. Day are shares of restricted stock.
|
|
|
(6)
|
The
shares shown for Mr. Gray include 99,865 shares held for his benefit in a custodial account and 308,883 shares which he has the
right to acquire within 60 days under the Employee Stock Plan. Mr. Gray resigned as Senior Vice President, Chief Financial Officer
and Principal Accounting Officer of the Company on April 4, 2020.
|
|
|
(7)
|
The
shares shown for Ms. Griffin include 91,584 shares held for her benefit in a custodial account and 28,416 shares of restricted
stock.
|
|
|
(8)
|
The
shares shown for Mr. Goodweather include 20,558 shares held for his benefit in a custodial account, 24,000 shares of restricted
stock and 37,828 shares that he has a right to acquire within 60 days under the Employee Stock Plan.
|
|
|
(9)
|
The
shares shown for Mr. Markantonis include 168,165 shares held for his benefit in a custodial account, 3,879 shares of phantom stock
held under the Nonemployee Phantom Stock Plan, and 122,910 shares of restricted stock.
|
|
|
(10)
|
The
shares shown for Mr. McKinney include 147,638 shares held in certificate form and 149,332 shares of restricted stock.
|
|
|
(11)
|
The
shares shown for Mr. Mir include 113,541 shares held for his benefit in a custodial account, 2,453 shares of phantom stock held
under the Nonemployee Phantom Stock Plan, and 143,377 shares of restricted stock.
|
|
|
(12)
|
The
shares shown for Mr. Morlock include 11,498 shares of restricted stock.
|
|
|
(13)
|
The
shares shown for Christopher J. Pappas include 4,553,159 shares held for his benefit in a custodial account and 1,071,380 shares
owned by Pappas Restaurants, Inc., as each of Christopher J. Pappas and Harris J. Pappas owns a 50% interest in Pappas Restaurants,
Inc. and therefore owns a corresponding beneficial interest in the 1,071,380 shares owned by Pappas Restaurants, Inc.
|
|
|
(14)
|
The
shares shown for Mr. Read include 106,192 shares of restricted stock.
|
|
|
(15)
|
The
shares shown for Mr. Rider include 24,000 shares of restricted stock.
|
|
|
(16)
|
The
shares shown for all directors and executive officers as a group include 5,266,977 shares held in custodial accounts, 524,415
shares which they have the right to acquire within 60 days under the Company’s various benefit plans, 918,100 shares of
restricted stock, 6,332 shares of phantom stock held by nonemployee directors under the Nonemployee Phantom Stock Plan, and 1,071,380
shares owned by Pappas Restaurants, Inc., of which Christopher J. Pappas and Harris J. Pappas each own a 50% interest, as described
above.
|
Security
Ownership of Certain Beneficial Owners
The
following table sets forth information as to the beneficial ownership of common stock by each person or group known by the Company
to own beneficially more than 5% of the outstanding shares of common stock as of August 26, 2020 and, unless otherwise indicated,
is based on disclosures made by the beneficial owners in SEC filings under Section 13 of the Exchange Act:
|
Name and Address of Beneficial Owner (1)
|
|
Shares Beneficially Owned
|
|
|
Percent of Outstanding(2)
|
|
|
Christopher J. Pappas(3)
|
|
|
5,667,153
|
|
|
|
18.43
|
%
|
|
13939 Northwest Freeway
|
|
|
|
|
|
|
|
|
|
Houston, Texas 77040
|
|
|
|
|
|
|
|
|
|
Harris J. Pappas(4)
|
|
|
5,491,020
|
|
|
|
17.86
|
%
|
|
13939 Northwest Freeway
|
|
|
|
|
|
|
|
|
|
Houston, Texas 77040
|
|
|
|
|
|
|
|
|
|
Bandera Partners LLC(5)
|
|
|
2,859,926
|
|
|
|
9.30
|
%
|
|
50 Broad Street, Suite 1820
|
|
|
|
|
|
|
|
|
|
New York, New York 10004
|
|
|
|
|
|
|
|
|
|
Hodges Capital Management, Inc.(6)
|
|
|
2,466,400
|
|
|
|
8.02
|
%
|
|
2905 Maple Ave.
|
|
|
|
|
|
|
|
|
|
Dallas, Texas 75201
|
|
|
|
|
|
|
|
|
|
Dimensional Fund Advisors(7)
|
|
|
1,873,197
|
|
|
|
6.09
|
%
|
|
Palisades West, Building One
|
|
|
|
|
|
|
|
|
|
6300 Bee Cave Road
|
|
|
|
|
|
|
|
|
|
Austin, Texas 78746
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Except
as indicated in these notes and subject to applicable community property laws, each person named in the table owns directly the
number of shares indicated and has the sole power to vote and to dispose of such shares.
|
|
|
(2)
|
Percentage
is based on 30,752,470 shares of common stock outstanding as of August 26, 2020.
|
|
|
(3)
|
The
shares shown for Christopher J. Pappas include 4,595,673 shares held for his benefit in a custodial account and 1,071,380 shares
owned by Pappas Restaurants, Inc., as each of Christopher J. Pappas and Harris J. Pappas owns a 50% interest in Pappas Restaurants,
Inc. and therefore owns a corresponding beneficial interest in the 1,071,380 shares owned by Pappas Restaurants, Inc.
|
|
|
(4)
|
The
shares shown for Harris J. Pappas include 4,419,640 shares held for his benefit in a custodial account and 1,071,380 shares owned
by Pappas Restaurants, Inc. Each of Christopher J. Pappas and Harris J. Pappas owns a 50% interest in Pappas Restaurants, Inc.
and therefore owns a corresponding beneficial interest in the 1,071,380 shares owned by Pappas Restaurants, Inc.
|
|
|
(5)
|
Information
based solely on 13F-HR Holdings Report filed with the SEC on August 12, 2020 by Bandera Partners LLC. Bandera Partners LLC has
shared voting authority with respect to 2,859,926shares.
|
|
|
(6)
|
Information
based solely on 13F-HR Holdings Report filed on July 22, 2020 with the SEC by Hodges Capital Management, Inc. Hodges Capital Management,
Inc. has sole voting authority with respect to 2,351,700 shares and has no voting authority with respect to 114,700 shares.
|
|
|
(7)
|
Information
based solely on 13F-HR Holdings Report filed on August 13, 2020 with the SEC by by Dimensional Fund Advisors LP. Dimensional Fund
Advisors LP has sole voting authority with respect to 1,826,977 shares and has no voting authority with respect to 46,220 shares.
|
OTHER
MATTERS
Where
You Can Find More Information; Incorporation of Certain Documents By Reference
We
file annual, quarterly and current reports, and other information with the SEC under the Exchange Act. The SEC maintains an Internet
website at www.sec.gov that contains reports and other information about issuers, like us, who file electronically with
the SEC. You also may obtain free copies of the documents we file with the SEC by going to our website, www.lubysinc.com/investors/filings.
The information provided on our website is not part of this Proxy Statement and is not incorporated by reference.
The
SEC allows us to “incorporate by reference” information into this Proxy Statement. This means that we can disclose
important information to you by referring you to another document filed separately with the SEC. The information incorporated
by reference is considered to be part of this Proxy Statement, except for any information that is superseded by information that
is included directly in this document.
This
Proxy Statement incorporates by reference the documents listed below that we have filed with the SEC but have not been included
or delivered with this Proxy Statement. These documents contain important information about us and our business, prospects and
financial condition.
|
|
●
|
Annual
Report on Form 10-K for the year ended August 28, 2019;
|
|
|
●
|
Quarterly
Reports on Form 10-Q for the quarter ended December 18, 2019, for the quarter ended
March 11, 2020 and for the quarter ended June 3, 2020; and
|
|
|
●
|
Current
Reports on Form 8-K filed with the SEC on February 6, 2020, February 14, 2020, March
24, 2020, April 7, 2020, April 20, 2020, April 23, 2020, April 28, 2020, July 6, 2020,
August 14, 2020, August 25, 2020 and September 8, 2020.
|
All
documents that the Company files pursuant to Sections 13(a), 13(c), 14 or 15(d) under the Exchange Act from the date of this
Proxy Statement to the date on which the Special Meeting is held, including any adjournments or postponements, will also be deemed
to be incorporated by reference in this Proxy Statement. Notwithstanding anything herein to the contrary, any information furnished
under Item 2.02 or Item 7.01 of our Current Reports on Form 8-K and any other information which is furnished, but
not filed with the SEC, is not incorporated herein by reference. You can obtain any of the documents incorporated by reference
in this Proxy Statement from us without charge, excluding any exhibits to those documents unless the exhibit is specifically incorporated
by reference in this Proxy Statement. You can obtain documents incorporated by reference in this Proxy Statement by requesting
them in writing or by telephone from us at the following address:
Luby’s,
Inc.
Attn:
Investor Relations
13111
Northwest Freeway, Suite 600
Houston,
Texas 77040
(713) 329-6808
Stockholder
Proposals and Nominations
We
do not expect the Certificate of Dissolution to be filed prior to our next annual meeting of stockholders in 2021. However, if
the Certificate of Dissolution is filed prior to our next annual meeting, we do not intend to hold an annual meeting of stockholders
in 2021.
Proposals
of stockholders for inclusion in our proxy statement and form of proxy for our 2021 annual meeting of stockholders submitted pursuant
to Rule 14a-8 under the Exchange Act must have been received in writing at our corporate office no later than September 1, 2020.
Our
Bylaws provide that any stockholder of record may nominate a candidate for election as a director of the Company or bring any
other business before an annual meeting of stockholders, so long as the stockholder gives timely notice thereof. To be timely,
such notice must be delivered in writing to the Secretary of the Company at the principal executive offices of the Company not
later than the close of business on the 90th day and not earlier than the close of business on the 120th day prior to the first
anniversary of the preceding year’s annual meeting of stockholders, subject to certain exceptions, and must include (1)
as to each person whom the stockholder proposes to nominate for election or reelection as a director, all information with respect
to each nominee as would be required to be disclosed in a proxy solicitation relating to an election of directors pursuant to
Regulation 14A under the Exchange Act; (2) as to any other business that the stockholder proposes to bring before the meeting,
a brief description of the business desired to be brought before the meeting, the text of the proposal or business (including
the text of any resolutions proposed for consideration and, if such business includes a proposal to amend the Company’s
Bylaws, the language of the proposed amendment), the reasons for conducting such business at the meeting, and any material interest
in such business of such stockholder; and (3) as to the stockholder giving the notice, (a) the name and address of such stockholder,
as they appear on the Company’s books, (b) the class and number of shares of the Company which are owned beneficially and
of record by such stockholder, and any derivative positions owned beneficially by such stockholder, and (c) all such other information
required to be submitted by the stockholder in accordance with the Bylaws. If an exception does not apply, notice of a stockholder
proposal submitted under the Bylaws will be considered timely if received no earlier than October 8, 2020 and no later than November
7, 2020.
Householding
of Proxy Materials
The
rules promulgated by the SEC permit companies, brokers, banks or other intermediaries to deliver a single copy of our proxy
materials to households at which two or more stockholders reside (“householding”). Stockholders sharing an
address who have been previously notified by their broker, bank or other intermediary and have consented to householding,
either affirmatively or implicitly by not objecting to householding, received only one copy of our proxy materials. A
stockholder who wishes to participate in householding in the future must contact his or her broker, bank or other
intermediary directly to make such request. Alternatively, a stockholder who wishes to revoke his or her consent to
householding and receive separate proxy materials for each stockholder sharing the same address must contact his or her
broker, bank or other intermediary to revoke such consent. Householding does not apply to stockholders with shares of common
stock registered directly in their name. Stockholders may also obtain a separate Proxy Statement or may receive a printed or
an e-mail copy of this Proxy Statement without charge by sending a written request to the Company or
at:
|
Luby’s,
Inc.
Attn:
Investor Relations
13111
Northwest Freeway, Suite 600
Houston,
Texas 77040
|
|
Transaction
of Other Business
At
the date of this Proxy Statement, the only business that the Board intends to present or knows that others will present at the
Special Meeting is as set forth above. If any other matter or matters are properly brought before the Special Meeting, or any
adjournment thereof, it is the intention of the persons named in the accompanying form of proxy to vote the proxy on such matters
in accordance with their best judgment.
|
|
By Order of the Board of Directors,
|
|
|
|
|
|
Christopher J. Pappas
|
|
|
President and Chief Executive Officer
|
|
|
|
|
|
, 2020
|
Annex
A
Plan of Liquidation and Dissolution
PLAN
OF LIQUIDATION AND DISSOLUTION
1.
Approval and Adoption of Plan.
This
Plan of Liquidation and Dissolution (the “Plan”) of Luby’s, Inc., a Delaware corporation (the “Company”),
has been approved by the Company’s Board of Directors (the “Board”) as being advisable and in the best interests
of the Company. This Plan is intended to accomplish the complete dissolution and liquidation of the Company, in accordance with
Section 275 and other applicable provisions of the General Corporation Law of Delaware (“DGCL”) and Sections 331 and
336 of the Internal Revenue Code of 1986, as amended (the “Code”). This Plan shall be effective when all of the following
steps have been completed:
|
|
(a)
|
Adoption
of this Plan by the Company’s Stockholders. The holders of a majority of the
outstanding common stock, par value $0.32 per share, of the Company (the “Common
Stock”), entitled to vote thereon, shall have approved and adopted this Plan, including
the liquidation and dissolution of the Company and authorizing the Board to sell all
or substantially all of the Company’s assets in connection therewith, at a special
meeting of the stockholders of the Company called for such purpose by the Board.
|
|
|
(b)
|
Filing
of the Certificate of Dissolution. The filing of a Certificate of Dissolution of
the Company (the “Certificate of Dissolution”) pursuant to Section 275
of the DGCL specifying the date (no later than ninety (90) days after the filing)
upon which the Certificate of Dissolution will become effective (the “Effective
Date”).
|
Notwithstanding
the authorization of the Board or the authorization of stockholders pursuant to Section 1(a) above, the Company may continue
to pursue other business opportunities and transactions, and, if for any reason, including the pursuit of such opportunities or
transactions, the Board determines that such action would be in the best interests of the Company, it may, prior to the Effective
Date, abandon the proposed dissolution and the proposed Plan pursuant to Section 275(e) of the DGCL. Upon the abandonment
of the proposed dissolution and the proposed Plan, the Plan shall be void.
2. Dissolution and Liquidation Period.
After
the Effective Date, the steps set forth below shall be completed at such times as the Board, in its absolute discretion, deems
necessary, appropriate or advisable. Without limiting the generality of the foregoing, the Board may instruct the officers of
the Company to delay the taking of any of the following steps until the Company has performed such actions as the Board or such
officers determine to be necessary, appropriate or advisable for the Company to maximize the value of the Company's assets upon
liquidation:
|
|
(a)
|
The
completion of all actions that may be necessary, appropriate or desirable to dissolve
and terminate the corporate existence of the Company, including any filings with or notices
to the Securities Exchange Commission, the New York Stock Exchange and any other relevant
regulatory authority;
|
|
|
(b)
|
The
cessation of all of the Company's business activities and the withdrawal of the Company
from any jurisdiction in which it is qualified to do business, except as necessary to
preserve the value of its assets, wind up its business affairs and distribute its assets
pursuant to Section 278 of the DGCL;
|
|
|
(c)
|
The
negotiation and consummation of sales of all of the assets and properties of the Company,
including the assumption by the purchaser or purchasers of any or all liabilities of
the Company;
|
|
|
(d)
|
The
giving of notice of the dissolution to all persons having a claim against the Company
and the rejection of any such claims in accordance with Section 280 of the DGCL;
|
|
|
(e)
|
The
offering of security to any claimant on a contract whose claim is contingent, conditional
or unmatured in an amount the Company determines is sufficient to provide compensation
to the claimant if the claim matures, and the petitioning of the Delaware Court of Chancery
(the “Court”) to determine the amount and form of security sufficient to
provide compensation to any such claimant who has rejected such offer in accordance with
Section 280 of the DGCL;
|
|
|
(f)
|
The
petitioning of the Court to determine the amount and form of security which would be
reasonably likely to be sufficient to provide compensation for (i) claims that are
the subject of pending litigation against the Company, and (ii) claims that have
not been made known to the Company or that have not arisen, but are likely to arise or
become known within five (5) years after the date of dissolution (or longer in the
discretion of the Court), each in accordance with Section 280 of the DGCL;
|
|
|
(g)
|
The
payment, or the making of adequate provision for payment, of all claims made against
the Company and not rejected, including all expenses of the sale of assets and of the
dissolution and liquidation provided for by the Plan in accordance with Section 280
of the DGCL;
|
|
|
(h)
|
The
posting of all security offered and not rejected and all security ordered by the Court
in accordance with Section 280 of the DGCL; and
|
|
|
(i)
|
The
distribution of the remaining funds of the Company and the distribution of remaining
unsold assets of the Company, if any, to its stockholders.
|
Notwithstanding
the foregoing, the Company shall not be required to follow the procedures described in Section 280 of the DGCL, and the adoption
of the Plan by the holders of the Common Stock shall constitute full and complete authority for the Board and the officers of
the Company, without further stockholder action, to proceed with the dissolution and liquidation of the Company in accordance
with any applicable provision of the DGCL, including, without limitation, Section 281(b) thereof.
3.
Authority of Officers and Directors.
After
the Effective Date, the Board and the officers of the Company shall continue in their positions for the purpose of winding up
the affairs of the Company as contemplated by Delaware law. The Board may appoint officers, hire employees and retain independent
contractors in connection with the winding up process, and is authorized to pay to the Company's officers, directors and employees,
or any of them, compensation or additional compensation above their regular compensation, in money or other property, in recognition
of the extraordinary efforts they, or any of them, will be required to undertake, or actually undertake, in connection with the
successful implementation of this Plan. To the fullest extent permitted by law, adoption of this Plan by stockholders shall constitute
approval of the payment of any such compensation.
The
adoption of the Plan by the holders of the Common Stock shall constitute full and complete authority for the Board and the officers
of the Company, without further stockholder action, to do and perform any and all acts and to make, execute and deliver any and
all agreements, conveyances, assignments, transfers, certificates and other documents of any kind and character that the Board
or such officers deem necessary, appropriate or advisable: (i) to dissolve the Company in accordance with the laws of the
State of Delaware and cause its withdrawal from all jurisdictions in which it is authorized to do business; (ii) to sell,
dispose, convey, transfer and deliver the assets of the Company; (iii) to satisfy or provide for the satisfaction of the
Company's obligations in accordance with Sections 280 and 281 of the DGCL; and (iv) to distribute all of the remaining
funds of the Company and any unsold assets of the Company to the holders of the Common Stock.
4. Sale of All or Substantially All of Assets.
The
Board shall sell, convey, transfer and deliver or otherwise dispose of all or substantially all of the assets of the Company,
including causing each of Luby’s Fuddruckers Restaurants, LLC, a wholly owned Texas limited liability company subsidiary
of the Company (the “OpCo”) and each of the wholly owned subsidiary entities of the Company listed on Exhibit A hereto
(the “Other Owned Entities”), to sell, convey, transfer, deliver or otherwise dispose of all or substantially all
of the assets of OpCo and the Other Owned Entities, in one or more transactions and upon such terms and conditions as the Board,
in its absolute discretion, deems expedient and in the best interests of the Company and the best interests of the stockholders,
without any further vote or action by the Company’s stockholders. The Company’s assets may be sold in one transaction
or in several transactions to one or more buyers. The Company shall not be required to obtain appraisals, fairness opinions or
other third-party opinions as to the value of its assets in connection with the liquidation.
5.
Professional Fees and Expenses.
It
is specifically contemplated that the Board may authorize the payment of a retainer fee to a law firm or law firms for legal fees
and expenses of the Company, including, among other things, to cover any costs payable pursuant to the indemnification of the
Company’s officers or members of the Board provided by the Company pursuant to its certificate of incorporation and bylaws,
as amended from time to time (“Charter Documents”) or the DGCL or otherwise.
In
addition, in connection with and for the purpose of implementing and assuring completion of this Plan, the Company may, in the
sole and absolute discretion of the Board, pay any brokerage, agency and other fees and expenses of persons rendering services
to the Company in connection with the collection, sale, exchange or other disposition of the Company’s assets and the implementation
of this Plan. Adoption of the Plan by stockholders shall, to the fullest extent permitted by law, constitute approval of such
payments by the stockholders of the Company.
6.
Indemnification.
The
Company shall continue to indemnify its officers, directors, employees and agents in accordance with its Charter Documents and
any contractual arrangements, for actions taken in connection with this Plan and the winding up of the affairs of the Company.
The Board, in its sole and absolute discretion, is authorized to obtain and maintain insurance as may be necessary, appropriate
or advisable to cover the Company's obligations hereunder, including without limitation directors' and officers' liability coverage.
7. Liquidating Trust.
The
Board may, but is not required to, establish a liquidating trust (the “Liquidating Trust”) and distribute assets of
the Company to the Liquidating Trust. The Liquidating Trust may be established by agreement with one or more trustees (the “Trustees”)
selected by the Board. If the Liquidating Trust is established by agreement with one or more Trustees, the trust agreement establishing
and governing the Liquidating Trust shall be in form and substance determined by the Board. To the fullest extent permitted by
law, adoption of the Plan by stockholders shall constitute the approval of the appointment of the Trustees, any trust agreement
and any transfer of assets by the Company to the Trust. In the alternative, the Board may petition the Court for the appointment
of one or more Trustees to conduct the liquidation of the Company, subject to the supervision of the Court. Whether appointed
by an agreement or by the Court, the Trustees shall in general be authorized to take charge of the Company’s assets, and
to collect the debts and property due and belonging to the Company, with power to prosecute and defend, in the name of the Company,
or otherwise, all such suits as may be necessary or proper for the foregoing purposes, and to appoint agents under them and to
do all other acts which might be done by the Company that may be necessary, appropriate or advisable for the final settlement
of the unfinished business of the Company.
8.
Liquidating Distributions.
Liquidating
distributions, in cash or in kind, may be made from time to time to the holders of record of outstanding shares of Common Stock
at the close of business on the Effective Date, as provided in Section 2 above, pro rata in accordance with the respective
number of shares then held of record; provided that, in the opinion of the Board, provision has been made for the payment of the
obligations of the Company to the extent required by law. All determinations as to the time for and the amount and kind of liquidating
distributions shall be made in the exercise of the absolute discretion of the Board and in accordance with Section 281 of
the DGCL. As provided in Section 11 below, distributions made pursuant to this Plan shall be treated as made in complete
liquidation of the Company within the meaning of the Code and the regulations promulgated thereunder.
9.
Amendment or Modification of Plan.
If
for any reason the Board determines that such action would be in the best interests of the Company, it may amend or modify the
Plan and all action contemplated thereunder, notwithstanding stockholder approval of the Plan; provided, however, that the Company
will not amend or modify the Plan under circumstances that would require additional stockholder approval under the federal securities
laws without complying with the federal securities laws.
10.
Cancellation of Stock and Stock Certificates.
Following
the Effective Date and subject to applicable law, the Company shall no longer permit or effect transfers of any of its stock,
and the Company’s capital stock and stock certificates evidencing the Common Stock will be treated as no longer being outstanding.
As a condition to receipt of any liquidating distribution to any holder of the Common Stock represented by a certificate, the
Board, in its absolute discretion, may require the holder to (i) surrender its certificates evidencing the Common Stock to
the Company or its agents for recording of such distributions thereon, or (ii) furnish the Company with evidence satisfactory
to the Board of the loss, theft or destruction of its certificates evidencing the Common Stock, together with such surety bond
or other security or indemnity as may be required by and satisfactory to the board. As a condition to receipt of any distribution
to any holder of the Common Stock that is not represented by a certificate, the Board may require the holder to provide such evidence
of ownership of the Common Stock as the Company may require.
11.
Liquidation under Code Sections 331 and 336.
It
is intended that this Plan shall be a plan of complete liquidation of the Company in accordance with the terms of Sections 331
and 336 of the Code, which plan shall only go into effect upon the Effective Date, and not prior to such date. The Plan shall
be deemed to authorize the taking of such action as, in the opinion of counsel for the Company, may be necessary to conform with
the provisions of Sections 331 and 336 and the regulations promulgated thereunder, including, without limitation, the making
of any elections thereunder, if applicable.
12.
Filing of Tax Forms.
The
officers of the Company are authorized and directed, within thirty (30) days after the Effective Date, to execute and file
United States Treasury Form 966 for the Company and any appropriate subsidiaries, pursuant to Section 6043 of the Code.
The officers of the Company and its subsidiaries are also authorized to file any additional returns, forms and reports with the
Internal Revenue Service, or other taxing authorities, including state and local taxing authorities, as may be necessary or appropriate
in connection with this Plan and the carrying out thereof.
13.
Absence of Appraisal Rights.
Under
Delaware law, the Company’s stockholders are not entitled to appraisal rights for their shares of capital stock in connection
with the transactions contemplated by the Plan.
14.
Abandoned Property.
If
any distribution to a stockholder cannot be made, whether because the stockholder cannot be located, has not surrendered certificates
evidencing the capital stock as required hereunder or for any other reason, the distribution to which such stockholder is entitled
shall be transferred, at such time as the final liquidating distribution is made by the Company, to the official of such state
or other jurisdiction authorized by applicable law to receive the proceeds of such distribution. The proceeds of such distribution
shall thereafter be held solely for the benefit of and for ultimate distribution to such stockholder as the sole equitable owner
thereof and shall be treated as abandoned property and escheat to the applicable state or other jurisdiction in accordance with
applicable law. In no event shall the proceeds of any such distribution revert to or become the property of the Company.
EXHIBIT
A
Luby’s
Bevco, Inc.
Luby’s
Bev I, LLC
Luby’s
Bev II, LLC
Fuddruckers
of Annapolis, LLC
Fuddruckers
of Brandywine, LLC
Paradise
Cheeseburgers, LLC
Paradise
Restaurant Group, LLC
Cheeseburger
of Algonquin, LLC
Cheeseburger
of California, LLC
Cheeseburger
of Downers Grove, LLC
Cheeseburger
of Evansville, LLC
Cheeseburger
of Fishers, LLC
Cheeseburger
of Fredericksburg, LLC
Cheeseburger
of Ft. Meyers, LLC
Cheeseburger
of Kansas City, LLC
Cheeseburger
of Middleton, LLC
Cheeseburger
of Myrtle Beach, LLC
Cheeseburger
of Newark, LLC
Cheeseburger
of Newport News, LLC
High
Tides of Omaha, LLC
Cheeseburger
of Pasadena, LLC
Cheeseburger
of Sandestin, LLC
Cheeseburger
of Secaucus, LLC
Cheeseburger
of Southport, LLC
Cheeseburger
of Sterling Heights, LLC
Cheeseburger
of Terre Haute, LLC
Cheeseburger
of Virgina Beach, LLC
Cheeseburger
of Wallkill, LLC
Cheeseburger
of Woodbridge, LLC
Cheeseburger
in Paradise of St. Mary’s County, LLC
Luby's
Fuddruckers Foundation
Annex
B
CONFORMED Rights Agreement
Luby’s,
Inc.
and
American
Stock Transfer & Trust Company, LLC
as Rights Agent
Rights Agreement
Dated as of February 15, 2018,
as amended on February 11, 2019 and February 14, 2020
Table of Contents
|
Exhibit A
|
-
|
Form of Rights Certificate
|
|
Exhibit B
|
-
|
Summary of Rights to Purchase Common Stock
|
RIGHTS AGREEMENT
This RIGHTS AGREEMENT,
dated as of February 15, 2018 (this “Agreement”), is by and between Luby’s, Inc., a Delaware corporation
(the “Company”), and American Stock Transfer & Trust Company, LLC (the “Rights Agent”).
W I T N E S E T H:
WHEREAS, on
February 15, 2018 (the “Rights Dividend Declaration Date”), the board of directors of the Company (the “Board
of Directors”) authorized and declared a dividend distribution of one Right (as hereinafter defined) for each share of
Common Stock (as hereinafter defined) outstanding at the Close of Business (as hereinafter defined) on February 28, 2018 (the “Record
Date”), each Right initially representing the right to purchase one half of a share of Common Stock, upon the terms and
subject to the conditions hereinafter set forth (the “Rights”), and has further authorized the issuance of one
Right (as such number may hereinafter be adjusted pursuant to the provisions of Section 11) for each share of Common Stock
that shall become outstanding between the Record Date (whether originally issued or delivered from the Company’s treasury)
and the earlier of the Distribution Time and the Expiration Time (as such terms are hereinafter defined) or, in certain circumstances
provided in Section 22, after the Distribution Time.
NOW, THEREFORE,
in consideration of the premises and the mutual agreements herein set forth, the parties hereby agree as follows:
Section 1. Certain
Definitions. For purposes of this Agreement, the following terms have the meanings indicated:
“Acquiring
Person” shall mean any Person who or which, together with all Affiliates and Associates of such Person, is or becomes
the Beneficial Owner of ten percent (10%) or more of the shares of Common Stock then outstanding, but shall not include (i) the
Company, (ii) any Subsidiary of the Company, (iii) any employee benefit plan of the Company or of any Subsidiary of the Company,
(iv) any Person organized, appointed or established by the Company or any Subsidiary of the Company for or pursuant to the terms
of any such plan, (v) any Person (other than an Exempt Person (as defined below)) who or which, as of immediately prior to the
first public announcement of the adoption of this Agreement, is the Beneficial Owner of ten percent (10%) or more of the outstanding
shares of Common Stock, until such time as such Person shall become the Beneficial Owner (other than pursuant to a dividend or
distribution paid or made by the Company on the outstanding Common Stock or pursuant to a split or subdivision of the outstanding
Common Stock) of any additional shares of Common Stock while such Person is the Beneficial Owner of ten percent (10%) or more of
the outstanding shares of Common Stock or (vi) Harris J. Pappas, Christopher J. Pappas or their respective spouses, descendants,
personal estate representatives, Affiliates or Associates (collectively, the “Exempt Persons”), either individually,
collectively or in any combination, provided that all of the Exempt Persons do not beneficially own, in the aggregate, more than
35.5% of the outstanding shares of Common Stock. Notwithstanding the foregoing, no Person shall become an “Acquiring Person”
(A) as a result of an acquisition of shares of Common Stock by the Company which, by reducing the number of shares outstanding,
increases the proportionate number of shares beneficially owned by such Person to ten percent (10%) (or 35.5% in the case of Exempt
Persons) or more of the shares of Common Stock then outstanding or (B) solely as a result of any grant of any options, warrants,
rights, restricted stock units, restricted shares or other securities made by the Company to any of its directors, officers or
employees in their capacities as such, or as a result of any vesting or exercise of any such grant; provided, however,
that if a Person, other than those Persons excepted in clauses (i), (ii), (iii), (iv), (v) or (vi) of the immediately preceding
sentence, shall become the Beneficial Owner of ten percent (10%) (or 35.5% in the case of Exempt Persons) or more of the shares
of Common Stock then outstanding by reason of purchases of Common Stock by the Company and shall, after such purchases by the Company,
become the Beneficial Owner (other than pursuant to a dividend or distribution paid or made by the Company on the outstanding Common
Stock or pursuant to a split or subdivision of the outstanding Common Stock) of any additional shares of Common Stock, then such
Person shall be deemed to be an “Acquiring Person.” Notwithstanding the foregoing, if the Board of Directors determines
in good faith that a Person who would otherwise be an “Acquiring Person” (as defined pursuant to the foregoing provisions
of this paragraph) has become such inadvertently, and such Person divests as promptly as practicable a sufficient number of shares
of Common Stock so that such Person would no longer be an “Acquiring Person” (as defined pursuant to the foregoing
provisions of this paragraph), then such Person shall be deemed not to be an “Acquiring Person” for any purposes of
this Agreement.
“Act”
shall mean the Securities Act of 1933, as amended.
“Adjustment
Shares” shall have the meaning set forth in Section 11(a)(ii).
“Affiliate”
and “Associate” shall have the respective meanings ascribed to such terms in Rule 12b-2 of the General Rules
and Regulations under the Exchange Act as in effect on the date of this Agreement.
“Agreement”
has the meaning set forth in the preamble.
A Person shall be
deemed the “Beneficial Owner” of, and shall be deemed to “beneficially own,” any securities:
that such
Person or any of such Person’s Affiliates or Associates owns, directly or indirectly, or has the right or obligation to acquire
(whether such right is exercisable, or such obligation is required to be performed, immediately or only after the passage of time)
pursuant to any agreement, arrangement or understanding (whether or not in writing and other than customary agreements with and
between underwriters and selling group members with respect to a bona fide public offering of securities) or upon the exercise
of conversion rights, exchange rights, rights (other than the Rights), warrants or options, or otherwise; provided, however,
that a Person shall not be deemed the “Beneficial Owner” of, or to “beneficially own,” (A) securities tendered
pursuant to a tender or exchange offer made by or on behalf of such Person or any of such Person’s Affiliates or Associates
until such tendered securities are accepted for purchase or exchange, (B) securities issuable upon exercise of Rights at any time
prior to the occurrence of a Triggering Event or (C) securities issuable upon exercise of Rights from and after the occurrence
of a Triggering Event which Rights were acquired by such Person or any such Person’s Affiliates or Associates prior to the
Distribution Time or pursuant to Section 22 (the “Original Rights”) or pursuant to Section 11(i)
in connection with an adjustment made with respect to any Original Rights;
that such
Person or any of such Person’s Affiliates or Associates, directly or indirectly, has the right to vote or dispose of or has
“beneficial ownership” of (as determined pursuant to Rule 13d-3 of the General Rules and Regulations under the Exchange
Act), including pursuant to any agreement, arrangement or understanding (whether or not in writing and other than customary agreements
with and between underwriters and selling group members with respect to a bona fide public offering of securities); provided,
however, that a Person shall not be deemed the “Beneficial Owner” of, or to “beneficially own,”
any security under this subparagraph (ii) as a result of an agreement, arrangement or understanding to vote such security if such
agreement, arrangement or understanding (A) arises solely from a revocable proxy or consent given in response to a public proxy
or consent solicitation made pursuant to, and in accordance with, the applicable provisions of the General Rules and Regulations
under the Exchange Act and (B) is not also then reportable by such Person on Schedule 13D under the Exchange Act (or any comparable
or successor report);
that are
beneficially owned, directly or indirectly, by any other Person (or any Affiliate or Associate thereof) with which such Person
(or any of such Person’s Affiliates or Associates) has any agreement, arrangement or understanding (whether or not in writing
and other than customary agreements with and between underwriters and selling group members with respect to a bona fide public
offering of securities), for the purpose of acquiring, holding, voting (except pursuant to a revocable proxy or consent as described
in the proviso to subparagraph (ii) of this definition) or disposing of any voting securities of the Company; or
(iv) that
such Person or any of such Person’s Affiliates or Associates is determined to Constructively Own;
provided,
however, that (x) nothing in this definition shall cause a Person engaged in business as an underwriter of securities to
be the “Beneficial Owner” of, or to “beneficially own,” any securities acquired through such Person’s
participation in good faith in a firm commitment underwriting until the expiration of forty (40) days after the date of such acquisition
and (y) no officer or director of the Company shall be deemed to Beneficially Own any securities of any other Person solely by
virtue of any actions that such officer or director takes in such capacity.
“Board of
Directors” shall have the meaning set forth in the recitals of this Agreement.
“Business
Day” shall mean any day other than a Saturday, a Sunday or a day on which banking institutions in the State of New York
are authorized or obligated by law or executive order to close.
“Close of
Business” on any given date shall mean 5:00 P.M., New York City time, on such date, provided, however,
that if such date is not a Business Day it shall mean 5:00 P.M., New York City time, on the next succeeding Business Day.
“Common Stock”
shall mean the common stock, par value $0.32 per share, of the Company.
“Company”
has the meaning set forth in the preamble to this Agreement.
A Person shall be
deemed to “Constructively Own” shares of Common Stock in respect of which such Person has, or has the right
or obligation to acquire, a Synthetic Long Position, calculated in the manner set forth below. The number of shares of Common Stock
in respect of a Synthetic Long Position that shall be deemed to be Constructively Owned is the notional or other number of shares
of Common Stock in respect of such Synthetic Long Position that is specified in a filing by such Person or any of such Person’s
Affiliates or Associates with the SEC or in the documentation evidencing such Synthetic Long Position as the basis upon which the
value or settlement amount of such Synthetic Long Position, or the opportunity of the holder of such Synthetic Long Position to
profit or share in any profit, is to be calculated in whole or in part, and in any case (or if no such number of shares of Common
Stock is specified in any filing or documentation), as determined by the Board of Directors in good faith to be the number of shares
of Common Stock to which such Synthetic Long Position relates.
“Current
Market Price” shall have the meaning set forth in Section 11(d).
“Current
Value” shall have the meaning set forth in Section 11(a)(iii).
“Derivative”
shall mean any option, warrant, convertible security, stock appreciation right, swap agreement or other security, contract right
or derivative position other than any interest, right, option or other security described in Rule 16a-1(c)(1)-(5) or (7) of the
General Rules and Regulations under the Exchange Act.
“Distribution
Time” shall have the meaning set forth in Section 3(a).
“Equivalent
Common Stock” shall have the meaning set forth in Section 11(b).
“Exchange
Act” shall mean the Securities Exchange Act of 1934, as amended.
“Exchange
Ratio” shall have the meaning set forth in Section 24(a).
“Expiration
Time” shall have the meaning set forth in Section 7(a).
“Final Expiration
Time” shall have the meaning set forth in Section 7(a).
“Flip-in
Event” shall have the meaning set forth in Section 11(a)(ii).
“Flip-in
Trigger Date” shall have the meaning set forth in Section 11(a)(iii).
“Flip-over
Event” shall have the meaning set forth in Section 13.
“Flip-over
Party” shall have the meaning set forth in Section 13(b).
“Flip-over
Stock” shall mean the capital stock (or similar equity interest) with the greatest voting power in respect of the election
of directors (or other Persons similarly responsible for the direction of the business and affairs) of the Flip-over Party.
“NYSE”
shall mean the New York Stock Exchange.
“OTCBB”
shall have the meaning set forth in Section 11(d)(i).
“Person”
shall mean any individual, partnership, firm, corporation, limited liability company, association, trust, limited liability partnership,
joint venture, unincorporated organization or other entity and shall include any successor (by merger or otherwise) of such entity.
“Purchase
Price” shall have the meaning set forth in Section 4(a).
“Record Date”
shall have the meaning set forth in the recitals of this Agreement.
“Redemption
Price” shall have the meaning set forth in Section 23(a).
“Rights”
shall have the meaning set forth in the recitals of this Agreement.
“Rights Agent”
shall have the meaning set forth in the introduction to this Agreement.
“Rights Certificates”
shall have the meaning set forth in Section 3(a).
“Rights Dividend
Declaration Date” shall have the meaning set forth in the recitals of this Agreement.
“SEC”
means the Securities and Exchange Commission.
“Spread”
shall have the meaning set forth in Section 11(a)(iii).
“Stock Acquisition
Date” shall mean the first date of public announcement (which, for purposes of this definition, shall include a report
filed pursuant to Section 13(d) under the Exchange Act) by the Company or an Acquiring Person that an Acquiring Person has become
such.
“Subsidiary”
shall mean, with reference to any Person, any corporation or other Person of which an amount of voting securities sufficient to
elect at least a majority of the directors (or other Persons similarly responsible for the direction of the business and affairs
of such other Person) of such corporation or other Person is beneficially owned, directly or indirectly, by such Person, or otherwise
controlled by such Person.
“Substitution
Period” shall have the meaning set forth in Section 11(a)(iii).
“Summary
of Rights” shall have the meaning set forth in Section 3(b).
“Synthetic
Long Position” shall mean any Derivative, whether or not presently exercisable, that has an exercise or conversion privilege
or a settlement payment or mechanism at a price related to the value of the Common Stock or a value determined in whole or in part
with reference to, or derived in whole or in part from, the value of the Common Stock and that increases in value as the value
of the Common Stock increases or that provides to the holder an opportunity, directly or indirectly, to profit or share in any
profit derived from any increase in the value of the Common Stock, in any case without regard to whether (i) such Derivative conveys
any voting rights in the Common Stock to such Person or any of such Person’s Affiliates or Associates, (ii) such Derivative
is required to be, or capable of being, settled through delivery of Common Stock or (iii) such Person or any of such Person’s
Affiliates or Associates may have entered into other transactions that hedge the economic effect of such Derivative.
“Trading
Day” shall have the meaning set forth in Section 11(d)(i).
“Triggering
Event” shall mean a Flip-in Event or a Flip-over Event.
“Trust”
shall have the meaning set forth in Section 24(a).
“Trust Agreement”
shall have the meaning set forth in Section 24(a).
Section 2. Appointment
of Rights Agent. The Company hereby appoints the Rights Agent to act as agent for the Company and the holders of the Rights
(who, in accordance with Section 3, shall, prior to the Distribution Time, also be the holders of the Common Stock) in accordance
with the terms and conditions of this Agreement, and the Rights Agent hereby accepts such appointment. The Company may from time
to time appoint such co-Rights Agents as it may deem necessary or desirable.
Section 3. Issuance
of Rights Certificates.
(a) Until the earlier
of (i) the Close of Business on the tenth (10th) day after the Stock Acquisition Date (or, if the tenth (10th) day after the Stock
Acquisition Date occurs before the Record Date, the Close of Business on the Record Date) or (ii) the Close of Business on the
tenth (10th) Business Day (or such later date as may be determined by action of the Board of Directors prior to such time as any
Person becomes an Acquiring Person) after the date that a tender or exchange offer by any Person (other than the Company, any Subsidiary
of the Company, any employee benefit plan of the Company or of any Subsidiary of the Company, or any Person organized, appointed
or established by the Company for or pursuant to the terms of any such plan) is first published or sent or given within the meaning
of Rule 14d-2(a) of the General Rules and Regulations under the Exchange Act, if upon consummation thereof, such Person would become
an Acquiring Person (the earlier of (i) and (ii) being herein referred to as the “Distribution Time”), (x) with
respect to shares of Common Stock outstanding as of the Record Date, or which become outstanding subsequent to the Record Date,
the Rights, unless earlier expired, redeemed or terminated, will be evidenced by the certificates for shares of Common Stock registered
in the names of the holders of shares of Common Stock (or, in the case of uncertificated shares of Common Stock, by the book-entry
account that evidences record ownership of such shares) (which certificates or book entries for Common Stock shall be deemed also
to be certificates or book entries for Rights) and not by separate certificates (or book entries) and (y) the Rights will be transferable
only in connection with the transfer of the underlying shares of Common Stock (and, thus, until the earlier of the Distribution
Time and the Expiration Time, the surrender for transfer of any certificate representing shares of Common Stock (or, in the case
of uncertificated shares of Common Stock, the effectuation of a book-entry transfer of such shares of Common Stock) in respect
of which Rights have been issued shall also constitute the transfer of the Rights associated with such shares of Common Stock).
The Company must promptly notify the Rights Agent of a Distribution Time and request its transfer agent to give the Rights Agent
a stockholder list together with all other relevant information. As soon as practicable after the Rights Agent is notified of the
Distribution Time and receives such information, the Rights Agent will send by first-class, insured, postage prepaid mail, to each
record holder of the Common Stock as of the Close of Business on the Distribution Time, at the address of such holder shown on
the records of the Company, one or more Rights certificates, in substantially the form of Exhibit A (the “Rights
Certificates”), evidencing one Right for each share of Common Stock so held, subject to adjustment as provided herein.
In the event that any adjustment in the number of Rights per share of Common Stock has been made pursuant to Section 11,
at the time of distribution of the Rights Certificates, the Company shall make the necessary and appropriate rounding adjustments
(in accordance with Section 14(a)) so that Rights Certificates representing only whole numbers of Rights are distributed
and cash is paid in lieu of any fractional Rights. As of and after the Distribution Time, the Rights will be evidenced solely by
such Rights Certificates.
(b) The Company will
make available, as promptly as practicable, a copy of a Summary of Rights, in substantially the form attached as Exhibit B
(the “Summary of Rights”), to any holder of Rights who may so request from time to time prior to the Expiration
Time. With respect to shares of Common Stock outstanding as of the Record Date, or which become outstanding subsequent to the Record
Date, until the Distribution Time, the Rights will be evidenced by the certificates for shares of Common Stock registered in the
names of the holders of shares of Common Stock (or, in the case of uncertificated shares of Common Stock, by the book-entry account
that evidences record ownership of such shares). Until the earlier of the Distribution Time or the Expiration Time, the surrender
for transfer of any certificate representing shares of Common Stock (or, in the case of uncertificated shares of Common Stock,
the effectuation of a book-entry transfer of such shares of Common Stock) in respect of which Rights have been issued shall also
constitute the transfer of the Rights associated with such shares of Common Stock.
(c) Rights shall be
issued in respect of all shares of Common Stock that are issued (whether originally issued or from the Company’s treasury)
after the Record Date but prior to the earlier of the Distribution Time or the Expiration Time or, in certain circumstances provided
in Section 22, after the Distribution Time. Certificates representing such shares of Common Stock shall also be deemed
to be certificates for Rights, and shall bear a legend substantially in the following form:
This certificate
also evidences and entitles the holder hereof to certain rights as set forth in the Rights Agreement between Luby’s, Inc.
(the “Company”) and American Stock Transfer & Trust Company, LLC (the “Rights Agent”) dated as of February
15, 2018, as the same may be amended from time to time (the “Rights Agreement”), the terms of which are hereby incorporated
herein by reference and a copy of which is on file at the principal offices of the Company. Under certain circumstances, as set
forth in the Rights Agreement, such Rights (as defined in the Rights Agreement) will be evidenced by separate certificates and
will no longer be evidenced by this certificate. The Company will mail to the holder of this certificate a copy of the Rights Agreement,
as in effect on the date of mailing, without charge promptly after receipt of a written request therefor. Under certain circumstances
set forth in the Rights Agreement, Rights issued to, or held by, any Person who or which is, was or becomes an Acquiring Person
or any Affiliate or Associate thereof (as such terms are defined in the Rights Agreement), whether currently held by or on behalf
of such Person or by any subsequent holder, may become null and void.
With respect to any book-entry shares of
Common Stock, such legend shall be included in a notice to the record holder of such shares in accordance with applicable law.
With respect to such certificates containing the foregoing legend, or any notice of the foregoing legend delivered to record holders
of book-entry shares, until the earlier of (i) the Distribution Time or (ii) the Expiration Time, the Rights associated with such
shares of Common Stock represented by such certificates or registered in book-entry form shall be evidenced by such certificates
alone, or such registration in book-entry form, and registered holders of such shares of Common Stock shall also be the registered
holders of the associated Rights, and the transfer of any of such Common Stock represented by such certificates or book-entries
shall also constitute the transfer of the Rights associated with the Common Stock represented by such certificates or book entries.
In the event the Company purchases or acquires any shares of Common Stock after the Record Date but prior to the Distribution Time,
any Rights associated with such shares shall be deemed cancelled and retired so that the Company shall not be entitled to exercise
any Rights associated with shares of Common Stock that are no longer outstanding. The omission of any legend described in this
Section 3 shall not affect the status, validity or enforceability of any part of this Agreement or the rights of any holder
of the Rights.
Section 4. Form
of Rights Certificates.
(a) The Rights Certificates
(and the forms of election to purchase and of assignment to be printed on the reverse thereof), when and if issued, shall each
be substantially in the form set forth in Exhibit A and may have such marks of identification or designation and such legends,
summaries or endorsements printed thereon as the Company may deem appropriate and as are not inconsistent with the provisions of
this Agreement, or as may be required to comply with any applicable law or with any rule or regulation made pursuant thereto or
with any rule or regulation of any stock exchange on which the Rights may from time to time be listed, or to conform to usage.
Subject to the provisions of Section 11 and Section 22, the Rights Certificates, whenever distributed, shall be dated
as of the Record Date or, in the case of Rights with respect to shares of Common Stock issued or becoming outstanding after the
Record Date, the same date as the date of the stock certificate evidencing such shares (or, with respect to uncertificated shares
of Common Stock, the date of the issuance of such shares of Common Stock indicated in the books of the registrar and transfer agent),
and on their face shall entitle the holders thereof to purchase such number of shares of Common Stock as shall be set forth therein
at the price per whole share of Common Stock set forth therein (the “Purchase Price”), but the amount and type
of securities purchasable upon the exercise of each Right and the Purchase Price thereof shall be subject to adjustment from time
to time as provided in Section 11 and Section 13(a).
(b) Any Rights Certificate
issued pursuant to Section 3(a), Section 11(a)(ii) or Section 22 that represents Rights beneficially owned
by any Person known to be (i) an Acquiring Person or any Associate or Affiliate of an Acquiring Person, (ii) a transferee
of an Acquiring Person (or of any such Associate or Affiliate) who becomes a transferee after the Acquiring Person becomes such
or (iii) a transferee of an Acquiring Person (or of any such Associate or Affiliate) who becomes a transferee prior to or concurrently
with the Acquiring Person becoming such and receives such Rights pursuant to either (A) a transfer (whether or not for consideration)
from the Acquiring Person (or any Affiliate or Associate thereof) to holders of equity interests in such Acquiring Person (or any
Affiliate or Associate thereof) or to any Person with whom such Acquiring Person (or any Affiliate or Associate thereof) has any
continuing agreement, arrangement or understanding regarding the transferred Rights or (B) a transfer which the Board of Directors
has determined is part of a plan, arrangement or understanding which has as a primary purpose or effect avoidance of Section
7(e), and any Rights Certificate issued pursuant to Section 6 or Section 11 upon transfer, exchange, replacement
or adjustment of any other Rights Certificate referred to in this sentence, shall contain (to the extent feasible) the following
legend:
The Rights represented by this
Rights Certificate are or were beneficially owned by a Person who was or became an Acquiring Person or an Affiliate or Associate
of an Acquiring Person (as such terms are defined in the Rights Agreement). Accordingly, this Rights Certificate and the Rights
represented hereby may become null and void in the circumstances specified in Section 7(e) of such Agreement.
The absence of the
foregoing legend on any Rights Certificate shall in no way affect any of the other provisions of this Agreement, including the
provisions of Section 7(e).
Section 5. Countersignature
and Registration.
(a) The Rights Certificates
shall be executed on behalf of the Company by any of its President and Chief Executive Officer, any Vice President or the General
Counsel and Secretary, either manually or by facsimile or other electronic signature. The Rights Certificates shall be countersigned
manually or by facsimile or other electronic signature by the Rights Agent and shall not be valid for any purpose unless so countersigned.
In case any officer of the Company who shall have signed or attested any of the Rights Certificates shall cease to be such officer
of the Company before countersignature by the Rights Agent and issuance and delivery by the Company, such Rights Certificates,
nevertheless, may be countersigned by the Rights Agent and issued and delivered by the Company with the same force and effect as
though the person who signed or attested such Rights Certificates had not ceased to be such officer of the Company; and any Rights
Certificates may be signed or attested on behalf of the Company by any person who, at the actual date of the execution of such
Rights Certificate, shall be a proper officer of the Company to sign or attest such Rights Certificate, although at the date of
the execution of this Rights Agreement any such person was not such an officer.
(b) Following the
Distribution Time, the Rights Agent will keep or cause to be kept, at its principal office or offices designated as the appropriate
place for surrender of Rights Certificates upon exercise or transfer, books for registration and transfer of the Rights Certificates
issued hereunder. Such books shall show the names and addresses of the respective holders of the Rights Certificates, the number
of Rights evidenced on its face by each of the Rights Certificates and the certificate number and the date of each of the Rights
Certificates.
Section 6. Transfer,
Split Up, Combination and Exchange of Rights Certificates; Mutilated, Destroyed, Lost or Stolen Rights Certificates.
(a) Subject to the
provisions of Section 4(b), Section 7(e) and Section 14, at any time after the Close of Business on the Distribution
Time, and at or prior to the Close of Business on the Expiration Time, any Rights Certificate or Certificates (other than Rights
Certificates representing Rights that have become null and void pursuant to Section 7(e) or that have been exchanged pursuant
to Section 24) may be transferred, split up, combined or exchanged for another Rights Certificate or Certificates, entitling
the registered holder to purchase a like number of shares of Common Stock (or, following a Triggering Event, other securities,
cash or other assets, as the case may be) as the Rights Certificate or Certificates surrendered then entitled such holder (or former
holder in the case of a transfer) to purchase. Any registered holder desiring to transfer, split up, combine or exchange any Rights
Certificate or Certificates shall make such request in writing delivered to the Rights Agent, and shall surrender the Rights Certificate
or Certificates to be transferred, split up, combined or exchanged at the principal office or offices of the Rights Agent designated
for such purpose. Neither the Rights Agent nor the Company shall be obligated to take any action whatsoever with respect to the
transfer of any such surrendered Rights Certificate until the registered holder shall have properly completed and duly executed
the certificate contained in the form of assignment on the reverse side of such Rights Certificate and shall have provided such
additional evidence of the identity of the Beneficial Owner (or former Beneficial Owner) or Affiliates or Associates thereof as
the Company or the Rights Agent shall reasonably request. Thereupon the Rights Agent shall, subject to Section 4(b), Section
7(e), Section 14 and Section 24, countersign and deliver to the Person entitled thereto a Rights Certificate
or Rights Certificates, as the case may be, as so requested. The Company may require payment of a sum sufficient to cover any tax
or governmental charge that may be imposed in connection with any transfer, split up, combination or exchange of Rights Certificates.
(b) Upon receipt by
the Company and the Rights Agent of evidence reasonably satisfactory to them of the loss, theft, destruction or mutilation of a
valid Rights Certificate, and, in case of loss, theft or destruction, of indemnity or security satisfactory to them, and reimbursement
to the Company and the Rights Agent of all reasonable expenses incidental thereto, and upon surrender to the Rights Agent and cancellation
of the Rights Certificates if mutilated, the Company will execute and deliver a new Rights Certificate of like tenor to the Rights
Agent for countersignature and delivery to the registered owner in lieu of the Rights Certificate so lost, stolen, destroyed or
mutilated.
Section 7. Exercise
of Rights; Purchase Price; Expiration Time of Rights.
(a) Subject to Section
7(e), the registered holder of any Rights Certificate may exercise the Rights evidenced thereby (except as otherwise provided
herein including the restrictions on exercisability set forth in Section 7(c), Section 9(c), Section 11(a)(iii)
and Section 23(a)) in whole or in part at any time after the Distribution Time upon surrender of the Rights Certificate,
with the form of election to purchase and the certificate on the reverse side thereof properly completed and duly executed, to
the Rights Agent at the principal office or offices of the Rights Agent designated for such purpose, together with payment of the
aggregate Purchase Price with respect to the total number of shares of Common Stock (or other securities, cash or other assets,
as the case may be) as to which such surrendered Rights are then exercisable, at or prior to the earliest of (i) the Close of Business
on February 15, 2021 (the “Final Expiration Time”), (ii) the time at which the Rights are redeemed as provided
in Section 23 or (iii) the time at which such Rights are exchanged pursuant to Section 24 (the earliest of (i), (ii)
and (iii) being herein referred to as the “Expiration Time”).
(b) The Purchase Price
for each whole share of Common Stock pursuant to the exercise of a Right shall initially be $12.00 (equivalent to $6.00 for each
one-half of one share of Common Stock), and shall be subject to adjustment from time to time as provided in Section 11 and
Section 13(a) and shall be payable in accordance with paragraph (c) below.
(c) Upon receipt of
a Rights Certificate representing exercisable Rights, with the form of election to purchase and the certificate properly completed
and duly executed, accompanied by payment, with respect to each Right so exercised, of the Purchase Price for the shares of Common
Stock (or other shares, securities, cash or other assets, as the case may be) to be purchased as set forth below and an amount
equal to any applicable transfer tax or charge required to be paid by the holder of the Rights Certificate in accordance with Section
9(e), the Rights Agent shall, subject to Section 20(k), thereupon promptly (i) (A) requisition from the transfer agent
of the shares of Common Stock (or make available, if the Rights Agent is the transfer agent for such shares) certificates for the
total number of shares of Common Stock to be purchased and the Company hereby irrevocably authorizes its transfer agent to comply
with all such requests, or (B) if the Company shall have elected to deposit the total number of shares of Common Stock issuable
upon exercise of the Rights hereunder with a depositary agent, requisition from the depositary agent depositary receipts representing
such number of shares of Common Stock as are to be purchased (in which case certificates for the shares of Common Stock represented
by such receipts shall be deposited by the transfer agent with the depositary agent) and the Company will direct the depositary
agent to comply with such request, (ii) requisition from the Company the amount of cash, if any, to be paid in lieu of fractional
shares in accordance with Section 14, (iii) after receipt of such certificates or depositary receipts, cause the same to
be delivered to or upon the order of the registered holder of such Rights Certificate, registered in such name or names as may
be designated by such holder, and (iv) after receipt thereof, deliver such cash, if any, to or upon the order of the registered
holder of such Rights Certificate. The payment of the Purchase Price (as such amount may be reduced pursuant to Section 11(a)(iii))
shall be made in cash or by certified bank check or bank draft payable to the order of the Company. In the event that the Company
is obligated to issue other securities of the Company, pay cash and/or distribute other property pursuant to Section 11(a),
the Company will make all arrangements necessary so that such other securities, cash and/or other property are available for distribution
by the Rights Agent, if and when necessary to comply with the terms of this Agreement. The Company reserves the right to require
prior to the occurrence of a Triggering Event that, upon any exercise of Rights, a number of Rights be exercised so that only whole
shares of Common Stock would be issued.
(d) In case the registered
holder of any Rights Certificate shall exercise less than all the Rights evidenced thereby, a new Rights Certificate evidencing
Rights equivalent to the Rights remaining unexercised shall be issued by the Rights Agent and delivered to, or upon the order of,
the registered holder of such Rights Certificate, registered in such name or names as may be designated by such holder, subject
to the provisions of Section 14.
(e) Notwithstanding
anything in this Agreement to the contrary, from and after the first occurrence of a Flip-in Event, any Rights beneficially owned
by (i) an Acquiring Person or an Associate or Affiliate of an Acquiring Person, (ii) a transferee of an Acquiring Person (or of
any such Associate or Affiliate) who becomes a transferee after the Acquiring Person becomes such, or (iii) a transferee of an
Acquiring Person (or of any such Associate or Affiliate) who becomes a transferee prior to or concurrently with the Acquiring Person
becoming such and receives such Rights pursuant to either (A) a transfer (whether or not for consideration) from the Acquiring
Person (or any Affiliate or Associate thereof) to holders of equity interests in such Acquiring Person (or any Affiliate or Associate
thereof) or to any Person with whom the Acquiring Person (or any Affiliate or Associate thereof) has any continuing agreement,
arrangement or understanding, whether or not in writing, regarding the transferred Rights or (B) a transfer which the Board of
Directors has determined is part of an agreement, arrangement or understanding which has as a primary purpose or effect the avoidance
of this Section 7(e), shall become null and void without any further action and no holder of such Rights shall have any
rights whatsoever with respect to such Rights, whether under any provision of this Agreement or otherwise. The Company shall notify
the Rights Agent when this Section 7(e) applies and shall use all reasonable efforts to ensure that the provisions of this
Section 7(e) and Section 4(b) are complied with, but neither the Company nor the Rights Agent shall have any liability
to any holder of Rights or other Person as a result of the Company’s failure to make any determinations with respect to an
Acquiring Person or any of its Affiliates, Associates or transferees hereunder.
(f) Notwithstanding
anything in this Agreement to the contrary, neither the Rights Agent nor the Company shall be obligated to undertake any action
with respect to a registered holder upon the occurrence of any purported exercise as set forth in this Section 7 unless
such registered holder shall have (i) properly completed and duly executed the certificate contained in the form of election to
purchase set forth on the reverse side of the Rights Certificate surrendered for such exercise and (ii) provided such additional
evidence of the identity of the Beneficial Owner (or former Beneficial Owner) or Affiliates or Associates thereof as the Company
or the Rights Agent shall reasonably request.
Section 8. Cancellation
and Destruction of Rights Certificates. All Rights Certificates surrendered for the purpose of exercise, transfer, split
up, combination or exchange shall, if surrendered to the Company or any of its agents, be delivered to the Rights Agent for cancellation
or in cancelled form, or, if surrendered to the Rights Agent, shall be cancelled by it, and no Rights Certificates shall be issued
in lieu thereof, except as expressly permitted by any of the provisions of this Agreement. The Company shall deliver to the Rights
Agent for cancellation and retirement, and the Rights Agent shall so cancel and retire, any other Rights Certificates purchased
or acquired by the Company otherwise than upon the exercise thereof. The Rights Agent shall deliver all cancelled Rights Certificates
to the Company, or shall, at the written request of the Company, destroy such cancelled Rights Certificates, and in such case shall
deliver a certificate of destruction thereof, executed by the Rights Agent, to the Company.
Section 9. Reservation
and Availability of Capital Stock.
(a) The Company covenants
and agrees that it will cause to be reserved and kept available out of its authorized and unissued shares of Common Stock (and,
following the occurrence of a Triggering Event, out of its authorized and unissued other securities, if any, or out of its authorized
and issued shares held in its treasury, the number of shares of Common Stock (and, following the occurrence of a Triggering Event,
other securities, if any, that, as provided in this Agreement, including Section 11(a)(iii), will be sufficient to permit
the exercise in full of all outstanding Rights.
(b) So long as the
shares of Common Stock (and, following the occurrence of a Triggering Event, other securities, if any), issuable and deliverable
upon the exercise of the Rights may be listed on any national securities exchange, the Company shall use its best efforts to cause,
from and after such time as the Rights become exercisable, all shares (and other securities, if any) reserved for such issuance
to be listed on such exchange, upon official notice of issuance upon such exercise.
(c) The Company shall
use its best efforts to (i) prepare and file, as soon as practicable following the earliest date after the first occurrence of
a Flip-in Event on which the consideration to be delivered by the Company upon exercise of the Rights has been determined in accordance
with Section 11(a)(iii), a registration statement under the Act with respect to the securities purchasable upon exercise
of the Rights on an appropriate form, (ii) cause such registration statement to become effective as soon as practicable after such
filing, and (iii) cause such registration statement to remain effective (with a prospectus at all times meeting the requirements
of the Act) until the earlier of (A) the date as of which the Rights are no longer exercisable for such securities, and (B) the
Expiration Time. The Company will also take such action as may be appropriate under, or to ensure compliance with, the securities
or “blue sky” laws of the various states in connection with the exercisability of the Rights. The Company may temporarily
suspend, for a period of time not to exceed ninety (90) days after the date set forth in clause (i) of the first sentence of this
Section 9(c), the exercisability of the Rights in order to prepare and file such registration statement and permit it to
become effective. Upon any such suspension, the Company shall issue a public announcement stating that the exercisability of the
Rights has been temporarily suspended, as well as a public announcement at such time as the suspension is no longer in effect.
In addition, if the Company shall determine that a registration statement is required following the Distribution Time, and a Flip-in
Event has not occurred, the Company may temporarily suspend (and shall give the Rights Agent prompt notice thereof) the exercisability
of Rights until such time as a registration statement has been declared effective. Notwithstanding any provision of this Agreement
to the contrary, the Rights shall not be exercisable in any jurisdiction if the requisite qualification or exemption in such jurisdiction
shall not have been obtained, the exercise thereof shall not be permitted under applicable law or a registration statement shall
not have been declared effective.
(d) The Company covenants
and agrees that it will take all such actions as may be necessary to ensure that all shares of Common Stock (and, following the
occurrence of a Triggering Event, other securities, if any) delivered upon exercise of Rights shall, at the time of delivery of
the certificates for such shares and/or other securities (subject to payment of the Purchase Price), be duly and validly authorized
and issued and fully paid and nonassessable.
(e) The Company further
covenants and agrees that it will pay, when due and payable, any and all transfer taxes and governmental charges which may be payable
in respect of the issuance or delivery of the Rights Certificates and of any shares of Common Stock and/or other securities, if
any, upon the exercise of Rights. The Company shall not, however, be required to pay any tax or charge that may be payable in respect
of any transfer or delivery of Rights Certificates to a Person other than, or the issuance or delivery of shares of Common Stock
and/or other securities, if any, in respect of a name other than that of the registered holder of the Rights Certificates evidencing
Rights surrendered for exercise or to issue or deliver any certificates for shares of Common Stock and/or other securities, if
any, in a name other than that of, the registered holder upon the exercise of any Rights until such tax shall have been paid (any
such tax being payable by the holder of such Rights Certificate at the time of surrender) or until it has been established to the
Company’s satisfaction that no such tax or charge is due.
Section 10. Common
Stock Record Date. Each Person in whose name any certificate for shares of Common Stock and/or other securities, if any,
is issued upon the exercise of Rights shall for all purposes be deemed to have become the holder of record of such shares of Common
Stock (and/or other securities, if any) represented thereby on, and such certificate shall be dated, the date upon which the Rights
Certificate evidencing such Rights was duly surrendered and payment of the Purchase Price (and all applicable transfer taxes) was
made; provided, however, that if the date of such surrender and payment is a date upon which the Common Stock (and/or
other securities, if any) transfer books of the Company are closed, such Person shall be deemed to have become the record holder
of such shares (fractional or otherwise) on, and such certificate shall be dated, the next succeeding Business Day on which the
Common Stock (and/or other securities, if any) transfer books of the Company are open. Prior to the exercise of the Rights evidenced
thereby, the holder of a Rights Certificate shall not be entitled to any rights of a stockholder of the Company with respect to
shares or other securities for which the Rights shall be exercisable, including the right to vote, to receive dividends or other
distributions or to exercise any preemptive rights, and shall not be entitled to receive any notice of any proceedings of the Company,
except as provided herein.
Section 11. Adjustment
of Purchase Price, Number and Kind of Shares or Number of Rights. The Purchase Price, the number and kind of shares covered
by each Right and the number of Rights outstanding are subject to adjustment from time to time as provided in this Section 11.
(a) In the event the
Company shall at any time after the date of this Agreement (A) declare a dividend on the Common Stock payable in shares of Common
Stock, (B) subdivide the outstanding Common Stock, (C) combine the outstanding Common Stock into a smaller number of shares, or
(D) issue any shares of its capital stock in a reclassification of the Common Stock (including any such reclassification in connection
with a consolidation or merger in which the Company is the continuing or surviving corporation), except as otherwise provided in
this Section 11(a) and Section 7(e), the Purchase Price in effect at the time of the record date for such dividend
or of the effective date of such subdivision, combination or reclassification, and the number and kind of shares of Common Stock
or capital stock, as the case may be, issuable on such date, shall be proportionately adjusted so that the holder of any Right
exercised after such time shall be entitled to receive, upon payment of the Purchase Price then in effect, the aggregate number
and kind of shares of Common Stock or capital stock, as the case may be, which, if such Right had been exercised immediately prior
to such date and at a time when the Common Stock transfer books of the Company were open, such holder would have owned upon such
exercise and been entitled to receive by virtue of such dividend, subdivision, combination or reclassification. If an event occurs
which would require an adjustment under both this Section 11(a)(i) and Section 11(a)(ii), the adjustment provided
for in this Section 11(a)(i) shall be in addition to, and shall be made prior to, any adjustment required pursuant
to Section 11(a)(ii).
Subject
to Section 24, in the event any Person becomes an Acquiring Person (such event, a “Flip-in Event”), then
each holder of a Right (except as provided below and in Section 7(e)) shall thereafter have the right to receive, upon exercise
thereof at a price equal to the then-current Purchase Price for a whole share of Common Stock in accordance with the terms of this
Agreement, in lieu of the number of shares of Common Stock otherwise receivable upon exercise, such number of shares of Common
Stock as shall equal the result obtained by (x) multiplying the then-current Purchase Price for a whole share of Common Stock by
the then number of halves of a share of Common Stock for which a Right was exercisable immediately prior to the first occurrence
of a Flip-in Event and (y) dividing that product (which, following such first occurrence shall thereafter be referred to as the
“Purchase Price” for each Right and for all purposes of this Agreement) by fifty percent (50%) of the Current Market
Price per share of Common Stock on the date of such first occurrence (such number of shares, the “Adjustment Shares”).
In the
event that the number of shares of Common Stock that are authorized by the Company’s Amended and Restated Certificate of
Incorporation, as the same may be amended from time to time, but not outstanding or reserved for issuance for purposes other than
upon exercise of the Rights, is not sufficient to permit the exercise in full of the Rights in accordance with the foregoing subparagraph
(ii) of this Section 11(a), the Company shall (A) determine the value of the Adjustment Shares issuable upon the exercise
of a Right (the “Current Value”), and (B) with respect to each Right, make adequate provision to substitute
for the Adjustment Shares, upon the exercise of a Right and payment of the applicable Purchase Price, (1) cash, (2) a reduction
in the Purchase Price, (3) Common Stock or other equity securities of the Company), (4) debt securities of the Company, (5) other
assets, or (6) any combination of the foregoing, having an aggregate value equal to the Current Value (less the amount of any reduction
in the Purchase Price), where such aggregate value has been determined by the Board of Directors based upon the advice of a nationally
recognized investment banking firm selected by the Board of Directors; provided, however, if the Company shall not
have made adequate provision to deliver value pursuant to clause (B) above within thirty (30) days following the later of (x) the
first occurrence of a Flip-in Event and (y) the date on which the Company’s right of redemption pursuant to Section 23(a)
expires (the later of (x) and (y) being referred to herein as the “Flip-in Trigger Date”), then the Company
shall be obligated to deliver, upon the surrender for exercise of a Right and without requiring payment of the Purchase Price,
shares of Common Stock (to the extent available) and then, if necessary, cash, which shares and/or cash have an aggregate value
equal to the Spread. For purposes of the immediately preceding sentence, the term “Spread” shall mean the excess of
(i) the Current Value over (ii) the Purchase Price. If the Board of Directors shall determine in good faith that it is likely that
sufficient additional shares of Common Stock could be authorized for issuance upon exercise in full of the Rights, the thirty (30)
day period set forth above may be extended to the extent necessary, but not more than ninety (90) days after the Flip-in Trigger
Date, in order that the Company may seek stockholder approval for the authorization of such additional shares (such thirty (30)
day period, as it may be extended, the “Substitution Period”). To the extent the Company determines that action
should be taken pursuant to the first sentence or third sentence of this Section 11(a)(iii), the Company (x) shall provide,
subject to Section 7(e), that such action shall apply uniformly to all outstanding Rights, and (y) may suspend the exercisability
of the Rights until the expiration of the Substitution Period in order to seek such stockholder approval for such authorization
of additional shares and/or to decide the appropriate form of distribution to be made pursuant to such first sentence and to determine
the value thereof. In the event of any such suspension, the Company shall issue a public announcement stating that the exercisability
of the Rights has been temporarily suspended, as well as a public announcement at such time as the suspension is no longer in effect
(with prompt notice of such announcements to the Rights Agent). For purposes of this Section 11(a)(iii), the value of each
Adjustment Share shall be the Current Market Price per share of Common Stock on the Flip-in Trigger Date.
(b) In case the Company
shall fix a record date for the issuance of rights (other than the Rights), options or warrants to all holders of Common Stock
entitling them to subscribe for or purchase (for a period expiring within forty-five (45) calendar days after such record date)
Common Stock (or shares having the same rights, privileges and preferences as the shares of Common Stock (“Equivalent
Common Stock”)) or securities convertible into Common Stock or Equivalent Common Stock at a price per share of
Common Stock or per share of Equivalent Common Stock (or having a conversion price per share, if a security convertible into Common
Stock or Equivalent Common Stock) less than the Current Market Price per share of Common Stock on such record date, the Purchase
Price to be in effect after such record date shall be determined by multiplying the Purchase Price in effect immediately prior
to such record date by a fraction, the numerator of which shall be the number of shares of Common Stock outstanding on such record
date, plus the number of shares of Common Stock which the aggregate offering price of the total number of shares of Common Stock
and/or Equivalent Common Stock so to be offered (and/or the aggregate initial conversion price of the convertible securities so
to be offered) would purchase at such Current Market Price, and the denominator of which shall be the number of shares of Common
Stock outstanding on such record date, plus the number of additional shares of Common Stock and/or Equivalent Common Stock to be
offered for subscription or purchase (or into which the convertible securities so to be offered are initially convertible). In
case such subscription price may be paid by delivery of consideration part or all of which may be in a form other than cash, the
value of such consideration shall be as determined in good faith by the Board of Directors, whose determination shall be described
in a statement filed with the Rights Agent and shall be binding on the Rights Agent and the holders of the Rights. Shares of Common
Stock owned by or held for the account of the Company shall not be deemed outstanding for the purpose of any such computation.
Such adjustment shall be made successively whenever such a record date is fixed, and in the event that such rights, options or
warrants are not so issued, the Purchase Price shall be adjusted to be the Purchase Price which would then be in effect if such
record date had not been fixed.
(c) In case the Company
shall fix a record date for a distribution to all holders of Common Stock (including any such distribution made in connection with
a consolidation or merger in which the Company is the continuing corporation) of evidences of indebtedness, cash (other than a
regular periodic cash dividend out of the earnings or retained earnings of the Company), assets (other than a dividend payable
in Common Stock, but including any dividend payable in stock other than Common Stock) or subscription rights or warrants (excluding
those referred to in Section 11(b)), the Purchase Price to be in effect after such record date shall be determined by multiplying
the Purchase Price in effect immediately prior to such record date by a fraction, the numerator of which shall be the Current Market
Price per share of Common Stock on such record date, less the fair market value (as determined in good faith by the Board of Directors,
whose determination shall be described in a statement filed with the Rights Agent and shall be binding on the Rights Agent and
the holders of the Rights) of the portion of the cash, assets or evidences of indebtedness so to be distributed or of such subscription
rights or warrants applicable to a share of Common Stock and the denominator of which shall be such Current Market Price per share
of Common Stock. Such adjustments shall be made successively whenever such a record date is fixed, and in the event that such distribution
is not so made, the Purchase Price shall be adjusted to be the Purchase Price which would have been in effect if such record date
had not been fixed.
(d) For the purpose
of any computation hereunder, other than computations made pursuant to Section 11(a)(iii), the “Current Market
Price” per share of common stock (or similar equity interest) of an issuer on any date shall be deemed to be the average
of the daily closing prices per share of such common stock (or other security) for the thirty (30) consecutive Trading Days immediately
prior to but not including such date, and for purposes of computations made pursuant to Section 11(a)(iii), the “Current
Market Price” per share of Common Stock on any date shall be deemed to be the average of the daily closing prices per
share of such Common Stock for the ten (10) consecutive Trading Days immediately following but not including such date; provided,
however, that in the event that the Current Market Price per share of common stock (or other security) of an issuer is determined
during a period following the announcement by the issuer of such common stock (or other security) of (A) a dividend or distribution
on such common stock (or other security) payable in shares of such common stock (or other security) or securities convertible into
shares of such common stock (or other security) (other than the Rights), or (B) any subdivision, combination or reclassification
of such common stock (or other security), and the ex-dividend date for such dividend or distribution, or the record date for such
subdivision, combination or reclassification shall not have occurred prior to the commencement of the requisite thirty (30) Trading
Day or ten (10) Trading Day period, as set forth above, then, and in each such case, the “Current Market Price” shall
be properly adjusted, as determined in good faith by the Board of Directors, to take into account any trading during the period
prior to such ex-dividend date or record date. The closing price per share of common stock (or other security) of an issuer for
each day shall be the last sale price, regular way, or, in case no such sale takes place on such day, the average of the closing
bid and asked prices, regular way, in either case as reported in the principal consolidated transaction reporting system with respect
to securities listed or admitted to trading on the NYSE or, if such shares of common stock (or other security) are not listed or
admitted to trading on the NYSE, as reported in the principal consolidated transaction reporting system with respect to securities
listed on the principal national securities exchange on which such shares of common stock (or other security) are listed or admitted
to trading or, if such shares of common stock (or other security) are not listed or admitted to trading on any national securities
exchange, the last quoted price or, if not so quoted, the average of the high bid and low asked prices in the over-the-counter
market, as reported by the OTC Bulletin Board service (the “OTCBB”) or such other quotation system then in use,
or, if on any such date such shares of common stock (or other security) are not quoted by any such organization, the average of
the closing bid and asked prices as furnished by a professional market maker making a market in such common stock (or other security)
selected by the Board of Directors. If on any such date no market maker is making a market in such common stock (or other security),
the fair value of such shares on such date as determined in good faith by the Board of Directors shall be used. The term “Trading
Day” shall mean a day on which the principal national securities exchange on which shares of an issuer’s common stock
(or other security) are listed or admitted to trading is open for the transaction of business or, if such shares of common stock
(or other security) are not listed or admitted to trading on any national securities exchange, a Business Day. If an issuer’s
shares of common stock (or other security) are not publicly held or not so listed or traded, “Current Market Price”
per share shall mean the fair value per share as determined in good faith by the Board of Directors, whose determination shall
be described in a statement filed with the Rights Agent and shall be conclusive for all purposes.
(e) Notwithstanding
anything in this Agreement to the contrary, no adjustment in the Purchase Price shall be required unless such adjustment would
require an increase or decrease of at least one percent (1%) in the Purchase Price; provided, however, that any adjustments
which by reason of this Section 11(e) are not required to be made shall be carried forward and taken into account in any
subsequent adjustment. All calculations under this Section 11 shall be made to the nearest cent or to the nearest one ten-thousandth
of a share of Common Stock or one ten-thousandth of any other share or security, as the case may be. Notwithstanding the first
sentence of this Section 11(e), any adjustment required by this Section 11 shall be made no later than the earlier
of (i) three (3) years from the date of the transaction which mandates such adjustment, or (ii) the Expiration Time.
(f) If as a result
of an adjustment made pursuant to Section 11(a)(ii) or Section 13(a), the holder of any Right thereafter exercised
shall become entitled to receive any shares of capital stock other than Common Stock, thereafter the number of such other shares
so receivable upon exercise of any Right and the Purchase Price thereof shall be subject to adjustment from time to time in a manner
and on terms as nearly equivalent as practicable to the provisions with respect to the Common Stock contained in Sections 11(a),
(b), (c), (e), (g), (h), (i), (j), (k) and (m), and the provisions
of Sections 7, 9, 10, 13 and 14 with respect to the Common Stock shall apply on like terms to
any such other shares.
(g) All Rights originally
issued by the Company subsequent to any adjustment made to the Purchase Price hereunder shall evidence the right to purchase, at
the adjusted Purchase Price, the number of shares of Common Stock purchasable from time to time hereunder upon exercise of the
Rights, all subject to further adjustment as provided herein.
(h) Unless the Company
shall have exercised its election as provided in Section 11(i), upon each adjustment of the Purchase Price as a result of
the calculations made in Section 11(b) and Section 11(c), each Right outstanding immediately prior to the making
of such adjustment shall thereafter evidence the right to purchase, at the adjusted Purchase Price, that number of shares of Common
Stock (calculated to the nearest one-ten thousandth) obtained by (i) multiplying (x) the number of shares of Common Stock covered
by a Right immediately prior to this adjustment, by (y) the Purchase Price in effect immediately prior to such adjustment of the
Purchase Price, and (ii) dividing the product so obtained by the Purchase Price in effect immediately after such adjustment of
the Purchase Price.
(i) The Company may
elect on or after the date of any adjustment of the Purchase Price to adjust the number of Rights, in lieu of any adjustment in
the number of shares of Common Stock purchasable upon the exercise of a Right. Each of the Rights outstanding after the adjustment
in the number of Rights shall be exercisable for the number of shares of Common Stock for which a Right was exercisable immediately
prior to such adjustment. Each Right held of record prior to such adjustment of the number of Rights shall become that number of
Rights (calculated to the nearest one-ten-thousandth) obtained by dividing the Purchase Price in effect immediately prior to adjustment
of the Purchase Price by the Purchase Price in effect immediately after adjustment of the Purchase Price. The Company shall make
a public announcement (with prompt notice thereof to the Rights Agent) of its election to adjust the number of Rights, indicating
the record date for the adjustment, and, if known at the time, the amount of the adjustment to be made. This record date may be
the date on which the Purchase Price is adjusted or any day thereafter, but, if the Rights Certificates have been issued, shall
be at least ten (10) days later than the date of the public announcement. If Rights Certificates have been issued, upon each adjustment
of the number of Rights pursuant to this Section 11(i), the Company shall, as promptly as practicable, cause to be distributed
to holders of record of Rights Certificates on such record date Rights Certificates evidencing, subject to Section 14, the
additional Rights to which such holders shall be entitled as a result of such adjustment, or, at the option of the Company, shall
cause to be distributed to such holders of record in substitution and replacement for the Rights Certificates held by such holders
prior to the date of adjustment, and upon surrender thereof, if required by the Company, new Rights Certificates evidencing all
the Rights to which such holders shall be entitled after such adjustment. Rights Certificates so to be distributed shall be issued,
executed and countersigned in the manner provided for herein (and may bear, at the option of the Company, the adjusted Purchase
Price) and shall be registered in the names of the holders of record of Rights Certificates on the record date specified in the
public announcement.
(j) Irrespective of
any adjustment or change in the Purchase Price or the number of shares of Common Stock issuable upon the exercise of the Rights,
the Rights Certificates theretofore and thereafter issued may continue to express the Purchase Price and the number of shares of
Common Stock which were expressed in the initial Rights Certificates issued hereunder.
(k) Before taking
any action that would cause an adjustment reducing the Purchase Price below the then par value, if any, of the shares of Common
Stock issuable upon exercise of the Rights, the Company shall take any corporate action which may, in the opinion of its counsel,
be necessary in order that the Company may validly and legally issue fully paid and nonassessable shares of Common Stock at such
adjusted Purchase Price.
(l) In any case in
which this Section 11 shall require that an adjustment in the Purchase Price be made effective as of a record date for a
specified event, the Company may elect to defer until the occurrence of such event the issuance to the holder of any Right exercised
after such record date the number of shares of Common Stock and other capital stock or securities of the Company, if any, issuable
upon such exercise over and above the number of shares of Common Stock and other capital stock or securities of the Company, if
any, issuable upon such exercise on the basis of the Purchase Price in effect prior to such adjustment (and shall provide the Rights
Agent prompt notice of such election); provided, however, that the Company shall deliver to such holder a due bill
or other appropriate instrument evidencing such holder’s right to receive such additional shares (fractional or otherwise)
or securities upon the occurrence of the event requiring such adjustment.
(m) Anything in this
Section 11 to the contrary notwithstanding, the Company shall be entitled (but not obligated) to make such reductions in
the Purchase Price, in addition to those adjustments expressly required by this Section 11, as and to the extent that the
Board of Directors, in its good faith judgment, shall determine to be advisable in order that any (i) consolidation or subdivision
of the Common Stock, (ii) issuance wholly for cash of any shares of Common Stock at less than the current market price, (iii) issuance
wholly for cash of shares of Common Stock or securities which by their terms are convertible into or exchangeable for shares of
Common Stock, (iv) stock dividends or (v) issuance of rights, options or warrants referred to in this Section 11, hereafter
made by the Company to holders of its Common Stock shall not be taxable to such stockholders.
(n) The Company covenants
and agrees that it shall not, at any time after the Distribution Time, (i) consolidate with any other Person (other than a Subsidiary
of the Company in a transaction which complies with Section 11(o)), (ii) merge with or into any other Person (other than
a Subsidiary of the Company in a transaction which complies with Section 11(o)), or (iii) sell or transfer (or permit any
Subsidiary to sell or transfer), in one transaction, or a series of related transactions, assets, cash flow or earning power aggregating
more than fifty percent (50%) of the assets, cash flow or earning power of the Company and its Subsidiaries (taken as a whole)
to any other Person or Persons (other than the Company or any of its Subsidiaries in one or more transactions each of which complies
with Section 11(o)), if (x) at the time of or immediately after such consolidation, merger, sale or transfer there are any
rights, warrants or other instruments or securities outstanding or agreements in effect which would substantially diminish or otherwise
eliminate the benefits intended to be afforded by the Rights or (y) prior to, simultaneously with or immediately after such consolidation,
merger, sale or transfer, the stockholders of the Person who constitutes, or would constitute, the “Flip-over Party”
for purposes of Section 13(a) shall have received a distribution of Rights previously owned by such Person or any of its
Affiliates and Associates.
(o) The Company covenants
and agrees that, after the Distribution Time, it will not, except as permitted by Section 23, Section 24 or Section
27, take (or permit any Subsidiary to take) any action if at the time such action is taken it is reasonably foreseeable that
such action will diminish substantially or otherwise eliminate the benefits intended to be afforded by the Rights.
(p) In the event that
the Company shall at any time after the Rights Dividend Declaration Date and prior to the Distribution Time (i) declare a dividend
on the outstanding shares of Common Stock payable in shares of Common Stock, (ii) subdivide the outstanding shares of Common Stock,
or (iii) combine the outstanding shares of Common Stock into a smaller number of shares, the number of Rights associated with each
share of Common Stock then outstanding, or issued or delivered thereafter but prior to the Distribution Time, shall be proportionately
adjusted so that the number of Rights thereafter associated with each share of Common Stock following any such event shall equal
the result obtained by multiplying the number of Rights associated with each share of Common Stock immediately prior to such event
by a fraction the numerator of which shall be the total number of shares of Common Stock outstanding immediately prior to the occurrence
of the event and the denominator of which shall be the total number of shares of Common Stock outstanding immediately following
the occurrence of such event.
Section 12. Certificate
of Adjusted Purchase Price or Number of Shares. Whenever an adjustment is made as provided in Section 11 or Section
13, the Company shall (a) promptly prepare a certificate setting forth such adjustment and a brief statement of the facts and
computations accounting for such adjustment, (b) promptly file with the Rights Agent, and with the transfer agent for the Common
Stock, a copy of such certificate, and (c) if a Distribution Time has occurred, mail a brief summary thereof to each holder of
a Rights Certificate in accordance with Section 26. The Rights Agent shall be fully protected in relying on any such certificate
and on any adjustment therein contained and shall not be deemed to have knowledge of such adjustment unless and until it shall
have received such certificate.
Section 13. Consolidation,
Merger or Sale or Transfer of Assets, Cash Flow or Earning Power.
(a) In the event that,
following the Stock Acquisition Date, directly or indirectly, (x) the Company shall consolidate with, or merge with and into, any
other Person (other than a Subsidiary of the Company in a transaction that complies with Section 11(o)), and the Company
shall not be the continuing or surviving corporation of such consolidation or merger, (y) any Person (other than a Subsidiary of
the Company in a transaction that complies with Section 11(o)) shall engage in a share exchange with or shall consolidate
with, or merge with or into, the Company, and the Company shall be the continuing or surviving corporation of such consolidation
or merger and, in connection with such share exchange, consolidation or merger, all or part of the outstanding shares of Common
Stock shall be changed into or exchanged for stock or other securities of any other Person or cash or any other property or (z)
the Company shall sell or otherwise transfer (or one or more of its Subsidiaries shall sell or otherwise transfer) in one transaction
or a series of related transactions, assets, cash flow or earning power aggregating to more than fifty percent (50%) of the assets,
cash flow or earning power of the Company and its Subsidiaries (taken as a whole) to any Person or Persons (other than the Company
or any Subsidiary of the Company in one or more transactions each of which complies with Section 11(o)) (any event
described in clauses (x), (y) or (z) of this Section 13(a) following the Stock Acquisition Date, a “Flip-over Event”),
then, and in each such case, proper provision shall be made so that: (i) each holder of a Right, except as provided in Section
7(e), shall thereafter have the right to receive upon the exercise thereof at the then-current Purchase Price for a whole share
of Common Stock in accordance with the terms of this Agreement, in lieu of the number of shares of Common Stock, otherwise receivable
upon exercise, such number of validly authorized and issued, fully paid, nonassessable and freely tradeable shares of Flip-over
Stock, not subject to any liens, encumbrances, rights of first refusal or other adverse claims, as shall be equal to the result
obtained by (l) multiplying the then-current Purchase Price for a whole share of Common Stock by the number of halves of a share
of Common Stock for which a Right was exercisable immediately prior to the first occurrence of a Flip-over Event (or, if a Flip-in
Event has occurred prior to the first occurrence of a Flip-over Event, multiplying the number of shares of Common Stock for which
a Right was exercisable immediately prior to the first occurrence of a Flip-in Event by the Purchase Price in effect immediately
prior to such first occurrence), and (2) dividing that product (which, following the first occurrence of a Flip-over Event, shall
be referred to as the “Purchase Price” for each Right and for all purposes of this Agreement) by fifty percent (50%)
of the Current Market Price (determined pursuant to Section 11(d)(i)) per share of the Flip-over Stock on the date of consummation
of such Flip-over Event; (ii) such Flip-over Party shall thereafter be liable for, and shall assume, by virtue of such Flip-over
Event, all the obligations and duties of the Company pursuant to this Agreement; (iii) the term “Company” shall thereafter
be deemed to refer to such Flip-over Party, it being specifically intended that the provisions of Section 11 shall apply
only to such Flip-over Party following the first occurrence of a Flip-over Event; (iv) such Flip-over Party shall take such steps
(including the reservation of a sufficient number of shares of Flip-over Stock) in connection with the consummation of any such
transaction as may be necessary to assure that the provisions hereof shall thereafter be applicable, as nearly as reasonably may
be, in relation to its shares of Common Stock thereafter deliverable upon the exercise of the Rights; and (v) the provisions of
Section 11(a)(ii) shall be of no effect following the first occurrence of any Flip-over Event.
(b) “Flip-over
Party” shall mean:
in the
case of any transaction described in clause (x) or (y) of the first sentence of Section 13(a), the Person that is the issuer
of any securities into which shares of Common Stock are converted or exchanged in such share exchange, consolidation or merger,
and if no securities are so issued, the Person that is the other party to such share exchange, consolidation or merger; and
in the
case of any transaction described in clause (z) of the first sentence of Section 13(a), the Person that is the party receiving
the greatest portion of the assets, cash flow or earning power transferred pursuant to such transaction or transactions;
provided, however, that in
any such case described in the foregoing clause (i) or (ii) of this Section 13(b), (1) if the common stock (or similar equity
interest) of such Person is not at such time and has not been continuously over the preceding twelve (12) month period registered
under Section 12 of the Exchange Act, and such Person is a direct or indirect Subsidiary of another Person the common stock (or
similar equity interest) of which is and has been so registered, “Flip-over Party” shall refer to such other Person;
and (2) in case such Person is a Subsidiary, directly or indirectly, of more than one Person, the common stock (or similar equity
interest) of two or more of which are and have been so registered, “Flip-over Party” shall refer to whichever of such
Persons is the issuer of the common stock (or similar equity interest) having the greatest aggregate market value.
(c) The Company shall
not consummate any Flip-over Event unless the Flip-over Party shall have a sufficient number of authorized shares of Flip-over
Stock (or similar equity interest) which have not been issued or reserved for issuance to permit the exercise in full of the Rights
in accordance with this Section 13 and unless prior thereto the Company and such Flip-over Party shall have executed and
delivered to the Rights Agent a supplemental agreement providing for the terms set forth in paragraphs (a) and (b) of this Section
13 and further providing that, as soon as practicable after the date of any exchange, consolidation, merger, sale or transfer
of assets mentioned in paragraph (a) of this Section 13, the Flip-over Party will:
prepare
and file a registration statement under the Act, with respect to the Rights and the securities purchasable upon exercise of the
Rights on an appropriate form, and will use its best efforts to cause such registration statement to (A) become effective as soon
as practicable after such filing and (B) remain effective (with a prospectus at all times meeting the requirements of the Act)
until the Expiration Time;
use its
best efforts to qualify or register the Rights and the securities purchasable upon exercise of the Rights under blue sky laws of
such jurisdiction, as may be necessary or appropriate; and
deliver
to holders of the Rights historical financial statements for the Flip-over Party and each of its Affiliates which comply in all
respects with the requirements for registration on Form 10 under the Exchange Act.
(d) The provisions
of this Section 13 shall similarly apply to successive exchanges, consolidations, mergers, sales or other transfers. In
the event that a Flip-over Event shall occur at any time after the occurrence of a Flip-in Event, the Rights which have not theretofore
been exercised shall thereafter become exercisable in the manner described in Section 13(a).
Section 14. Fractional
Rights and Fractional Shares.
(a) The Company shall
not be required to issue fractions of Rights, except prior to the Distribution Time as provided in Section 11, or to distribute
Rights Certificates which evidence fractional Rights. In lieu of such fractional Rights, there shall be paid to the registered
holders of the Rights Certificates with regard to which such fractional Rights would otherwise be issuable, an amount in cash equal
to the same fraction of the current market value of a whole Right. For purposes of this Section 14(a), the current market
value of a whole Right shall be the closing price of the Rights for the Trading Day immediately prior to the date on which such
fractional Rights would have been otherwise issuable. The closing price of the Rights for any day shall be the last sale price,
regular way, or, in case no such sale takes place on such day, the average of the closing bid and asked prices, regular way, in
either case as reported in the principal consolidated transaction reporting system with respect to securities listed or admitted
to trading on the NYSE or, if the Rights are not listed or admitted to trading on the NYSE, as reported to the principal consolidated
transaction reporting system with respect to securities listed on the principal national securities exchange on which the Rights
are listed or admitted to trading, or if the Rights are not listed or admitted to trading on any national securities exchange,
the last quoted price or, if not so quoted, the average of the high bid and low asked prices in the over-the-counter market, as
reported by OTCBB or such other system then in use or, if on any such date the Rights are not quoted by any such organization,
the average of the closing bid and asked prices as furnished by a professional market maker making a market in the Rights selected
by the Board of Directors. If on any such date no such market maker is making a market in the Rights the fair value of the Rights
on such date as determined in good faith by the Board of Directors shall be used.
(b) The Company shall
not be required to issue fractions of shares of Common Stock or other securities upon exercise of the Rights or to distribute certificates
which evidence fractional shares of Common Stock or other securities. In lieu of fractional shares of Common Stock or other securities,
the Company shall pay to the registered holders of Rights Certificates at the time such Rights are exercised as herein provided
an amount in cash equal to the same fraction of the current market value of one share of Common Stock or such other securities.
For purposes of this Section 14(b), the current market value of one share of Common Stock or other security shall be the
closing price of one share of Common Stock or such other security, as applicable, (as determined pursuant to Section 11(d)(i))
for the Trading Day immediately prior to the date of such exercise.
(c) The holder of
a Right by the acceptance of the Rights expressly waives such holder’s right to receive any fractional Rights or any fractional
shares upon exercise of a Right, except as permitted by this Section 14.
(d) Whenever a payment
for fractional Rights or fractional shares is to be made by the Rights Agent, the Company shall (i) promptly prepare and deliver
to the Rights Agent a certificate setting forth in reasonable detail the facts related to such payment and the prices or formulas
utilized in calculating such payments, and (ii) provide sufficient monies to the Rights Agent in the form of fully collected funds
to make such payments.
Section 15. Rights
of Action. All rights of action in respect of this Agreement, other than rights of action vested in the Rights Agent pursuant
to the terms of this Agreement, are vested in the respective registered holders of the Rights Certificates (and, prior to the Distribution
Time, the registered holders of the Common Stock); and any registered holder of any Rights Certificate (or, prior to the Distribution
Time, of the Common Stock), without the consent of the Rights Agent or of the holder of any other Rights Certificate (or, prior
to the Distribution Time, of the Common Stock), may, in such holder’s own behalf and for such holder’s own benefit,
enforce, and may institute and maintain any suit, action or proceeding against the Company or any other Person to enforce, or otherwise
act in respect of, such holder’s right to exercise the Rights evidenced by such Rights Certificate in the manner provided
in such Rights Certificate and in this Agreement. Without limiting the foregoing or any remedies available to the holders of Rights,
it is specifically acknowledged that the holders of Rights would not have an adequate remedy at law for any breach of this Agreement
and shall be entitled to specific performance of the obligations hereunder and injunctive relief against actual or threatened violations
of the obligations hereunder of any Person subject to this Agreement.
Section 16. Agreement
of Rights Holders. Every holder of a Right by accepting the same consents and agrees with the Company and the Rights Agent
and with every holder of a Right that:
(a) prior to the Distribution
Time, the Rights will be transferable only in connection with the transfer of Common Stock;
(b) after the Distribution
Time, the Rights Certificates are transferable only on the registry books of the Rights Agent if surrendered at the principal office
or offices of the Rights Agent designated for such purposes, duly endorsed or accompanied by a proper instrument of transfer and
with the appropriate forms and certificates properly completed and duly executed;
(c) subject to Section
6(a) and Section 7(f), the Company and the Rights Agent may deem and treat the person in whose name a Rights Certificate
(or, prior to the Distribution Time, any associated Common Stock certificate) is registered as the absolute owner thereof and of
the Rights evidenced thereby (notwithstanding any notations of ownership or writing on the Rights Certificates or any associated
Common Stock certificates made by anyone other than the Company or the Rights Agent) for all purposes whatsoever, and neither the
Company nor the Rights Agent, subject to the last sentence of Section 7(e), shall be required to be affected by any notice
to the contrary; and
(d) notwithstanding
anything in this Agreement to the contrary, neither the Company nor the Rights Agent shall have any liability to any holder of
a Right or other Person as a result of its inability to perform any of its obligations under this Agreement by reason of any preliminary
or permanent injunction or other order, decree, judgment or ruling issued by a court of competent jurisdiction or by a governmental,
regulatory or administrative agency or commission, or any statute, rule, regulation or executive order promulgated or enacted by
any governmental authority, prohibiting or otherwise restraining performance of such obligation; provided, however,
the Company must use commercially reasonable efforts to have any such injunction, order, decree, judgment or ruling lifted or otherwise
overturned as soon as possible.
Section 17. Rights
Certificate Holder Not Deemed a Stockholder. No holder, as such, of any Rights Certificate shall be entitled to vote, receive
dividends or be deemed for any purpose to be the holder of the number of shares of Common Stock or any other securities of the
Company which may at any time be issuable upon the exercise of the Rights represented thereby, nor shall anything contained herein
or in any Rights Certificate be construed to confer upon the holder of any Rights Certificate, as such, any of the rights of a
stockholder of the Company or any right to vote for the election of directors or upon any matter submitted to stockholders at any
meeting thereof, or to give or withhold consent to any corporate action, or to receive notice of meetings or other actions affecting
stockholders (except as provided in Section 25), or to receive dividends or subscription rights, or otherwise, until the
Right or Rights evidenced by such Rights Certificate shall have been exercised in accordance with the provisions hereof.
Section 18. Concerning
the Rights Agent.
(a) The Company agrees
to pay to the Rights Agent reasonable compensation for all services rendered by it hereunder and, from time to time, on demand
of the Rights Agent, its reasonable expenses and counsel fees and disbursements and other disbursements incurred in the negotiation,
preparation, execution, delivery and amendment of this Agreement and the exercise and performance of its duties hereunder. The
Company also agrees to indemnify the Rights Agent for, and to hold it harmless against, any loss, liability, damage, judgment,
fine, penalty, claim, demand, settlement, cost or expense incurred without negligence, bad faith or willful misconduct on the part
of the Rights Agent for any action taken, suffered or omitted by the Rights Agent in connection with the acceptance and administration
of this Agreement, including the reasonable costs and expenses of defending against any claim of liability.
(b) The Rights Agent
shall be authorized and protected and shall incur no liability for or in respect of any action taken, suffered or omitted to be
taken by it in connection with its acceptance and administration of this Agreement in reliance upon any Rights Certificate or certificate
for Common Stock or for other securities of the Company, instrument of assignment or transfer, power of attorney, endorsement,
affidavit, letter, notice, direction, consent, certificate, statement, or other paper or document believed by it to be genuine
and to be duly signed, executed and, where necessary, guaranteed, verified or acknowledged, by the proper Person or Persons, or
otherwise upon the advice of counsel as set forth in Section 20.
Section 19. Merger
or Consolidation or Change of Name of Rights Agent.
(a) Any Person into
which the Rights Agent or any successor Rights Agent may be merged or with which it may be consolidated, or any Person resulting
from any merger or consolidation to which the Rights Agent or any successor Rights Agent shall be a party, or any Person succeeding
to the stock transfer business of the Rights Agent or any successor Rights Agent, shall be the successor to the Rights Agent under
this Agreement without the execution or filing of any paper or any further act on the part of any of the parties hereto; provided,
however, that such Person would be eligible for appointment as a successor Rights Agent under the provisions of Section
21. In case at the time such successor Rights Agent shall succeed to the agency created by this Agreement, any of the Rights
Certificates shall have been countersigned but not delivered, any such successor Rights Agent may adopt the countersignature of
a predecessor Rights Agent and deliver such Rights Certificates so countersigned; and in case at the time any of the Rights Certificates
shall not have been countersigned, any successor Rights Agent may countersign such Rights Certificates either in the name of the
predecessor or in the name of the successor Rights Agent; and in all such cases such Rights Certificates shall have the full force
provided in the Rights Certificates and in this Agreement.
(b) In case at any
time the name of the Rights Agent shall be changed, and at such time any of the Rights Certificates shall have been countersigned
but not delivered, the Rights Agent may adopt the countersignature under its prior name and deliver Rights Certificates so countersigned;
and in case, at that time, any of the Rights Certificates shall not have been countersigned, the Rights Agent may countersign such
Rights Certificates either in its prior name or in its changed name; and in all such cases such Rights Certificates shall have
the full force provided in the Rights Certificates and in this Agreement.
Section 20. Duties
of Rights Agent. The Rights Agent undertakes only the duties and obligations expressly imposed by this Agreement upon the
following terms and conditions, by all of which the Company and the holders of Rights Certificates, by their acceptance thereof,
shall be bound:
(a) Before the Rights
Agent acts or refrains from acting, the Rights Agent may consult with legal counsel (who may be legal counsel for the Company),
and the opinion of such counsel shall be full and complete authorization and protection to the Rights Agent as to any action taken
or omitted by it in good faith and in accordance with such opinion.
(b) Whenever in the
performance of its duties under this Agreement the Rights Agent shall deem it necessary or desirable that any fact or matter (including
the identity of any Acquiring Person and the determination of “Current Market Price”) be proved or established by the
Company prior to taking, suffering or omitting to take any action hereunder, such fact or matter (unless other evidence in respect
thereof be herein specifically prescribed) may be deemed to be conclusively proved and established by a certificate signed by the
President and Chief Executive Officer, any Vice President or the General Counsel and Secretary and delivered to the Rights Agent;
and such certificate shall be full authorization and protection to the Rights Agent, and the Rights Agent shall incur no liability
for or in respect of any action taken, suffered or omitted to be taken by it in good faith by it under the provisions of this Agreement
in reliance upon such certificate.
(c) The Rights Agent
shall be liable hereunder only for its own negligence, bad faith or willful misconduct.
(d) The Rights Agent
shall not be liable for or by reason of any of the statements of fact or recitals contained in this Agreement or in the Rights
Certificates or be required to verify the same (except as to its countersignature on such Rights Certificates), but all such statements
and recitals are and shall be deemed to have been made by the Company only.
(e) The Rights Agent
shall not be under any responsibility in respect of the validity of this Agreement or the execution and delivery hereof (except
the due execution hereof by the Rights Agent) or in respect of the validity or execution of any Rights Certificate (except its
countersignature thereof); nor shall it be responsible for any breach by the Company of any covenant or condition contained in
this Agreement or in any Rights Certificate; nor shall it be responsible for any adjustment required under the provisions of Section
11, Section 13 or Section 24 or responsible for the manner, method or amount of any such adjustment or the
ascertaining of the existence of facts that would require any such adjustment (except with respect to the exercise of Rights evidenced
by Rights Certificates after actual notice of any such adjustment); nor shall it by any act hereunder be deemed to make any representation
or warranty as to the authorization or reservation of any shares of Common Stock to be issued pursuant to this Agreement or any
Rights Certificate or as to whether any shares of Common Stock will, when so issued, be validly authorized and issued, fully paid
and nonassessable.
(f) The Company agrees
that it will perform, execute, acknowledge and deliver or cause to be performed, executed, acknowledged and delivered all such
further and other acts, instruments and assurances as may reasonably be required by the Rights Agent for the carrying out or performing
by the Rights Agent of the provisions of this Agreement.
(g) The Rights Agent
is hereby authorized and directed to accept instructions with respect to the performance of its duties hereunder from the President
and Chief Executive Officer, any Vice President or the General Counsel and Secretary and to apply to such officers for advice or
instructions in connection with its duties, and it shall incur no liability for or in respect of any action taken, suffered or
omitted by it in good faith in accordance with instructions of any such officer.
(h) The Rights Agent
and any stockholder, director, Affiliate, officer or employee of the Rights Agent may buy, sell or deal in any of the Rights or
other securities of the Company or become pecuniarily interested in any transaction in which the Company may be interested, or
contract with or lend money to the Company or otherwise act as fully and freely as though it were not Rights Agent under this Agreement.
Nothing herein shall preclude the Rights Agent from acting in any other capacity for the Company or for any other Person.
(i) The Rights Agent
may execute and exercise any of the rights or powers hereby vested in it or perform any duty hereunder either itself or by or through
its attorneys or agents, and the Rights Agent shall not be answerable or accountable for any act, default, neglect or misconduct
of any such attorneys or agents or for any loss to the Company resulting from any such act, default, neglect or misconduct; provided,
however, that reasonable care was exercised in the selection and continued employment thereof.
(j) No provision of
this Agreement shall require the Rights Agent to expend or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder or in the exercise of its rights if there shall be reasonable grounds for believing
that repayment of such funds or adequate indemnification against such risk or liability is not reasonably assured to it.
(k) If, with respect
to any Rights Certificate surrendered to the Rights Agent for exercise or transfer, the certificate attached to the form of assignment
or form of election to purchase, as the case may be, has either not been completed or indicates an affirmative response to clause
1 or 2 thereof, the Rights Agent shall not take any further action with respect to such requested exercise or transfer without
first consulting with the Company.
Section 21. Change
of Rights Agent. The Rights Agent or any successor Rights Agent may resign and be discharged from its duties under this
Agreement upon sixty (60) days’ notice in writing mailed to the Company, and to the transfer agent of the Common Stock, by
registered or certified mail, and to the holders of the Rights Certificates by first-class mail. The Company may remove the Rights
Agent or any successor Rights Agent upon no less than thirty (30) days’ notice in writing, mailed to the Rights Agent or
successor Rights Agent, as the case may be, and to the transfer agent of the Common Stock, by registered or certified mail, and,
if such removal occurs after the Distribution Time, to the holders of the Rights Certificates by first-class mail. If the Rights
Agent shall resign or be removed or shall otherwise become incapable of acting, the Company shall appoint a successor to the Rights
Agent. If the Company shall fail to make such appointment within a period of thirty (30) days after giving notice of such removal
or after it has been notified in writing of such resignation or incapacity by the resigning or incapacitated Rights Agent or by
any registered holder of a Rights Certificate (who shall, with such notice, submit such holder’s Rights Certificate for inspection
by the Company), then any registered holder of any Rights Certificate may apply to any court of competent jurisdiction for the
appointment of a new Rights Agent. Any successor Rights Agent, whether appointed by the Company or by such a court, shall be (i)
a Person organized and doing business under the laws of the United States or of the State of Delaware or of the State of New York
(or of any other state of the United States so long as such Person is authorized to do business in the State of Delaware or in
the State of New York), in good standing, having an office or agency in the State of Delaware or in the State of New York, which
is authorized under such laws to exercise stock transfer powers and is subject to supervision or examination by federal or state
authority and which has at the time of its appointment as Rights Agent a combined capital and surplus of at least $100,000,000
or (ii) an Affiliate of such Person. After appointment, the successor Rights Agent shall be vested with the same powers, rights,
duties and responsibilities as if it had been originally named as Rights Agent under this Agreement without further act or deed;
but the predecessor Rights Agent shall deliver and transfer to the successor Rights Agent any property at the time held by it hereunder,
and execute and deliver any further reasonable assurance, conveyance, act or deed necessary for the purpose. Not later than the
effective date of any such appointment, the Company shall file notice thereof in writing with the predecessor Rights Agent and
the transfer agent of the Common Stock, and, if such appointment occurs after the Distribution Time, mail a notice thereof in writing
to the registered holders of the Rights Certificates. Failure to give any notice provided for in this Section 21 or any
defect therein shall not affect the legality or validity of the resignation or removal of the Rights Agent or the appointment of
the successor Rights Agent, as the case may be.
Section 22. Issuance of New Rights Certificates.
Notwithstanding any of the provisions of this Agreement or of the Rights to the contrary, the Company may, at its option, issue
new Rights Certificates evidencing Rights in such form as may be approved by its Board of Directors to reflect any adjustment or
change in the Purchase Price and the number or kind or class of shares or other securities or property purchasable under the Rights
Certificates made in accordance with the provisions of this Agreement. In addition, in connection with the issuance or sale of
shares of Common Stock following the Distribution Time and prior to the redemption or expiration of the Rights, the Company (a)
shall, with respect to shares of Common Stock so issued or sold pursuant to the exercise of stock options or under any employee
plan or arrangement, granted or awarded prior to the Distribution Time, or upon the exercise, conversion or exchange of securities
hereinafter issued by the Company, and (b) may, in any other case, if deemed necessary or appropriate by the Board of Directors
of the Company, issue Rights Certificates representing an appropriate number of Rights in connection with such issuance or sale;
provided, however, that (i) no such Rights Certificate shall be issued if, and to the extent that, the Company shall be advised
by counsel that such issuance would create a significant risk of material adverse tax consequences to the Company or the Person
to whom such Rights Certificate would be issued, and (ii) no such Rights Certificate shall be issued if, and to the extent that,
appropriate adjustment shall otherwise have been made in lieu of the issuance thereof.
Section 23. Redemption
and Termination.
(a) The Board of Directors
may, at its option, at any time prior to the earlier of (i) the Close of Business on the tenth day following the Stock Acquisition
Date (or, if the Stock Acquisition Date shall have occurred prior to the Record Date, the Close of Business on the tenth day following
the Record Date), or (ii) the Final Expiration Time, redeem all but not less than all of the then outstanding Rights at a redemption
price of $0.01 per Right, as such amount may be appropriately adjusted to reflect any stock split, stock dividend or similar transaction
occurring after the date hereof (such redemption price being hereinafter referred to as the “Redemption Price”). Notwithstanding
anything contained in this Agreement to the contrary, the Rights shall not be exercisable after the first occurrence of a Flip-in
Event until such time as the Company’s right of redemption hereunder has expired. The Company may, at its option, pay the
Redemption Price in cash, shares of Common Stock (based on the Current Market Price of the Common Stock at the time of redemption)
or any other form of consideration deemed appropriate by the Board of Directors. The redemption of the Rights by the Board of Directors
may be made effective at such time, on such basis and with such conditions as the Board of Directors in its sole discretion may
establish.
(b) Immediately upon
the action of the Board of Directors ordering the redemption of the Rights pursuant to Section 23(a) (or, if the resolutions of
the Board of Directors electing to redeem the Rights state that the redemption will not be effective until a specified future time
or the occurrence of a specified future event, at such future time or upon the occurrence of such future event), evidence of which
shall have been filed with the Rights Agent and without any further action and without any notice, the right to exercise the Rights
will terminate and the only right thereafter of the holders of Rights shall be to receive the Redemption Price for each Right so
held. Promptly after the action of the Board of Directors ordering the redemption of the Rights, the Company shall give notice
of such redemption to the Rights Agent and the holders of the then outstanding Rights by mailing such notice to the Rights Agent
and to all such holders at each holder’s last address as it appears upon the registry books of the Rights Agent or, prior
to the Distribution Time, on the registry books of the transfer agent for the Common Stock; provided, however, that
the failure to give, or any defect in, such notice shall not affect the validity of such redemption. Any notice which is mailed
in the manner herein provided shall be deemed given, whether or not the holder receives the notice. Each such notice of redemption
will state the method by which the payment of the Redemption Price will be made.
Section 24. Exchange.
(a) The Board of Directors
may, at its option, at any time after any Person becomes an Acquiring Person, exchange all or part of the then outstanding and
exercisable Rights (which shall not include Rights that have become null and void pursuant to the provisions of Section 7(e))
for shares of Common Stock at an exchange ratio of one share of Common Stock per Right, appropriately adjusted to reflect any stock
split, stock dividend or similar transaction occurring after the date hereof (such exchange ratio being hereinafter referred to
as the “Exchange Ratio”). Notwithstanding the foregoing, the Board of Directors shall not be empowered to effect
such exchange at any time after any Person (other than the Company, any Subsidiary of the Company, any employee benefit plan of
the Company or of any Subsidiary of the Company, or any Person organized, appointed or established by the Company for or pursuant
to the terms of any such plan), together with all Affiliates and Associates of such Person, becomes the Beneficial Owner of fifty
percent (50%) or more of the Common Stock then outstanding. Before effecting an exchange pursuant to this Section 24, the
Board may direct the Company to enter into a trust agreement in such form and with such terms as the Board shall then approve (the
“Trust Agreement”). If the Board so directs, the Company shall enter into the Trust Agreement and shall issue
to the trust created by such agreement (the “Trust”) all or some (as designated by the Board) of the shares
of Common Stock (or other securities) issuable pursuant to the exchange, and all or some (as designated by the Board) holders of
Rights entitled to receive shares pursuant to the exchange shall be entitled to receive such shares (and any dividends paid or
distributions made thereon after the date on which such shares are deposited in the Trust) only from the Trust and solely upon
compliance with the relevant terms and provisions of the Trust Agreement.
(b) Immediately upon
the effectiveness of the action of the Board of Directors ordering the exchange of any Rights pursuant to subsection (a) of this
Section 24 and without any further action and without any notice, the right to exercise such Rights shall terminate
and the only right thereafter of a holder of any such Rights shall be to receive that number of shares of Common Stock equal to
the number of such Rights held by such holder multiplied by the Exchange Ratio. The Company shall promptly give public notice (with
prompt notice thereof to the Rights Agent) of any exchange. The Company promptly thereafter shall mail a notice of any such exchange
to all of the holders of such Rights at their last addresses as they appear upon the registry books of the Rights Agent. Any notice
which is mailed in the manner herein provided shall be deemed given, whether or not the holder receives the notice. Each such notice
of exchange will state the method by which the exchange of the Common Stock for Rights will be effected and, in the event of any
partial exchange, the number of Rights which will be exchanged. Any partial exchange will be effected pro rata based on the number
of Rights (other than Rights which have become null and void pursuant to the provisions of Section 7(e)) held by each holder
of Rights. Prior to effecting any exchange and registering shares of Common Stock (or such other securities) in any Person’s
name, including any nominee or transferee of a Person, the Company may require (or cause the trustee of the Trust to require),
as a condition thereof, that any holder of Rights provide evidence, including the identity of the Beneficial Owners thereof and
their Affiliates and Associates (or former Beneficial Owners thereof and their Affiliates and Associates) as the Company shall
reasonably request in order to determine if such Rights are null and void. If any Person shall fail to comply with such request,
the Company shall be entitled conclusively to deem the Rights formerly held by such Person to be null and void pursuant to Section
7(e). No failure to give, or any defect in, any notice provided under this Section 24(b) shall affect the validity of
any exchange.
(c) In the event that
there shall not be sufficient shares of Common Stock issued but not outstanding or authorized but unissued to permit any exchange
of Rights as contemplated in accordance with this Section 24, the Company shall take all such actions as may be necessary
to authorize additional shares of Common Stock for issuance upon exchange of the Rights.
(d) The Company shall
not be required to issue fractions of shares of Common Stock or to distribute certificates which evidence fractional shares of
Common Stock. In lieu of such fractional shares of Common Stock, there shall be paid to the registered holders of the Rights Certificates
with regard to which such fractional shares of Common Stock would otherwise be issuable, an amount in cash equal to the same fraction
of the current market value of a whole share of Common Stock. For the purposes of this Section 24(d), the current market
value of a whole share of Common Stock shall be the closing price of a share of Common Stock (as determined pursuant to the second
sentence of Section 11(d)(i)) for the Trading Day immediately prior to the date of exchange pursuant to this Section
24.
Section 25. Notice
of Certain Events.
(a) In case the Company
shall propose, at any time after the Distribution Time, (i) to pay any dividend payable in stock of any class to the holders of
Common Stock or to make any other distribution to the holders of Common Stock (other than a regular periodic cash dividend out
of earnings or retained earnings of the Company), or (ii) to offer to the holders of Common Stock rights or warrants to subscribe
for or to purchase any additional shares of Common Stock or shares of stock of any class or any other securities, rights or options,
or (iii) to effect any reclassification of its Common Stock (other than a reclassification involving only the subdivision of outstanding
shares of Common Stock), or (iv) to effect any consolidation or merger into or with any other Person (other than a Subsidiary of
the Company in a transaction which complies with Section 11(o)), or to effect any sale or other transfer (or to permit one
or more of its Subsidiaries to effect any sale or other transfer), in one transaction or a series of related transactions, of more
than fifty percent (50%) of the assets, cash flow or earning power of the Company and its Subsidiaries (taken as a whole) to any
other Person or Persons (other than the Company or any of its Subsidiaries in one or more transactions each of which complies with
Section 11(o)), or (v) to effect the liquidation, dissolution or winding up of the Company, then, in each such case, the
Company shall give to the Rights Agent and to each holder of a Rights Certificate, to the extent feasible and in accordance with
Section 26, a notice of such proposed action, which shall specify the record date for the purposes of such stock dividend,
distribution of rights or warrants, or the date on which such reclassification, consolidation, merger, sale, transfer, liquidation,
dissolution, or winding up is to take place and the date of participation therein by the holders of the shares of Common Stock,
if any such date is to be fixed, and such notice shall be so given in the case of any action covered by clause (i) or (ii) above
at least twenty (20) days prior to the record date for determining holders of the shares of Common Stock for purposes of such action,
and in the case of any such other action, at least twenty (20) days prior to the date of the taking of such proposed action or
the date of participation therein by the holders of the shares of Common Stock, whichever shall be the earlier.
(b) In case a Flip-in
Event shall occur, then, in any such case, (i) the Company shall as soon as practicable thereafter give to each holder of a Rights
Certificate, to the extent feasible and in accordance with Section 26, a notice of the occurrence of such event, which shall
specify the event and the consequences of the event to holders of Rights under Section 11(a)(ii), and (ii) if appropriate,
all references in the preceding paragraph to Common Stock shall be deemed thereafter to refer to other securities.
Section 26. Notices. Notices
or demands authorized by this Agreement to be given or made by the Rights Agent or by the holder of any Rights Certificate to or
on the Company shall be sufficiently given or made if in writing and sent by first-class mail, postage prepaid, addressed (until
another address is filed in writing with the Rights Agent) or by facsimile transmission as follows:
Luby’s, Inc.
13111 Northwest Freeway
Suite 600
Houston, Texas 77040
Attention: General Counsel
Facsimile No.: (713) 329-6819
Subject to the provisions of Section
21, any notice or demand authorized by this Agreement to be given or made by the Company or by the holder of any Rights Certificate
to or on the Rights Agent shall be sufficiently given or made if in writing and sent by first-class mail, postage prepaid, addressed
(until another address is filed in writing with the Company) or by facsimile transmission as follows:
American Stock Transfer
& Trust Company, LLC
6201 15th Avenue
Brooklyn, NY 11219
Attention: Jacqueline I. Kretzu
Facsimile No.: (718) 765-8713
Notices or demands authorized by this Agreement
to be given or made by the Company or the Rights Agent to the holder of any Rights Certificate (or, if prior to the Distribution
Time, to the holder of shares of Common Stock) shall be sufficiently given or made if sent by first-class mail, postage prepaid,
addressed to such holder at the address of such holder as shown on the registry books of the Company.
Section 27. Supplements
and Amendments. The Company and the Rights Agent may from time to time supplement or amend this Agreement without the approval
of any holders of Rights (a) prior to the Stock Acquisition Date, in any respect, and (b) on or after the Stock Acquisition Date,
(i) to make any changes that the Company may deem necessary or desirable that shall not materially adversely affect the interests
of the holders of Rights (other than the Acquiring Person, any Affiliate or Associate thereof or any transferee of any Acquiring
Person or any Affiliate or Associate thereof), (ii) to cure any ambiguity or (iii) to correct or supplement any provision contained
herein that may be inconsistent with any other provision herein, including any change in order to satisfy any applicable law, rule
or regulation. For the avoidance of doubt, the Company shall be entitled to adopt and implement such procedures and arrangements
(including with third parties) as it may deem necessary or desirable to facilitate the exercise, exchange, trading, issuance or
distribution of the Rights (and the shares of Common Stock issuable and deliverable upon the exercise of the Rights) as contemplated
hereby and to ensure that an Acquiring Person and its Affiliates, Associates and transferees do not obtain the benefits thereof,
and any amendment in respect of the foregoing shall be deemed not to adversely affect the interests of the holders of Rights. Any
supplement or amendment authorized by this Section 27 shall be evidenced by a writing signed by the Company and the Rights Agent.
The Rights Agent shall duly execute and deliver any supplement or amendment hereto requested by the Company in writing provided
that the Company has delivered to the Rights Agent a certificate from an appropriate officer of the Company that states that the
proposed supplement or amendment complies with the terms of this Agreement. Notwithstanding anything in this Agreement to the contrary,
the Rights Agent may, but shall not be obligated to, enter into any supplement or amendment that materially and adversely affects
the Rights Agent’s own rights, duties, immunities or obligations under this Agreement.
Section 28. Successors.
All the covenants and provisions of this Agreement by or for the benefit of the Company or the Rights Agent shall bind and inure
to the benefit of their respective successors and assigns hereunder.
Section 29. Determination
and Actions by the Board of Directors, etc. The Board of Directors, or a duly authorized committee thereof, shall have
the exclusive power and authority to administer this Agreement and to exercise all rights and powers specifically granted to the
Board of Directors or to the Company, or as may be necessary or advisable in the administration of this Agreement, including the
right and power to (i) interpret the provisions of this Agreement, and (ii) make all determinations deemed necessary or advisable
for the administration of this Agreement (including a determination to redeem or not redeem the Rights or to amend this Agreement).
All such actions, calculations, interpretations and determinations (including, for purposes of clause (y) below, all omissions
with respect to the foregoing) which are done or made by the Board of Directors in good faith shall (x) be final, conclusive and
binding on the Company, the Rights Agent, the holders of the Rights and all other Persons, and (y) not subject the Board of Directors
to any liability to the holders of the Rights.
Section 30. Benefits
of this Agreement. Nothing in this Agreement shall be construed to give to any Person other than the Company, the Rights
Agent and the registered holders of the Rights Certificates (and, prior to the Distribution Time, registered holders of the Common
Stock) any legal or equitable right, remedy or claim under this Agreement; but this Agreement shall be for the sole and exclusive
benefit of the Company, the Rights Agent and the registered holders of the Rights Certificates (and, prior to the Distribution
Time, registered holders of the Common Stock).
Section 31. Severability.
If any term, provision, covenant or restriction of this Agreement or the Rights is held by a court of competent jurisdiction or
other authority to be invalid, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions of this
Agreement and the Rights shall remain in full force and effect and shall in no way be affected, impaired or invalidated; provided,
however, that notwithstanding anything in this Agreement to the contrary, if any such term, provision, covenant or restriction
is held by such court or authority to be invalid, void or unenforceable and the Board of Directors determines in its good faith
judgment that severing the invalid language from this Agreement or the Rights would adversely affect the purpose or effect of this
Agreement, the right of redemption set forth in Section 23 shall be reinstated and shall not expire until the Close of Business
on the tenth day following the date of such determination by the Board of Directors.
Section 32. Governing
Law; Submission to Jurisdiction. This Agreement, each Right and each Rights Certificate issued hereunder shall be deemed
to be a contract made under the laws of the State of Delaware and for all purposes shall be governed by and construed in accordance
with the laws of such State applicable to contracts made and to be performed entirely within such State. The Company and each holder
of Rights hereby irrevocably submits to the exclusive jurisdiction of the Court of Chancery of the State of Delaware, or, if such
court shall lack subject matter jurisdiction, the United States District Court for the District of Delaware, over any suit, action
or proceeding arising out of or relating to this Agreement. The Company and each holder of Rights acknowledge that the forum designated
by this Section 32 has a reasonable relation to this Agreement and to such Persons’ relationship with one another.
The Company and each holder of Rights hereby waive, to the fullest extent permitted by applicable law, any objection which they
now or hereafter have to personal jurisdiction or to the laying of venue of any such suit, action or proceeding brought in any
court referred to in this Section 32. The Company and each holder of Rights undertake not to commence any action subject
to this Agreement in any forum other than the forum described in this Section 32. The Company and each holder of Rights
agree that, to the fullest extent permitted by applicable law, a final and non-appealable judgment in any such suit, action or
proceeding brought in any such court shall be conclusive and binding upon such Persons.
Section 33. Counterparts.
This Agreement may be executed in any number of counterparts and each of such counterparts shall for all purposes be deemed to
be an original, and all such counterparts shall together constitute but one and the same instrument.
Section 34. Descriptive
Headings; Interpretation. Descriptive headings of the several Sections of this Agreement are inserted for convenience only
and shall not control or affect the meaning or construction of any of the provisions hereof. The words “include,” “includes”
and “including” shall be deemed to be followed by the phrase “without limitation.” Each reference in this
Agreement to a period of time following or after a specified date or event shall be calculated without including such specified
date or the day on which such specified event occurs.
* * * * * * *
Exhibit A
[Form of Rights Certificate]
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Certificate No. R-
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__________ Rights
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NOT EXERCISABLE AFTER February
15, 2021 OR EARLIER IF REDEEMED OR EXCHANGED BY THE COMPANY. AS SET FORTH IN THE RIGHTS AGREEMENT, THE RIGHTS ARE SUBJECT
TO REDEMPTION, AT THE OPTION OF THE COMPANY, AT $0.01 PER RIGHT, AND TO EXCHANGE ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT.
UNDER CERTAIN CIRCUMSTANCES, RIGHTS BENEFICIALLY OWNED BY AN “ACQUIRING PERSON” OR ANY “AFFILIATE” OR “ASSOCIATE”
OF AN “ACQUIRING PERSON” (AS SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT) AND ANY SUBSEQUENT HOLDER OF SUCH RIGHTS
SHALL BECOME NULL AND VOID. [THE RIGHTS REPRESENTED BY THIS RIGHTS CERTIFICATE ARE OR WERE BENEFICIALLY OWNED BY A PERSON WHO WAS
OR BECAME AN “ACQUIRING PERSON” OR AN “AFFILIATE” OR “ASSOCIATE” OF AN “ACQUIRING PERSON”
(AS SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT). ACCORDINGLY, THIS RIGHTS CERTIFICATE AND THE RIGHTS REPRESENTED HEREBY SHALL
BECOME NULL AND VOID IN THE CIRCUMSTANCES SPECIFIED IN SECTION 7(e) OF SUCH AGREEMENT.]*
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*
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The portion of the legend in brackets shall be inserted
only if applicable and shall replace the preceding sentence.
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Rights Certificate
LUBY’S,
INc.
This certifies that
[ ], or registered assigns, is the registered owner of the number of Rights set forth above, each of which entitles the owner thereof,
subject to the terms, provisions and conditions of the Rights Agreement, dated as of February 15, 2018 (the “Rights Agreement”),
between Luby’s, Inc., a Delaware corporation (the “Company”), and American Stock Transfer & Trust
Company, LLC (the “Rights Agent”), to purchase from the Company at any time prior to 5:00 P.M. (New York City
time) on February 15, 2021 at the office or offices of the Rights Agent designated for such purpose, or its successors as Rights
Agent, half of a fully paid, nonassessable share of common stock, par value $0.32 per share (the “Common Stock”),
of the Company, at a purchase price of $6.00 per one-half of a share of Common Stock (the “Purchase Price”),
upon presentation and surrender of this Rights Certificate with the Form of Election to Purchase and related Certificate properly
completed and duly executed. The number of Rights evidenced by this Rights Certificate (and the number of shares which may be purchased
upon exercise thereof) set forth above, and the Purchase Price per share set forth above, are the number and Purchase Price as
of February 15, 2018, based on the Common Stock as constituted at such date. The Company reserves the right to require prior to
the occurrence of a Triggering Event (as such term is defined in the Rights Agreement) that, upon any exercise of Rights, a number
of Rights be exercised so that only whole shares of Common Stock will be issued.
Upon the occurrence
of a Flip-in Event (as such term is defined in the Rights Agreement), if the Rights evidenced by this Rights Certificate are beneficially
owned by (i) an Acquiring Person or an Affiliate or Associate of any such Acquiring Person (as such terms are defined in the Rights
Agreement), (ii) a transferee of any such Acquiring Person, Associate or Affiliate, or (iii) under certain circumstances specified
in the Rights Agreement, a transferee of a person who, after such transfer, became an Acquiring Person or an Affiliate or Associate
of such Acquiring Person, such Rights shall become null and void and no holder hereof shall have any right with respect to such
Rights from and after the occurrence of such Flip-in Event.
As provided in the
Rights Agreement, the Purchase Price and the number and kind of shares of Common Stock or other securities which may be purchased
upon the exercise of the Rights evidenced by this Rights Certificate are subject to modification and adjustment upon the happening
of certain events, including Triggering Events.
This Rights Certificate
is subject to all of the terms, provisions and conditions of the Rights Agreement, which terms, provisions and conditions are hereby
incorporated herein by reference and made a part hereof and to which Rights Agreement reference is hereby made for a full description
of the rights, limitations of rights, obligations, duties and immunities hereunder of the Rights Agent, the Company and the holders
of the Rights Certificates, which limitations of rights include the temporary suspension of the exercisability of such Rights under
the specific circumstances set forth in the Rights Agreement. Copies of the Rights Agreement are on file at the office of the Company
and are also available upon written request to the Company.
This Rights Certificate,
with or without other Rights Certificates, upon surrender at the principal office or offices of the Rights Agent designated for
such purpose, may be exchanged for another Rights Certificate or Rights Certificates of like tenor and date evidencing Rights entitling
the holder to purchase a like aggregate number of halves of a share of Common Stock as the Rights evidenced by the Rights Certificates
surrendered shall have entitled such holder to purchase. If this Rights Certificate shall be exercised in part, the holder shall
be entitled to receive upon surrender hereof another Rights Certificate or Rights Certificates for the number of whole Rights not
exercised.
Subject to the provisions
of the Rights Agreement, the Rights evidenced by this Rights Certificate may, in each case at the option of the Company, be (i)
redeemed by the Company at its option at a redemption price of $0.01 per Right or (ii) exchanged in whole or in part for shares
of Common Stock or other securities of the Company. Immediately upon the action of the Board of Directors of the Company authorizing
redemption, the Rights will terminate and the only right of the holders of Rights will be to receive the redemption price.
No fractional shares
of Common Stock will be issued upon the exercise of any Right or Rights evidenced hereby, but in lieu thereof a cash payment will
be made, as provided in the Rights Agreement.
No holder of this
Rights Certificate shall be entitled to vote or receive dividends or be deemed for any purpose the holder of shares of Common Stock
or of any other securities of the Company which may at any time be issuable on the exercise hereof, nor shall anything contained
in the Rights Agreement or herein be construed to confer upon the holder hereof, as such, any of the rights of a stockholder of
the Company or any right to vote for the election of directors or upon any matter submitted to stockholders at any meeting thereof,
or to give or withhold consent to any corporate action, or to receive notice of meetings or other actions affecting stockholders
(except as provided in the Rights Agreement), or to receive dividends or subscription rights, or otherwise, until the Right or
Rights evidenced by this Rights Certificate shall have been exercised as provided in the Rights Agreement.
This Rights Certificate
shall not be valid or obligatory for any purpose until it shall have been countersigned manually or by facsimile signature by the
Rights Agent.
* * * * * * *
WITNESS the facsimile signature of the
proper officer of the Company.
Dated as of _______ __, 201_
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LUBY’S, INc.
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By:
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Name:
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Title:
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Countersigned:
American Stock Transfer & Trust Company, LLC
[Form of Reverse Side of Rights Certificate]
FORM OF ASSIGNMENT
(To be executed by the registered holder
if such
holder desires to transfer the Rights Certificate.)
FOR VALUE RECEIVED ________________________________________
hereby sells, assigns and transfers unto ___________________________________________________
(Please print name and address of transferee)
this Rights Certificate, together with
all right, title and interest therein, and does hereby irrevocably constitute and appoint __________ Attorney, to transfer the
within Rights Certificate on the books of the within-named Company, with full power of substitution.
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Dated: ___________________, ____
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Signature
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Signature Guaranteed:
Certificate
The undersigned hereby certifies by checking
the appropriate boxes that:
this Rights
Certificate [ ] is [ ] is not being sold, assigned and transferred by or on behalf of a Person who is or was an Acquiring Person
or an Affiliate or Associate of an Acquiring Person (as such terms are defined pursuant to the Rights Agreement); and
after due
inquiry and to the best knowledge of the undersigned, it [ ] did [ ] did not acquire the Rights evidenced by this Rights Certificate
from any Person who or which is, was or subsequently became an Acquiring Person or an Affiliate or Associate of an Acquiring Person.
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Dated: ___________________, ____
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Signature
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Signature Guaranteed:
NOTICE
The signature to the foregoing Assignment
and Certificate must correspond to the name as written upon the face of this Rights Certificate in every particular, without alteration
or enlargement or any change whatsoever.
FORM OF ELECTION TO PURCHASE
(To be executed if holder desires to exercise
Rights represented by the Rights Certificate.)
TO: Luby’s, Inc.
The undersigned hereby
irrevocably elects to exercise ______ Rights represented by this Rights Certificate to purchase the shares of Common Stock issuable
upon the exercise of the Rights (or such other securities of the Company or of any other person which may be issuable upon the
exercise of the Rights) and requests that certificates for such shares (or other securities) be issued in the name of and delivered
to:
Please insert social security or other identifying number: ______________________
(Please print name and address)
If such number of
Rights shall not be all the Rights evidenced by this Rights Certificate, a new Rights Certificate for the balance of such Rights
shall be registered in the name of and delivered to:
Please insert social security or other identifying number: ______________________
(Please print name and address)
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Dated: ___________________, ____
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Signature
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Signature Guaranteed:
Certificate
The undersigned hereby certifies by checking
the appropriate boxes that:
the Rights
evidenced by this Rights Certificate [ ] are [ ] are not being exercised by or on behalf of a Person who is or was an Acquiring
Person or an Affiliate or Associate of an Acquiring Person (as such terms are defined pursuant to the Rights Agreement); and
after due
inquiry and to the best knowledge of the undersigned, it [ ] did [ ] did not acquire the Rights evidenced by this Rights Certificate
from any Person who or which is, was or became an Acquiring Person or an Affiliate or Associate of an Acquiring Person.
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Dated: ___________________, ____
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Signature
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Signature Guaranteed:
NOTICE
The signature to the
foregoing Election to Purchase and Certificate must correspond to the name as written upon the face of this Rights Certificate
in every particular, without alteration or enlargement or any change whatsoever.
Exhibit B
SUMMARY OF RIGHTS TO PURCHASE COMMON
STOCK
On February 15, 2018,
the board of directors of Luby’s, Inc. (the “Company”) adopted a stockholder rights agreement and declared
a dividend distribution of one right for each outstanding share of Company common stock to stockholders of record at the close
of business on February 28, 2018. Each right entitles its holder, under the circumstances described below, to purchase from the
Company one half of a share of common stock of the Company. The purchase price for each whole share of Company common stock pursuant
to the exercise of a right is initially $12.00 (equivalent to $6.00 for each half of a share of Company common stock), subject
to adjustment. The description and terms of the rights are set forth in a stockholder rights agreement between the Company and
American Stock Transfer & Trust Company, LLC, as rights agent.
The Rights.
The Company’s board of directors authorized the issuance of a right with respect to each outstanding share of Company common
stock on February 28, 2018. Initially, the rights are associated with Company common stock and evidenced by common stock certificates
or, in the case of uncertificated shares of Company common stock, the book-entry account that evidences record ownership of such
shares, which will contain a notation incorporating the stockholder rights agreement by reference, and are transferable with and
only with the underlying shares of Company common stock. New rights will attach to any shares of Company common stock that become
outstanding after the record date and prior to the earlier of the distribution time (as defined below) and the expiration time
(as described below).
Separation and
Distribution of Rights; Exercisability. Subject to certain exceptions, the rights become exercisable and trade separately from
Company common stock only upon the “distribution time,” which occurs upon the earlier of:
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the close of business on the tenth day after the first date (the “stock acquisition date”) of public announcement that a person or group of affiliated or associated persons has acquired, or obtained the right or obligation to acquire, beneficial ownership of 10% or more of the outstanding shares of Company common stock, including in the form of synthetic ownership through derivative positions, (any such person or group of affiliated or associated persons being referred to herein as an “acquiring person”) or
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●
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the close of business on the tenth business day (or later date if determined by the Company’s board of directors prior to such time as any person or group becomes an acquiring person) following the commencement of a tender offer or exchange offer which, if consummated, would result in a person or group becoming an acquiring person.
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An acquiring person
does not include:
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any subsidiary of the Company,
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any employee benefit plan of the Company or of any subsidiary of the Company,
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●
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any person organized, appointed or established by the Company for or pursuant to the terms of any such plan or
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●
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any person who or which, as of immediately prior to the first public announcement of the adoption of the stockholder rights agreement, beneficially owns 10% or more of the outstanding shares of Company common stock, including in the form of synthetic ownership through derivative positions. Notwithstanding the foregoing, such person would be an “acquiring person” if such person, at any time after the first public announcement of the adoption of the stockholder rights agreement, beneficially owns any shares of Company common stock (with certain exceptions) in addition to the shares of Company common stock beneficially owned by such person as of immediately prior to the first public announcement of the adoption of the stockholder rights agreement.
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In addition, Harris
J. Pappas, Christopher J. Pappas and their respective spouses, descendants, personal estate representatives, affiliates or associates
(collectively, the “Exempt Persons”) will not be acquiring persons provided that all of the Exempt Persons do
not beneficially own, in the aggregate, more than 35.5% of the shares of Company common stock then outstanding. Also, if the Company’s
board of directors determines in good faith that a person who would otherwise be an acquiring person has become such inadvertently
and such person divests as promptly as practicable a sufficient number of shares of Company common stock so that such person would
no longer be an acquiring person, then such person will not be deemed to be an acquiring person.
Until the distribution
time, the surrender for transfer of any shares of Company common stock outstanding will also constitute the transfer of the rights
associated with those shares.
As soon as practicable
after the distribution time, separate rights certificates will be mailed to holders of record of Company common stock as of the
close of business at the distribution time. From and after the distribution time, the separate rights certificates alone will represent
the rights. Except as otherwise provided in the stockholder rights agreement, only shares of Company common stock issued prior
to the distribution time will be issued with rights.
The rights are not
exercisable until the distribution time.
Expiration Time.
Unless earlier redeemed or exchanged by the Company as described below, the rights will expire at the close of business on February
15, 2021.
Flip-in Event.
In the event that a person or group becomes an acquiring person (a “flip-in event”), each holder of a right
(other than any acquiring person and certain related parties, whose rights automatically become null and void) will have the right
to receive, upon exercise, Company common stock having a value equal to two times the exercise price of the right. If an insufficient
number of shares of Company common stock is available for issuance, then the Company’s board of directors would be required
to substitute cash, property or other securities of the Company for Company common stock. The rights may not be exercised following
a flip-in event while the Company has the ability to cause the rights to be redeemed, as described later in this summary.
For example, at an
exercise price of $6.00 per right (equivalent to $12.00 for each whole share of Company common stock), each right not owned by
an acquiring person (or by certain related parties) following a flip-in event would entitle its holder to purchase $24.00 worth
of Company common stock (or other consideration, as noted above) for $12.00. Assuming that Company common stock had a per share
value of $4.00 at that time, the holder of each valid right would be entitled to purchase six shares of Company common stock for
$12.00.
Flip-over Event.
In the event that, at any time following the stock acquisition date, any of the following occurs (each, a “flip-over event”):
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the Company consolidates with or merges with and into any other entity and the Company is not the continuing or surviving corporation,
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any entity engages in a share exchange with or consolidates with, or merges with or into, the Company, and the Company is the continuing or surviving corporation and, in connection with such share exchange, consolidation or merger, all or part of the outstanding shares of Company common stock are changed into or exchanged for stock or other securities of any other entity or cash or any other property or
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the Company sells or otherwise transfers, in one transaction or a series of related transactions, more than 50% of the assets, cash flow or earning power of the Company and its subsidiaries (taken as a whole),
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each holder of a right (except rights which
previously have been voided as described above) will have the right to receive, upon exercise, common stock of the acquiring company
having a value equal to two times the exercise price of the right. Flip-in events and flip-over events are collectively referred
to as “triggering events.”
Anti-dilution Adjustments.
The exercise price payable, and the number of shares of Company common stock or other securities or property issuable, upon exercise
of the rights are subject to adjustment from time to time to prevent dilution:
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in the event of a stock dividend on, or a subdivision, combination or reclassification of, the Company common stock,
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if holders of the Company common stock are granted certain rights, options or warrants to subscribe for Company common stock or convertible securities at less than the current market price of the Company common stock or
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upon the distribution to holders of the Company common stock of evidences of indebtedness or assets (excluding regular quarterly cash dividends) or of subscription rights or warrants (other than those referred to above).
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With certain exceptions,
no adjustment in the exercise price will be required until cumulative adjustments amount to at least 1% of the exercise price.
No fractional shares of Company common stock will be issued, and, in lieu thereof, an adjustment in cash will be made based on
the market price of the Company common stock on the last trading day prior to the date of exercise.
Redemption; Exchange.
In general, the Company may redeem the rights in whole, but not in part, at a price of $0.01 per right (subject to adjustment and
payable in cash, Company common stock or other consideration deemed appropriate by the Company’s board of directors) at any
time until ten days following the stock acquisition date. Immediately upon the action of the board of directors authorizing any
redemption, the rights will terminate and the only right of the holders of rights will be to receive the redemption price.
At any time after
there is an acquiring person and prior to the acquisition by the acquiring person of 50% or more of the outstanding shares of Company
common stock, the Company may exchange the rights (other than rights which previously have been voided as described above), in
whole or in part, at an exchange ratio of one share of Company common stock per right (subject to adjustment).
No Rights as Stockholder.
Until a right is exercised, its holder will have no rights as a stockholder of the Company, including, without limitation, the
right to vote or to receive dividends.
Amendment of the
Rights Agreement. The Company and the rights agent may from time to time amend or supplement the stockholder rights agreement
without the consent of the holders of the rights. After the stock acquisition date, however, no amendment can materially adversely
affect the interests of the holders of the rights (other than the acquiring person, any affiliate or associate thereof or any transferee
of the acquiring person or any affiliate or associate thereof).
Additional Information.
A copy of the stockholder rights agreement is available free of charge from the Company.
* * * * *
This description of
the rights does not purport to be complete and is qualified in its entirety by reference to the stockholder rights agreement, which
is incorporated herein by reference.
Annex
C
Board Size Amendment
The
full text of the Board Size Amendment, amending Article SIXTH, Paragraph (a) of the Amended Charter, is set forth below, with
deletions indicated by strike-outs and additions indicated by underlining:
“Number,
Election and Terms of Directors. The business and affairs of the Corporation shall be managed by a Board of Directors which
shall consist of not less than ninefive nor more than fifteenthirteen persons,
who need not be residents of the State of Delaware or stockholders of the Corporation. The exact number of directors within the
minimum and maximum limitations specified in the preceding sentence shall be fixed from time to time by the Board of Directors
pursuant to a resolution adopted by a majority of the entire Board of Directors. Until the 2012 Annual Meeting of Stockholders,
the directors of the Corporation shall be divided into three classes, each consisting of approximately one-third of the total
number of directors. At the 2010 Annual Meeting of Stockholders, the terms of the then-serving Class I directors shall expire
and Class I directors shall be elected for one-year terms expiring at the 2011 Annual Meeting of Stockholders; at the 2011 Annual
Meeting of Stockholders, the terms of the then-serving Class I and II directors shall expire, and both the Class I directors and
Class II directors shall be elected for one-year terms expiring at the 2012 Annual Meeting of Stockholders; and at the 2012 Annual
Meeting of Stockholders, the terms of the then-serving Class I, II and III directors shall expire. From and after the 2012 Annual
Meeting of Stockholders, the directors shall no longer be divided into classes and aAll directors shall be elected
for one-year terms expiring at the next Annual Meeting of Stockholders.”
Annex
D
Written consent Amendment
The
full text of the Written Consent Amendment, amending Article THIRTEENTH of the Amended Charter, is set forth below, with deletions
indicated by strike-outs and additions indicated by underlining:
“THIRTEENTH.
Any action required or permitted to be taken by the stockholders of the Corporation must be effected at anany
annual or special meeting of stockholders may be taken without a meeting of Stockholders of the Corporation and
may not be effected by any, without prior notice and without a vote, if one or more consents in writing
by such stockholders, setting forth the action so taken, shall be signed by the holders of outstanding shares
having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which
all of the shares entitled to vote thereon were present and voted.”
Form
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