UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities
Exchange Act of 1934 (Amendment
No. )
Filed by the Registrant
þ
Filed by a Party other than the
Registrant
o
Check the appropriate box:
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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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Definitive
Proxy Statement
o
Definitive
Additional Materials
o
Soliciting
Material Pursuant to § 240.14a-12
BURGER KING HOLDINGS,
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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No fee required.
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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:
Common Stock, par value $0.01
per share
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(2)
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Aggregate number of securities to
which transaction applies:
144,697,276 (includes
6,579,653 shares issuable upon exercise of options with an
exercise price of less than $24.00 and 1,651,767 restricted
stock units)
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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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Solely for purposes of calculating the registration fee, the
maximum aggregate value of the transaction was calculated as the
sum of (A) 136,465,856 shares of common stock
multiplied
by $24.00, plus (B) 6,579,653 options to
acquire common stock with an exercise price below $24.00
multiplied
by $24.00 minus such exercise price, plus
(C) 1,651,767 restricted stock units
multiplied
by
$24.00.
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(4)
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Proposed maximum aggregate value of transaction:
$3,366,943,534.15
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(5)
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Total fee paid:
$240,063
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Fee paid previously with preliminary materials:
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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:
$235,905.46
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(2)
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Form, Schedule or Registration Statement No.:
Schedule TO
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(3)
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Filing Party:
Blue Acquisition Holding Corporation, Blue
Acquisition Sub, Inc., 3G Special Situations
Fund II,L.P.
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(4)
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Date Filed:
September 16, 2010
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PRELIMINARY
PROXY MATERIAL SUBJECT TO COMPLETION
BURGER
KING HOLDINGS, INC.
5505 BLUE LAGOON DRIVE
MIAMI, FLORIDA 33126
[ ],
2010
Dear Shareholder:
On behalf of the board of directors of Burger King Holdings,
Inc. (the Company), I cordially invite you to attend
a special meeting of shareholders of the Company, to be held on
[ ], 2010 at
[ ] a.m. Eastern Standard Time, at
[ ].
On September 2, 2010, the Company entered into a definitive
Merger Agreement to be acquired by an affiliate of 3G Capital.
3G Capital is a global investment firm focused on long-term
value creation, with a particular emphasis on maximizing the
potential of brands and businesses. At the special meeting, you
will be asked to consider and vote upon a proposal to adopt the
Merger Agreement.
If the merger contemplated by the Merger Agreement is completed,
you will be entitled to receive $24.00 in cash, without
interest, less any applicable withholding taxes, for each share
of our common stock owned by you (unless you have properly
exercised your appraisal rights with respect to such shares).
After careful consideration, the Companys board of
directors has unanimously determined that the merger is
advisable, fair to and in the best interests of the shareholders
of the Company, and approved the Merger Agreement, the merger
and the other transactions contemplated by the Merger Agreement.
Accordingly, the Companys board of directors recommends
that you vote FOR approval of the proposal to adopt
the Merger Agreement and FOR approval of the
proposal to adjourn the special meeting, if necessary or
appropriate, to solicit additional proxies.
Approval of the proposal to adopt the Merger Agreement requires
the affirmative vote of holders of a majority of the outstanding
shares of our common stock entitled to vote thereon.
Your
vote is very important.
Whether or not you plan to attend
the special meeting, please complete, date, sign and return, as
promptly as possible, the enclosed proxy card in the
accompanying prepaid reply envelope, or submit your proxy by
telephone or the Internet. If you attend the special meeting and
vote in person, your vote by ballot will revoke any proxy
previously submitted.
The failure to vote your shares of our
common stock will have the same effect as a vote
AGAINST approval of the proposal to adopt the Merger
Agreement.
If your shares of our common stock are held in street
name by your bank, brokerage firm or other nominee, your
bank, brokerage firm or other nominee will be unable to vote
your shares of our common stock without instructions from you.
You should instruct your bank, brokerage firm or other nominee
to vote your shares of our common stock in accordance with the
procedures provided by your bank, brokerage firm or other
nominee.
The failure to instruct your bank, brokerage firm or
other nominee to vote your shares of our common stock
FOR approval of the proposal to adopt the Merger
Agreement will have the same effect as voting
AGAINST the proposal to adopt the Merger
Agreement.
The accompanying proxy statement provides you with detailed
information about the special meeting, the Merger Agreement and
the merger. A copy of the Merger Agreement is attached as
Annex A
to the proxy statement. We encourage you to
read the entire proxy statement and its annexes, including the
Merger Agreement, carefully. You may also obtain additional
information about the Company from documents we have filed with
the Securities and Exchange Commission.
On behalf of the board of directors and management of the
Company, we thank you for your support.
Best regards,
John W. Chidsey
Chairman and Chief Executive Officer
The proxy statement is dated [ ], 2010, and is
first being mailed to our shareholders on or about
[ ], 2010.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE
SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED THE MERGER,
PASSED UPON THE MERITS OR FAIRNESS OF THE MERGER AGREEMENT OR
THE TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE PROPOSED
MERGER, OR PASSED UPON THE ADEQUACY OR ACCURACY OF THE
INFORMATION CONTAINED IN THIS DOCUMENT. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
PRELIMINARY
PROXY MATERIAL SUBJECT TO COMPLETION
BURGER
KING HOLDINGS, INC.
5505 BLUE LAGOON DRIVE
MIAMI, FLORIDA 33126
NOTICE OF SPECIAL MEETING OF
SHAREHOLDERS
To Be Held ,
2010
A special meeting of shareholders of Burger King Holdings, Inc.,
a Delaware corporation (the Company), will be held
on [ ], 2010 at
[ ] a.m. Eastern Standard Time, at
[ ].
The meeting will be held for the following purposes:
1. To consider and vote on a proposal to adopt the
Agreement and Plan of Merger, dated as of September 2,
2010, as it may be amended from time to time, by and among the
Company, Blue Acquisition Holding Corporation, a Delaware
corporation (Parent), and Blue Acquisition Sub,
Inc., a Delaware corporation and a wholly-owned subsidiary of
Parent (the Merger Agreement). A copy of the Merger
Agreement is attached as Annex A to the accompanying proxy
statement.
2. To consider and vote on a proposal to adjourn the
special meeting, if necessary or appropriate, to solicit
additional proxies if there are insufficient votes at the time
of the special meeting to approve the proposal to adopt the
Merger Agreement.
3. To transact any other business that may properly come
before the special meeting, or any adjournment or postponement
of the special meeting, by or at the direction of the board of
directors of the Company.
The board of directors has fixed the close of business
on , 2010 as the record date for determining
shareholders entitled to notice of and to vote at the meeting.
Your vote is very important, regardless of the number of shares
of Company common stock you own. The merger cannot be completed
unless the Merger Agreement is adopted by the affirmative vote
of the holders of a majority of the outstanding shares of
Company common stock entitled to vote thereon. Even if you plan
to attend the special meeting in person, we request that you
complete, sign, date and return, as promptly as possible, the
enclosed proxy card in the accompanying prepaid reply envelope
or submit your proxy by telephone or the Internet prior to the
special meeting to ensure that your shares of Company common
stock will be represented at the special meeting if you are
unable to attend. If you fail to return your proxy card or fail
to submit your proxy by phone or the Internet, your shares of
Company common stock will not be counted for purposes of
determining whether a quorum is present at the special meeting
and will have the same effect as a vote AGAINST the
proposal to adopt the Merger Agreement.
After careful consideration, the Companys board of
directors has unanimously determined that the merger is
advisable, fair to and in the best interests of the shareholders
of the Company, and approved the Merger Agreement, the merger
and the other transactions contemplated by the Merger Agreement.
Accordingly, the Companys board of directors recommends
that you vote FOR approval of the proposal to adopt
the Merger Agreement and FOR approval of the
proposal to adjourn the special meeting, if necessary or
appropriate, to solicit additional proxies.
WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING, PLEASE
COMPLETE, DATE, SIGN AND RETURN, AS PROMPTLY AS POSSIBLE, THE
ENCLOSED PROXY CARD IN THE ACCOMPANYING PREPAID REPLY ENVELOPE,
OR SUBMIT YOUR PROXY BY TELEPHONE OR THE INTERNET. IF YOU ATTEND
THE SPECIAL MEETING AND VOTE IN PERSON, YOUR VOTE BY BALLOT WILL
REVOKE ANY PROXY PREVIOUSLY SUBMITTED.
By Order of the Board of Directors,
Anne Chwat
General Counsel and Secretary
Miami, Florida
, 2010
TABLE OF
CONTENTS
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D-1
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i
This proxy statement and a proxy card are first being mailed on
or about [ ], 2010 to shareholders who owned
shares of Company common stock as of the close of business on
[ ], 2010.
SUMMARY
The following summary highlights selected information in this
proxy statement and may not contain all the information that may
be important to you. Accordingly, we encourage you to read
carefully this entire proxy statement, its annexes and the
documents referred to in this proxy statement. Each item in this
summary includes a page reference directing you to a more
complete description of that topic. You may obtain the
information incorporated by reference in this proxy statement
without charge by following the instructions under Where
You Can Find More Information beginning on page
[ ].
Parties
to the Merger (Page [ ])
Burger King Holdings, Inc.
, or the Company, we, our, or
us, is a Delaware corporation formed on July 23, 2002, and
is headquartered in Miami, Florida. Our restaurant system
includes restaurants owned by the Company and by franchisees. We
are the worlds second largest fast food hamburger
restaurant chain as measured by the total number of restaurants
and system-wide sales. As of June 30, 2010, we owned or
franchised a total of 12,174 restaurants in 76 countries and
U.S. territories, of which 1,387 restaurants were Company
restaurants and 10,787 were owned by our franchisees. Of these
restaurants, 7,258 or 60% were located in the United States and
4,916 or 40% were located in our international markets. Our
restaurants feature flame-broiled hamburgers, chicken and other
specialty sandwiches, french fries, soft drinks and other
affordably-priced food items. During our more than 50 years
of operating history, we have developed a scalable and
cost-efficient quick service hamburger restaurant model that
offers customers fast food at affordable prices.
Blue Acquisition Holding Corporation
, or Parent, is a
Delaware corporation that was formed solely for the purpose of
acquiring the Company and has not engaged in any business except
for activities related to its formation, completing the
transactions contemplated by the merger agreement and arranging
the related financing. Parent is controlled by 3G Special
Situations Fund II, L.P., a Cayman exempted limited
partnership, which we sometimes refer to as 3G. 3G is a private
equity fund principally engaged in the business of making
investments in securities. Upon completion of the merger, the
Company will be a direct wholly-owned subsidiary of Parent.
Blue Acquisition Sub, Inc.
, or Merger Sub, is a Delaware
corporation and a wholly-owned subsidiary of Parent that was
formed by Parent solely for the purpose of facilitating the
acquisition of the Company. To date, Merger Sub has not carried
on any activities other than those related to its formation,
completing the transactions contemplated by the merger agreement
and arranging the related financing. Upon completion of the
merger, Merger Sub will cease to exist.
In this proxy, we refer to the Agreement and Plan of Merger,
dated September 2, 2010, as it may be amended from time to
time, among the Company, Parent and Merger Sub, as the merger
agreement, and the merger of Merger Sub with and into the
Company, as the merger.
Tender
Offer
On September 16, 2010, Merger Sub commenced a tender offer,
which we refer to as the offer, for all of the outstanding
shares of Company common stock at a price of $24.00 per share,
net to the seller in cash without interest. The offer
contemplated that, after completion of the offer and the
satisfaction or waiver of all conditions, we will merge with
Merger Sub and all outstanding shares of Company common stock,
other than shares held by Parent, Merger Sub or the Company or
shares held by the Companys shareholders who have and
validly exercised appraisal rights under Delaware law, will be
canceled and converted into the right to receive cash equal to
the $24.00 offer price per share. The offer was commenced
pursuant to the merger agreement.
1
Under the terms of the merger agreement, the parties agreed to
complete the merger whether or not the offer is completed. If
the offer is not completed, the parties agreed that the merger
could only be completed after the receipt of shareholder
approval of the adoption of the merger agreement that will be
considered at the special meeting. We are soliciting proxies for
the special meeting to obtain shareholder approval of the
adoption of the merger agreement to be able to consummate the
merger regardless of the outcome of the offer.
We refer in this proxy statement to the offer and to terms of
the merger agreement applicable to the offer, however, the offer
is being made separately to the holders of shares of Company
common stock and is not applicable to the special meeting.
The
Special Meeting (Page [ ])
Time,
Place and Purpose of the Special Meeting
(Page [ ])
The special meeting will be held on [ ], 2010
at [ ] a.m. EST, at
[ ].
At the special meeting, holders of common stock of the Company,
par value $0.01 per share, which we refer to as Company common
stock, will be asked to approve the proposal to adopt the merger
agreement and to approve the proposal to adjourn the special
meeting, if necessary or appropriate, for the purpose of
soliciting additional proxies if there are insufficient votes at
the time of the special meeting to approve the proposal to adopt
the merger agreement.
Record
Date and Quorum (Page [ ])
You are entitled to receive notice of, and to vote at, the
special meeting if you owned shares of Company common stock at
the close of business on [ ], 2010, which the
Company has set as the record date for the special meeting and
which we refer to as the record date. You will have one vote for
each share of Company common stock that you owned on the record
date. As of the record date, there were
[ ] shares of Company common stock
outstanding and entitled to vote at the special meeting. A
majority of the shares of Company common stock outstanding at
the close of business on the record date and entitled to vote,
present in person or represented by proxy, at the special
meeting constitutes a quorum for the purposes of the special
meeting.
Vote
Required (Page [ ])
Approval of the proposal to adopt the merger agreement requires
the affirmative vote of the holders of a majority of the
outstanding shares of Company common stock entitled to vote
thereon.
Approval of the proposal to adjourn the special meeting, if
necessary or appropriate, for the purpose of soliciting
additional proxies requires the affirmative vote of holders of a
majority of the shares of Company common stock present in person
or represented by proxy and entitled to vote on the matter at
the special meeting.
As of the record date, the directors and executive officers of
the Company beneficially owned and were entitled to vote, in the
aggregate, [ ] shares of Company common
stock (excluding (1) shares issuable upon the exercise of
options to purchase Company common stock, which we refer to as
stock options, (2) shares issuable upon vesting of Company
restricted stock units, which we refer to as restricted stock
units, (3) shares issuable upon vesting of Company
performance-based stock units, which we refer to as
performance-based restricted stock units, and (4) vested
and unvested deferred stock awards granted to members of the
board of directors of the Company, which we refer to as director
stock units (collectively representing [ ]% of
the outstanding shares of Company common stock on the record
date). The directors and executive officers have informed the
Company that they currently intend to vote all of their shares
of Company common stock (other than shares of Company common
stock as to which such holder does not have discretionary
authority)
FOR
the proposal to adopt the
merger agreement and
FOR
the proposal to
adjourn the special meeting, if necessary or appropriate, to
solicit additional proxies.
In addition, concurrently with the execution of the merger
agreement, certain private equity funds affiliated with TPG
Capital, Bain Capital Partners and the Goldman Sachs Funds, who
we refer to as the
2
Sponsors, entered into stockholder tender agreements with the
Company. It is anticipated that, pursuant to the terms of such
stockholder tender agreements, such Sponsors will each enter
into customary voting agreements with Parent to vote their
shares of Company common stock in favor of the merger. The
shares of Company common stock collectively held by such
Sponsors comprise approximately 31% of the outstanding shares of
Company common stock.
Proxies
and Revocation (Page [ ])
Any shareholder of record entitled to vote at the special
meeting may submit a proxy by telephone, over the Internet, by
returning the enclosed proxy card in the accompanying prepaid
reply envelope, or may vote in person by appearing at the
special meeting. If your shares of Company common stock are held
in street name through a bank, brokerage firm or
other nominee, you should instruct your bank, brokerage firm or
other nominee on how to vote your shares of Company common stock
using the instructions provided by your bank, brokerage firm or
other nominee. If you fail to submit a proxy or to vote in
person at the special meeting, or do not provide your bank,
brokerage firm or other nominee with voting instructions, as
applicable, your shares of Company common stock will not be
voted on the proposal to adopt the merger agreement, which will
have the same effect as a vote
AGAINST
the
proposal to adopt the merger agreement, and your shares of
Company common stock will not have an effect on approval of the
proposal to adjourn the special meeting.
You may change your vote or revoke your proxy at any time before
it is voted at the special meeting by:
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submitting a new proxy by telephone or via the Internet after
the date of the earlier voted proxy;
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signing another proxy card with a later date and returning it to
us prior to the special meeting; or
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attending the special meeting and voting in person.
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If you hold your shares of Company common stock in street name,
you may submit new voting instructions by contacting your bank,
brokerage firm or other nominee. You may also vote in person at
the special meeting if you obtain a legal proxy from your bank,
brokerage firm or other nominee.
The
Merger (Page [ ])
The merger agreement provides that Merger Sub will merge with
and into the Company. The Company will be the surviving
corporation in the merger and will continue to do business
following the merger. As a result of the merger, the Company
will cease to be a publicly traded company. If the merger is
completed, you will not own any shares of the capital stock of
the surviving corporation.
Merger
Consideration (Page [ ])
In the merger, each outstanding share of Company common stock
(except for certain shares owned by Parent or Merger Sub, and
shares held by shareholders who have perfected their statutory
dissenters rights of appraisal under Delaware law, which we
refer to collectively as the excluded shares) will be converted
into the right to receive $24.00 in cash, without interest,
which amount we refer to as the per share merger consideration,
less any applicable withholding taxes.
Reasons
for the Merger; Recommendation of the Board of Directors
(Page [ ])
After careful consideration of various factors described in the
section entitled The Merger Reasons for the
Merger; Recommendation of the Board of Directors, the
board of directors of the Company, which we refer to as the
board of directors, unanimously (i) authorized and approved
the execution, delivery and performance of the merger agreement
and the transactions contemplated by the merger agreement,
(ii) approved and declared advisable the merger agreement,
the merger and the other transactions contemplated by the merger
agreement, (iii) declared that the terms of the merger
agreement and the transactions contemplated by the merger
agreement, including the merger and the other transactions
contemplated by the merger agreement, on the terms and subject
to the conditions set forth therein, are fair to and in the best
interests of the
3
shareholders of the Company, (iv) directed that the
adoption of the merger agreement be submitted to a vote at a
meeting of the shareholders of the Company, (v) recommended
that the shareholders of the Company vote their shares of
Company common stock in favor of adoption of the merger
agreement and (vi) approved for all purposes Merger Sub,
Parent and their affiliates, the merger agreement and the
transactions contemplated by the merger agreement to exempt such
persons, agreements and transactions from any anti-takeover laws.
In considering the recommendation of the board of directors with
respect to the proposal to adopt the merger agreement, you
should be aware that our directors and executive officers have
interests in the merger that are different from, or in addition
to, yours. The board of directors was aware of and considered
these interests, among other matters, in evaluating and
negotiating the merger agreement and the merger, and in
recommending that the merger agreement be adopted by the
shareholders of the Company. See the section entitled The
Merger Interests of Certain Persons in the
Merger beginning on page [ ].
The board of directors recommends that you vote
FOR the proposal to adopt the merger agreement and
FOR the proposal to adjourn the special meeting, if
necessary or appropriate.
Opinions
of the Companys Financial Advisors
(Page [ ])
Opinion
of Morgan Stanley & Co. Incorporated
(Page [ ])
Morgan Stanley & Co. Incorporated, or Morgan Stanley, was
engaged by the Company to provide it with financial advisory
services in connection with the potential sale of the Company.
At the meeting of the board of directors on September 1,
2010, Morgan Stanley rendered its oral opinion, subsequently
confirmed in writing, that, as of that date, based upon and
subject to the limitations, qualifications and assumptions set
forth in the written opinion, the $24.00 per share to be
received by holders of shares of Company common stock pursuant
to the merger agreement, was fair from a financial point of view
to such holders.
The full text of the written opinion of Morgan Stanley, dated
September 1, 2010, which sets forth among other things,
assumptions made, procedures followed, matters considered and
limitations on the scope of the review undertaken by Morgan
Stanley in rendering its opinion, is attached as Annex B
hereto. Shareholders are urged to, and should, read the opinion
carefully and in its entirety. Morgan Stanleys opinion is
directed to the Company board of directors and addresses only
the fairness, from a financial point of view, of the
consideration to be received by the holders of shares of Company
common stock pursuant to the merger agreement, as of the date of
the opinion. Morgan Stanleys opinion does not address any
other aspect of the transactions contemplated by the merger
agreement and does not constitute a recommendation as to how any
such holder should vote at the special meeting or whether any
such holder should take any other action with respect to the
merger. The summary of the opinion of Morgan Stanley set forth
below under The Merger Opinions of the
Companys Financial Advisors Opinion of
Morgan Stanley & Co. Incorporated is qualified
in its entirety by reference to the full text of the opinion.
We encourage you to read the opinion of Morgan Stanley
described above carefully in its entirety for a description of
the assumptions made, procedures followed, matters considered
and limitations on the scope of the review undertaken in
connection with such opinion.
Opinion
of Goldman, Sachs & Co.
(Page [ ])
Goldman, Sachs & Co., or Goldman Sachs, a financial
advisor to the board of directors, rendered its opinion to the
board of directors that, as of September 2, 2010, and based
upon and subject to the factors and assumptions set forth
therein, the $24.00 per share of Company common stock to be paid
to the holders (other than Parent and its affiliates) of shares
of Company common stock pursuant to the merger agreement was
fair from a financial point of view to such holders.
The full text of the written opinion of Goldman Sachs, dated
September 2, 2010, which sets forth among other things,
assumptions made, procedures followed, matters considered and
limitations on the review undertaken by Goldman Sachs in
rendering its opinion, is attached as Annex C to this proxy
statement and is incorporated by reference herein in its
entirety. Goldman Sachs provided its opinion
4
for the information and assistance of the board of directors
in connection with its consideration of the transactions
contemplated by the merger agreement. Goldman Sachs
opinion does not address any other aspect of the merger and does
not constitute a recommendation to any shareholder as to how any
holder of shares of Company common stock should vote with
respect to the merger or any other matter. The summary of the
written opinion of Goldman Sachs set forth below under The
Merger Opinions of the Companys Financial
Advisors Opinion of Goldman, Sachs &
Co. is qualified in its entirety by reference to the full
text of such opinion.
We encourage you to read the opinion of Goldman Sachs
described above carefully in its entirety for a description of
the assumptions made, procedures followed, factors considered
and limitations on the review undertaken in connection with such
opinion.
Financing
of the Merger (Page [ ])
We anticipate that the total funds needed to complete the
merger, including the funds needed to:
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pay our shareholders (and holders of our other equity-based
interests) the amounts due to them under the merger agreement
and the related expenses, which, based upon the shares (and our
other equity-based interests) outstanding as of
[ ], 2010, would be approximately
$3.3 billion; and
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repay or refinance indebtedness of the Company at the closing of
the merger, which, as of [ ], 2010, was
approximately $729 million;
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will be funded through a combination of:
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equity financing of $1.5 billion to be provided by 3G;
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a $1.9 billion senior secured credit facility, comprised of
a $1.75 billion term loan facility and a $150 million
revolving credit facility; and
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the issuance of senior unsecured notes yielding at least
$900 million in gross cash proceeds (or, to the extent
those notes are not issued at or prior to the closing of the
merger, by a senior unsecured bridge loan facility).
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Parent has obtained the equity commitment letter and the debt
commitment letter described below, which we refer to
collectively as the commitment letters. The funding under those
commitment letters is subject to certain conditions, including
conditions that do not relate directly to the merger agreement.
We believe the amounts committed under the commitment letters
and the proceeds from the senior notes will be sufficient to
complete the merger, but we cannot assure you of that. Those
amounts might be insufficient if, among other things, one or
more of the parties to the commitment letters fails to fund the
committed amounts in breach of such commitment letters or if the
conditions to such commitments are not met. If the merger
agreement is terminated in the circumstances in which Merger Sub
does not receive the proceeds of the debt commitment letter,
Parent may be obligated to pay the Company a fee of
$175 million, or the Parent Termination Fee, as described
under The Merger Agreement Terms of the Merger
Agreement Termination Fees beginning on
page [ ]. The obligation of Parent to pay
the Parent Termination Fee is guaranteed by 3G as discussed
below.
Equity
Financing (Page [ ])
Parent has entered into a letter agreement, which we refer to as
the equity commitment letter, with 3G dated September 2,
2010, pursuant to which 3G has committed to purchase, or cause
the purchase of, equity interests in Parent simultaneously with
the effective time of the merger, up to a maximum of
$1.5 billion in the aggregate, to fund the merger
consideration and related expenses.
3Gs obligation to fund the financing contemplated by the
equity commitment letter is generally subject to the
satisfaction of the conditions to Parents and Merger
Subs obligations to consummate the transactions
contemplated by the merger agreement, the funding of the debt
financing pursuant to the terms and conditions of the debt
commitment letter or any alternative financing that Parent and
Merger Sub are required or
5
permitted to accept from alternative sources pursuant to the
merger agreement and the substantially contemporaneous closing
of the merger.
Debt
Financing (Page [ ])
In connection with the entry into the merger agreement, Merger
Sub received a debt commitment letter, dated September 2,
2010, which we refer to as the debt commitment letter, from
JPMorgan Chase Bank, N.A., J.P. Morgan Securities LLC and
Barclays Bank PLC, which along with JPMorgan Chase Bank, N.A.,
we refer to as the lenders. Pursuant to the debt commitment
letter, the lenders have committed to provide the aggregate of
$1.9 billion in debt financing to Merger Sub, consisting of
(i) a senior secured term loan facility in an aggregate
principal amount of $1.75 billion, (ii) a senior
secured revolving credit facility with a maximum availability of
$150 million and (iii) $900 million of senior
unsecured bridge loans to the extent that some or all of the
senior unsecured notes referred to in the next sentence are
unable to be issued at or prior to the closing of the merger or
such offering does not yield at least $900 million in gross
cash proceeds. It is expected that at the closing of the merger,
$900 million principal amount of senior unsecured notes
will be issued pursuant to Rule 144A of the Securities Act
of 1933, as amended, or the Securities Act, or another private
placement exemption in lieu of the senior unsecured bridge loans.
The debt commitment letter is not subject to due diligence or a
market out condition, which would allow lenders not
to fund their commitments if the financial markets are
materially adversely affected, but such financing may not be
considered assured. There is a risk that the conditions to the
debt financing will not be satisfied and the debt financing may
not be funded when required. As of the date of this proxy
statement, no alternative financing arrangements or alternative
financing plans have been made in the event the debt financing
described in this proxy statement is not available as
anticipated.
Limited
Guaranty (Page [ ])
Pursuant to a limited guaranty, which we refer to as the limited
guaranty, delivered by 3G in favor of the Company, dated
September 2, 2010, 3G has agreed to guarantee:
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the obligation of Parent and Merger Sub under the merger
agreement to pay the Parent Termination Fee of $175 million
to the Company, or
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the performance and discharge of Parents and Merger
Subs obligations and liabilities under the merger
agreement,
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in each case, if, as and when due,
provided, however
, in
no case shall the liability of 3G pursuant to the limited
guaranty exceed $175 million. See The Merger
Agreement Terms of the Merger Agreement
Termination Fees beginning on
page [ ].
Interests
of Certain Persons in the Merger
(Page [ ])
When considering the recommendation of the board of directors
that you vote to approve the proposal to adopt the merger
agreement, you should be aware that our directors and executive
officers have interests in the merger that are different from,
or in addition to, your interests as a shareholder. The board of
directors was aware of and considered these interests, among
other matters, in evaluating and negotiating the merger
agreement and the merger, and in recommending that the merger
agreement be adopted by the shareholders of the Company. These
interests include the following:
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accelerated vesting of equity awards held by our employees,
including our executive officers, at the effective time of the
merger, and the settlement of such awards in exchange for cash;
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payment of a pro rata annual bonus to all of our bonus-eligible
employees, including our executive officers, for the period
commencing on July 1, 2010 through the effective time of
the merger;
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certain executive officers will receive a bonus upon the
effective time of the merger and payment for performing
transition services;
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the executive officers will receive payments and benefits under
the executive officers employment agreements upon certain
types of termination of employment following the effective time
of the merger which severance benefits have, in some
circumstances, been enhanced; and
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accelerated vesting of any unvested director stock units and the
payment to all non-management directors for all outstanding
director stock units upon their resignation from the board in
accordance with the terms of such awards.
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In addition, if the proposal to adopt the merger agreement is
approved by our shareholders, the vested shares of Company
common stock held by our directors and executive officers will
be treated in the same manner as outstanding shares of Company
common stock held by other shareholders of the Company.
Material
U.S. Federal Income Tax Consequences of the Merger
(Page [ ])
The exchange of shares of Company common stock for cash in the
merger will generally be a taxable transaction to United States
holders for United States federal income tax purposes. In
general, a United States holder whose shares of Company common
stock are converted into the right to receive cash in the merger
will recognize gain or loss for United States federal income tax
purposes in an amount equal to the difference, if any, between
the amount of cash received with respect to such shares
(determined before the deduction of any applicable withholding
taxes) and its adjusted tax basis in such shares. Backup
withholding may also apply to the cash payments made pursuant to
the merger unless the United States holder or other payee
provides a taxpayer identification number, certifies that such
number is correct and otherwise complies with the backup
withholding rules. Payments made to a
non-United
States holder with respect to shares of Company common stock
exchanged for cash pursuant to the merger will generally be
exempt from United States federal income tax. A
non-United
States holder may, however, be subject to backup withholding
with respect to the cash payments made pursuant to the merger,
unless the holder certifies that it is not a United States
person or otherwise establishes a valid exemption from backup
withholding tax. You should read The Merger
Material United States Federal Income Tax Consequences of the
Merger beginning on page [ ] for
definitions of United States Holder and
Non-United
States Holder, and for a more detailed discussion of the
United States federal income tax consequences of the merger. You
should also consult your tax advisor with respect to the
specific tax consequences to you in connection with the merger
in light of your own particular circumstances, including federal
estate, gift and other non-income tax consequences, and tax
consequences under state, local or foreign tax laws.
Regulatory
Approvals and Notices (Page [ ])
Under the terms of the merger agreement, the merger cannot be
completed until the waiting period applicable to the
consummation of the merger under the
Hart-Scott-Rodino
Antitrust Improvements Act of 1976, or the HSR Act, has expired
or been terminated.
Under the HSR Act and the rules promulgated thereunder by the
Federal Trade Commission, or the FTC, the merger cannot be
completed until each of the Company and Parent files a
notification and report form with the FTC and the Antitrust
Division of the Department of Justice, or the DOJ, and the
applicable waiting period has expired or been terminated. Parent
filed such a notification and report form on September 16,
2010 and requested early termination of the waiting period. The
Company filed such a notification and report form on
September 17, 2010. The applicable waiting period will
expire at 11:59 pm on October 1, 2010, unless earlier
terminated.
The merger may also trigger antitrust notifications in Mexico
and Turkey. Under Mexican law, certain acquisition transactions
may not be consummated unless certain information has been
furnished to the Federal Competition Commission, or the Mexican
FCC, and certain waiting period requirements have been
satisfied. The Company and Parent filed the notification and
report form with the Mexican FCC on September 21, 2010.
Consequently, the required waiting period under Mexican law is
expected to expire on October 12, 2010. Under Turkish law,
certain acquisition transactions may not be consummated unless
certain information has been furnished to the Turkish
Competition Authority, or the TCA, and certain waiting period
requirements
7
have been satisfied. The Company and Parent filed the
notification and report with the TCA on September 17, 2010.
Consequently, the required waiting period under Turkish law is
expected to expire on October 17, 2010.
Litigation
Relating to the Merger
(Page [ ])
In connection with the offer and the merger, on
September 3, 2010, four purported class action complaints
were filed in the Circuit Court for the County of Miami-Dade,
Florida against the Company, each member of its board of
directors and 3G Capital Partners Ltd., or 3G Capital. In
addition, on September 8, 2010, a purported class action
complaint was filed in the Delaware Court of Chancery against
the Company, its board members, 3G, 3G Capital, Parent, and
Merger Sub. The complaints generally allege, among other things,
that the board of directors breached their fiduciary duties in
connection with the merger and that 3G, Parent, Merger Sub and
3G Capital and the Company aided and abetted the purported
breaches of fiduciary duty.
We believe the complaints are completely without merit, and
intend to vigorously defend them.
The
Merger Agreement (Page [ ])
Treatment
of Common Stock, Options and Restricted Stock Units
(Page [ ])
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Common Stock.
At the effective time of the
merger, each share of Company common stock issued and
outstanding (except for the excluded shares) will convert into
the right to receive the per share merger consideration of
$24.00 in cash, without interest, less any applicable
withholding taxes.
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Options.
At the effective time of the merger,
each outstanding and unexercised option to purchase shares of
Company common stock, vested or unvested, issued under the
Companys equity plans or otherwise, will be cancelled and
will entitle the holder to receive an amount in cash equal to
the product of the total number of shares of Company common
stock subject to such option multiplied by the amount, if any,
by which $24.00 exceeds the exercise price per share of such
option, less any applicable withholding taxes, other than the
August equity grants, which will be treated as described under
The Merger Interests of Certain Persons in the
Merger Equity Awards beginning on
page [ ].
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Restricted Stock Units.
At the effective time
of the merger, each outstanding restricted stock unit will be
cancelled and will entitle the holder to receive an amount in
cash, for each restricted stock unit, equal to $24.00, less any
applicable withholding taxes, other than the August equity
grants, which will be treated as described under The
Merger Interests of Certain Persons in the
Merger Equity Awards beginning on
page [ ].
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Performance-Based Stock Units.
At the
effective time of the merger, each outstanding performance-based
stock unit will be cancelled and will entitle the holder to
receive an amount in cash equal to $24.00 multiplied by the
number of shares subject to the performance-based stock units
assuming that the target level of performance had been attained,
less any applicable withholding taxes, other than the August
equity grants, which will be treated as described under
The Merger Interests of Certain Persons in the
Merger Equity Awards beginning on
page [ ].
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Director Stock Units.
At the effective time of
the Merger, each director stock unit that has not yet vested
will vest, and in connection with such directors
resignation, will be converted into an amount in cash equal to
$24.00, less any applicable withholding taxes.
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Solicitation
of Takeover Proposals
(Page [ ])
The merger agreement provides that until 11:59 p.m.,
Eastern time, on October 12, 2010, which we refer to as the
go shop period, we are permitted to solicit any
inquiry or the making of any takeover proposals from third
parties and to participate in any negotiations or discussions
with third parties with respect to any takeover proposals. From
and after 12:00 a.m., Eastern time, on October 13,
2010 and until the effective time of the merger or, if earlier,
the termination of the merger agreement, we are not permitted to
solicit any inquiry or the making of any takeover proposals or
engage in any negotiations or discussions with any person
8
relating to an takeover proposal. Notwithstanding these
restrictions, under certain circumstances, we may, from and
after 11:59 a.m., Eastern time, on October 13, 2010,
which we refer to as the no-shop period start date, and prior to
the time that our shareholders adopt the merger agreement,
respond to a written takeover proposal or engage in discussions
or negotiations with the person making such an takeover
proposal. In addition, the restrictions applicable to us
following the no-shop period start date do not apply to our
activities with any person who made a written takeover proposal
prior to the no-shop period start date that our board of
directors believed in good faith (after consultation with its
financial advisor and outside legal counsel) could reasonably be
expected to result in a superior proposal. At any time before
the merger agreement is adopted by our shareholders, if our
board of directors determines that an takeover proposal is a
superior proposal, we may terminate the merger agreement and
enter into any acquisition, merger or similar agreement, which
we refer to as an acquisition agreement, with respect to such
superior proposal, so long as we comply with certain terms of
the merger agreement, including paying a termination fee to
Parent. See The Merger Agreement Terms of the
Merger Agreement Termination Fees beginning on
page [ ].
Conditions
to the Merger (Page [ ])
The respective obligations of the Company, Parent and Merger Sub
to consummate the merger are subject to the satisfaction or
waiver of certain customary conditions, including the adoption
of the merger agreement by our shareholders, receipt of required
antitrust approvals, the accuracy of the representations and
warranties of the parties and compliance by the parties with
their respective obligations under the merger agreement. The
obligation of Parent and Merger Sub to consummate the merger is
also subject to the absence of any change, event or occurrence,
from the date of the merger agreement until the effective time
of the merger, that has had or is reasonably likely to have a
Company material adverse effect, as described under The
Merger Agreement Terms of the Merger
Agreement Representations and Warranties
beginning on page [ ].
Termination
(Page [ ])
We and Parent may, by mutual written consent, terminate the
merger agreement and abandon the merger at any time prior to the
effective time of the merger, whether before or after the
adoption of the merger agreement by our shareholders.
The merger agreement may be terminated and the merger abandoned
at any time prior to the effective time of the merger, whether
before or after the adoption of the merger agreement by our
shareholders:
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by either Parent or the Company:
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if the merger shall not have been consummated on or before
March 2, 2011; provided that the right to terminate the
merger agreement on such date shall not be available to Parent
or the Company if (x) the offer has closed, or (y) the
failure of Parent or the Company, as applicable, to perform any
of its obligations under the merger agreement has been a
principal cause of the failure of the merger to be consummated
on or before such date;
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if any temporary restraining order, preliminary or permanent
injunction, law or other judgment is in effect enjoining or
otherwise prohibiting the consummation of the merger and such
restraint becomes final and non-appealable; provided that the
right to terminate in this circumstance shall not be available
to Parent or the Company unless Parent or the Company, as
applicable, shall have complied with its obligations under the
merger agreement to prevent, oppose or remove such
restraint; or
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the approval of the merger agreement by an affirmative vote of
holders of a majority of the outstanding shares of Company
common stock shall not have been obtained at the duly convened
shareholders meeting or at any adjournment or postponement
thereof.
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if there is any breach or inaccuracy in any of the
Companys representations or warranties or the Company has
failed to perform any of its covenants or agreements, which
inaccuracy, breach or failure to perform (i) would give
rise to the failure of a condition to the merger regarding the
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accuracy of the Companys representations and warranties or
the Companys compliance with its covenants or agreements,
and (ii) (A) is not capable of being cured prior to
March 2, 2011 or (B) is not cured within fifteen
calendar days following Parents delivery of written notice
to the Company of such breach; provided that Parent shall not
have the right to terminate the merger agreement in this
circumstance if (x) Parent or Merger Sub is then in
material breach of any of its representations, warranties,
covenants or agreements or (y) the offer has closed;
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the Company board of directors has made an adverse
recommendation change or delivered a notice to Parent of its
intent to effect an adverse recommendation change, provided that
Parent shall have given the Company the right to enter into an
acquisition agreement and such right has been available to the
Company for no less than twenty-four hours,
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the Company failed to include in the proxy statement the board
of directors recommendation to adopt the merger agreement
and a statement of the findings and conclusions of the board of
directors described in the board resolutions adopted in
connection with the merger agreement,
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following the disclosure or announcement of a takeover proposal
(other than a tender or exchange offer described below), the
Companys board of directors shall have failed to reaffirm
publicly its recommendation to adopt the merger agreement within
five business days after Parent requests in writing that such
recommendation under such circumstances be reaffirmed
publicly, or
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a tender or exchange offer relating to securities of the Company
shall have been commenced and the Company shall not have
announced, within ten business days after the commencement of
such tender or exchange offer, a statement disclosing that the
Company recommends rejection of such tender or exchange offer;
provided that Parent shall not have the right to terminate the
merger agreement in this circumstance if the approval of the
merger by the shareholders of the Company shall have been
obtained;
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there is any breach or inaccuracy in any of Parents or
Merger Subs representations or warranties set forth in the
merger agreement or Parent or Merger Sub has failed to perform
any of its covenants or agreements set forth in the merger
agreement, which inaccuracy, breach or failure to perform
(i) would (x) give rise to the failure of certain
conditions or, (y) reasonably be expected to, individually
or in the aggregate, have a parent material adverse effect, and
(ii) (A) is not capable of being cured prior to
March 2, 2011 or (B) is not cured within fifteen
calendar days following the Companys delivery of written
notice to Parent of such breach; provided that the Company shall
not have the right to terminate the merger agreement in this
circumstance if (x) the Company is then in material breach
of any of its representations, warranties, covenants or
agreements thereunder or (y) the offer has closed;
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in order to accept a superior proposal and enter into the
acquisition agreement providing for such superior proposal
immediately following or concurrently with such termination;
provided, however, that payment of the termination fee by the
Company to the parent, which we refer to as the Company
Termination Fee (as described below), shall be a condition to
the termination of the merger agreement by the Company in this
circumstance; or
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(i)(A) all the conditions of the offer shall have been
satisfied or waived as of the expiration of the offer, and
(B) Parent shall have failed to consummate the offer
promptly thereafter in accordance with the merger agreement, or
(ii)(A) all the offer conditions (other than the financing
proceeds condition) shall have been satisfied or waived as of
the expiration of the offer, and (B) Parent shall have
failed to consummate the offer in accordance with the merger
agreement, in the case of both clause (i) and (ii), the Company
shall have given Parent written notice at least one business day
prior to such termination stating the Companys intention
to terminate the merger agreement in this circumstance and the
basis for such termination; provided, however, that the
termination right set forth in clause (ii) shall only be
available from and after the close of business on
November 18, 2010; or
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after the close of business on November 18, 2010, if
(i) all the conditions that are applicable to each
partys obligation to consummate the merger (other than the
purchase of shares of Company common stock to the extent the
offer has been terminated, which we refer to as the Offer
Termination) and the conditions to the obligations of Parent and
Merger Sub to consummate the merger have been satisfied (other
than those conditions that by their terms are to be satisfied by
actions taken at the closing of the merger, each of which is
capable of being satisfied at the merger closing),
(ii) Parent shall have failed to consummate the merger by
the time required under the merger agreement, (iii) the
Company has notified Parent in writing that it stands and will
stand ready, willing and able to consummate the merger at such
time, and (iv) the Company shall have given Parent written
notice at least one business day prior to such termination
stating the Companys intention to terminate the merger
agreement in this circumstance and the basis for such
termination.
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Termination
Fees (Page [ ])
If the merger agreement is terminated in certain circumstances
described under The Merger Agreement Terms of
the Merger Agreement Termination Fees
beginning on page [ ], the terminating
party may be required to pay a termination fee.
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If the Company terminates the merger agreement in order to
accept a superior proposal, the Company is required to pay a
termination fee of $50 million during the go-shop period or
$95 million after the go-shop period. We refer to these
fees as the Company Termination Fee.
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If Parent fails to effect the closing of the merger under
certain circumstances, Parent may be obligated to pay the
Company the Parent Termination Fee of $175 million. 3G has
agreed to guarantee the obligation of Parent to pay the Parent
Termination Fee pursuant to the limited guaranty.
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If Parent terminates the merger agreement due to a breach by the
Company of any of its representations or warranties or the
failure by the Company to perform any of its covenants or
agreements set forth in the merger agreement, which breach or
failure to perform is the principal factor in the failure of the
merger to be consummated, then the Company shall pay a
termination fee to 3G in an amount equal to $175 million.
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Limitations
of Liability (Page [ ])
The maximum aggregate liability of 3G, Parent and Merger Sub
(including the debt and equity financing) for damages or
otherwise is limited to the amount of the Parent Termination Fee
of $175 million.
Our maximum aggregate liability for damages or otherwise in
connection with the merger agreement or any of the transactions
contemplated by the merger agreement is limited to
$175 million.
The parties are entitled to equitable relief to prevent breaches
of the merger agreement and to enforce specifically the terms of
the merger agreement in addition to any other remedy to which
they are entitled at law or in equity. Neither Parent and Merger
Sub or the Company will be entitled to receive both the fee
payable by the other party and a grant of specific performance.
Our right to seek specific performance of Parents and
Merger Subs obligations to cause the equity financing for
the merger to be funded is subject to the satisfaction of the
following conditions:
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the adoption of the merger agreement by our shareholders,
receipt of required antitrust approvals, no injunctions or
restraints, the accuracy of our representations and warranties
in the merger agreement, subject to certain materiality
qualifications, the performance of our obligations under the
merger agreement in all material respects, no material adverse
effect, and our solvency;
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the funding of the debt financing (or alternative debt
financing); and
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our confirmation that if the debt and equity financings were
funded, to take such actions that are within our control to
cause the closing of the merger to occur.
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Our right to seek specific performance of Parents and
Merger Subs obligations to cause a bridge take-down is
subject to the adoption of the merger agreement by our
shareholders, receipt of required antitrust approvals, no
injunctions or restraints, the accuracy of our representations
and warranties in the merger agreement, subject to certain
materiality qualifications, the performance of our obligations
under the merger agreement in all material respects, no material
adverse effect, and our solvency.
Market
Price of Company Common Stock
(Page [ ])
The per share merger consideration of $24.00 per share of
Company common stock:
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represented a premium of 43.1% over the closing price of the
Company common stock on August 30, 2010;
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represented a premium of 41.6%, 36.7% and 27.0% over the one,
three and six month, respectively, volume-weighted average
closing prices of the Company common stock prior to
August 30, 2010; and
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exceeded, by 8.8%, the 52-week high prior to August 30,
2010.
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Appraisal
Rights (Page [ ])
Shareholders are entitled to appraisal rights under the Delaware
General Corporation Law, or the DGCL, in connection with the
merger, provided that shareholders meet all of the conditions
set forth in Section 262 of the DGCL. This means that you
are entitled to have the fair value of your shares of Company
common stock determined by the Delaware Court of Chancery and to
receive payment based on that valuation. The ultimate amount you
receive in an appraisal proceeding may be less than, equal to or
more than the amount you would have received under the merger
agreement.
To exercise your appraisal rights, you must submit a written
demand for appraisal to the Company before the vote is taken on
the merger agreement and you must not submit a proxy or
otherwise vote in favor of the proposal to adopt the merger
agreement. Your failure to follow exactly the procedures
specified under the DGCL will result in the loss of your
appraisal rights. See Appraisal Rights beginning on
page [ ] and the text of the Delaware
appraisal rights statute reproduced in its entirety as
Annex D
to this proxy statement. If you hold your
shares of Company common stock through a bank, brokerage firm or
other nominee and you wish to exercise appraisal rights, you
should consult with your bank, brokerage firm or other nominee
to determine the appropriate procedures for the making of a
demand for appraisal by such bank, brokerage firm or nominee. In
view of the complexity of the DGCL, shareholders who may wish to
pursue appraisal rights should consult their legal and financial
advisors promptly.
Delisting
and Deregistration of Company Common Stock
(Page [ ])
If the merger is completed, Company common stock will be
delisted from the New York Stock Exchange, or the NYSE, and
deregistered under the Securities Exchange Act of 1934, as
amended, or the Exchange Act. As such, we would no longer file
periodic reports with the SEC on account of Company common stock.
12
QUESTIONS
AND ANSWERS ABOUT THE SPECIAL MEETING AND THE MERGER
The following questions and answers are intended to address
briefly some commonly asked questions regarding the merger, the
merger agreement and the special meeting. These questions and
answers may not address all questions that may be important to
you as a shareholder of the Company. Please refer to the
Summary and the more detailed information contained
elsewhere in this proxy statement, the annexes to this proxy
statement and the documents referred to in this proxy statement,
which you should read carefully and in their entirety. You may
obtain the information incorporated by reference in this proxy
statement without charge by following the instructions under
Where You Can Find More Information beginning on
page
[ ].
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Q.
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What is the proposed transaction and what effects will it
have on the Company?
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A.
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The proposed transaction is the acquisition of the Company by
Parent pursuant to the merger agreement. If the proposal to
adopt the merger agreement is approved by our shareholders and
the other closing conditions under the merger agreement have
been satisfied or waived, Merger Sub will merge with and into
the Company. Upon completion of the merger, Merger Sub will
cease to exist and the Company will continue as the surviving
corporation. As a result of the merger, the Company will become
a subsidiary of Parent and will no longer be a publicly held
corporation, and you will no longer have any interest in our
future earnings or growth. In addition, the Company common stock
will be delisted from the NYSE and deregistered under the
Exchange Act, and we will no longer file periodic reports with
the SEC on account of Company common stock.
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Q:
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Did Merger Sub commence a tender offer for shares of Company
common stock?
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A:
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Yes. On September 16, 2010, Merger Sub commenced the offer
for all of the outstanding shares of Company common stock at a
price of $24.00 per share, net to the seller in cash without
interest. The offer was commenced pursuant to the merger
agreement.
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Under the terms of the merger agreement, the parties agreed to
complete the merger whether or not the offer is completed. If
the offer is not completed, the parties agreed that the merger
could only be completed after the receipt of shareholder
approval of the adoption of the merger agreement that will be
considered at the special meeting.
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We are soliciting proxies for the special meeting to obtain
shareholder approval of the adoption of the merger agreement to
be able to consummate the merger regardless of the outcome of
the offer.
Regardless of whether you tendered your shares of
Company common stock in the offer, you may nevertheless vote
your shares at the special meeting because you were a
shareholder as of the record date of the meeting.
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Q.
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What will I receive if the merger is completed?
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A.
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Upon completion of the merger, you will be entitled to receive
the per share merger consideration of $24.00 in cash, without
interest, less any applicable withholding taxes, for each share
of Company common stock that you own, unless you have properly
exercised and not withdrawn your appraisal rights under the DGCL
with respect to such shares. For example, if you own
100 shares of Company common stock, you will receive $2,400
in cash in exchange for your shares of Company common stock,
less any applicable withholding taxes. You will not own any
shares of the capital stock in the surviving corporation.
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Q.
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When do you expect the merger to be completed?
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A.
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We are working towards completing the merger as soon as
possible. If the merger is approved at the shareholders meeting
then, assuming timely satisfaction of the other necessary
closing conditions, we anticipate that the merger will be
completed promptly thereafter.
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Q.
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What happens if the merger is not completed?
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A.
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If the merger agreement is not adopted by the shareholders of
the Company or if the merger is not completed for any other
reason, the shareholders of the Company will not receive any
payment for their shares of Company common stock. Instead, the
Company will remain an independent public company, and
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13
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Company common stock will continue to be listed and traded on
the NYSE. Under specified circumstances, the Company may be
required to pay to Parent, or may be entitled to receive from
Parent, a fee with respect to the termination of the merger
agreement, as described under The Merger
Agreement Terms of the Merger Agreement
Termination Fees beginning on
page [ ].
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Q.
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Is the merger expected to be taxable to me?
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A.
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Yes. The exchange of shares of Company common stock for cash in
the merger will generally be a taxable transaction to United
States holders for United States federal income tax purposes. In
general, a United States holder whose shares of Company
common stock are converted into the right to receive cash in the
merger will recognize gain or loss for United States federal
income tax purposes in an amount equal to the difference, if
any, between the amount of cash received with respect to such
shares (determined before the deduction of any applicable
withholding taxes) and its adjusted tax basis in such shares.
Backup withholding may also apply to the cash payments made
pursuant to the merger unless the United States holder or other
payee provides a taxpayer identification number, certifies that
such number is correct and otherwise complies with the backup
withholding rules.
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Payments made to a
non-United
States holder with respect to shares of Company common stock
exchanged for cash pursuant to the merger will generally be
exempt from United States federal income tax. A
non-United
States holder may, however, be subject to backup withholding
with respect to the cash payments made pursuant to the merger,
unless the holder certifies that it is not a United States
person or otherwise establishes a valid exemption from backup
withholding tax.
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You should read The Merger Material United
States Federal Income Tax Consequences of the Merger
beginning on page [ ] for definitions of
United States Holder and
Non-United
States Holder, and for a more detailed discussion of the
United States federal income tax consequences of the merger. You
should also consult your tax advisor with respect to the
specific tax consequences to you in connection with the merger
in light of your own particular circumstances, including federal
estate, gift and other non-income tax consequences, and tax
consequences under state, local or foreign tax laws.
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Q:
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Do any of the Companys directors or officers have
interests in the merger that may differ from or be in addition
to my interests as a shareholder?
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A:
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Yes. In considering the recommendation of the board of directors
with respect to the proposal to adopt the merger agreement, you
should be aware that our directors and executive officers have
interests in the merger that are different from, or in addition
to, the interests of our shareholders generally. The board of
directors was aware of and considered these interests, among
other matters, in evaluating and negotiating the merger
agreement and the merger, and in recommending that the merger
agreement be adopted by the shareholders of the Company. See
The Merger Interests of Certain Persons in the
Merger beginning on page [ ].
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Q.
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Why am I receiving this proxy statement and proxy card or
voting instruction form?
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A.
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You are receiving this proxy statement and proxy card or voting
instruction form because you own shares of Company common stock.
This proxy statement describes matters on which we urge you to
vote and is intended to assist you in deciding how to vote your
shares of Company common stock with respect to such matters.
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Q.
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When and where is the special meeting?
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A.
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The special meeting of shareholders of the Company will be held
on [ ], 2010 at
[ ] a.m. Eastern Standard Time, at
[ ]. This proxy statement for the special
meeting will be mailed to shareholders on or about
[ ], 2010.
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Q.
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Who may attend the special meeting?
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A.
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All shareholders of record at the close of business on
[ ], 2010, or the record date, or their duly
appointed proxies, and our invited guests may attend the special
meeting. Seating is limited and admission
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is on a first-come, first-served basis. Please be prepared to
present valid photo identification for admission to the special
meeting.
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If you hold shares of Company common stock in street
name (that is, in a brokerage account or through a bank or
other nominee) and you plan to vote in person at the special
meeting, you will need to bring a valid photo identification and
a copy of a statement reflecting your share ownership as of the
record date, or a legal proxy from your broker or nominee.
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Shareholders of record will be verified against an official list
available in the registration area at the meeting. We reserve
the right to deny admittance to anyone who cannot adequately
show proof of share ownership as of the record date.
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Q.
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When will the shareholders list be available for
examination?
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A.
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A complete list of the shareholders of record as of the record
date will be available for examination by shareholders of record
beginning on [ ], 2010 at the Companys
headquarters and will continue to be available through and
during the meeting at [ ].
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Q.
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Who may vote?
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A.
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You may vote if you owned Company common stock as of the close
of business on the record date. Each share of Company common
stock is entitled to one vote. As of the record date, there were
[ ] shares
of Company common stock outstanding and entitled to vote at the
special meeting.
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Q.
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What will I be voting on?
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A.
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You will be voting on the following:
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The adoption of the merger agreement, which provides
for the acquisition of the Company by Parent; and
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The approval to adjourn the special meeting, if
necessary or appropriate, to solicit additional proxies if there
are insufficient votes at the time of the special meeting to
approve the proposal to adopt the merger agreement.
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Q.
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|
What are the voting recommendations of the Board of
Directors?
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A.
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The board of directors recommends that you vote your shares of
Company common stock
FOR
the proposal to
adopt the merger agreement and
FOR
the
proposal to adjourn the special meeting, if necessary or
appropriate, to solicit additional proxies.
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Q.
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How do I vote?
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A.
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If you are a shareholder of record (that is, if your shares of
Company common stock are registered in your name with The Bank
of New York Mellon, our transfer agent, there are four ways to
vote:
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Telephone Voting:
You may vote by calling the
toll-free telephone number indicated on your proxy card. Please
follow the voice prompts that allow you to vote your shares of
Company common stock and confirm that your instructions have
been properly recorded.
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Internet Voting
: You may vote by logging on to
the website indicated on your proxy card. Please follow the
website prompts that allow you to vote your shares of Company
common stock and confirm that your instructions have been
properly recorded.
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Return Your Proxy Card By Mail
: You may vote
by completing, signing and returning the proxy card in the
postage-paid envelope provided with this proxy statement. The
proxy holders will vote your shares of Company common stock
according to your directions. If you sign and return your proxy
card without specifying choices, your shares of Company common
stock will be voted by the persons named in the proxy in
accordance with the recommendations of the board of directors as
set forth in this proxy statement.
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Vote at the Meeting
: You may cast your vote in
person at the special meeting. Written ballots will be passed
out to shareholders or legal proxies who want to vote in person
at the meeting.
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15
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Telephone and Internet voting for shareholders of record will be
available 24 hours a day and will close at 11:59 p.m.
Eastern Standard Time on [ ], 2010. Telephone
and Internet voting is convenient, provides postage and mailing
cost savings and is recorded immediately, minimizing the risk
that postal delays may cause votes to arrive late and therefore
not be counted.
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Even if you plan to attend the special meeting, you are
encouraged to vote your shares of Company common stock by proxy.
You may still vote your shares of Company common stock in person
at the meeting even if you have previously voted by proxy. If
you are present at the meeting and desire to vote in person,
your previous vote by proxy will not be counted.
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Q.
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What if I hold my shares of Company common stock in
street name?
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A.
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You should follow the voting directions provided by your bank,
brokerage firm or other nominee. You may complete and mail a
voting instruction card to your bank, brokerage firm or other
nominee or, in most cases, submit voting instructions by
telephone or the Internet to your bank, brokerage firm or other
nominee. If you provide specific voting instructions by mail,
telephone or the Internet, your bank, brokerage firm or other
nominee will vote your shares of Company common stock as you
have directed. Please note that if you wish to vote in person at
the special meeting, you must provide a legal proxy from your
bank, brokerage firm or other nominee at the special meeting.
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If you do not instruct your bank, brokerage firm or other
nominee to vote your shares of Company common stock, your shares
will not be voted and the effect will be the same as a vote
AGAINST
the proposal to adopt the merger
agreement, and your shares of Company common stock will not have
an effect on the proposal to adjourn the special meeting.
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Q.
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Can I change my mind after I vote?
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A.
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Yes. If you are a shareholder of record, you may change your
vote or revoke your proxy at any time before it is voted at the
special meeting by:
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submitting a new proxy by telephone or via the
Internet after the date of the earlier voted proxy;
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signing another proxy card with a later date and
returning it to us prior to the special meeting; or
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attending the special meeting and voting in person.
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If you hold your shares of Company common stock in street name,
you may submit new voting instructions by contacting your bank,
brokerage firm or other nominee. You may also vote in person at
the special meeting if you obtain a legal proxy from your bank,
brokerage firm or other nominee.
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Q.
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Who will count the votes?
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A.
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A representative of Mediant Communications, Inc. will count the
votes and will serve as the independent inspector of elections.
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Q.
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What does it mean if I receive more than one proxy card?
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A.
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It means that you have multiple accounts with brokers or our
transfer agent. Please vote all of these shares. We encourage
you to register all of your shares of Company common stock in
the same name and address. You may do this by contacting your
broker or our transfer agent. Our transfer agent may be reached
at
1-800-524-4458
or at the following address:
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The Bank of New York Mellon
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Shareowner Services
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Church Street Station
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P.O. Box 11258
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New York, NY
10286-1258
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Q.
|
|
Will my shares of Company common stock be voted if I do not
provide my proxy?
|
16
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A.
|
|
If you are the shareholder of record and you do not vote or
provide a proxy, your shares of Company common stock will not be
voted.
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If your shares of Company common stock are held in street name,
they may not be voted if you do not provide the bank, brokerage
firm or other nominee with voting instructions. Currently,
banks, brokerage firms or other nominees have the authority
under the NYSE rules to vote shares of Company common stock for
which their customers do not provide voting instructions on
certain routine matters.
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However, banks, brokerage firms or other nominees are precluded
from exercising their voting discretion with respect to
approving non-routine matters, such as the proposal to adopt the
merger agreement and the proposal to approve the adjournment of
the special meeting, if necessary or appropriate, and, as a
result, absent specific instructions from the beneficial owner
of such shares of Company common stock, banks, brokerage firms
or other nominees are not empowered to vote those shares of
Company common stock on non-routine matters, which we refer to
generally as broker non-votes.
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Q.
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May shareholders ask questions?
|
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A.
|
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Yes. Our representatives will answer shareholders
questions of general interest following the meeting consistent
with the rules distributed at the meeting.
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Q.
|
|
How many votes must be present to hold the meeting?
|
|
A.
|
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A majority of the outstanding shares of Company common stock
entitled to vote at the special meeting, represented in person
or by proxy, will constitute a quorum. Shares of Company common
stock represented in person or by proxy, including abstentions
and broker non-votes, will be counted for purposes of
determining whether a quorum is present.
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|
Q.
|
|
What vote is required to approve each proposal?
|
|
A.
|
|
The adoption of the merger agreement requires the affirmative
vote of the holders of a majority of the outstanding shares of
Company common stock entitled to vote thereon. Because the
affirmative vote required to approve the proposal to adopt the
merger agreement is based upon the total number of outstanding
shares of Company common stock, if you fail to submit a proxy or
vote in person at the special meeting, or abstain, or you do not
provide your bank, brokerage firm or other nominee with voting
instructions, as applicable, this will have the same effect as a
vote
AGAINST
the proposal to adopt the merger
agreement.
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Approval of the proposal to adjourn the special meeting, if
necessary or appropriate, for the purpose of soliciting
additional proxies requires the affirmative vote of the holders
of a majority of the shares of Company common stock present in
person or represented by proxy and entitled to vote on the
matter at the special meeting. Abstaining will have the same
effect as a vote
AGAINST
the proposal to
adjourn the special meeting, if necessary or appropriate. If you
fail to submit a proxy or to vote in person at the special
meeting or if your shares of Company common stock are held
through a bank, brokerage firm or other nominee and you do not
instruct your bank, brokerage firm or other nominee on how to
vote your shares of Company common stock, your shares of Company
common stock will not be voted, but this will not have an effect
on the proposal to adjourn the special meeting.
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|
Q.
|
|
How are votes counted?
|
|
A.
|
|
For the proposal to adopt the merger agreement, you may vote
FOR, AGAINST
or
ABSTAIN
. Abstentions and broker non-votes
will have the same effect as votes
AGAINST
the proposal to adopt the merger agreement.
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For the proposal to adjourn the special meeting, if necessary or
appropriate, to solicit additional proxies, you may vote
FOR, AGAINST
or
ABSTAIN
. Abstentions will have the same
effect as if you voted
AGAINST
the proposal,
but broker non-votes will not have an effect on the proposal.
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Q.
|
|
Who will pay for this proxy solicitation?
|
17
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A.
|
|
We will bear the cost of preparing, assembling and mailing the
proxy material and of reimbursing brokers, nominees, fiduciaries
and other custodians for
out-of-pocket
and clerical expenses of transmitting copies of the proxy
material to the beneficial owners of shares of Company common
stock. A few of our officers and employees may participate in
the solicitation of proxies without additional compensation.
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Q.
|
|
Will any other matters be voted on at the special meeting?
|
|
A.
|
|
As of the date of this proxy statement, our management knows of
no other matter that will be presented for consideration at the
special meeting other than those matters discussed in this proxy
statement.
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Q.
|
|
What is the Companys website address?
|
|
A.
|
|
Our website address is www.bk.com. We make this proxy statement,
our annual reports on
Form 10-K,
quarterly reports on
Form 10-Q,
current reports on
Form 8-K
and amendments to those reports filed or furnished pursuant to
Section 13(a) or 15(d) of the Exchange Act available on our
website in the Investor Relations-SEC Filings section, as soon
as reasonably practicable after electronically filing such
material with the SEC.
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This information is also available free of charge at
www.sec.gov, an Internet site maintained by the SEC that
contains reports, proxy and information statements, and other
information regarding issuers that is filed electronically with
the SEC. Shareholders may also read and copy any reports,
statements and other information filed by us with the SEC at the
SEC public reference room at 100 F Street, N.E.,
Room 1580, Washington, D.C. 20549. Please call the SEC
at
1-800-SEC-0330
or visit the SECs website for further information on its
public reference room. In addition, shareholders may obtain free
copies of the documents filed with the SEC by contacting our
Investor Relations department at
305-378-7696
or by sending a written request to Burger King Holdings, Inc.,
Investor Relations, 5505 Blue Lagoon Drive, Miami, Florida 33126.
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The references to our website address and the SECs website
address do not constitute incorporation by reference of the
information contained in these websites and should not be
considered part of this document.
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Our SEC filings are available in print to any shareholder who
requests a copy at the phone number or address listed above.
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|
Q.
|
|
What happens if I sell my shares of Company common stock
before the special meeting?
|
|
A.
|
|
The record date for shareholders entitled to vote at the special
meeting is earlier than both the date of the special meeting and
the consummation of the merger. If you transfer your shares of
Company common stock after the record date but before the
special meeting, unless special arrangements (such as provision
of a proxy) are made between you and the person to whom you
transfer your shares and each of you notifies the Company in
writing of such special arrangements, you will retain your right
to vote such shares at the special meeting but will transfer the
right to receive the per share merger consideration to the
person to whom you transfer your shares.
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Q.
|
|
What do I need to do now?
|
|
A.
|
|
Even if you plan to attend the special meeting, after carefully
reading and considering the information contained in this proxy
statement, please vote promptly to ensure that your shares are
represented at the special meeting. If you hold your shares of
Company common stock in your own name as the shareholder of
record, please vote your shares of Company common stock by
(i) completing, signing, dating and returning the enclosed
proxy card in the accompanying prepaid reply envelope,
(ii) using the telephone number printed on your proxy card
or (iii) using the Internet voting instructions printed on
your proxy card. If you decide to attend the special meeting and
vote in person, your vote by ballot will revoke any proxy
previously submitted. If you are a beneficial owner, please
refer to the instructions provided by your bank, brokerage firm
or other nominee to see which of the above choices are available
to you.
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|
Q.
|
|
Should I send in my stock certificates now?
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18
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|
A.
|
|
No. You will be sent a letter of transmittal promptly after
the completion of the merger, describing how you may exchange
your shares of Company common stock for the per share merger
consideration. If your shares of Company common stock are held
in street name by your bank, brokerage firm or other
nominee, you will receive instructions from your bank, brokerage
firm or other nominee as to how to effect the surrender of your
street name shares of Company common stock in
exchange for the per share merger consideration.
Please do
NOT return your stock certificate(s) with your proxy.
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Q.
|
|
Am I entitled to exercise appraisal rights under the DGCL
instead of receiving the per share merger consideration for my
shares of Company common stock?
|
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A.
|
|
Yes. As a holder of Company common stock, you are entitled to
exercise appraisal rights under the DGCL in connection with the
merger if you take certain actions and meet certain conditions.
See Appraisal Rights beginning on
page [ ].
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Q.
|
|
Who can help answer my other questions?
|
|
A.
|
|
If you have additional questions about the merger, need
assistance in submitting your proxy or voting your shares of
Company common stock, or need additional copies of the proxy
statement or the enclosed proxy card, please call
[ ] toll-free at [ ].
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19
CAUTIONARY
STATEMENT CONCERNING FORWARD-LOOKING INFORMATION
This proxy statement, and the documents to which we refer you in
this proxy statement, as well as information included in oral
statements or other written statements made or to be made by us,
contain statements that, in our opinion, may constitute
forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. The words such
as believe, expect,
anticipate, intend, plan,
foresee, likely, project,
estimate, will, may,
should, future, predicts,
potential, continue and similar
expressions identify these forward-looking statements, which
appear in a number of places in this proxy statement (and the
documents to which we refer you in this proxy statement) and
include, but are not limited to, all statements relating
directly or indirectly to the timing or likelihood of completing
the merger to which this proxy statement relates, plans for
future growth and other business development activities as well
as capital expenditures, financing sources and the effects of
regulation and competition and all other statements regarding
our intent, plans, beliefs or expectations or those of our
directors or officers. You are cautioned that such
forward-looking statements are not assurances for future
performance or events and involve risks and uncertainties that
could cause actual results and developments to differ materially
from those covered in such forward-looking statements. These
risks and uncertainties include, but are not limited to, the
risks detailed in our filings with the SEC, including our most
recent filings on
Forms 10-K
and
10-Q,
factors and matters contained or incorporated by reference in
this document, and the following factors:
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the occurrence of any event, change or other circumstances that
could give rise to the termination of the merger agreement,
including a termination under circumstances that could require
us to pay a termination fee;
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Parents failure to obtain the necessary equity and debt
financing set forth in commitment letters received in connection
with the merger or the failure of that financing to be
sufficient to complete the merger and the transactions
contemplated thereby;
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|
the inability to complete the merger due to the failure to
obtain shareholder approval or the failure to satisfy other
conditions to completion of the merger, including required
regulatory approvals;
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the failure of the merger to close for any other reason;
|
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risks that the proposed transaction disrupts current plans and
operations and the potential difficulties in employee retention
as a result of the merger;
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|
the outcome of any legal proceedings that have been or may be
instituted against the Company
and/or
others relating to the merger agreement;
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|
diversion of managements attention from ongoing business
concerns;
|
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|
|
the effect of the announcement of the merger on our business
relationships, operating results and business generally; and
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|
|
the amount of the costs, fees, expenses and charges related to
the merger.
|
Consequently, all of the forward-looking statements we make in
this document are qualified by the information contained or
incorporated by reference herein, including, but not limited to
(a) the information contained under this heading and
(b) the information contained under the headings
Business and Risk Factors and
information in our consolidated financial statements and notes
thereto included in our most recent filings on
Forms 10-K
and
10-Q
(see Where You Can Find More Information beginning
on page [ ]). We are under no obligation
to publicly release any revision to any forward-looking
statement contained or incorporated herein to reflect any future
events or occurrences.
You should carefully consider the cautionary statements
contained or referred to in this section in connection with any
subsequent written or oral forward-looking statements that may
be issued by us or persons acting on our behalf.
20
PARTIES
TO THE MERGER
The
Company
Burger King Holdings, Inc.
5505 Blue Lagoon Drive
Miami, Florida 33126
(305) 378-7696
The Company is a Delaware corporation formed on July 23,
2002, and its headquarters are located in Miami, Florida. Our
restaurant system includes restaurants owned by the Company and
by franchisees. We are the worlds second largest fast food
hamburger restaurant chain as measured by the total number of
restaurants and system-wide sales. For more information about
the Company, please visit our website at
http://www.bk.com.
Our website address is provided as an inactive textual reference
only. The information contained on our website is not
incorporated into, and does not form a part of, this proxy
statement or any other report or document on file with or
furnished to the SEC. See also Where You Can Find More
Information beginning on page [ ].
Company common stock is publicly traded on the NYSE under the
symbol BKC.
Parent
Blue Acquisition Holding Corporation
c/o 3G
Capital Partners Ltd.
600 Third Avenue,
37
th
Floor
New York, New York 10016
(212) 893-6727
Blue Acquisition Holding Corporation, or Parent, is a Delaware
corporation which was formed by an affiliate of, and is
controlled by, 3G Special Situations Fund II, L.P, a Cayman
exempted limited partnership, which we sometimes refer to as 3G,
solely for the purpose of entering into the merger agreement and
completing the transactions contemplated by the merger agreement
and the related financing transactions. Parent has not engaged
in any business except for activities incidental to its
formation and as contemplated by the merger agreement. Upon
completion of the merger, the Company will be a direct
wholly-owned subsidiary of Parent.
3G is a private equity fund principally engaged in the business
of making investments in securities.
Merger
Sub
Blue Acquisition Sub, Inc.
c/o 3G
Capital Partners Ltd.
600 Third Avenue,
37
th
Floor
New York, New York 10016
(212) 893-6727
Blue Acquisition Sub, Inc., or Merger Sub, is a Delaware
corporation that was formed by Parent solely for the purpose of
facilitating the acquisition of the Company. Merger Sub is a
wholly-owned subsidiary of Parent and has not engaged in any
business except for activities incidental to its formation and
as contemplated by the merger agreement and the related
financing transactions. Upon the completion of the merger,
Merger Sub will cease to exist and the Company will continue as
the surviving corporation.
21
THE
SPECIAL MEETING
Time,
Place and Purpose of the Special Meeting
This proxy statement is being furnished to our shareholders as
part of the solicitation of proxies by the board of directors
for use at the special meeting to be held on
[ ], 2010, starting at
[ ] a.m., Eastern Standard Time, at
[ ], or at any postponement or adjournment
thereof. At the special meeting, holders of Company common stock
will be asked to approve the proposal to adopt the merger
agreement and to approve the proposal to adjourn the special
meeting, if necessary or appropriate, for the purpose of
soliciting additional proxies if there are insufficient votes at
the time of the special meeting to approve the proposal to adopt
the merger agreement.
Our shareholders must approve the proposal to adopt the merger
agreement in order for the merger to occur. If our shareholders
fail to approve the proposal to adopt the merger agreement, the
merger will not occur. A copy of the merger agreement is
attached as
Annex A
to this proxy statement, which
we encourage you to read carefully in its entirety.
Record
Date and Quorum
We have fixed the close of business on [ ],
2010 as the record date for the special meeting, and only
holders of record of Company common stock on the record date are
entitled to vote at the special meeting. You are entitled to
receive notice of, and to vote at, the special meeting if you
owned shares of Company common stock at the close of business on
the record date. On the record date, there were
[ ] shares of Company common stock
outstanding and entitled to vote. Each share of Company common
stock entitles its holder to one vote on all matters properly
coming before the special meeting.
A majority of the shares of Company common stock outstanding at
the close of business on the record date and entitled to vote,
present in person or represented by proxy, at the special
meeting constitutes a quorum for the purposes of the special
meeting. Shares of Company common stock represented at the
special meeting but not voted, including shares of Company
common stock for which a shareholder directs an
abstention from voting, as well as broker non-votes,
will be counted for purposes of establishing a quorum. A quorum
is necessary to transact business at the special meeting. Once a
share of Company common stock is represented at the special
meeting, it will be counted for the purpose of determining a
quorum at the special meeting and any adjournment of the special
meeting. However, if a new record date is set for the adjourned
special meeting, then a new quorum will have to be established.
In the event that a quorum is not present at the special
meeting, it is expected that the special meeting will be
adjourned or postponed.
Attendance
Only shareholders of record or their duly authorized proxies
have the right to attend the special meeting. To gain
admittance, you must present a valid photo identification, such
as a drivers license or passport. If your shares of
Company common stock are held through a bank, brokerage firm or
other nominee, please bring to the special meeting a copy of
your brokerage statement evidencing your beneficial ownership of
Company common stock and a valid photo identification. If you
are the representative of a corporate or institutional
shareholder, you must present valid photo identification along
with proof that you are the representative of such shareholder.
Please note that cameras, recording devices and other electronic
devices will not be permitted at the special meeting.
Vote
Required
Approval of the proposal to adopt the merger agreement requires
the affirmative vote of the holders of a majority of the
outstanding shares of Company common stock entitled to vote
thereon. For the proposal to adopt the merger agreement, you may
vote
FOR
,
AGAINST
or
ABSTAIN
. Abstentions
will not be counted as votes cast in favor of the proposal to
adopt the merger agreement but will count for the purpose of
determining whether a quorum is present.
If you fail to
submit a proxy or to vote in person at the special meeting, or
abstain, it will have the same effect as a vote
AGAINST the proposal to adopt the merger
agreement.
22
If your shares of Company common stock are registered directly
in your name with our transfer agent, The Bank of New York
Mellon, you are considered, with respect to those shares of
Company common stock, the shareholder of record.
This proxy statement and proxy card have been sent directly to
you by the Company.
If your shares of Company common stock are held through a bank,
brokerage firm or other nominee, you are considered the
beneficial owner of shares of Company common stock
held in street name. In that case, this proxy statement has been
forwarded to you by your bank, brokerage firm or other nominee
who is considered, with respect to those shares of Company
common stock, the shareholder of record. As the beneficial
owner, you have the right to direct your bank, brokerage firm or
other nominee how to vote your shares by following their
instructions for voting.
Under the rules of the NYSE, banks, brokerage firms or other
nominees who hold shares in street name for customers have the
authority to vote on routine proposals when they
have not received instructions from beneficial owners. However,
banks, brokerage firms or other nominees are precluded from
exercising their voting discretion with respect to approving
non-routine matters, such as the proposal to adopt the merger
agreement, and, as a result, absent specific instructions from
the beneficial owner of such shares of Company common stock,
banks, brokerage firms or other nominees are not empowered to
vote those shares of Company common stock on non-routine
matters, which we refer to generally as broker non-votes.
These broker non-votes will be counted for purposes of
determining a quorum, but will have the same effect as a vote
AGAINST the proposal to adopt the merger
agreement.
The proposal to adjourn the special meeting, if necessary or
appropriate, to solicit additional proxies requires the
affirmative vote of the holders of a majority of the shares of
Company common stock present in person or represented by proxy
and entitled to vote on the matter at the special meeting. For
the proposal to adjourn the special meeting, if necessary or
appropriate, you may vote
FOR
,
AGAINST
or
ABSTAIN
. For purposes of this proposal, if your shares of
Company common stock are present at the special meeting but are
not voted on this proposal, or if you have given a proxy and
abstained on this proposal, this will have the same effect as if
you voted
AGAINST
the proposal. If you fail
to submit a proxy or vote in person at the special meeting, or
there are broker non-votes on the issue, as applicable, the
shares of Company common stock not voted, will not be counted in
respect of, and will not have an effect on, the proposal to
adjourn the special meeting.
If you are a shareholder of record, you may have your shares of
Company common stock voted on matters presented at the special
meeting in any of the following ways:
Telephone Voting:
You may vote by calling the
toll-free telephone number indicated on your proxy card. Please
follow the voice prompts that allow you to vote your shares and
confirm that your instructions have been properly recorded.
Internet Voting:
You may vote by logging on to
the website indicated on your proxy card. Please follow the
website prompts that allow you to vote your shares of Company
common stock and confirm that your instructions have been
properly recorded.
Return Your Proxy Card By Mail:
You may vote
by completing, signing and returning the proxy card in the
postage-paid envelope provided with this proxy statement. The
proxy holders will vote your shares of Company common stock
according to your directions. If you sign and return your proxy
card without specifying choices, your shares of Company common
stock will be voted by the persons named in the proxy in
accordance with the recommendations of the board of directors as
set forth in this proxy statement.
Vote at the Meeting:
You may cast your vote in
person at the special meeting. Written ballots will be passed
out to shareholders or legal proxies who want to vote in person
at the meeting.
If you are a beneficial owner, you will receive instructions
from your bank, brokerage firm or other nominee that you must
follow in order to have your shares of Company common stock
voted. Those instructions will identify which of the above
choices are available to you in order to have your shares voted.
23
Please note that if you are a beneficial owner and wish to vote
in person at the special meeting, you must provide a legal proxy
from your bank, brokerage firm or other nominee.
Please refer to the instructions on your proxy or voting
instruction card to determine the deadlines for voting over the
Internet or by telephone. If you choose to vote by mailing a
proxy card, your proxy card must be filed with our General
Counsel and Secretary by the time the special meeting begins.
Please do not send in your stock certificates with your proxy
card.
When the merger is completed, a separate letter of
transmittal will be mailed to you that will enable you to
receive the per share merger consideration in exchange for your
stock certificates.
If you vote by proxy, regardless of the method you choose to
vote, the individuals named on the enclosed proxy card, and each
of them, with full power of substitution, or your proxies, will
vote your shares of Company common stock in the way that you
indicate. When completing the Internet or telephone processes or
the proxy card, you may specify whether your shares of Company
common stock should be voted for or against or to abstain from
voting on all, some or none of the specific items of business to
come before the special meeting.
If you properly sign your proxy card but do not mark the boxes
showing how your shares of Company common stock should be voted
on a matter, the shares of Company common stock represented by
your properly signed proxy will be voted
FOR
the proposal to adopt the merger agreement and
FOR
the proposal to adjourn the special
meeting, if necessary or appropriate, to solicit additional
proxies.
If you have any questions or need assistance voting your shares,
please call [ ] toll-free at
[ ].
IT IS IMPORTANT THAT YOU VOTE YOUR SHARES OF COMPANY
COMMON STOCK PROMPTLY. WHETHER OR NOT YOU PLAN TO ATTEND THE
SPECIAL MEETING, PLEASE COMPLETE, DATE, SIGN AND RETURN, AS
PROMPTLY AS POSSIBLE, THE ENCLOSED PROXY CARD IN THE
ACCOMPANYING PREPAID REPLY ENVELOPE, OR SUBMIT YOUR PROXY BY
TELEPHONE OR THE INTERNET. SHAREHOLDERS WHO ATTEND THE SPECIAL
MEETING MAY REVOKE THEIR PROXIES BY VOTING IN PERSON.
As of [ ], 2010, the record date, the directors
and executive officers of the Company beneficially owned and
were entitled to vote, in the aggregate,
[ ] shares of Company common stock
(excluding any shares of Company common stock deliverable upon
exercise or conversion of any options or restricted stock
units), representing [ ]% of the outstanding
shares of Company common stock on the record date. The directors
and executive officers have informed the Company that they
currently intend to vote all of their shares of Company common
stock
FOR
the proposal to adopt the merger
agreement and
FOR
the proposal to adjourn the
special meeting, if necessary or appropriate, to solicit
additional proxies.
Proxies
and Revocation
Any shareholder of record entitled to vote at the special
meeting may submit a proxy by telephone, over the Internet, by
returning the enclosed proxy card in the accompanying prepaid
reply envelope, or may vote in person at the special meeting. If
your shares of Company common stock are held in street
name by your bank, brokerage firm or other nominee, you
should instruct your bank, brokerage firm or other nominee on
how to vote your shares of Company common stock using the
instructions provided by your bank, brokerage firm or other
nominee. If you fail to submit a proxy or vote in person at the
special meeting, or abstain, or do not provide your bank,
brokerage firm or other nominee with voting instructions, as
applicable, your shares of Company common stock will not be
voted on the proposal to adopt the merger agreement, which will
have the same effect as a vote
AGAINST
the
proposal to adopt the merger agreement.
If you are a shareholder of record, you have the right to revoke
a proxy, whether delivered over the Internet, by telephone or by
mail, at any time before it is voted at the special meeting by:
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submitting a new proxy by telephone or via the Internet after
the date of the earlier voted proxy;
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signing another proxy card with a later date and returning it to
us prior to the special meeting; or
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attending the special meeting and voting in person.
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If you hold your shares in street name, you may submit new
voting instructions by contacting your bank, brokerage firm or
other nominee. You may also vote in person at the special
meeting if you obtain a legal proxy from your bank, brokerage
firm or other nominee.
Adjournments
and Postponements
Although it is not currently expected, the special meeting may
be adjourned or postponed, including for the purpose of
soliciting additional proxies, if there are insufficient votes
at the time of the special meeting to approve the proposal to
adopt the merger agreement or if a quorum is not present at the
special meeting. Other than an announcement to be made at the
special meeting of the time, date and place of an adjourned
meeting, an adjournment generally may be made without notice.
Any adjournment or postponement of the special meeting for the
purpose of soliciting additional proxies will allow the
Companys shareholders who have already sent in their
proxies to revoke them at any time prior to their use at the
special meeting as adjourned or postponed.
Anticipated
Date of Completion of the Merger
We are working towards completing the merger as soon as
possible. If the merger is approved at the shareholders meeting,
then, assuming timely satisfaction of the other necessary
closing conditions, we anticipate that the merger will be
completed promptly thereafter.
Rights of
Shareholders Who Seek Appraisal
Shareholders that do not vote for the adoption of the merger
agreement are entitled to appraisal rights under the DGCL in
connection with the merger. This means that you are entitled to
have the fair value of your shares of Company common stock
determined by the Delaware Court of Chancery and to receive
payment based on that valuation in lieu of the right to receive
$24.00 per share of Company common stock in cash, without
interest. The ultimate amount you receive in an appraisal
proceeding may be less than, equal to or more than the amount
you would have received under the merger agreement.
To exercise your appraisal rights, you must submit a written
demand for appraisal to the Company before the vote is taken on
the merger agreement and you must not vote in favor of the
proposal to adopt the merger agreement. Your failure to follow
exactly the procedures specified under the DGCL may result in
the loss of your appraisal rights. See Appraisal
Rights beginning on page [ ] and the
text of the Delaware appraisal rights statute reproduced in its
entirety as
Annex D
to this proxy statement. If you
hold your shares of Company common stock through a bank,
brokerage firm or other nominee and you wish to exercise
appraisal rights, you should consult with your bank, brokerage
firm or other nominee to determine the appropriate procedures
for the making of a demand for appraisal by your bank, brokerage
firm or nominee. In view of the complexity of the DGCL,
shareholders who may wish to pursue appraisal rights should
consult their legal and financial advisors.
Payment
of Solicitation Expenses
The Company may reimburse brokers, banks and other custodians,
nominees and fiduciaries representing beneficial owners of
shares of Company common stock for their expenses in forwarding
soliciting materials to beneficial owners of Company common
stock and in obtaining voting instructions from those owners.
Our directors, officers and employees may also solicit proxies
by telephone, by facsimile, by mail, on the Internet or in
person. They will not be paid any additional amounts for
soliciting proxies.
Questions
and Additional Information
If you have more questions about the merger or how to submit
your proxy, or if you need additional copies of this proxy
statement or the enclosed proxy card or voting instructions,
please call [ ] toll-free at
[ ].
25
THE
MERGER
This discussion of the merger is qualified in its entirety by
reference to the merger agreement, which is attached to this
proxy statement as
Annex A
. You should read
the entire merger agreement carefully as it is the legal
document that governs the merger.
The merger agreement provides that Merger Sub will merge with
and into the Company. The Company will be the surviving
corporation in the merger and will continue to do business
following the merger. As a result of the merger, the Company
will cease to be a publicly traded company. You will not own any
shares of the capital stock of the surviving corporation.
Merger
Consideration
In the merger, each outstanding share of Company common stock
(except for the excluded shares) will be converted into the
right to receive the per share merger consideration of $24.00 in
cash, less any applicable withholding taxes.
Background
of the Merger
Since our initial public offering in 2006, as part of our
ongoing strategic planning process, the board of directors and
members of our senior management have regularly reviewed and
evaluated our business and operations, competitive position,
strategic plans and alternatives with a goal of enhancing
shareholder value. Although we have achieved many financial and
operating performance goals since our initial public offering,
certain initiatives that management considered important to our
long-term success, including (1) the recent roll-out of the
new flexible broiler and
point-of-sale
system, (2) the on-going reimaging and remodeling of our
restaurants, (3) our portfolio management strategies,
including the refranchising of half of our restaurant portfolio
over the next three to five years, and (4) other operating
initiatives designed to enhance overall efficiencies and
profitability, could take several years to yield any direct
monetary benefits to us and our shareholders and may depress the
market price of our common stock in the interim. Furthermore
there are significant internal and external risks that could
result in us not recognizing all of the anticipated benefits of
these initiatives. In addition, our refranchising strategy,
although designed to position us for stronger net restaurant
growth and reduce our future required capital expenditure
obligations, could exacerbate the operational risks associated
with our highly franchised business model.
In late 2009 and early 2010, Alexandre Behring, Managing Partner
at 3G Capital, the investment advisor of 3G, taking action on
behalf of 3G, Parent and Merger Sub, other representatives of 3G
Capital and certain representatives of Lazard Freres &
Co. LLC, or Lazard, financial advisor to 3G Capital, contacted
representatives of certain private equity funds affiliated with
TPG Capital, Bain Capital Partners and Goldman, Sachs & Co.
(the Goldman Sachs Funds), who we refer to as the
Sponsors, on an unsolicited basis to express 3G Capitals
preliminary interest in exploring a potential transaction
involving the Company. The representatives of the Sponsors
informed the representatives of 3G Capital and Lazard that any
inquiries regarding the Company should be raised directly with
Mr. John Chidsey, our Chief Executive Officer and Executive
Chairman.
In early March 2010, Mr. Behring contacted Mr. Chidsey
to express 3G Capitals preliminary interest in exploring a
potential acquisition of the Company. During this discussion,
Mr. Behring suggested that the consideration payable in
such transaction would be entirely paid in cash, but
Mr. Behring did not propose a purchase price for the
acquisition of the Company. Mr. Chidsey informed
Mr. Behring that the Company was not for sale, but that the
Company and the board of directors would consider any proposal
that would enhance shareholder value. Mr. Chidsey informed
Mr. Behring that, if 3G Capital was serious about exploring
a potential acquisition of the Company, then 3G Capital should
deliver a written acquisition proposal to the Company based on
publicly available information, which Mr. Chidsey would
then discuss with the board of directors.
On March 29, 2010, we received a letter from 3G Capital and
a third party private equity firm with whom 3G Capital was
discussing the transaction containing a non-binding indication
of interest to acquire all of the
26
outstanding shares of Company common stock for $24.00 in cash
per share, which we refer to as the
March 29th Proposal.
Following receipt of the March 29th Proposal,
Mr. Chidsey contacted Mr. Behring to confirm that he
had received the proposal and would discuss it with the board of
directors at a special meeting to be held on April 6, 2010.
On April 6, 2010, the board of directors held a special
meeting, at which certain members of our senior management were
present. At the meeting, the terms and conditions of the
March 29th Proposal were discussed and it was noted,
among other matters, that the March 29th Proposal:
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set forth a price of $24.00 in cash per share as compared to the
market price of approximately $21 to $22 per share over the
prior two weeks;
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was non-binding in nature and could be withdrawn or modified by
3G Capital at any time;
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was based solely on publicly available information and was
subject to due diligence that 3G Capital described as
confirmatory in nature;
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had been reviewed and approved by the investment committee of 3G
Capital;
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was subject to financing but included non-binding highly
confident letters from Barclays Capital PLC and another
international lending institution to provide the necessary debt
financing for the potential transaction; and
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indicated that 3G Capital had reviewed all of the publicly
available information and was prepared to enter into a
confidentiality agreement in order to gain access to non-public
information and personnel to further refine its proposal.
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The board of directors and management also discussed our
prospects as a stand-alone company, including our strategic
plan, the historical operating and financial results and the
short-term and long-term outlook for us, as well as
macroeconomic factors. With a view towards maximizing
shareholder value, the board of directors and management then
discussed whether, if the board of directors were to decide to
explore a possible sale of the Company, any third parties other
than 3G Capital, including any potential strategic buyers,
should be contacted regarding their potential interest in the
Company. The board of directors noted that the most likely
strategic acquirer had not shown an interest in pursuing a
business combination with the Company.
In addition, the board of directors discussed the advisability
of hiring an investment bank as its financial advisor to conduct
an independent assessment and valuation of the Company. The
board of directors authorized our senior management team to
retain a financial advisor to perform such valuation and
otherwise assist us in its evaluation of strategic alternatives.
At this meeting, the board of directors unanimously approved the
appointment of Ronald Dykes as the independent lead director of
the board. After further discussion of the
March 29th Proposal, the board of directors decided to
not pursue a potential sale to 3G Capital at that time. The
board of directors requested that Mr. Chidsey communicate
the board of directors position to 3G Capital. Following
the meeting, Mr. Chidsey contacted a representative of
Lazard to convey the board of directors position that the
offer price contained in the March 29th Proposal was
not sufficient to warrant further discussions at this time
unless 3G Capital was willing to increase its offer price.
On or about April 12, 2010, representatives of Lazard
contacted Mr. Chidsey and indicated that 3G Capital might
be willing to increase the price of its offer above $24.00 per
share but would need to meet with our management to further
understand our business and its short-term and long-term
prospects. No alternative prices were discussed in these
conversations. Based on these discussions, Mr. Chidsey said
he was willing to meet with representatives of 3G Capital to
discuss additional information about us that might be helpful to
3G Capitals analysis if 3G Capital entered into an
acceptable confidentiality agreement.
On April 14, 2010, we distributed to 3G Capital a draft of
a non-disclosure and standstill agreement, or a Non-Disclosure
Agreement. We, 3G Capital, Holland & Knight, LLP, or
Holland & Knight, our outside corporate counsel, and
Kirkland & Ellis LLP, or Kirkland, outside counsel to
3G Capital, negotiated the terms of the Non-Disclosure Agreement
over the next several weeks. On April 26, 2010, we and 3G
Capital executed
27
the Non-Disclosure Agreement. The Non-Disclosure Agreement
contained customary provisions, including standstill and
non-solicitation of employees provisions. The other private
equity firm that had initially participated in the
March 29th Proposal did not execute a Non-Disclosure
Agreement and we had no further contact with such firm.
In addition, beginning on April 14, 2010, we began
discussions with representatives of Morgan Stanley and Goldman
Sachs regarding their potential role as financial advisors to
the Company. During the next few weeks, our representatives held
discussions with each of Morgan Stanley and Goldman Sachs
regarding preparing a financial analysis of the Company. On
April 21, 2010, we entered into a Non-Disclosure Agreement
with Morgan Stanley in connection with Morgan Stanleys
engagement to conduct a valuation of the Company.
On April 27, 2010, Mr. Chidsey and Ben Wells, our
Chief Financial Officer, met with representatives of 3G Capital
at the Miami offices of Holland & Knight. At such
meeting, Mr. Chidsey and Mr. Wells provided
information regarding our business and prospects that had
recently been presented to investors and analysts and that were
publicly available. At the conclusion of the meeting,
representatives of 3G Capital requested certain additional due
diligence information from us. In addition, representatives of
3G Capital indicated that they would deliver an updated proposal
to us within a few weeks after receiving the requested
additional information. Following the April 27, 2010
discussion, Mr. Wells provided representatives of 3G
Capital with the information requested by 3G Capital.
On May 11, 2010, we received a revised proposal from 3G
Capital to acquire all of the outstanding shares of Company
common stock for $25.00 per share in cash, which we refer to as
the May 11th Proposal
,
subject to results of
its due diligence investigation. The May 11th Proposal
indicated that the $25.00 per share offer price represented a
value of the Company equal to 9.4x our trailing twelve month
EBITDA as of March 31, 2010. In the
May 11th Proposal, 3G Capital stated its commitment to
contribute all of the equity capital required to finance the
transaction and indicated that JP Morgan and Barclays Capital
had committed to provide all of the debt financing required to
consummate the transaction. 3G Capital also indicated that it
was working on firm commitment papers with those lenders. In the
May 11th Proposal, 3G Capital requested further
meetings with us to complete its due diligence review as soon as
possible and indicated that it would be able to finalize its
confirmatory due diligence and financing commitments within two
to three weeks. Finally, 3G Capital indicated in the
May 11th Proposal that it expected to enter into
exclusive negotiations with us for a period of 30 days
following the start of its due diligence. We did not agree to
any exclusivity arrangement with 3G Capital and the discussions
and negotiations continued on a non-exclusive basis throughout
the period until the signing of the merger agreement. On
May 12, 2010, representatives of Morgan Stanley contacted
representatives of Lazard by telephone to convey that the board
of directors would review the May 11th Proposal in
detail at its regularly scheduled board of directors meeting on
June 3, 2010.
From mid-April 2010 until early June 2010, Mr. Chidsey and
Mr. Wells had several in-person and telephonic meetings
with representatives of Morgan Stanley in connection with Morgan
Stanleys preparation of preliminary financial analyses
relating to us. We also interviewed several national law firms
specializing in public company mergers and acquisitions to
provide additional assistance to the board of directors and us
in connection with its evaluation of 3G Capitals interest
in a potential transaction with us.
On May 20, 2010, the board of directors held a special
meeting, at which certain members of our senior management were
present. During the meeting, Mr. Chidsey updated the board
of directors on the status of our activities in response to the
acquisition proposal received from 3G Capital and reviewed the
terms and conditions of the May 11th Proposal.
Mr. Chidsey informed the board of directors that
(i) representatives of Morgan Stanley would attend the
regularly scheduled board of directors meeting on June 3,
2010 to review their preliminary financial analyses relating to
us detail and (ii) representatives of an outside special
legal counsel, or Outside Special Counsel, would attend the
June 3rd board of directors meeting to discuss the
fiduciary duties of the directors in general and specifically in
connection with their consideration of 3G Capitals
interest in a potential transaction. The board of directors
determined to defer further consideration of the
May 11th Proposal until it had received the
preliminary financial analyses from Morgan Stanley and further
discussed with management and our advisors potential responses
to the May 11th Proposal. The board
28
of directors instructed representatives of Morgan Stanley to
advise 3G Capital that we would respond to the
May 11th Proposal following the board of directors
meeting on June 3, 2010.
On June 3, 2010, the board of directors held a regularly
scheduled meeting, at which certain members of our senior
management were present and, for portions of the meeting,
representatives of Morgan Stanley and Outside Special Counsel
were present. During this meeting, our management provided the
board of directors with a forecast of the fourth quarter 2010
financial results and the proposed annual operating plan for
fiscal year 2011. During the review of the fourth quarter
forecasted financial results and the forecasted fiscal 2010
results generally, our management indicated that our results
were adversely impacted by a generally weak consumer
environment, including continued high unemployment, and
commodity price increases, which have contributed to an erosion
of margins as well as uncertainties created by fluctuations in
currency exchange rates. Mr. Chidsey then reviewed the
proposed annual operating plan for fiscal year 2011.
Mr. Chidsey also reviewed the macroeconomic and business
challenges facing us, including global economic uncertainty,
high unemployment, potential as well as current commodity price
increases, unpredictable currency exchange rates, competitive
pressures and the negative impact of refranchisings on sales and
EBITDA. Mr. Chidsey then reviewed the proposed capital
expenditure plan for fiscal year 2011, including our re-imaging
program and new restaurant development. Mr. Wells then
discussed the need to refinance our existing credit facility
before the end of September 2010 since the term loan under that
facility would become a current liability in the fourth quarter
of calendar 2010 and the revolver was scheduled to mature in
June 2011.
Mr. Chidsey and Mr. Wells then reviewed with the board
of directors our five year plan, including key strategic
imperatives, the key assumptions underlying the plan and various
growth scenarios. Representatives of Outside Special Counsel
reviewed the legal duties of the directors generally and
specifically in connection with a proposed acquisition
transaction. Representatives of Morgan Stanley presented and
reviewed with the board of directors their preliminary financial
analyses of the Company. Representatives of Morgan Stanley
discussed with the board of directors the terms of the
May 11th Proposal and other potential strategic
alternatives. Representatives of Morgan Stanley also reviewed
certain background information relating to 3G Capital, including
its involvement in other transactions. The board of directors,
along with representatives of Morgan Stanley, Outside Special
Counsel and members of senior management, discussed the terms of
the May 11th Proposal in light of the preliminary
valuation analyses of the Company performed by Morgan Stanley
and the state of the financing markets. At the conclusion of
these discussions, the board of directors instructed
representatives of Morgan Stanley to inform Lazard that if 3G
Capital would confirm the $25.00 per share price in its
May 11th Proposal, then the board of directors would
permit our management to meet with 3G Capital and its
representatives and provide additional due diligence materials
to allow 3G Capital to further improve its proposal, including
to potentially decrease uncertainty in its offer and potentially
improve its offer price.
Following the board of directors meeting on June 3, 2010, a
representative of Morgan Stanley contacted a representative of
Lazard to inform Lazard that the board of directors authorized
us to have a due diligence meeting with 3G Capital and its debt
financing sources if 3G Capital confirmed that there had been no
change to the $25.00 per share price contained in the
May 11th Proposal and a representative of Lazard
stated that 3G Capital had not changed its price from the
May 11th Proposal.
On June 14, 2010, Mr. Chidsey, Mr. Wells and Anne
Chwat, our General Counsel, met with representatives of 3G
Capital, its debt financing sources and another private equity
firm considering participating in the transaction. Our and 3G
Capitals financial and legal advisors also attended the
meeting. During this meeting, Mr. Chidsey and
Mr. Wells gave a detailed presentation regarding our
business and prospects for the remaining portion of fiscal year
2010 as well as the budget for fiscal year 2011 and the issues
and opportunities for fiscal year 2012 and beyond.
On June 16, 2010, representatives of Lazard contacted
representatives of Morgan Stanley to express 3G Capitals
continued interest in pursuing a transaction and indicated that
3G Capital would respond to us no later than July 1, 2010
with a proposal that included fully committed financing.
29
During the last two weeks of June 2010, representatives of
Outside Special Counsel and Holland & Knight had a few
discussions with representatives of Kirkland to confirm that the
new proposal to be delivered by 3G Capital would also address
other significant deal provisions and conditions.
On June 25, 2010, representatives of Lazard contacted
representatives of Morgan Stanley to provide an update on 3G
Capitals discussions with the lenders that would be
providing the debt financing for the proposed transaction. The
representatives of Lazard indicated that the lenders remained
willing to fully commit the debt financing, but that the credit
markets had tightened and worsened significantly since the
May 11th Proposal and such adjustment in market
conditions had resulted in reduced availability of leverage and
significantly higher financing costs. The representatives of
Lazard indicated that due to the less favorable market
conditions and certain financial information provided by us
during the June 14, 2010 meeting, 3G Capital expected to
propose an offer price to acquire the Company that was lower
than the price in the May 11th Proposal.
On June 29, 2010, we received a proposal from 3G Capital to
acquire all of the outstanding shares of Company common stock
for $23.00 in cash per share, which we refer to as the
June 29th Proposal. The key elements of the
June 29th Proposal included, among other things:
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draft commitment letters from debt financing sources (JP Morgan
and Barclays Capital) for the entire debt financing that would
be necessary to consummate the transaction;
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a draft equity commitment letter from 3G Capital to fund the
entire equity capital of Merger Sub (approximately
$1.5 billion) needed to consummate the transaction;
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an indication that 3G Capital had completed substantially all of
its work and that it needed two additional weeks to complete
confirmatory due diligence and negotiate a definitive merger
agreement;
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a summary of certain key provisions of the merger agreement
pursuant to which 3G Capital would be willing to enter into the
transaction, including a one-step merger structure, a
30-day
go-shop period during which we would be permitted to
solicit alternative transaction proposals and if a superior
offer were made and accepted during this period, we would only
be obligated to pay a reduced termination fee to 3G Capital of
$75 million (compared to $100 million after the
go-shop period), and a reverse termination fee of
$150 million;
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an expectation that, at the time the board of directors
considered to be most appropriate, certain members of senior
management (including Mr. Chidsey and Mr. Wells) would
agree to continue their association with the Company during a
post-closing transition period, although management retention
would not be a condition to closing the transaction and none of
the members of senior management would be rolling-over any of
their equity interests in the transaction; and
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a statement that the proposal was a non-binding indication of
interest and the offer remained subject to negotiation and
execution of definitive agreements and the satisfactory
completion of confirmatory due diligence.
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In addition, the June 29th Proposal included a request
that we grant 3G Capital a
30-day
period of exclusivity. We did not grant 3G Capitals
request for exclusivity and the parties continued discussions on
a non-exclusive basis.
On June 30, 2010, representatives of Outside Special
Counsel and representatives of Kirkland held a teleconference to
discuss the proposed terms of the merger agreement included with
the June 29th Proposal.
On July 1, 2010, the board of directors held a special
meeting, at which certain members of our senior management were
present and, for portions of the meeting, representatives of
Morgan Stanley, Holland & Knight and Outside Special
Counsel were present. Representatives of Morgan Stanley and
Outside Special Counsel presented the board of directors with a
detailed summary of the June 29th Proposal.
Representatives of Morgan Stanley then reviewed with the board
of directors our recent share price performance relative to
other participants and competitors in its industry over a range
of historical short-term and long-term periods, as well as a
description of the current debt financing market conditions and
changes in the market since the
30
May 11th Proposal and the board of directors meeting
on June 3, 2010. The board of directors, in consultation
with representatives of Morgan Stanley, noted that although the
leveraged loan markets had weakened considerably during these
periods, the market had recently showed some improvement.
Finally, representatives of Morgan Stanley presented their
preliminary valuation analyses of the Company. At the conclusion
of the meeting and following an extensive discussion of the
June 29th Proposal, the board of directors determined
that pursuing a potential acquisition by 3G Capital on the terms
of the June 29th Proposal was not in the best interest
of the Company and its shareholders at that time. The board of
directors instructed representatives of Morgan Stanley to inform
Lazard that the board of directors was not willing to pursue a
transaction on the basis of the June 29th Proposal at
that time. Following the meeting, representatives of Morgan
Stanley contacted a representative of Lazard to convey the board
of directors position.
On July 26, 2010, the board of directors held a special
meeting, at which certain members of our senior management, and
representatives of Morgan Stanley, Holland & Knight
and Outside Special Counsel were present. Mr. Chidsey
provided the board of directors with an update of our financial
results and forecast since the July 1, 2010 board of
directors meeting. Representatives of Morgan Stanley informed
the board of directors of the discussions between Morgan Stanley
and Lazard on July 1, 2010 following the board of directors
meeting. Representatives of Morgan Stanley further indicated
that neither Lazard nor 3G Capital had contacted us or Morgan
Stanley since the July 1, 2010 call between representatives
of Morgan Stanley and Lazard. The board of directors and its
advisors discussed the June 29th Proposal, our
stand-alone prospects and whether any further action should be
taken with respect to the June 29th Proposal. After
discussion, the board of directors determined not to initiate
any further discussions with 3G Capital at that time.
On July 27, 2010, Mr. Behring contacted a member of
the board of directors to discuss 3G Capitals interest in
the transaction and the amount of work that had been done to
support the June 29th Proposal. The director suggested
that it might be productive for 3G Capital to discuss these
topics directly with Mr. Chidsey. Thereafter, a
representative of Lazard contacted a representative of Morgan
Stanley to schedule a meeting among them, Mr. Behring and
Mr. Chidsey to take place within a few days.
On July 29, 2010, Mr. Chidsey and a representative of
Morgan Stanley met with Mr. Behring and a representative of
Lazard. At the meeting, Mr. Behring indicated that 3G
Capital wished to continue discussions with us in a
collaborative process regarding the appropriate price at which a
transaction may be completed. Mr. Chidsey and the
representative of Morgan Stanley indicated at the meeting that
they could not commit to any additional discussions without
further guidance from the board of directors.
On July 30, 2010, a representative of Morgan Stanley
informed a representative of Lazard that the board of directors
planned to meet the following week to discuss the July 29,
2010 meeting.
On August 3, 2010, the board of directors held a special
meeting, at which certain members of our senior management and
representatives of Morgan Stanley, Holland & Knight
and Outside Special Counsel were present. Mr. Chidsey and
representatives of Morgan Stanley updated the board of directors
on the discussions that had occurred with 3G Capital and Lazard
since July 26, 2010, including the discussion during the
in-person meeting on July 29, 2010. Representatives of
Morgan Stanley and Outside Special Counsel reminded the board of
directors that the non-price terms of the
June 29th Proposal had not yet been discussed between
the parties. Following discussion, the board of directors
determined that its legal advisors should engage in discussions
and negotiations with Kirkland regarding the non-price terms of
the potential transaction, particularly to decrease the
conditionality of the proposed terms. At the conclusion of the
meeting, the board of directors instructed representatives of
Morgan Stanley to inform representatives of Lazard that we would
provide 3G Capital with updated due diligence materials and
organize a meeting between Outside Special Counsel and Kirkland
to negotiate certain material non-price terms and conditions of
the June 29th Proposal. Following the meeting,
representatives of Morgan Stanley contacted a representative of
Lazard to convey the board of directors position.
Later in the day on August 3, 2010, Outside Special Counsel
distributed to Kirkland a revised version of the summary terms
of the merger agreement that was included in the
June 29th Proposal. The revised terms deleted all
conditions to the consummation of the transaction related to 3G
Capitals debt financing and required that 3G Capital enter
into definitive financing for the transaction prior to signing
the merger
31
agreement. In addition, the revised terms proposed that 3G
Capital would complete the transaction through a tender offer
directly to the Companys shareholders and a back-end
merger, which representatives of Outside Special Counsel
explained would be favorable to us because it could be completed
more quickly and therefore with greater certainty of closing. In
addition, the revised terms proposed expansions to our go
shop rights to solicit superior proposals, including a
lower termination fee and more limited matching and information
rights.
Between August 3, 2010 and August 16, 2010,
representatives of Outside Special Counsel, Holland &
Knight and Kirkland held meetings and discussions regarding the
summary terms of a merger agreement. During this period, the
parties also discussed the terms under which 3G Capital would
intend for certain members of our management to continue to be
employed following the closing of the transaction and other
management transition and retention matters.
In addition, during early August, 3G Capital and its
representatives were provided with information in response to
due diligence requests. Commencing on August 10, 2010, 3G
Capital and its representatives were advised that an online data
room that contained various legal and financial due diligence
materials was available for representatives of 3G Capital and
its advisors to access. Throughout the process leading to the
execution of the merger agreement the data room was updated with
new information, including specific information requested by 3G
Capital and its advisors.
Between August 3, 2010 and August 13, 2010,
representatives of Morgan Stanley and Lazard had a number of
conversations to discuss the process that would be followed in
the next few weeks to allow 3G Capital to make a definitive
offer. Representatives of Lazard and Morgan Stanley discussed
the mutual desire to finalize the due diligence and work through
any other key issues in the proposed transaction through a
negotiation of the merger agreement terms.
On August 12, 2010, representatives of Morgan Stanley,
Outside Special Counsel and Holland & Knight, on our
behalf, and representatives of Lazard and Kirkland, on behalf of
3G Capital, held a call to review the status of the discussions
and open issues in advance of a meeting of the board of
directors. Later that day, a subset of this group met to recap
their mutual understanding on the remaining open items regarding
the proposed terms of the merger agreement based on the
discussions that had taken place over the course of the prior
days of negotiations. In particular, the parties agreed that the
merger agreement would initially contemplate a tender offer
followed by a back-end merger with a minimum tender condition of
approximately
78-80%,
but
that the merger agreement would provide that we would
simultaneously proceed with filing a proxy statement for a
single-step merger to prevent delay to the transaction if a
majority but less than a supermajority of our shareholders
tendered their shares in the tender offer.
On August 13, 2010, the board of directors held a special
meeting, at which certain members of our senior management and
representatives of Morgan Stanley, Holland & Knight
and Outside Special Counsel were present. Mr. Chidsey
updated the board of directors on our fourth quarter and full
year 2010 results as well as results for July 2010 and indicated
that he would be presenting an updated forecast for the full
year and the five-year plan at the upcoming board of directors
meeting on August 19, 2010. Representatives of Morgan
Stanley updated the board of directors on their discussions with
representatives of Lazard since August 3, 2010 regarding
the proposed process and timeline to get to a definitive
agreement for a proposed transaction. In that regard, it was
noted that progress on the deal had been made (other than on the
price of the transaction, on which the parties had agreed to
delay further negotiation). Following discussion, the board of
directors determined that our management and advisors should
continue to furnish due diligence materials to 3G Capital and
its advisors and deliver a draft merger agreement to 3G Capital
and Kirkland. Representatives of Morgan Stanley informed the
board of directors that Mr. Behring had requested a meeting
with Mr. Chidsey to review the transition and retention
issues with respect to members our management team. Following a
discussion, the board of directors determined that
Mr. Chidsey should meet with Mr. Behring to discuss
the management retention and transition issues, but that
Mr. Chidsey should not discuss any of the terms of his own
retention arrangements until later in the process.
On August 16, 2010, Mr. Chidsey met with
Mr. Behring at 3G Capitals offices to discuss our
senior management organizational structure and management
retention and transition issues generally, although no specific
individual arrangements were discussed at this meeting.
32
Also on August 16, 2010, Outside Special Counsel
distributed to Kirkland an initial draft of the merger agreement
that reflected the most recent discussions between the parties,
as well as our proposal to resolve certain of the remaining open
issues.
On August 18, 2010, the Compensation Committee of the board
of directors met to discuss proposed changes to the severance
arrangements for Mr. Chidsey, members of the Global
Executive Team, other Senior Vice Presidents and Vice
Presidents. The Compensation Committee received advice from
Mercer Inc., or Mercer, its compensation consultant, and CAP
Partners, our compensation consultant, that the level of
severance in connection with a change in control of the Company
provided at the time of our initial public offering was
currently below market as compared to industry peers. The
Compensation Committee then discussed the potential changes that
should be made to such provisions in order to bring them more in
line with industry peers, including for Mr. Chidsey by
adding a pro-rata bonus in addition to his current severance
benefit and increasing the benefits for other members of the
Global Executive Team, other Senior Vice Presidents and Vice
Presidents, who we collectively refer to as the Company
Officers. In addition, the Compensation Committee discussed our
regular, annual grant of long-term incentive compensation to our
employees and officers under our Equity Incentive Plan,
including the fact that such grant was a standard component of
compensation for certain of our employees and officers as well
as the pros and cons of making such grant in light of a possible
transaction with 3G Capital. Following such discussion, the
Compensation Committee approved such grant of long-term
incentive compensation under our Equity Incentive Plan, such
grant to be made and priced as of August 25, 2010,
generally, in the form of 50% stock options and 50% restricted
stock awards.
On August 19, 2010, the board of directors held a regular
meeting, at which certain members of our senior management were
present and, for portions of the meeting, representatives of
Morgan Stanley, Holland & Knight and Outside Special
Counsel were present. Mr. Chidsey updated the board of
directors on our results for the 2010 fiscal year.
Mr. Chidsey then provided an update on the proposed
transaction with 3G Capital and indicated that we were still
awaiting an updated proposal, with a revised offer price, from
3G Capital. Our senior management team then reviewed with the
board of directors the refinancing options that existed with
respect to our term loan facility, including the amendment and
extension of our existing credit facility, and reported to the
board of directors that we would need to capitalize on any
favorable conditions in the debt markets to effect the
refinancing if a transaction could not be finalized with 3G
Capital. Representatives of Outside Special Counsel then gave a
presentation regarding the board of directors fiduciary
duties, the current transaction terms proposed by 3G Capital and
compensation and equity-related matters. The board of directors
also discussed the terms of the draft merger agreement,
including the go-shop provision which allows for a
formal marketing process after the signing of a definitive
merger agreement to explore whether any third parties would be
interested in acquiring the Company on more favorable terms. The
board of directors also reviewed the current transaction terms
and conditions proposed by 3G Capital, including a two-step
tender offer structure with a fall back one-step merger, the
status of the debt financing, the proposed termination fees
(including the amounts and circumstances in which such fees
would be payable), the reverse termination fees payable by 3G
Capital and other matters. The board of directors then discussed
the principal outstanding open issues between the parties, our
position with respect to these matters and the potential risks
to us. Representatives of the Sponsors indicated that they would
be prepared to enter into tender agreements, with customary
fiduciary out provisions, to support a transaction with 3G
Capital that was approved by the board of directors. The board
of directors then reviewed the change in control severance
enhancements for our officers that were discussed with the
Compensation Committee on August 18, 2010 at a meeting of
the Compensation Committee, as described in the paragraph
immediately above. After carefully considering the implications
of the equity grant in light of the potential, but not definite,
transaction with 3G Capital and the impact of deviating from our
standard practice with respect to such grants, the board of
directors ratified the fiscal year 2011 annual equity grant
previously approved by the Compensation Committee. In addition,
the board of directors approved management moving forward with
the refinancing in the event the transaction with 3G Capital did
not occur, in order to take advantage of a window of opportunity
in the credit markets.
Also at the August 19, 2010 meeting, representatives of
Morgan Stanley summarized for the board of directors the recent
developments with respect to the 3G Capital proposal, including
the expectation that 3G
33
Capital seek to put in place fully negotiated financing
agreements before signing. Representatives of Morgan Stanley
discussed the recent share price performance of the Company and
our peers and again reviewed Morgan Stanleys preliminary
financial analyses.
In order to efficiently manage the process of reviewing the new
proposal that was expected from 3G Capital and any alternatives
thereto, the board of directors authorized the Executive
Committee of the board of directors to provide advice and
guidance to our management and advisors in reviewing the basic
financial terms of any proposal received by 3G Capital but that
no definitive steps relating to such proposal would be
determined without the final approval of the entire board of
directors. The Executive Committee of the board of directors is
comprised of Richard Boyce, John W. Chidsey, Ronald M. Dykes,
Sanjeev K. Mehra and Stephen G. Pagliuca.
Following the presentation from Morgan Stanley, the
representatives of Morgan Stanley, Outside Special Counsel and
Holland & Knight were excused from the meeting, and
the board of directors discussed the fee proposals submitted by
Morgan Stanley relating to its role as financial advisor in
connection with a potential acquisition transaction and the
potential role of Goldman Sachs as our co-financial advisor with
Morgan Stanley. Mr. Mehra was then excused from the
meeting. Representatives of Outside Special Counsel were invited
back into the meeting, and together with the board of directors,
reviewed the history of the Goldman Sachs Funds ownership
interest in the Company, its board rights under the existing
shareholders agreement between us and the Sponsors, any
potential (or perceived) conflict of interest in Goldman Sachs
acting as our co-financial advisor on the transaction, the depth
of knowledge that Goldman Sachs had of the Company and the
industry including through its role as an underwriter in various
equity offerings and noted the benefit of receiving a second
financial analysis of the transaction and opinion as to the
fairness of the price that would be offered in the transaction.
The board of directors noted that the financial advisor fees
would be split between Morgan Stanley and Goldman Sachs. The
board of directors also noted that the advice, analysis and
fairness opinion provided by Goldman Sachs would be independent
of any analysis prepared by Morgan Stanley and that Goldman
Sachs financial advisory team would be separate from the
persons affiliated with the Goldman Sachs Funds. Following such
discussion, the Outside Special Counsel representatives were
excused from the meeting and the board of directors (excluding
Mr. Mehra) approved the engagement of Goldman Sachs as
co-financial advisor in connection with the proposed transaction
and the advisory fee to be paid to both Morgan Stanley and
Goldman Sachs. The board of directors also discussed formally
retaining legal counsel to provide advice and assistance in
connection with the proposed transaction and instructed
Ms. Chwat to retain such legal counsel to represent the
Company.
Finally, Mr. Wells provided the board of directors with a
summary of the financial results for fiscal year 2010 and the
fiscal year 2011 plan, including the strategic initiatives
regarding refranchising of our restaurants. Mr. Wells
reviewed the assumptions in the forecasted plan, including
comparable sales and traffic, commodity prices and currency
impact. Mr. Wells advised the board of directors that,
because our 2011 plan and five-year plans contained many risks
and uncertainties, including macroeconomic factors outside of
our control such as those regarding currency, commodities,
unemployment rates, and general economic conditions, it was very
difficult to forecast our potential results.
Later in the day on August 19, 2010, representatives of
Morgan Stanley and Lazard had a detailed conversation regarding
the status of the potential transaction, the issues discussed at
the board of directors meeting earlier that day, and the process
to move forward. Representatives of Morgan Stanley indicated
during this discussion that the board of directors was reviewing
the refinancing alternatives relating to our existing credit
facility and that we needed to know whether or not there would
be a mutually agreeable transaction by August 30, 2010.
Representatives of Lazard indicated that 3G Capital hoped to
conclude the discussions by August 30, 2010 and that it was
in discussions with its banks to provide detailed debt
commitment letters. They further discussed the status and
remaining items needed to complete the legal and financial due
diligence.
On August 20, 2010, Ms. Chwat contacted Skadden, Arps,
Slate, Meagher & Flom LLP, or Skadden Arps, to engage
the firm as legal counsel to provide advice and assistance in
connection with the proposed transaction with 3G Capital.
Thereafter, Skadden Arps served as our special transaction
counsel. From
34
August 22, 2010 through August 25, 2010,
representatives of Skadden Arps discussed certain outstanding
open issues in the merger agreement with representatives of
Kirkland, including transaction structure, certainty of
financing, conditions to the closing, cooperation by us with 3G
Capitals debt financing efforts, obligations of 3G Capital
to use bridge financing, specific performance rights, the
go-shop period, termination fees and management
retention and transition matters.
On August 22, 2010, representatives of Kirkland and
representatives of Skadden Arps held a teleconference to discuss
the status of the merger agreement and management retention
arrangements and the open items on each. Following the call,
Kirkland delivered to Skadden Arps a proposal setting forth 3G
Capitals expectations regarding the treatment of employee
equity in the merger, the treatment of existing severance
arrangements for our officers and transition arrangements with
Mr. Chidsey, Mr. Wells and Ms. Chwat, who we
collectively refer to as the Transition Executives, and
Mr. Smith. The proposed terms included a cash out of all
vested equity and a cash out and placement in trust of the
proceeds with respect to all unvested equity for all employees,
including management, which would then be released over the two
year period following the completion of the merger. The proposal
did not contemplate the issuance of any new equity for
management or other employees post-closing, including pursuant
to the rollover of existing Company equity awards. The proposal
generally indicated 3G Capitals acceptance of the
severance terms discussed by the Compensation Committee at the
August 18, 2010 meeting for members of the Global Executive
Team and other Senior Vice Presidents. The proposal further
contemplated transition agreements with Messrs. Chidsey,
Wells and Smith and Ms. Chwat, pursuant to which the
executives would perform transition services for a period of up
to one year or, in the case of Mr. Chidsey, at least two
years. Pursuant to the proposal, Mr. Chidsey would serve as
Co-Chairman during the transition period, would no longer serve
as our Chief Executive Officer upon the completion of the
merger, would receive current salary and bonus levels during the
transition period, would agree to the placement in trust of his
unvested equity proceeds and severance entitlements at closing
and would receive a payment of 1.5 times Mr. Chidseys
equity proceeds placed in trust. With respect to
Messrs. Wells and Smith and Ms. Chwat, the proposal
provided that the executives would receive current salary and
bonus levels during the transition period and would agree to the
placement in trust of the executives equity amounts and
severance entitlements at closing. Discussions between us and 3G
Capital and their respective legal advisors regarding treatment
of employee equity and severance arrangements and the retention
and transition arrangements for the Transition Executives and
Mr. Smith continued until the signing of the merger
agreement.
On August 25, 2010, Kirkland distributed a revised draft of
the merger agreement for the proposed transaction. From
August 25, 2010 through August 29, 2010, our senior
management and representatives of Skadden Arps,
Holland & Knight and Morgan Stanley held numerous
meetings and conference calls with representatives of 3G
Capital, Lazard and Kirkland to discuss the open issues in the
merger agreement and our position with respect to such issues,
including the obligations of Merger Sub to use the bridge
financing in lieu of placing the high-yield notes, the timing of
the tender offer (and extensions thereto) and the filing and
mailing of the proxy statement, the conditions to the tender
offer and the merger, including with respect to solvency matters
and financial performance criteria of the Company, the
termination fees (including the amounts and the circumstances in
which such fees would become payable) and the management
retention and transition matters.
On August 26, 2010, Mr. Chidsey met with
Mr. Behring to discuss (i) the treatment of employee
equity in the transaction, including the Companys standard
equity grant on August 25, 2010 of approximately
2.2 million shares, (ii) the senior management team
and retention issues, and (iii) the transition arrangements
for the Transition Executives and Mr. Smith.
On August 27, 2010, representatives of 3G Capital, Lazard,
Kirkland, the Company, Morgan Stanley, Skadden Arps and
Holland & Knight met by teleconference to negotiate
certain key terms of the merger agreement, including the terms
of our go shop period and the closing conditions to
the offer and the merger. In particular, we objected to the
presence of a closing condition providing for the Company to
have a minimum EBITDA of $100 million during the first
fiscal quarter of fiscal 2011.
35
On August 28, 2010, Skadden Arps delivered a revised
proposal to Kirkland reflecting managements position
regarding management retention and transition issues. The
revised proposal, among other things, provided (i) that all
Company equity awards, whether or not vested, would be cashed
out in the merger, except that an amount equal to sixty percent
(60%) of the proceeds (representing an after-tax amount) from
the equity awards that were granted on August 25, 2010 to
the Companys officers who hold the position of vice
president and above, including the executive officers (the
August Equity Grants) (excluding Peter Smith), would
be deposited in a trust, escrow or similar account for the
benefit of such employees for subsequent release; (ii) for
the payment at closing of pro rata bonuses in respect of the
2011 fiscal year to all of our bonus-eligible employees;
(iii) for amendments to the severance provisions of our
officers consistent with changes discussed at the
August 18, 2010 compensation committee meeting;
(iv) transition bonuses for the Transition Executives; and
(v) for transition services to be performed by
Messrs. Chidsey and Wells and Ms. Chwat for six months
following completion of the merger, including a part-time
consulting arrangement for Mr. Chidsey for an additional
six-month period.
On August 29, 2010, Skadden Arps distributed a revised
draft of the merger agreement relating to the proposed
transaction and drafts of the stockholder tender agreements,
whereby the Sponsors would, subject to customary exceptions,
agree to tender their shares of Company common stock into the
proposed tender offer. From this time until early in the morning
on September 2, 2010, representatives of us and 3G Capital
and their respective legal and financial advisors engaged in
extensive discussions and negotiations regarding the terms of
the merger agreement, the debt and equity commitment letters and
the management retention and transition matters. In particular,
the parties discussed the timing of the tender offer and mailing
of the proxy statement, the terms of the go-shop
period during which we could solicit interest in alternative
transactions, our obligation to cooperate in the financing
efforts of Parent and the closing conditions. During these
negotiations, 3G Capital agreed to permit a 40-day
go-shop period, lower the termination fee payable in
connection with the termination of the merger agreement to
accept a superior proposal to $50 million, and agreed to
increase the termination fee payable by 3G Capital in connection
with certain events of termination of the merger agreement where
3G Capital has failed to close the offer or the merger to
$175 million. 3G Capital also agreed to eliminate its
minimum EBITDA condition if we would agree that 3G would not
have to draw on its bridge commitment under its debt financing
commitment letters to complete the offer prior to
November 18, 2010 unless it was commercially reasonable to
do so.
On August 31, 2010, a representative of Lazard contacted a
representative of Morgan Stanley and stated that 3G Capital
proposed to acquire all of the outstanding shares of Company
common stock at a price of $24.00 in cash per share. The
representative of Lazard indicated that this was 3G
Capitals best and final offer.
On August 31, 2010, the Compensation Committee held a
special meeting, with representatives of Skadden Arps, Mercer
and CAP Partners, managements compensation consultant, in
attendance, to consider certain matters in connection with the
proposed transaction. At this meeting, the Compensation
Committee determined that the treatment of the Companys
equity awards provided in the merger agreement was consistent
with the terms of the Companys equity incentive plans and
further approved, and recommended that the board of directors
approve the cancellation of outstanding equity awards at the
effective time of the merger in exchange for the consideration
to be paid to holders of such equity awards in accordance with
the terms of the merger agreement, as well as the placement in
trust of the after tax amount of the proceeds with respect to
the August Equity Grants made to our Vice Presidents and above.
The Compensation Committee considered and approved, and
recommended that the board of directors approve, the employment
agreement amendments for Messrs. Chidsey, Wells and Smith
and Ms. Chwat. The Compensation Committee also authorized
amendments to the employment agreements for members of the
Global Executive Team, other Senior Vice Presidents and Vice
Presidents which modified the severance payments for such
executives to be effective upon consummation of the merger. The
Compensation Committee also authorized and approved the payment,
upon effectiveness of the merger, of pro rata bonuses for the
portion of our 2011 fiscal year occurring prior to such date at
target level, as contemplated by the merger agreement. These
transition and retention arrangements are described in
Interests of Certain Persons in the Merger beginning
on page [ ].
36
On August 31, 2010, Kirkland distributed a revised draft of
the equity commitment letter and an initial draft of the limited
guaranty pursuant to which 3G would agree to guarantee the
performance and discharge of the payment of the reverse
termination fee when required to be paid under the merger
agreement. Representatives of Skadden Arps and Kirkland
subsequently discussed the issues regarding the limited guaranty
and equity commitment letter, including the circumstances in
which we would be permitted to specifically enforce, as a third
party beneficiary, the obligations of 3G under the equity
commitment letter.
On the evening of August 31, 2010, news articles ran
reporting rumors that we were considering a sale of the Company.
On September 1, 2010, the board of directors held a special
meeting, at which members of our senior management and
representatives of Skadden Arps, Holland & Knight,
Morgan Stanley and Goldman Sachs were present. Prior to this
meeting, the members of the board of directors were provided
with materials related to the proposed transaction. At the
meeting:
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representatives of Skadden Arps reviewed with the board of
directors its fiduciary duties in considering the proposed
transaction;
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the board of directors reviewed the developments in the
negotiations with 3G Capital, including the terms of the merger
agreement and stockholder tender agreements and the changes that
had been effected to the merger agreement since the last board
of directors meeting, the terms of the debt and equity financing
commitment letters and the information that had been received
regarding the sources of funding of 3G with respect to its
obligations under the equity commitment letter and the limited
guaranty;
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the board of directors considered the positive and negative
factors and risks in connection with the proposed transaction,
as discussed in the section entitled
Reasons for Recommendation
below;
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Ms. Chwat reviewed with the board of directors the actions
taken by the Compensation Committee on August 31, 2010 with
respect to retention and transition matters;
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representatives of Morgan Stanley made a financial presentation
and rendered to the board of directors its oral opinion,
subsequently confirmed in writing, that as of September 1,
2010, and based upon and subject to the limitations,
qualifications and assumptions set forth in the written opinion,
the $24.00 per share to be received by holders of shares of
Company common stock pursuant to the merger agreement was fair,
from a financial point of view, to such holders as discussed in
Opinion of the Companys Financial
Advisors Opinion of Morgan Stanley & Co.
Incorporated.
Such opinion is attached hereto as Annex
B. Representatives of Morgan Stanley discussed with the board of
directors the possibility of another private equity buyer or
strategic buyer making an offer for the Company; and
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representatives of Goldman Sachs made a financial presentation
and rendered to the board of directors its oral opinion, which
was subsequently confirmed by delivery of a written opinion,
dated September 2, 2010, to the effect that, as of that
date, and based upon and subject to the factors, assumptions and
limitations described in the opinion, the $24.00 per share of
Company common stock in cash to be paid to the holders (other
than Parent and its affiliates) of shares of Company common
stock pursuant to the merger agreement was fair, from a
financial point of view, to such holders as discussed in the
section entitled
Opinion of the
Companys Financial Advisors Opinion of Goldman
Sachs & Co.
Such opinion is attached hereto as
Annex C.
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Following an extensive discussion, the board of directors
instructed us and our advisors to continue to pursue their due
diligence with respect to the source of the funds for 3G to
ensure that 3G could perform its obligations under the equity
commitment letter and the limited guaranty, including satisfying
its obligations to pay the reverse termination fee. The board of
directors determined to adjourn the meeting until later in the
evening on September 1, 2010 to allow for the due diligence
and discussions on this issue to progress. Following the
adjournment of the meeting, we and our advisors contacted 3G
Capital and its advisors to discuss the source of the funds for
3G and to explore potential methods to provide reasonable
assurances that 3G would have the funds to satisfy its
obligations under the equity commitment letter and the limited
guaranty.
37
Skadden Arps and Kirkland then discussed certain modifications
to the equity commitment letter and limited guaranty to include
provisions that would provide assurances on these matters.
Later in the evening of September 1, 2010, the board of
directors reconvened the special meeting, at which members of
our senior management and representatives of Skadden Arps,
Morgan Stanley, Goldman Sachs and Holland & Knight
were present. The board of directors reviewed discussions with
3G Capital and its advisors regarding the source of funds of 3G.
The board of directors also discussed the assurances that 3G had
agreed to provide to us. Following a detailed discussion of
these matters and following careful consideration of the
proposed merger agreement and the offer and the merger, the
board of directors unanimously (1) approved and declared
advisable the merger agreement, the offer, the merger and the
other transactions contemplated by the merger agreement
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and (2) declared that the terms of the merger agreement and
the transactions contemplated by the merger agreement, including
the merger, the offer and the other transactions contemplated by
the merger agreement, on the terms and subject to the conditions
set forth therein, are fair to and in the best interests of the
shareholders of the Company. The board of directors unanimously
resolved to recommend that the Companys shareholders
accept the offer and tender their shares into the offer and, if
necessary, vote their shares in favor of adoption of the merger
agreement to approve the merger. The board of directors
authorized the appropriate officers of the Company to finalize
and execute the merger agreement and related documentation. The
board of directors also ratified the actions taken by the
Compensation Committee on August 31, 2010.
During the course of the late evening of September 1, 2010
and early morning of September 2, 2010, representatives of
Kirkland, Skadden Arps, Holland & Knight and us
finalized the merger agreement and the other definitive
transaction agreements.
On September 2, 2010, the parties executed the merger
agreement and the appropriate parties executed and delivered the
equity commitment letter, the debt commitment letter and the
stockholder tender agreements and ancillary documents on
September 2, 2010. On September 2, 2010, before the
opening of trading on the NYSE, we and 3G Capital issued a joint
press release announcing the execution of the merger agreement.
Beginning on September 3, 2010, the day following the
execution of the merger agreement, at the direction of the board
of directors and under the supervision of our executive
officers, representatives of Morgan Stanley began the process of
contacting parties to determine whether they might be interested
in pursuing a transaction that would be superior to the proposed
transaction with 3G Capital. Representatives of Morgan Stanley
and, in one case, together with representatives of Goldman
Sachs, contacted 21 parties, consisting of one potential
strategic buyer and 20 potential financial sponsor buyers.
On September 16, 2010, Parent and Merger Sub commenced the
offer, which has an initial expiration date of October 14,
2010.
As of September 23, 2010, none of the parties contacted during
the go-shop process, on behalf of us and at the direction of the
board of directors, had submitted an acquisition proposal for
the Company. The process for the solicitation of other third
party interest is ongoing, although there can be no assurance
that such efforts will result in an alternative transaction
being proposed or in a definitive agreement for such a
transaction being entered into. We do not intend to announce
further developments with respect to the solicitation process
until the board of directors has made a decision regarding an
alternative proposal, if any.
Reasons
for the Merger; Recommendation of the Board of
Directors
In evaluating the merger agreement, the merger and the other
transactions contemplated by the merger agreement, the board of
directors consulted with our senior management, outside legal
counsel and independent financial advisors. In recommending that
the Companys shareholders vote their shares of Company
38
common stock in favor of adoption of the merger agreement, the
board of directors also considered a number of factors,
including the following:
Financial
Terms; Fairness Opinions; Certainty of Value
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Historical market prices, volatility and trading information
with respect to the Company common stock, including that the per
share merger consideration of $24.00 per share in cash:
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Represented a premium of 43.1% over the closing price of the
Company common stock on August 30, 2010.
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Represented a premium of 41.6%, 36.7% and 27.0% over the one,
three and six month, respectively, volume-weighted average
closing prices of the Company common stock prior to
August 30, 2010.
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Exceeded, by 8.8%, the 52-week high prior to August 30,
2010.
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Opinions of the Companys financial advisors and support of
the transactions:
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Morgan Stanley and Goldman Sachs presented certain financial
analyses and delivered their opinions that as of the date of
their respective opinions and subject to various limitations,
qualifications and assumptions set forth therein, the $24.00 per
share to be received by holders of shares of Company common
stock pursuant to the merger agreement was fair, from a
financial point of view, to such holders, other than with
respect to Goldman Sachs opinion, Parent and its
affiliates, as described under Opinions of the
Companys Financial Advisors below.
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The Sponsors, highly sophisticated investors and whose
affiliated funds own approximately 31% of the outstanding shares
of Company common stock, have three representatives on the board
of directors, all of whom support the transaction.
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The form of consideration to be paid in the transaction is cash,
which provides certainty of value and immediate liquidity to the
Companys shareholders.
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Financial
Condition; Prospects of the Company
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Our current and historical financial condition, results of
operations, competitive position, strategic options and
prospects, as well as the financial plan and prospects if we
were to remain an independent public company, and the potential
impact of those factors on the trading price of the Company
common stock (which is not feasible to quantify numerically).
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The prospective risks to us as a stand-alone public entity,
including the risks and uncertainties with respect to
(i) achieving its growth in light of the current and
foreseeable market conditions, including the risks and
uncertainties in the U.S. and global economy generally and
the quick service restaurant industry specifically,
(ii) future commodity prices, (iii) fluctuations in
foreign exchange rates, (iv) potential increased costs
relating to changes in law effecting the health care industry
and (v) the risk factors set forth in our
Form 10-K
for the fiscal year ended June 30, 2010.
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In particular, the board of directors considered the increasing
challenges to achieving our business plan caused by having
approximately 90% of its restaurants owned by franchisees (which
percentage would have been expected to increase in the next five
years if we accelerated the pace of refranchisings as part of
the portfolio management strategy):
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Given the significant percentage of franchised restaurants, our
operating results (i.e., royalties) are closely tied to the
success of its franchisees, but the franchisees are independent
operators and we have limited influence over their restaurant
operations and must rely on franchisees to implement major
initiatives (including the reimaging initiative and
point-of-sale
upgrade initiative) and marketing and advertising programs to
drive future growth.
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Our principal competitors may have greater influence over their
restaurant systems because of their significantly higher
percentage of owned restaurants (as compared to us) which allows
such
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competitors more control in the implementation of operational
initiatives and business strategies, including marketing and
advertising programs.
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The board of directors considered how closely tied our
comparable sales and average restaurant sales are to the
unemployment and consumer confidence levels and its opinion
that, while some operating improvements were achievable in the
current economic environment, until and unless the economy
experiences significant improvements in unemployment and
consumer confidence, we would not be able to significantly
capitalize on the investments and operating improvements that
had been made in the business.
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The board of directors knowledge of the significant
capital expenditures that are required in order to remodel or
rebuild our restaurants and the risks that are associated with
our plan to refranchise approximately half of our restaurant
portfolio in the next three to five years to minimize these
capital expenditures and encourage additional restaurant growth.
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The board of directors knowledge of our recent share price
performance, specifically that our recent earnings multiples
compared to those of certain comparable companies did not
provide shareholders the full benefit of our recent operational
performance.
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Strategic
Alternatives
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In consultation with its financial advisors, the board of
directors considered the likelihood of another financial or
strategic buyer being willing to pursue a transaction with us.
Although we did not actively seek offers from other potential
purchasers, the board of directors believes that the per share
merger consideration is the highest price reasonably attainable
by the Companys shareholders in an acquisition
transaction, considering the likelihood of potential interested
third parties and strategic opportunities.
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As discussed below, the terms of the merger agreement permit the
board of directors to solicit and consider alternative proposals
and to terminate the merger agreement and enter into an
agreement with a third party to accept a superior
proposal.
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The board of directors also considered the possibility of
continuing as a standalone company or pursuing a leveraged stock
repurchase and perceived risks of those alternatives, the range
of potential benefits to the Companys shareholders of
these alternatives and the timing and execution risk of
accomplishing the goals of such alternatives, as well as the
board of directors assessment that no alternatives were
reasonably likely to create greater value for the Companys
shareholders, taking into account risks of execution as well as
business, competitive, industry and market risk.
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Merger
Agreement Terms (Go-Shop Period; Solicitation of Alternative
Proposals)
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We have the right to conduct a go shop process for
40 days after signing the merger agreement to solicit
alternative acquisition proposals, if available, or confirm the
advisability of the merger.
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The merger agreement has customary no solicitation and
termination provisions which should not preclude third parties
from making superior proposals:
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After the go-shop period, the board of directors can furnish
information or enter into discussions with respect to a takeover
proposal if it determines in good faith, after consultation with
its outside legal counsel and financial advisor, that such
takeover proposal constitutes or would reasonably be expected to
result in a superior proposal.
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If the board of directors determines in good faith after
consultation with its financial advisor and outside legal
counsel, that a takeover proposal constitutes a superior
proposal, it can (after giving Merger Sub a match
right) terminate the merger agreement and enter into an
agreement with respect to the superior proposal.
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The board of directors may withdraw or modify its recommendation
if it determines in good faith after consultation with its
financial advisor and outside legal counsel, that the failure to
do so would be inconsistent with its fiduciary duties (whether
or not in response to a takeover proposal).
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If we terminate the merger agreement in order to accept a
superior proposal, we are required to pay a termination fee of
$50 million during the go-shop period or $95 million
after the go-shop period (equal to approximately 1.5% and 2.8%
of the aggregate equity value of the transaction, respectively);
the board of directors believes that such termination fees are
customary and would not deter any interested third party from
making, or inhibit the board of directors from approving a
superior proposal if such were available.
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The merger agreement has customary terms and was the product of
extensive arms-length negotiations.
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The structure of the transaction as a two-step transaction
enables the shareholders to receive the cash price pursuant to
the offer in a relatively short time frame (and reduce the
uncertainty during the pendency of the transaction), followed by
the merger in which shareholders that do not tender in the offer
will receive the same cash price as is paid in the offer. In
addition, the structure of the transaction permits the use of a
one-step transaction, under certain circumstances, in the event
the two-step transaction is unable to be effected.
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Merger Sub is obligated to exercise the
top-up
to purchase up to an additional number of shares of Company
common stock sufficient to cause Merger Sub to own 90% of the
shares of Company common stock outstanding after the offer,
which would permit Merger Sub to close the merger (as a
short-form merger under Delaware law) more quickly than
alternative structures.
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The availability of statutory appraisal rights under Delaware
law in the merger.
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Likelihood
of Consummation
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Stockholder Tender Agreements:
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The Sponsors, who currently own approximately 31% of the
outstanding shares of Company common stock, entered into the
stockholder tender agreements and agreed to tender their shares
in the offer. It is anticipated that, pursuant to the terms of
such stockholder tender agreements, such Sponsors will each
enter into customary voting agreements with Parent to vote their
shares of Company common stock in favor of the merger.
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The stockholder tender agreements were a condition to
Parents willingness to enter into the merger agreement.
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The stockholder tender agreements would automatically terminate
upon a termination of the merger agreement for any reason
(including as a result of the board of directors accepting a
superior proposal) and do not prevent the board of directors
from accepting a superior proposal.
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The likelihood that the offer and the merger would be
consummated, including:
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Merger Sub is required, subject to certain exceptions, to extend
the offer in certain circumstances.
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The consummation of the offer is conditioned on 79.1% of the
outstanding shares of Company common stock being tendered in the
offer, with a
back-up
one-step merger (that only requires the approval of the holders
of a majority of the outstanding shares of Company common stock)
in certain circumstances, including in the event the minimum
condition in the offer is not satisfied.
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The conditions to the offer are specific and limited, and are
not within the control or discretion of Merger Sub, Parent or 3G
and, in the board of directors judgment, are likely to be
satisfied.
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The transaction is likely to be completed if a sufficient number
of shares are tendered in the offer.
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There are no significant antitrust or other regulatory
impediments.
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There are no third party consents that are conditions to the
transaction.
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Merger Sub has obtained commitment letters as described below.
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Financing-Related
Terms
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Debt/Equity Commitment Letters:
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Merger Sub received executed debt financing commitment letters
from major commercial banks with significant experience in
similar lending transactions and a strong reputation for
honoring the terms of the commitment letters, which, in the
reasonable judgment of the board of directors, increases the
likelihood of such financing being completed.
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Each of Parent and Merger Sub is required to use reasonable best
efforts to seek to enforce its rights under the debt financing
documents in the event of a material breach thereof by the
financing sources thereunder.
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3G has provided the equity commitment letter to fund the equity
portion of the financing (which represents approximately 37.5%
of the total financing required for the transaction) and has
provided assurances of the sources of its funds.
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The limited number and nature of the conditions to funding set
forth in the debt and equity financing commitment letters and
the expectation that such conditions will be timely met and the
financing will be provided in a timely manner, and the
obligation of Parent and Merger Sub to use reasonable best
efforts to obtain the debt financing, and if they fail to effect
the closing under certain circumstances, for Parent to pay us
the Parent Termination Fee.
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3G has provided the Guaranty in favor of the Company that
guarantees the payment of the Parent Termination Fee.
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The board of directors considered the level of effort Merger Sub
and Parent must use under the merger agreement to obtain the
proceeds of the financing, including the obligation to
take-down the bridge financing by November 18,
2010 if all conditions to the merger or offer (other than the
financing proceeds condition), as applicable, have been
satisfied or waived.
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We are entitled to cause the equity to be funded if (i) all
of the conditions to Parents and Merger Subs
obligations to the offer closing and/or the effective time of
the merger have been satisfied, (ii) the debt financing
would be funded at the effective time of the merger if the
equity is funded and (iii) we have confirmed that if the
equity financing and debt financing were funded, it would take
actions within its control to cause the closing of the merger to
occur.
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The board of directors also considered a number of uncertainties
and risks in its deliberations concerning the merger and the
other transactions contemplated by the merger agreement,
including the following:
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Our current shareholders would not have the opportunity to
participate in any possible growth and profits of the Company
following the completion of the transaction.
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The risk that the minimum tender condition of 79.1% in the offer
may not be satisfied and that such minimum tender condition is a
higher threshold than the approval percentage that would be
required if the transaction was structured as a one-step merger
(i.e., a majority of the outstanding shares).
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However, this consideration was viewed in light of the
provisions in the merger agreement that provide for the one-step
merger (with a majority voting requirement) if the minimum
tender condition is not satisfied.
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The merger agreement contemplates the early filing of a proxy
statement so that the one-step merger structure could be
implemented without significant delay if the minimum tender
condition is not satisfied.
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The risk that the proposed transaction might not be completed
and the effect of the resulting public announcement of
termination of the merger agreement on:
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The market price of the Company common stock, which could be
affected by many factors, including (i) the reason for
which the merger agreement was terminated and whether such
termination results from factors adversely affecting us,
(ii) the possibility that the marketplace would consider us
to be an unattractive acquisition candidate and (iii) the
possible sale of shares of Company common stock by short-term
investors following the announcement of termination of the
merger agreement.
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Our operating results, particularly in light of the costs
incurred in connection with the transaction, including the
potential requirement to make a termination payment.
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The ability to attract and retain key personnel.
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Relationships with franchisees and others that do business with
us.
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The possible disruption to our business that may result from the
announcement of the transaction and the resulting distraction of
the attention of our management and employees and the impact of
the transaction on our franchisees and others that do business
with us.
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The terms of the merger agreement, including (i) the
operational restrictions imposed on us between signing and
closing (which may delay or prevent us from undertaking business
opportunities that may arise pending the completion of the
transaction), and (ii) the termination fee, that could
become payable by us under certain circumstances, including if
we terminate the merger agreement to accept a superior proposal,
in an amount equal to:
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$50 million (or approximately 1.5% of the equity value of
the transaction) if such termination occurs prior to the
expiration of the go-shop period, or
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$95 million (or approximately 2.8% of the equity value of
the transaction) if such termination occurs after the expiration
of the go-shop period.
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The fact that we entered into the transaction with Parent and
Merger Sub before seeking offers from other potential purchasers.
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The board of directors believed that initiating a prolonged
auction process could have (i) resulted in the loss of
Merger Subs offer, (ii) negative impacts on the
morale of employees, and (iii) distracted employees and
senior management from implementing our operating plan.
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The permissive go shop provisions and level of
termination fees of the merger agreement would nonetheless
provide an opportunity to seek offers from other potential
purchasers.
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The restriction on soliciting competing proposals following the
go-shop period.
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The possibility that Merger Sub will be unable to obtain the
debt financing from the lenders under the commitment letters,
including as a result of the conditions in the debt commitment
letter.
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The fact that we are entering into a merger agreement with a
newly formed entity and, accordingly, that its remedy in
connection with a breach of the merger agreement by Merger Sub,
even a breach that is deliberate or willful, is limited to
$175 million.
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The interests of our CEO and certain other members of senior
management in the offer and the merger, including certain
severance and retention arrangements as described under the
section entitled The Merger Interests of
Certain Persons in the Merger beginning on
page [ ].
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The fact that the cash consideration paid in the transaction
would be taxable to the Companys shareholders and would
provide liquidity to the Sponsors.
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The board of directors believed that, overall, the potential
benefits of the offer and the merger to the Companys
shareholders outweighed the risks and uncertainties of the offer
and the merger.
43
The foregoing discussion of information and factors considered
by the board of directors is not intended to be exhaustive. In
light of the variety of factors considered in connection with
its evaluation of the offer and the merger, the board of
directors did not find it practicable to, and did not, quantify
or otherwise assign relative weights to the specific factors
considered in reaching its determinations and recommendations.
Moreover, each member of the board of directors applied his own
personal business judgment to the process and may have given
different weight to different factors. In arriving at their
recommendation, the members of the board of directors were aware
of the interests of our executive officers, directors and
affiliates as described under the section entitled The
Merger Interests of Certain Persons in the
Merger beginning on page [ ]. The
board of directors believed it was appropriate to engage Goldman
Sachs to provide financial advice and to undertake a study to
render a fairness opinion in connection with the offer and
merger, notwithstanding that certain of its affiliates have
interests as described under the section entitled The
Merger Interests of Certain Persons in the
Merger beginning on page [ ], as,
among other things, (i) Goldman Sachs financial
advisory team was separate from the persons affiliated with the
Goldman Sachs Funds, which is a Sponsor, and Mr. Mehra, a
member of the board of directors and a Managing Director of
Goldman Sachs, (ii) the board of directors had also engaged
Morgan Stanley to act as a financial advisor and
(iii) Goldman Sachs would split the financial advisor fee
with Morgan Stanley, therefore there would be no incremental
advisor fees as a result of our engaging two financial advisors.
The board of directors recommends that you vote
FOR the proposal to adopt the merger agreement and
FOR the proposal to adjourn the special meeting, if
necessary or appropriate, to solicit additional proxies.
In considering the recommendation of the board of directors with
respect to the proposal to adopt the merger agreement, you
should be aware that our directors and executive officers have
interests in the merger that are different from, or in addition
to, yours. The board of directors was aware of and considered
these interests, among other matters, in evaluating and
negotiating the merger agreement and the merger, and in
recommending that the merger agreement be adopted by the
shareholders of the Company. See the section entitled The
Merger Interests of Certain Persons in the
Merger beginning on page [ ].
Opinions
of the Companys Financial Advisors
Opinion
of Morgan Stanley & Co. Incorporated
Morgan Stanley was engaged by the Company to provide it with
financial advisory services in connection with the potential
sale of the Company. At the meeting of the board of directors on
September 1, 2010, Morgan Stanley rendered its oral
opinion, subsequently confirmed in writing, that, as of that
date, based upon and subject to the limitations, qualifications
and assumptions set forth in the written opinion, the $24.00 per
share to be received by holders of shares of Company common
stock pursuant to the merger agreement, was fair from a
financial point of view to such holders.
The full text of the written opinion of Morgan Stanley, dated
September 1, 2010, which sets forth among other things,
assumptions made, procedures followed, matters considered and
limitations on the scope of the review undertaken by Morgan
Stanley in rendering its opinion, is attached as Annex B
hereto. Shareholders are urged to, and should, read the opinion
carefully and in its entirety. Morgan Stanleys opinion is
directed to the board of directors and addresses only the
fairness, from a financial point of view, of the consideration
to be received by the holders of shares of Company common stock
pursuant to the merger agreement, as of the date of the opinion.
Morgan Stanleys opinion does not address any other aspect
of the transactions contemplated by the merger agreement and
does not constitute a recommendation as to how any such holder
should vote at the special meeting or whether any such holder
should take any other action with respect to the merger. The
summary of the opinion of Morgan Stanley set forth in this proxy
statement is qualified in its entirety by reference to the full
text of the opinion. The summary of the opinion of Morgan
Stanley set forth below is qualified in its entirety by
reference to the full text of the opinion.
44
Summary
of Morgan Stanleys Opinion
In connection with rendering its opinion, Morgan Stanley, among
other things:
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Reviewed certain publicly available financial statements and
other business and financial information of the Company;
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Reviewed certain internal financial and operating data
concerning the Company;
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Reviewed certain financial projections prepared by the
management of the Company;
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Discussed the past and current operations and financial
condition and the prospects of the Company with senior
executives of the Company;
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Reviewed the reported prices and trading activity for the shares
of the Company common stock;
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Compared the financial performance of the Company and the price
and trading activity of the shares with that of certain other
comparable publicly-traded companies and their securities;
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Reviewed the financial terms, to the extent publicly available,
of certain comparable acquisition transactions;
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Participated in certain discussions and negotiations among
representatives of the Company, Parent, Merger Sub, certain
parties and their respective financial and legal advisors;
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Reviewed the merger agreement, drafts of equity and debt
commitment letters from certain lenders and other parties, or
the Commitment Letters, and certain related documents; and
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Performed such other analyses and considered such other factors
as Morgan Stanley deemed appropriate.
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In rendering its opinion, Morgan Stanley assumed and relied
upon, without independent verification, the accuracy and
completeness of the information that was publicly available or
supplied or otherwise made available to Morgan Stanley by the
Company, which formed a substantial basis for its opinion. With
respect to the financial projections, Morgan Stanley assumed
that they were reasonably prepared on bases reflecting the best
currently available estimates and judgments of the management of
the Company of the future financial performance of the Company.
In addition, Morgan Stanley assumed that the offer and the
merger will be consummated in accordance with the terms set
forth in the merger agreement without any waiver, amendment or
delay of any terms or conditions and that the Parent and Merger
Sub will obtain financing in accordance with the terms set forth
in the Commitment Letters. Morgan Stanley assumed that in
connection with the receipt of all the necessary governmental,
regulatory or other approvals and consents required for the
merger, no delays, limitations, conditions or restrictions would
be imposed that would have a material adverse effect on the
contemplated benefits expected to be derived in the merger.
Morgan Stanley is not a legal, tax or regulatory advisor.
Morgan Stanley is a financial advisor only and relied upon,
without independent verification, the assessment of Parent,
Merger Sub and the Company and their legal, tax or regulatory
advisors with respect to legal, tax or regulatory matters.
Morgan Stanley did not express an opinion with respect to the
fairness of the amount or nature of the compensation to any of
the Companys officers, directors or employees, or any
class of such persons, relative to the consideration to be
received by the holders of shares in the transaction. Morgan
Stanley did not make any independent valuation or appraisal of
the assets or liabilities of the Company, nor was it furnished
with any such appraisals.
Morgan Stanleys opinion was necessarily based on
financial, economic, market and other conditions as in effect
on, and the information made available to it, as of
September 1, 2010. Events occurring after September 1,
2010 may affect Morgan Stanleys opinion and the
assumptions used in preparing it. Morgan Stanley did not assume
any obligation to update, revise or reaffirm its opinion.
In arriving at its opinion, Morgan Stanley was not authorized to
solicit and did not solicit interest from any party with respect
to the acquisition, business combination or other extraordinary
transaction, involving the Company, nor did Morgan Stanley
negotiate with any of the parties, other than Parent and Merger
Sub,
45
which expressed interest to Morgan Stanley in the possible
acquisition of the Company or certain of its constituent
businesses.
Morgan Stanleys opinion was approved by a committee of
Morgan Stanley investment banking and other professionals in
accordance with its customary practice.
The following is a brief summary of the material analyses
performed by Morgan Stanley in connection with its oral opinion
and the preparation of its written opinion letter dated
September 1, 2010. Some of these summaries of financial
analyses include information presented in tabular format. In
order to fully understand the financial analyses used by Morgan
Stanley, the tables must be read together with the text of each
summary. The tables alone do not constitute a complete
description of the financial analyses.
Historical Share Price Performance.
Morgan
Stanley reviewed the share price performance and compared
various metrics to the per share merger consideration.
Morgan Stanley observed that the shares of Company common stock
closed at $17.12 on June 29, 2010 (the day on which the
Company received a written proposal from Parent and Merger Sub
proposing an acquisition of the Company at $23.00 per share) and
compared that to per share merger consideration to be received
by holders of shares of Company common stock pursuant to the
merger agreement of $24.00 per share. Morgan Stanley noted that
the implied premium of the per share merger consideration to be
received by holders of shares of Company common stock pursuant
to the merger agreement of $24.00 per share when compared with
the closing share price on June 29th was 40.2%.
Morgan Stanley also observed that the shares of Company common
stock closed at $16.77 on August 30, 2010 (two trading days
prior to the announcement of the execution of the merger
agreement) and compared that to the per share merger
consideration to be received by holders of shares of Company
common stock pursuant to the merger agreement of $24.00 per
share. Morgan Stanley noted that the implied premium of the per
share merger consideration to be received by holders of shares
of Company common stock pursuant to the merger agreement of
$24.00 per share when compared with the closing share price on
August 30 was 43.1%.
Morgan Stanley also observed that the range of closing share
prices for the twelve months ending August 30, 2010 was
from $16.41 to $22.06.
The following table presents various closing prices for the
shares of Company common stock and the premium implied by the
per share merger consideration when compared with such closing
prices:
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June
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August
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52-Week
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1-Month
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3-Month
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6-Month
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29th
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30th
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High(1)
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Average(1)
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Average(1)
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Average(1)
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Closing Share Price
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$
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17.12
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$
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16.77
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$
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22.06
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$
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16.94
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$
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17.55
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$
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18.90
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Premium Implied by the Offer Price
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40.2
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%
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43.1
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%
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8.8
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%
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41.6
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%
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36.7
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%
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27.0
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%
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(1)
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As of August 30, 2010, two trading days prior to
announcement of the execution of the merger agreement.
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Securities Research Analysts Future Price
Targets.
Morgan Stanley reviewed the public
market trading price targets for the shares of Company common
stock prepared and published by securities research analysts
prior to August 30, 2010. These targets reflected each
analysts estimate of the future public market trading
price of the shares. The range of equity analyst price targets
for the Company was $18.00 per share to $24.00 per share. Morgan
Stanley discounted the analysts price targets to derive a
range of present values of these price targets which resulted in
a range of securities research analysts future price
targets for the Company of approximately $16.50 per share to
$22.00 per share.
The public market trading price targets published by securities
research analysts do not necessarily reflect current market
trading prices for the shares and these estimates are subject to
uncertainties, including the future financial performance of the
Company and future financial market conditions.
46
Peer Group Comparison.
Morgan Stanley compared
certain financial information of the Company with
publicly-available information for certain companies that
operate in and are exposed to similar lines of business as the
Company, namely companies in the quick service restaurant
sector. The peer group included:
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Yum! Brands, Inc.
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McDonalds Corporation
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Sonic Corporation
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Jack in the Box Inc.
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Dominos Pizza, Inc.
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Wendys Arbys Group Inc.
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Tim Hortons Inc.
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Papa Johns International, Inc.
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For this analysis, Morgan Stanley analyzed the following
statistics for each of these companies, as of August 30,
2010 and based on estimates for the peer group companies
provided by I/B/E/S and public filings:
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The ratio of aggregate value, defined as market capitalization
plus total debt plus minority interests plus preferred capital
less cash and cash equivalents, which we refer to as Aggregate
Value or AV, to estimated calendar year 2010 earnings before
interest, taxes, depreciation and amortization, or EBITDA;
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The ratio of price to estimated earnings per share for calendar
year 2010; and
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The ratio of price to estimated earnings growth per share for
calendar year 2010.
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Based on the analysis of the relevant metrics for each of the
peer group companies, Morgan Stanley selected a range of
multiples for the peer group companies and applied this range of
multiples to the relevant Company financial statistics. For
purposes of the Companys estimated calendar year 2010
EBITDA, earnings and earnings growth, Morgan Stanley utilized
estimates provided by I/B/E/S. Based on this analysis, the
implied value per share of Company common stock is as of
August 30, 2010 as follows:
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Company
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Peer Group
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Financial
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Company
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Implied Value per
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Ratio
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Statistic
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Multiple Range
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Share
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Aggregate Value to Estimated Calendar 2010 EBITDA
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$
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444.2MM
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6.5x - 8.5x
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$
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16.25 - $22.50
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Price to Estimated Calendar 2010 Earnings
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$
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1.36 per share
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12.0x - 14.5x
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$
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16.25 - $19.75
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Price to Estimated Calendar 2010 Earnings Growth
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12.8
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%
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0.8x - 1.2x
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$
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14.00 - $21.00
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Morgan Stanley also noted that applying McDonalds
Corporation and Yum! Brands, Inc., valuation metrics to the
Company resulted in a per share price of $27.00 based on the AV
to Estimated Calendar 2010 EBITDA ratio, a per share price of
$22.50 based on the Price to Estimated Calendar 2010 Earnings
ratio, and a per share price of $26.25 based on the Price to
Estimated Calendar 2010 Earnings Growth ratio.
No company in the peer group comparison analysis is identical to
the Company. In evaluating the peer group, Morgan Stanley made
judgments and assumptions with regard to industry performance,
general business, economic, market and financial conditions and
other matters, many of which are beyond the control of the
Company, such as the impact of competition on the business of
the Company or the industry generally, industry growth and the
absence of any material adverse change in the financial
condition and prospects of the Company or the industry or in the
financial markets in general. Mathematical analysis, such as
determining the average or median, is not in itself a meaningful
method of using peer group data.
Discounted Equity Value Analysis.
Morgan
Stanley performed an illustrative analysis of the present value
of the Companys theoretical implied future price per share
of Company common stock. In performing the discounted equity
value analysis, Morgan Stanley multiplied the earnings per share
estimate for calendar years
2011-2013,
based on Company management forecasts, to
price-to-earnings,
or P/E multiples of 12.0x
47
and 15.0x in order to estimate the future price per share. The
estimated future price per share was then discounted to present
value implying a price per share ranging from approximately
$15.50 per share to $19.75 per share for a P/E multiple of 12.0x
and a price per share ranging from approximately $19.25 per
share to $24.75 per share for a P/E multiple of 15.0x.
Analysis of Selected Precedent
Transactions.
Using publicly available
information, Morgan Stanley reviewed the terms of selected
transactions in which the targets were companies or divisions
that operate in
and/or
were
exposed to similar lines of business as the Company.
Morgan Stanley reviewed the price paid and calculated the ratio
of Aggregate Value implied by the price paid to last twelve
months, or LTM, EBITDA (based on publicly available information)
in each of the selected transactions in the quick service
restaurant and casual dining restaurant sectors since
May 31, 2002 (listed below). Based on this analysis, Morgan
Stanley selected a range of multiples implied by these
transactions and applied this range of multiples to the
Companys LTM EBITDA to imply a value per share of Company
common stock based on such multiples.
For this analysis Morgan Stanley reviewed the following
transactions:
Domestic
Transactions
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Acquiror
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Target
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Announcement Date
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Oak Hill Capital Partners
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Dave & Busters
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5/3/10
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Apollo Management
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CKE Restaurants
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4/24/10
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Golden Gate Capital
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On-The-Border Cafes, Inc.
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3/23/10
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Friedman Fleischer & Lowe
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Churchs Chicken
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6/9/09
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Golden Gate Capital
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Romanos Macaroni Grill
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8/18/08
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Triarc Companies, Inc.
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Wendys International, Inc.
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4/24/08
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LNK Partners
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ABP Corporation
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1/16/08
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Sun Capital Partners (Barbeque Integrated, Inc.)
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Smokey Bones Barbeque and Grill (Darden)
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12/4/07
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Ruths Chris Steak House Inc.
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Mitchells Fish Market
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11/6/07
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Darden Restaurants Inc.
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|
RARE Hospitality International Inc.
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8/16/07
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Sun Capital Partners Inc.
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Boston Market Corporation
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8/6/07
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IHOP Corp.
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Applebees International, Inc.
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7/16/07
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Seminole Hard Rock Hotel & Casino
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Hard Rock Café International, Inc.
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12/7/06
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Bain Capital Partners LLC & Catterton Partners
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OSI Restaurant Partners, Inc.
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11/6/06
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Black Canyon and BRS
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Logans Roadhouse
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10/30/06
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Catterton Partners & Oak Investment Partners
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Cheddars Inc.
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8/28/06
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Buffets, Inc.
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Ryans Restaurant Group, Inc.
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7/24/06
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CCMP Capital Advisors LLC
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The Quiznos Corporation
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3/20/06
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Services Acquisition Corp. International
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Jamba Juice Company
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3/13/06
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Carlyle Group, Bain Capital, THL Partners
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|
Dunkin Brands Inc.
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12/12/05
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Trimaran Capital Partners, Inc.
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|
El Pollo Loco, Inc.
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|
9/28/05
|
Management
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|
Au bon Pain, Inc.
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|
5/18/05
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Arcapita Inc.
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|
Churchs Chicken
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|
11/1/04
|
Catterton Partners
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|
First Watch Restaurants, Inc.
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|
9/1/04
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Wendys International Inc.
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|
Fresh Enterprises Inc. (Baja Fresh)
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|
5/31/02
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48
International
Transactions
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|
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|
Acquiror
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|
Target
|
|
Announcement Date
|
|
Bridgepoint Capital Ltd.
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|
Pret A Manger
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|
2/22/08
|
Rome Bidco (Paladin Partners and Saratoga)
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|
Caffe Nero Group PLC
|
|
12/7/06
|
CDC Capital Investissement
|
|
Quick Restaurant NV
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|
10/25/06
|
Foodco Pastries
|
|
Tele Pizza SA
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|
2/20/06
|
Investor Group
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|
PizzaExpress PLC
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|
5/13/03
|
TPG, Bain Capital, GS Capital Partners
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|
Burger King Corp.
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7/25/02
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The following table summarizes Morgan Stanleys analysis:
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Company
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Comparable
|
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Implied
|
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|
Financial
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Company
|
|
|
Value per
|
|
Ratio
|
|
Statistic
|
|
|
Multiple Range
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|
|
Share
|
|
|
Aggregate Value to LTM EBITDA
|
|
$
|
444.6MM
|
|
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8.0x - 10.0
|
x
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|
$
|
21.00 - $27.00
|
|
Morgan Stanley also reviewed the premiums paid or proposed to be
paid in acquisitions of U.S. public companies with
capitalization greater than $1 billion during the
21-year
period ended March 31, 2010. Morgan Stanley observed that
the premiums paid or proposed to be paid in these transactions
was between 30% to 40% of the targets pre-announcement
trading price, which implied a range of $21.75 to $23.50 per
share based on the closing share price on August 30, 2010.
No company utilized in the selected precedent transactions
analysis is identical to the Company, nor is any transaction
listed identical to the transactions contemplated by the merger
agreement. In evaluating the transactions listed above, Morgan
Stanley made judgments and assumptions with regard to industry
performance, general business, economic, market and financial
conditions and other matters, many of which are beyond the
control of the Company, such as the impact of competition on the
business of the Company or the industry generally, industry
growth and the absence of any adverse material change in the
financial condition and prospects of the Company or the industry
or in the financial markets in general. Mathematical analysis,
such as determining the average or median, is not in itself a
meaningful method of using comparable transaction data.
Discounted Cash Flow Analysis.
Morgan Stanley
performed a discounted cash flow analysis as of August 30,
2010, which is an analysis of the present value of projected
unlevered free cash flows using terminal year Aggregate Value to
EBITDA multiples based on projected EBITDA for the Company.
Morgan Stanley analyzed the Companys business using
information provided by Company management, including certain
financial forecasts prepared by Company management for the
fiscal years 2011 through 2015, under five scenarios. The first
scenario assumes that the Company operates in a continued
recessionary economic environment, or the Recessionary Case. The
second scenario assumes that the Company operates in a
moderately improved economic environment, or the Moderate Growth
Case. The third scenario assumes that the Company operates in a
significantly improved economic environment, or the Economic
Expansion Case. The fourth scenario assumes that the Company
implemented a re-franchising of its company-owned stores, or the
Refranchise Case. The fifth scenario assumes that the Company
operates in an economic environment without any macroeconomic
risks to pricing and costs (e.g., commodities, labor, inflation,
etc.), or the Risk Neutral Case. The terminal value was
calculated by applying terminal multiples ranging from 6.5x to
8.5x fiscal year 2015 EBITDA, as estimated by Company
management. For purposes of this analysis, Morgan Stanley
calculated the Companys discounted unlevered free cash
flow value using discount rates ranging from 8.0% to 9.0%. The
range of discount rates was selected based upon an analysis of
the Companys weighted average cost of capital and on the
experience and judgment of Morgan Stanley. The discounted cash
flow analysis implied a range of $20.50 per share to $27.25 per
share using the Recessionary Case, $21.75 per share to $29.00
per share using the Moderate Growth Case and Refranchise Case
and $24.00 per share to $32.50 per share using the Economic
Expansion Case and Risk Neutral Case.
Leveraged Buyout Analysis.
Morgan Stanley
performed an illustrative leveraged buyout analysis to estimate
the theoretical purchase price that a financial buyer could pay
in an acquisition of the Company. For purposes of this analysis,
Morgan Stanley assumed that the capital structure of the Company
that would result
49
from the theoretical transaction would be identical to the
capital structure proposed by Parent and Merger Sub and that
such a financial buyer would attempt to realize a return on its
investment in fiscal year 2015. Estimated financial data for the
Company was based on certain financial forecasts prepared by
Company management for fiscal years 2011 through 2015, under the
five scenarios described above. Estimated exit values for the
Company were calculated by applying an exit value multiple of
8.5x to fiscal year 2015 EBITDA, as estimated by Company
management. Morgan Stanley then derived a range of theoretical
purchase prices based on an assumed required internal rate of
return for a financial buyer of between 17.5% and 22.5%. This
analysis implied a value range of $21.00 per share to $22.75 per
share using the Recessionary Case, $22.00 per share to $24.00
per share using the Moderate Growth Case and Refranchise Case
and $23.50 per share to $26.50 per share using the Economic
Expansion Case and Risk Neutral Case.
In connection with the review of the transaction contemplated by
the merger agreement by the board of directors, Morgan Stanley
performed a variety of financial and comparative analyses for
purposes of its opinion given in connection therewith. The
preparation of a financial opinion is a complex process and is
not necessarily susceptible to partial analysis or summary
description. In arriving at its opinion, Morgan Stanley
considered the results of all of its analyses as a whole and did
not attribute any particular weight to any analysis or factor
considered by it. Furthermore, Morgan Stanley believes that
selecting any portion of its analyses, without considering all
analyses as a whole, would create an incomplete view of the
process underlying its analyses and opinion. In addition, Morgan
Stanley may have given various analyses and factors more or less
weight than other analyses and factors and may have deemed
various assumptions more or less probable than other
assumptions, so that the ranges of valuations resulting from any
particular analysis described above should not be taken to be
Morgan Stanleys view of the actual value of the Company.
In performing its analyses, Morgan Stanley made numerous
assumptions with respect to industry performance, general
business and economic conditions and other matters, many of
which are beyond the control of the Company. Any estimates
contained in Morgan Stanleys analyses are not necessarily
indicative of future results or actual values, which may be
significantly more or less favorable than those suggested by
such estimates. The analyses performed were prepared solely as
part of Morgan Stanleys analysis of the fairness from a
financial point of view of the $24.00 per share to be
received by the holders of shares of Company common stock
pursuant to the merger agreement, and were conducted in
connection with the delivery of Morgan Stanleys opinion to
the board of directors. These analyses do not purport to be
appraisals or to reflect the prices at which the shares might
actually trade. The per share merger consideration to be
received by the holders of the shares of Company common stock
and other terms of the merger agreement were determined through
arms-length negotiations between the Company and Parent
and Merger Sub and were approved by the board of directors.
Morgan Stanley provided advice to the Company during such
negotiations; however, Morgan Stanley did not recommend any
specific consideration to the Company or that any specific
consideration constituted the only appropriate consideration for
the proposed transaction. In addition, as described above under
the heading
Reasons for the Merger;
Recommendation of the Board of Directors,
Morgan
Stanleys opinion and presentation to the board of
directors was one of many factors taken into consideration by
the board of directors in making their decision to approve the
merger agreement. Consequently, the Morgan Stanley analyses as
described above should not be viewed as determinative of the
opinion of the board of directors with respect to the
consideration or the value of the Company, or of whether the
board of directors would have been willing to agree to a
different consideration.
The board of directors retained Morgan Stanley based upon Morgan
Stanleys qualifications, experience and expertise and its
knowledge of the business affairs of the Company. Morgan Stanley
is a global financial services firm engaged in the securities,
investment management and individual wealth management
businesses. Its securities business is engaged in securities
underwriting, trading and brokerage activities, foreign
exchange, commodities and derivatives trading, prime brokerage,
as well as providing investment banking, financing and financial
advisory services. Morgan Stanley, its affiliates, directors and
officers may at any time invest on a principal basis or manage
funds that invest, hold long or short positions, finance
positions, and may trade or otherwise structure and effect
transactions, for their own account or the accounts of its
customers, in debt or equity securities or loans of the Parent
and Merger Sub or their affiliates, the Company, or any other
company, or any currency or commodity, that may be involved in
this transaction, or any related derivative instrument.
50
In the two years prior to the date of its opinion, Morgan
Stanley has provided financial advisory and financing services
to the Company and has received fees in connection with such
services. Morgan Stanley may also seek to provide such services
to the Parent and Merger Sub and the Company in the future and
expects to receive fees for the rendering of these services.
Pursuant to the terms of its engagement letter, Morgan Stanley
provided financial advisory services and a financial fairness
opinion to the board of directors in connection with the
transaction, and the Company agreed to pay Morgan Stanley a
customary fee, a substantial portion of which is contingent upon
the consummation of the merger, in connection with the
transaction. For a description of the engagement letter and the
fees payable thereunder by the Company to Morgan Stanley, see
Persons Retained, Employed, Compensated or
Used. The Company has also agreed to reimburse Morgan
Stanley for its expenses incurred in performing its services. In
addition, the Company has agreed to indemnify Morgan Stanley and
its affiliates, their respective directors, officers, agents and
employees and each person, if any, controlling Morgan Stanley or
any of its affiliates against certain liabilities and expenses,
including certain liabilities under the federal securities laws,
related to or arising out of Morgan Stanleys engagement.
Opinion
of Goldman, Sachs & Co.
Goldman Sachs rendered its opinion to the board of directors
that, as of September 2, 2010, and based upon and subject
to the factors and assumptions set forth therein, the $24.00 per
share of Company common stock in cash to be paid to the holders
(other than Parent and its affiliates) of shares of Company
common stock pursuant to the merger agreement was fair, from a
financial point of view, to such holders.
The full text of the written opinion of Goldman Sachs, dated
September 2, 2010, which sets forth the assumptions made,
procedures followed, matters considered and limitations on the
review undertaken in connection with the opinion, is attached as
Annex C. Goldman Sachs provided its opinion for the
information and assistance of the board of directors in
connection with its consideration of the transactions
contemplated by the merger agreement. Goldman Sachs
opinion does not address any other aspect of the merger and does
not constitute a recommendation as to how any shareholder of the
Company should vote with respect to the merger or any other
matter. The summary of the written opinion of Goldman Sachs set
forth below is qualified in its entirety by reference to the
full text of such opinion.
In connection with rendering the opinion described above and
performing its related financial analyses, Goldman Sachs
reviewed, among other things:
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the merger agreement;
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annual reports to shareholders and Annual Reports on
Form 10-K
of the Company for the five fiscal years ended June 30,
2010;
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certain interim reports to shareholders and Quarterly Reports on
Form 10-Q
of the Company;
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certain other communications from the Company to its
shareholders;
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certain publicly available research analyst reports for the
Company; and
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certain internal financial analyses and forecasts for the
Company prepared by its management, including the Companys
Refranchise Case, which was approved for Goldman
Sachs use by the Company.
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Goldman Sachs also held discussions with members of the senior
management of the Company regarding their assessment of the past
and current business operations, financial condition and future
prospects of the Company. In addition, Goldman Sachs reviewed
the reported price and trading activity for the shares of
Company Common Stock, compared certain financial and stock
market information for the Company with similar information for
certain other companies the securities of which are publicly
traded, reviewed the financial terms of certain recent business
combinations in the restaurant industry specifically and in
other
51
industries generally, and performed such other studies and
analyses, and considered such other factors, as Goldman Sachs
considered appropriate.
For purposes of rendering the opinion described above, Goldman
Sachs relied upon and assumed, without assuming any
responsibility for independent verification, the accuracy and
completeness of all of the financial, legal, regulatory, tax,
accounting and other information provided to, discussed with or
reviewed by it, and Goldman Sachs does not assume any liability
for any such information. In that regard, Goldman Sachs assumed
with the consent of the Company that the Refranchise Case was
reasonably prepared on a basis reflecting the best currently
available estimates and judgments of the management of the
Company. In addition, Goldman Sachs did not make an independent
evaluation or appraisal of the assets and liabilities (including
any contingent, derivative or other off-balance sheet assets and
liabilities) of the Company or any of its subsidiaries, nor was
any such evaluation or appraisal of the assets or liabilities of
the Company or any of its subsidiaries furnished to Goldman
Sachs. Goldman Sachs assumed that all governmental, regulatory
or other consents and approvals necessary for the consummation
of the transactions contemplated by the merger agreement will be
obtained without any adverse effect on the expected benefits of
such transactions in any way meaningful to its analysis. Goldman
Sachs also assumed that the transactions contemplated by the
merger agreement will be consummated on the terms set forth
therein, without the waiver or modification of any term or
condition the effect of which would be in any way meaningful to
its analysis. Goldman Sachs opinion does not address any
legal, regulatory, tax or accounting matters.
Goldman Sachs opinion does not address the underlying
business decision of the Company to engage in the transactions
contemplated by the merger agreement or the relative merits of
such transactions as compared to any strategic alternatives that
may be available to the Company. Goldman Sachs was not requested
to solicit, and did not solicit, interest from other parties
with respect to an acquisition of or other business combination
with the Company. Goldman Sachs opinion addresses only the
fairness from a financial point of view, as of the date of its
opinion, of the $24.00 per share of Company common stock in cash
to be paid to the holders (other than Parent and its affiliates)
of such shares pursuant to the merger agreement. Goldman
Sachs opinion does not express any view on, and does not
address, any other term or aspect of the merger agreement or the
transactions contemplated thereby or any term or aspect of any
other agreement or instrument contemplated by the merger
agreement or entered into or amended in connection with the
transactions contemplated thereby, including, without
limitation, the fairness of such transactions to, or any
consideration received in connection therewith by, the holders
of any other class of securities, creditors, or other
constituencies of the Company; nor as to the fairness of the
amount or nature of any compensation to be paid or payable to
any of the officers, directors or employees of the Company, or
class of such persons in connection with the transactions
contemplated by the merger agreement, whether relative to the
per share merger consideration to be paid to the holders (other
than Parent and its affiliates) of such shares pursuant to the
merger agreement or otherwise. In addition, Goldman Sachs did
not express any opinion as to the impact of the transactions
contemplated by the merger agreement on the solvency or
viability of the Company or Parent or the ability of the Company
or Parent to pay their respective obligations when they become
due. Goldman Sachs opinion was necessarily based on
economic, monetary, market and other conditions as in effect on,
and the information made available to it as of, the date of its
opinion and Goldman Sachs assumed no responsibility for
updating, revising or reaffirming its opinion based on
circumstances, developments or events occurring after the date
of the opinion. The advisory services provided by Goldman Sachs
and the opinion expressed in Goldman Sachs opinion were
provided for the information and assistance of the board of
directors in connection with its consideration of the
transactions contemplated by the merger agreement and Goldman
Sachs opinion does not constitute a recommendation as to
whether or not any holder of shares of Company common stock
should vote with respect to the merger or any other matter.
Goldman Sachs opinion was approved by a fairness committee
of Goldman Sachs.
The following is a summary of the material financial analyses
delivered by Goldman Sachs to the board of directors in
connection with rendering the opinion described above. The
following summary, however, does not purport to be a complete
description of the financial analyses performed by Goldman
Sachs, nor does the order of analyses described represent
relative importance or weight given to those analyses by Goldman
Sachs. Some of the summaries of the financial analyses include
information presented in tabular format. The tables
52
must be read together with the full text of each summary and are
alone not a complete description of Goldman Sachs
financial analyses. Except as otherwise noted, the following
quantitative information, to the extent that it is based on
market data, is based on market data as it existed on or before
August 30, 2010 (the date on which Goldman Sachs completed
its analyses) and is not necessarily indicative of current
market conditions.
Historical Trading Analysis.
Goldman Sachs
reviewed the historical trading prices for the shares of Company
common stock and analyzed the consideration to be paid to
holders of such shares pursuant to the merger agreement in
relation to (1) the closing price of the shares of Company
common stock on August 30, 2010; (2) the average
closing prices of shares of Company common stock for the
30-calendar day and 60-calendar day periods ending
August 30, 2010; (3) the high closing price of shares
of Company common stock for the 52-week period ending
August 30, 2010; and (4) the high closing price of
shares of Company common stock for the period beginning with the
date of the initial public offering of the shares of Company
common stock and ending August 30, 2010.
This analysis indicated that the price per share to be paid to
the Companys shareholders in connection with the
transactions contemplated by the merger agreement represented:
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a premium of 43.1% based on the closing market price of the
shares of Company common stock on August 30, 2010;
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a premium of 41.8% based on the average closing price of the
shares of Company common stock for the 30-calendar day period
ended on August 30, 2010;
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a premium of 40.4% based on the average closing price of the
shares of Company common stock for the 60-calendar day period
ended on August 30, 2010;
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a premium of 8.8% based on the last twelve months high closing
price of the shares of Company common stock for the period
ending on August 30, 2010; and
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a discount of 21.1% based on the high closing price of the
shares of Company common stock for the period beginning on the
Companys initial public offering (May 18,
2006) and ending on August 30, 2010.
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Selected Public Companies Analysis.
Goldman
Sachs reviewed and compared certain financial information,
ratios and public market multiples for the Company to
corresponding financial information, ratios and public market
multiples for the following publicly traded corporations in the
quick service restaurant, or QSR, industry:
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QSR Index
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Large Cap QSR
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Wendys/Arbys Group, Inc.
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McDonalds Corporation
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Dominos Pizza, Inc.
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YUM! Brands, Inc.
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Jack in the Box Inc.
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Sonic Corp.
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Papa Johns International, Inc.
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Although none of the selected companies is directly comparable
to the Company, the companies included were chosen because they
are publicly traded companies with operations that for purposes
of analysis may be considered similar to certain operations of
the Company.
Goldman Sachs calculated and compared various financial
multiples and ratios based on the most recent publicly available
financial data and I/B/E/S estimates
and/or
other
Wall Street research. The multiples and ratios of the Company
and the selected companies were calculated using the closing
price of each companys shares on August 30, 2010.
With respect to the Company and the selected companies, Goldman
Sachs calculated (1) enterprise value, which is the market
value of common equity plus the book value of debt less cash, as
a multiple of earnings before interest, taxes, depreciation and
amortization, or EBITDA, for the latest twelve months ended
August 30, 2010; and (2) enterprise value as a
multiple of EBITDA for estimated calendar years 2010 and 2011,
respectively, based on IBES estimates
and/or
other
Wall Street research.
53
The following table presents the results of this analysis:
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Selected Public Companies
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Company
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QSR Index
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Large Cap Index
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As of 8/30
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Offer Price
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Range
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Median
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Range
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Median
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2010
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$24.00
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Enterprise Value as a multiple of EBITDA:
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LTM
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5.5x - 9.2x
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6.5x
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9.6x - 10.0x
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10.0x
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6.6x
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9.0x
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CY2010E
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5.5x - 9.1x
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6.8x
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9.6x - 10.2x
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9.9x
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6.6x
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9.0x
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CY2011E
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5.3x - 8.8x
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6.3x
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8.8x - 9.8x
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9.3x
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6.3x
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8.7x
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Goldman Sachs also calculated (1) the
price-to-earnings
ratios for estimated calendar years 2010 and 2011, respectively;
(2) the
price-to-earnings
ratios for the latest twelve months ended August 30, 2010;
(3) the price to earnings ratios estimated for the next
twelve months ending August 30, 2011; and (4) the
latest twelve months EBITDA margins, which is the last twelve
months EBITDA as a percentage of the last twelve months revenue.
The following table presents the results of this analysis:
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Selected Public Companies
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Company
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QSR Index
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Large Cap QSR
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As of 8/30
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Offer Price
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Range
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Median
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Range
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Median
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2010
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$24.00
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Price/Earnings Ratio:
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CY2010E
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9.9x - 31.9x
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13.2x
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16.1x - 16.7x
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16.4x
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12.4x
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17.7x
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CY2011E
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9.1x - 122.2x
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11.5x
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14.8x - 14.9x
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14.9x
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11.7x
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16.7x
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LTM
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8.5x - 14.4x
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11.3x
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16.8x - 18.8x
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17.7x
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12.3x
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17.6x
|
NTM-E
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9.4x - 24.9x
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12.1x
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15.5x - 15.7x
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15.6x
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12.3x
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17.6x
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EBITDA Margin:
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LTM
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10.1% - 24.6%
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12.0%
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21.6% - 35.8%
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28.7%
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17.8%
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17.8%
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Selected Transactions Analysis.
Goldman Sachs
analyzed certain information relating to the following selected
transactions in the restaurant industry since 1998 with
transaction equity values ranging from $570 million to
$3 billion. These transactions (listed by acquirer/target
and date of announcement) were:
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Oak Hill Capital Partners, L.P./Dave & Busters,
Inc. (May 2010)
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Apollo Management, L.P./CKE Restaurants, Inc. (April 2010)
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Tilman J. Fertitta/Landrys Restaurants, Inc. (June 2008)
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Triarc Companies, Inc./Wendys International, Inc. (April
2008)
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Darden Restaurants, Inc./RARE Hospitality International, Inc.
(August 2007)
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IHOP Corp./Applebees International, Inc. (June 2007)
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Bain Capital Partners LLC and Catterton Partners and Company/OSI
Restaurant Partners, LLC (November 2006)
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Merrill Lynch Global Private Equity, Inc./NPC International,
Inc. (March 2006)
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JP Morgan Partners LLC/Quiznos Master LLC (March 2006)
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Bain Capital Partners LLC, the Carlyle Group and Thomas H. Lee
Partners LP/Dunkin Brands, Inc. (December 2005)
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Weston Presidio Capital/Apple American Group LLC (January 2005)
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Caxton-Iseman Capital, Inc./Buffets Holdings, Inc. (June 2000)
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Sbarro Family/Sbarro, Inc. (January 1999)
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54
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Bain Capital, Inc./Dominos Pizza, Inc. (September 1998)
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For each of the selected transactions, Goldman Sachs calculated
and compared the enterprise value as a multiple of latest twelve
months EBITDA, using publicly available data, and then
calculated the median of these multiple values for all
transactions; however, for purposes of its analysis Goldman
Sachs excluded transactions occurring during calendar years 2005
through 2007 because in its professional judgment, these
transactions were not representative of the current market
environment. While none of the companies that participated in
the selected transactions are directly comparable to the
Company, these companies were chosen because they are publicly
traded companies with operations that, for the purposes of
analysis, may be considered similar to certain of the
Companys results, market size and product profile.
The following table presents the results of this analysis:
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Selected Transactions
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Proposed Transaction
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Range
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Median
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Offer Price $24.00
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LTM EV/EBITDA (all transactions)
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5.0x - 13.3x
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8.2x
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9.0x
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|
LTM EV/EBITDA (excluding transactions occurring in
2005-2007)
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5.0x - 8.9x
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7.4x
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Premia Paid Analysis.
Goldman Sachs also
calculated the median price premia paid per share relative to
the market closing price of target companies on the day prior to
announcement of transactions for announced and completed cash
transactions involving target companies in the United States in
all industries since 2001 with transaction values over
$1 billion, using publicly available historical data, but
excluding transactions with undisclosed value, spinoffs,
recapitalizations, self-tenders, stock repurchases, deals in
which minority stakes in a target were acquired, deals involving
acquisitions of the remaining minority stake in a target by a
controlling shareholder and nationalization transactions. Based
on this information, Goldman Sachs then calculated the median of
these implied premia values for the multi-year period from 2001
to 2010.
The following table presents the results of this analysis:
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Selected Transactions
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|
Proposed Transaction
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Offer Price Premium
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Period
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|
Range
|
|
Median
|
|
to Price as of 8/30/2010
|
|
2001-2010
|
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|
22.7% - 43.8%
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|
27.7
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%
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|
43.1
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%
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Illustrative Present Value of Future Share Price
Analysis.
Goldman Sachs performed an illustrative
analysis of the implied present value of the future price per
share of Company common stock, which is designed to provide an
indication of the present value of a theoretical future value of
a companys equity as a function of such companys
estimated future earnings and its assumed price to future
earnings per share multiple. For this analysis, Goldman Sachs
used the Refranchise Case provided by the Companys
management for the fiscal years 2011 to 2015. Goldman Sachs
calculated the implied present values per share by applying
price to forward earnings per share multiples ranging from 12.3x
to 14.8x earnings per share of Company common stock for each of
the fiscal years 2011 to 2015 based on the Refranchise Case,
discounted to present value using a discount rate of 10%,
reflecting an estimate of the Companys cost of equity, and
assuming a yearly dividend of $0.25 with a constant yield
throughout such time period. This analysis resulted in a range
of implied present values per share of Company common stock of
$19.51 to $27.38.
Illustrative Discounted Cash Flow
Analysis.
Goldman Sachs performed an illustrative
discounted cash flow analysis on the Company using the
Refranchise Case. Goldman Sachs calculated indications of the
net present value of free cash flows for the Company for the
years 2011 through 2015. Goldman Sachs calculated illustrative
value indications per share of Company common stock using the
Refranchise Case and illustrative terminal value indications in
the year 2015 based on terminal multiples ranging from 6.0x 2015
EBITDA to 7.5x 2015 EBITDA and discounting these terminal values
to illustrative present values using discount rates ranging from
8.0% to 10.0%, reflecting estimates of the Companys
weighted average cost of capital. This analysis resulted in a
range of illustrative per share of Company common stock values
of $20.73 to $27.74.
Goldman Sachs also performed a sensitivity analysis to
illustrate the effect of different assumptions for changes in
annual revenue growth rates and operating margins for the
Company. The sensitivity adjustments to
55
the projected annual EBITDA growth rates ranged from 4.4%, which
implies an estimated 2015 EBITDA of $550.0 million, to
12.8%, which implies an estimated 2015 EBITDA of
$750.0 million. This analysis, assuming a 9% discount rate
and 6.6x 2015 EBITDA multiple, resulted in an implied present
value per share of Company common stock range of $17.76 to
$26.59.
General.
The preparation of a fairness opinion
is a complex process and is not necessarily susceptible to
partial analysis or summary description. Selecting portions of
the analyses or of the summary set forth above, without
considering the analyses as a whole, could create an incomplete
view of the processes underlying Goldman Sachs opinion. In
arriving at its fairness determination, Goldman Sachs considered
the results of all of its analyses and did not attribute any
particular weight to any factor or analysis considered by it.
Rather, Goldman Sachs made its determination as to fairness on
the basis of its experience and professional judgment after
considering the results of all of its analyses. No company or
transaction used in the above analyses as a comparison is
directly comparable to the Company or the contemplated
transactions.
Goldman Sachs prepared these analyses for purposes of Goldman
Sachs providing its opinion to the board of directors as
to the fairness from a financial point of view of the $24.00 per
share merger consideration to be paid to the holders (other than
Parent and its affiliates) of shares pursuant to the merger
agreement. These analyses do not purport to be appraisals nor do
they necessarily reflect the prices at which businesses or
securities actually may be sold. Analyses based upon forecasts
of future results are not necessarily indicative of actual
future results, which may be significantly more or less
favorable than suggested by these analyses. Because these
analyses are inherently subject to uncertainty, being based upon
numerous factors or events beyond the control of the parties or
their respective advisors, none of the Company, Parent, Goldman
Sachs or any other person assumes responsibility if future
results are materially different from those forecast.
The consideration for the transactions was determined through
arms-length negotiations between the Company and Parent
and was approved by the board of directors. Goldman Sachs
provided advice to the Company during these negotiations.
Goldman Sachs did not, however, recommend any specific amount of
consideration to the Company or the board of directors or that
any specific amount of consideration constituted the only
appropriate consideration for the transactions.
As described above, Goldman Sachs opinion to the board of
directors was one of many factors taken into consideration by
the board of directors in making its determination to approve
the merger agreement. The foregoing summary does not purport to
be a complete description of the analyses performed by Goldman
Sachs in connection with the fairness opinion and is qualified
in its entirety by reference to the written opinion of Goldman
Sachs attached as Annex C.
Goldman Sachs and its affiliates are engaged in investment
banking and financial advisory services, commercial banking,
securities trading, investment management, principal investment,
financial planning, benefits counseling, risk management,
hedging, financing, brokerage activities and other financial and
non-financial activities and services for various persons and
entities. In the ordinary course of these activities and
services, Goldman Sachs and its affiliates may at any time make
or hold long or short positions and investments, as well as
actively trade or effect transactions, in the equity, debt and
other securities (or related derivative securities) and
financial instruments (including bank loans and other
obligations) of the Company, Parent, any of their respective
affiliates and third parties, including affiliates and portfolio
companies of 3G Capital, TPG Capital and Bain Capital, LLC or
any currency or commodity that may be involved in the
transactions contemplated by the merger agreement for their own
account and for the accounts of their customers. Goldman Sachs
acted as financial advisor to the Company in connection with,
and participated in certain of the negotiations leading to, the
transactions contemplated by the merger. For a description of
the engagement letter and the fees payable thereunder by the
Company to Goldman Sachs, see Persons
Retained, Compensated or Used.
Goldman Sachs also has provided certain investment banking
services to the Company and its affiliates from time to time.
Goldman Sachs also has provided from time to time and is
currently providing certain investment banking to Bain Capital
and its affiliates and portfolio companies for which its
Investment Banking Division has received, and may receive,
compensation, including having acted as joint lead arranger for
a new
56
term loan (aggregate principal amount of $250,000,000) for
SunGard Data Systems Inc., a portfolio company of Bain Capital,
in September 2008; as joint bookrunner on a high yield offering
(aggregate principal amount of $1,100,000,000) for Warner Music
Group, a portfolio company of Bain Capital, in May 2009; as
joint bookrunner on high yield offerings (aggregate principal
amount of $2,900,000,000) for HCA Inc., a portfolio company of
Bain Capital, in April 2009 and March 2010; as joint bookrunner
with respect to a high yield offering (aggregate principal
amount of $2,500,000,000) for Clear Channel Communications Inc.,
a portfolio company of Bain Capital, in December 2009; and as
joint lead arranger with respect to a term loan (aggregate
principal amount of $1,500,000,000) for Warner Chilcott Plc, a
portfolio company of Bain Capital, in August 2010. In addition,
Goldman Sachs has provided from time to time and is currently
providing certain investment banking services to TPG and its
affiliates and portfolio companies for which its Investment
Banking Division has received, and may receive, compensation,
including having acted as joint bookrunner on a notes offering
(aggregate principal amount of $1,500,000,000) by TXU Electric
Delivery Company, a portfolio company of TPG, in September 2008;
as a joint lead arranger for a term loan (aggregate principal
amount of $250,000,000) for SunGard Data Systems Inc., a
portfolio company of TPG, in September 2008; as financial
advisor to ALLTEL Corporation, a former portfolio company of
TPG, in connection with its sale in January 2009; and as
co-manager of a high yield offering (aggregate principal amount
of $1,000,000,000) by Harrahs Entertainment Inc., a
portfolio company of TPG, in May 2009. Goldman Sachs may also in
the future provide investment banking services to the Company,
its affiliates and Parent, TPG, Bain Capital and their
respective affiliates and portfolio companies for which its
Investment Banking Division may receive compensation. The
Goldman Sachs Funds currently own, in the aggregate,
approximately 10.3% of the outstanding shares of Company Common
Stock. In connection with the transactions contemplated by the
merger agreement, the Goldman Sachs Funds have entered into a
stockholder tender agreement. Goldman Sachs may be deemed to
directly or indirectly own the shares which are owned directly
or indirectly by the Goldman Sachs Funds. Sanjeev K. Mehra, a
Managing Director of Goldman Sachs, is a director of the
Company. Affiliates of Goldman Sachs also may have co-invested
with Parent, TPG, Bain Capital and their respective affiliates
from time to time and may have invested in limited partnership
units of affiliates of Parent, TPG and Bain Capital from time to
time and may do so in the future.
Certain
Company Projections
We do not, as a matter of course, make public projections as to
future performance, earnings or other results beyond the current
fiscal year due to the unpredictability of the underlying
assumptions and estimates. However, we provided to Parent,
Merger Sub and Lazard in August 2010, in connection with their
due diligence review, managements internal non-public
stand-alone fiscal 2011 financial forecasts, or the Fiscal 2011
P&L Projections
,
which are summarized below. We also
provided to Morgan Stanley and Goldman Sachs for their use in
connection with the rendering of their fairness opinions to the
board of directors and performing their related financial
analysis, as described under the section entitled The
Merger Opinion of the Companys Financial
Advisors beginning on page [ ],
non-public five-year standalone financial forecasts that had
been prepared by management for internal planning purposes and
that are subjective in many respects. We have included below a
summary of a subset of these five-year forecast which assumes
that we implement our previously announced plan to refranchise
approximately half of our restaurant portfolio in the next three
to five years, which we refer to as the Five-Year Projections.
We believe that the Five-Year Projections, which incorporate the
impact of the refranchising strategy, are the projections that
reflect our current operating plan a go-forward standalone
basis. The board of directors also considered other projections
prepared by management, including those that excluded the impact
of the refranchising strategy and those that applied alternative
macroeconomic assumptions, but came to the conclusion that the
Five-Year Projections were the most realistic. In addition, we
provided to Morgan Stanley and Goldman Sachs certain stand-alone
fiscal 2011 free cash flow forecasts which are summarized below,
which we refer to as the Free Cash Flow Projections, and
collectively, with the Fiscal 2011 P & L Projections
and the Five-Year Projections, the Projections. The Fiscal 2011
P&L Projections were based on the 2011 fiscal plan adopted
by the board of directors, and adjusted for one-month of actual
results, while the Five-Year Projections and the Free Cash Flow
Projections were not so adjusted.
57
The Projections have been prepared by, and are the
responsibility of, our management. The Projections were not
prepared with a view toward public disclosure; and, accordingly,
do not necessarily comply with published guidelines of the SEC,
the guidelines established by the American Institute of
Certified Public Accountants for preparation and presentation of
financial forecasts, or generally accepted accounting
principles, or GAAP. KPMG LLP, our independent registered public
accounting firm, has not audited, compiled or performed any
procedures with respect to the Projections and does not express
an opinion or any form of assurance related thereto. A summary
of the Projections is not being included in this document to
influence your decision whether to vote for or against the
proposal to adopt the merger agreement, but is being included
because (i) the Projections were made available to the
board of directors and its advisors and (ii) the Fiscal
2011 P&L Projections were made available to Parent and
Merger Sub and their advisors. The inclusion of this information
should not be regarded as an indication that our board of
directors or its advisors or any other person considered, or now
considers, such financial forecasts to be material or to be a
reliable prediction of actual future results, and these
forecasts should not be relied upon as such. Our
managements internal financial forecasts, upon which the
Projections were based, are subjective in many respects. There
can be no assurance that the Projections will be realized or
that actual results will not be significantly higher or lower
than forecasted. The Projections cover multiple years and such
information by its nature becomes subject to greater uncertainty
with each successive year. As a result, the inclusion of the
Projections in this proxy statement should not be relied on as
necessarily predictive of actual future events.
The Projections, while presented with numerical specificity,
necessarily were based on numerous variables and assumptions
that are inherently uncertain and many of which are beyond the
control of our management. Because the Five-Year Projections
cover multiple years, by their nature, they become subject to
greater uncertainty with each successive year. The assumptions
upon which the Projections were based necessarily involve
judgments with respect to, among other things, future economic,
competitive and financial market conditions, all of which are
difficult or impossible to predict accurately and many of which
are beyond our control. The Projections also reflect assumptions
as to certain business decisions that are subject to change. In
addition, the Projections may be affected by our ability to
achieve strategic goals, objectives and targets over the
applicable periods.
Accordingly, there can be no assurance that the Projections will
be realized, and actual results may vary materially from those
shown. The inclusion of the Projections in this document should
not be regarded as an indication that we or any of our
affiliates, advisors, officers, directors or representatives
considered or consider the Projections to be predictive of
actual future events, and the Projections should not be relied
upon as such. Neither we nor any of our affiliates, advisors,
officers, directors or representatives can give any assurance
that actual results will not differ from the Projections, and
none of them undertakes any obligation to update or otherwise
revise or reconcile the Projections to reflect circumstances
existing after the date the Projections were generated or to
reflect the occurrence of future events even in the event that
any or all of the assumptions underlying the Projections are
shown to be in error. We do not intend to make publicly
available any update or other revision to the Projections,
except as otherwise required by law. Neither we nor any of our
affiliates, advisors, officers, directors or representatives has
made or makes any representation to any shareholder of the
Company or other person regarding our ultimate performance
compared to the information contained in the Projections or that
the Projections will be achieved. We have made no representation
to Parent, Merger Sub or their affiliates, in the merger
agreement or otherwise, concerning the Projections.
In light of the foregoing factors and the uncertainties
inherent in the Projections, shareholders are cautioned not to
place undue, if any, reliance on the Projections.
The financial forecasts are forward-looking statements. For
information on factors that may cause the Companys future
financial results to materially vary, see Cautionary
Statement Concerning Forward-Looking Information on
page [ ].
58
Fiscal
2011 Projections
The following is a summary of the Fiscal 2011 Projections
(dollars in millions, except per share information):
|
|
|
|
|
|
|
FY 2011 Estimate
|
|
|
Revenues
|
|
|
|
|
Company
|
|
$
|
1,846.1
|
|
Franchise
|
|
|
566.2
|
|
Property
|
|
|
114.5
|
|
|
|
|
|
|
Total Revenues
|
|
|
2,556.8
|
|
Company Restaurant expenses
|
|
|
(1,628.8
|
)
|
Selling, general and administrative expenses
|
|
|
(513.5
|
)
|
Other Income and Expenses
|
|
|
(5.7
|
)
|
Operating Income
|
|
|
348.4
|
|
Net Interest Expense
|
|
|
(49.9
|
)
|
Income Tax Expense
|
|
|
(107.5
|
)
|
|
|
|
|
|
Net Income
|
|
$
|
191.1
|
|
Earnings per share
|
|
|
|
|
Net Income basic
|
|
$
|
1.41
|
|
Net Income diluted
|
|
$
|
1.39
|
|
EBITDA(1)
|
|
$
|
465.8
|
|
The key assumptions underlying the summary Fiscal 2011
Projections include:
|
|
|
|
|
Comparable Sales of 1.6%
|
|
|
|
Comparable Traffic of 1.3%
|
|
|
|
Commodities inflation continues
|
|
|
|
Competition for value will continue
|
|
|
|
Global economic and financial market recovery uncertain
|
|
|
|
Re-franchising will reduce Sales, EBITDA, and EPS in the short
term
|
|
|
|
Re-financing of outstanding debt will negatively impact Interest
Expense/Net Income/EPS
|
Cash
Flow Projections
The following is a summary of the Cash Flow Projections (dollars
in millions):
|
|
|
|
|
|
|
FY 2011
|
|
|
|
Estimate
|
|
|
EBITDA(1)
|
|
$
|
463
|
|
Cash Interest Expense, net
|
|
|
(50
|
)
|
Cash Tax Expense
|
|
|
(103
|
)
|
FX Hedging
|
|
|
|
|
Other non-cash losses/gains
|
|
|
29
|
|
Changes in working capital
|
|
|
3
|
|
Other long-term assets/liabilities
|
|
|
2
|
|
|
|
|
|
|
Operating Cash Flow
|
|
$
|
344
|
|
|
|
|
|
|
Maintenance Capital Expenditures
|
|
|
(24
|
)
|
|
|
|
|
|
Free Cash Flow
|
|
|
321
|
|
59
Five-Year
Projections
The following is a summary of the Five-Year Projections (dollars
in millions, except per share information):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FY 2011
|
|
|
FY 2012
|
|
|
FY 2013
|
|
|
FY 2014
|
|
|
FY 2015
|
|
|
Revenue
|
|
$
|
2,574
|
|
|
$
|
2,102
|
|
|
$
|
1,884
|
|
|
$
|
1,910
|
|
|
$
|
2,024
|
|
EBIT
|
|
|
351
|
|
|
|
426
|
|
|
|
465
|
|
|
|
528
|
|
|
|
589
|
|
Profit Before Tax
|
|
|
299
|
|
|
|
363
|
|
|
|
409
|
|
|
|
478
|
|
|
|
549
|
|
EPS
|
|
|
1.40
|
|
|
|
1.69
|
|
|
|
1.91
|
|
|
|
2.23
|
|
|
|
2.56
|
|
EBITDA(1)
|
|
|
464
|
|
|
|
518
|
|
|
|
563
|
|
|
|
620
|
|
|
|
685
|
|
|
|
|
(1)
|
|
EBITDA is a non-GAAP financial measure. EBITDA is defined as
earnings (net income) before interest, taxes, depreciation and
amortization, and is used by management to measure operating
performance of the business. The Company also uses EBITDA as a
measure to calculate certain incentive based compensation and
certain financial covenants related to the Companys credit
facility and as a factor in the Companys tangible and
intangible asset impairment test. Management believes EBITDA is
a useful measure as it reflects certain operating drivers of the
Companys business, such as sales growth, operating costs,
selling, general and administrative expenses and other operating
income and expense.
|
The key assumptions underlying the summary Five-Year Projections
include:
|
|
|
|
|
Refranchising a total of 689 restaurants over the 5 year
period, comprising of 105 in fiscal year 2011, 342 in fiscal
year 2012, 240 in fiscal year 2013 and 45 in fiscal year 2014
|
|
|
|
Comparable Sales of 1.6% in fiscal year 2011, 2.7% in fiscal
year 2012, 2.8% in fiscal year 2013, 2.9% in fiscal year 2014
and 2.8% in fiscal year 2015
|
|
|
|
Comparable Traffic of 1.3% for all years presented
|
|
|
|
Royalty Rate of 4.5% on all refranchised restaurants
|
|
|
|
Excludes 36% Estimated Tax Rate for all years presented
|
|
|
|
137.3 million weighted average shares outstanding for all
years presented and no dilutive effect of compensation grants
|
|
|
|
Cash benefits of $258 million over the five-year period,
including approximately $110 million in cash proceeds from
the refranchising of the Company restaurants and
$148 million in reduced capital expenditures. However the
run-rate EBIT set forth above excludes any impact from the
re-investment of any cash proceeds.
|
The Projections should be evaluated, if at all, in
conjunction with the historical financial statements and other
information regarding the Company contained elsewhere in this
proxy statement and the Companys public filings with the
SEC.
Financing
of the Merger
We anticipate that the total funds needed to complete the
merger, including the funds needed to:
|
|
|
|
|
pay our shareholders (and holders of our other equity-based
interests) the amounts due to them under the merger agreement
and the related expenses, which, based upon the shares (and our
other equity-based interests) outstanding as of
[ ], 2010, would be approximately
$3.3 billion; and
|
|
|
|
repay indebtedness of the Company at the closing of the merger,
which, as of [ ], 2010, was approximately
$729 million;
|
will be funded through a combination of:
|
|
|
|
|
equity financing of $1.5 billion to be provided by 3G;
|
60
|
|
|
|
|
a $1.9 billion senior secured credit facility, comprised of
a $1.75 billion term loan facility and a $150 million
revolving credit facility; and
|
|
|
|
the issuance of senior unsecured notes yielding at least
$900 million in gross cash proceeds (or, to the extent
those notes are not issued at or prior to the closing of the
merger, by a senior unsecured bridge loan facility).
|
The equity and debt financing commitments are subject to certain
conditions. If the merger agreement is terminated in the
circumstance in which Merger Sub does not receive the proceeds
of the debt financing commitments, Merger Sub may be obligated
to pay us a termination fee of $175 million.
Equity
Financing
Parent has received the equity commitment letter from 3G,
pursuant to which 3G has committed to invest up to
$1.5 billion solely for the purpose of funding, and to the
extent necessary to fund, a portion of the aggregate offer price
and/or merger consideration pursuant to and in accordance with
the merger agreement, together with related expenses. We refer
to the financing contemplated by the equity commitment letter,
as may be amended and restated, and any permitted replacement
equity financing, as the equity financing. The Company is a
third party beneficiary to the equity commitment letter for the
limited purpose provided in the equity commitment letter to
permit the Company to seek specific performance to cause Parent
and Merger Sub to cause, or to directly cause, 3G to fund its
equity commitment in certain limited circumstances in accordance
with the terms of the equity commitment letter and the merger
agreement.
Concurrently with the execution and delivery of the equity
commitment letter, 3G executed and delivered to the Company the
limited guaranty where 3G has agreed to guaranty:
|
|
|
|
|
the obligation of Parent and Merger Sub under the merger
agreement to pay the Parent Termination Fee of $175 million
to the Company, and
|
|
|
|
the performance and discharge of Parents and Merger
Subs obligations and liabilities under the merger
agreement, up to a maximum of $175 million.
|
In no event will 3G incur obligations totalling more than
$175 million under the limited guaranty.
The funding of the equity financing is subject to (i) the
satisfaction or waiver by Parent and Merger Sub of all
conditions of the merger, (ii) pursuant to the terms and
conditions of the debt commitment letter, the debt financing
described below or any alternative financing that Parent and
Merger Sub are required or permitted to accept from alternative
sources pursuant to the merger agreement having been obtained,
and (iii) the substantially contemporaneous consummation of
the merger.
Debt
Financing
Merger Sub has received the debt commitment letter from JPMorgan
Chase Bank, N.A., which we refer to as JPMCB, J.P. Morgan
Securities LLC, which we refer to as JPMSLLC, and Barclays Bank
PLC, which we refer to as Barclays Bank and, together with
JPMCB, the lenders, to provide the following, subject to the
conditions set forth in the debt commitment letter:
|
|
|
|
|
to Merger Sub, up to $1.90 billion of senior secured
facilities (not all of which is expected to be drawn at the
closing of such facilities) for the purpose of financing the
merger, refinancing certain existing indebtedness of the
Company, paying fees and expenses incurred in connection with
the merger and the transactions contemplated thereby and for
providing ongoing working capital and for other general
corporate purposes of the Company and its subsidiaries; and
|
|
|
|
to Merger Sub, up to $900 million of bridge facilities for
the purpose of financing the merger.
|
Upon consummation of the merger, Burger King Corporation, or
BKC, will assume all of the obligations under the senior secured
facilities.
61
The commitment of the lenders with respect to the senior secured
facilities and the bridge facility expires upon the earliest to
occur of (i) the irrevocable termination of the merger
agreement prior to the closing of the merger or
(ii) March 2, 2011. The documentation governing the
debt financings has not been finalized and, accordingly, the
actual terms of the debt financing may differ from those
described in this document. Each of Parent and Merger Sub has
agreed to use its reasonable best efforts to arrange the debt
financing on the terms and conditions described in the debt
commitment letter. If any portion of the debt financing becomes
unavailable on the terms and conditions contemplated in the debt
commitment letter, Parent must use its reasonable best efforts
to arrange promptly to obtain alternative financing from
alternative sources in an amount at least equal to the debt
financing or such unavailable portion thereof on terms that are
not materially less favorable in the aggregate to Parent and
Merger Sub than as contemplated by the debt commitment letter.
Although the debt financing described in this document is not
subject to a due diligence or market out, such
financing may not be considered assured. As of the date hereof,
no alternative financing arrangements or alternative financing
plans have been made in the event the debt financing described
herein is not available.
Credit
Facilities
The availability of the senior secured facilities and the bridge
facility is subject, among other things, to consummation of the
merger in accordance with the merger agreement (without giving
effect to any amendments or waivers to the provisions thereof,
or any consents or requests by Parent or Merger Sub resulting in
an action taken by the Company or its subsidiaries, in each case
that are materially adverse to the lead arrangers or lenders
under such facilities without the consent of the commitment
parties thereunder), the achievement of a specified pro forma
ratio of total debt of the Company and its consolidated
subsidiaries to EBITDA for the four most recent fiscal quarters
ended at least 45 days prior to closing, payment of
required fees and expenses, the funding of the equity financing,
the refinancing of certain of the Companys existing debt
and the absence of certain types of other debt, delivery of
certain historical and pro forma financial information, the
execution of certain guarantees and the creation of security
interests and the negotiation, execution and delivery of
definitive documentation.
Senior
Secured Term and Revolving Credit Facilities
The senior secured facilities will consist of a
(i) $1.75 billion term loan facility with a term of
six years and (ii) a $150 million revolving credit
facility with a term of five years.
Roles.
JPMSLLC and Barclays Capital have been
appointed as joint lead arrangers and joint bookrunners for the
senior secured facilities. JPMCB has been appointed as
administrative agent for the senior secured facilities.
Interest Rate.
Loans under the senior secured
facilities are expected to bear interest, at BKCs option,
at a rate equal to the adjusted Eurodollar rate or an alternate
base rate, in each case, plus a spread. After the Companys
delivery of financial statements with respect to at least one
full fiscal quarter ending after the effective date of the
merger, interest rates under the revolving credit facility shall
be subject to decreases based on a total leverage ratio as
agreed upon between BKC and the lenders.
Prepayments and Amortization.
BKC will be
permitted to make voluntary prepayments with respect to the
senior secured facilities at any time, without premium or
penalty (other than LIBOR breakage costs, if applicable). The
term loans under the senior secured facilities will amortize 1%
per annum in equal quarterly installments until the final
maturity date.
Guarantors.
All obligations under the senior
secured facilities will be guaranteed by the Company and each of
the existing and future direct and indirect, material
wholly-owned domestic subsidiaries of BKC.
Security.
The obligations of BKC and the
guarantors under the senior secured facilities and under any
swap agreements and cash management arrangements entered into
with a lender or any of its affiliates, will be secured, subject
to permitted liens and other agreed upon exceptions on a first
priority basis by a perfected security interest in all of
BKCs and each guarantors tangible and intangible
assets, including United States registered intellectual
property, real property and all of the capital stock of BKC and
each of its direct and
62
indirect subsidiaries (limited, in the case of foreign
subsidiaries, to 65% of the capital stock of first tier foreign
subsidiaries). If certain security is not provided at closing
despite the use of commercially reasonable efforts to do so, the
delivery of such security will not be a condition precedent to
the availability of the senior secured facilities on the closing
date, but instead will be required to be delivered following the
closing date pursuant to arrangements to be mutually agreed.
Other Terms.
The senior secured facilities
will contain customary representations and warranties and
customary affirmative and negative covenants, including, among
other things, restrictions on indebtedness, investments, sales
of assets, mergers and consolidations, prepayments of
subordinated indebtedness, liens and dividends and other
distributions. The senior secured facilities will also include
customary events of defaults including a change of control to be
defined.
Bridge
Facility
Merger Sub is expected to issue up to $900 million
aggregate principal amount of senior notes, as described below.
If the offering of senior notes by Merger Sub is not completed
on or prior to the closing of the senior secured facilities, the
lenders have committed to provide a bridge facility of up to
$900 million. Merger Sub would be the initial borrower
under the bridge facility, and upon consummation of the merger,
BKC would assume all of the obligations under the bridge
facility. The bridge facility will be guaranteed by the persons
that guarantee the senior secured facilities. JPMSLLC and
Barclays Capital have been appointed as joint lead arrangers and
joint bookrunners for the bridge facility. JPMCB has been
appointed as administrative agent for the bridge facility.
Subject to the satisfaction of certain conditions related to the
merger, Merger Sub is obligated to take down and use the
proceeds of the bridge facility if it has not completed the
senior notes offering by November 18, 2010.
Senior
Notes due 2018
Merger Sub plans to issue up to $900 million in aggregate
principal amount of senior notes due in 2018. Merger Sub plans
to issue the notes in transactions exempt from or not subject to
registration under the Securities Act pursuant to Rule 144A
and Regulation S under the Securities Act. If senior notes
are issued, upon consummation of the merger, the Company will
assume all of the obligations under the senior notes and the
guarantees described below will become effective. The provisions
below set forth the expected material terms for the senior notes.
Guarantees.
The Companys obligations
under the senior notes will be jointly and severally guaranteed
on a senior unsecured basis by the Company and all of its
existing and future direct and indirect domestic subsidiaries
that guarantee its indebtedness or indebtedness of subsidiary
guarantors.
Optional Redemption.
The Company may redeem
any of the senior notes at any time on or after the fourth
anniversary of the issuance date of the senior notes, in whole
or in part, in cash at the redemption prices described in the
indenture governing the senior notes, plus accrued and unpaid
interest, if any, to the date of redemption. In addition, on or
before the third anniversary of the issuance date, the Company
may redeem up to 35% of the aggregate principal amount of senior
notes with the net proceeds of certain equity offerings at a
price of 100% of the principal amount of the senior notes, plus
accrued and unpaid interest, if any, to the date of redemption.
The Company may make that redemption only if, after the
redemption, a specified minimum percentage of the aggregate
principal amount of senior notes remains outstanding. The
Company may redeem any of the senior notes at any time before
the fourth anniversary of the issuance date of the senior notes,
in cash at 100% of the principal amount plus accrued and unpaid
interest, if any, to the date of redemption and a make-whole
premium.
Change of Control.
Upon a change of control,
the Company may be required to make an offer to purchase each
holders senior notes at a price equal to 101% of the
principal amount thereof, plus accrued and unpaid interest to
the date of purchase.
63
Certain Covenants.
The indenture governing the
senior notes is expected to contain covenants that, among other
things, limit our ability and the ability of our restricted
subsidiaries to:
|
|
|
|
|
incur additional indebtedness and guarantee indebtedness;
|
|
|
|
pay dividends or make other distributions in respect of, or
repurchase or redeem, capital stock;
|
|
|
|
prepay, redeem or repurchase certain debt;
|
|
|
|
make loans and investments;
|
|
|
|
sell or otherwise dispose of assets;
|
|
|
|
incur liens;
|
|
|
|
enter into transactions with affiliates;
|
|
|
|
alter the businesses we conduct;
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|
|
enter into agreements restricting our subsidiaries ability
to pay dividends; and
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|
|
|
consolidate, merge or sell all or substantially all of our
assets.
|
These limitations are expected to be subject to a number of
qualifications and exceptions that will be set forth in the
indenture governing the senior notes.
Closing
and Effective Time of Merger
If the merger is approved at the shareholders meeting then,
assuming timely satisfaction of the other necessary closing
conditions, we anticipate that the merger will be completed
promptly thereafter. The effective time of the merger will occur
as soon as practicable following the closing of the merger upon
the filing of a certificate of merger with the Secretary of
State of the State of Delaware (or at such later date as we and
Parent may agree and specify in the certificate of merger).
Payment
of Merger Consideration and Surrender of Stock
Certificates
Each record holder of shares of Company common stock (other than
holders of solely the excluded shares) will be sent a letter of
transmittal describing how such holder may exchange its shares
of Company common stock for the per share merger consideration
promptly, and in any event within two business days, after the
completion of the merger.
You should not return your stock certificates with the
enclosed proxy card, and you should not forward your stock
certificates to the paying agent without a letter of
transmittal.
You will not be entitled to receive the per share merger
consideration until you deliver a duly completed and executed
letter of transmittal to the paying agent. If your shares are
certificated, you must also surrender your stock certificate or
certificates to the paying agent. If ownership of your shares is
not registered in the transfer records of the Company, a check
for any cash to be delivered will only be issued if the
applicable letter of transmittal is accompanied by all documents
reasonably required by the Company to evidence and effect such
transfer and to evidence that any applicable stock transfer
taxes have been paid or are not applicable.
Interests
of Certain Persons in the Merger
Overview
The vested shares of Company common stock held by our directors
and executive officers will be treated in the same manner as
outstanding shares of Company common stock held by our other
shareholders. As of September 13, 2010, our directors and
executive officers and their affiliates owned in the aggregate
28,659,925 shares of Company common stock, excluding
(1) shares issuable upon the exercise of stock options,
(2) shares issuable upon vesting of Company restricted
stock units, (3) shares issuable upon vesting of
64
the Companys performance-based stock units and
(4) vested and unvested director stock units. If the merger
is completed, our directors and executive officers and their
affiliates, including the Sponsors, would receive an aggregate
amount of $687,838,200 net in cash, without interest
thereon and less any required withholding taxes.
Aside from their interests as shareholders of the Company, our
directors and employees, including our executive officers, have
interests in the merger that may be different from, or in
addition to, those of other shareholders of the Company
generally. In considering the recommendation of the board of
directors that you approve the proposal to adopt the merger
agreement, you should be aware of these interests. The members
of the board of directors were aware of and considered these
interests, among other matters, in making their decision to
recommend that you approve the proposal to adopt the merger
agreement. The interests of the Companys directors and
employees, including its executive officers, in the merger that
are different from, or in addition to, those of other
shareholders of the Company are as follows:
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accelerated vesting of all stock options held by our employees,
including our executive officers, at the earlier to occur of the
offer closing and the effective time of the merger, which we
refer to as the acceleration time, and the settlement of such
options in exchange for cash (as described below).
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accelerated vesting of all restricted stock units held by our
employees, including our executive officers, at the acceleration
time and the cancelation of such awards in exchange for cash (as
described below).
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|
|
accelerated vesting of all performance-based stock units held by
our employees, including our executive officers, at the
acceleration time (calculated at target level of performance)
and the cancelation of such awards in exchange for cash (as
described below).
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payment of a pro rata annual bonus (calculated at target level
of performance) to all of our bonus-eligible employees,
including our executive officers, for the period commencing on
July 1, 2010 through the effective time of the merger.
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certain of our executive officers will receive payment for
performing transition services.
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|
our executive officers will receive payments and benefits under
the executive officers employment agreements upon certain
types of termination of employment following the effective time
of the merger.
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accelerated vesting of any unvested director stock units and the
payment to all non-management directors for all outstanding
director stock units upon their resignation from the board of
directors in accordance with the terms of such awards.
|
The dates used below to quantify these interests have been
selected for illustrative purposes only. They do not necessarily
reflect the dates on which certain events will occur.
Equity
Awards
Our officers, and certain of our employees, hold stock options,
restricted stock units
and/or
performance-based stock units. All of our non-management
directors hold director stock units. Under the merger agreement,
each stock option, whether vested or unvested, that is
outstanding immediately prior to the effective time of the
merger will vest and be canceled in exchange for an amount in
cash equal to (A) the excess, if any, of (x) $24.00
over (y) the exercise price per share of Company common
stock subject to such option, multiplied by (B) the number
of shares of Company common stock for which such option shall
not have been exercised. Each restricted stock unit that is
outstanding immediately prior to such time will vest and be
converted into an amount in cash equal to $24.00. Each
performance-based stock unit that is outstanding immediately
prior to such time will vest and be converted into an amount in
cash equal to (A) $24.00 multiplied by (B) the number
of shares subject to the performance-based stock units assuming
that the target level of performance had been attained. Each
director stock unit, that has not yet vested, will vest and all
director stock units outstanding immediately prior to such time,
in connection with such directors resignation, will be
converted into an amount in cash equal to $24.00.
65
For our officers who hold the position of vice president and
above, including the executive officers, the equity awards that
were granted on August 25, 2010, which we refer to as the
August equity grants, will be converted into the right to
receive $24.00, however 60% of the cash amount attributable to
the August equity grants for such officers, other than
Mr. Smith (who will receive such amounts at the effective
time of the merger), will be deposited into a trust account
established with a third party for the officers benefit.
The remaining 40% will be withheld for taxes. For those officers
other than Messrs. Chidsey and Wells, and Ms. Chwat,
if the officer is employed on each of August 25, 2011 and
August 25, 2012, the officer will receive from the trust an
amount equal to 25% of the portion of the trust account related
to such officers stock options, which mirrors the vesting
schedule of the original underlying option grant. If the officer
is actively employed until the end of the two year anniversary
following the effective time of the merger, the balance of the
trust will be paid to the officer. If the officer is terminated
without cause prior to any of these payment dates (or terminates
for good reason prior to the payment date, for those officers
who are a party to an employment agreement containing a
definition of good reason) the balance will be paid to such
officer upon such termination. However, if the officer
voluntarily terminates his or her employment (other than for
good reason, for those officers who are a party to an employment
agreement containing a definition of good reason) or is
terminated for cause prior to any of these payment dates, the
officer will forfeit his or her remaining balance in the trust.
For Mr. Chidsey, Mr. Wells and Ms. Chwat, whom we
refer to as the transition executives, the subsequent conditions
to receive the payment of the trust amounts are as follows:
(i) in the case of Mr. Chidsey (i) 50% of the
amounts in the trust will be released and remitted on the
six-month anniversary of the effective time of the merger and
(ii) 50% of the amounts in the trust will be released and
remitted on the twelve-month anniversary of the effective time
of the merger, subject to Mr. Chidseys continued
service until each such date except as provided below and
(ii) in the case of each of Mr. Wells and
Ms. Chwat, the amounts in the trust will be released in six
substantially equal installments on the first business day of
each of the first six months following the effective time of the
merger, subject to such transition executives continued
service through such date except as provided below. If the
transition executives employment is terminated due to
death or disability or without cause or if the transition
executive terminates his or her employment for good reason prior
to any of these payment dates, the balance of the transition
executives trust will be paid to such transition executive
upon termination. However, if the transition executive
voluntarily terminates his or her employment (other than for
good reason) or is terminated for cause prior to any of these
payment dates, the transition executive will forfeit his or her
remaining balance in the trust. For Mr. Chidsey, the merger
agreement specifies that the expiration of the transition period
and the commencement of the six-month consulting arrangement
described below under
Amendments to
Employment Agreements
will not be deemed to be the
termination of his employment without cause or voluntary
resignation for good reason. Further, if Mr. Chidseys
consulting arrangement is terminated without cause or by reason
of his death or disability, the amount in trust will be
immediately released to him upon such termination.
The following table shows the amount in cash that each executive
officer is expected to receive pursuant to the merger agreement,
based on equity awards held as of September 13, 2010,
assuming the effective time of the merger occurs on
October 15, 2010 as a result of the cancelation of all
stock options, restricted stock units and performance-based
stock units held by our executive officers.
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|
|
|
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|
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Vested
|
|
Unvested
|
|
Performance-Based
|
|
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|
|
Stock
|
|
Stock
|
|
and Restricted
|
|
|
Executive Officer
|
|
Options ($)
|
|
Options ($)
|
|
Stock Units ($)
|
|
Total ($)
|
|
John W. Chidsey
|
|
|
17,154,523
|
|
|
|
3,583,134
|
|
|
|
6,763,392
|
|
|
|
27,501,049
|
|
Ben K. Wells
|
|
|
1,274,398
|
|
|
|
834,230
|
|
|
|
1,547,688
|
|
|
|
3,656,316
|
|
Anne Chwat
|
|
|
1,175,140
|
|
|
|
581,122
|
|
|
|
968,856
|
|
|
|
2,725,118
|
|
Peter C. Smith
|
|
|
807,153
|
|
|
|
563,161
|
|
|
|
903,960
|
|
|
|
2,274,274
|
|
Charles M. Fallon, Jr.
|
|
|
1,387,295
|
|
|
|
937,936
|
|
|
|
988,056
|
|
|
|
3,313,287
|
|
Julio A. Ramirez
|
|
|
205,229
|
|
|
|
510,234
|
|
|
|
1,104,384
|
|
|
|
1,819,847
|
|
Natalia Franco
|
|
|
|
|
|
|
181,468
|
|
|
|
344,448
|
|
|
|
525,916
|
|
Kevin Higgins
|
|
|
47,620
|
|
|
|
392,307
|
|
|
|
571,104
|
|
|
|
1,011,031
|
|
66
The following table shows the amount in cash that each director
is expected to receive pursuant to the merger agreement, based
on equity awards held as of September 13, 2010, assuming
the effective time of the merger occurs on October 15, 2010
as a result of the cancelation of all director stock units held
by our directors.
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|
|
|
|
|
|
|
|
|
|
|
|
Vested
|
|
Unvested
|
|
|
|
|
Director Stock
|
|
Director Stock
|
|
|
Director
|
|
Units ($)
|
|
Units ($)
|
|
Total ($)
|
|
Richard W. Boyce
|
|
|
600,000
|
|
|
|
|
|
|
|
600,000
|
|
David A. Brandon
|
|
|
840,000
|
|
|
|
|
|
|
|
840,000
|
|
Ronald M. Dykes
|
|
|
574,200
|
|
|
|
|
|
|
|
574,200
|
|
Peter R. Formanek
|
|
|
3,780,168
|
|
|
|
|
|
|
|
3,780,168
|
|
Manuel A. Garcia
|
|
|
1,551,384
|
|
|
|
|
|
|
|
1,551,384
|
|
Sanjeev K. Mehra(1)
|
|
|
587,472
|
|
|
|
|
|
|
|
587,472
|
|
Stephen Pagliuca
|
|
|
495,552
|
|
|
|
28,776
|
|
|
|
524,328
|
|
Brian T. Swette
|
|
|
3,141,648
|
|
|
|
|
|
|
|
3,141,648
|
|
Kneeland C. Youngblood
|
|
|
420,168
|
|
|
|
|
|
|
|
420,168
|
|
|
|
|
(1)
|
|
Mr. Mehra has an understanding with The Goldman Sachs
Group, Inc. pursuant to which he holds such director stock units
for the benefit of The Goldman Sachs Group, Inc.
|
Employment
Agreements
We are a party to employment agreements with our executive
officers that provide for certain payments and benefits upon a
termination of employment by the Company (other than for cause)
or a resignation for good reason (as such terms are defined in
the respective employment agreements).
Amendments
to Employment Agreements
On September 1, 2010, we entered into amendments to the
employment agreements of Messrs. Chidsey, Wells and Smith
and Ms. Chwat, effective upon the effective time of the
merger, which add or modify certain terms of their existing
agreements, including terms pursuant to which services will be
performed following the effective time of the merger. The
amendments provide that at the effective time of the merger, the
transition executives will remain employed with the Company for
a period of six months. With respect to the transition
executives, the six-month transition period can be extended if
the Company and the executive mutually agree.
Mr. Smiths employment will terminate at the effective
time of the merger and he will receive the severance payments
and benefits set forth in his employment agreement, as amended.
In exchange for performing services during the transition
period, the transition executives will generally be compensated
during the transition period as they were compensated prior to
the transition period. If their employment is terminated during
the transition period other than (i) for cause or
(ii) the executives voluntary termination without
good reason, in addition to the severance payments and benefits
under the executives existing employment agreement, the
executive will receive the remaining cash compensation that
would have been paid to the executive had he or she performed
services through the end of the transition period.
Following the six-month transition period, the employment of
each of Messrs. Chidsey and Wells and Ms. Chwat will
terminate and he or she will be entitled to the severance
payments and benefits set forth in his or her employment
agreement. In addition, Mr. Chidsey has agreed to perform
part-time consulting services for the six-month period following
the transition period. In exchange for performing consulting
services, Mr. Chidsey will receive a monthly consulting fee
of $100,000.
Each of Messrs. Chidsey, Wells and Smith and Ms. Chwat
will receive a transition bonus ($3,021,000, $1,308,500,
$1,097,518, and $1,130,619 for Messrs. Chidsey, Wells and
Smith and Ms. Chwat, respectively) in respect of his or her
contributions toward the successful completion of the Merger
and, in the case of Messrs. Wells and Chidsey and
Ms. Chwat, as an inducement for his or her agreement to
perform services
67
following the effective time of the merger. The transition
bonuses will be paid at the time the Merger closes except for
Mr. Chidsey, who will receive $521,000 of his transition
bonus at the effective time of the merger, $1,250,000 on the
six-month anniversary of the effective time of the merger and
$1,250,000 on the twelve-month anniversary of the effective time
of the merger, subject to his continued service or earlier
termination of employment without cause, for good reason, or by
reason of his death or disability.
In connection with the employment agreement amendments,
Messrs. Chidsey, Wells and Smith and Ms. Chwat have
agreed to extend the non-competition and non-solicitation
covenants from one year following their termination to two years
following their termination and Messrs. Chidsey and Wells
and Ms. Chwat have agreed to modify their right to
terminate for good reason, including waiving that right due to
any change in their duties resulting from consummation of the
Merger. In the case of Messrs. Wells and Smith and
Ms. Chwat, the welfare benefits continuation period in the
event of a qualifying termination has been extended from one
year to two years pursuant to their amended employment
agreements.
Pursuant to the merger agreement, the Company is authorized to
enter into amendments to the employment agreements of
Messrs. Fallon, Ramirez and Higgins and Ms. Franco,
effective upon the effective time of the merger, which will
increase their severance payments to two times the sum of base
salary, benefits or perquisite allowance (as applicable) and
target bonus for the year of termination. In addition, the right
of Messrs. Fallon and Ramirez and Ms. Franco to
receive welfare benefits continuation will be extended from one
year to two years. In addition, the proposed amendments provide
for the non-competition provisions and the non-solicitation
provisions to be extended from one year to two years.
Prior to amendment, the employment agreements of each of
Messrs. Fallon, Ramirez and Higgins and Ms. Franco
provide that in the event of a termination by the Company
without cause, or by the executive for good reason in the case
of Messrs. Fallon and Ramirez and Ms. Franco, subject
to execution by the executive of a release, the executive is
entitled to an amount equal to (i) his or her annual base
salary and annual perquisite allowance plus (ii) a pro-rata
bonus though the date of termination, payable when and to the
extent that the Company pays a bonus for such year, and
continued coverage for one year under BKCs medical, dental
and life insurance plans. In addition, Ms. Francos
agreement provides that if a Change in Control (as defined in
the agreement) occurs on or before May 17, 2011, and,
within twelve months following such Change in Control
Ms. Franco is terminated without cause or resigns for good
reason, Ms. Franco is entitled to an amount equal to twice
her annual base salary, annual perquisite allowance and prorated
bonus.
Potential
Payments Upon a Change in Control
Based on compensation and benefit levels as of
September 16, 2010, and assuming that the effective time of
the merger occurs on October 15, 2010 and that the
executive officers experience a qualifying termination of
employment at that time (except that for Messrs. Chidsey
and Wells and Ms. Chwat, it assumes that a qualifying
termination occurs at the end of the transition period), the
executive officers would be entitled to receive the following
cash payments and benefits under their amended employment
agreements upon a
68
qualifying termination (assuming that all of the payments
described above under
Equity
Awards
have been previously made, including payments
resulting from accelerated vesting of outstanding equity awards):
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination w/o
|
|
|
|
|
|
|
|
|
Cause or
|
|
|
Pro-Rata
|
|
|
|
|
|
for Good
|
|
|
Bonus
|
|
|
|
|
|
Reason
|
|
|
Payable Upon
|
|
|
|
|
|
After Change
|
|
|
the Mergers
|
|
Name
|
|
Benefit
|
|
in Control ($)
|
|
|
Closing ($)(2)
|
|
|
John W. Chidsey(1)
|
|
Salary
|
|
$
|
6,257,250
|
|
|
|
|
|
|
|
Pro Rata Bonus Payable at Closing
|
|
|
|
|
|
$
|
302,862
|
|
|
|
Pro Rata Bonus at Termination Date(3)
|
|
$
|
521,438
|
|
|
|
|
|
|
|
Transition Bonus(4)
|
|
$
|
3,021,000
|
|
|
|
|
|
|
|
Benefits Continuation(5)
|
|
$
|
90,000
|
|
|
|
|
|
|
|
Perquisite Allowance
|
|
$
|
190,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
10,080,188
|
|
|
$
|
302,862
|
|
Ben K. Wells(1)
|
|
Salary
|
|
$
|
525,000
|
|
|
|
|
|
|
|
Bonus
|
|
|
|
|
|
|
|
|
|
|
Pro Rata Bonus Payable at Closing
|
|
|
|
|
|
$
|
106,726
|
|
|
|
Pro Rata Bonus at Termination Date(3)
|
|
$
|
183,750
|
|
|
|
|
|
|
|
Transition Bonus(4)
|
|
$
|
1,308,500
|
|
|
|
|
|
|
|
Benefits Continuation(5)
|
|
$
|
60,000
|
|
|
|
|
|
|
|
Perquisite Allowance
|
|
$
|
48,500
|
|
|
|
|
|
|
|
Outplacement Services
|
|
$
|
28,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
2,154,250
|
|
|
$
|
106,726
|
|
Anne Chwat(1)
|
|
Salary
|
|
$
|
450,883
|
|
|
|
|
|
|
|
Bonus
|
|
|
|
|
|
|
|
|
|
|
Pro Rata Bonus Payable at Closing
|
|
|
|
|
|
$
|
91,659
|
|
|
|
Pro Rata Bonus at Termination Date(3)
|
|
$
|
157,809
|
|
|
|
|
|
|
|
Transition Bonus(4)
|
|
$
|
1,130,619
|
|
|
|
|
|
|
|
Benefits Continuation(5)
|
|
$
|
60,000
|
|
|
|
|
|
|
|
Perquisite Allowance
|
|
$
|
48,500
|
|
|
|
|
|
|
|
Outplacement Services
|
|
$
|
28,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
1,876,311
|
|
|
$
|
91,659
|
|
Peter C. Smith
|
|
Salary
|
|
$
|
437,091
|
|
|
|
|
|
|
|
Bonus
|
|
|
|
|
|
|
|
|
|
|
Pro Rata Bonus Payable at Closing(3)
|
|
|
|
|
|
$
|
88,855
|
|
|
|
Transition Bonus(4)
|
|
$
|
1,097,518
|
|
|
|
|
|
|
|
Benefits Continuation(5)
|
|
$
|
60,000
|
|
|
|
|
|
|
|
Perquisite Allowance
|
|
$
|
48,500
|
|
|
|
|
|
|
|
Outplacement Services
|
|
$
|
28,500
|
|
|
|
|
|
|
|
Total
|
|
$
|
1,671,609
|
|
|
$
|
88,855
|
|
|
|
|
|
|
|
|
|
|
|
|
69
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination w/o
|
|
|
|
|
|
|
|
|
Cause or
|
|
|
Pro-Rata
|
|
|
|
|
|
for Good
|
|
|
Bonus
|
|
|
|
|
|
Reason
|
|
|
Payable Upon
|
|
|
|
|
|
After Change
|
|
|
the Mergers
|
|
Name
|
|
Benefit
|
|
in Control ($)
|
|
|
Closing ($)(2)
|
|
|
Charles M. Fallon, Jr
|
|
Salary
|
|
$
|
1,000,000
|
|
|
|
|
|
|
|
Bonus
|
|
$
|
700,000
|
|
|
|
|
|
|
|
Pro Rata Bonus Payable at Closing
|
|
|
|
|
|
$
|
101,644
|
|
|
|
Benefits Continuation(5)
|
|
$
|
60,000
|
|
|
|
|
|
|
|
Perquisite Allowance
|
|
$
|
97,000
|
|
|
|
|
|
|
|
Outplacement Services
|
|
$
|
28,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
1,885,500
|
|
|
$
|
101,644
|
|
Julio A. Ramirez
|
|
Salary
|
|
$
|
824,000
|
|
|
|
|
|
|
|
Bonus
|
|
$
|
576,800
|
|
|
|
|
|
|
|
Pro Rata Bonus Payable at Closing
|
|
|
|
|
|
$
|
83,755
|
|
|
|
Benefits Continuation(5)
|
|
$
|
60,000
|
|
|
|
|
|
|
|
Perquisite Allowance
|
|
$
|
97,000
|
|
|
|
|
|
|
|
Outplacement Services
|
|
$
|
28,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
1,586,300
|
|
|
$
|
83,755
|
|
Natalia Franco
|
|
Salary
|
|
$
|
700,000
|
|
|
|
|
|
|
|
Bonus
|
|
$
|
490,000
|
|
|
|
|
|
|
|
Pro Rata Bonus Payable at Closing
|
|
|
|
|
|
$
|
71,151
|
|
|
|
Benefits Continuation(5)
|
|
$
|
60,000
|
|
|
|
|
|
|
|
Perquisite Allowance
|
|
$
|
97,000
|
|
|
|
|
|
|
|
Outplacement Services
|
|
$
|
28,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
1,375,500
|
|
|
$
|
71,151
|
|
Kevin Higgins(6)
|
|
Salary
|
|
$
|
992,600
|
|
|
|
|
|
|
|
Bonus
|
|
$
|
446,670
|
|
|
|
|
|
|
|
Pro Rata Bonus Payable at Closing
|
|
|
|
|
|
$
|
64,859
|
|
|
|
Benefits Continuation
|
|
|
N/A
|
|
|
|
|
|
|
|
Perquisite Allowance
|
|
$
|
121,098
|
|
|
|
|
|
|
|
Outplacement Services
|
|
$
|
28,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
1,527,801
|
|
|
$
|
64,380
|
|
|
|
|
(1)
|
|
If Messrs. Chidsey or Wells or Ms. Chwat are
terminated other than for cause or good reason, he or she will
receive the remaining cash compensation that he or she would
have received had he or she performed services through the end
of their six-month transition period.
|
|
(2)
|
|
All bonus eligible employees, including each executive officer,
will receive a pro rata annual bonus for the period commencing
July 1, 2010 through October 15, 2010, calculated at
target level of performance, upon the effective time of the
merger without regard to whether the executive is terminated or
continues to be employed by the Company.
|
|
(3)
|
|
For each of the transition executives, the pro rata bonus
payable at Termination Date represents a pro rata bonus,
calculated at target level of performance, for services rendered
during the six-month transition period.
|
|
(4)
|
|
The transition bonus will be paid at the effective time of the
merger, except for Mr. Chidsey, who will receive $521,000
at the effective time of the merger, $1,250,000 six months after
the effective time of the merger and $1,250,000 12 months
after the effective time of the merger.
|
70
|
|
|
(5)
|
|
Assumes cost of the benefits continuation of $30,000 per year.
However, each executive will receive benefits at the level in
effect on the date of termination.
|
|
(6)
|
|
Mr. Higgins salary and other payments are due in Swiss
Francs. Amounts above represent conversion to U.S. dollars based
on the Bloomberg exchange rate in effect on September 13,
2010, which was 1 Swiss Franc to 0.9926 United States Dollars.
|
Director
Compensation
Each non-management director receives an annual deferred stock
award, director stock units, with a grant date fair value of
$85,000. The director stock units vest in quarterly installments
over a 12 month period. In addition, the non-management
directors receive an annual retainer of $65,000. The chair of
the Audit Committee receives an additional $20,000 fee and the
chairs of the Compensation Committee and the Nominating and
Corporate Governance Committee each receive an additional
$10,000 fee. In addition, commencing on July 1, 2010, the
board appointed a lead independent director who will be eligible
to receive an additional $25,000 annual fee. Directors have the
option to receive their annual retainer and their chair fees
either 100% in cash or 100% in director stock units.
Messrs. Formanek and Youngblood, who elected to receive
their annual retainer for the 2010 calendar year in cash,
previously received their annual retainer. The remaining
non-management directors, who elected to receive their annual
retainer for the 2010 calendar year in director stock units,
will receive a cash settlement in the amount of $65,000 at the
effective time of the merger in lieu of receiving director stock
units at the annual meeting of shareholders.
All director stock units, whether the annual grant or a grant in
lieu of a cash retainer or chair fees, will be settled upon
termination of service on the board of directors. Any director
stock units granted as part of a directors annual
compensation that remain unvested immediately before the
consummation of the merger will vest and be canceled in exchange
for an amount in cash calculated as described above under
Equity Awards
. The director stock
units for each director are set forth in the Deferred Stock
columns in the director table above under
Equity Awards
.
Indemnification
and Exculpation of Directors and Officers
Section 145 of the DGCL provides that a Delaware
corporation may indemnify any persons who are, or are threatened
to be made, parties to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in
the right of such corporation), by reason of the fact that such
person was an officer, director, employee or agent of such
corporation, or is or was serving at the request of such person
as an officer, director, employee or agent of another
corporation or enterprise. The indemnity may include expenses
(including attorneys fees), judgments, fines and amounts
paid in settlement actually and reasonably incurred by such
person in connection with such action, suit or proceeding,
provided that such person acted in good faith and in a manner he
or she reasonably believed to be in or not opposed to the
corporations best interests and, with respect to any
criminal action or proceeding, had no reasonable cause to
believe that his or her conduct was illegal. A Delaware
corporation may indemnify any persons who are, or are threatened
to be made, a party to any threatened, pending or completed
action or suit by or in the right of the corporation by reason
of the fact that such person was a director, officer, employee
or agent of such corporation, or is or was serving at the
request of such corporation as a director, officer, employee or
agent of another corporation or enterprise. The indemnity may
include expenses (including attorneys fees) actually and
reasonably incurred by such person in connection with the
defense or settlement of such action or suit provided such
person acted in good faith and in a manner he or she reasonably
believed to be in or not opposed to the corporations best
interests, except that no indemnification is permitted without
judicial approval if the officer or director is adjudged to be
liable to the corporation. Expenses incurred by any officer or
director in defending any such action, suit or proceeding in
advance of its final disposition shall be paid by the
corporation upon delivery to the corporation of an undertaking,
by or on behalf of such director or officer, to repay all
amounts so advanced if it shall ultimately be determined that
such director or officer is not entitled to be indemnified by
the corporation. Where an officer or director is successful on
the merits or otherwise in the defense of any action referred to
above, the corporation must indemnify him or her against the
expenses which such officer or director has actually and
reasonably incurred. Our certificate of
71
incorporation and bylaws provide for the indemnification of our
directors and officers to the fullest extent permitted under the
DGCL.
Section 102(b)(7) of the DGCL permits a corporation to
provide in its certificate of incorporation that a director of
the corporation shall not be personally liable to the
corporation or its shareholders for monetary damages for breach
of fiduciary duties as a director, except for liability for any:
|
|
|
|
|
transaction from which the director derives an improper personal
benefit;
|
|
|
|
act or omission not in good faith or that involves intentional
misconduct or a knowing violation of law;
|
|
|
|
unlawful payment of dividends or redemption of shares; or
|
|
|
|
breach of a directors duty of loyalty to the corporation
or its shareholders.
|
Our certificate of incorporation provides for such limitation of
liability to the fullest extent permitted by the DGCL. In
addition, the employment agreements of each of
Messrs. Chidsey, Wells, Fallon, Franco, Ramirez and Smith,
and Ms. Chwat contain provisions providing for the
indemnification of the executive officer in certain
circumstances.
The merger agreement requires the surviving corporation to honor
all existing rights to indemnification in favor of all current
and former directors and officers of the Company and its
subsidiaries.
In addition, the merger agreement requires Parent to maintain
the Companys current directors and officers
insurance policies (or substitute insurance of at least the same
coverage and amounts containing terms that are no less favorable
to the indemnified parties) for six years following the
effective time of the merger. However, Parent will not be
required to pay premiums which on an annual basis exceed 300% of
the premium paid by the Company for its last fiscal year. The
merger agreement also requires Parent and the surviving
corporation to indemnify, defend and hold harmless, and provide
advancement of expenses to, the current and former directors and
officers of the Company and the Companys subsidiaries
against certain losses and indemnified liabilities, including in
connection with the merger agreement, the merger and the other
transactions contemplated by the merger agreement.
Persons
Retained, Employed, Compensated or Used
We have retained Morgan Stanley and Goldman Sachs as our
financial advisors in connection with the Merger and in
connection with such engagement, Morgan Stanley and Goldman
Sachs provided the fairness opinions described in
Opinion of the Companys Financial
Advisors,
which are filed as Annex B and C
hereto, respectively, and are incorporated herein by reference.
The board of directors selected Morgan Stanley and Goldman Sachs
as its financial advisors because each is an internationally
recognized investment banking firm that has substantial
experience in transactions similar to the transactions
contemplated by the merger agreement and each has a strong
experience working with the Company and in the industry which
the board of directors believed would assist it in successfully
evaluating and negotiating the transaction.
Pursuant to the Engagement Letter between Morgan Stanley and the
Company, the Company has agreed to pay to Morgan Stanley
(i) an announcement fee of $4.5 million, which was due
and payable upon execution of the merger agreement, credited
against fees payable pursuant to (ii) and (iii);
(ii) a transaction fee of 0.4% of the Adjusted Aggregate
Value (as defined in the Engagement Letter) paid in the
transaction if the transaction is consummated; and (iii) if
the transaction is not consummated, but the Company receives
compensation pursuant to the termination provisions contained in
the merger agreement, a termination fee of 13.34% of the total
of such fees, provided that the termination fee will not exceed
the transaction fee payable in (ii). Assuming the transaction is
consummated, the Company will pay approximately $20 million
in the aggregate to Morgan Stanley.
The Company has also agreed in the Engagement Letter to
reimburse Morgan Stanley for all reasonable
out-of-pocket
expenses and to indemnify Morgan Stanley and certain related
persons from and against any liabilities, expenses and actions
arising out of or in connection with its engagement.
72
In the past two years, Morgan Stanley and its affiliates have
provided financial advisory services for the Company and
received customary fees for such services. In the ordinary
course of Morgan Stanleys trading and brokerage
activities, Morgan Stanley or its affiliates may at any time
hold long or short positions, and may trade or otherwise
effect transactions, for its own account or for the account of
customers in the equity and other securities of the Company or
any other parties, commodities or currencies involved in the
merger.
Pursuant to the Engagement Letter between Goldman Sachs and the
Company, the Company has agreed to pay to Goldman Sachs
(i) 0.2% of the Aggregate Value (as defined in the
Engagement Letter) paid in the transaction if the transaction is
consummated; and (ii) if the transaction is not
consummated, but the Company receives compensation pursuant to
the termination provisions contained in the merger agreement, a
termination fee of 6.66% of the total of such fees, provided
that the termination fee will not exceed the transaction fee
payable in (i). Assuming the transaction is consummated, the
Company will pay approximately $10 million in the aggregate
to Goldman Sachs. The Company has also agreed in the Engagement
Letter to reimburse Goldman Sachs for all reasonable expenses
and to indemnify Goldman Sachs and certain related persons from
and against any liabilities, expenses and actions arising out of
or in connection with its engagement.
The Goldman Sachs Funds, affiliates of Goldman Sachs, are one of
the Companys Sponsors and own 10.3% of the issued and
outstanding shares of Company Common Stock. The Goldman Sachs
Funds have entered into a stockholder tender agreement and are a
party to the shareholders agreement. In addition,
Mr. Mehra, a member of the board of directors, is a
Managing Director of Goldman Sachs. In connection with the
merger, Mr. Mehra will be entitled to receive $587,472 in
cash pursuant to the accelerated vesting of his director stock
units. See
Interests of Certain Persons in the
Merger
above. Mr. Mehra has an understanding with
The Goldman Sachs Group, Inc. pursuant to which he holds such
Director Stock Units for the benefit of The Goldman Sachs Group,
Inc. Over the past two years, Goldman Sachs and its affiliates
have provided financial advisory services for the Company and
received customary fees for such services. In the ordinary
course of Goldman Sachs trading and brokerage activities,
Goldman Sachs or its affiliates may at any time hold long or
short positions, and may trade or otherwise effect transactions,
for its own account or for the account of customers in the
equity and other securities of the Company or any other parties,
commodities or currencies involved in the merger.
The Company has also retained Joele Frank, Wilkinson Brimmer
Katcher, which we refer to as Joele Frank, as its public
relations advisor in connection with the merger. The Company has
agreed to pay customary compensation to Joele Frank for such
services. In addition, the Company has agreed to reimburse Joele
Frank for its reasonable
out-of-pocket
expenses and to indemnify it and certain related persons against
certain liabilities arising out of the engagement.
Except as set forth above, neither the Company nor any person
acting on its behalf has or currently intends to employ, retain
or compensate any person to make solicitations or
recommendations to the shareholders of the Company on its behalf
with respect to the merger.
Accounting
Treatment
The merger will be accounted for as a purchase
transaction for financial accounting purposes.
Material
U.S. Federal Income Tax Consequences of the Merger
The following is a summary of the material United States federal
income tax consequences to beneficial owners of shares of
Company common stock whose shares are converted into the right
to receive cash in the merger. This summary is general in nature
and does not discuss all aspects of United States federal income
taxation that may be relevant to a holder of shares of Company
common stock in light of its particular circumstances. In
addition, this summary does not describe any tax consequences
arising under the laws of any local, state or foreign
jurisdiction and does not consider any aspects of United States
federal tax law other than income taxation. This summary deals
only with shares of Company common stock held as capital assets
within the meaning of Section 1221 of the United States
Internal Revenue Code of 1986, as amended (which we refer to as
the Code) (generally, property held for investment),
and does not address tax considerations
73
applicable to any holder of shares of Company common stock that
may be subject to special treatment under the United States
federal income tax laws, including:
|
|
|
|
|
a bank or other financial institution;
|
|
|
|
a tax-exempt organization;
|
|
|
|
a retirement plan or other tax-deferred account;
|
|
|
|
a partnership, an S corporation or other pass-through
entity (or an investor in a partnership, S corporation or
other pass-through entity);
|
|
|
|
an insurance company;
|
|
|
|
a mutual fund;
|
|
|
|
a real estate investment trust;
|
|
|
|
a dealer or broker in stocks and securities, or currencies;
|
|
|
|
a trader in securities that elects
mark-to-market
treatment;
|
|
|
|
a holder of shares of Company common stock subject to the
alternative minimum tax provisions of the Code;
|
|
|
|
a holder of shares of Company common stock that received such
shares through the exercise of an employee stock option, through
a tax qualified retirement plan or otherwise as compensation;
|
|
|
|
a person that has a functional currency other than the United
States dollar;
|
|
|
|
a person that holds the shares of Company common stock as part
of a hedge, straddle, constructive sale, conversion or other
integrated transaction;
|
|
|
|
a United States expatriate;
|
|
|
|
any holder of shares of Company common stock that holds an
equity interest, actually or constructively, in Parent or the
surviving corporation after the merger;
|
|
|
|
any holder of shares of Company common stock that entered into a
stockholder tender agreement as part of the transactions
described in this proxy statement; or
|
|
|
|
any holder of shares of Company common stock that beneficially
owns, actually or constructively, or at some time during the
5-year
period ending on the date of the exchange has beneficially
owned, actually or constructively, more than 5% of the total
fair market value of the shares of Company common stock.
|
If a partnership (including any entity or arrangement treated as
a partnership for United States federal income tax purposes)
holds shares of Company common stock, the tax treatment of a
partner in the partnership generally will depend upon the status
of the partner and the activities of the partnership.
Partnerships holding shares of Company common stock and the
partners therein should consult their own tax advisors regarding
the tax consequences of exchanging the shares pursuant to the
merger.
This summary is based on the Code, the Treasury regulations
promulgated under the Code, and rulings and judicial decisions,
all as in effect as of the date of this proxy statement, and all
of which are subject to change or differing interpretations at
any time, with possible retroactive effect. We have not sought,
and do not intend to seek, any ruling from the Internal Revenue
Service (which we refer to as the IRS) with respect
to the statements made and the conclusions reached in the
following summary, and no assurance can be given that the IRS
will agree with the views expressed herein, or that a court will
not sustain any challenge by the IRS in the event of litigation.
The discussion set out herein is intended only as a summary
of the material United States federal income tax consequences to
a holder of shares of Company common stock. We urge you to
consult your own tax advisor with respect to the specific tax
consequences to you in connection with the merger in
74
light of your own particular circumstances, including federal
estate, gift and other non-income tax consequences, and tax
consequences under state, local or foreign tax laws.
United
States Holders
For purposes of this discussion, the term United States
Holder means a beneficial owner of shares of Company
common stock that is, for United States federal income tax
purposes:
|
|
|
|
|
a citizen or resident of the United States;
|
|
|
|
a corporation (or any other entity or arrangement treated as a
corporation for United States federal income tax purposes)
organized in or under the laws of the United States or any state
thereof or the District of Columbia;
|
|
|
|
an estate, the income of which is subject to United States
federal income taxation regardless of its source; or
|
|
|
|
a trust if (i) a court within the United States is able to
exercise primary supervision over the administration of the
trust and one or more United States persons have the authority
to control all substantial decisions of the trust or
(ii) the trust has validly elected to be treated as a
United States person under applicable Treasury
regulations.
|
Payments
with Respect to Shares
The exchange of shares of Company common stock for cash pursuant
to the merger will generally be a taxable transaction for United
States federal income tax purposes, and a United States Holder
who receives cash for shares of Company common stock pursuant to
the merger will recognize gain or loss, if any, equal to the
difference between the amount of cash received and the
holders adjusted tax basis in the shares exchanged
therefor. Gain or loss will be determined separately for each
block of shares of Company common stock (i.e., shares acquired
at the same cost in a single transaction). Such gain or loss
will be capital gain or loss, and will be long-term capital gain
or loss if such United States Holders holding period for
the shares of Company common stock is more than one year at the
time of the exchange. Long-term capital gain recognized by an
individual holder generally is subject to tax at a lower rate
than short-term capital gain or ordinary income. There are
limitations on the deductibility of capital losses.
Backup
Withholding Tax
Proceeds from the exchange of shares of Company common stock
pursuant to the merger generally will be subject to backup
withholding tax at the applicable rate (currently, 28%) unless
the applicable United States Holder or other payee provides a
valid taxpayer identification number and complies with certain
certification procedures (generally, by providing a properly
completed IRS
Form W-9)
or otherwise establishes an exemption from backup withholding
tax. Any amounts withheld under the backup withholding tax rules
from a payment to a United States Holder will be allowed as a
credit against that holders United States federal income
tax liability and may entitle the holder to a refund, provided
that the required information is timely furnished to the IRS.
Each United States Holder should complete and sign the IRS
Form W-9,
which is included with the letter of transmittal to be returned
to the paying agent, to provide the information and
certification necessary to avoid backup withholding, unless an
exemption applies and is established in a manner satisfactory to
the paying agent.
Non-United
States Holders
The following is a summary of the material United States federal
income tax consequences that will apply to you if you are a
Non-United
States Holder of shares of Company common stock. The term
Non-United
States Holder means a beneficial owner of shares of
Company common stock that is neither a United States Holder nor
a partnership for United States federal income tax purposes.
75
The following discussion applies only to
Non-United
States Holders, and assumes that no item of income, gain,
deduction or loss derived by the
Non-United
States Holder in respect of shares of Company common stock at
any time is effectively connected with the conduct of a United
States trade or business. Special rules, not discussed herein,
may apply to certain
Non-United
States Holders, such as:
|
|
|
|
|
certain former citizens or residents of the United States;
|
|
|
|
controlled foreign corporations;
|
|
|
|
passive foreign investment companies;
|
|
|
|
corporations that accumulate earnings to avoid United States
federal income tax;
|
|
|
|
investors in pass-through entities that are subject to special
treatment under the Code; and
|
|
|
|
Non-United
States Holders that are engaged in the conduct of a United
States trade or business.
|
Payments
with Respect to Shares
Payments made to a
Non-United
States Holder with respect to shares of Company common stock
exchanged for cash pursuant to the merger generally will be
exempt from United States federal income tax. However, if the
Non-United
States Holder is an individual who was present in the United
States for 183 days or more in the taxable year of the
exchange and certain other conditions are met, such holder will
be subject to tax at a flat rate of 30% (or such lower rate as
may be specified under an applicable income tax treaty) on any
gain from the exchange of the shares of Company common stock,
net of applicable United States-source losses from sales or
exchanges of other capital assets recognized by the holder
during the year.
Backup
Withholding Tax
A
Non-United
States Holder may be subject to backup withholding tax with
respect to the proceeds from the disposition of shares of
Company common stock pursuant to the merger, unless, generally,
the
Non-United
States Holder certifies under penalties of perjury on an
appropriate IRS
Form W-8
that such
Non-United
States Holder is not a United States person, or the
Non-United
States Holder otherwise establishes an exemption in a manner
satisfactory to the paying agent.
Any amounts withheld under the backup withholding tax rules will
be allowed as a refund or a credit against the
Non-United
States Holders United States federal income tax liability,
provided the required information is timely furnished to the IRS.
The foregoing summary does not discuss all aspects of United
States federal income taxation that may be relevant to
particular holders of shares of Company common stock. Holders of
shares of Company common stock should consult their own tax
advisors as to the particular tax consequences to them of
exchanging their shares for cash in the merger under any
federal, state, foreign, local or other tax laws.
The United States federal income tax consequences described
above are not intended to constitute a complete description of
all tax consequences relating to the merger. Because individual
circumstances may differ, each shareholder should consult the
shareholders tax advisor regarding the applicability of
the rules discussed above to the shareholder and the particular
tax effects to the shareholder of the merger in light of such
shareholders particular circumstances and the application
of state, local and foreign tax laws.
Regulatory
Approvals and Notices
U.S.
Antitrust Approval
Under the terms of the merger agreement, the merger cannot be
completed until the waiting period applicable to the
consummation of the merger under the HSR Act has expired or been
terminated.
76
Under the HSR Act and the rules promulgated thereunder by the
FTC, the merger cannot be completed until each of the Company
and Parent files a notification and report form with the FTC and
the Antitrust Division of the DOJ under the HSR Act and the
applicable waiting period has expired or been terminated. Parent
filed a notification and report form with the FTC and the
Antitrust Division of the DOJ relating to its proposed
acquisition of the Company on September 16, 2010. We
submitted our Premerger Notification and Report Form with the
FTC and the Antitrust Division of the DOJ on September 17,
2010. Consequently, the required waiting period will expire on
October 1, 2010, unless earlier terminated.
At any time before or after consummation of the merger,
notwithstanding the termination of the waiting period under the
HSR Act, the Antitrust Division of the DOJ or the FTC could take
such action under the antitrust laws as it deems necessary or
desirable in the public interest, including seeking to enjoin
the completion of the merger or seeking divestiture of
substantial assets of the Company or Parent. At any time before
or after the completion of the merger, and notwithstanding the
termination of the waiting period under the HSR Act, any state
could take such action under the antitrust laws as it deems
necessary or desirable in the public interest. Such action could
include seeking to enjoin the completion of the merger or
seeking divestiture of substantial assets of the Company or
Parent. Private parties may also seek to take legal action under
the antitrust laws under certain circumstances.
There can be no assurance that all of the regulatory approvals
described above will be sought or obtained and, if obtained,
there can be no assurance as to the timing of any approvals, the
ability of Parent or the Company to obtain the approvals on
satisfactory terms or the absence of any litigation challenging
such approvals. There can also be no assurance that the DOJ, the
FTC or any other governmental entity or any private party will
not attempt to challenge the merger on antitrust grounds and, if
such a challenge is made, there can be no assurance as to its
result.
Foreign
Antitrust Approval
The merger may also trigger antitrust notifications in the
following jurisdictions:
Mexico.
Under
Articles 16-22
of Mexicos Federal Law of Economic Competition, or the
Competition Law, along with
Articles 15-27
of Mexicos new Regulations to the Competition Law, certain
acquisition transactions may not be consummated unless certain
information has been furnished to the Federal Competition
Commission, or the Mexican FCC, and certain waiting period
requirements have been satisfied. The initial statutory review
period can range between 15 and 35 working days from receipt of
a complete notification, depending on whether the notification
is made under the so-called fast-track procedure or the general
procedure. Transactions notified under the general procedure or
under the fast-track procedure may not be completed for 10
working days following the date of notification. If the Mexican
FCC does not issue a suspension order during the
10-day
period, the parties may close the transaction without incurring
the risk of any fine on day 11 and any time thereafter. If the
Mexican FCC issues a bar on closing order during the initial
waiting period, the parties must refrain from closing the
transaction until the Mexican FCC issues a decision. The Company
and Parent filed with the Mexican FCC on September 21,
2010. Consequently, the required waiting period with respect to
the offer and/or merger is expected to expire on
October 12, 2010.
Turkey.
Under Articles 7, 10, 11, and 12
of the Law on the Protection of Competition, No. 4054,
dated 7 December 1994, and the Competition Authority
Communique No. 1997/1 on the Mergers and Acquisitions
Calling for the Authorization of the Competition Board, as
amended by Communiques No. 1998/2, No. 1998/6,
No. 2000/2 and 2006/2, certain acquisition transactions may
not be consummated unless certain information has been furnished
to the Turkish Competition Authority, or the TCA, and certain
waiting period requirements have been satisfied. The TCA must
notify the parties of its decision to approve a transaction or
to open a prolonged in-depth investigation within 30 calendar
days following the receipt of a complete notification, unless
the TCA requests additional information. If the TCA requests
additional information, the
30-day
review period will start again as of the date of submission of
the requested information. A notifiable transaction is invalid
and unenforceable under Turkish law until
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the date of approval of the TCA. The Company and Parent filed
with the TCA on September 17, 2010. Consequently, the
required waiting period is expected to expire on
October 17, 2010.
Litigation
Relating to the Merger
On September 3, 2010, four purported class action
complaints were filed in the Circuit Court for the County of
Miami-Dade, Florida, captioned
Darcy Newman v. Burger
King Holdings, Inc. et. al.
, Case
No. 10-48422CA30,
Belle Cohen v. David A. Brandon, et. al.
, Case
No. 10-48395CA32,
Melissa Nemeth v.
Burger King Holdings, Inc. et.
al.
, Case
No. 10-48424CA05
and
Vijayalakshmi Venkataraman v. John W. Chidsey, et.
al.
, Case
No. 10-48402CA13,
by purported shareholders of the Company, in connection with the
offer and the merger. Each of the four complaints (collectively,
the
Florida Action
) names as defendants the
Company, each member of the Companys board of directors
(the
Individual Defendants
) and 3G Capital.
The suits generally allege that the Individual Defendants
breached their fiduciary duties to the Companys
shareholders in connection with the proposed sale of the Company
and that 3G Capital and the Company aided and abetted the
purported breaches of fiduciary duties. The complaint filed on
behalf of Belle Cohen includes, among others, allegations that
the Individual Defendants have failed to explore alternatives to
the offer; that the consideration to be received by the holders
of shares of Company common stock is unfair and inadequate; and
that the proposed transaction employs a process that does not
maximize shareholder value. The complaints filed on behalf of
Melissa Nemeth and Darcy Newman generally allege that the
Individual Defendants breached their fiduciary duties by
engaging in self-dealing and obtaining for themselves personal
benefits not shared equally by the other holders of shares.
Those complaints include allegations that the consideration to
be received by the holders of shares is unfair and inadequate,
and that the proposed transaction employs a process which
renders it unlikely that a higher bid will emerge for the
Company. The complaint filed on behalf of Vijayalakshmi
Venkataraman generally alleges that the Individual Defendants
breached their fiduciary duties by pursuing a transaction that
fails to maximize shareholder value. The complaint includes,
among others, allegations that the
40-day
go-shop period is inadequate and the proposed
transaction is intended to enable the Companys private
equity investors to dump their shares. Each of the
complaints seeks injunctive relief and one complaint also seeks
compensatory damages. The plaintiffs in the Florida Action have
filed a joint agreed motion to consolidate these actions and to
appoint plaintiffs co-lead counsel. In addition, the Court
has granted a motion to transfer the actions to the Complex
Business Litigation Section.
On September 20, 2010, an Amended Complaint was filed on
behalf of two of the plaintiffs in the Florida Action. The
Amended Complaint generally alleges, among other things, that
the board of directors breached their fiduciary duties in
connection with the merger and that 3G Capital, Parent and the
Company aided and abetted the purported breaches of fiduciary
duty. The Amended Complaint also adds allegations related to
purported deficiencies in the Companys public disclosures
about the offer and the process leading up to it. On
September 22, 2010, a Motion to Stay Proceedings Pending
Disposition of Related Delaware Action was filed in the Florida
Actions.
On September 8, 2010, another putative shareholder class
action suit captioned
Roberto S. Queiroz v. Burger King
Holdings, Inc., et al
., Case
No. 5808-VCP
was filed in the Delaware Court of Chancery against the
Individual Defendants, the Company, 3G, 3G Capital, Parent, and
Merger Sub. The complaint generally alleges that the Individual
Defendants breached their fiduciary duty to maximize shareholder
value by entering into the proposed transaction via an unfair
process and at an unfair price, and that the merger agreement
contains provisions that unreasonably dissuade potential suitors
from making competing offers. The complaint further alleges that
the Individual Defendants engaged in self-dealing and obtained
for themselves personal benefits not shared equally by the
shareholders. Specifically, the complaint includes allegations
that the
Top-Up
will likely lead to a short form merger without obtaining
shareholder approval, that the termination fees are
unreasonable, that the no shop restriction
impermissibly constrains the Companys ability to
communicate with potential acquirers, and that the consideration
to be received by the Companys shareholders is unfair and
inadequate. The complaint also alleges that the Company and 3G
aided and abetted these alleged breaches of fiduciary duty. The
complaint seeks class certification, injunctive relief,
including enjoining the merger and rescinding the merger
agreement, unspecified damages, and costs of the action as well
as
78
attorneys and experts fees. The Company and the
Individual Defendants filed an answer to the complaint on
September 9, 2010, substantially denying the allegations of
wrongdoing contained therein. 3G filed its answer in this action
on September 15, 2010.
On September 22, 2010, the plaintiff in the Delaware action
filed a Motion For Leave To File An Amended Class Action
Complaint. Like the Amended Complaint in the Florida Action, the
proposed Amended Complaint in Delaware alleges that the
Companys public disclosures about the offer and the
process leading up to it are incomplete and misleading.
The Company believes the aforementioned complaints are
completely without merit, and intends to vigorously defend them.
THE
MERGER AGREEMENT
This section describes the material terms of the merger
agreement. The description in this section and elsewhere in this
proxy statement is qualified in its entirety by reference to the
complete text of the merger agreement, a copy of which is
attached as
Annex A
and is incorporated by reference
into this proxy statement. This summary does not purport to be
complete and may not contain all of the information about the
merger agreement that is important to you. We encourage you to
read the merger agreement carefully and in its entirety. This
section is not intended to provide you with any factual
information about us. Such information can be found elsewhere in
this proxy statement and in the public filings we make with the
SEC, as described in the section entitled, Where You Can
Find More Information, beginning on page
[ ].
Explanatory
Note Regarding the Merger Agreement
The merger agreement is included to provide you with information
regarding its terms. Factual disclosures about the Company
contained in this proxy statement or in the Companys
public reports filed with the SEC may supplement, update or
modify the factual disclosures about the Company contained in
the merger agreement. The representations, warranties and
covenants made in the merger agreement by the Company, Parent
and Merger Sub were qualified and subject to important
limitations agreed to by the Company, Parent and Merger Sub in
connection with negotiating the terms of the merger agreement.
In particular, in your review of the representations and
warranties contained in the merger agreement and described in
this summary, it is important to bear in mind that the
representations and warranties were negotiated with the
principal purposes of establishing the circumstances in which a
party to the merger agreement may have the right not to
consummate the merger if the representations and warranties of
the other party prove to be untrue due to a change in
circumstance or otherwise, and allocating risk between the
parties to the merger agreement, rather than establishing
matters as facts. The representations and warranties may also be
subject to a contractual standard of materiality different from
those generally applicable to shareholders and reports and
documents filed with the SEC and in some cases were qualified by
the matters contained in the disclosure schedule that the
Company delivered in connection with the merger agreement, which
disclosures were not reflected in the merger agreement.
Moreover, information concerning the subject matter of the
representations and warranties, which do not purport to be
accurate as of the date of this proxy statement, may have
changed since the date of the merger agreement and subsequent
developments or new information qualifying a representation or
warranty may have been included in this proxy statement.
Effects
of the Merger; Directors and Officers; Certificate of
Incorporation; Bylaws
The merger agreement provides for the merger of Merger Sub with
and into the Company upon the terms, and subject to the
conditions, set forth in the merger agreement. As the surviving
corporation, the Company will continue to exist following the
merger.
The board of directors of the surviving corporation will, from
and after the effective time of the merger, consist of the
directors of Merger Sub until their successors have been duly
elected or appointed and qualified or until their earlier death,
resignation or removal in accordance with the certificate of
incorporation and bylaws of the surviving corporation. The
officers of the Company immediately prior to the effective time
of
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the merger will, from and after the effective time of the
merger, be the officers of the surviving corporation until their
successors have been duly elected or appointed and qualified or
until their earlier death, resignation or removal in accordance
with the certificate of incorporation and bylaws of the
surviving corporation.
The certificate of incorporation of the surviving corporation
will be in the form of the certificate of incorporation attached
as an exhibit to the merger agreement, until amended in
accordance with its terms or by applicable law, except that the
name of the surviving corporation will be Burger King
Holdings, Inc.. The by-laws of Merger Sub as in effect
immediately prior to the effective time of the merger will be
the by-laws of the surviving corporation, until amended in
accordance with its terms or by applicable law.
Following the completion of the merger, the Company common stock
will be delisted from the NYSE and deregistered under the
Exchange Act and to cease to be publicly traded.
Terms of
the Merger Agreement
The following is a summary of certain provisions of the merger
agreement. This summary does not purport to be complete and is
qualified in its entirety by reference to the full text of the
merger agreement, a copy of which is attached hereto as
Annex A, which is incorporated herein by reference. Copies
of the merger agreement, and any other filings that we make with
the SEC with respect to the offer or the merger, may be obtained
in the manner set forth in Where You Can Find More
Information beginning on page [ ].
Shareholders and other interested parties should read the merger
agreement for a more complete description of the provisions
summarized below.
The
Offer
On September 16, 2010, Merger Sub commenced the offer for
all of the outstanding shares of Company common stock at a price
of $24.00 per share, net to the seller in cash without interest.
The offer contemplated that, after completion of the offer and
the satisfaction or waiver of all conditions, we will merge with
Merger Sub and all outstanding shares of Company common stock,
other than shares held by Parent, Merger Sub or the Company or
shares held by the Companys shareholders who have and
validly exercised appraisal rights under Delaware law, will be
canceled and converted into the right to receive cash equal to
$24.00 per share. The offer was commenced pursuant to the merger
agreement.
Under the terms of the merger agreement, the parties agreed to
complete the merger whether or not the offer is completed. If
the offer is not completed, the parties agreed that the merger
could only be completed after the receipt of shareholder
approval of the adoption of the merger agreement that will be
considered at the special meeting. We are soliciting proxies for
the special meeting to obtain shareholder approval of the
adoption of the merger agreement to be able to consummate the
merger regardless of the outcome of the offer.
We refer in this proxy statement to the offer and to terms of
the merger agreement applicable to the offer, however, the offer
is being made separately to the holders of shares of Company
common stock and is not applicable to the special meeting.
The merger agreement also provides that the obligation of Merger
Sub to purchase shares tendered in the offer is subject to the
satisfaction or waiver of a number of conditions set forth in
the merger agreement, including the expiration or termination of
applicable waiting periods under the
Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended, the consummation
of the offer not being unlawful under the antitrust or similar
law of certain foreign jurisdictions, the receipt of proceeds by
Parent under certain financing agreements, and other customary
closing conditions. In addition, it is a condition to Merger
Subs obligation to purchase the shares tendered in the
offer that the number of the outstanding shares of Company
common stock that have been validly tendered and not validly
withdrawn, together with any shares of Company common stock then
owned by Parent and its subsidiaries, equals at least 79.1% of
the Company common stock outstanding as of the expiration of the
offer.
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Top-Up
Pursuant to the merger agreement, the Company granted to Merger
Sub an irrevocable right, which we refer to as the
top-up,
to
purchase additional shares of Company common stock, which Merger
Sub must exercise immediately following consummation of the
offer, if necessary, at a price per share equal to the merger
consideration that, when added to the number of shares owned by
Parent, Merger Sub and any of their wholly-owned subsidiaries
immediately prior to the time of such exercise, will constitute
at least one share more than 90% of the shares of Company common
stock then outstanding (after giving effect to the
top-up).
The
top-up
is
intended to expedite the timing of the completion of the merger
by permitting the merger to occur pursuant to Delawares
short-form merger statute. Merger Sub is required to exercise
the
top-up
if Merger Sub does not own at least 90% of the outstanding
shares immediately after it accepts for purchase all of the
shares validly tendered and not withdrawn. Simultaneously with
the consummation of the offer, Merger Sub shall pay to the
Company the purchase price owed by Merger Sub to the Company to
purchase that number of newly issued, fully paid and
nonassessable shares of Company common stock required to effect
the
top-up,
at Merger Subs option, (i) in cash, by wire transfer
of
same-day
funds, or (ii) by (x) paying in cash, by wire transfer
of
same-day
funds, an amount equal to not less than the aggregate par value
of the such newly issued shares of Company common stock and
(y) executing and delivering to the Company a promissory
note, with such terms as specified in the merger agreement,
having a principal amount equal to the aggregate purchase price
pursuant to the
top-up
less
the amount paid in cash.
If, following the offer, Parent, Merger Sub and any other
subsidiary of Parent collectively at least own 90% of the
outstanding shares of Company common stock, Parent, Merger Sub
and the Company shall take all necessary and appropriate action
to consummate the merger as a short-form merger as soon as
practicable without a meeting of Company shareholders. In such a
case, shareholder approval at the special meeting will not be
required.
Recommendation
The Company has represented in the merger agreement that the
board of directors has, at a meeting duly called and held,
unanimously (i) authorized and approved the execution,
delivery and performance of the merger agreement and the
transactions contemplated by the merger agreement,
(ii) approved and declared advisable the merger agreement,
the merger and the other transactions contemplated by the merger
agreement, (iii) declared that the terms of the merger
agreement and the transactions contemplated by the merger
agreement, including the merger and the other transactions
contemplated by the merger agreement, on the terms and subject
to the conditions set forth therein, are fair to and in the best
interests of the shareholders of the Company, (iv) directed
that the adoption of the merger agreement be submitted to a vote
at a meeting of the shareholders of the Company,
(v) recommended that the shareholders of the Company vote
their shares of Company common stock in favor of adoption of the
merger agreement and (vi) approved for all purposes Merger
Sub, Parent and their affiliates, the merger agreement and the
transactions contemplated by the merger agreement to exempt such
persons, agreements and transactions from any anti-takeover
laws. We refer to the recommendation in clause (v) above as
the Recommendation.
The
Merger
The merger agreement provides that, subject to the terms and
conditions of the merger agreement, and in accordance with the
DGCL, at the effective time of the merger:
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Merger Sub will be merged with and into the Company and, as a
result of the merger, the separate corporate existence of Merger
Sub will cease;
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the Company will be the surviving corporation in the merger and
will become a wholly-owned subsidiary of Parent; and
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All of the properties, rights, privileges, powers and franchises
of the Company and Merger Sub will vest in the surviving
corporation, and all of the claims, obligations, liabilities,
debts and duties of the
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Company and Merger Sub shall become the claims, obligations,
liabilities, debts and duties of the surviving corporation.
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Merger Closing Conditions.
The obligations of
Parent and Merger Sub, on the one hand, and the Company, on the
other hand, to complete the merger are each subject to the
satisfaction or (to the extent permitted by applicable law) the
waiver of the following conditions:
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the affirmative vote of holders of a majority of shares of
Company common stock entitled to vote at a shareholders
meeting to adopt the merger agreement, which we refer to as the
Shareholder Approval, shall have been obtained, if required by
applicable law;
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the waiting period applicable to the merger under the HSR Act
shall have expired unless early termination shall have been
granted, and the consummation of the merger is not unlawful
under the competition, merger control, antitrust or similar law
of certain applicable jurisdictions; and
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the consummation of the merger will not then be restrained,
enjoined or prohibited by any order of any court of competent
jurisdiction which remains in effect that enjoins or otherwise
prohibits consummation of the merger.
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Merger Sub shall have accepted for payment the shares of Company
common stock validly tendered and not validly withdrawn pursuant
to the offer, unless the Offer Termination has occurred.
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Solely if the Offer Termination shall have occurred, the
obligations of Parent and Merger Sub to complete the merger
shall be subject to the satisfaction or (to the extent permitted
by applicable law) the waiver of the following conditions:
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the representations and warranties of the Company, (i) set
forth in Section 4.03 (Capital Structure),
Section 4.04 (Authority, Recommendation), Section 4.26
(Voting Requirements) and Section 4.27 (State Takeover
Statute) shall be true and correct in all material respects as
of the date of the merger agreement and as of the closing date
of the merger; as though made on such date, (ii) set forth
in Section 4.07 (Absence of Certain Changes or Events)
shall be true and correct as of the date of the merger agreement
and as of the closing date of the merger; as though made on such
date without disregarding the Material Adverse
Effect qualification set forth therein and (iii) set
forth in the merger agreement, other than those described in
clauses (i) and (ii) above, shall be true and correct
(disregarding all qualifications or limitations as to
materiality, Material Adverse Effect and
words of similar import set forth therein) as of the date of the
merger agreement and as of the closing date of the merger; as
though made on such date, except, in the case of this clause
(iii), where the failure of such representations and warranties
to be so true and correct would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse
Effect; provided in each case that representations and
warranties made as of a specific date shall be required to be so
true and correct (subject to such qualifications) as of such
date only.
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the Company shall have performed or complied in all material
respects with its obligations required to be performed or
complied with by it under the merger agreement at or prior to
the closing of the merger;
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since the date of the merger agreement, there shall not have
occurred any change, event or occurrence that has had or would
reasonably be expected to have a Material Adverse
Effect; and
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as of immediately prior to the closing date of the merger (and,
for the avoidance of doubt, before giving effect to the
incurrence of the Debt Financing and the consummation of the
transactions contemplated by the merger agreement and such Debt
Financing), the Company is Solvent.
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The obligations of the Company to complete the merger shall be
subject to the satisfaction or (to the extent permitted by
applicable law) the waiver of the following conditions:
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the representations and warranties of Parent and Merger Sub set
forth in the merger agreement shall be true and correct
(disregarding all qualifications or limitations as to
materiality, parent material adverse
effect and words of similar import set forth therein) as
of the date of the merger agreement
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and as of the closing date of the merger; as though made on such
date (except to the extent such representations and warranties
expressly relate to an earlier date, in which case as of such
earlier date), except where the failure of such representations
and warranties to be so true and correct would not, individually
or in the aggregate, reasonably be expected to have a parent
material adverse effect; and
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Parent and Merger Sub shall each have performed or complied in
all material respects with its obligations required to be
performed or complied with by it under the merger agreement at
or prior to the closing of the merger.
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Merger Consideration.
At the effective time of
the merger, each share of Company common stock issued and
outstanding immediately prior to the effective time of the
merger, other than shares of Company common stock owned by
Parent or Merger Sub immediately prior to the effective time of
the merger, or any shareholder of the Company who is entitled to
and properly exercises appraisal rights under Delaware law, will
automatically be converted into the right to receive the per
share merger consideration in cash, without interest and less
any applicable withholding taxes. All shares converted into the
right to receive the per share merger consideration shall be
canceled and cease to exist.
Payment for the Company Common Stock.
Before
the merger, Parent will designate a bank or trust company
reasonably acceptable to the Company to make payment of the per
share merger consideration, which we refer to as the Paying
Agent. At or prior to the effective time of the merger, Parent
shall cause to be deposited, in trust with the Paying Agent, the
funds necessary to pay the aggregate per share merger
consideration to the shareholders.
As promptly as reasonably practicable after the effective time
of the merger, the Paying Agent will send to each holder of
shares of Company common stock a letter of transmittal and
instructions advising the shareholders how to surrender stock
certificates in exchange for the per share merger consideration.
The Paying Agent will pay the per share merger consideration to
the shareholders upon receipt of (1) surrendered
certificates representing the shares of Company common stock and
(2) a signed letter of transmittal and any other items
specified by the Paying Agent. Interest will not be paid or
accrue in respect of the per share merger consideration. The
surviving corporation will reduce the amount of any per share
merger consideration paid to the shareholders by any applicable
withholding taxes.
If any cash deposited with the Paying Agent is not claimed
within six months following the effective time of the merger,
such cash will be returned to Parent, upon demand, and any
holders of the certificates evidencing shares of Company common
stock, which we refer to as share certificates, who have not
theretofore complied with share certificate exchange procedures
in the merger agreement shall thereafter look only to Parent
for, and Parent shall remain liable for, payment of their claims
for the per share merger consideration and any dividends
declared in accordance with the restrictions in the merger
agreement with a record date prior to the effective time of the
merger that remain unpaid at the effective time of the merger
and that are due to any such holder.
The transmittal instructions will include instructions if the
shareholder has lost the share certificate or if it has been
stolen or destroyed. The shareholder will have to provide an
affidavit to that fact and, if required by the Paying Agent or
Parent, post a bond in an amount that Parent or the Paying Agent
reasonably directs as indemnity against any claim that may be
made against it in respect of the share certificate.
Treatment of the Company Equity Awards.
At the
acceleration time each of (i) the stock options outstanding
as of such date, (ii) the restricted stock units
outstanding as of such date, (iii) the performance-based
restricted stock units outstanding as of such date and
(iv) the deferred stock units outstanding as of such date
(items (i) through (iv) are collectively referred to
herein as the Company Equity Awards), will vest in full (but in
the case of the performance-based stock units, assuming the
target level of performance is satisfied) and be converted into
the right to receive an amount in cash equal to the per share
merger consideration, less, in the case of options, the exercise
price per share subject to such option, other than the August
equity grants, which will be treated as described under
The Merger Interests of Certain Persons in the
Merger Equity Awards on
page [ ].
83
Representations
and Warranties
The merger agreement contains representations and warranties of
the Company, Parent and Merger Sub.
Some of the representations and warranties in the merger
agreement made by the Company are qualified as to
materiality or Material Adverse Effect.
For purposes of the merger agreement, Material Adverse
Effect means any change, effect, event or occurrence that
individually or in the aggregate with all other changes,
effects, events or occurrences, has had or would reasonably be
expected to have a material adverse effect on (a) the
business, condition (financial or otherwise), assets,
liabilities or results of operations of the Company and its
subsidiaries, taken as a whole or (b) the ability of the
Company to perform its obligations under the merger agreement or
to consummate the merger. For the purposes of clause (a)
above, no change, effect, event or occurrence directly arising
out of or directly relating to any of the following shall either
alone or in combination constitute, or be taken into account in
determining whether there has been, a Material Adverse
Effect:
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general economic, credit, capital or financial markets or
political conditions in the United States or elsewhere in the
world, including with respect to interest rates or currency
exchange rates;
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any outbreak or escalation of hostilities, acts of war (whether
or not declared), sabotage or terrorism;
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any hurricane, tornado, flood, volcano, earthquake or other
natural or man-made disaster occurring after the date of the
merger agreement;
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any change in applicable law or GAAP (or authoritative
interpretation or enforcement thereof) which is proposed,
approved or enacted on or after the date of the merger agreement;
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general conditions in the industries in which the Company and
its subsidiaries primarily operate;
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the failure, in and of itself, of the Company to meet any
internal or published projections, forecasts, estimates or
predictions in respect of revenues, earnings or other financial
or operating metrics before, on or after the date of the merger
agreement, or changes after the date of the merger agreement in
the market price or trading volume of the shares of Company
common stock or the credit rating of the Company (it being
understood that the underlying facts giving rise or contributing
to such failure or change may be taken into account in
determining whether there has been a Material Adverse Effect);
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the announcement and pendency of the merger agreement and the
transactions contemplated thereby;
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any action taken by the Company or its subsidiaries at
Parents written request or otherwise required by the
merger agreement; or
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the identity of, or any facts or circumstances relating to
Parent, Merger Sub or their respective affiliates.
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Except in the cases of the first four bullets above, to the
extent that the Company and its subsidiaries, taken as a whole,
are materially disproportionately affected by such item as
compared with other participants in the industries in which the
Company and its subsidiaries primarily operate (in which case
the incremental materially disproportionate impact or impacts
may be taken into account in determining whether there has been,
or is reasonably expected to be, a Material Adverse Effect).
In the merger agreement, the Company has made customary
representations and warranties to Parent and Merger Sub with
respect to, among other things:
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corporate matters related to the Company and its subsidiaries,
such as organization, standing and corporate power;
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its capitalization;
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its subsidiaries;
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public SEC filings and financial statements;
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the absence of undisclosed liabilities;
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compliance with laws;
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employee benefit matters;
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affiliate transactions;
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the absence of certain changes or events;
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absence of litigation;
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tax matters;
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labor and employment matters;
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intellectual property;
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real property;
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environmental matters;
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insurance;
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franchise matters;
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quality and safety of food and beverage products;
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certain business practices;
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the Company swaps;
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the vote required for the adoption of the merger agreement and
the approval of the merger and the transactions contemplated by
the merger agreement;
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material contracts;
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finders and brokers fees and expenses;
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opinions of financial advisors with respect to the fairness of
the per share merger consideration;
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the inapplicability of state takeover statutes or regulations to
the offer or the merger; and
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solvency.
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In the merger agreement, Parent and Merger Sub have made
customary representations and warranties to the Company with
respect to, among other things:
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corporate matters related to Parent and Merger Sub, such as
organization, standing and corporate power;
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capitalization;
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authority;
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non-contravention;
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financing;
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limited guaranty;
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absence of litigation;
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information supplied;
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operation and ownership of Merger Sub;
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absence of competing businesses;
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finders and brokers fees and expenses;
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no ownership of shares of Company common stock; and
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solvency.
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None of the representations and warranties contained in the
merger agreement survives the consummation of the merger.
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Conduct
of Business of the Company
The merger agreement provides that, except (i) as may be
otherwise required by applicable law, (ii) with the prior
written consent of Parent (not to be unreasonably withheld or
delayed), (iii) as contemplated, required or permitted by
the merger agreement or (iv) as previously disclosed to
Parent in connection with the merger agreement, after the date
of the merger agreement, and prior to the effective time of the
merger:
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the Company shall, and shall cause each of its subsidiaries to,
carry on its business in the ordinary course of business
consistent with past practice;
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use reasonable best efforts to preserve substantially intact its
current business organization and to preserve its relationships
with significant franchisees, customers, suppliers, licensors,
licensees, distributors, wholesalers, lessors and others having
significant business dealings with the Company or any of its
subsidiaries consistent with past practice; and
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comply with law consistent with past practice.
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In addition, during the same period except as previously
disclosed to Parent in connection with the merger agreement, as
expressly contemplated or required by the merger agreement,
required by law or consented to in writing by Parent (such
consent not to be unreasonably withheld or delayed), the Company
shall not, and shall not permit any of its subsidiaries to, take
certain actions with respect to the following, subject to the
thresholds and exceptions specified in the merger agreement:
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making dividends, distributions or redemptions of shares of
Company common stock;
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effecting issuances, splits, combinations or reclassifications
of shares of Company common stock or any rights, warrants or
options to acquire, any such shares of Company common stock;
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effecting mergers or consolidations with any person;
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purchasing or selling assets;
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making capital expenditures;
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incurring indebtedness for borrowed money;
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effecting increases in salaries, bonuses, severance or
termination pay; announcing new incentive awards, adopting
compensation or benefit plans or accelerating the vesting of any
right to compensation or benefits;
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establishing, adopting, entering into or amending in any
material respect any material collective bargaining agreement;
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effecting compromises, settlements or agreements to settle any
pending or threatened suit or claim;
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amending the organizational documents of the Company or of a
subsidiary of the Company;
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changing financial accounting principles;
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adopting a plan of complete or partial liquidation, dissolution,
restructuring, recapitalization or other reorganization of the
Company or any of its subsidiaries;
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effecting tax election changes, changes to annual tax accounting
periods, changes to tax accounting methods, settlements of, or
extensions or waivers of the applicable statute of limitations
for any tax claim;
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entering into any contract that restricts the ability of the
Company or any or its subsidiaries to compete with any business
or in any geographic area, or to solicit customers;
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terminating or materially amending or modifying certain
agreements or (b) entrance into any contract that would
have been required to be disclosed in connection with the
execution of the merger agreement;
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authorizing of any of, or committing or agreeing to take any of,
the foregoing actions.
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Go-Shop;
Solicitation
During the period beginning on September 2, 2010 and
continuing until 11:59 p.m., New York City time, on
October 12, 2010, which we refer to as the No-Shop Period
Start Date, the Company may, directly or through its
representatives: (i) solicit, initiate or encourage,
whether publicly or otherwise, any Takeover Proposals (as
defined below), including by way of providing access to
non-public information; however, the Company shall only permit
such non-public information related to the Company to be
provided pursuant to a confidentiality and standstill agreement
with terms no less favorable to the Company in any substantive
respect than those contained in the confidentiality agreement
with an affiliate of Parent and Merger Sub, which we refer to as
the Confidentiality Agreement; provided that such
confidentiality and standstill agreement shall expressly not
prohibit, or adversely affect the rights of the Company
thereunder upon compliance by the Company with any provision of
the merger agreement, and in addition, (A) the Company
shall promptly provide to Parent any non-public information
concerning the Company or its subsidiaries to which any person
is provided such access and which was not previously provided to
Parent, and (B) the Company shall withhold such portions of
documents or information, or provide pursuant to customary
clean-room or other appropriate procedures, to the
extent relating to any pricing or other matters that are highly
sensitive or competitive in nature if the exchange of such
information (or portions thereof) could reasonably be likely to
be harmful to the operation of the Company in any material
respect; and (ii) engage in and maintain discussions or
negotiations with respect to any inquiry, proposal or offer that
constitutes or may reasonably be expected to lead to any
Takeover Proposal or otherwise cooperate with or assist or
participate in, or facilitate any such inquiries, proposals,
offers, discussions or negotiations or the making of any
Takeover Proposal.
No Solicitation.
After 11:59 p.m., New
York City time, on October 12, 2010 until the effective
time of the merger, or, if earlier, the termination of the
merger agreement in accordance with its terms, the Company shall
not, nor shall it permit any representative of the Company to,
directly or indirectly, (i) solicit, initiate or knowingly
encourage (including by way of providing information) the
submission or announcement of any inquiries, proposals or offers
that constitute or would reasonably be expected to lead to any
Takeover Proposal, (ii) provide any non-public information
concerning the Company or any of its subsidiaries related to, or
to any person or group who would reasonably be expected to make,
any Takeover Proposal, (iii) engage in any discussions or
negotiations with respect thereto, (iv) approve, support,
adopt, endorse or recommend any Takeover Proposal, or
(v) otherwise cooperate with or assist or participate in,
or knowingly facilitate any such inquiries, proposals, offers,
discussions or negotiations. Subject to the section of the
merger agreement governing the Companys response to
Takeover Proposals, at the No-Shop Period Start Date, the
Company shall immediately cease and cause to be terminated any
solicitation, encouragement, discussion or negotiation with any
person or groups (other than a Qualified Go-Shop Bidder (as
defined below)) conducted theretofore by the Company, its
subsidiaries or any of their respective representatives with
respect to any Takeover Proposal and shall use reasonable best
efforts to require any other parties (other than a Qualified
Go-Shop Bidder) who have made or have indicated an intention to
make a Takeover Proposal to promptly return or destroy any
confidential information previously furnished by the Company,
any of its subsidiaries or any of their respective
representatives.
For purposes of the merger agreement:
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Takeover Proposal
means any inquiry, proposal
or offer from any person or group providing for (a) any
direct or indirect acquisition or purchase, in a single
transaction or a series of related transactions, of (1) 20%
or more (based on the fair market value, as determined in good
faith by the board of directors) of assets (including capital
stock of the subsidiaries of the Company) of the Company and its
subsidiaries, taken as a whole, or (2)(A) shares of Company
common stock, which together with any other shares of Company
common stock beneficially owned by such person or group, would
equal to 20% or more of the outstanding shares of Company common
stock, or (B) any other equity securities of the Company or
any of its subsidiaries, (b) any tender offer or exchange
offer that, if consummated, would result in any person or group
owning, directly or indirectly, 20% or more of the outstanding
shares of Company common stock or any other equity securities of
the Company or any of
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its subsidiaries, (c) any merger, consolidation, business
combination, binding share exchange or similar transaction
involving the Company or any of its subsidiaries pursuant to
which any person or group (or the shareholders of any person)
would own, directly or indirectly, 20% or more of the aggregate
voting power of the Company or of the surviving entity in a
merger or the resulting direct or indirect parent of the Company
or such surviving entity, or (d) any recapitalization,
liquidation, dissolution or any other similar transaction
involving the Company or any of its material operating
subsidiaries, other than, in each case, the transactions
contemplated by the merger agreement.
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Qualified Go-Shop Bidder
means any person or
group from whom the Company or any of its representatives has
received a Takeover Proposal after the execution of the merger
agreement and prior to the No-Shop Period Start Date that the
Companys board of directors determines, prior to or as of
the No-Shop Period Start Date, in good faith, after consultation
with its financial advisor and outside legal counsel,
constitutes or could reasonably be expected to result in a
Superior Proposal (as defined below).
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Superior Proposal
means any bona fide,
written Takeover Proposal that if consummated would result in a
person or group (or the shareholders of any person) owning,
directly or indirectly, (a) 75% or more of the outstanding
shares of Company common stock or (b) 75% or more of the
assets of the Company and its subsidiaries, taken as a whole, in
either case which the board of directors determines in good
faith (after consultation with its financial advisor and outside
legal counsel) (x) is reasonably likely to be consummated
in accordance with its terms, and (y) if consummated, would
be more favorable to the shareholders of the Company from a
financial point of view than the offer and the merger, in each
case taking into account all financial, legal, financing,
regulatory and other aspects of such Takeover Proposal
(including the person or group making the Takeover Proposal) and
of the merger agreement (including any changes to the terms of
the merger agreement proposed by Parent in connection with a
response to a change in recommendation by the board of
directors).
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The Board of Directors Recommendation; Adverse
Recommendation Changes.
As described above, and
subject to the provisions described below, the board of
directors has made the Recommendation that the holders of the
shares of Company Common Stock adopt the merger agreement. The
merger agreement provides that the board of directors will not
effect an Adverse Recommendation Change (as defined
below) except as described below.
Neither the board of directors any committee thereof shall
(i) withdraw or rescind (or modify in a manner adverse to
Parent), or publicly propose to withdraw (or modify in a manner
adverse to Parent), the Recommendation or the findings or
conclusions of the board of directors described in the board
resolutions adopted in connection with the execution of the
merger agreement, (ii) approve or recommend the adoption
of, or publicly propose to approve, declare the advisability of
or recommend the adoption of, any Takeover Proposal,
(iii) cause or permit the Company or any of its
subsidiaries to execute or enter into, any letter of intent,
memorandum of understanding, agreement in principle, merger
agreement, acquisition agreement or other similar agreement
related to any Takeover Proposal, other than a confidentiality
and standstill agreement with terms no less favorable to the
Company in any substantive respect than those contained in the
confidentiality agreement between the Company and an affiliate
of Parent and Merger Sub, or (iv) publicly proposed or
announced an intention to take any of the foregoing actions (any
action described in clauses (i), (ii), (iii) or (iv), we
refer to as an Adverse Recommendation Change).
The board of directors is entitled to make an Adverse
Recommendation Change only if the board of directors determines
in good faith (after consultation with its outside counsel) that
the failure to take such action would be inconsistent with its
fiduciary duties under applicable law. However, the board of
directors is not entitled to exercise its right to make an
Adverse Recommendation Change or, solely with regards to a
Superior Proposal, terminate the merger agreement in order to
accept a Superior Proposal and enter into an agreement for such
Superior Proposal immediately following or concurrently with the
termination of the merger agreement (x) unless the Company
shall have provided prior written notice to Parent and Merger
Sub,
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at least three business days in advance, that it will effect an
Adverse Recommendation Change or terminate the merger agreement
in such circumstances and specifying the reasons for such
actions and (y):
i. if the Adverse Recommendation Change is not being made
as a result of a Superior Proposal, during such three business
day period, if requested by Parent, the Company shall have
engaged in good faith negotiations with Parent to amend the
merger agreement in such a manner that would otherwise obviate
the need for such Adverse Recommendation Change; or
ii. if such Adverse Recommendation Change or termination is
being made as a result of a Superior Proposal:
(1) then the notice to Parent shall specify the identity of
the party making such Superior Proposal and the material terms
thereof and copies of all relevant documents relating to such
Superior Proposal (any material amendment to the terms of any
Superior Proposal (and in any event including any amendment to
any price term thereof) shall require a new notice and the three
business day period shall be reduced to one business day for any
such new notice);
(2) after providing any notice to Parent, the Company
shall, and shall cause its representatives to, negotiate with
Parent and Merger Sub in good faith (to the extent Parent and
Merger Sub desire to negotiate) during such three business day
period (or one business day period if a notice is delivered due
to a material amendment to the terms of any Superior Proposal)
to make such adjustments in the terms and conditions of the
merger agreement; and
iii. in the case of either clause (i) or
clause (ii) above, the board of directors shall have
considered in good faith any adjustments to the merger agreement
(including a change to the price terms thereof) that may be
offered in writing by Parent no later than 5:00 p.m., New
York City time, on the third business day of such three business
day period (or the first business day in certain circumstances)
and shall have determined that (x) in the case of a
Superior Proposal, the Superior Proposal would continue to
constitute a Superior Proposal if such adjustments were to be
given effect, or (y) in the case of an Adverse
Recommendation Change not being made as a result of a Superior
Proposal, no adjustment has been made that would obviate the
need for such Adverse Recommendation Change, and (y) the
findings contemplated by clause (i) above continue to be
applicable such that an Adverse Recommendation Change should be
made the Superior Proposal would continue to constitute a
Superior Proposal if such adjustments were to be given effect.
The merger agreement does not prohibit the Company from
(i) taking and disclosing to its shareholders a position
contemplated by
Rule 14d-9
or
Rule 14e-2(a)
promulgated under the Exchange Act or (ii) making any
disclosure to its shareholders as, in the good faith
determination of the board of directors, after consultation with
its outside legal counsel, is required by applicable laws or
(iii) making any stop-look-and-listen
communication to the Companys shareholders pursuant to
Section 14d-9(f)
promulgated under the Exchange Act (or any similar
communications to the shareholders of the Company) in which the
Company indicates that it has not changed the Recommendation.
Financing
Efforts
Each of Parent and Merger Sub shall use, and cause its
affiliates to use, its reasonable best efforts to take, or cause
to be taken, all actions and to do, or cause to be done, all
things necessary, proper or advisable to consummate and obtain
the financing on the terms and conditions set forth in the
commitment letters and related documents, including using
reasonable best efforts to seek to enforce (including through
litigation) its rights under the debt commitment letter in the
event of a material breach thereof by the lenders thereunder,
and shall not permit any amendment or modification to be made
to, or consent to any waiver of any provision or remedy under,
the commitment letters, if such amendment, modification or
waiver (i) reduces the aggregate amount of the financing
(including by changing the amount of fees to be paid or original
issue discount) from that contemplated in the commitment
letters, (ii) imposes new or additional conditions or
otherwise expands, amends or modifies any of the conditions to
the receipt of the financing in a manner adverse to Parent or
the Company, (iii) decreases the aggregate equity financing
as set forth in the equity commitment letter delivered
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on the date of the merger agreement, (iv) amends or
modifies any other terms in a manner that would reasonably be
expected to (x) delay or prevent the closing of the offer
or the completion of the merger or (y) make the timely
funding of the financing or satisfaction of the conditions to
obtaining the financing less likely to occur, or
(v) adversely impact the ability of Parent or Merger Sub to
enforce its rights against the other parties to the commitment
letters.
The Company has agreed to use its reasonable best efforts to
provide such reasonable cooperation as Parent may reasonably
request in connection with the debt financing and certain other
financing related matters.
Obligations to Use Bridge Financing.
Each of
Parent and Merger Sub shall use, and cause its affiliates to
use, commercially reasonable efforts to take all actions and to
do all things necessary, proper or advisable to consummate, or
cause to be consummated, and shall use, or cause to be used, the
proceeds of the bridge financing (or any alternative debt
financing) within ten calendar days after the conditions of the
offer (other than the financing proceeds conditions) have been
satisfied or waived, or if the Offer Termination has occurred,
applicable conditions to the merger have been satisfied or
waived. Notwithstanding the foregoing, if it shall not be
commercially reasonable to complete the utilization of such
bridge financing by the tenth calendar day, Parent and Merger
Sub shall continue to use, and cause its affiliates to continue
to use, commercially reasonable efforts to take, or cause to be
taken, all actions and to do, or cause to be done, all things
necessary, proper or advisable to consummate, or cause to be
consummated, and shall use, or cause to be used, the proceeds of
such bridge financing (or such alternative debt financing) as
soon as reasonably practicable thereafter. Notwithstanding
anything to the contrary contained in the merger agreement, and
without regard to the then market conditions or other general
economic conditions, including the interest rate and cost of the
debt financing, and, for the avoidance of doubt, regardless of
whether or not commercially reasonable, if all of the offer
conditions (other than the financing proceeds condition) have
been satisfied or waived or, if the Offer Termination has
occurred, certain conditions have been satisfied or waived, then
Parent shall consummate, or cause to be consummated, and shall
use, or cause to be used, the proceeds of the bridge financing
(or such alternative debt financing) in no event later than
November 18, 2010.
Obligations
with Respect to the Proxy Statement
The merger agreement provides that, on or before
September 24, 2010, the Company will prepare and file with
the SEC in preliminary form a proxy statement relating to a
shareholders meeting, which shall include the
Recommendation with respect to the merger, the opinions of the
Companys financial advisors and a copy of Section 262
of the DGCL. This proxy statement fulfills such obligation.
If the adoption of the merger agreement by the Companys
shareholders is required by applicable law, then the Company
shall have the right at any time after the Proxy Statement
Clearance Date (and Parent and Merger Sub shall have the right,
at any time after the later of such date and November 1,
2010, to request in writing that the Company, and upon receipt
of such written request, the Company shall, as promptly as
practicable and in any event within ten business days),
(x) establish a record date for and give notice of a
meeting of its shareholders, for the purpose of voting upon the
adoption of the merger agreement, and (y) mail to the
holders of shares of Company common stock as of the record date
established for the shareholders meeting a proxy statement.
Efforts
to Close the Transaction
In the merger agreement, each of the Company, Parent and Merger
Sub agreed to use its reasonable best efforts to take all
actions necessary, proper or advisable under applicable law to
consummate, as promptly as reasonably practicable, the offer,
the merger and the other transactions contemplated by the merger
agreement, including making all necessary filings, notices, and
other documents necessary to consummate the offer, the merger
and other transactions contemplated by the merger agreement.
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Takeover
Statute
If any moratorium, control share
acquisition, business combination, fair
price or other form of anti-takeover laws becomes
applicable to the Company, Parent or Merger Sub, the offer, the
merger, the
Top-Up,
including the acquisition of shares of Company common stock
pursuant thereto, or the other transactions contemplated by the
merger agreement, the Company and the members of the board of
directors shall take such actions as are necessary to eliminate
if possible, and otherwise to minimize, the effects of such
statute or regulation on the merger agreement, the offer, the
merger and the other transactions contemplated thereby.
Indemnification
and Insurance
Parent and Merger Sub agreed that all rights to exculpation,
indemnification and advancement of expenses for acts or
omissions occurring at or prior to the effective time of the
merger, whether asserted or claimed prior to, at or after the
effective time of the merger, now existing in favor of the
current or former directors, officers or employees of the
Company as provided in their respective employers
certificates of incorporation or bylaws or other organizational
documents or in any indemnification or other agreement will
survive the offer or the merger and will continue in full force
and effect and will not be, for a period of six years from the
effective time of the merger, modified in any manner that would
adversely affect the rights thereunder of any individuals who at
the effective time of the merger were current or former
directors, officers or employees of the Company.
In addition, the surviving corporation agreed to indemnify and
hold harmless each current and former director or officer of the
Company or any of its subsidiaries against any losses, claims,
damages, liabilities, costs, expenses, judgments, fines and
amounts paid in settlement of or in connection with or arising
out of any action or omission in connection with such
directors or officers service to the Company or any
of its subsidiaries and the merger agreement and any transaction
contemplated thereby.
For a period of six years after the effective time of the
merger, Parent shall maintain in effect the current or
substitute policies of officers and directors
liability insurance maintained by the Company and its
subsidiaries on terms and coverage amounts no less favorable
than the terms of such policies in effect on the date of the
merger agreement; provided that neither Parent nor the surviving
corporation shall be required to expend annually in excess of
300% of the annual premium paid by the Company in its last full
fiscal year for such insurance coverage, but in such case shall
purchase the greatest amount of coverage available for such
amount. Alternatively, the Company shall be entitled to
purchase, at or prior to the effective time of the merger, a
tail policy on terms and conditions providing no
less favorable benefits as the current policies of
directors and officers liability insurance
maintained by the Company with respect to matters arising on or
before the effective time of the merger, subject to the maximum
premium listed in the immediate preceding sentence.
Shareholder
Litigation
Each of the Company, Parent and Merger Sub shall keep the other
parties reasonably informed regarding litigation relating to the
merger agreement, the offer, the merger or the transactions
contemplated thereby. the Company agreed to promptly advise
Parent orally and in writing and cooperate fully with Parent in
connection with, and to consult with and permit Parent to
participate in, the defense, negotiations or settlement of
litigation relating to the merger agreement, the offer, the
merger or the transactions contemplated thereby and the Company
will give consideration to Parents advice with respect to
such litigation. the Company will not compromise, settle, or
come to a settlement arrangement regarding any such litigation
without Parents consent.
Other
Covenants
The merger agreement contains other customary covenants,
including, but not limited to, covenants relating to public
announcements and access and confidentiality.
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Continuing
Pursuit of the Merger
If at any then-scheduled expiration date of the offer occurring
after November 24, 2010 (i) any offer condition has
not been satisfied or waived, and (ii) the Expiration Date
has occurred (which we refer to as the Offer Determination
Date), then Merger Sub may irrevocably and unconditionally
terminate the offer if the Proxy Statement Clearance Date has
occurred on or prior to such Offer Determination Date. In
addition, the Company has the right, exercisable by delivering
written notice to Parent and Merger Sub at any time after the
Offer Determination Date to cause Merger Sub to, and upon
receipt of such written notice, Merger Sub must terminate the
offer at the then-scheduled Expiration Date. The termination of
the offer pursuant to the foregoing process is referred to as
the Offer Termination.
Termination
of the Merger Agreement
The merger agreement may be terminated at any time prior to the
effective time of the merger, whether before or after any
approval of the merger by the shareholders of the Company:
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by mutual written consent of Parent and the Company;
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by either Parent or the Company:
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if the merger shall not have been consummated on or before
March 2, 2011; provided that the right to terminate the
merger agreement on such date shall not be available to Parent
or the Company if (x) the offer has closed or (y) the
failure of Parent or the Company, as applicable, to perform any
of its obligations under the merger agreement has been a
principal cause of the failure of the merger to be consummated
on or before such date;
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if any temporary restraining order, preliminary or permanent
injunction, law or other judgment issued by any court of
competent jurisdiction is in effect enjoining or otherwise
prohibiting the consummation of the merger and such temporary
restraining order, preliminary or permanent injunction, law or
other judgment becomes final and non-appealable; provided that
the right to terminate in this circumstance shall not be
available to Parent or the Company unless Parent or the Company,
as applicable, shall have complied with its obligations under
the merger agreement to prevent, oppose or remove such temporary
restraining order, preliminary or permanent injunction, law or
other judgment; or
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the Shareholder Approval shall not have been obtained at the
duly convened shareholders meeting or at any adjournment
or postponement thereof.
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by Parent, if there is any breach or inaccuracy in any of the
Companys representations or warranties set forth in the
merger agreement or the Company has failed to perform any of its
covenants or agreements set forth in the merger agreement, which
inaccuracy, breach or failure to perform (i) would give
rise to the failure of a condition to the merger regarding the
accuracy of the Companys representations and warranties or
the Companys compliance with its covenants or agreements,
and (ii) (A) is not capable of being cured prior to
March 2, 2011 or (B) is not cured within fifteen
calendar days following Parents delivery of written notice
to the Company of such breach; provided that Parent shall not
have the right to terminate the merger agreement in this
circumstance if (x) Parent or Merger Sub is then in
material breach of any of its representations, warranties,
covenants or agreements or (y) the offer has closed;
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by the Company, if there is any breach or inaccuracy in any of
Parents or Merger Subs representations or warranties
set forth in the merger agreement or Parent or Merger Sub has
failed to perform any of its covenants or agreements set forth
in the merger agreement, which inaccuracy, breach or failure to
perform (i) would (x) give rise to the failure of
certain conditions or, (y) reasonably be expected to,
individually or in the aggregate, have a parent material adverse
effect, and (ii) (A) is not capable of being cured prior to
March 2, 2011 or (B) is not cured within fifteen
calendar days following the Companys delivery of written
notice to Parent of such breach; provided that the Company shall
not have the right to terminate the merger agreement in this
circumstance if (x) the Company is then in
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material breach of any of its representations, warranties,
covenants or agreements thereunder or (y) the offer has
closed;
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by Parent, in the event that any of the following shall have
occurred: (i) an Adverse Recommendation Change;
(ii) the Company shall have delivered a notice to parent of
its intent to effect an Adverse Recommendation Change, if Parent
shall have given the Company the right to enter into an
acquisition agreement and such right has been available to the
Company for no less than twenty-four hours, (iii) the
Company failed to include in the proxy statement or the
Schedule 14D-9
filed by the Company, in each case, when mailed, the
Recommendation and a statement of the findings and conclusions
of the board of directors described in the board resolutions
adopted in connection with the merger agreement, (iv) if,
following the disclosure or announcement of a Takeover Proposal
(other than a tender or exchange offer described in
clause (v) below), the Companys board of directors
shall have failed to reaffirm publicly the Recommendation within
five business days after Parent requests in writing that such
recommendation under such circumstances be reaffirmed publicly,
or (v) a tender or exchange offer relating to securities of
the Company shall have been commenced and the Company shall not
have announced, within ten business days after the commencement
of such tender or exchange offer, a statement disclosing that
the Company recommends rejection of such tender or exchange
offer (we refer to any of the forgoing actions as a Triggering
Event); provided that Parent shall not have the right to
terminate the merger agreement in this circumstance if
(x) the offer has closed or (y) the approval of the
merger by the shareholders of the Company shall have been
obtained;
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by the Company, in order to accept a Superior Proposal and enter
into the acquisition agreement providing for such Superior
Proposal immediately following or concurrently with such
termination; provided, however, that payment of the termination
fee by the Company to the parent, which we refer to as the
Company Termination Fee (as described below), shall be a
condition to the termination of the merger agreement by the
Company in this circumstance; or
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by the Company, if (i)(A) all the conditions of the offer
shall have been satisfied or waived as of the expiration of the
offer, and (B) Parent shall have failed to consummate the
offer promptly thereafter in accordance with the merger
agreement, or (ii)(A) all the offer conditions (other than
the financing proceeds condition) shall have been satisfied or
waived as of the expiration of the offer, and (B) Parent
shall have failed to consummate the offer in accordance with the
merger agreement, in the case of both clause (i) and (ii), the
Company shall have given Parent written notice at least one
business day prior to such termination stating the
Companys intention to terminate the merger agreement in
this circumstance and the basis for such termination; provided,
however, that the termination right set forth in
clause (ii) shall only be available from and after the
close of business on November 18, 2010; or
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by the Company, after the close of business on November 18,
2010, if (i) all the conditions that are applicable to each
partys obligation to consummate the merger (other than the
purchase of shares of Company common stock to the extent the
Offer Termination has occurred) and the conditions to the
obligations of Parent and Merger Sub to consummate the merger
have been satisfied (other than those conditions that by their
terms are to be satisfied by actions taken at the closing of the
merger, each of which is capable of being satisfied at the
merger closing), (ii) Parent shall have failed to
consummate the merger by the time required under the merger
agreement, (iii) the Company has notified Parent in writing
that it stands and will stand ready, willing and able to
consummate the merger at such time, and (iv) the Company
shall have given Parent written notice at least one business day
prior to such termination stating the Companys intention
to terminate the merger agreement in this circumstance and the
basis for such termination.
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Effect of Termination.
If the merger agreement
is terminated in accordance with its terms, the merger agreement
will become null and void and, subject to certain designated
provisions of the merger agreement which survive, including the
termination, confidentiality, cooperation, specific performance,
remedies, and limitation on liability provisions , among others,
there will be no liability on the part of Parent, Merger Sub or
the Company. No party is relieved of any liability for any
breach of any of its representations, warranties,
93
covenants or agreements set forth in the merger agreement prior
to such termination. No party is liable for punitive damages.
Termination
Fees
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The Company has agreed to pay 3G a termination fee of
$50 million if the merger agreement is terminated by the
Company prior to October 12, 2010 in order for the Company
to accept a Superior Proposal, with such fee being payable
concurrently with, and as a condition to the effectiveness of,
such termination.
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the Company has agreed to pay 3G a termination fee of
$95 million as follows:
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if the merger agreement is terminated by the Company after
October 12, 2010 in order for the Company to accept a
Superior Proposal, with such fee being payable concurrently
with, and as a condition to the effectiveness of, such
termination;
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if the merger agreement is terminated by Parent upon an Adverse
Recommendation Change or other Triggering Event (as described
above), with such fee being payable within two business days
following such termination; or
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if (A) the merger agreement is terminated by the Company or
Parent due to (x) the failure of the merger to be completed
by March 2, 2011 or (y) the failure of the
Companys shareholders to adopt the merger agreement at the
shareholders meeting, to the extent such shareholder approval is
required by applicable law, or (ii) the merger agreement is
terminated by Parent due to a material breach of the
Companys representations, warranties, covenants or
agreements set forth in the merger agreement as described above
under Termination of the Merger
Agreement, other than any termination relating to such
material breach to the extent such breach was the principal
factor in the failure of the offer or the merger to be completed
as described below, (B) prior to such termination a
Takeover Proposal become publicly known and was not withdrawn,
and (C) within 12 months after any termination of the
merger agreement in the circumstances described in
clause (A) above, the Company enters into a definitive
agreement providing for any transaction contemplated by any
Takeover Proposal (which transaction is thereafter consummated)
or consummates any Takeover Proposal, then such fee shall be
paid on the date such transaction is consummated. For purposes
of determining whether the termination fee is payable under the
circumstances described in the previous sentence, the term
Takeover Proposal has the meaning described below, except that
the references to 20% in the definition of Takeover
Proposal shall be deemed to be references to 50%.
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the Company has agreed to pay 3G a termination fee of
$175 million, if the merger agreement is terminated by
Parent due to a breach by the Company of any of its
representations or warranties or the failure by the Company to
perform any of its covenants or agreements set forth in the
merger agreement, which breach or failure to perform is the
principal factor in the failure of the offer or the merger to be
consummated; provided that Parent and Merger Sub is not then in
material breach of any of their representations, warranties,
covenants or agreements set forth in the merger agreement, with
such termination fee being payable within two (2) business
days following such termination of the merger agreement.
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Parent has agreed to pay the Company $175 million, as
follows:
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if the merger agreement is terminated by the Company due to a
breach by Parent of any of its representations or warranties or
the failure by Parent to perform any of its covenants or
agreements set forth in the merger agreement, which breach or
failure to perform is the principal factor in the failure of the
offer or the merger to be consummated; provided that the Company
is not then in material breach of any of its representations,
warranties, covenants or agreements set forth in the merger
agreement; or
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if the merger agreement is terminated by the Company at such
time as (i)(A) all the offer conditions shall have been
satisfied or waived as of the expiration of the offer, and
(B) Parent shall have failed
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94
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to consummate the offer promptly thereafter in accordance with
the merger agreement, or (ii)(A) all the offer conditions
(other than the financing proceeds condition) shall have been
satisfied or waived as of the expiration of the offer, and
(B) Parent shall have failed to consummate the offer in
accordance with the merger agreement, in the case of both
clause (i) and (ii), the Company shall have given Parent
written notice at least one business day prior to such
termination stating the Companys intention to terminate
the merger agreement in this circumstance and the basis for such
termination; provided, however, that the termination right set
forth in clause (ii) shall only be available from and after
the close of business on November 18, 2010; or
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if the merger agreement is terminated by the Company, after the
close of business on November 18, 2010, if (i) all the
conditions that are applicable to each partys obligation
to consummate the merger and the conditions to the obligations
of Parent and Merger Sub to consummate the merger (other than
the purchase of shares of Company common stock to the extent the
Offer Termination has occurred) have been satisfied (other than
those conditions that by their terms are to be satisfied by
actions taken at the merger Closing, each of which is capable of
being satisfied at the merger Closing), (ii) Parent shall
have failed to consummate the merger by the time required under
the merger agreement, (iii) the Company has notified Parent
in writing that it stands and will stand ready, willing and able
to consummate the merger at such time, and (iv) the Company
shall have given Parent written notice at least one business day
prior to such termination stating the Companys intention
to terminate the merger agreement in this circumstance and the
basis for such termination.
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Such $175 million termination fee shall be payable by
Parent within two business days following the date of
termination of the merger agreement in such circumstances.
Expense
Reimbursement
If the merger agreement is terminated by Parent or the Company
due to the failure of the Companys shareholders to adopt
the merger agreement at the shareholders meeting, to the extent
such shareholder approval is required by applicable law, then
the Company shall reimburse Parent for up to $15 million of
the documented
out-of-pocket
fees and expenses of Parent, 3G or their affiliates in
connection with the merger agreement.
Specific
Performance
Parent, Merger Sub and the Company shall be entitled to an
injunction or injunctions, or any other appropriate form of
specific performance or equitable relief, to prevent breaches of
the merger agreement and to enforce specifically the terms and
provisions thereof in any arbitration or any court of competent
jurisdiction, this being in addition to any other remedy to
which they are entitled under the terms of the merger agreement
at law or in equity. Notwithstanding the foregoing, the
Companys right to obtain an injunction, or other
appropriate form of specific performance or equitable relief,
solely with respect to causing Parent and Merger Sub to, or to
directly, cause either the equity financing to be funded at any
time but only simultaneously with the receipt of the debt
financing or a draw on the bridge commitment under the debt
commitment letters is subject to the requirements that:
(a) with respect to any funding of the equity financing to
occur at the consummation of the offer closing, all of the
conditions of the offer (other than the financing proceeds
condition) are satisfied or waived as the expiration of the
offer, and, with respect to any funding of the equity financing
to occur at the consummation of the merger, all conditions with
respect to obtaining Shareholder Approval and regulatory
approval, as well as there being no temporary restraining order,
preliminary or permanent injunction, law or other judgment
issued by any court of competent jurisdiction in effect
enjoining or otherwise preventing or prohibiting the
consummation of the merger;
(b) the debt financing (or, in the case any alternative
financing that Parent and Merger Sub are required or permitted
to accept has been obtained, for all the debt financing), has
been funded or would be funded in accordance with its terms at
the consummation of the offer or the merger, as applicable, if
the equity financing is funded at the consummation of the offer
or the merger, as applicable, and
95
(c) the Company has irrevocably confirmed to Parent in
writing that if the equity financing and the debt financing were
funded, it would take such actions that are within its control
to cause the consummation of the merger.
Limitations
of Liability
The maximum aggregate liability of 3G, Parent and Merger Sub
(including the Parent Termination Fee) for damages or otherwise
is limited to $175 million. the Company can cause 3G to
provide funds, subject to the maximum set forth in the equity
commitment letter between the Company, Parent and 3G, up to such
aggregate limit to Parent to the extent provided in the equity
commitment letter, subject to the terms of the equity commitment
letter and the limited guaranty. In addition, the rights of the
Company pursuant to the equity commitment letter and the limited
guaranty are the sole and exclusive remedy of the Company and
its affiliates against Parent and Parents affiliates in
respect of monetary liabilities or obligations arising under the
merger agreement.
The maximum aggregate liability of the Company for damages or
otherwise in connection with the merger agreement or any of the
transactions contemplated thereby is limited to
$175 million, provided that in no event shall Parent, on
behalf of itself and its affiliates, be entitled to both
(x) the receipt of the Company Termination Fee or the
$175 million or recovery of monetary damages against the
Company or any of its subsidiaries and (y) specific
enforcement of the merger agreement.
Fees
and Expenses
Except for the provisions described under Expense
Reimbursement, all fees and expenses incurred in
connection with the merger agreement, the offer, the merger and
the other transactions contemplated by the merger agreement will
be paid by the party incurring such fees or expenses, whether or
not the offer, the merger or any of the other transactions
contemplated by the merger agreement are consummated.
Amendment
The merger agreement may be amended by Parent, Merger Sub or the
Company at any time before or after the closing of the offer or
receipt of the Shareholder Approval; provided, however, that
(x) after the closing of the offer, there will be no
amendment that decreases the per share merger consideration, and
(y) after the Shareholder Approval has been obtained, no
amendment will be made that by law requires further approval by
the shareholders of the Company without such approval having
been obtained.
Governing
Law
The merger agreement shall be governed by Delaware law.
Stockholder
Voting Agreements
Concurrently with the execution of the merger agreement, certain
private equity funds affiliated with each of the Sponsors
entered into stockholder tender agreements with the Company
pursuant to which such shareholders have agreed to tender their
shares of Company common stock in the offer upon the terms and
subject to the conditions of such agreements. It is anticipated
that, pursuant to the terms of such stockholder tender
agreements, such Sponsors will each enter into customary voting
agreements with Parent to vote their shares of Company common
stock in favor of the merger. The shares of Company common stock
held by such Sponsors comprise approximately 31% of the
outstanding shares of Company common stock. The stockholder
voting agreements will terminate upon certain circumstances,
including upon termination of the merger agreement.
96
MARKET
PRICE OF COMPANY COMMON STOCK
The Company common stock is listed for trading on the NYSE under
the symbol BKC. The table below shows, for the
periods indicated, the high and low sales prices for the Company
common stock, as reported on the NYSE.
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Common Stock Price
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High
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Low
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Fiscal Year Ended June 30, 2009
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First Quarter ended September 30
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$
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30.95
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$
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22.77
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Second Quarter ended December 31
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$
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25.07
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$
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16.56
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Third Quarter ended March 31
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$
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24.48
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$
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19.21
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Fourth Quarter ended June 30
|
|
$
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24.10
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|
$
|
15.85
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|
Fiscal Year Ending June 30, 2010
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First Quarter ended September 30
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|
$
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19.50
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|
$
|
15.61
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Second Quarter ended December 31
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$
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19.13
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$
|
16.63
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Third Quarter ended March 31
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|
$
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21.50
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|
$
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17.10
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Fourth Quarter ended June 30
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|
$
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22.19
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$
|
16.80
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Fiscal Year Ending June 30, 2011
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First Quarter July 1 to [ ]
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$
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$
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The closing price of Company common stock on the NYSE on
September 1, 2010, the last trading day prior to the public
announcement of the merger agreement, was $18.86 per share of
Company common stock. In addition, on August 31, 2010, the
date on which news articles ran in the evening reporting rumors
that the Company was considering a sale, the closing price was
$16.45 per share of Company common stock. On
[ ], 2010, the most recent practicable date
before this proxy statement was mailed to our shareholders, the
closing price for Company common stock on the NYSE was
$[ ] per share of Company common stock. You are
encouraged to obtain current market quotations for Company
common stock in connection with voting your shares of Company
common stock.
During each quarter of fiscal 2009 and 2010, the Company paid a
quarterly cash dividend of $0.0625 per share. Under the terms of
the merger agreement, the Company is not permitted to declare or
pay dividends in respect of shares unless approved in advance by
Parent in writing, other than the payment of the fiscal 2011
first quarter dividend of $0.0625 per share, which was declared
on August 19, 2010 and is payable on September 30,
2010 to shareholders of record on September 14, 2010.
97
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as of
September 13, 2010, regarding the beneficial ownership of
our common stock by:
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Each of our directors and NEOs;
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All directors and executive officers as a group; and
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Each person or entity who is known to us to be the beneficial
owner of more than 5% of our common stock.
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As of September 13, 2010, our outstanding equity securities
consisted of 136,465,856 shares of common stock. The number
of shares beneficially owned by each shareholder is determined
under rules promulgated by the SEC and generally includes voting
or investment power over the shares. The information does not
necessarily indicate beneficial ownership for any other purpose.
Under the SEC rules, the number of shares of common stock deemed
outstanding includes shares issuable upon the conversion of
other securities, as well as the exercise of options or the
settlement of restricted stock units held by the respective
person or group that may be exercised or settled on or within
60 days of September 13, 2010. For purposes of
calculating each persons or groups percentage
ownership, shares of common stock issuable pursuant to stock
options and restricted stock units that may be exercised or
settled on or within 60 days of September 13, 2010 are
included as outstanding and beneficially owned by that person or
group but are not treated as outstanding for the purpose of
computing the percentage ownership of any other person or group.
Unless otherwise indicated, the address for each listed
shareholder is:
c/o Burger
King Holdings, Inc., 5505 Blue Lagoon Drive, Miami, Florida
33126. To our knowledge, except as indicated in the footnotes to
this table and pursuant to applicable community property laws,
the persons named in the table have sole voting and investment
power with respect to all shares of common stock beneficially
owned by them.
98
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Common Stock, par Value
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$.01 Per Share
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Percentage
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Name and Address of Beneficial Owner
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Number
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of Class
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John W. Chidsey(1)
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1,831,834
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1.3
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%
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Ben K. Wells(1)
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300,660
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*
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Russell B. Klein(1)
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124,778
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*
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Charles M. Fallon, Jr.(1)
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305,154
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*
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Anne Chwat(1)
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363,292
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*
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Peter Smith(1)
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195,357
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*
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Richard W. Boyce(1)
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25,000
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|
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|
*
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David M. Brandon(1)
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35,000
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*
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Ronald M. Dykes(1)
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23,925
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*
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Peter R. Formanek(1)
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|
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233,094
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*
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Manuel A. Garcia(1)
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|
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64,641
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|
|
|
*
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Sanjeev K. Mehra(1)(2)(6)
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13,946,647
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10.2
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%
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Stephen G. Pagliuca(1)
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13,601,924
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|
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10.0
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%
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Brian T. Swette(1)
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130,902
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|
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*
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Kneeland C. Youngblood(1)
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17,507
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|
|
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*
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|
All Executive Officers and Directors as a group
(18 persons)(1)
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|
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31,297,015
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22.9
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%
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5% Stockholders
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|
|
|
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FMR LLC(3)
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|
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7,824,558
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5.7
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%
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Investment funds affiliated with Artisan Partners Holdings LLC(4)
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7,971,200
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5.8
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%
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Investment funds affiliated with Bain Capital Investors, LLC(5)
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10,403,858
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7.6
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%
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Investment funds affiliated with The Goldman Sachs Group, Inc.(6)
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14,046,089
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|
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10.3
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%
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TPG BK Holdco LLC(7)
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|
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15,131,497
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|
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11.1
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%
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*
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Less than one percent (1%)
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(1)
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Includes beneficial ownership of shares of common stock for
which the following persons hold options currently exercisable
or exercisable on or within 60 days of September 13,
2010: Mr. Chidsey, 1,340,714 shares; Mr. Wells,
266,509 shares; Mr. Fallon, 252,653 shares;
Ms. Chwat, 284,462 shares; and Mr. Smith,
98,819 shares; and all directors and executive officers as
a group, 2,311,985 shares. Also includes beneficial
ownership of shares of common stock underlying deferred stock
units held by the following persons that are currently vested or
will vest on or within 60 days of September 13, 2010
and will be settled upon termination of Board service: each of
Messrs. Boyce and Brandon, 25,000 shares;
Mr. Dykes, 23,925 shares; each of Mr. Formanek
and Mr. Youngblood, 17,507 shares; Mr. Garcia,
23,078 shares; Mr. Mehra, 24,478 shares;
Mr. Pagliuca, 3,597 shares; Mr. Swette,
30,277 shares; and all non-employee directors as a group,
189,153 shares. See Footnotes 2 and 6 below for more
information regarding the deferred stock held by Mr. Mehra.
Mr. Kleins employment terminated on December 15,
2009 and his shares included in the table are based on the
Form 4 filed with the SEC on December 16, 2009. None
of the executive officers have restricted stock units or
performance-based restricted stock units that will vest on or
within 60 days of September 13, 2010, except 11,565
restricted stock units held by a non-NEO executive officer.
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(2)
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Mr. Mehra is a managing director of Goldman,
Sachs & Co. Mr. Mehra and The Goldman Sachs
Group, Inc. each disclaims beneficial ownership of the shares of
common stock owned directly or indirectly by the Goldman Sachs
Funds and Goldman, Sachs & Co., except to the extent
of his or its pecuniary interest therein, if any. Goldman,
Sachs & Co. disclaims beneficial ownership of the
shares of common stock owned directly or indirectly by the
Goldman Sachs Funds, except to the extent of its pecuniary
interest therein, if any. Mr. Mehra has an understanding
with The Goldman Sachs Group, Inc. pursuant to which he holds
the
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99
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deferred stock units he receives in his capacity as a director
of the Company for the benefit of The Goldman Sachs Group, Inc.
See Footnote 6 below for information regarding The Goldman Sachs
Group, Inc.
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(3)
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The shares included in the table are based solely on Amendment
No. 3 to the Schedule 13G filed with the SEC on
January 11, 2010 by FMR LLC. FMR LLC filed the amended
Schedule 13G on a voluntary basis as if all of the shares
are beneficially owned by FMR LLC and Fidelity International
Limited (FIL) on a joint basis, but each is of the
view that the shares held by the other need not be aggregated
for purposes of Section 13(d). FMR LLC has the sole power
to vote or to direct the vote regarding 4,857,828 of these
shares and the sole power to dispose or to direct the
disposition of 7,824,558 of these shares. The business address
of FMR LLC is 82 Devonshire Street, Boston, MA 02109.
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(4)
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The shares included in the table are based solely on the
Schedule 13G filed with the SEC on February 11, 2010
by Artisan Partners Holdings LP (Artisan Holdings),
Artisan Investment Corporation (Artisan Corp.),
Artisan Partners Limited Partnership (Artisan
Partners), Artisan Investments GP LLC (Artisan
Investments), ZFIC, Inc. (ZFIC), Andrew A.
Ziegler and Carlene M. Ziegler. Artisan Holdings, a registered
investment adviser, is the sole limited partner of Artisan
Partners, a registered investment adviser. Artisan Investments
is the general partner of Artisan Partners. Artisan Corp. is the
general partner of Artisan Holdings. ZFIC is the sole
stockholder of Artisan Corp. and Mr. Ziegler and
Ms. Ziegler are the principal stockholders of ZFIC. Of the
shares reported, each of Artisan Holdings, Artisan Corp., ZFIC,
Mr. Ziegler and Ms. Ziegler reported that they had
shared voting power with respect to 7,811,200 shares and
shared dispositive power with respect to 7,971,200 shares.
Artisan Partners and Artisan Investments each reported that it
had shared voting power over 7,754,000 shares and shared
dispositive power over 7,914,000 shares. The shares
reported were acquired on behalf of discretionary clients of
Artisan Partners and Artisan Holdings. The business address of
Artisan Holdings is 875 East Wisconsin Avenue, Suite 800,
Milwaukee, WI 53202.
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(5)
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The shares included in the table consist of:
(i) 10,403,858 shares of common stock owned by Bain
Capital Integral Investors, LLC, whose administrative member is
Bain Capital Investors, LLC (BCI);
(ii) 3,117,905 shares of common stock owned by Bain
Capital VII Coinvestment Fund, LLC, whose managing and sole
member is Bain Capital VII Coinvestment Fund, L.P., whose
general partner is Bain Capital Partners VII, L.P., whose
general partner is BCI and (iii) 59,513 shares of
common stock owned by BCIP TCV, LLC, whose administrative member
is BCI. The shares included in the table are based solely on the
Amendment No. 3 to Schedule 13G filed with the SEC on
February 16, 2010 by BCI on behalf of itself and its
reporting group. The business address of BCI is 111 Huntington
Avenue, Boston, MA 02199.
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(6)
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The Goldman Sachs Group, Inc., and certain affiliates,
including, Goldman, Sachs & Co., may be deemed to
directly or indirectly own the shares of common stock which are
owned directly or indirectly by investment partnerships, which
The Goldman Sachs Group, Inc. refers to as the Goldman Sachs
Funds, of which affiliates of The Goldman Sachs Group, Inc. and
Goldman Sachs & Co. are the general partner, managing
limited partner or the managing partner. Goldman,
Sachs & Co. is the investment manager for certain of
the Goldman Sachs Funds. Goldman, Sachs & Co. is a
direct and indirect, wholly owned subsidiary of The Goldman
Sachs Group, Inc. The Goldman Sachs Group, Inc., Goldman,
Sachs & Co. and the Goldman Sachs Funds share voting
and investment power with certain of their respective
affiliates. Shares beneficially owned by the Goldman Sachs Funds
consist of: (i) 7,262,660 shares of common stock owned
by GS Capital Partners 2000, L.P.;
(ii) 2,638,973 shares of common stock owned by GS
Capital Partners 2000 Offshore, L.P.;
(iii) 303,562 shares of common stock owned by GS
Capital Partners 2000 GmbH & Co. Beteiligungs KG;
(iv) 2,306,145 shares of common stock owned by GS
Capital Partners 2000 Employee Fund, L.P.;
(v) 106,837 shares of common stock owned by Bridge
Street Special Opportunities Fund 2000, L.P.;
(vi) 213,675 shares of common stock owned by Stone
Street Fund 2000, L.P.; (vii) 356,124 shares of
common stock owned by Goldman Sachs Direct Investment
Fund 2000, L.P.; (viii) 412,941 shares of common
stock owned by GS Private Equity Partners 2000, L.P.;
(ix) 141,944 shares of common stock owned by GS
Private Equity Partners 2000 Offshore Holdings, L.P.; and
(x) 157,364 shares of common stock owned by GS Private
Equity Partners
2000-Direct
Investment Fund, L.P.
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Goldman Sachs Execution & Clearing, L.P. beneficially
owns directly and The Goldman Sachs Group, Inc. may be deemed to
beneficially own indirectly 3,520 shares of common stock.
Goldman, Sachs & Co. beneficially owns directly and
The Goldman Sachs Group, Inc. may be deemed to beneficially own
indirectly 10,100 shares of common stock. Goldman,
Sachs & Co. and The Goldman Sachs Group, Inc. may
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100
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each be deemed to beneficially own indirectly, in the aggregate,
13,900,225 shares of common stock through certain limited
partnerships described in this footnote, of which affiliates of
Goldman, Sachs & Co. and The Goldman Sachs Group, Inc.
are the general partner, managing general partner, managing
partner, managing member or member. Goldman, Sachs &
Co. is a wholly-owned subsidiary of The Goldman Sachs Group,
Inc. Goldman, Sachs & Co. is the investment manager of
certain of the limited partnerships.
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The Goldman Sachs Group, Inc. may be deemed to beneficially own
24,478 shares of common stock pursuant to the 2006 Omnibus
Incentive Plan, which are deferred shares granted to Sanjeev K.
Mehra, a managing director of Goldman, Sachs & Co. in
his capacity as a director of the Company. Mr. Mehra has an
understanding with The Goldman Sachs Group, Inc. pursuant to
which he holds such deferred shares for the benefit of The
Goldman Sachs Group, Inc. The grant of 24,478 deferred shares is
currently vested or will vest within 60 days of
September 13, 2010. The deferred shares granted to
Mr. Mehra will be settled upon termination of Board
service. Each of Goldman, Sachs & Co. and The Goldman
Sachs Group, Inc. disclaims beneficial ownership of the deferred
shares of common stock except to the extent of its pecuniary
interest therein.
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The shares included in the table are based solely on the
Schedule 13G filed with the SEC on February 16, 2010
by The Goldman Sachs Group, Inc. on behalf of itself and its
reporting group. The business address for The Goldman Sachs
Group, Inc. is 85 Broad Street, New York, NY 10004.
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(7)
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The shares included in the table are directly held by TPG BK
Holdco LLC. TPG Advisors III, Inc., a Delaware corporation
(Advisors III), is the sole general partner of TPG
GenPar III, L.P., a Delaware limited partnership, which in turn
is the sole general partner of TPG Partners III, L.P., a
Delaware limited partnership, which in turn is the managing
member of TPG BK Holdco LLC. David Bonderman and James Coulter
are directors, officers and sole shareholders of Advisors III,
and therefore, David Bonderman, James Coulter and
Advisors III may each be deemed to beneficially own the
shares directly held by TPG BK Holdco LLC. The shares included
in this table are based solely on the Amendment No. 2 to
Schedule 13G filed with the SEC on February 13, 2009
on behalf of Advisors III, Mr. Bonderman and
Mr. Coulter. The business address for TPG BK Holdco LLC is
c/o TPG
Capital, L.P., 301 Commerce Street, Suite 3300,
Fort Worth, TX 76102.
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APPRAISAL
RIGHTS
Under the DGCL, if you do not wish to accept the per share
merger consideration provided for in the merger agreement and
you do not vote for the adoption of the merger agreement, you
have certain rights under the DGCL to demand appraisal of your
shares of Company common stock and to receive payment in cash
for the fair value of your shares of Company common stock in
lieu of the $24.00 per share to be paid in the merger, exclusive
of any element of value arising from the accomplishment or
expectation of the merger, as determined by the Delaware Court
of Chancery, together with interest, if any, to be paid upon the
amount determined to be fair value. The fair value
of your shares of Company common stock as determined by the
Delaware Court of Chancery may be more or less than, or the same
as, the $24.00 per share that you are otherwise entitled to
receive under the terms of the merger agreement. These rights
are known as appraisal rights. The Companys shareholders
who elect to exercise appraisal rights must not vote in favor of
the proposal to adopt the merger agreement and must comply with
the provisions of Section 262 of the DGCL, in order to
perfect their rights. Strict compliance with the statutory
procedures in Section 262 is required.
Failure to follow
precisely any of the statutory requirements will result in the
loss of your appraisal rights.
This section is intended as a brief summary of the material
provisions of the Delaware statutory procedures that a
shareholder must follow in order to seek and perfect appraisal
rights. This summary, however, is not a complete statement of
all applicable requirements, and is qualified in its entirety by
reference to Section 262 of the DGCL, the full text of
which appears in
Annex D
to this proxy statement.
The following summary does not constitute any legal or other
advice, nor does it constitute a recommendation that
shareholders exercise their appraisal rights under
Section 262.
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Section 262 requires that where a merger agreement is to be
submitted for adoption at a meeting of shareholders, the
shareholders be notified that appraisal rights will be available
not less than 20 days before the meeting to vote on the
merger. A copy of Section 262 must be included with such
notice. This proxy statement constitutes the Companys
notice to our shareholders that appraisal rights are available
in connection with the merger, in compliance with the
requirements of Section 262. If you wish to consider
exercising your appraisal rights, you should carefully review
the text of Section 262 contained in
Annex D
.
Failure to comply timely and properly with the requirements of
Section 262 will result in the loss of your appraisal
rights under the DGCL.
If you elect to demand appraisal of your shares of Company
common stock, you must satisfy each of the following conditions:
You must deliver to the Company a written demand for appraisal
of your shares of Company common stock before the vote is taken
to approve the proposal to adopt the merger agreement, which
must reasonably inform us of the identity of the holder of
record of shares of Company common stock who intends to demand
appraisal of his, her or its shares of Company common stock; and
you must not vote or submit a proxy in favor of the proposal to
adopt the merger agreement.
If you fail to comply with either of these conditions and the
merger is completed, you will be entitled to receive payment for
your shares of Company common stock as provided for in the
merger agreement, but you will have no appraisal rights with
respect to your shares of Company common stock. A holder of
shares of Company common stock wishing to exercise appraisal
rights must hold of record the shares of Company common stock on
the date the written demand for appraisal is made and must
continue to hold the shares of Company common stock of record
through the effective time of the merger, because appraisal
rights will be lost if the shares of Company common stock are
transferred prior to the effective time of the merger. Voting
against or failing to vote for the proposal to adopt the merger
agreement by itself does not constitute a demand for appraisal
within the meaning of Section 262. A proxy that is
submitted and does not contain voting instructions will, unless
revoked, be voted in favor of the proposal to adopt the merger
agreement, and it will constitute a waiver of the
shareholders right of appraisal and will nullify any
previously delivered written demand for appraisal. Therefore, a
shareholder who submits a proxy and who wishes to exercise
appraisal rights must either submit a proxy containing
instructions to vote against the proposal to adopt the merger
agreement or abstain from voting on the proposal to adopt the
merger agreement. The written demand for appraisal must be in
addition to and separate from any proxy or vote on the proposal
to adopt the merger agreement.
All demands for appraisal should be addressed to Burger King
Holdings, Inc., Attention: General Counsel and Secretary, 5505
Blue Lagoon Drive, Miami, Florida 33126, and must be delivered
before the vote is taken to approve the proposal to adopt the
merger agreement at the special meeting, and should be executed
by, or on behalf of, the record holder of the shares of Company
common stock. The demand must reasonably inform the Company of
the identity of the shareholder and the intention of the
shareholder to demand appraisal of his, her or its shares of
Company common stock.
To be effective, a demand for appraisal by a shareholder of
Company common stock must be made by, or in the name of, the
record shareholder, fully and correctly, as the
shareholders name appears on the shareholders stock
certificate(s) or in the transfer agents records, in the
case of uncertificated shares. The demand cannot be made by the
beneficial owner if he or she does not also hold the shares of
Company common stock of record. The beneficial holder must, in
such cases, have the registered owner, such as a bank, brokerage
firm or other nominee, submit the required demand in respect of
those shares of Company common stock.
If you hold your shares
of Company common stock through a bank, brokerage firm or other
nominee and you wish to exercise appraisal rights, you should
consult with your bank, brokerage firm or the other nominee to
determine the appropriate procedures for the making of a demand
for appraisal by the nominee.
If shares of Company common stock are owned of record in a
fiduciary capacity, such as by a trustee, guardian or custodian,
execution of a demand for appraisal should be made in that
capacity. If the shares of Company common stock are owned of
record by more than one person, as in a joint tenancy or tenancy
in common, the demand should be executed by or for all joint
owners. An authorized agent, including an
102
authorized agent for two or more joint owners, may execute the
demand for appraisal for a shareholder of record; however, the
agent must identify the record owner or owners and expressly
disclose the fact that, in executing the demand, he or she is
acting as agent for the record owner. A record owner, such as a
bank, brokerage firm or other nominee, who holds shares of
Company common stock as a nominee for others, may exercise his
or her right of appraisal with respect to the shares of Company
common stock held for one or more beneficial owners, while not
exercising this right for other beneficial owners. In that case,
the written demand should state the number of shares of Company
common stock as to which appraisal is sought. Where no number of
shares of Company common stock is expressly mentioned, the
demand will be presumed to cover all shares of Company common
stock held in the name of the record owner.
Within ten days after the effective time of the merger, the
surviving corporation in the merger must give written notice
that the merger has become effective to each of the
Companys shareholders who has properly filed a written
demand for appraisal and who did not vote in favor of the
proposal to adopt the merger agreement. At any time within
60 days after the effective time of the merger, any
shareholder who has not commenced an appraisal proceeding or
joined a proceeding as a named party may withdraw the demand and
accept the cash payment specified by the merger agreement for
that shareholders shares of Company common stock by
delivering to the surviving corporation a written withdrawal of
the demand for appraisal. However, any such attempt to withdraw
the demand made more than 60 days after the effective time
of the merger will require written approval of the surviving
corporation. Unless the demand is properly withdrawn by the
shareholder within 60 days after the effective date of the
merger, no appraisal proceeding in the Delaware Court of
Chancery will be dismissed as to any shareholder without the
approval of the Delaware Court of Chancery, with such approval
conditioned upon such terms as the Court deems just. If the
surviving corporation does not approve a request to withdraw a
demand for appraisal when that approval is required, or if the
Delaware Court of Chancery does not approve the dismissal of an
appraisal proceeding, the shareholder will be entitled to
receive only the appraised value determined in any such
appraisal proceeding, which value could be less than, equal to
or more than the consideration offered pursuant to the merger
agreement.
Within 120 days after the effective time of the merger, but
not thereafter, either the surviving corporation or any
shareholder who has complied with the requirements of
Section 262 and is entitled to appraisal rights under
Section 262 may commence an appraisal proceeding by filing
a petition in the Delaware Court of Chancery demanding a
determination of the fair value of the shares of Company common
stock held by all shareholders entitled to appraisal. Upon the
filing of the petition by a shareholder, service of a copy of
such petition shall be made upon the surviving corporation. The
surviving corporation has no obligation to file such a petition,
and holders should not assume that the surviving corporation
will file a petition. Accordingly, the failure of a shareholder
to file such a petition within the period specified could
nullify the shareholders previous written demand for
appraisal. In addition, within 120 days after the effective
time of the merger, any shareholder who has properly filed a
written demand for appraisal and who did not vote in favor of
the merger agreement, upon written request, will be entitled to
receive from the surviving corporation, a statement setting
forth the aggregate number of shares of Company common stock not
voted in favor of the merger agreement and with respect to which
demands for appraisal have been received and the aggregate
number of holders of such shares. The statement must be mailed
within 10 days after such written request has been received
by the surviving corporation. A person who is the beneficial
owner of shares of Company common stock held either in a voting
trust or by a nominee on behalf of such person may, in such
persons own name, file a petition for appraisal or request
from the surviving corporation such statement.
If a petition for appraisal is duly filed by a shareholder and a
copy of the petition is delivered to the surviving corporation,
then the surviving corporation will be obligated, within
20 days after receiving service of a copy of the petition,
to file with the Delaware Register in Chancery a duly verified
list containing the names and addresses of all shareholders who
have demanded an appraisal of their shares of Company common
stock and with whom agreements as to the value of their shares
of Company common stock have not been reached. After notice to
shareholders who have demanded appraisal, if such notice is
ordered by the Delaware Court of Chancery, the Delaware Court of
Chancery is empowered to conduct a hearing upon the petition and
to determine those shareholders who have complied with
Section 262 and who have become entitled to the appraisal
rights provided by Section 262. The Delaware Court of
Chancery may require shareholders who have
103
demanded payment for their shares of Company common stock to
submit their stock certificates to the Register in Chancery for
notation of the pendency of the appraisal proceedings; and if
any shareholder fails to comply with that direction, the
Delaware Court of Chancery may dismiss the proceedings as to
that shareholder.
After determination of the shareholders entitled to appraisal of
their shares of Company common stock, the Delaware Court of
Chancery will appraise the shares of Company common stock,
determining their fair value as of the effective time of the
merger after taking into account all relevant factors exclusive
of any element of value arising from the accomplishment or
expectation of the merger, together with interest, if any, to be
paid upon the amount determined to be the fair value. When the
value is determined, the Delaware Court of Chancery will direct
the payment of such value upon surrender by those shareholders
of the certificates representing their shares of Company common
stock. Unless the Court in its discretion determines otherwise
for good cause shown, interest from the effective date of the
merger through the date of payment of the judgment shall be
compounded quarterly and shall accrue at 5% over the Federal
Reserve discount rate (including any surcharge) as established
from time to time during the period between the effective time
of the merger and the date of payment of the judgment.
You should be aware that an investment banking opinion as to
fairness from a financial point of view is not necessarily an
opinion as to fair value under Section 262.
Although we
believe that the per share merger consideration is fair, no
representation is made as to the outcome of the appraisal of
fair value as determined by the Delaware Court of Chancery and
shareholders should recognize that such an appraisal could
result in a determination of a value higher or lower than, or
the same as, the per share merger consideration.
Moreover,
we do not anticipate offering more than the per share merger
consideration to any shareholder exercising appraisal rights and
reserve the right to assert, in any appraisal proceeding, that,
for purposes of Section 262, the fair value of
a share of Company common stock is less than the per share
merger consideration. In determining fair value, the
Delaware Court is required to take into account all relevant
factors. In
Weinberger
v.
UOP, Inc.
, the Delaware
Supreme Court discussed the factors that could be considered in
determining fair value in an appraisal proceeding, stating that
proof of value by any techniques or methods which are
generally considered acceptable in the financial community and
otherwise admissible in court should be considered and
that [f]air price obviously requires consideration of all
relevant factors involving the value of a company. The
Delaware Supreme Court has stated that in making this
determination of fair value the court must consider market
value, asset value, dividends, earnings prospects, the nature of
the enterprise and any other facts which could be ascertained as
of the date of the merger which throw any light on future
prospects of the merged corporation. Section 262 provides
that fair value is to be exclusive of any element of value
arising from the accomplishment or expectation of the
merger. In
Cede & Co.
v.
Technicolor,
Inc.
, the Delaware Supreme Court stated that such exclusion
is a narrow exclusion [that] does not encompass known
elements of value, but which rather applies only to the
speculative elements of value arising from such accomplishment
or expectation. In
Weinberger
, the Delaware Supreme Court
construed Section 262 to mean that elements of future
value, including the nature of the enterprise, which are known
or susceptible of proof as of the date of the merger and not the
product of speculation, may be considered.
Costs of the appraisal proceeding (which do not include
attorneys fees or the fees and expenses of experts) may be
determined by the Delaware Court of Chancery and imposed upon
the surviving corporation and the shareholders participating in
the appraisal proceeding by the Delaware Court of Chancery, as
it deems equitable in the circumstances. Upon the application of
a shareholder, the Delaware Court of Chancery may order all or a
portion of the expenses incurred by any shareholder in
connection with the appraisal proceeding, including, without
limitation, reasonable attorneys fees and the fees and
expenses of experts used in the appraisal proceeding, to be
charged pro rata against the value of all shares of Company
common stock entitled to appraisal. Any shareholder who demanded
appraisal rights will not, after the effective time of the
merger, be entitled to vote shares of Company common stock
subject to that demand for any purpose or to receive payments of
dividends or any other distribution with respect to those shares
of Company common stock, other than with respect to payment as
of a record date prior to the effective time of the merger.
However, if no petition for appraisal is filed within
120 days after the effective time of the merger, or if the
shareholder otherwise fails to perfect, successfully withdraws
or loses such holders right to appraisal, then the right
of that shareholder to
104
appraisal will cease and that shareholder will be entitled to
receive the $24.00 per share cash payment (without interest) for
his, her or its shares of Company common stock pursuant to the
merger agreement.
In view of the complexity of Section 262 of the DGCL,
the Companys shareholders who may wish to pursue appraisal
rights should consult their legal and financial advisors.
DELISTING
AND DEREGISTRATION OF COMPANY COMMON STOCK
If the merger is completed, Company common stock will be
delisted from the NYSE and deregistered under the Exchange Act
and we will no longer file periodic reports with the SEC on
account of Company common stock.
OTHER
MATTERS
Other
Matters for Action at the Special Meeting
As of the date of this proxy statement, our board of directors
knows of no matters that will be presented for consideration at
the special meeting other than as described in this proxy
statement.
Shareholder
Proposals and Nominations for 2010 Annual Meeting
Once the merger is completed, there will be no public
participation in any future meetings of the Companys
shareholders. If the merger is not completed, our public
shareholders will continue to be entitled to attend and
participate in our shareholder meetings, and we would expect to
hold our 2010 annual meeting of shareholders prior to the end of
2010.
Inclusion
of Proposals in the Companys Proxy Statement and Proxy
Card under the SEC Rules
In order to be considered for inclusion in the proxy statement
distributed to shareholders prior to the annual meeting of
shareholders in 2010, a shareholder proposal pursuant to
Rule 14a-8
under the Exchange Act must have been received by us no later
than June 10, 2010 and must comply with the requirements of
SEC
Rule 14a-8;
provided, however, if the annual meeting date is changed by more
than 30 days from the anniversary of last years
annual meeting, which took place on November 19, 2009, then
the deadline for such proposals is a reasonable time before the
Company begins to print and send its proxy materials, which
would be disclosed in the Companys reports filed with the
SEC. Written requests for inclusion should be addressed to:
Burger King Holdings, Inc., 5505 Blue Lagoon Drive, Miami,
Florida 33126, Attention: General Counsel and Secretary. We
suggest that you mail your proposal by certified mail, return
receipt requested.
Advance
Notice Requirements for Shareholder Submission of Nominations
and Proposals
A shareholder recommendation for nomination of a person for
election to the board of directors or a proposal for
consideration at the 2010 annual meeting of shareholders must be
submitted in accordance with the advance notice procedures and
other requirements in the Companys bylaws. These
requirements are separate from, and in addition to, the
requirements discussed above to have the shareholder proposal
included in our proxy statement and form of proxy/voting
instruction card pursuant to the SECs rules.
Our bylaws require a shareholder who wants to nominate a
director or submit a shareholder proposal be a shareholder of
record at the time of giving the notice and the time of the
meeting, be entitled to vote at the meeting and comply with the
advance notice provisions of our bylaws.
Our bylaws require that shareholder recommendations for nominees
to the board of directors must include the name of the nominee
or nominees, all information relating to such person that is
required to be disclosed in a proxy statement, a consent signed
by the nominee evidencing a willingness to serve as a director,
if elected, and disclosure of any material relationship between
the shareholder or the beneficial owner and the proposed nominee
or nominees, including any material interest in such business of
the shareholder or the beneficial owner.
105
Our bylaws require that shareholder proposals include a brief
description of the business to be brought before the meeting,
the text of the proposal or business, the reasons for conducting
such business at the meeting, and any material interest of such
shareholder or the beneficial owner, if any, on whose behalf the
proposal is made in such business. In order to be considered
timely pursuant to
Rule 14a-4
and
14a-5(e)
of the Exchange Act, under the advance notice requirements of
our bylaws the proposal or recommendation for nomination must be
received by the Companys General Counsel and Secretary at
least 90 days but no more than 120 days prior to the
first anniversary of the previous years annual meeting.
For the 2010 annual meeting of shareholders, a proposal or
recommendation for nomination must have been received by the
Companys General Counsel and Secretary not earlier than
July 22, 2010 and not later than August 21, 2010. If
no annual meeting was held in the previous year or if the date
of the annual meeting is more than 30 days from the date of
the previous years annual meeting, then the proposal or
recommendation must be received not later than the close of
business on the 90th day prior to the annual meeting or the
10th day following the day on which notice of the date of
the 2010 annual meeting is mailed or publicly disclosed or such
proposal will be considered untimely pursuant to
Rule 14a-4
and
14a-5(e)
of the Exchange Act. Except for proposals properly made in
accordance with
Rule 14a-8
under the Exchange Act and included in the notice of meeting
given by or at the direction of the board of directors, the
advance notice provisions of the bylaws shall be the exclusive
means for a shareholder to propose business to be brought before
an annual meeting of shareholders.
In addition, our bylaws require that the shareholder giving
notice and the beneficial owner, if any, on whose behalf the
proposal is made, must also include (i) the name and
address of the shareholder, (ii) the class and number of
shares beneficially owned and held of record by the shareholder
and the beneficial owner, (iii) any derivative, swap or any
other transaction or series of transactions engaged in, directly
or indirectly by the shareholder or the beneficial owner the
purpose or effect of which is to give the shareholder or
beneficial owner economic risk similar to ownership of shares in
the Company, (iv) a representation that the shareholder is
the holder of record of the shares entitled to vote at the
meeting and intends to appear in person or by proxy at the
meeting to present the proposal or nomination, and (v) a
representation that the shareholder or the beneficial owner
intends to be or is a part of a group which intends to deliver a
proxy statement or a form of proxy to the holders of at least
the percentage of the Companys outstanding shares required
to approve or adopt the proposal or elect the nominee, or
otherwise plans to solicit proxies from shareholders in support
of the nomination or proposal.
WHERE YOU
CAN FIND MORE INFORMATION
We file annual, quarterly and current reports, proxy statements
and other information with the SEC. You may read and copy any
document we file at the SEC public reference room located at
100 F Street, N.E., Room 1580,
Washington, D.C. 20549. Please call the SEC at
1-800-SEC-0330
for further information on the public reference room. Our SEC
filings are also available to the public at the SEC website at
www.sec.gov. You also may obtain free copies of the documents we
file with the SEC, including this proxy statement, by going to
the Investor Relations page of our corporate website at
www.bk.com. Our website address is provided as an inactive
textual reference only. The information provided on our website,
other than copies of the documents listed below that have been
filed with the SEC, is not part of this proxy statement, and
therefore is not incorporated herein by reference.
Statements contained in this proxy statement, or in any document
incorporated by reference in this proxy statement regarding the
contents of any contract or other document, are not necessarily
complete and each such statement is qualified in its entirety by
reference to that contract or other document filed as an exhibit
with the SEC. The SEC allows us to incorporate by
reference into this proxy statement documents we file with
the SEC. This means that we can disclose important information
to you by referring you to those documents. The information
incorporated by reference is considered to be a part of this
proxy statement, and later information that we file with the SEC
will update and supersede that information. We incorporate by
reference the documents listed below and any documents filed by
us pursuant to Section 13(a), 13(c), 14 or 15(d) of the
Exchange Act after the date of this proxy statement and before
the date of the special meeting.
106
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Annual Report on
Form 10-K
for the fiscal year ended June 30, 2010 (filed with the SEC
on August 26, 2010);
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Form 10-K/A
(filed with the SEC on September 20, 2010); and
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Current Reports on
Form 8-K
(filed with the SEC on August 25, 2010, September 2,
2010, September 3, 2010; and September 16, 2010).
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Notwithstanding the foregoing, information furnished under
Items 2.02 and 7.01 of any Current Report on
Form 8-K,
including the related exhibits, is not incorporated by reference
into this proxy statement.
Any person, including any beneficial owner, to whom this proxy
statement is delivered may request copies of proxy statements
and any of the documents incorporated by reference in this
document or other information concerning us, without charge, by
written or telephonic request directed to Investor Relations
Department, Burger King Holdings, Inc., 5505 Blue Lagoon Drive,
Miami, Florida 33126, telephone number
(305) 378-3000
or from the SEC through the SEC website at the address provided
above. Documents incorporated by reference are available without
charge, excluding any exhibits to those documents unless the
exhibit is specifically incorporated by reference into those
documents.
THIS PROXY STATEMENT DOES NOT CONSTITUTE THE SOLICITATION OF A
PROXY IN ANY JURISDICTION TO OR FROM ANY PERSON TO WHOM OR FROM
WHOM IT IS UNLAWFUL TO MAKE SUCH PROXY SOLICITATION IN THAT
JURISDICTION. YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED
OR INCORPORATED BY REFERENCE IN THIS PROXY STATEMENT TO VOTE
YOUR SHARES OF COMPANY COMMON STOCK AT THE SPECIAL MEETING.
WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION
THAT IS DIFFERENT FROM WHAT IS CONTAINED IN THIS PROXY
STATEMENT. THIS PROXY STATEMENT IS DATED [ ],
2010. YOU SHOULD NOT ASSUME THAT THE INFORMATION CONTAINED IN
THIS PROXY STATEMENT IS ACCURATE AS OF ANY DATE OTHER THAN THAT
DATE, AND THE MAILING OF THIS PROXY STATEMENT TO SHAREHOLDERS
DOES NOT CREATE ANY IMPLICATION TO THE CONTRARY.
107
Annex A
AGREEMENT AND PLAN OF MERGER
by and among
BLUE ACQUISITION HOLDING CORPORATION,
BLUE ACQUISITION SUB, INC.
and
BURGER KING HOLDINGS, INC.
dated as of
September 2, 2010
The Merger Agreement has been provided solely to inform
investors of its terms. The representations, warranties and
covenants contained in the Merger Agreement were made only for
the purposes of such agreement and as of specific dates, were
made solely for the benefit of the parties to the Merger
Agreement and may be intended not as statements of fact, but
rather as a way of allocating risk to one of the parties if
those statements prove to be inaccurate. In addition, such
representations, warranties and covenants may have been
qualified by certain disclosures not reflected in the text of
the Merger Agreement and may apply standards of materiality in a
way that is different from what may be viewed as material by
stockholders of, or other investors in, the Company. The
Companys stockholders and other investors are not
third-party beneficiaries under the Merger Agreement and should
not rely on the representations, warranties and covenants or any
descriptions thereof as characterizations of the actual state of
facts or conditions of the Company, Parent, Sub or any of their
respective subsidiaries or affiliates.
A-1
TABLE OF
CONTENTS
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Page
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ARTICLE I The Offer
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1
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Section 1.01
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The Offer
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1
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Section 1.02
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Company Actions
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4
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Section 1.03
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Top-Up
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5
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Section 1.04
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Directors
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6
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ARTICLE II The Merger
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7
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Section 2.01
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The Merger
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7
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Section 2.02
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Closing
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7
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Section 2.03
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Effective Time
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7
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Section 2.04
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Effects of the Merger
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7
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Section 2.05
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Certificate of Incorporation and By-Laws
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7
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Section 2.06
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Directors
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7
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Section 2.07
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Officers
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8
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Section 2.08
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Taking of Necessary Action
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8
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ARTICLE III Effect of the Merger on the Capital Stock of
the Constituent Corporations
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8
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Section 3.01
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Effect on Capital Stock
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8
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Section 3.02
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Adjustment to Merger Consideration
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9
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Section 3.03
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Exchange Fund
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9
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Section 3.04
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Company Equity Awards
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11
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ARTICLE IV Representations and Warranties of the Company
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11
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Section 4.01
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Organization, Standing and Corporate Power
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12
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Section 4.02
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Subsidiaries
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12
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Section 4.03
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Capital Structure
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12
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Section 4.04
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Authority; Recommendation
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13
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Section 4.05
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Non-Contravention
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14
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Section 4.06
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SEC Documents; Financial Statements; Undisclosed Liabilities
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15
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Section 4.07
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Absence of Certain Changes or Events
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16
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Section 4.08
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Litigation
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17
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Section 4.09
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Contracts
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17
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Section 4.10
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[Reserved]
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18
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Section 4.11
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Compliance with Laws
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18
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Section 4.12
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Labor and Employment Matters
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19
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Section 4.13
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Employee Benefit Matters
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19
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Section 4.14
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Taxes
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22
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Section 4.15
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Real Property
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22
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Section 4.16
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Intellectual Property
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23
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Section 4.17
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Environmental Matters
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24
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Section 4.18
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Insurance
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24
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Section 4.19
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Franchise Matters
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25
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Section 4.20
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Quality and Safety of Food & Beverage Products
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26
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Section 4.21
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[Reserved]
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26
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Section 4.22
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Affiliate Transactions
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26
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i
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Page
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Section 4.23
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Certain Business Practices
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26
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Section 4.24
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Company Swaps
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26
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Section 4.25
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Information Supplied
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26
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Section 4.26
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Voting Requirements
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27
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Section 4.27
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State Takeover Statutes
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27
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Section 4.28
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Brokers and Other Advisors
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27
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Section 4.29
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Opinions of Financial Advisors
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27
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Section 4.30
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Solvency
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27
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ARTICLE V Representations and Warranties of Parent and Sub
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27
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Section 5.01
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Organization, Standing and Corporate Power
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27
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Section 5.02
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Authority
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27
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Section 5.03
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Non-Contravention
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28
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Section 5.04
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Financing
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28
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Section 5.05
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Limited Guaranty
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29
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Section 5.06
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Litigation
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29
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Section 5.07
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Information Supplied
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29
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Section 5.08
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Operation and Ownership of Sub
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29
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Section 5.09
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Brokers and Other Advisors
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29
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Section 5.10
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No Competing Businesses
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30
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Section 5.11
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Ownership of Company Common Stock
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30
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Section 5.12
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Solvency
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30
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ARTICLE VI Covenants Relating to Conduct of Business
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30
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Section 6.01
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Conduct of Business
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30
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Section 6.02
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Solicitation; Takeover Proposals; Change of Recommendation
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33
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ARTICLE VII Additional Agreements
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37
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Section 7.01
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Preparation of the Proxy Statement; Stockholders Meeting
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37
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Section 7.02
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Access to Information; Confidentiality
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38
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Section 7.03
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Reasonable Best Efforts; Approvals; Transaction Litigation
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39
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Section 7.04
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State Takeover Laws
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40
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Section 7.05
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Benefit Plans
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40
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Section 7.06
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Indemnification, Exculpation and Insurance
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41
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Section 7.07
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Public Announcements
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42
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Section 7.08
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Financing
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43
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Section 7.09
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Financing Cooperation
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45
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Section 7.10
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Rule 14d-10
Matters
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48
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Section 7.11
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Rule 16b-3
Matters
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48
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Section 7.12
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FIRPTA Certificate
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48
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ARTICLE VIII Conditions Precedent
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48
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Section 8.01
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Conditions to Each Partys Obligation to Effect the Merger
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48
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Section 8.02
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Conditions to Obligations of Parent and Sub to Effect the Merger
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48
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Section 8.03
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Conditions to Obligation of the Company to Effect the Merger
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49
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Section 8.04
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Frustration of Closing Conditions
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49
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ii
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Page
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ARTICLE IX Termination, Amendment and Waiver
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50
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Section 9.01
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Termination
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50
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Section 9.02
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Effect of Termination
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51
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Section 9.03
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Termination Fees and Expenses
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52
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Section 9.04
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Amendment
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53
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Section 9.05
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Extension; Waiver
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53
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ARTICLE X Interpretation
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53
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Section 10.01
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Certain Definitions
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53
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Section 10.02
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Index of Defined Terms
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56
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Section 10.03
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Interpretation
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59
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ARTICLE XI General Provisions
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60
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Section 11.01
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Nonsurvival of Representations and Warranties
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60
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Section 11.02
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Expenses
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61
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Section 11.03
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Notices
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61
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Section 11.04
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Entire Agreement
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61
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Section 11.05
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No Third-Party Beneficiaries
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62
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Section 11.06
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Assignment
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62
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Section 11.07
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GOVERNING LAW
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62
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Section 11.08
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Jurisdiction; Service of Process
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62
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Section 11.09
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WAIVER OF JURY TRIAL
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63
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Section 11.10
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Specific Performance; Remedies
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63
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Section 11.11
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Maximum Recourse; Limitation on Liability
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64
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Section 11.12
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Severability
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66
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Section 11.13
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Counterparts; Facsimile and Electronic Signatures
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66
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Annex I Conditions to the Offer
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I-1
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iii
AGREEMENT
AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER (this
Agreement
), dated as of September 2,
2010, is entered into by and among Blue Acquisition Holding
Corporation, a Delaware corporation (
Parent
),
Blue Acquisition Sub, Inc., a Delaware corporation and a wholly
owned Subsidiary of Parent (
Sub
), and Burger
King Holdings, Inc., a Delaware corporation (the
Company
). Each of Parent, Sub and the Company
are referred to herein as a
Party
and
together as
Parties
. Capitalized terms used
and not otherwise defined herein have the meanings set forth in
Article X
.
RECITALS
WHEREAS, the respective boards of directors of each of Parent,
Sub and the Company have unanimously (i) determined that
this Agreement and the transactions contemplated hereby,
including the Offer and the Merger, are advisable, fair to and
in the best interests of their respective stockholders and
(ii) approved this Agreement and the transactions
contemplated hereby, including the Offer and the Merger, on the
terms and subject to the conditions set forth in this Agreement;
WHEREAS, Parent proposes to cause Sub to commence a tender offer
(as it may be amended from time to time as permitted under this
Agreement, the
Offer
) to purchase all the
outstanding shares of common stock, par value $0.01 per share,
of the Company (the
Company Common Stock
) at
a price per share of Company Common Stock of $24.00, without
interest (such amount, or any other amount per share paid
pursuant to the Offer and this Agreement, the
Offer
Price
), net to the seller thereof in cash, on the
terms and subject to the conditions set forth in this Agreement;
WHEREAS, concurrently with the execution and delivery of this
Agreement, the Company has entered into a Sponsor Tender
Agreement with certain investment funds affiliated with Bain
Capital Investors, LLC, TPG Capital, L.P. and The Goldman Sachs
Group, Inc. and their respective Affiliates set forth therein
(collectively, the
Sponsor Tender
Agreements
), pursuant to which, among other things,
such investment funds have irrevocably agreed to tender shares
of Company Common Stock beneficially owned by them in the Offer
(the shares subject to such agreements constituting, in the
aggregate, approximately 31% of the Company Common Stock as of
the date hereof) and to take certain actions and exercise
certain rights, and to refrain from taking other actions or
exercising other rights, in each case, as set forth therein;
WHEREAS, regardless of whether the Offer Closing occurs, Sub
will merge with and into the Company, with the Company
continuing as the surviving corporation in the merger (the
Merger
), upon the terms and subject to the
conditions set forth in this Agreement, whereby, except as
expressly provided in
Section 3.01
, each issued and
outstanding share of Company Common Stock immediately prior to
the effective time of the Merger will be cancelled and converted
into the right to receive the Offer Price; and
WHEREAS Parent, Sub and the Company desire to make certain
representations, warranties, covenants and agreements in
connection with the Offer and the Merger and also to prescribe
various conditions to the Offer and the Merger.
NOW, THEREFORE, in consideration of the foregoing premises and
the representations, warranties, covenants and agreements
contained in this Agreement, and subject to the conditions set
forth herein, as well as other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged,
and intending to be legally bound hereby, the Parties agree as
follows:
ARTICLE I
The
Offer
Section
1.01
The
Offer
.
(a)
Commencement of the Offer
.
As
promptly as reasonably practicable (and, in any event, within
10 business days) after the date of this Agreement, Sub
shall, and Parent shall cause Sub to, commence (within the
meaning of
Rule 14d-2
under the Securities Exchange Act of 1934, as amended (together
with the
1
rules and regulations promulgated thereunder, the
Exchange Act
)) the Offer to purchase all of
the outstanding shares of Company Common Stock at a price per
share equal to the Offer Price (as adjusted as provided in
Section 1.01(c)
, if applicable).
(b)
Terms and Conditions of the
Offer
.
The obligations of Sub to, and of
Parent to cause Sub to, accept for payment, and pay for, any
shares of Company Common Stock tendered pursuant to the Offer
are subject only to the conditions set forth in Annex I
(the
Offer Conditions
). The Offer Conditions
are for the sole benefit of Parent and Sub, and Parent and Sub
may waive, in whole or in part, any Offer Condition at any time
and from time to time, in their sole discretion, other than the
Minimum Tender Condition, which may be waived by Parent and Sub
only with the prior written consent of the Company. Parent and
Sub expressly reserve the right to increase the Offer Price or
to waive or make any other changes in the terms and conditions
of the Offer;
provided
,
however
, that unless
otherwise provided in this Agreement or previously approved by
the Company in writing, Sub shall not, and Parent shall not
permit Sub to, (i) reduce the number of shares of Company
Common Stock sought to be purchased in the Offer,
(ii) reduce the Offer Price, (iii) change the form of
consideration payable in the Offer, (iv) amend, modify or
waive the Minimum Tender Condition, (v) add to the Offer
Conditions or amend, modify or supplement any Offer Condition,
or (vi) extend the expiration date of the Offer in any
manner other than in accordance with the terms of
Section 1.01(d)
.
(c)
Adjustments to Offer
Price
.
The Offer Price shall be adjusted
appropriately to reflect the effect of any stock split, reverse
stock split, stock dividend (including any dividend or
distribution of securities convertible into Company Common
Stock), cash dividend (other than the First Quarter Dividend),
reorganization, recapitalization, reclassification, combination,
exchange of shares or other like change with respect to Company
Common Stock occurring on or after the date hereof and prior to
Subs acceptance for payment of, and payment for, Company
Common Stock tendered in the Offer.
(d)
Expiration and Extension of the
Offer
.
The Offer shall initially be scheduled
to expire at midnight, New York City time, on the later of
(x) the 20th business day following the commencement
of the Offer (determined using
Rule 14d-1(g)(3)
under the Exchange Act) and (y) the second business day
following the No-Shop Period Start Date (such later date being
the
Initial Offer Expiration Date
),
provided
,
however
, if at the Initial Offer
Expiration Date, any Offer Condition is not satisfied or waived,
Sub shall, and Parent shall cause Sub to, extend the Offer for
ten (10) business days;
provided
,
further
,
that if the only Offer Condition not satisfied at such time is
the Financing Proceeds Condition, then such Initial Offer
Expiration Date may be extended, at Parents option, for
less than ten (10) business days. Thereafter, if at any
then scheduled expiration of the Offer, any Offer Condition is
not satisfied or waived, Sub shall, and Parent shall cause Sub
to, extend the Offer on one or more occasions, in consecutive
increments of up to five (5) business days (or such longer
period as the Parties may agree) each;
provided
,
however
, if the Proxy Statement Clearance Date has
occurred on or prior to November 24, 2010, then no such
extension shall be required after November 24, 2010;
provided
,
further
,
however
, if the Proxy
Statement Clearance Date has not occurred on or prior to
November 24, 2010, then either Parent or the Company may
request, and upon such request, Sub shall extend the Offer in
increments of up to five (5) business days (or such longer
period as the Parties may agree) each until the Proxy Statement
Clearance Date; it being understood that nothing contained
herein shall limit or otherwise affect the Companys right
to terminate this Agreement pursuant to Section 9.01(g) in
accordance with the terms thereof.
Proxy Statement
Clearance Date
means the date on which the SEC has,
orally or in writing, confirmed that it has no further comments
on the Proxy Statement, including the first date following the
tenth calendar day following the filing of the preliminary Proxy
Statement if the SEC has not informed the Company that it
intends to review the Proxy Statement. In addition, Sub shall,
and Parent shall cause Sub to, extend the Offer on one or more
occasions for the minimum period required by any rule,
regulation, interpretation or position of the Securities and
Exchange Commission (the
SEC
) or the staff
thereof applicable to the Offer;
provided
,
however
, that Sub shall not be required to extend the
Offer beyond the Outside Date and such extension shall be
subject to the right to terminate the Offer in accordance with
Section 1.01(f). The last date on which the Offer is
required to be extended pursuant to this
Section 1.01(d)
is referred to as the
Offer
End Date
(it being understood that under no
circumstances shall the Offer End Date occur prior to
November 24, 2010).
2
(e)
Payment
.
On the terms and
subject to the conditions of the Offer and this Agreement, Sub
shall, and Parent shall cause Sub to, accept for payment, and
pay for, all shares of Company Common Stock validly tendered and
not withdrawn pursuant to the Offer promptly (and in any event
within 3 business days) after the applicable expiration date of
the Offer (as it may be extended in accordance with
Section 1.01(d)
) and in any event in compliance with
Rule 14e-1(c)
promulgated under the Exchange Act. The date of payment for
shares of Company Common Stock accepted for payment pursuant to
and subject to the conditions of the Offer is referred to in
this Agreement as the
Offer Closing
, and the
date on which the Offer Closing occurs is referred to in this
Agreement as the
Offer Closing Date
.
(f)
Termination of the Offer; Continuing Pursuit of
the Merger
.
If at any then-scheduled
expiration of the Offer occurring after November 24, 2010
(i) any Offer Condition shall not have been satisfied or
waived, and (ii) the Offer End Date shall have occurred
(the
Offer Determination Date
), then Sub may
irrevocably and unconditionally terminate the Offer if the Proxy
Statement Clearance Date has occurred on or prior to such Offer
Determination Date. In addition, the Company shall have the
right, exercisable by delivering written notice to Parent and
Sub at any time from and after the Offer Determination Date to
cause Sub to, and upon receipt of such written notice, Sub
shall, and Parent shall cause Sub to, irrevocably and
unconditionally terminate the Offer at the then-scheduled
expiration date of the Offer following the receipt of such
notice from the Company (delivered no less than one
(1) business day of the then -scheduled expiration date of
the Offer). The termination of the Offer pursuant to this
Section 1.01(f)
is referred to in this Agreement as
the
Offer Termination
, and the date on which
the Offer Termination occurs is referred to in this Agreement as
the
Offer Termination Date
. Notwithstanding
anything to the contrary in this
Section 1.01(f)
, if
this Agreement is terminated pursuant to
Section 9.01
, then Sub shall promptly (and, in any
event, within one (1) business day of such termination),
irrevocably and unconditionally terminate the Offer. If the
Offer is terminated or withdrawn by Sub, or this Agreement is
terminated in accordance with
Section 9.01
, Sub
shall promptly return, and shall cause any depository acting on
behalf of Sub to return, all tendered shares of Company Common
Stock to the registered holders thereof to the extent required
by the terms of the Offer. The Parties hereto acknowledge and
agree that the Offer Termination shall not give rise to a right
of termination of this Agreement unless to the extent expressly
provided for in
Section 9.01
and that, absent such
any termination of this Agreement, the obligations of the
Parties hereunder other than those related to the Offer shall
continue to remain in effect, including those obligations with
respect to the Merger.
(g)
Offer Documents
.
On the date
of commencement of the Offer, Parent and Sub shall file with the
SEC a Tender Offer Statement on Schedule TO with respect to
the Offer (together with all amendments and supplements thereto,
and including all exhibits thereto, the
Schedule TO
), which shall include, as
exhibits, an offer to purchase and a related letter of
transmittal, a summary advertisement and other ancillary Offer
documents pursuant to which the Offer will be made (such
Schedule TO and the documents attached as exhibits thereto,
together with any supplements or amendments thereto, the
Offer Documents
) and promptly thereafter
shall mail the Offer Documents to the holders of the Company
Common Stock as required by applicable Law. The Company shall
promptly furnish to Parent and Sub all information concerning
the Company that may be required by applicable securities laws
or reasonably requested by Parent or Sub for inclusion in the
Offer Documents. The Company hereby consents to the inclusion in
the Offer Documents of the Recommendation of the Company Board.
Each of Parent, Sub and the Company shall promptly correct any
information provided by it for use in the Offer Documents if and
to the extent that such information shall have become false or
misleading in any material respect. Parent and Sub shall take
all steps necessary to cause the Offer Documents, as so
corrected, to be filed with the SEC and the other Offer
Documents, as so corrected, to be disseminated to the holders of
Company Common Stock, in each case as and to the extent required
by applicable federal securities Laws. Parent and Sub shall
promptly notify the Company upon the receipt of any comments
from the SEC or the staff of the SEC or any request from the SEC
or the staff of the SEC for amendments or supplements to the
Offer Documents, and shall provide the Company with copies of
all correspondence between Parent, Sub and their respective
Representatives, on the one hand, and the SEC or the staff of
the SEC, on the other hand. Parent and Sub shall use reasonable
best efforts to respond as promptly as reasonably practicable to
any comments of the SEC or the staff of the SEC with respect to
the Offer Documents, and Parent and Sub shall provide the
Company and its counsel a reasonable opportunity to participate
in the formulation of any written response to any such written
comments of the SEC or its staff.
3
Prior to the filing of the Offer Documents (or any amendment or
supplement thereto) or the dissemination thereof to the holders
of Company Common Stock, or responding to any comments of the
SEC or the staff of the SEC with respect thereto, Parent and Sub
shall provide the Company a reasonable opportunity to review and
to propose comments on such document or response.
(h)
Funds
.
Subject to the other
terms and conditions of this Agreement and the Offer Conditions,
Parent shall provide or cause to be provided to Sub on a timely
basis the funds necessary to purchase any shares of Company
Common Stock that Sub becomes obligated to purchase pursuant to
the Offer.
(i)
Withholding
.
Notwithstanding
anything in this Agreement to the contrary, Parent and Sub shall
be entitled to deduct and withhold from the consideration
otherwise payable pursuant to the Offer to any holder of shares
of Company Common Stock such amounts as Parent or Sub are
required to deduct and withhold with respect to the making of
such payment under the Internal Revenue Code of 1986, as amended
(the
Code
), or any other provision of tax
Law. To the extent that amounts are so withheld and paid over to
the appropriate taxing authority by Parent or Sub, such withheld
amounts shall be treated for all purposes of this Agreement as
having been paid to the person in respect of which such
deduction and withholding was made by Parent or Sub.
Section
1.02
Company
Actions
.
(a)
Schedule 14D-9
.
On
the date the Offer Documents are filed with the SEC, the Company
shall file with the SEC a Solicitation/Recommendation Statement
on
Schedule 14D-9
with respect to the Offer (such
Schedule 14D-9,
together with any supplements or amendments thereto, the
Schedule 14D-9
),
which shall describe and make the Recommendation with respect to
the Offer, and promptly thereafter shall mail the
Schedule 14D-9
to the holders of the Company Common Stock. The Company shall
also include in the
Schedule 14D-9
the Fairness Opinions. Parent and Sub shall promptly furnish to
the Company in writing all information concerning Parent and Sub
that may be required by applicable securities laws for inclusion
in the
Schedule 14D-9.
Each of Parent, Sub and the Company shall promptly correct any
information provided by it for use in the
Schedule 14D-9
if and to the extent that such information shall have become
false or misleading in any material respect. The Company shall
take all steps necessary to cause the
Schedule 14D-9,
as so corrected, to be filed with the SEC and the
Schedule 14D-9,
as so corrected, to be disseminated to the holders of Company
Common Stock, in each case as and to the extent required by
applicable federal securities Laws. The Company shall promptly
notify Parent and Sub upon the receipt of any comments from the
SEC or the staff of the SEC or any request from the SEC or the
staff of the SEC for amendments or supplements to the
Schedule 14D-9,
and shall provide Parent and Sub with copies of all
correspondence between the Company and its Representatives, on
the one hand, and the SEC or the staff of the SEC, on the other
hand. The Company shall use reasonable best efforts to respond
as promptly as reasonably practicable to any comments of the SEC
or the staff of the SEC with respect to the
Schedule 14D-9,
and the Company shall provide Parent and Sub and their
respective counsel a reasonable opportunity to participate in
the formulation of any written response to any such written
comments of the SEC or its staff. Prior to the filing of the
Schedule 14D-9
(or any amendment or supplement thereto) or the dissemination
thereof to the holders of Company Common Stock, or responding to
any comments of the SEC or the staff of the SEC with respect
thereto, the Company shall provide Parent and Sub a reasonable
opportunity to review and to propose comments on such document
or response.
(b)
Stockholder Lists
.
In
connection with the Offer and the Merger, the Company shall
cause its transfer agent to furnish Sub promptly with mailing
labels containing the names and addresses of the record holders
of Company Common Stock as of a recent date and of those persons
becoming record holders subsequent to such date, together with
lists, copies of all lists of stockholders, security position
listings, computer files and all other information in the
Companys possession or control regarding the beneficial
owners of Company Common Stock, and shall furnish to Sub such
information (including updated lists of stockholders, security
position listings and computer files) and assistance as Parent
or Sub may reasonably request in communicating the Offer to the
record and beneficial holders of the Company Common Stock.
Subject to the requirements of applicable Law, and except for
such steps as are necessary to disseminate the Offer Documents
and any other documents necessary to consummate the transactions
contemplated by this Agreement, Parent and Sub shall
4
not use or disclose the information contained in any such
labels, lists, listings and files other than in connection with
the Offer and the Merger and, if this Agreement shall be
terminated, shall, upon request, deliver to the Company or
destroy all copies of such information then in their possession
or control in accordance with the Confidentiality Agreement.
Section
1.03
Top-Up
.
(a)
Top-Up
.
The
Company hereby grants to Sub an irrevocable right (the
Top-Up
),
exercisable on the terms and conditions set forth in this
Section 1.03
, to purchase at a price per share equal
to the Offer Price that number of newly issued, fully paid and
nonassessable shares of Company Common Stock (the
Top-Up
Shares
) equal to the lowest number of shares of
Company Common Stock that, when added to the number of shares of
Company Common Stock directly or indirectly owned by Parent and
Sub at the time of the
Top-Up
Closing (after giving effect to the Offer Closing), shall
constitute one share more than 90% of the shares of the Company
Common Stock outstanding immediately after the issuance of the
Top-Up
Shares;
provided
,
however
, that the
Top-Up
may
not be exercised to purchase an amount of
Top-Up
Shares in excess of the number of shares of Company Common Stock
authorized and unissued (treating shares owned by the Company as
treasury stock as unissued) and not reserved for issuance at the
time of exercise of the
Top-Up.
The
Top-Up
shall
be exercisable only once, in whole but not in part.
(b)
Exercise of
Top-Up;
Top-Up
Closing
.
If there shall have not been validly
tendered and not validly withdrawn that number of shares of
Company Common Stock which, when added to the shares of Company
Common Stock owned by Parent and its Affiliates, would represent
at least 90% of the shares of the Company Common Stock
outstanding on the Offer Closing Date, Sub shall be deemed to
have exercised the
Top-Up
and
on such date shall give the Company prior written notice
specifying the number of shares of Company Common Stock directly
or indirectly owned by Parent and its Subsidiaries at the time
of such notice (giving effect to the Offer Closing). The Company
shall, as soon as practicable following receipt of such notice
(and in any event no later than the Offer Closing), deliver
written notice to Sub specifying, based on the information
provided by Sub in its notice, the number of
Top-Up
Shares. At the closing of the purchase of the
Top-Up
Shares (the
Top-Up
Closing
), which shall take place at the location of
the Merger Closing specified in
Section 2.02
, and
shall take place simultaneously with the Offer Closing, the
purchase price owed by Sub to the Company to purchase the
Top-Up
Shares shall be paid to the Company, at Subs option,
(i) in cash, by wire transfer of
same-day
funds, or (ii) by (x) paying in cash, by wire transfer
of
same-day
funds, an amount equal to not less than the aggregate par value
of the
Top-Up
Shares and (y) executing and delivering to the Company a
promissory note having a principal amount equal to the aggregate
purchase price pursuant to the
Top-Up
less
the amount paid in cash pursuant to the preceding clause (x)
(the
Promissory Note
). The Promissory Note
(i) shall be due on the first anniversary of the
Top-Up
Closing, (ii) shall bear simple interest of 5% per annum,
(iii) shall be full recourse to Parent and Sub,
(iv) may be prepaid, in whole or in part, at any time
without premium or penalty, and (v) shall have no other
material terms. At the
Top-Up
Closing, the Company shall cause to be issued to Sub a
certificate representing the
Top-Up
Shares.
(c)
Exemption from
Registration
.
Parent and Sub acknowledge that
the
Top-Up
Shares that Sub may acquire upon exercise of the
Top-Up
will
not be registered under the Securities Act of 1933, as amended
(together with the rules and regulations promulgated thereunder,
the
Securities Act
), and will be issued in
reliance upon an applicable exemption from registration under
the Securities Act. Each of Parent and Sub hereby represents and
warrants to the Company that Sub will be, upon the purchase of
the
Top-Up
Shares, an
accredited investor
, as defined in
Rule 501 of Regulation D under the Securities Act. Sub
agrees that the
Top-Up
and
the
Top-Up
Shares to be acquired upon exercise of the
Top-Up
are
being and will be acquired by Sub for the purpose of investment
and not with a view to, or for resale in connection with, any
distribution thereof (within the meaning of the Securities Act).
(d)
No Effect on Appraisal
Rights
.
Any dilutive impact on the value of
the shares of Company Common Stock as a result of the issuance
of the
Top-Up
Shares will not be taken into account in any determination of
the fair value of any Appraisal Shares pursuant to
Section 262 of the DGCL as contemplated by
Section 3.01(d)
.
5
Section
1.04
Directors
.
(a)
Composition of Company Board and Board
Committees
.
Effective upon the initial
acceptance for payment by Sub of shares of Company Common Stock
pursuant to the Offer (the
Acceptance Time
,
the use of which term herein shall not, unless the context
otherwise requires, depend upon whether Parent shall exercise
its rights under this
Section 1.04(a)
) and from time
to time thereafter, Parent shall be entitled to designate from
time to time such number of members of the Company Board as will
give Parent, subject to compliance with Section 14(f) of
the Exchange Act and
Rule 14f-1
thereunder, representation equal to at least that number of
directors, rounded up to the next whole number, that is the
product of (i) the total number of directors (giving effect
to the directors elected or appointed pursuant to this sentence)
multiplied by
(ii) the percentage that (A) the
number of shares of Company Common Stock owned by Parent and its
Subsidiaries (including shares of Company Common Stock accepted
for payment pursuant to the Offer) bears to (B) the number
of shares of the Company Common Stock then outstanding;
provided
,
however
, that in the event that
Parents designees are appointed or elected to the Company
Board, until the Effective Time the Company Board shall have at
least three directors who are members of the Company Board and
who are not officers, stockholders or Affiliates of the Company
or Parent and who will be independent for purposes of
Rule 10A-3
under the Exchange Act (the
Independent
Directors
);
provided
further
that, in
such event, if the number of Independent Directors shall be
reduced below two for any reason whatsoever, any remaining
Independent Directors (or the Independent Director, if there
shall be only one remaining) shall be entitled to designate
persons to fill such vacancies who shall be deemed to be
Independent Directors for purposes of this Agreement or, if no
Independent Directors then remain, the other directors shall
designate three persons to fill such vacancies who are not
officers, stockholders or Affiliates of the Company or Parent
and who will be independent for purposes of
Rule 10A-3
under the Exchange Act, and such persons shall be deemed to be
Independent Directors for purposes of this Agreement. Subject to
applicable Law, the Company shall take all action requested by
Parent necessary to effect any election or appointment pursuant
to this
Section 1.04
, including (at the election of
Parent) (x) subject to the Company Certificate of
Incorporation, increasing the size of the Company Board, and
(y) obtaining the resignation of such number of its current
directors as is, in each case, necessary to enable such
designees to be so elected or appointed to the Company Board in
compliance with applicable Law (including, to the extent
applicable prior to the Effective Time,
Rule 10A-3
under the Exchange Act). From time to time after the Acceptance
Time, the Company shall take all action necessary to cause the
individuals so designated by Parent to be directors on the
Company Board to constitute substantially the same percentage
(rounding up where appropriate) as is on the Company Board on
each committee of the Company Board to the fullest extent
permitted by all applicable Law and the rules of the New York
Stock Exchange (the
NYSE
), and the Company
shall take all action requested by Parent necessary to effect
any such election or appointment.
(b)
Section 14(f) of the Exchange
Act
.
The Company shall mail to its
stockholders the Information Statement containing the
information required by Section 14(f) of the Exchange Act
and
Rule 14f-1
thereunder, and the Company agrees to make such mailing either
(i) concurrently with the mailing of the
Schedule 14D-9
or (ii) if not included in the
Schedule 14D-9,
if Parent shall have requested, within three (3) calendar
days following such request, which request shall not be
delivered prior to ten (10) calendar days following the
mailing of the
Schedule 14D-9
(provided that, in each case, Parent and Sub shall have provided
to the Company on a timely basis all information required to be
included in the Information Statement with respect to such
designees and with respect to Parents officers, directors
and Affiliates, and if not then as soon as practicable
thereafter).
(c)
Required Approvals of Independent
Directors
.
Following the election or
appointment of Parents designees pursuant to
Section 1.04(a)
and prior to the Effective Time, the
affirmative vote of a majority of the Independent Directors then
in office shall be required for the Company to consent
(i) to amend or terminate this Agreement, (ii) to
waive or elect to enforce any of the Companys rights or
remedies under this Agreement, (iii) to extend the time for
the performance of any of the obligations or other acts of
Parent or Sub, or (iv) to any other matter under this
Agreement.
6
(d)
Effects on Continued
Listing
.
After the Acceptance Time, the
Company shall, upon Parents request, take all action
reasonably necessary to elect to be treated as a
controlled company as defined by Rule 303A of
the New York Stock Exchange Listed Company Manual.
ARTICLE II
The
Merger
Section
2.01
The
Merger
.
Upon the terms and subject to the
conditions set forth in this Agreement, and in accordance with
the General Corporation Law of the State of Delaware (the
DGCL
), Sub shall be merged with and into the
Company at the Effective Time. Following the Effective Time, the
separate corporate existence of Sub shall cease, and the Company
shall continue as the surviving corporation in the Merger (the
Surviving Corporation
).
Section
2.02
Closing
.
The
closing of the Merger (the
Merger Closing
)
will take place at (a) if the Offer Closing shall have not
occurred at or prior to the Merger Closing, 10:00 a.m., New
York City time, on the second business day after satisfaction or
(to the extent permitted by Law) waiver of the conditions set
forth in
Article VIII
(other than those conditions
that by their terms are to be satisfied at the Merger Closing,
but subject to the satisfaction or (to the extent permitted by
Law) waiver of those conditions), or (b) if the Offer
Closing shall have occurred on or prior to the Merger Closing,
on the date of, and immediately following the Offer Closing (or
the
Top-Up
Closing if the
Top-Up
has
been exercised), in either case at the offices of
Kirkland & Ellis LLP, located at 601 Lexington Avenue,
New York, New York 10022, unless another time, date or place is
agreed to in writing by Parent and the Company. The date on
which the Merger Closing occurs is referred to in this Agreement
as the
Merger Closing Date
.
Section
2.03
Effective
Time
.
Subject to the provisions of this
Agreement, as promptly as reasonably practicable on the Merger
Closing Date, the Parties shall file a certificate of merger
(the
Certificate of Merger
) in such form as
is required by, and executed and acknowledged in accordance
with, the relevant provisions of the DGCL, and shall make all
other filings and recordings required under the DGCL. The Merger
shall become effective on such date and time as the Certificate
of Merger is filed with the Secretary of State of the State of
Delaware or at such other date and time as Parent and the
Company shall agree and specify in the Certificate of Merger.
The date and time at which the Merger becomes effective is
referred to in this Agreement as the
Effective
Time
.
Section
2.04
Effects
of the Merger
.
The Merger shall have the
effects set forth in the applicable provisions of the DGCL.
Without limiting the generality of the foregoing, from and after
the Effective Time, the Surviving Corporation shall possess all
properties, rights, privileges, powers and franchises of the
Company and Sub, and all of the claims, obligations,
liabilities, debts and duties of the Company and Sub shall
become the claims, obligations, liabilities, debts and duties of
the Surviving Corporation.
Section
2.05
Certificate
of Incorporation and By-Laws
.
(a) At the Effective Time, the certificate of incorporation
of Sub as in effect immediately prior to the Effective Time
(which shall not be amended by Sub from the date hereof until
such time except as otherwise contemplated hereby) shall be the
certificate of incorporation of the Surviving Corporation until
thereafter changed or amended (subject to
Section 7.06(a)
) as provided therein or by
applicable Law;
provided
,
however
, that at the
Effective Time the certificate of incorporation of the Surviving
Corporation shall be amended so that the name of the Surviving
Corporation shall be Burger King Holdings, Inc.
(b) The by-laws of Sub as in effect immediately prior to
the Effective Time shall be the by-laws of the Surviving
Corporation until thereafter changed or amended (subject to
Section 7.06(a)
) as provided therein or by
applicable Law.
Section
2.06
Directors
.
The
directors of Sub immediately prior to the Effective Time shall
be the directors of the Surviving Corporation until the earlier
of their resignation or removal or until their respective
successors are duly elected and qualified, as the case may be.
7
Section
2.07
Officers
.
The
officers of the Company immediately prior to the Effective Time
shall be the officers of the Surviving Corporation, until the
earlier of their resignation or removal or until their
respective successors are duly elected and qualified, as the
case may be.
Section
2.08
Taking
of Necessary Action
.
If at any time after the
Effective Time any further action is necessary or desirable to
carry out the purposes of this Agreement and to vest the
Surviving Corporation with full right, title and possession to
all assets, property, rights, privileges, powers and franchises
of the Company and Sub, the Surviving Corporation, the board of
directors of the Surviving Corporation and officers of the
Surviving Corporation shall take all such lawful and necessary
action, consistent with this Agreement, on behalf of the
Company, Sub and the Surviving Corporation.
ARTICLE III
Effect of
the Merger on the Capital Stock of
the
Constituent Corporations
Section
3.01
Effect
on Capital Stock
.
At the Effective Time, by
virtue of the Merger and without any action on the part of the
holder of any shares of Company Common Stock or any shares of
capital stock of Parent or Sub:
(a)
Capital Stock of Sub
.
Each
share of capital stock of Sub issued and outstanding immediately
prior to the Effective Time shall be converted into and become
one validly issued, fully paid and nonassessable share of common
stock, par value $0.01 per share, of the Surviving Corporation.
(b)
Cancellation of Treasury Stock and Parent-Owned
Stock
.
Each share of Company Common Stock
issued and outstanding immediately prior to the Effective Time
that is directly owned by the Company as treasury stock, or by
Parent or Sub at such time, shall automatically be canceled and
shall cease to exist, and no consideration shall be delivered in
exchange therefor.
(c)
Conversion of Company Common
Stock
.
Each share of Company Common Stock
issued and outstanding immediately prior to the Effective Time
(excluding shares to be canceled in accordance with
Section 3.01(b)
and, except as provided in
Section 3.01(d)
, the Appraisal Shares) shall be
converted into the right to receive the Offer Price in cash,
without interest (the
Merger Consideration
).
At the Effective Time, all such shares of Company Common Stock
shall no longer be outstanding and shall automatically be
canceled and shall cease to exist, and each holder of a
certificate (or evidence of shares in book-entry form) that
immediately prior to the Effective Time represented any such
shares of Company Common Stock (each, a
Certificate
) shall cease to have any rights
with respect thereto, except the right to receive the Merger
Consideration and any dividends declared from and after the date
hereof in accordance with
Section 6.01(a)
with a
record date prior to the Effective Time that remain unpaid at
the Effective Time and that are due to such holder.
(d)
Appraisal
Rights
.
Notwithstanding anything in this
Agreement to the contrary, shares of Company Common Stock issued
and outstanding immediately prior to the Effective Time that are
held by any holder who is entitled to demand and properly
demands appraisal of such shares pursuant to, and who complies
in all respects with, the provisions of Section 262 of the
DGCL (the
Appraisal Shares
) shall not be
converted into the right to receive the Merger Consideration as
provided in
Section 3.01(c)
, but instead such holder
shall be entitled to payment of the fair value of such shares in
accordance with the provisions of Section 262 of the DGCL.
At the Effective Time, the Appraisal Shares shall no longer be
outstanding and shall automatically be canceled and shall cease
to exist, and each holder of Appraisal Shares shall cease to
have any rights with respect thereto, except the right to
receive the fair value of such Appraisal Shares in accordance
with the provisions of Section 262 of the DGCL.
Notwithstanding the foregoing, if any such holder shall fail to
perfect or otherwise shall waive, withdraw or lose the right to
appraisal under Section 262 of the DGCL or a court of
competent jurisdiction shall determine that such holder is not
entitled to the relief provided by Section 262 of the DGCL,
then the right of such holder to be paid the fair value of such
holders Appraisal Shares under Section 262 of the
DGCL shall cease and such Appraisal Shares shall be deemed to
have been converted at the Effective Time into, and shall have
become, the right to receive the Merger Consideration as
provided in
Section 3.01(c)
, without
8
any interest thereon. The Company shall give prompt notice to
Parent of any demands for appraisal of any shares of Company
Common Stock or written threats thereof, withdrawals of such
demands and any other instruments served pursuant to the DGCL
received by the Company, and Parent shall have the right to
participate in and direct all negotiations and proceedings with
respect to such demands. Prior to the Effective Time, the
Company shall not, without the prior written consent of Parent
(which consent shall not be unreasonably withheld or delayed),
voluntarily make any payment with respect to, or settle or offer
to settle, any such demands, or agree to do or commit to do any
of the foregoing.
Section
3.02
Adjustment
to Merger Consideration
.
Without limiting the
other provisions of this Agreement, if at any time during the
period between the date of this Agreement and the Effective
Time, if there shall be any stock split, reverse stock split,
stock dividend (including any dividend or distribution of
securities convertible into Company Common Stock), cash dividend
(other than the First Quarter Dividend), reorganization,
recapitalization, reclassification, combination, exchange of
shares or other like change with respect to Company Common Stock
occurring on or after the date hereof and prior to the Effective
Time, the Merger Consideration as provided in
Section 3.01(c)
shall be equitably adjusted by
Parent to reflect the effect thereof.
Section
3.03
Exchange
Fund
.
(a)
Paying Agent
.
Prior to the
Merger Closing Date, Parent shall appoint a bank or trust
company reasonably acceptable to the Company to act as paying
agent (the
Paying Agent
) for the payment of
the Merger Consideration in accordance with this
Article III
and, in connection therewith, shall
enter into an agreement with the Paying Agent in the form
reasonably acceptable to the Company (the
Paying Agency
Agreement
). At or prior to the Effective Time, Parent
shall deposit with the Paying Agent cash in an amount sufficient
to pay the aggregate Merger Consideration as required to be paid
pursuant to this Agreement (such cash being hereinafter referred
to as the
Exchange Fund
).
(b)
Certificate Exchange
Procedures
.
As promptly as reasonably
practicable after the Effective Time, Parent shall cause the
Paying Agent to mail to each holder of record of a Certificate
(i) a letter of transmittal (which shall specify that
delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon proper delivery of the
Certificates to the Paying Agent and which shall otherwise be in
customary form (including customary provisions with respect to
delivery of an agents message with respect to
shares held in book-entry form)), and (ii) instructions for
use in effecting the surrender of the Certificates in exchange
for the Merger Consideration. Each holder of record of a
Certificate shall, upon surrender to the Paying Agent of such
Certificate, together with such letter of transmittal, duly
executed, and such other documents as may reasonably be required
by the Paying Agent, be entitled to receive in exchange therefor
the amount of cash which the number of shares of Company Common
Stock previously represented by such Certificate shall have been
converted into the right to receive pursuant to
Section 3.01(c)
, and the Certificate so surrendered
shall forthwith be canceled. In the event of a transfer of
ownership of Company Common Stock which is not registered in the
transfer records of the Company, payment of the Merger
Consideration and any dividends declared in accordance with
Section 6.01(a)
with a record date prior to the
Effective Time that remain unpaid at the Effective Time with
respect to such Company Common Stock may be made to a person
other than the person in whose name the Certificate so
surrendered is registered if such Certificate shall be properly
endorsed or otherwise be in proper form for transfer and the
person requesting such payment shall pay any transfer or other
similar taxes required by reason of the payment of the Merger
Consideration and any such dividends to a person other than the
registered holder of such Certificate or establish to the
reasonable satisfaction of Parent that such tax has been paid or
is not applicable. Until surrendered as contemplated by this
Section 3.03(b)
, each Certificate shall be deemed at
any time after the Effective Time to represent only the right to
receive upon such surrender the Merger Consideration which the
holder thereof has the right to receive in respect of such
Certificate pursuant to this
Article III
and any
dividends declared in accordance with
Section 6.01(a)
with a record date prior to the
Effective Time that remain unpaid at the Effective Time and that
are due to such holder. No interest shall be paid or will accrue
on any cash payable to holders of Certificates pursuant to the
provisions of this
Article III
.
9
(c)
No Further Ownership Rights in Company Common
Stock
.
All cash paid upon the surrender of
Certificates in accordance with the terms of this
Article III
shall be deemed to have been paid in
full satisfaction of all rights pertaining to the shares of
Company Common Stock formerly represented by such Certificates,
subject
,
however
, to the Surviving
Corporations obligation to pay all dividends declared in
accordance with
Section 6.01(a)
with a record date
prior to the Effective Time that remain unpaid at the Effective
Time. At the close of business on the day on which the Effective
Time occurs, the stock transfer books of the Company shall be
closed, and there shall be no further registration of transfers
on the stock transfer books of the Surviving Corporation of the
shares of Company Common Stock that were outstanding immediately
prior to the Effective Time. If, after the Effective Time, any
Certificate is presented to the Surviving Corporation for
transfer, it shall be canceled against delivery of cash to the
holder thereof as provided in this
Article III
.
(d)
Termination of the Exchange
Fund
.
Any portion of the Exchange Fund that
remains undistributed to the holders of the Certificates for six
(6) months after the Effective Time shall be delivered to
Parent, upon demand, and any holders of the Certificates who
have not theretofore complied with this
Article III
shall thereafter look only to Parent for, and Parent shall
remain liable for, payment of their claims for the Merger
Consideration pursuant to the provisions of this
Article III
and any dividends declared in accordance
with
Section 6.01(a)
with a record date prior to the
Effective Time that remain unpaid at the Effective Time and that
are due to any such holder.
(e)
No Liability
.
None of Parent,
Sub, the Company, the Surviving Corporation or the Paying Agent
shall be liable to any person in respect of any cash from the
Exchange Fund delivered to a public official in compliance with
any applicable state, federal or other abandoned property,
escheat or similar Law. If any Certificate shall not have been
surrendered prior to the date on which the related Merger
Consideration would escheat to or become the property of any
Governmental Authority, any such Merger Consideration shall, to
the extent permitted by applicable Law, immediately prior to
such time become the property of Parent, free and clear of all
claims or interest of any person previously entitled thereto.
(f)
Investment of Exchange
Fund
.
The Paying Agent shall invest the cash
in the Exchange Fund as directed by Parent;
provided
,
however
, that such investments shall be in obligations of
or guaranteed by the United States of America or any agency or
instrumentality thereof and backed by the full faith and credit
of the United States of America, in commercial paper obligations
rated A 1 or P 1 or better by Moodys Investors Service,
Inc. or Standard & Poors Corporation,
respectively, or in certificates of deposit, bank repurchase
agreements or bankers acceptances of commercial banks with
capital exceeding $5.0 billion (based on the most recent
financial statements of such bank that are then publicly
available). Any interest and other income resulting from such
investments shall be paid solely to Parent. Nothing contained
herein and no investment losses resulting from investment of the
Exchange Fund shall diminish the rights of any holder of
Certificates to receive the Merger Consideration or any holder
of a Company Equity Award to receive the holders Equity
Award Amount, in each case as provided herein.
(g)
Lost Certificates
.
If any
Certificate shall have been lost, stolen or destroyed, upon the
making of an affidavit of that fact by the person claiming such
Certificate to be lost, stolen or destroyed and, if required by
Parent, the posting by such person of a bond in such reasonable
amount as Parent may direct as indemnity against any claim that
may be made against it with respect to such Certificate, the
Paying Agent shall deliver in exchange for such lost, stolen or
destroyed Certificate the applicable Merger Consideration and
any dividends declared in accordance with
Section 6.01(a)
with a record date prior to the
Effective Time that remain unpaid at the Effective Time with
respect thereto.
(h)
Withholding
Rights
.
Notwithstanding anything in this
Agreement to the contrary, Parent, the Surviving Corporation or
the Paying Agent shall be entitled to deduct and withhold from
the consideration otherwise payable pursuant to this Agreement
to any holder of shares of Company Common Stock (or any holder
of a Company Equity Award) such amounts as Parent, the Surviving
Corporation or the Paying Agent are required to deduct and
withhold with respect to the making of such payment under the
Code or any provision of tax Law. To the extent that amounts are
so withheld and paid over to the appropriate taxing authority by
Parent, the Surviving Corporation or the Paying Agent, such
withheld amounts shall be treated for
10
all purposes of this Agreement as having been paid to the holder
of the shares of Company Common Stock or the holder of the
Company Equity Award, as the case may be, in respect of which
such deduction and withholding was made by Parent, the Surviving
Corporation or the Paying Agent.
Section
3.04
Company
Equity Awards
.
As soon as reasonably
practicable following the date of this Agreement, and in any
event prior to the expiration of the Offer, the Company Board
(or, if appropriate, any committee administering the Company
Stock Plans) shall adopt such resolutions and take such other
actions as may be required to provide that, at the earlier to
occur of the time of the Offer Closing and the Effective Time
(such earlier time, the
Acceleration Time
):
(a) each unexercised Company Stock Option, whether vested
or unvested, that is outstanding immediately prior to the
Acceleration Time shall be canceled, with the holder thereof
becoming entitled to receive (subject to the terms and
conditions set forth in
Section 7.05(d)(II)
of the
Company Disclosure Letter), on the date which the Acceleration
Time occurs, an amount in cash, without interest, equal to
(i) the excess, if any, of (A) the Offer Price over
(B) the exercise price per share of Company Common Stock
subject to such Company Stock Option
multiplied by
(ii) the number of shares of Company Common Stock subject
to such Company Stock Option;
(b) each Company RSU that is outstanding immediately prior
to the Acceleration Time shall be fully vested and, at the
Acceleration Time, canceled, with the holder thereof becoming
entitled to receive (subject to the terms and conditions set
forth in
Section 7.05(d)(II)
of the Company
Disclosure Letter), on the date which the Acceleration Time
occurs, an amount in cash, without interest, equal to
(i) the Offer Price
multiplied by
(ii) the
number of shares of Company Common Stock subject to such Company
RSU at the Acceleration Time;
(c) each Company PSU that is outstanding immediately prior
to the Acceleration Time shall be vested as to the number of
shares of Company Common Stock issuable pursuant to such Company
PSU upon attainment of the target level of performance
applicable to such Company PSU (the
PSU
Shares
), and, at the Acceleration Time, canceled, with
the holder thereof becoming entitled to receive (subject to the
terms and conditions set forth in
Section 7.05(d)(II)
of the Company Disclosure
Letter), on the date which the Acceleration Time occurs, an
amount in cash, without interest, equal to (i) the Offer
Price
multiplied
by
(ii) the number of PSU
Shares attributable to such Company PSU; and
(d) with respect to each member of the Company Board, in
connection with the cessation of such persons service as a
member of the Company Board as of the Acceleration Time, each
Company DSU that is outstanding immediately prior to the
Acceleration Time shall, at the Acceleration Time, be vested and
canceled, with the holder thereof becoming entitled to receive,
on the date which the Acceleration Time occurs, an amount in
cash, without interest, equal to (i) the Offer Price
multiplied
by
(ii) the number of shares of
Company Common Stock subject to such Company DSU at the
Acceleration Time.
(e) The payment of all Equity Award Amounts hereunder shall
be subject to appropriate withholding for taxes in accordance
with
Section 3.03(h)
. The term
Equity Award
Amounts
means, collectively, all amounts payable
pursuant to this
Section 3.04
.
ARTICLE IV
Representations
and Warranties of the Company
Except (i) as disclosed in any report, schedule, form,
statement or other document filed with, or furnished to, the SEC
by the Company, or incorporated by reference into such document,
within the two (2) years preceding the date hereof and
publicly available prior to the date of this Agreement
(collectively, the
Filed SEC Documents
),
other than any disclosures contained under the captions
Risk Factors or Forward Looking
Statements and any other disclosures contained therein
that are predictive, cautionary or forward looking in nature,
but being understood that this clause (i) shall not be
applicable to
Section 4.03
,
Section 4.04
,
Section 4.25
,
Section 4.26
,
Section 4.27
,
Section 4.28
and
Section 4.29
, or
(ii) subject to
Section 10.03(g)
, as
11
set forth in the Company Disclosure Letter, the Company
represents and warrants to Parent and Sub as follows:
Section
4.01
Organization,
Standing and Corporate Power
.
Each of the
Company and its Subsidiaries is duly organized and validly
existing under the Laws of its jurisdiction of organization and
has all requisite corporate or other entity power and authority
to carry on its business as presently conducted, except (other
than with respect to the Companys due organization and
valid existence) as would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect. Each
of the Company and its Subsidiaries is duly qualified or
licensed to do business and is in good standing (where such
concept is recognized under applicable Law) in each jurisdiction
where the nature of its business or the ownership, leasing or
operation of its properties makes such qualification or
licensing necessary, other than where the failure to be so
qualified, licensed or in good standing would not, individually
or in the aggregate, reasonably be expected to have a Material
Adverse Effect. True and complete copies of the Amended and
Restated Certificate of Incorporation of the Company (the
Company Certificate of Incorporation
) and the
Amended and Restated By-Laws of the Company (the
Company By-Laws
), in each case as in effect
on the date of this Agreement, are included in the Filed SEC
Documents.
Section
4.02
Subsidiaries
.
Section 4.02
of the Company Disclosure Letter lists, as of the date of this
Agreement, each Subsidiary of the Company and the jurisdiction
of organization thereof. All the outstanding shares of capital
stock of, or other equity interests in, each Subsidiary of the
Company have been validly issued and are fully paid and
nonassessable and are owned, directly or indirectly, by the
Company free and clear of all pledges, liens, charges,
mortgages, encumbrances or security interests of any kind or
nature whatsoever (collectively,
Liens
),
other than Permitted Liens. Except for its interests in its
Subsidiaries and equity interests in any person organized
outside the United States that is not a Subsidiary in which the
Companys and its Subsidiaries invested capital is
less than $2 million as of the date of this Agreement, the
Company does not own, directly or indirectly, any capital stock
of, or other equity interests in, any corporation, partnership,
joint venture, association or other entity. There are no
options, warrants, rights, convertible or exchangeable
securities, stock-based performance units, Contracts or
undertakings of any kind to which any Subsidiary of the Company
is a party or by which any of them is bound (i) obligating
any such Subsidiary to issue, deliver or sell, or cause to be
issued, delivered or sold, additional shares of capital stock or
other voting securities of or equity interests in, or any
security convertible or exchangeable for any shares of capital
stock or other voting securities of or equity interest in, any
Subsidiary of the Company, (ii) obligating any such
Subsidiary to issue, grant or enter into any such option,
warrant, right, security, unit, Contract or undertaking, or
(iii) that give any person the right to receive any
economic interest of a nature accruing to the holders of capital
stock of any of the Companys Subsidiaries.
Section
4.03
Capital
Structure
.
(a) The authorized capital stock of the Company consists of
300,000,000 shares of Company Common Stock and
10,000,000 shares of preferred stock, par value $0.01 per
share (the
Company Preferred Stock
). At the
close of business on August 31, 2010,
(i) 136,333,333 shares of Company Common Stock were
issued and outstanding, (ii) 1,467,523 shares of
Company Common Stock were reserved and available for issuance
pursuant to the Companys Amended and Restated Equity
Incentive Plan and 2006 Omnibus Incentive Plan (collectively,
the
Company Stock Plans
), and pursuant to
such Company Stock Plans (A) 7,651,238 shares of
Company Common Stock were subject to outstanding options to
acquire shares of Company Common Stock (such options, together
with any options granted thereunder after August 31, 2010,
the
Company Stock Options
),
(B) 1,264,357 shares of Company Common Stock were
subject to restricted stock unit awards that were subject to
service-based vesting or delivery requirements (the
Company RSUs
), (C) 196,691 shares
of Company Common Stock were subject to restricted stock unit
awards that were subject to performance-based vesting or
delivery requirements, assuming settlement of such awards based
on the attainment of performance goals at target levels (the
Company PSUs
), and
(D) 191,568 shares of Company Common Stock were
subject to deferred stock unit awards (the
Company
DSUs
and, together with the Company Stock Options,
Company RSUs and Company PSUs, the
Company Equity
Awards
), (iii) 3,088,996 shares of Company
Common Stock were owned by the Company as treasury stock, and
(iv) no shares of Company Preferred Stock were outstanding.
Except as set forth above, at the close of business on
August 31, 2010, no shares of
12
capital stock or other voting securities of or equity interests
in the Company were issued, reserved for issuance or
outstanding.
Section 4.03(a)
of the Company
Disclosure Letter sets forth the aggregate amount of Company
Equity Awards outstanding as of August 31, 2010, including
(to the extent applicable) the Company Stock Plan under which
each such Company Equity Award was granted, the price at which
such Company Equity Award may be exercised (if any) and status
of each such Company Equity Award. From August 31, 2010
(and except for the issuance for any
Top-Up
Shares), (x) there have been no issuances by the Company of
shares of capital stock or other voting securities of or equity
interests in the Company (including Company Equity Awards),
other than issuances of shares of Company Common Stock pursuant
to Company Equity Awards outstanding on August 31, 2010 or
the Companys Amended and Restated Savings Plan (the
Company 401(k) Plan
), and (y) there have
been no issuances by the Company of options, warrants, rights,
convertible or exchangeable securities, stock-based performance
units or other rights to acquire shares of capital stock of the
Company or other rights that give the holder thereof any
economic interest of a nature accruing to the holders of Company
Common Stock, other than issuances pursuant to Company Equity
Awards outstanding on August 31, 2010 or the Company 401(k)
Plan.
(b) All outstanding shares of Company Common Stock are, and
all such shares that may be issued prior to the Effective Time
will be, when issued, duly authorized, validly issued, fully
paid and nonassessable and not subject to preemptive rights.
There are no bonds, debentures, notes or other indebtedness of
the Company having the right to vote (or convertible into, or
exchangeable for, securities having the right to vote) on any
matters on which holders of Company Common Stock may vote
(
Voting Company Debt
). Except for any
obligations pursuant to this Agreement or as otherwise set forth
above, as of August 31, 2010, there were no options,
warrants, rights, convertible or exchangeable securities,
stock-based performance units, Contracts or undertakings of any
kind to which the Company is a party or by which the Company is
bound (1) obligating the Company to issue, deliver or sell,
or cause to be issued, delivered or sold, additional shares of
capital stock or other voting securities of or equity interests
in, or any security convertible or exchangeable for any shares
of capital stock or other voting securities of or equity
interest in, the Company or of any of its Subsidiaries or any
Voting Company Debt, (2) obligating the Company to issue,
grant or enter into any such option, warrant, right, security,
unit, Contract or undertaking, or (3) that give any person
the right to receive any economic interest of a nature accruing
to the holders of Company Common Stock, and since
August 30, 2010, none of the foregoing has been issued.
There are no outstanding contractual obligations of the Company
to repurchase, redeem or otherwise acquire any shares of capital
stock or options, warrants, rights, convertible or exchangeable
securities, stock-based performance units or other rights to
acquire shares of capital stock of the Company, other than
pursuant to the Company Stock Plans and the Company 401(k) Plan.
(c) The Company does not have any stockholder rights plan
in effect.
Section
4.04
Authority;
Recommendation
.
(a) The Company has all requisite corporate power and
authority to execute and deliver this Agreement and to
consummate the transactions contemplated by this Agreement,
subject, in the case of the Merger, if required by applicable
Law, to receipt of the Stockholder Approval. The execution and
delivery of this Agreement by the Company and the consummation
of the transactions contemplated by, and compliance with the
provisions of, this Agreement by the Company have been duly
authorized by all necessary corporate action on the part of the
Company, subject, in the case of the Merger, if required by
applicable Law, to receipt of the Stockholder Approval. This
Agreement has been duly executed and delivered by the Company
and, assuming the due authorization, execution and delivery by
each of Parent and Sub, constitutes a legal, valid and binding
obligation of the Company, enforceable against the Company in
accordance with its terms, subject, as to enforceability, to
bankruptcy, insolvency and other Laws of general applicability
relating to or affecting creditors rights and to general
equity principles.
(b) The board of directors of the Company (the
Company Board
), at a meeting duly called and
held at which all directors of the Company were present, duly
and unanimously adopted resolutions (i) authorizing and
approving the execution, delivery and performance of this
Agreement and the transactions contemplated hereby,
(ii) approving and declaring advisable this Agreement, the
Offer, the Merger and the other transactions contemplated by
this Agreement, (iii) declaring that the terms of this
Agreement and the transactions
13
contemplated hereby, including the Merger, the Offer and the
other transactions contemplated by this Agreement, on the terms
and subject to the conditions set forth herein, are fair to and
in the best interests of the stockholders of the Company,
(iv) directing that the adoption of this Agreement be
submitted to a vote at a meeting of the stockholders of the
Company unless the adoption of this Agreement by the
Companys stockholders is not required by applicable Law,
(v) recommending that the stockholders of the Company
accept the Offer and tender their shares of Company Common Stock
pursuant to the Offer and adopt this Agreement (this clause (v),
the
Recommendation
), and
(vi) irrevocably approving for all purposes each of Parent,
Sub and their respective Affiliates and this Agreement and the
transactions contemplated hereby (including the Offer, the
Top-Up
and
the Merger) to exempt such persons, agreements and transactions
from, and to elect for the Company, Parent, Sub and their
respective Affiliates not to be subject to, any
moratorium, control share acquisition,
business combination, fair price or
other form of anti-takeover Laws (collectively,
Takeover Laws
) of any jurisdiction that may
purport to be applicable to the Company, Parent, Sub or any of
their respective Affiliates or this Agreement or the
transactions contemplated hereby (including the Offer, the
Top-Up
and
the Merger) with respect to any of the foregoing, which
resolutions, as of the date of this Agreement, have not been
rescinded, modified or withdrawn in any way.
Section
4.05
Non-Contravention
.
The
execution and delivery by the Company of this Agreement do not,
and the consummation of the Offer, the Merger and the other
transactions contemplated by this Agreement and compliance with
the provisions of this Agreement will not, conflict with, or
result in any violation or breach of, or default (with or
without notice or lapse of time, or both) under, or give rise to
a right of termination, cancellation or acceleration of any
obligation or to the loss of a benefit under, or result in the
creation of any Lien upon any of the properties or assets of the
Company or any of its Subsidiaries under (other than any such
Lien created as a result of any action taken by Parent or Sub),
any provision of (a) the Company Certificate of
Incorporation, the Company By-Laws or the comparable
organizational documents of any of its Subsidiaries, or
(b) subject to the filings and other matters referred to in
the immediately following sentence, and assuming the accuracy of
the representations and warranties of Parent and Sub set forth
in
Section 5.10
, (i) any written contract,
lease, permit, authorization, indenture, note, bond, mortgage,
franchise or other agreement or instrument, commitment,
obligation or binding arrangement, with respect to which there
are continuing rights, liabilities or obligations (a
Contract
) to which the Company or any of its
Subsidiaries is a party or by which any of their respective
properties or assets are bound, (ii) any supranational,
federal, national, state, provincial or local statute, law
(including common law), ordinance, rule or regulation of any
Governmental Authority (
Law
) or any judgment,
order or decree of any Governmental Authority
(
Judgment
), in each case applicable to the
Company or any of its Subsidiaries or any of their respective
properties or assets, or (iii) any Authorizations of the
Company or its Subsidiaries, other than, in the case of
clause (b) above, any such conflicts, violations, defaults,
rights, losses or Liens that would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse
Effect. No consent, approval, order, waiver or authorization of,
action or nonaction by, registration, declaration or filing
with, or notice to, any supranational, federal, national, state,
provincial or local, whether domestic or foreign, government,
any court of competent jurisdiction or any administrative,
regulatory (including any stock exchange) or other governmental
agency, commission or authority (each, a
Governmental
Authority
) is required to be obtained or made by or
with respect to the Company or any of its Subsidiaries in
connection with the execution and delivery of this Agreement by
the Company or the consummation by the Company of the Offer, the
Merger or the other transactions contemplated by this Agreement,
except for (A) the filing of a premerger notification and
report form by the Company under the
Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the
HSR
Act
), and the filings and receipt, termination or
expiration, as applicable, of such other approvals or waiting
periods as may be required under the competition, merger
control, antitrust or similar Law of any jurisdiction
(collectively, the
Foreign Merger Control
Laws
), (B) the filing with the SEC of
(w) the
Schedule 14D-9,
(x) if required by applicable Law, the Proxy Statement,
(y) any information statement required in connection with
the Offer under
Rule 14f-1
under the Exchange Act (together with any amendments or
supplements thereto, the
Information
Statement
), and (z) such reports under the
Exchange Act as may be required in connection with this
Agreement and the transactions contemplated by this Agreement,
(C) the filing of the Certificate of Merger with the
Secretary of State of the State of Delaware and of appropriate
documents with the relevant authorities of other jurisdictions
in which the Company or any of
14
its Subsidiaries is qualified to do business, (D) any
filings or notices required under the rules and regulations of
the NYSE, and (E) such other consents, approvals, orders,
waivers, authorizations, actions, nonactions, registrations,
declarations, filings and notices the failure of which to be
obtained or made would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect.
Section
4.06
SEC
Documents; Financial Statements; Undisclosed
Liabilities
.
(a) The Company has filed all material reports, schedules,
forms, statements and other documents with the SEC required to
be filed by the Company pursuant to the Securities Act or the
Exchange Act since July 1, 2008 (the
SEC
Documents
). As of their respective effective dates (in
the case of SEC Documents that are registration statements filed
pursuant to the requirements of the Securities Act) and as of
their respective dates of filing (in the case of all other SEC
Documents), the SEC Documents complied as to form in all
material respects with the requirements of the Securities Act or
the Exchange Act, as the case may be, and the rules and
regulations of the SEC promulgated thereunder applicable
thereto, and except to the extent amended or superseded by a
subsequent filing with the SEC prior to the date of this
Agreement, as of such respective dates, none of the SEC
Documents contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein
or necessary in order to make the statements therein, in light
of the circumstances under which they were made, not misleading.
None of the Companys Subsidiaries is subject to the
periodic reporting requirements of the Exchange Act. As of the
date hereof, there are no outstanding or unresolved comments in
comment letters from the SEC staff with respect to any of the
SEC Documents. To the Knowledge of the Company, as of the date
hereof, none of the SEC Documents is the subject of ongoing SEC
review or outstanding SEC investigation.
(b) Each of the audited consolidated financial statements
and the unaudited quarterly financial statements (including, in
each case, the notes thereto) of the Company included in the SEC
Documents when filed complied as to form in all material
respects with the published rules and regulations of the SEC
with respect thereto, have been prepared in all material
respects in accordance with generally accepted accounting
principles (
GAAP
) (except, in the case of
unaudited quarterly statements, to the extent permitted by
Form 10-Q
of the SEC or other rules and regulations of the SEC) applied on
a consistent basis during the periods involved (except as may be
indicated in the notes thereto) and fairly present in all
material respects the consolidated financial position of the
Company and its consolidated Subsidiaries as of the dates
thereof and the consolidated results of their operations and
cash flows for the periods then ended (subject, in the case of
unaudited quarterly statements, to normal year end adjustments
and the absence of footnotes).
(c) Except for matters reflected or reserved against in the
most recent consolidated balance sheet of the Company (or the
notes thereto) included in the Filed SEC Documents, neither the
Company nor any of its Subsidiaries has any liabilities or
obligations (whether absolute, accrued, contingent, fixed or
otherwise) of any nature that would be required under GAAP, as
in effect on the date of this Agreement, to be reflected on a
consolidated balance sheet of the Company (including the notes
thereto), except liabilities and obligations that (A) were
incurred since the date of such balance sheet in the Ordinary
Course of Business, (B) are incurred in connection with the
transactions contemplated by this Agreement, or (C) would
not, individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect.
(d)
Internal Controls
.
(i) The Company and its Subsidiaries have established and
maintained a system of internal control over financial reporting
(as defined in
Rule 13a-15
under the Exchange Act). Such internal controls provide
reasonable assurance regarding the reliability of the
Companys financial reporting and the preparation of
Company financial statements for external purposes in accordance
with GAAP. Since July 1, 2009, the Companys principal
executive officer and its principal financial officer have
disclosed to the Companys auditors and the audit committee
of the Company Board (i) all known significant deficiencies
and material weaknesses in the design or operation of internal
controls over financial reporting that are reasonably likely to
adversely affect in any material respects the Companys
ability to record, process, summarize and report financial
information, and (ii) any known fraud, whether or not
material, that involves management or other employees who have a
significant role in the Companys internal controls and the
Company has provided to Parent copies of any material written
materials relating to each of the foregoing. The Company has
made
15
available to Parent all such disclosures made by management to
the Companys auditors and audit committee from
July 1, 2009 to the date of this Agreement.
(ii) The Company has established and maintains disclosure
controls and procedures (as such term is defined in
Rule 13a-15
under the Exchange Act); such disclosure controls and procedures
are designed to ensure that material information relating to the
Company required to be included in reports filed under the
Exchange Act, including its consolidated Subsidiaries, is made
known to the Companys principal executive officer and its
principal financial officer, and such disclosure controls and
procedures are effective in timely alerting the Companys
principal executive officer and its principal financial officer
to material information required to be disclosed by the Company
in the reports that it files or submits to the SEC under the
Exchange Act is recorded, processed, summarized and reported
within the time periods specified in the rules and forms of the
SEC.
(iii) Since May 17, 2006, neither the Company nor any
of its Subsidiaries has made any prohibited loans to any
executive officer of the Company (as defined in
Rule 3b-7
under the Exchange Act) or director of the Company. There are no
outstanding loans or other extensions of credit made by the
Company or any of its Subsidiaries to any executive officer (as
defined in
Rule 3b-7
under the Exchange Act) or director of the Company.
(e) Neither the Company nor any of its Subsidiaries has or
is subject to any Off-Balance Sheet Arrangement (as
defined in Item 303(a)(4)(ii) of
Regulation S-K
promulgated under the Securities Act).
Section
4.07
Absence
of Certain Changes or Events
.
Between
July 1, 2010 and the date of this Agreement, (i) there
has not been any change, effect, event or occurrence that has
had or would reasonably be expected to have a Material Adverse
Effect, and (ii) the Company and its Subsidiaries have
conducted their businesses only in the Ordinary Course of
Business, and, except as set forth in
Section 4.07
of the Company Disclosure Letter, there has not been:
(a) any declaration, setting aside or payment of any
dividend on, or making of any other distribution (whether in
cash, stock or property) in respect of, any capital stock of the
Company, other than the declaration by the Company on
August 19, 2010 of a quarterly cash dividend of $0.0625 per
share of Company Common Stock (the
First Quarter
Dividend
);
(b) any split, combination or reclassification of any
capital stock of the Company or any issuance or the
authorization of any issuance of any other securities in lieu of
or in substitution for shares of capital stock of the Company;
(c) any repurchase, redemption or other acquisition by the
Company or any of its Subsidiaries of any shares of capital
stock of the Company or any of its Subsidiaries or any options,
warrants, rights, convertible or exchangeable securities,
stock-based performance units or other rights to acquire such
shares or other rights that give the holder thereof any economic
interest of a nature accruing to the holders of such shares,
other than (i) the acquisition by the Company of shares of
Company Common Stock in connection with the surrender of shares
of Company Common Stock by holders of Company Stock Options in
order to pay the exercise price thereof, (ii) the
withholding of shares of Company Common Stock to satisfy tax
obligations with respect to awards granted pursuant to the
Company Stock Plans, (iii) the acquisition by the Company
of Company Stock Options, Company RSUs, Company PSUs and Company
DSUs in connection with the forfeiture of such awards, and
(iv) the acquisition by the trustee of the Company 401(k)
Plan of shares of Company Common Stock in order to satisfy
participant investment elections under the Company 401(k) Plan;
(d) except (i) as reasonably required by applicable
Law, (ii) in the Ordinary Course of Business or
(ii) as required pursuant to the terms of any Company
Benefit Plan or Company Benefit Agreement or other written
agreement, in the Company Disclosure Letter, in each case in
effect as of June 30, 2010, (A) any granting to any
director or member of the Company Executive Team any increase in
compensation, (B) any granting to any director or member of
the Company Executive Team any increase in severance or
termination pay, (C) any entry by the Company into any
employment, consulting, severance, retention or termination
agreement with any (x) director or member of the Company
Executive Team or
16
(y) other employee pursuant to which the total annual
compensation or the aggregate severance benefits under such
agreement, solely in the case of clause (y), in excess of
$2,000,000, (D) any establishing, adopting, entry into or
amending in any material respect any material collective
bargaining agreement or material Company Benefit Plan or
material Company Benefit Agreement, or (E) any acting to
accelerate any rights or benefits under any Company Benefit Plan
or Company Benefit Agreement;
(e) any change in accounting methods, principles or
practices by the Company or any of its Subsidiaries materially
affecting the consolidated assets, liabilities or results of
operations of the Company, except as required (i) by GAAP
(or any interpretation thereof), including pursuant to
standards, guidelines and interpretations of the Financial
Accounting Standards Board or any similar organization, or
(ii) by Law, including
Regulation S-X
under the Securities Act; or
(f) any material tax election, any change of annual
accounting period, any entering into of a material closing
agreement or any settlement of a material claim or
assessment by the Company or any of its Subsidiaries, in each
case, other than in the Ordinary Course of Business.
Section
4.08
Litigation
.
There
is no suit, claim (or counterclaim), litigation, action, charge,
complaint, arbitration, mediation, grievance or other proceeding
brought, conducted or heard by or before any court or other
Governmental Authority, arbitrator or mediator or arbitration or
mediation panel (each, a
Litigation
) pending
or, to the Knowledge of the Company, threatened in writing
against the Company or any of its Subsidiaries that,
individually or in the aggregate, would reasonably be expected
to have a Material Adverse Effect. There is no Judgment
outstanding against the Company or any of its Subsidiaries that,
individually or in the aggregate, would reasonably be expected
to have a Material Adverse Effect. This
Section 4.08
does not relate to tax matters, which are the subject of
Section 4.14
, or environmental matters, which are
the subject of
Section 4.17
.
Section
4.09
Contracts
.
(a) Except for this Agreement and for Contracts filed as an
exhibits to the Filed SEC Documents,
Section 4.09
of
the Company Disclosure Letter sets forth a true and complete
list of, as of the date of this Agreement:
(i) each Contract that would be required to be filed by the
Company as a material contract pursuant to
Item 601(b)(10) of
Regulation S-K
under the Securities Act;
(ii) each loan and credit agreement, note, debenture, bond,
indenture and other similar Contract pursuant to which any
Indebtedness of the Company or any of its Subsidiaries, in each
case in excess of $10,000,000, is outstanding or may be
incurred, other than any such Contract between or among any of
the Company and any of its Subsidiaries and any letters of
credit;
(iii) each Contract to which the Company or any of its
Subsidiaries is a party that by its terms calls for aggregate
payments by the Company or any of its Subsidiaries of more than
$10,000,000 over the remaining term of such Contract, except for
any such Contract entered into in the Ordinary Course of
Business or that may be canceled, without any material penalty
or other material liability to the Company or any of its
Subsidiaries, upon notice of 90 days or less;
(iv) each Contract to which the Company or any of its
Subsidiaries is a party entered into since July 1, 2009,
for the acquisition or disposition by the Company or any of its
Subsidiaries of properties or assets for, in each case,
aggregate consideration of more than $10,000,000, except for
acquisitions and dispositions of properties and assets in the
Ordinary Course of Business (including acquisitions of supplies
and acquisitions and dispositions of inventory and equipment
that is no longer used or useful in the operations of the
Company or any of its Subsidiaries);
(v) each Contract that restricts the ability of the Company
or any of its Subsidiaries to compete, in any material respects,
with any business or in any geographical area or to solicit
customers, in any material respects, except for use or radius
restrictions that may be contained in Contracts entered into in
the Ordinary Course of Business;
17
(vi) each Contract that is a material settlement,
conciliation or similar agreement (A) that is with any
Governmental Authority, (B) pursuant to which the Company
or any of its Subsidiaries is obligated after the execution date
of this Agreement to pay consideration in excess of $10,000,000,
or (C) that would otherwise materially limit the operation
of the Company or any of its Subsidiaries (or, to the Knowledge
of the Company, Parent or any of its other Affiliates from and
after the Merger Closing) as currently operated;
(vii) each Contract to which the Company or any of its
Subsidiaries is a party primarily involving the development or
licensing of any Intellectual Property (except for licenses of
commercially available software) that is material to the conduct
of the business of the Company and its Subsidiaries, taken as a
whole, as presently conducted;
(viii) each Contract that grants to any person any right or
first offer or right of first refusal to purchase, lease,
sublease, use, possess or occupy all or a substantial part of
the material assets of the Company or any of its Subsidiaries,
taken as a whole; and
(ix) each Contract that relates to a partnership, joint
venture or similar arrangement.
Each Contract set forth on
Section 4.09
of the
Company Disclosure Letter or required to be set forth thereon
(but subject to the last sentence of
Section 4.09(b)
) is referred to herein as a
Specified Contract
.
(b) As of the date of this Agreement, the Company has made
available to Parent true and complete copies of each Specified
Contract. Each of the Specified Contracts is valid and binding
on the Company or the Subsidiary of the Company party thereto
and, to the Knowledge of the Company, each other party thereto,
and is in full force and effect, except for such failures to be
valid and binding or to be in full force and effect that would
not, individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect. There is no default under any
Specified Contract by the Company or any of its Subsidiaries or,
to the Knowledge of the Company, by any other party thereto, and
no event has occurred that with the lapse of time or the giving
of notice or both would constitute a default thereunder by the
Company or any of its Subsidiaries or, to the Knowledge of the
Company, by any other party thereto, in each case except as
would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect. This
Section 4.09
does not relate to real property
leases, which are the subject of
Section 4.15
, or
agreements entered into with franchisees, which are the subject
of
Section 4.19
, or Company Benefit Plans and
Company Benefit Agreements, which are the subject of
Section 4.13
.
Section 4.10
[Reserved]
.
Section 4.11
Compliance
with Laws
.
(a) Each of the Company and its Subsidiaries is in
compliance with all Laws applicable to its business or
operations (including Franchise Laws and Relationship Laws), in
each case except for instances of noncompliance that would not,
individually or in the aggregate, reasonably be expected to have
a Material Adverse Effect. Each of the Company and its
Subsidiaries has in effect all approvals, authorizations,
registrations, licenses, exemptions, permits and consents of
Governmental Authorities (collectively,
Authorizations
) necessary for it to conduct
its business as presently conducted, except for such
Authorizations the absence of which would not, individually or
in the aggregate, have a Material Adverse Effect. This
Section 4.11
does not relate to the SEC Documents,
financial statements or disclosure controls and procedures,
which are the subject of
Section 4.06
, employee
benefit matters, which are the subject of
Section 4.13
, taxes, which are the subject of
Section 4.14
, or environmental matters, which are
the subject of
Section 4.17
. To the Knowledge of the
Company, neither the Company nor any of its Subsidiaries has
received notice that any Authorizations will be terminated or
modified or cannot be renewed in the Ordinary Course of
Business, and the Company has no Knowledge of any reasonable
basis for any such termination, modification or nonrenewal,
except as would not, individually or in the aggregate, have a
Material Adverse Effect.
(b) The term
Franchise Laws
means the
FTC Rule and any other Law regulating the offer or sale of
franchises, including any pre-sale registration or disclosure
Law. The term
FTC Rule
means the Federal
Trade Commission trade regulation rule entitled Disclosure
Requirements and Prohibitions Concerning
18
Franchising, 16 CFR Part 436. The term
Relationship Laws
means any franchise
termination, non-renewal, unfair practices or Relationship Laws,
including the requirements of such Laws with respect to the
notice of default, time to cure and the actual termination of
any franchisee or business opportunity operator.
Section
4.12
Labor
and Employment Matters
.
Neither the Company
nor any of its Subsidiaries is a party to any collective
bargaining agreement or other Contract with any labor
organization, union or association and there are not, to the
Knowledge of the Company, any union organizing activities
concerning any employees of the Company or any of its
Subsidiaries, that, individually or in the aggregate, would
reasonably be expected to have a Material Adverse Effect. As of
the date of this Agreement, there are no strikes, slowdowns,
work stoppages, lockouts, or other material labor disputes
pending or, to the Knowledge of the Company, threatened, against
the Company or any of its Subsidiaries. Except as contemplated
by this Agreement, to the Knowledge of the Company, no director,
member of the Company Executive Team other than the Transition
Executives (as such term is defined in
Section 7.05(d)
of the Company Disclosure Letter),
other key employee or group of employees has any present
intention to terminate his, her, or their employment with the
Company or any of its Subsidiaries (that, individually or in the
aggregate, would reasonably be expected to have a Material
Adverse Effect).
Section
4.13
Employee
Benefit Matters
.
(a)
Section 4.13(a)
of the Company Disclosure
Letter contains a true and complete list, as of the date of this
Agreement, of each material Company Benefit Plan and material
Company Benefit Agreement. Each Company Benefit Plan has been
administered in compliance with its terms and with applicable
Law (including the Employee Retirement Income Security Act of
1974, as amended (
ERISA
), and the Code),
other than instances of noncompliance that, individually or in
the aggregate, would not have a Material Adverse Effect.
(b) The Company has made available to Parent true and
complete copies of (to the extent applicable) (A) each
material Company Benefit Plan and each material Company Benefit
Agreement (or, in either case, with respect to any unwritten
material Company Benefit Plan or material Company Benefit
Agreement, a written description thereof), other than any
Company Benefit Plan or Company Benefit Agreement that the
Company or any of its Subsidiaries is prohibited from making
available to Parent as the result of applicable Law relating to
the safeguarding of data privacy, (B) the two most recent
annual report on Form 5500 filed with the Internal Revenue
Service or similar report required to be filed with any
Governmental Authority, in each case with respect to each
material Company Benefit Plan (if any such report was required
by applicable Law), (C) each trust agreement and group
annuity contract or other material contract relating to any
material Company Benefit Plan, (D) the most recent
actuarial reports (if applicable) for each Company Benefit Plan
and (E) the most recent summary plan description, if any,
required under ERISA with respect to each material Company
Benefit Plan and material Company Benefit Agreement.
(c) Each Company Benefit Plan intended to be
qualified (or registered) within the meaning of
Section 401(a) of the Code (or any comparable provision
under applicable
non-U.S. laws)
has received a favorable determination or opinion letter as to
such qualification or registration from the Internal Revenue
Service (or any comparable Governmental Authority), and no event
has occurred, either by reason of any action or failure to act,
that could reasonably be expected to cause the loss of any such
qualification, registration or tax-exempt status or the
imposition of any material penalty or tax liability, except
where such loss of qualification, registration or tax-exempt
status or the imposition of any material penalty or tax
liability, individually or in the aggregate, would not have a
Material Adverse Effect.
(d)
Section 4.13(d)
of the Company Disclosure
Letter sets forth, as of the date of this Agreement, each
material Company Benefit Plan that provides health or welfare
benefits (whether or not insured) with respect to employees or
former employees (or any of their beneficiaries) of the Company
or any of its Subsidiaries after retirement or other termination
of service (other than coverage or benefits (A) required to
be provided under Part 6 of Title I of ERISA, or any
other applicable Law, or (B) the full cost of which is
borne by the employee or former employee (or any of their
beneficiaries)). Each such U.S. plan is amendable and
terminable unilaterally by the Company at any time without
material liability or expense to the Company and its
Subsidiaries, taken as a whole, as a result thereof other than
claims incurred prior to the date of such amendment, and no such
plan, plan documentation or agreement, summary plan description
or other written
19
communication distributed generally to employees by its terms
prohibits the Company from amending or terminating any such
Company Benefit Plan.
(e) Except as would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect, during
the immediately preceding six (6) years, no liability under
Title IV or Section 302 of ERISA has been incurred by
the Company or any trade or business, whether or not
incorporated, that together with the Company would be deemed a
single employer within the meaning of
Section 4001(b) of ERISA (
ERISA
Affiliate
) that has not been satisfied in full, and no
condition exists that presents a risk to the Company or any
ERISA Affiliate of incurring any such liability, other than
liability for premiums due the Pension Benefit Guaranty
Corporation (
PBGC
) (which premiums have been
paid when due). Except as would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse
Effect, the PBGC has not instituted proceedings pursuant to
Section 4042 of ERISA to terminate any Company Benefit Plan
subject to Title IV of ERISA (each, a
Title IV Plan
) and, to the Knowledge of
the Company, no condition exists that presents a risk that such
proceedings will be instituted by the PBGC.
(f) The Compensation Committee of the Company Board (each
member of which the Company Board has determined is an
independent director as defined in Rule 303A.02
of the New York Stock Exchange Listed Company Manual and is an
independent director in accordance with the
requirements of
Rule 14d-10(d)(2)
under the Exchange Act) (the
Compensation
Committee
) has taken all such steps as may be required
to cause to be exempt under
Rule 14d-10(d)
under the Exchange Act any employment compensation, severance or
employee benefit arrangements that have been entered into on or
before the date of this Agreement by the Company or its
Subsidiaries with current or future directors, officers or
employees of the Company or its Subsidiaries and to ensure that
any such arrangements fall within the safe harbor provisions of
such rule.
(g) Except as would not, individually or in the aggregate,
have a Material Adverse Effect, with respect to any Company
Benefit Plan to which the Company, any Company Subsidiary or any
ERISA Affiliate make, or was required to make, contributions
during the past six (6) years: (i) there does not now
exist, nor do any circumstances exist on the date hereof that
could reasonably be expected to result in any material
accumulated funding deficiency within the meaning of
Section 412 of the Code or Section 302 of ERISA,
whether or not waived, or any liability under Section 4971
of the Code; (ii) the fair market value of the assets of
any such plan equals or exceeds the actuarial present value of
all accrued benefits under such plan (whether or not vested,
each as determined under the assumptions and valuation method of
the latest actuarial valuation of such plan); (iii) no
reportable event within the meaning of Section 4043(c) of
ERISA for which the 30 days notice requirement has not been
waived has occurred, and the consummation of the Merger will not
result in the occurrence of any such reportable event; an
(iv) no material liability or contingent liability
(including liability pursuant to Section 4069 of ERISA)
under Title IV of ERISA has been or is reasonably expected
to be incurred by the Company, any Company Subsidiary or any
ERISA Affiliate.
(h) None of the Company, its Subsidiaries or any ERISA
Affiliates or any of their respective predecessors has within
the last six (6) years contributed to, contributes to, has
ever been required to contribute to, or otherwise participated
in or participates in any way, directly or indirectly, has any
liability with respect to any multiemployer plan
(within the meaning of Sections 3(37) or 4001(a)(3) of
ERISA or Section 414(f) of the Code).
(i) Except as would not reasonably be expected to have a
Material Adverse Effect, (i) no proceeding has been
threatened, asserted, instituted or, to the Knowledge of the
Company, is anticipated against any of the Company Benefit Plans
or Company Benefit Agreement (other than non-material routine
claims for benefits and appeals of such claims), any trustee or
fiduciary thereof, or any of the assets of any trust of any of
the Company Benefit Plans, (ii) no non-exempt
prohibited transaction (within the meaning of
Section 4975 of the Code and Section 406 of ERISA) has
occurred or is reasonably expected to occur with respect to the
Company Benefit Plans, and (iii) no Company Benefit Plan is
under, and neither the Company nor any of its Subsidiaries has
received any notice of, an audit or investigation by the
Internal Revenue Service, Department of Labor or, to the
Knowledge of the Company, any other Governmental Authority, and
no such completed audit, if any, has resulted in the imposition
of any tax or penalty.
20
(j) The consummation of the Offer or the Merger alone, or
in combination with a termination of any employee, officer or
director of the Company or any of its Subsidiaries (whether
current, former or retired) or their beneficiaries, will not
give rise to any material liability under any material Company
Benefit Plan or material Company Benefit Agreement, including
liability for severance pay, unemployment compensation,
termination pay or withdrawal liability, or accelerate the time
of payment or vesting or increase the amount of compensation or
benefits due to any employee, officer or director of the Company
or any of its Subsidiaries (whether current, former or retired)
or their beneficiaries. Except as would not have a Material
Adverse Effect, no amount that could be received (whether in
cash or property or the vesting of property) as a result of the
consummation of the Merger by any employee, officer or director
of the Company or any of its Subsidiaries under any Company
Benefit Plan or Company Benefit Agreement, or otherwise, would
not be deductible by reason of Section 280G of the Code or
would be subject to an excise tax under Section 4999 of the
Code. Neither the Company nor any of its Subsidiaries has any
indemnity obligation on or after the Effective Time for any
taxes imposed under Section 4999 or 409A of the Code.
(k) None of the Company or any of its Subsidiaries has made
any promises or commitments to create any additional material
Company Benefit Plan or material Company Benefit Agreement or to
modify or change in any material way any existing material
Company Benefit Plan or material Company Benefit Agreement other
than those amendments or modifications required by Law.
(l) Except as would not have a Material Adverse Effect
(i) any individual who performs services for the Company or
any Company Subsidiary and who is not treated as an employee for
federal income tax purposes by the Company or any Company
Subsidiary is not an employee under applicable Law and is not an
employee for any purpose (including tax withholding purposes or
Company Benefit Plan purposes) and (ii) neither the Company
nor any of its Subsidiaries has any liability by reason of an
individual who performs or performed services for the Company or
any of its Subsidiaries in any capacity being improperly
excluded from participating in a Company Benefit Plan. Each
employee of the Company and its Subsidiaries has been properly
classified as exempt or non-exempt under
applicable Law.
(m) Except as would not have a Material Adverse Effect,
each Company Benefit Plan that is mandated by a Governmental
Authority other than a Governmental Authority of the United
States or subject to the Laws of a jurisdiction outside of the
United States (each, a
Foreign Company Plan
),
the fair market value of the assets of each funded Foreign
Company Plan, the liability of each insurer for any Foreign
Company Plan funded through insurance or the book reserve
established for any Foreign Company Plan, together with any
accrued contributions, is sufficient to procure or provide for
the accrued benefit obligations, as of the date of this
Agreement, with respect to all current and former participants
in such Foreign Company Plan according to the actuarial
assumptions and valuations most recently used to determine
employer contributions to such Foreign Company Plan, and no
transaction contemplated by this Agreement shall cause such
assets or insurance obligations to be less than such benefit
obligations. Each Foreign Company Plan has been maintained and
operated in all material respects in accordance with the
applicable plan document and all applicable Laws and other
requirements, and if intended to qualify for special tax
treatment, satisfies all requirements for such treatment.
(n) The term
Company Benefit Agreement
means each employment, consulting, indemnification, change in
control, severance or termination agreement or arrangement
between the Company or any of its Subsidiaries, on the one hand,
and any current or former employee, officer or director of the
Company or any of its Subsidiaries, on the other hand (but
excluding any Company Benefit Plans) pursuant to which the
Company or any of its Subsidiaries has any continuing
obligations as of the date of this Agreement, other than any
agreement or arrangement mandated by applicable Law. The term
Company Benefit Plan
means each bonus,
pension, profit sharing, deferred compensation, incentive
compensation, stock ownership, stock purchase, stock option,
phantom stock or other equity-based compensation, retirement,
vacation, severance, disability, death benefit, hospitalization,
medical or other employee benefits plan, policy, program,
arrangement or understanding, (but excluding any Company Benefit
Agreement), in each case sponsored, maintained or contributed
to, or required to be sponsored, maintained or contributed to,
by the Company or any of its Subsidiaries as of the date of this
Agreement, in each case for the benefit of any current or former
employee, officer or director of the Company or any of its
Subsidiaries, other than (A) any multiemployer
plan (within
21
the meaning of Section 3(37) of ERISA) or (B) any
plan, policy, program, arrangement or understanding mandated by
applicable Law.
Section
4.14
Taxes
.
(a) Each of the Company and its Subsidiaries has timely
filed or has caused to be timely filed all U.S. federal
income tax and other material tax returns required to be filed
by it (taking into account any validly obtained extension of
time within which to file), and all such tax returns are true,
complete and accurate in all material respects. Each of the
Company and its Subsidiaries has either paid or caused to be
paid all material taxes due and owing by the Company and its
Subsidiaries, other than taxes that are being contested in good
faith through appropriate proceedings or for which the most
recent financial statements contained in the Filed SEC Documents
reflect an adequate reserve in accordance with GAAP (excluding
any reserves for deferred taxes).
(b) No deficiencies for any material taxes (other than
taxes that are not yet due and payable or that are being
contested in good faith) have been proposed, asserted, assessed
or to the Knowledge of the Company, threatened in writing
against the Company or any of its Subsidiaries which have not
been settled and paid. All assessments for material taxes due
and owing by the Company or any of its Subsidiaries with respect
to completed and settled examinations or concluded litigation
have been paid. There is no currently effective agreement or
other document with respect to the Company or any of its
Subsidiaries extending the period of assessment or collection of
any material taxes. The U.S. consolidated federal income
tax returns of the Company through the tax year ending
June 30, 2006 have been examined and closed by the Internal
Revenue Service. There are no material Liens for taxes on any of
the assets of the Company or any of its Subsidiaries other than
statutory Liens for taxes not yet due and payable. None of the
Company or any of its Subsidiaries has been a controlled
corporation or a distributing corporation in
any distribution that was purported or intended to be governed
by Section 355 of the Code (or any similar provision of
state, local or foreign Law) occurring during the two-year
period ending on the date hereof. Neither the Company nor any of
its Subsidiaries has engaged in any listed
transaction within the meaning of Section 6011 of the
Code and the Treasury regulations promulgated thereunder.
(c) The term
taxes
means all
(i) income, profits, capital gains, goods and services,
branch, payroll, unemployment, windfall profits, franchise,
gross receipts, capital, net worth, sales, use, withholding,
value added, ad valorem, registration, employment, social
security, disability, occupation, real property, personal
property (tangible and intangible), stamp, transfer (including
real property transfer or gains), conveyance, severance,
production, excise, duties, levies, imposts, license,
registration and other taxes (including all penalties and
additions to any such taxes and interest thereon) imposed by any
Governmental Authority, whether dispute or not,
(ii) liability for the payment of any amount imposed on any
person of the type described in clause (i) as a result of
being or having been before the Effective Time a member of an
affiliated, consolidated, combined or unitary group and
(iii) liability for the payment of any amount imposed on
any person of a type described in clause (i) or
clause (ii) as a transferor or successor or a result of any
existing express or implied indemnification agreement or
arrangement. The term
tax return
means any
return, statement, report, form, or filing, including in each
case any amendments, schedules or attachments thereto, required
to be filed with any Governmental Authority.
(d) Except as provided in
Section 4.06(c)
,
Section 4.07(f)
and
Section 4.13
, this
Section 4.14
represents the sole and exclusive
representations and warranties of the Company regarding tax
matters of the Company and its Subsidiaries.
Section
4.15
Real
Property
.
(a)
Section 4.15(a)
of the Company Disclosure
Letter sets forth, as of the date of this Agreement, a true and
complete list of all real property, other than real property
relating to a restaurant, owned by the Company and its
Subsidiaries (individually, an
Owned Real
Property
). Except as would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse
Effect on the Company, the Company or a Subsidiary of the
Company has good and valid fee title to each Owned Real
Property, and all real property
22
owned by the Company and its Subsidiaries relating to a
restaurant, in each case free and clear of all Liens and defects
in title, except for Permitted Liens.
(b)
Section 4.15(b)
of the Company Disclosure
Letter sets forth, as of the date of this Agreement, a true and
complete list of all leases of real property (the
Specified Real Property Leases
) under which
the Company or any of its Subsidiaries is a tenant or a
subtenant, other than (x) leases of real property relating
to a restaurant and (y) leases that do not provide for
annual rent in excess of $150,000 (individually, a
Specified Leased Real Property
). Except as
would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect on the Company, the
Company or a Subsidiary of the Company has a good and valid
title to a leasehold estate in each Specified Leased Real
Property, and all leases of real property relating to a
restaurant, all Specified Real Property Leases, each Specified
Real Property Sublease and leases of real property relating to a
restaurant are in full force and effect, and neither the Company
nor any of its Subsidiaries that is party to such leases has
received or given any written notice of any material default
thereunder which default continues on the date of this Agreement.
(c)
Section 4.15(c)
of the Company Disclosure
Letter sets forth, as of the date of this Agreement, a true and
complete list of all leases, subleases or similar agreements
under which the Company or any of its Subsidiaries is the
landlord or the sublandlord, other than (x) leases,
subleases and similar arrangements with respect to real property
relating to a restaurant and (y) leases, subleases and
similar arrangements that do not provide for annual rent in
excess of $150,000 (such leases, subleases and similar
agreements, collectively, the
Specified Real Property
Subleases
).
Section
4.16
Intellectual
Property
.
(a)
Section 4.16(a)
of the Company Disclosure
Letter sets forth a true and complete (in all material respects)
list, as of the date of this Agreement, of all issued or
registered Intellectual Property (including Internet domain
names) or applications for issuance or registration of any
Intellectual Property owned by the Company or its Subsidiaries
(indicating for each, as applicable, the owner(s), jurisdiction
and patent, registration number and date). Except as would not,
individually or in the aggregate, reasonably be expected to have
a Material Adverse Effect, the Company or one of its
Subsidiaries is the sole and exclusive owner of all right, title
and interest in and to, or has the valid and enforceable right
to use all Intellectual Property used in or necessary for the
conduct of the business of the Company or any of its
Subsidiaries as currently conducted (collectively, the
Company Intellectual Property
) and free and
clear of any Liens, except Permitted Liens. All registrations
owned by the Company or any of its Subsidiaries and set forth in
Section 4.16(a)
of the Company Disclosure Letter for
the trademarks and service marks BURGER KING and WHOPPER in the
United States, Canada, Mexico, the United Kingdom, and Germany,
for and to the extent such registrations cover any of the core
products and or services of the Company and any of its
Subsidiaries, are valid, subsisting, and enforceable and in full
force and effect and no loss of such registrations is reasonably
foreseeable. Except as would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse
Effect, the transactions contemplated by this Agreement shall
not impair the right, title, or interest of the Company or any
its Subsidiaries in or to any Company Intellectual Property, and
all of the Company Intellectual Property shall be owned or
available for use by the Company and its Subsidiaries on terms
and conditions identical to those under which the Company and
its Subsidiaries used the Company Intellectual Property
immediately prior to the Merger Closing Date.
(b) Except as would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect, no
claims or other suits, actions or proceedings are pending or, to
the Knowledge of the Company, threatened against the Company or
any of its Subsidiaries that the Company or any of its
Subsidiaries has infringed, misappropriated, diluted or
otherwise violated any Intellectual Property rights of any other
person, or that contest the validity, use, ownership or
enforceability of any of the Company Intellectual Property.
Except as would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect,
neither the Company nor any of its Subsidiaries use of any
Company Intellectual Property, nor the operation of the
Companys or any of its Subsidiaries respective
businesses, infringes, misappropriates, dilutes or otherwise
violates any Intellectual Property of any other person. As of
the date of this Agreement, no person is infringing,
misappropriating, diluting or otherwise conflicted with the
rights of
23
the Company or any of its Subsidiaries with respect to any
Company Intellectual Property, except as would not, individually
or in the aggregate, reasonably be expected to have a Material
Adverse Effect. The Company Intellectual Property owned by the
Company or its Subsidiaries is not subject to any outstanding
consent, settlement, lien, decree, order, injunction, judgment
or ruling restricting the use thereof in a manner that would
reasonably be expected to materially impair the continued
operation of the Company and its Subsidiaries businesses, as
currently conducted.
(c) The Company and its Subsidiaries have taken
commercially reasonable steps to maintain and protect the
secrecy and confidentiality of its trade secrets and other
material confidential information.
(d) Each of the Company and its Subsidiaries is, and has
been to the extent required by Law, in compliance with its
posted privacy policies and all other related notices, policies
and programs and all applicable data protection, privacy and
other applicable Laws regarding the collection, use, storage,
distribution, transfer, import, export, disposal or disclosure
(in any form or medium) of any personally identifiable
information, except as would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse
Effect.
(e) The term
Intellectual Property
means
all intellectual property and other similar proprietary rights
in any jurisdiction, including such rights in and to:
(i) any patent (including all reissues, divisions,
continuations,
continuations-in-part
and extensions thereof), patent application, patent disclosure
or other patent right, (ii) any trademark, service mark,
trade name, business name, brand name, slogan, logo, trade dress
and all other indicia of origin together with all goodwill
associated therewith, and all registrations, applications for
registration, and renewals for any of the foregoing, and
(iii) any copyright, work of authorship (whether or not
copyrightable), design, design registration, database rights,
and all registrations, applications for registration, and
renewals for any of the foregoing (and including in all website
content and software), (iv) any Internet domain names, and
(vi) any trade secrets.
Section
4.17
Environmental
Matters
.
(a) Except for those matters that would not, individually
or in the aggregate, reasonably be expected to have a Material
Adverse Effect, (A) each of the Company and its
Subsidiaries is, and has for the past five years been, in
compliance with all applicable Environmental Laws, and neither
the Company nor any of its Subsidiaries has received any written
communication alleging that the Company is in violation of, or
has any liability under, any Environmental Law, (B) each of
the Company and its Subsidiaries possesses and is in compliance
with all Authorizations required under applicable Environmental
Laws to conduct its business as presently conducted,
(C) there are no Environmental Claims pending or, to the
Knowledge of the Company, threatened against the Company or any
of its Subsidiaries, and (D) none of the Company or any of
its Subsidiaries has Released or exposed any person to, any
Hazardous Materials, and no Hazardous Materials have been
Released at, on, under or from any of the Owned Real Property or
the Specified Leased Real Property, in a manner that would
reasonably be expected to result in an Environmental Claim
against the Company or any of its Subsidiaries.
(b) The term
Environmental Claims
means
any administrative or judicial actions, suits, orders, claims,
proceedings or written notices of noncompliance by or from any
Governmental Authority or any other person alleging liability
arising out of the Release of any Hazardous Material or the
failure to comply with any Environmental Law or any
Authorization issued thereunder. The term
Environmental
Law
means any Law relating to pollution or protection
of the environment or natural resources or human exposure to
Hazardous Materials. The term
Hazardous
Materials
means any materials or wastes that are
listed or defined in relevant form, quantity, concentration or
condition as hazardous substances, hazardous wastes, hazardous
materials, extremely hazardous substances, toxic substances,
pollutants, contaminants or terms of similar import under any
applicable Environmental Law. The term
Release
means any release, spill, emission,
leaking, pumping, emitting, discharging, injecting, escaping,
leaching, dumping, disposing or migrating into or through the
environment.
Section
4.18
Insurance
.
Except
as would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect, (a) the Company
and its Subsidiaries maintain insurance in such amounts
24
and against such risks as is sufficient to comply with
applicable Law, (b) all insurance policies of the Company
and its Subsidiaries are in full force and effect, except for
any expiration thereof in accordance with the terms thereof,
(c) neither the Company nor any of its Subsidiaries is in
breach of, or default under, any such insurance policy, and
(d) no written notice of cancellation or termination has
been received with respect to any such insurance policy, other
than in connection with ordinary renewals.
Section
4.19
Franchise
Matters
.
(a)
Section 4.19(a)(i)
of the Company
Disclosure Letter sets forth a true and complete list of all
(i) development agreements in which the Company or any of
its Subsidiaries has granted exclusive rights to develop or
operate or license others to develop or operate within one or
more countries, states, provinces or other significant
geographic areas and (ii) master franchise agreements
(collectively, the
Specified Agreements
), in
each case to which the Company or any of its Subsidiaries is a
party or by which the Company or any of its Subsidiaries or its
or their properties is bound (other than any such agreements
between a person and its Subsidiaries or among its Subsidiaries)
and that grant or purport to grant to any person the right to
develop or operate or license others to develop or operate
within one or more countries, states, provinces or other
significant geographic areas any of the following (each, a
Franchise
): Burger King
restaurants, Whopper Bar restaurants or Hungry
Jacks restaurants (each, a
Franchised
Restaurant
).
Section 4.19(a)(ii)
of the
Company Disclosure Letter sets forth a true and complete list of
the top twenty-five Franchisees based upon the total royalties
paid by each such Franchisee to the Company or its Subsidiaries
during the fiscal year 2010.
(b) Each of the Specified Agreements is valid and binding
on the Company or the Subsidiary of the Company party thereto
and, to the Knowledge of the Company, each other party thereto,
is in full force and effect, except for such failures to be
valid and binding or to be in full force and effect that would
not, individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect. There is no default under any
Specified Agreement by the Company or any of its Subsidiaries
or, to the Knowledge of the Company, by any other party thereto,
and no event has occurred that with the lapse of time or the
giving of notice or both would constitute a default thereunder
by the Company or any of its Subsidiaries or, to the Knowledge
of the Company, by any other party thereto, in each case except
as would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect. The execution and
delivery by the Company of this Agreement do not, and the
consummation of the Offer, the Merger and the other transactions
contemplated by this Agreement and compliance with the
provisions of this Agreement will not, conflict with, or result
in any violation of, or default (with or without notice or lapse
of time, or both) under, or give rise to a right of termination,
cancellation or acceleration of any obligation or to the loss of
a benefit under, or result in the creation of any Lien upon any
of the properties or assets of the Company or any of its
Subsidiaries under (other than any such Lien created from any
action taken by Parent or Sub) or any right of rescission or
set-off under, any provision of any Specified Agreement other
than any such conflicts, violations, defaults, rights, losses or
Liens that would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect.
(c)
Section 4.19(c)
of the Company Disclosure
Letter sets forth a true and complete list of all FDDs that the
Company or any of its Subsidiaries have used to offer or sell
Franchises within the United States at any time since
January 1, 2009. The Company has made available to Parent
true and complete copies of each such FDD. Since January 1,
2009, the Company and its Subsidiaries have not, in any such FDD
or in any registration, application or filing with any
Governmental Authority under any United States federal or state
Franchise Law, made any untrue statement of a material fact or
omitted to state a material fact required to be stated therein
or necessary in order to make the statements made therein, in
light of the circumstances under which they were made, not
misleading.
(d) Neither the Company nor any of its Subsidiaries is
subject to any Judgment with respect to the offer or sale of
Franchises in any jurisdiction.
(e) To the Companys Knowledge, all funds administered
by or paid to the Company or any of its Subsidiaries by or on
behalf of one or more Franchises at any time since
January 1, 2007, including funds that Franchisees
contributed for advertising and promotion and rebates and other
payments made by suppliers and
25
other third parties on account of Franchisees purchases
from those suppliers and third parties, have been administered
and spent in accordance in all material respects with the
Franchise Agreements.
(f) Either the FDD or
Section 4.19
of the
Company Disclosure Letter contains a summary of all material
Franchise-related arbitrations, litigation, class proceedings,
material complaints or disputes, or other Litigations which are
pending or, to the Knowledge of the Company, threatened
(i) from any Franchisee or association purporting to
represent a group of Franchisees, or (ii) from any other
Franchisee except where such Litigation, either individually or
in the aggregate, would not reasonably be expected to have a
Material Adverse Effect.
(g) The term
FDD
means any franchise
disclosure document used by the Company or any of its
Subsidiaries in connection with the offer or sale of franchises
in the United States. The term
Franchisee
means a person other than the Company or any of its Subsidiaries
that is granted a right (whether directly by the Company or any
of its Subsidiaries or by another Franchisee) to develop or
operate, or is granted a right to license others to develop or
operate, a Franchised Restaurant within a specific geographic
area or at a specific location.
Section
4.20
Quality
and Safety of Food & Beverage
Products
.
Since January 1, 2008,
(a) there have been no recalls of any food or beverage
product of the Company or any Subsidiary, whether ordered by a
Governmental Authority or undertaken voluntarily by the Company
or a Subsidiary; and (b) to the Knowledge of the Company,
none of the food or beverage products of the Company or any
Subsidiary have been adulterated, misbranded, mispackaged, or
mislabeled in violation of applicable Law, or pose an
inappropriate threat to the health or safety of a consumer when
consumed in the intended manner, except as (a) and (b),
either individually or in the aggregate, would not reasonably be
expected to have a Material Adverse Effect.
Section
4.21
[Reserved]
.
Section 4.22
Affiliate
Transactions
.
There have not been during the
preceding three (3) years any transactions, Contracts,
agreements, arrangements or understandings or series of related
transactions, Contracts, agreements, arrangements or
understandings, nor are there any of the foregoing currently
proposed, that (if proposed but not having been consummated or
executed, if consummated or executed) would be required to be
disclosed under Item 404 of
Regulation S-K
promulgated under the Securities Act that have not been
disclosed in the Filed SEC Documents filed prior to the date
hereof.
Section
4.23
Certain
Business Practices
.
To the Knowledge of the
Company, neither the Company nor any of its Subsidiaries (nor
any of their respective officers, directors or employees)
(a) has made or agreed to make any contribution, payment,
gift or entertainment to, or accepted or received any
contributions, payments, gifts or entertainment from, any
government official, employee, political party or agent or any
candidate for any federal, state, local or foreign public
office, where either the contribution, payment or gift or the
purpose thereof was illegal under the laws of any federal,
state, local or foreign jurisdiction; or (b) has engaged in
or otherwise participated in, assisted or facilitated any
transaction that is prohibited by any applicable embargo or
related trade restriction imposed by the United States Office of
Foreign Assets Control or any other agency of the United States
government.
Section
4.24
Company
Swaps
.
Section 4.24
of the
Company Disclosure Letter contains a complete and correct list
of all interest rate swaps and currency exchange swaps
(
Company Swaps
) entered into by the Company
or any of its Subsidiaries as of the date of this Agreement. All
such Company Swaps were, and any Company Swaps entered into
after the date of this Agreement will be, entered into in
accordance with applicable Laws, and in accordance with the
investment, securities, commodities, risk management and other
policies, practices and procedures employed by the Company and
its Subsidiaries, and were, and will be, entered into with
counterparties believed at the time to be financially
responsible and able to bear the risks of such Company Swaps.
The Company and each of its Subsidiaries have, and will have,
duly performed in all material respects all of their respective
obligations under the Company Swaps to the extent that such
obligations to perform have accrued.
Section
4.25
Information
Supplied
.
None of the information supplied or
to be supplied by or on behalf of the Company for inclusion or
incorporation by reference in (i) the Offer Documents, the
Schedule 14D-9
or the Information Statement will, at the time such document is
filed with the SEC, at any time such document is
26
amended or supplemented or at the time such document is first
published, sent or given to the Companys stockholders,
contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the
circumstances under which they are made, not misleading, or
(ii) the Proxy Statement will, at the date it is first
mailed to the stockholders of the Company and at the time of the
Stockholders Meeting, contain any untrue statement of a
material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are
made, not misleading.
Section
4.26
Voting
Requirements
.
The affirmative vote of holders
of a majority of all the outstanding shares of Company Common
Stock entitled to vote thereon at the Stockholders Meeting
or any adjournment or postponement thereof to adopt this
Agreement (the
Stockholder Approval
), unless
Section 253 of the DGCL shall be applicable, is the only
vote of the holders of any class or series of capital stock of
the Company necessary for the Company to adopt this Agreement
and approve the transactions contemplated hereby.
Section
4.27
State
Takeover Statutes
.
Assuming the accuracy of
the representations and warranties of Parent and Sub set forth
in
Section 5.11
, to the Knowledge of the Company, no
state takeover statute applies or purports to apply to the
Company with respect to this Agreement, the Offer, the Merger or
any of the other transactions contemplated by this Agreement.
Section
4.28
Brokers
and Other Advisors
.
No broker, investment
banker, financial advisor or other person, other than Morgan
Stanley & Co. Incorporated (
Morgan
Stanley
) and Goldman, Sachs & Co.
(
Goldman
), the fees and expenses of which
will be paid by the Company, is entitled to any brokers,
finders or financial advisors fee or commission in
connection with the Offer, the Merger and the transactions
contemplated by this Agreement based upon arrangements made by
or on behalf of the Company.
Section 4.28
of the
Company Disclosure Letter sets forth the maximum aggregate fees
(without including reimbursement for expenses) that may become
payable to Morgan Stanley and Goldman pursuant to any engagement
or fee letters between the Company and Morgan Stanley or Goldman
with respect to the transactions contemplated by this Agreement.
Section
4.29
Opinions
of Financial Advisors
.
The Company Board has
received the opinion of each of Morgan Stanley and Goldman
(together, the
Fairness Opinions
), in each
case, dated the date of this Agreement, to the effect that, as
of such date, the Offer Price to be received by the holders of
shares of Company Common Stock in the Offer and the Merger is
fair, from a financial point of view, to such holders.
Section
4.30
Solvency
.
As
of the date hereof (and for the avoidance of doubt, before
giving effect to the incurrence of the Debt Financing and the
consummation of the transactions contemplated by this Agreement
and such Debt Financing), the Company is Solvent.
ARTICLE V
Representations
and Warranties of Parent and Sub
Parent and Sub jointly and severally represent and warrant to
the Company as follows:
Section
5.01
Organization,
Standing and Corporate Power
.
Each of Parent
and Sub is duly organized, validly existing and in good standing
under the Laws of its jurisdiction of organization and has all
requisite corporate power and authority to carry on its business
as presently conducted.
Section
5.02
Authority
.
Each
of Parent and Sub has all requisite corporate power and
authority to execute and deliver this Agreement and to
consummate the transactions contemplated by this Agreement,
including the Offer, the Merger and the Financing. The execution
and delivery of this Agreement by Parent and Sub and the
consummation of the transactions contemplated by, and compliance
with the provisions of, this Agreement, including the Offer, the
Merger and the Financing, by Parent and Sub have been duly
authorized by all necessary corporate action on the part of each
of Parent and Sub, and no other corporate proceedings (including
any stockholder action) on the part of Parent or Sub are
necessary to authorize this Agreement or to consummate the
transactions contemplated by this Agreement, including the
Offer, the
27
Merger and the Financing. This Agreement has been duly executed
and delivered by each of Parent and Sub and, assuming the due
authorization, execution and delivery by the Company,
constitutes a legal, valid and binding obligation of Parent and
Sub, enforceable against each of Parent and Sub in accordance
with its terms, subject, as to enforceability, to bankruptcy,
insolvency and other Laws of general applicability relating to
or affecting creditors rights and to general equity
principles.
Section
5.03
Non-Contravention
.
The
execution and delivery of this Agreement by Parent and Sub do
not, and the consummation of the Offer, the Merger and the other
transactions contemplated by this Agreement, including the
Financing, and compliance with the provisions of this Agreement
will not, conflict with, or result in any violation or breach
of, or default (with or without notice or lapse of time, or
both) under, or give rise to a right of termination,
cancellation or acceleration of any obligation or to the loss of
a benefit under, or result in the creation of any Lien upon any
of the properties or assets of Parent or Sub under (other than
any such Lien created in connection with the Financing), any
provision of (a) the certificate of incorporation or bylaws
of Parent or the certificate of incorporation or bylaws of Sub
or (b) subject to the filings and other matters referred to
in the immediately following sentence, (i) any Contract to
which Parent or Sub or any of their respective Subsidiaries is a
party or by which any of their respective properties or assets
are bound or (ii) any Law or Judgment, in each case
applicable to Parent or Sub or any of their respective
Subsidiaries or any of their respective properties or assets,
other than, in the case of clause (B) above, any such
conflicts, violations, breaches, defaults, rights, losses or
Liens that would not, individually or in the aggregate,
reasonably be expected to have a Parent Material Adverse Effect.
No consent, approval, order, waiver or authorization of, action
or nonaction by, registration, declaration or filing with, or
notice to, any Governmental Authority is required to be obtained
or made by or with respect to Parent or Sub or any of their
respective Subsidiaries in connection with the execution and
delivery of this Agreement by Parent and Sub or the consummation
by Parent and Sub of the Offer, the Merger or the other
transactions contemplated by this Agreement, including the
Financing, except for (w) the filing of a premerger
notification and report form by Parent and Sub under the HSR Act
and the filings and receipt, termination or expiration, as
applicable, of such other approvals or waiting periods as may be
required under each Foreign Merger Control Law, (x) the
filing with the SEC of the Offer Documents, (y) the filing
of the Certificate of Merger with the Secretary of State of the
State of Delaware, and (z) such other consents, approvals,
orders, waivers, authorizations, actions, nonactions,
registrations, declarations, filings and notices the failure of
which to be obtained or made would not, individually or in the
aggregate, reasonably be expected to have a Parent Material
Adverse Effect.
Section
5.04
Financing
.
Parent
has delivered to the Company true and complete copies of
(i) the executed equity commitment letter, dated as of the
date of this Agreement (the
Equity Financing
Commitment
), pursuant to which 3G Special Situations
Fund II L.P. (
Sponsor
) has committed,
upon the terms and subject to the conditions thereof, to invest
in Parent the cash amount set forth therein (the
Equity
Financing
), and (ii) the executed commitment
letter, dated as of the date hereof, among Parent,
J.P. Morgan Chase Bank, N.A., J.P. Morgan Securities
LLC, and Barclays Bank PLC (the
Debt Commitment
Letter
), pursuant to which the lenders party thereto
have agreed, upon the terms and subject to the conditions
thereof, to lend the amounts (which includes up to
$900,000,000.00 in bridge financing (the
Bridge
Financing
) to be utilized in the event the placement
of senior notes (the
High Yield Financing
) is
not consummated) set forth therein for the purposes of financing
the transactions contemplated by this Agreement and related fees
and expenses and the refinancing of any outstanding indebtedness
of the Company (including under the Existing Credit Agreement)
(the
Debt Financing
and, together with the
Equity Financing, the
Financing
). The Debt
Commitment Letter and the related Fee Letter and the Equity
Financing Commitment are referred to collectively in this
Agreement as the
Financing Agreements
. None
of the Financing Agreements has been amended or modified prior
to the date of this Agreement, no such amendment or modification
is contemplated and none of the respective commitments contained
in the Financing Agreements have been withdrawn or rescinded in
any respect. As of the date of this Agreement, the Financing
Agreements are in full force and effect. Except for a fee letter
and fee credit letter relating to fees with respect to the Debt
Financing and an engagement letter (complete copies of which
have been provided to the Company, with only the fee amounts and
certain economic terms of the market flex (none of which would
adversely effect the amount or availability of the Debt
Financing) redacted), as of the date of this Agreement there are
no side letters or other agreements, Contracts or arrangements
related to the funding or investment, as applicable, of the
Financing
28
other than as expressly set forth in the Financing Agreements
delivered to the Company prior to the date hereof. Parent has
fully paid any and all commitment fees or other fees in
connection with the Financing Agreements that are payable on or
prior to the date hereof. The only conditions precedent or other
contingencies related to the obligations of the Sponsor to fund
the full amount of the Equity Financing and lenders to fund the
full amount of Debt Financing are those expressly set forth in
the Equity Financing Commitment and the Debt Commitment Letter,
respectively. As of the date of this Agreement, no event has
occurred which, with or without notice, lapse of time or both,
would constitute a default or breach on the part of Parent, Sub
or any direct investor in Parent under any term, or a failure of
any condition, of the Financing Agreements or otherwise be
reasonably likely to result in any portion of the Financing
contemplated thereby to be unavailable. As of the date of this
Agreement, neither Parent nor Sub has any reason to believe that
it will be unable to satisfy on a timely basis any term or
condition of the Financing Agreements required to be satisfied
by it. Based on the terms and conditions of this Agreement, the
proceeds from the Financing will be sufficient to provide Parent
and Sub with the funds necessary to pay the aggregate Offer
Price and Merger Consideration, the Equity Awards Amount, any
repayment or refinancing of debt contemplated in this Agreement
or the Financing Agreements (including repayment of indebtedness
under the Existing Credit Agreement), the payment of all other
amounts required to be paid in connection with the consummation
of the transactions contemplated by this Agreement and to allow
Parent and Sub to perform all of their obligations under this
Agreement and pay all fees and expenses to be paid by Parent or
Sub related to the transactions contemplated by this Agreement.
Section
5.05
Limited
Guaranty
.
Concurrently with the execution of
this Agreement, Sponsor has duly executed and delivered to the
Company the limited guarantee by Sponsor, dated as of the date
of this Agreement, in favor of the Company (the
Limited
Guaranty
). The Limited Guaranty is in full force and
effect and is a legal, valid and binding obligation of Sponsor,
enforceable against Sponsor in accordance with its terms,
subject, as to enforceability, to bankruptcy, insolvency and
other Laws of general applicability relating to or affecting
creditors rights and to general equity principles. There
is no default under the Limited Guaranty by Sponsor, and no
event has occurred that with the lapse of time or the giving of
notice or both would constitute a default thereunder by Sponsor.
Section
5.06
Litigation
.
There
is no suit, action or proceeding pending or, to the Knowledge of
Parent or Sub, threatened against Parent, Sub, Sponsor or any of
their respective Affiliates that, individually or in the
aggregate, would reasonably be expected to have a Parent
Material Adverse Effect. There is no Judgment outstanding
against Parent, Sub, Sponsor or any of their respective
Affiliates that, individually or in the aggregate, would
reasonably be expected to have a Parent Material Adverse Effect.
Section
5.07
Information
Supplied
.
None of the information supplied or
to be supplied by or on behalf of Parent or Sub or any of its
Subsidiaries for inclusion or incorporation by reference in
(i) the Offer Documents, the
Schedule 14D-9
or the Information Statement will, at the time such document is
filed with the SEC, at any time such document is amended or
supplemented or at the time such document is first published,
sent or given to the Companys stockholders, contain any
untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in
order to make the statements therein, in light of the
circumstances under which they are made, not misleading, or
(ii) the Proxy Statement will, at the date it is first
mailed to the stockholders of the Company and at the time of the
Stockholders Meeting, contain any untrue statement of a
material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are
made, not misleading.
Section
5.08
Operation
and Ownership of Sub
.
Sub has been formed
solely for the purpose of engaging in the transactions
contemplated hereby and, prior to the Effective Time, will not
have engaged in any business activities, other than activities
pursuant to this Agreement. Parent owns, beneficially and of
record, all the outstanding shares of capital stock of Sub, free
and clear of all Liens (other than any Liens created pursuant to
the Financing).
Section
5.09
Brokers
and Other Advisors
.
No broker, investment
banker, financial advisor or other person, other than Lazard
Frères & Co. LLC, the fees and expenses of which
will be paid by Parent, is entitled
29
to any brokers, finders or financial advisors
fee or commission in connection with the Offer, the Merger and
the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of Parent or Sub.
Section
5.10
No
Competing Businesses
.
None of Parents
Affiliates are engaged in, and neither Parent nor any of its
Affiliates beneficially owns any equity interests or voting
securities (including any equity interests or voting securities
that may be acquired through the conversion or exchange of
securities or the exercise of options, warrants or other rights)
in excess of 5% of the outstanding capital stock of any person
engaged in any business involving (i) the operation or
franchise of quick service or fast food restaurants anywhere in
the world or (ii) the operation of a U.S. soft drink
company or its Affiliates.
Section
5.11
Ownership
of Company Common Stock
.
Except as disclosed
to the Company in a letter to the Company dated
September 1, 2010, none of Parent, Sub, Sponsor or any of
their Affiliates beneficially owns (within the meaning of
Section 13 of the Exchange Act and the rules and
regulations promulgated thereunder), or will prior to the Merger
Closing Date (other than pursuant to the transactions
contemplated hereby), beneficially own any shares of Company
Common Stock.
Section
5.12
Solvency
.
Assuming
(i) the satisfaction of the condition set forth in
Section 8.02(d)
and (ii) the accuracy of the
representations and warranties of the Company set forth in
Section 4.30
, and after giving effect to the
transactions contemplated by this Agreement, including the
Financing, any alternative financing and the payment of the
aggregate Offer Price and Merger Consideration, any repayment or
refinancing of debt contemplated in this Agreement or the
Financing Agreements, the payment of all other amounts required
to be paid in connection with the consummation of the
transactions contemplated by this Agreement and the payment of
all related fees and expenses, each of Parent and the Surviving
Corporation will be Solvent as of the Effective Time and
immediately after the consummation of the transactions
contemplated by this Agreement. For the purposes of this
Agreement, the term
Solvent
means that, as of
any date of determination and with respect to any person:
(i) the sum of the debt (including contingent liabilities)
of such person and its Subsidiaries, taken as a whole, does not
exceed the present fair saleable value of the present assets of
such person and its Subsidiaries, taken as a whole;
(ii) the capital of such person and its Subsidiaries, taken
as a whole, is not unreasonably small in relation to the
business of such person and its Subsidiaries, taken as a whole;
and (iii) such person and its Subsidiaries, taken as a
whole, do not have or intend to incur debts including current
obligations beyond their ability to pay such debt as they mature
in the ordinary course of business;
provided
,
however
, for the purposes hereof, the amount of any
contingent liability at any time shall be computed as the amount
that, in light of all of the facts and circumstances existing at
such time, represents the amount that can reasonably be expected
to become an actual or matured liability (irrespective of
whether such contingent liabilities meet the criteria for
accrual under Statement of Financial Accounting Standard
No. 5).
ARTICLE VI
Covenants
Relating to Conduct of Business
Section
6.01
Conduct
of Business
.
(a) Except as set forth in
Section 6.01
of the
Company Disclosure Letter, contemplated, required or permitted
by this Agreement, required by Law or consented to in writing by
Parent (such consent not to be unreasonably withheld or
delayed), during the period from the date of this Agreement to
the Effective Time, the Company shall, and shall cause each of
its Subsidiaries to, (x) carry on its business in the
Ordinary Course of Business, (y) use reasonable best
efforts to preserve substantially intact its current business
organization and to preserve its relationships with significant
Franchisees, customers, suppliers, licensors, licensees,
distributors, wholesalers, lessors and others having significant
business dealings with the Company or any of its Subsidiaries
and (z) comply with Law, in each case consistent with past
practice. Without limiting the generality of the foregoing,
except as set forth in
Section 6.01
of the Company
Disclosure Letter, expressly contemplated or required by this
Agreement, required by Law or consented to in writing by Parent
(such
30
consent not to be unreasonably withheld or delayed), during the
period from the date of this Agreement to the Effective Time,
the Company shall not, and shall not permit any of its
Subsidiaries to:
(i) declare, set aside or pay any dividends on, or make any
other distributions (whether in cash, stock or property) in
respect of, any of its capital stock or set any record date
therefor, other than (A) dividends or distributions by a
direct or indirect wholly owned Subsidiary of the Company to its
parent and (B) the payment of the First Quarter Dividend;
(ii) split, combine or reclassify any of its capital stock
or issue or authorize the issuance of any other securities in
lieu of or in substitution for shares of its capital stock;
(iii) repurchase, redeem or otherwise acquire any shares of
its capital stock or any options, warrants or other rights to
acquire any such shares, other than (A) the acquisition by
the Company of shares of Company Common Stock in connection with
the surrender of shares of Company Common Stock by holders of
Company Stock Options in order to pay the exercise price of the
Company Stock Options, (B) the withholding of shares of
Company Common Stock to satisfy tax obligations with respect to
awards granted pursuant to the Company Stock Plans, (C) the
acquisition by the Company of Company Stock Options, Company
RSUs, Company PSUs and Company DSUs in connection with the
forfeiture of such awards, and (D) the acquisition by the
trustee of the Company 401(k) Plan of shares of Company Common
Stock in order to satisfy participant elections under the
Company 401(k) Plan;
(iv) issue, deliver or sell any shares of its capital stock
or other voting securities or equity interests, any securities
convertible or exchangeable into any such shares, voting
securities or equity interests, any options, warrants or other
rights to acquire any such shares, voting securities, equity
interests or convertible or exchangeable securities, any
stock-based performance units, any Voting Company Debt or any
other rights that give any person the right to receive any
economic interest of a nature accruing to the holders of Company
Common Stock, other than (A) upon the exercise or
settlement of awards under the Company Stock Plans outstanding
on the date of this Agreement in accordance with their present
terms, and (B) as required to comply with any Company
Benefit Plan or Company Benefit Agreement as in effect on the
date of this Agreement;
(v) (A) amend the Company Certificate of Incorporation
or the Company By-Laws or (B) amend the comparable
organizational documents of any material Subsidiary of the
Company;
(vi) merge or consolidate with, or purchase an equity
interest in or a substantial portion of the assets of, any
person or any division or business thereof, if the aggregate
amount of the consideration paid or transferred by the Company
and its Subsidiaries in connection with all such transactions
would exceed $15 million, other than any such action solely
between or among the Company and its Subsidiaries;
(vii) sell, lease, license, abandon or otherwise dispose of
any of its properties or assets (including capital stock of any
Subsidiary of the Company), other than (A) sales or other
dispositions of inventory in the Ordinary Course of Business or
equipment that is no longer used or useful in the operations of
the Company or any of its Subsidiaries, (B) the licensing
or sublicensing (or abandonment) of Intellectual Property in the
Ordinary Course of Business, (C) leases and subleases of
real property owned by the Company or its Subsidiaries and
leases of real property under which the Company or any of its
Subsidiaries is a tenant or a subtenant and voluntary
terminations or surrenders of such leases, in each case, in the
Ordinary Course of Business, and (D) other sales, leases or
other dispositions for aggregate consideration of
$15 million or less;
(viii) (A) incur any indebtedness for borrowed money,
issue or sell any debt securities or warrants or other rights to
acquire any debt securities of the Company or any of its
Subsidiaries, guarantee any such indebtedness or any debt
securities of another person or enter into any keep
well or other agreement to maintain any financial
statement condition of another person (collectively,
Indebtedness
), other than
(1) Indebtedness incurred, assumed or otherwise entered
into in the Ordinary Course of Business (including any
borrowings under the Companys existing credit facilities
and in respect of letters of credit) and in no event in excess
of $10,000,000 in the aggregate, (2) Indebtedness incurred
in connection with the refinancing of any Indebtedness existing
on the date of this Agreement or permitted to be
31
incurred, assumed or otherwise entered into hereunder on the
same terms and conditions of such Indebtedness, and
(3) intercompany Indebtedness, other than in the case of
clause (1) or clause (2), for such Indebtedness which would
not permit compliance with, or would constitute a breach of
Section 7.09
, (B) make any loans or capital
contributions to, or investments in, any other person, other
than (1) to any Subsidiary of the Company,
(2) pursuant to clause (vi) above or (3) in the
Ordinary Course of Business, or (C) take any action that
would not permit the administrative agent of the lenders under
the Debt Financing to have a perfected first priority security
interest in the Debt Financing;
(ix) except (A) in the Ordinary Course of Business or
as reasonably required by applicable Law, (B) as required
pursuant to the terms of any Company Benefit Plan or Company
Benefit Agreement or other written agreement disclosed to Parent
in the Company Disclosure Letter, in each case in effect on the
date of this Agreement, (C) as otherwise expressly
permitted by this Agreement or (D) as may be required to
avoid adverse treatment under Section 409A of the Code
without increasing any benefit or payment otherwise due or
payable thereunder, (1) grant to any director or member of
the Company Executive Team any increase in compensation,
(2) grant to any director or member of the Company
Executive Team any increase in severance or termination pay,
(3) enter into any employment, consulting, severance,
retention or termination agreement with (x) any director or
member of the Company Executive Team or (y) other employee
pursuant to which the total annual compensation or the aggregate
severance benefits under such agreement, solely in the case of
this clause (y), in excess of $1,000,000 individually or
$3,000,000 in the aggregate, (4) establish, adopt, enter
into or amend in any material respect any material collective
bargaining agreement or Company Benefit Plan or Company Benefit
Agreement, or (5) take any action to accelerate any rights
or benefits under any Company Benefit Plan or Company Benefit
Agreement;
provided
,
however
, that the foregoing
clauses (4) and (5) shall not restrict the Company or
any of its Subsidiaries from entering into or making available
to newly hired employees or to employees in the context of
promotions based on job performance or workplace requirements,
other than any director or member of the Companys
Executive Team, in each case in the Ordinary Course of Business,
plans, agreements, benefits and compensation arrangements
(including incentive grants) that have a value that is
consistent with the past practice of making compensation and
benefits available to newly hired or promoted employees in
similar positions;
(x) settle any claim or Litigation, in each case made or
pending against the Company or any of its Subsidiaries, other
than (A) the settlement of claims or Litigation in the
Ordinary Course of Business that require payments by the Company
or any of its Subsidiaries (net of insurance proceeds) in an
amount not to exceed, individually or in the aggregate,
$10,000,000 and (B) the settlement of claims or Litigation
disclosed, reflected or reserved against in the most recent
financial statements (or the notes thereto) of the Company
included in the Filed SEC Documents for an amount not materially
in excess of the amount so disclosed, reflected or reserved;
provided
,
however
, that the foregoing
clauses (A) and (B) shall not permit the Company or
any of its Subsidiaries to settle any claim or Litigation
(x) that would impose any material restrictions or changes
on the business or operations of the Company or any of its
Subsidiaries or (y) for which such settlement is not
permitted pursuant to
Section 7.03(d)
.
(xi) make any material change in accounting methods,
principles or practices by the Company or any of its
Subsidiaries materially affecting the consolidated assets,
liabilities or results of operations of the Company, except as
required (A) by GAAP (or any interpretation thereof),
including pursuant to standards, guidelines and interpretations
of the Financial Accounting Standards Board or any similar
organization, or (B) by Law, including
Regulation S-X
under the Securities Act;
(xii) adopt a plan of complete or partial liquidation,
dissolution, restructuring, recapitalization or other
reorganization of the Company or any of its Subsidiaries (other
than reorganizations solely among wholly owned Subsidiaries of
the Company);
(xiii) make any material tax election, settle or compromise
any material tax liability for an amount that exceeds the amount
disclosed, reflected or reserved against in the most recent
consolidated balance sheet of the Company (or the notes thereto)
included in the Filed SEC Documents, change an annual
32
accounting period for tax purposes, or adopt or change any
accounting method for tax purposes, other than in the Ordinary
Course of Business;
(xiv) make any capital expenditures, other than (A) in
accordance with the Companys capital expenditure plan
previously provided to Parent, and (B) otherwise in an
aggregate amount for all such capital expenditures made pursuant
to this clause (B) not to exceed $5 million; or
(xv) enter into any Contract that restricts the ability of
the Company or any or its Subsidiaries, taken as a whole, to
compete, in any material respects, with any business or in any
geographic area, or to solicit customers, except for use or
radius restrictions that may be contained in Contracts entered
into in the Ordinary Course of Business;
(xvi) (a) terminate or materially amend or modify any
agreement set forth on
Section 6.01(a)(xvi)
of the
Company Disclosure Letter or (b) enter into any Contract
that would have been required to be set forth on the following
Sections of the Company Disclosure Letter had such Contract been
entered into prior to the date hereof:
Section 4.09(a)(iii)
,
Section 4.09(a)(v)
,
Section 4.09(a)(vi)
or
Section 4.09(a)(viii)
;
(xvii) authorize any of, or commit or agree to take any of,
the foregoing actions in the preceding clause (i)
(xvi).
(b)
Notice of Changes
.
The Company
shall promptly give Parent written notice upon becoming aware of
any material event, development or occurrence that would
reasonably be expected to give rise to a failure of any Offer
Condition or any condition precedent set forth in
Section 8.01
or
Section 8.02.
Parent
shall promptly give the Company written notice upon becoming
aware of any material event, development or occurrence that
would reasonably be expected to give rise to a failure of any
condition precedent set forth in
Section 8.01
or
Section 8.03.
Section
6.02
Solicitation;
Takeover Proposals; Change of Recommendation
.
(a)
Solicitation
.
Notwithstanding
any other provision of this Agreement to the contrary, during
the period beginning on the date of this Agreement and
continuing until 11:59 p.m, New York City time, on
October 12, 2010 (the
No-Shop Period Start
Date
), the Company may, directly or through its
Representatives: (i) solicit, initiate or encourage,
whether publicly or otherwise, any Takeover Proposals, including
by way of providing access to non-public information;
provided
,
however
, that the Company shall only
permit such non-public information related to the Company to be
provided pursuant to an Acceptable Confidentiality Agreement,
and
provided
further
that (A) the Company
shall promptly provide to Parent any non-public information
concerning the Company or its Subsidiaries to which any person
is provided such access and which was not previously provided to
Parent, and (B) the Company shall withhold such portions of
documents or information, or provide pursuant to customary
clean-room or other appropriate procedures, to the
extent relating to any pricing or other matters that are highly
sensitive or competitive in nature if the exchange of such
information (or portions thereof) could reasonably be likely to
be harmful to the operation of the Company in any material
respect; and (ii) engage in and maintain discussions or
negotiations with respect to any inquiry, proposal or offer that
constitutes or may reasonably be expected to lead to any
Takeover Proposal or otherwise cooperate with or assist or
participate in, or facilitate any such inquiries, proposals,
offers, discussions or negotiations or the making of any
Takeover Proposal.
The term
Takeover Proposal
means any inquiry,
proposal or offer from any person or group providing for
(a) any direct or indirect acquisition or purchase, in a
single transaction or a series of related transactions, of
(1) 20% or more (based on the fair market value, as
determined in good faith by the Company Board) of assets
(including capital stock of the Subsidiaries of the Company) of
the Company and its Subsidiaries, taken as a whole, or (2)(A)
shares of Company Common Stock, which together with any other
shares of Company Common Stock beneficially owned by such person
or group, would equal to 20% or more of the outstanding shares
of Company Common Stock, or (B) any other equity securities
of the Company or any of its Subsidiaries, (b) any tender
offer or exchange offer that, if consummated, would result in
any person or group owning, directly or indirectly, 20% or more
of the outstanding shares of Company Common Stock or any other
equity securities of the Company or any of its Subsidiaries,
(c) any merger, consolidation, business
33
combination, binding share exchange or similar transaction
involving the Company or any of its Subsidiaries pursuant to
which any person or group (or the shareholders of any person)
would own, directly or indirectly, 20% or more of the aggregate
voting power of the Company or of the surviving entity in a
merger or the resulting direct or indirect parent of the Company
or such surviving entity, or (d) any recapitalization,
liquidation, dissolution or any other similar transaction
involving the Company or any of its material operating
Subsidiaries, other than, in each case, the transactions
contemplated by this Agreement.
Wherever the term
group
is used in this
Section 6.02
, it is used as defined in
Rule 13d-3
under the Exchange Act.
(b)
No Solicitation
.
From the
No-Shop Period Start Date until the Effective Time, or, if
earlier, the termination of this Agreement in accordance with
Section 9.01
, the Company shall not, nor shall it
permit any Representative of the Company to, directly or
indirectly, (i) solicit, initiate or knowingly encourage
(including by way of providing information) the submission or
announcement of any inquiries, proposals or offers that
constitute or would reasonably be expected to lead to any
Takeover Proposal, (ii) provide any non-public information
concerning the Company or any of its Subsidiaries related to, or
to any person or group who would reasonably be expected to make,
any Takeover Proposal, (iii) engage in any discussions or
negotiations with respect thereto, (iv) approve, support,
adopt, endorse or recommend any Takeover Proposal, or
(v) otherwise cooperate with or assist or participate in,
or knowingly facilitate any such inquiries, proposals, offers,
discussions or negotiations. Subject to
Section 6.02(c)
, at the No-Shop Period Start Date,
the Company shall immediately cease and cause to be terminated
any solicitation, encouragement, discussion or negotiation with
any person or groups (other than a Qualified Go-Shop Bidder)
conducted theretofore by the Company, its Subsidiaries or any of
their respective Representatives with respect to any Takeover
Proposal and shall use reasonable best efforts to require any
other parties (other than a Qualified Go-Shop Bidder) who have
made or have indicated an intention to make a Takeover Proposal
to promptly return or destroy any confidential information
previously furnished by the Company, any of its Subsidiaries or
any of their respective Representatives.
The term
Qualified Go-Shop Bidder
means any
person or group from whom the Company or any of its
Representatives has received a Takeover Proposal after the
execution of this Agreement and prior to the No-Shop Period
Start Date that the Company Board determines, prior to or as of
the No-Shop Period Start Date, in good faith, after consultation
with its financial advisor and outside legal counsel,
constitutes or could reasonably be expected to result in a
Superior Proposal.
The term
Superior Proposal
means any
bona
fide
, written Takeover Proposal that if consummated would
result in a person or group (or the shareholders of any person)
owning, directly or indirectly, (a) 75% or more of the
outstanding shares of Company Common Stock or (b) 75% or
more of the assets of the Company and its Subsidiaries, taken as
a whole, in either case which the Company Board determines in
good faith (after consultation with its financial advisor and
outside legal counsel) (x) is reasonably likely to be
consummated in accordance with its terms, and (y) if
consummated, would be more favorable to the stockholders of the
Company from a financial point of view than the Offer and the
Merger, in each case taking into account all financial, legal,
financing, regulatory and other aspects of such Takeover
Proposal (including the person or group making the Takeover
Proposal) and of this Agreement (including any changes to the
terms of this Agreement proposed by Parent pursuant to
Section 6.02(f)
.
(c)
Response to Takeover
Proposals
.
Notwithstanding anything to the
contrary contained in
Section 6.02(b)
or any other
provisions of this Agreement, if at any time following the
No-Shop Period Start Date and prior to the earlier to occur of
the Offer Closing and obtaining the Stockholder Approval,
(i) the Company has received a
bona fide
, written
Takeover Proposal from a third party that did not result from a
breach of this
Section 6.02
, and (ii) the
Company Board determines in good faith, after consultation with
its financial advisor and outside legal counsel, that such
Takeover Proposal constitutes or could reasonably be expected to
result in a Superior Proposal, then the Company may
(A) furnish information with respect to the Company and its
Subsidiaries to the person making such Takeover Proposal
pursuant to an Acceptable Confidentiality Agreement and the
other restrictions imposed by clause (A) and (B) of
Section 6.02(a)
related to the sharing of
information, or (B) engage in discussions or negotiations
with the person making such
34
Takeover Proposal regarding such Takeover Proposal. The Company
shall be permitted prior to the earlier to occur of the Offer
Closing and obtaining the Stockholder Approval to take the
actions described in clauses (A) and (B) above with
respect to any Qualified Go-Shop Bidder.
(d)
Notice to Parent of Takeover
Proposals
.
The Company shall promptly (and,
in any event, within one (1) business day) notify Parent in
the event that the Company or any of its Representatives
receives any Takeover Proposal, or any initial request for
non-public information concerning the Company or any of its
Subsidiaries related to, or from any person or group who would
reasonably be expected to make any Takeover Proposal, or any
initial request for discussions or negotiations related to any
Takeover Proposal (including any material changes related to the
foregoing), and in connection with such notice, provide the
identity of the person or group making such Takeover Proposal or
request and the material terms and conditions thereof
(including, if applicable, copies of any written requests,
proposals or offers, including proposed agreements), and
thereafter the Company shall keep Parent reasonably informed of
any material changes to the terms thereof.
(e)
Prohibited Activities
.
Neither
the Company Board nor any committee thereof shall
(i) withdraw or rescind (or modify in a manner adverse to
Parent), or publicly propose to withdraw (or modify in a manner
adverse to Parent), the Recommendation or the findings or
conclusions of the Company Board referred to in
Section 4.04(b)
, (ii) approve or recommend the
adoption of, or publicly propose to approve, declare the
advisability of or recommend the adoption of, any Takeover
Proposal, (iii) or cause or permit the Company or any of
its Subsidiaries to execute or enter into, any letter of intent,
memorandum of understanding, agreement in principle, merger
agreement, acquisition agreement or other similar agreement
related to any Takeover Proposal, other than any Acceptable
Confidentiality Agreement referred to in
Section 6.02(a)
or
6.02(c)
(an
Acquisition Agreement
), or (iv) publicly
proposed or announced an intention to take any of the foregoing
actions (any action described in clauses (i), (ii),
(iii) or (iv) being referred to as an
Adverse
Recommendation Change
).
(f)
Change of
Recommendation
.
Notwithstanding any provision
of
Section 6.02(e)
, at any time prior to the earlier
to occur of the Offer Closing and obtaining the Stockholder
Approval, the Company Board may effect an Adverse Recommendation
Change only if the Company Board determines in good faith (after
consultation with its outside legal counsel) that the failure to
take such action would be inconsistent with its fiduciary duties
under applicable Law. Notwithstanding anything to the contrary,
the Company Board shall not be entitled to exercise its right to
make an Adverse Recommendation Change or, solely with regards to
a Superior Proposal, terminate this Agreement pursuant to
Section 9.01(f)
(x) unless the Company shall
have provided prior written notice to Parent and Sub, at least
three (3) business days in advance, that it will effect an
Adverse Recommendation Change or terminate this Agreement
pursuant to
Section 9.01(f)
and specifying the
reasons therefor (a
Notice of Intended Recommendation
Change
) and (y):
(i) if such Adverse Recommendation Change is not being made
as a result of a Superior Proposal, during such three
(3) business day period, if requested by Parent, the
Company shall have engaged in good faith negotiations with
Parent to amend this Agreement in such a manner that would
otherwise obviate the need for such Adverse Recommendation
Change; or
(ii) if such Adverse Recommendation Change or termination
is being made as a result of a Superior Proposal:
(1) the Notice of Intended Recommendation Change shall
specify the identity of the party making such Superior Proposal
and the material terms thereof and copies of all relevant
documents relating to such Superior Proposal (it being
understood and agreed that any material amendment to the terms
of any such Superior Proposal (and in any event including any
amendment to any price term thereof), shall require a new Notice
of Intended Recommendation Change and compliance with the
requirements of this
Section 6.02(f)
, except that
the prior written notice period and corresponding references to
a three (3) business day period shall be reduced to a one
(1) business day for any such new Notice of Intended
Recommendation Change);
35
(2) after providing any such Notice of Intended
Recommendation Change, the Company shall, and shall cause its
Representatives to, negotiate with Parent and Sub in good faith
(to the extent Parent and Sub desire to negotiate) during such
three (3) business day period (or one business day period
in the case of a new Notice of Intended Recommendation Change)
to make such adjustments in the terms and conditions of this
Agreement and the other agreements contemplated hereby; and
(iii) in the case of either clause (i) or clause (ii),
the Company Board shall have considered in good faith any
adjustments to this Agreement (including a change to the price
terms hereof) and the other agreements contemplated hereby that
may be offered in writing by Parent no later than
5:00 p.m., New York City time, on the third business day of
such three (3) business day period (or the first business
day of such one (1) business day period for any such new
Notice of Intended Recommendation Change) and shall have
determined that (x) in the case of a Superior Proposal, the
Superior Proposal would continue to constitute a Superior
Proposal if such adjustments were to be given effect, or
(y) in the case of an Adverse Recommendation Change not
being made as a result of a Superior Proposal, no adjustment has
been made that would obviate the need for such Adverse
Recommendation Change, and (y) the findings contemplated by
clause (i) above continue to be applicable such that an
Adverse Recommendation Change should be made the Superior
Proposal would continue to constitute a Superior Proposal if
such adjustments were to be given effect.
(g)
Standstills; Confidentiality
Agreements
.
Notwithstanding any provision of
Section 6.02(e)
, the Company Board shall not grant
any waiver or release under any standstill agreement with
respect to any class of equity securities of the Company;
provided
,
however
, (i) at any time prior to
the earlier to occur of the Offer Closing and obtaining the
Stockholder Approval, the Company Board may grant a waiver or
release under any standstill agreement with respect to any class
of equity securities of the Company if the Company Board
determines in good faith (after consultation with its outside
legal counsel) that the failure to take such action would be
inconsistent with its fiduciary duties under applicable Law and
(ii) from the date hereof until the No-Shop Period Start
Date, the Company may grant any such waiver solely to permit any
counterparty to any such agreement to make non-public inquiries,
proposals or offers that constitute or may reasonably be
expected to lead to any Takeover Proposal. The Company shall
provide written notice to Parent of waiver of any standstill by
the Company. Except for the waiver of standstill as contemplated
by this
Section 6.02(g)
, the Company shall enforce,
and shall not release or permit the release of any person from,
or amend, waive, terminate or modify, and shall not permit the
amendment, waiver, termination or modification of, any provision
of, any confidentiality or similar agreement or provision to
which the Company or any of its Subsidiaries is a party or under
which the Company or any of its is a party or under which the
Company or any of its Subsidiaries has any rights. The Company
shall not, and shall not permit any of its Representatives to,
enter into any confidentiality agreement subsequent to the date
of this Agreement which prohibits the Company from providing to
Parent the information specifically required to be provided to
Parent pursuant to this
Section 6.02
.
(h)
Communications With
Stockholders
.
Nothing contained in this
Section 6.02
shall prohibit the Company from
(i) taking and disclosing to its stockholders a position
contemplated by
Rule 14d-9
or
Rule 14e-2(a)
promulgated under the Exchange Act or (ii) making any
disclosure to its stockholders as, in the good faith
determination of the Company Board, after consultation with its
outside legal counsel, is required by applicable Laws or
(iii) making any stop-look-and-listen
communication to the stockholders of the Company pursuant to
Section 14d-9(f)
promulgated under the Exchange Act (or any similar
communications to the stockholders of the Company) in which the
Company indicates that it has not changed the Recommendation;
provided
,
however
, that clause (ii) shall not
be deemed to permit the Company Board to make an Adverse
Recommendation Change or take any of the actions referred to in
Section 6.02(e)
or
Section 6.02(f)
except, in each case, to the extent permitted by
Section 6.02(e))
or
Section 6.02(f)
,
respectively.
36
ARTICLE VII
Additional
Agreements
Section
7.01
Preparation
of the Proxy Statement; Stockholders Meeting
.
(a)
Preparation of Proxy
Statement
.
As soon as practicable after the
date hereof (and in any event, but subject to Parents
timely performance of its obligations under
Section 7.01(b)
, within 15 business days hereof),
the Company shall prepare and shall cause to be filed with the
SEC in preliminary form a proxy statement relating to the
Stockholders Meeting (together with any amendments thereof
or supplements thereto, the
Proxy Statement
).
Except as expressly contemplated by
Section 6.02(f)
,
the Proxy Statement shall include the Recommendation with
respect to the Merger, the Fairness Opinions and a copy of
Section 262 of the DGCL. The Company will cause the Proxy
Statement, at the time of the mailing of the Proxy Statement or
any amendments or supplements thereto, and at the time of the
Stockholders Meeting, to not contain any untrue statement
of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which
they were made, not misleading;
provided
,
however
,
that no representation or warranty is made by the Company with
respect to information supplied by Parent or Sub for inclusion
or incorporation by reference in the Proxy Statement. The
Company shall cause the Proxy Statement to comply as to form in
all material respects with the provisions of the Exchange Act
and the rules and regulations promulgated thereunder and to
satisfy all rules of the NYSE. The Company shall promptly notify
Parent and Sub upon the receipt of any comments from the SEC or
the staff of the SEC or any request from the SEC or the staff of
the SEC for amendments or supplements to the Proxy Statement,
and shall provide Parent and Sub with copies of all
correspondence between the Company and its Representatives, on
the one hand, and the SEC or the staff of the SEC, on the other
hand. The Company shall use reasonable best efforts to respond
as promptly as reasonably practicable to any comments of the SEC
or the staff of the SEC with respect to the Proxy Statement, and
the Company shall provide Parent and Sub and their respective
counsel a reasonable opportunity to participate in the
formulation of any written response to any such written comments
of the SEC or its staff. Prior to the filing of the Proxy
Statement or the dissemination thereof to the holders of Company
Common Stock, or responding to any comments of the SEC or the
staff of the SEC with respect thereto, the Company shall provide
Parent and Sub a reasonable opportunity to review and to propose
comments on such document or response.
(b)
Covenants of Parent with Respect to the Proxy
Statement
.
Parent shall provide to the
Company all information concerning Parent and Sub as may be
reasonably requested by the Company in connection with the Proxy
Statement and shall otherwise assist and cooperate with the
Company in the preparation of the Proxy Statement and resolution
of comments of the SEC or its staff related thereto. Parent will
cause the information relating to Parent or Sub supplied by it
for inclusion in the Proxy Statement, at the time of the mailing
of the Proxy Statement or any amendments or supplements thereto,
and at the time of the Stockholders Meeting, not to
contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the
circumstances under which they were made, not misleading;
provided
,
however
, that no representation or
warranty is made by Parent or Sub with respect to information
supplied by the Company for inclusion or incorporation by
reference in the Proxy Statement. Each of Parent and Sub will
furnish to the Company the information relating to it required
by the Exchange Act and the rules and regulations promulgated
thereunder to be set forth in the Proxy Statement promptly
following request therefor from the Company.
(c)
Mailing of Proxy Statement; Stockholders
Meeting
.
If the adoption of this Agreement by
the Companys stockholders is required by applicable Law,
then the Company shall have the right at any time after the
Proxy Statement Clearance Date to (and Parent and Sub shall have
the right, at any time after the later of the Proxy Statement
Clearance Date and November 1, 2010, to request in writing
that the Company, and upon receipt of such written request, the
Company shall, as promptly as practicable and in any event
within ten (10) business days), (x) establish a record
date for and give notice of a meeting of its stockholders, for
the purpose of voting upon the adoption of this Agreement (the
Stockholders Meeting
), and
(y) mail to the holders of Company Common Stock as of the
record date established for the Stockholders Meeting a
Proxy Statement (the date the Company elects to take such action
or is required to take such action, the
37
Proxy Date
). The Company shall duly call,
convene and hold the Stockholders Meeting as promptly as
reasonably practicable after the Proxy Date;
provided
,
however
, that in no event shall such meeting be held
later than 35 calendar days following the date the Proxy
Statement is mailed to the Companys stockholders and any
adjournments of such meetings shall require the prior written
consent of the Parent other than in the case it is required to
allow reasonable additional time for the filing and mailing of
any supplemental or amended disclosure which the SEC or its
staff has instructed the Company is necessary under applicable
Law and for such supplemental or amended disclosure to be
disseminated and reviewed by the Companys stockholders
prior to the Stockholders Meeting. Notwithstanding the
foregoing, Parent may require the Company to adjourn or postpone
the Stockholders Meeting one (1) time (for a period
of not more than 30 calendar days but not past 2 business
days prior to the Outside Date), unless prior to such
adjournment the Company shall have received an aggregate number
of proxies voting for the adoption of this Agreement and the
transactions contemplated hereby (including the Merger), which
have not been withdrawn, such that the condition in
Section 8.01(a)
will be satisfied at such meeting.
Once the Company has established a record date for the
Stockholders Meeting, the Company shall not change such
record date or establish a different record date for the
Stockholders Meeting without the prior written consent of
Parent, unless required to do so by applicable Law or the
Companys By-Laws. Unless the Company Board shall have
withdrawn, modified or qualified its recommendation thereof or
otherwise effected an Adverse Recommendation Change, the Company
shall use reasonable best efforts to solicit proxies in favor of
the adoption of this Agreement and shall ensure that all proxies
solicited in connection with the Stockholders Meeting are
solicited in compliance with all applicable Laws and all rules
of the NYSE. Unless this Agreement is validly terminated in
accordance with
Section 9.01
, the Company shall
submit this Agreement to its stockholders at the
Stockholders Meeting even if the Company Board shall have
effected an Adverse Recommendation Change or proposed or
announced any intention to do so. The Company shall, upon the
reasonable request of Parent, advise Parent at least on a daily
basis on each of the last seven business days prior to the date
of the Stockholders Meeting as to the aggregate tally of
proxies received by the Company with respect to the Stockholder
Approval. Without the prior written consent of Parent, the
adoption of this Agreement and the transactions contemplated
hereby (including the Merger) shall be the only matter (other
than procedure matters) which the Company shall propose to be
acted on by the stockholders of the Company at the
Stockholders Meeting.
(d)
Amendments to Proxy
Statement
.
If at any time prior to the
Effective Time any event or circumstance relating to the Company
or any of its Subsidiaries or its or their respective officers
or directors should be discovered by the Company which, pursuant
to the Securities Act or Exchange Act, should be set forth in an
amendment or a supplement to the Proxy Statement, they shall
promptly inform Parent. Each of Parent, Sub and the Company
agree to correct any information provided by it for use in the
Proxy Statement which shall have become false or misleading.
Each of the Company and Parent shall cause all documents that
such party is responsible for filing with the SEC in connection
with the Merger to comply as to form in all material respects
with the applicable requirements of the Securities Act and the
Exchange Act and, as applicable, not to contain any untrue
statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which
they were made, not misleading.
(e)
Short
Form Merger
.
Notwithstanding the
foregoing, if, following the Offer Closing and the exercise, if
any, of the
Top-Up,
Parent and its Affiliates shall own at least 90% of the
outstanding shares of the Company Common Stock, the Parties
shall take all necessary and appropriate action, including with
respect to the transfer to Sub of any shares of Company Common
Stock held by Parent or its Affiliates, to cause the Merger to
become effective as soon as practicable after the Offer Closing
without the Stockholders Meeting in accordance with
Section 253 of the DGCL.
Section
7.02
Access
to Information; Confidentiality
.
The Company
shall afford to Parent, and to Parents officers,
employees, accountants, counsel, consultants, financial advisors
and other Representatives, reasonable access during normal
business hours during the period prior to the earlier of the
Effective Time and the termination of this Agreement to all of
its and its Subsidiaries properties, books and records and
to those employees of the Company to whom Parent reasonably
requests access, and, during such period, the Company shall
furnish to Parent, as promptly as reasonably practicable, all
information concerning its and its
38
Subsidiaries business, properties and personnel as Parent
may reasonably request (it being agreed, however, that the
foregoing shall not permit Parent or any such Representatives to
conduct any invasive environmental testing or sampling of the
nature customarily referred to as a Phase II environmental
assessment). Notwithstanding the foregoing, neither the Company
nor any of its Subsidiaries shall be required to provide access
to or disclose information where the Company reasonably
determines that such access or disclosure would jeopardize the
attorney-client privilege of the Company or any of its
Subsidiaries or conflict with or violate any Law (including
antitrust Laws) or any Contract to which the Company or any of
its Subsidiaries is a party. No investigation or access
permitted pursuant to this
Section 7.02
shall affect
or be deemed to modify any representation or warranty made by
the Company hereunder. Except for disclosures expressly
permitted by the Confidentiality Agreement, Parent shall, in
accordance with the Confidentiality Agreement, keep confidential
and not disclose, and shall cause its officers, employees,
accountants, counsel, consultants, financial advisors and other
Representatives to keep confidential and not disclose, all
Evaluation Material (as defined in the Confidentiality
Agreement) directly or indirectly received from the Company or
its Representatives.
Section
7.03
Reasonable
Best Efforts; Approvals; Transaction
Litigation
.
(a) Upon the terms and subject to the conditions set forth
in this Agreement, each of the Parties agrees to use its
reasonable best efforts (unless, with respect to any action,
another standard for performance is expressly provided for
herein) to take, or cause to be taken, all actions, and to do,
or cause to be done, and to assist and cooperate with the other
parties in doing, all things necessary, proper or advisable to
consummate, as promptly as reasonably practicable, the Offer,
the Merger and the other transactions contemplated by this
Agreement, including using reasonable best efforts to:
(i) take all acts necessary to cause (A) in the case
of the Company, the Offer Conditions and the conditions to the
Merger Closing set forth in
Section 8.01
or
Section 8.02
to be satisfied, or (B) in the
case of Parent and Sub, the conditions to the Merger Closing
Section 8.01
or
Section 8.03
to be
satisfied, in each case, as promptly as reasonably practicable;
(ii) obtain all necessary consents, approvals, orders,
waivers and authorizations of, actions or nonactions by, any
Governmental Authority or any third party and make all necessary
registrations, declarations and filings with, and notices to,
any Governmental Authorities (including pursuant to the HSR Act
and each Foreign Merger Control Law) and take all reasonable
steps as may be necessary to avoid a suit, action, proceeding or
investigation by, any Governmental Authority; (iii) execute
and deliver any additional instruments necessary to consummate
the transactions contemplated by this Agreement; and
(iv) vigorously defend or contest any claim, suit, action
or other proceeding that would otherwise prevent or materially
impede, interfere with, hinder or delay the consummation of the
Offer, the Merger and the other transactions contemplated by
this Agreement or any Transaction Litigation. In furtherance of
the foregoing, the Parties agree that, reasonable best efforts
to obtain any approvals necessary under any Foreign Merger
Control Laws shall include offering to hold separate (but not
divest) the business conducted in certain jurisdictions that are
subject to such Foreign Merger Control Laws if such action is
necessary to obtain approval for consummation of the
transactions contemplated by this Agreement and would not,
individually or in the aggregate, have a Material Adverse
Effect.
Transaction Litigation
means any
Litigation commenced or threatened against any Party or any of
its Affiliates by any Governmental Authority or any private
party relating to, arising out of or involving this Agreement,
the Offer, the Merger or any of the other transactions
contemplated hereby or that would otherwise prevent or
materially impede, interfere with, hinder or delay the
consummation of the Offer, the Merger and the other transactions
contemplated by this Agreement.
(b) In furtherance and not in limitation of the foregoing,
each Party agrees to (i) make an appropriate filing of a
Notification and Report Form pursuant to the HSR Act with
respect to the transactions contemplated by this Agreement
within ten (10) business days of the date of this
Agreement, (ii) supply as promptly as reasonably
practicable any additional information and documentary material
that may be requested pursuant to the HSR Act, and
(iii) use its reasonable best efforts to take or cause to
be taken all other actions necessary, proper or advisable
consistent with this
Section 7.03
to cause the
expiration or termination of the applicable waiting periods, or
receipt of required authorizations, as applicable, under the HSR
Act as soon as practicable. Without limiting the foregoing, the
Parties shall request and shall use reasonable best efforts to
obtain early termination of the waiting period under the HSR Act.
39
(c) Subject to applicable Laws and the instructions of any
Governmental Authority, the Company and Parent each shall keep
the other apprised of the status of matters relating to the
completion of the transactions contemplated hereby, including
promptly furnishing the other with copies of notices or other
communications received by Parent or any of its Representatives,
or the Company or any of its Representatives, as the case may
be, from any third party
and/or
any
Governmental Authority with respect to the Offer, the Merger and
the other transactions contemplated hereby this Agreement.
(d) Each Party shall keep the other Parties reasonably
informed unless doing so would, in the reasonable judgment of
such Party, jeopardize any privilege of the Company or any of
its Subsidiaries with respect thereto regarding any such
Transaction Litigation. The Company shall promptly advise Parent
orally and in writing and the Company shall cooperate fully with
Parent in connection with, and shall consult with and permit
Parent and its Representatives to participate in, the defense,
negotiations or settlement of any Transaction Litigation and the
Company shall give consideration to Parents advice with
respect to such Transaction Litigation. The Company shall not,
and shall not permit any of its Subsidiaries nor any of its or
their representatives to, compromise, settle, come to a
settlement arrangement regarding any Transaction Litigation
hereby or consent thereto unless Parent shall otherwise consent
in writing, which shall not be unreasonably withheld or delayed.
(e) Prior to the Merger Closing Date, the Company shall
cooperate with Parent and use reasonable best efforts to take,
or cause to be taken, all actions, and do or cause to be done
all things, reasonably necessary, proper or advisable on its
part under applicable Laws and rules and policies of the NYSE to
cause the delisting of the Company and of the Company Common
Stock from the NYSE as promptly as practicable after the
Effective Time and the deregistration of the Company Common
Stock under the Exchange Act as promptly as practicable after
such delisting.
(f) The Company shall (i) not terminate or amend any
of the Sponsor Tender Agreements or the agreements with senior
management executives entered into as of the date hereof without
Parents consent in Parents sole discretion and
(ii) enforce its rights under the Sponsor Tender Agreements
and the agreements with senior management executives entered
into as of the date hereof as directed by Parent in
Parents sole discretion.
Section
7.04
State
Takeover Laws
.
If any Takeover Law becomes or
is deemed to be applicable to the Company, Parent or Sub, the
Offer, the Merger or the
Top-Up,
including the acquisition of shares of Company Common Stock
pursuant thereto, or any other transaction contemplated by this
Agreement, then the Company and the Company Board, as
applicable, shall take all action necessary to ensure that the
Offer, the Merger and the other transactions contemplated hereby
may be consummated as promptly as practicable on the terms
contemplated herein and otherwise act to eliminate, or if not
possible minimize to the maximum extent possible, the effects of
such Takeover Law on this Agreement, the Offer, the Merger, the
Top-Up
and
the other transactions contemplated hereby. No Adverse
Recommendation Change shall change the approval of the Company
Board for purposes of causing any Takeover Law to be
inapplicable to the transactions contemplated by this Agreement.
Section
7.05
Benefit
Plans
.
(a) It is Parents intention that, for a period of two
years following the Effective Time, individuals who are employed
by the Company or any of its Subsidiaries immediately before the
Effective Time (each, a
Company Employee
)
shall be provided with salaries and benefits that are in the
aggregate approximately equal to the salaries and benefits
(other than equity compensation) those Company Employees
received prior to the Effective Time, it being understood that
Parent shall review the Companys and its
Subsidiaries salaries and benefits from time to time in
order to determine the most appropriate way to compensate and
incentivize Company Employees, and accordingly may make such
changes in the compensation and benefits that Parent determines
to be in the best interests of the Company from time to time.
Notwithstanding anything in this
Section 7.05
to the
contrary, nothing contained herein, whether express or implied,
shall be treated as an amendment or other modification of any
Company Benefit Plan or Company Benefit Agreement, or shall
limit the right of Parent to amend, terminate or otherwise
modify any Company Benefit Plan or Company Benefit Agreement
following the Effective Time.
40
(b) Each Company Employee shall be given credit for all
service with the Company and its Subsidiaries and their
respective predecessors under any employee benefit plan of
Parent, the Surviving Corporation, or any of their Subsidiaries,
including any such plans providing vacation, sick pay, severance
and retirement benefits maintained by Parent or its Subsidiaries
in which such Company Employees participate for purposes of
eligibility, vesting and entitlement to benefits, including for
severance benefits and vacation entitlement (but not for accrual
of pension benefits), to the extent past service was recognized
for such Company Employees under the comparable Company Benefit
Plans immediately prior to the Effective Time. Notwithstanding
the foregoing, nothing in this
Section 7.05
shall be
construed to require crediting of service that would result in
(i) duplication of benefits or (ii) service credit for
benefit accruals under a defined benefit pension plan.
(c) In the event of any change in the welfare benefits
provided to Company Employees following the Effective Time,
Parent shall cause (i) the waiver of all limitations as to
pre-existing conditions, exclusions and waiting periods with
respect to participation and coverage requirements applicable to
the Company Employees (and their eligible dependents) under any
welfare benefit plans in which Company Employees participate
following the Effective Time, to the extent that such
conditions, exclusions or waiting periods would not apply in the
absence of such change, and (ii) for the plan year in which
the Effective Time occurs, the crediting of each Company
Employee (or his or her eligible dependents) with any
co-payments and deductibles paid prior to any such change in
satisfying any applicable deductible or
out-of-pocket
requirements after such change.
(d) The Parties acknowledge and agree to the arrangements
set forth in
Section 7.05(d)
of the Company
Disclosure Letter.
(e) The Parties acknowledge and agree that all provisions
contained in this
Section 7.05
are included for the
sole benefit of the Parties, and that nothing in this Agreement,
whether express or implied, (i) shall create any third
party beneficiary or other rights (A) in any other person,
including any employees or former employees of the Company, any
of the Companys Subsidiaries or any Affiliate of the
Company, any Company Employee, or any dependent or beneficiary
thereof, or (B) to continued employment with Parent or any
of its Affiliates, (ii) shall be treated as an amendment or
other modification of any employee benefit plan of Parent or its
Subsidiaries, or (iii) shall limit the right of Parent or
its Subsidiaries to amend, terminate or otherwise modify any
employee benefit plan of Parent or its Subsidiaries following
the Effective Time.
Section
7.06
Indemnification,
Exculpation and Insurance
.
(a) All rights to indemnification and exculpation from
liabilities for acts or omissions occurring at or prior to the
Effective Time and rights to advancement of expenses relating
thereto now existing in favor of any person who is or prior to
the Effective Time becomes, or has been at any time prior to the
date of this Agreement, a director, officer, employee or agent
(including as a fiduciary with respect to an employee benefit
plan) of the Company, any of its Subsidiaries or any of their
respective predecessors (each, an
Indemnified
Party
) as provided in the Company Certificate of
Incorporation, the Company By-Laws, the organizational documents
of any Subsidiary of the Company or any indemnification
agreement between such Indemnified Party and the Company or any
of its Subsidiaries shall survive the Merger and shall not be
amended, repealed or otherwise modified in any manner that would
adversely affect any right thereunder of any such Indemnified
Party.
(b) Without limiting
Section 7.06(a)
or any
rights of any Indemnified Party pursuant to any indemnification
agreement set forth in
Section 7.06(b)
of the
Company Disclosure Letter, from and after the Effective Time, in
the event of any threatened or actual claim, suit, action,
proceeding or investigation (a
Claim
),
whether civil, criminal or administrative, based in whole or in
part on, or arising in whole or in part out of, or pertaining to
(i) the fact that the Indemnified Party is or was a
director (including in a capacity as a member of any board
committee), or officer of the Company, any of its Subsidiaries
or any of their respective predecessors or (ii) this
Agreement or any of the transactions contemplated hereby,
whether in any case asserted or arising before or after the
Effective Time, the Surviving Corporation shall
(x) indemnify and hold harmless, as and to the fullest
extent permitted by Law, each such Indemnified Party against any
losses, claims, damages, liabilities, costs, expenses (including
reasonable attorneys fees and expenses in advance of the
final disposition of any claim, suit, proceeding or
investigation to each Indemnified Party to the fullest extent
permitted by Law upon receipt of any undertaking required by
applicable Law), judgments, fines and
41
amounts paid in settlement of or in connection with any such
threatened or actual Claim, and (y) comply with the terms
of each such indemnification agreement with respect to such
Claim. Any determination of entitlement to indemnification under
the preceding sentences shall be made by an independent counsel
selected jointly by the Surviving Corporation and such
indemnified party. None of Parent or the Surviving Corporation
shall settle, compromise or consent to the entry of any judgment
in any threatened or actual Claim for which indemnification has
been sought by an Indemnified Party hereunder, unless such
settlement, compromise or consent includes an unconditional
release of such Indemnified Party from all liability arising out
of such Claim or such Indemnified Party otherwise consents in
writing to such settlement, compromise or consent. Parent and
the Surviving Corporation shall cooperate with an Indemnified
Party in the defense of any matter for which such Indemnified
Party has validly sought indemnification under such
indemnification agreement. Parents and the Surviving
Corporations obligations under this
Section 7.06(b)
shall continue in full force and
effect for a period of six (6) years from the Effective
Time;
provided
,
however
, that all rights to
indemnification in respect of any Claim asserted or made within
such period shall continue until the final disposition of such
Claim.
(c) The Company may obtain, at or prior to the Effective
Time, prepaid (or tail) directors and
officers liability insurance policies in respect of acts
or omissions occurring at or prior to the Effective Time for six
(6) years from the Effective Time, covering each person who
is covered by such policies on the date of this Agreement on
terms with respect to such coverage and amounts no less
favorable than those of such policies in effect on the date of
this Agreement;
provided
,
however
, that the
maximum aggregate annual premium for such insurance policies for
any such year shall not be in excess of the maximum aggregate
annual premium contemplated by the immediately following
sentence;
provided
,
further
,
that
, any such
tail policy may not be amended, modified or cancelled or revoked
by the Company, Parent or the Surviving Corporation. In the
event the Company does not obtain such tail
insurance policies, then, for a period of six (6) years
from the Effective Time, Parent shall maintain in effect the
Companys current directors and officers
liability insurance policies in respect of acts or omissions
occurring at or prior to the Effective Time, covering each
Indemnified Party on terms with respect to such coverage and
amounts no less favorable than those of such policies in effect
on the date of this Agreement;
provided
,
however
,
that neither Parent nor the Surviving Corporation shall be
required to pay an aggregate annual premium for such insurance
policies in excess of 300% of the annual premium paid by the
Company for coverage for its last full fiscal year for such
insurance (which amount the Company represents and warrants is
set forth in
Section 7.06(c)
of the Company
Disclosure Letter); and
provided
further
that if
the annual premiums of such insurance coverage exceed such
amount, Parent or the Surviving Corporation shall be obligated
to obtain a policy with the greatest coverage available for a
cost not exceeding such amount; and
provided
further
that Parent may substitute therefor policies of a
reputable and financially sound insurance company containing
terms, including with respect to coverage and amounts, no less
favorable to any Indemnified Party.
(d) In the event that the Surviving Corporation or any of
its successors or assigns (i) consolidates with or merges
into any other person and is not the continuing or surviving
corporation or entity of such consolidation or merger, or
(ii) transfers or conveys all or a substantial portion of
its properties and other assets to any person, or if Parent
dissolves the Surviving Corporation, then, and in each such
case, the Surviving Corporation or Parent, respectively, shall
cause proper provision to be made so that the applicable
successors and assigns or transferees expressly assume the
obligations set forth in this
Section 7.06
unless
assumed by operation of Law.
(e) From and after the Effective Time (but not prior
thereto), the provisions of this
Section 7.06
are
intended to be for the benefit of, and will be enforceable by,
each Indemnified Party and his or her heirs. The provisions of
this
Section 7.06
are in addition to, and not in
substitution for, any other rights to indemnification or
contribution that any such person may have by contract or
otherwise.
Section
7.07
Public
Announcements
.
(a) Parent and the Company shall consult with each other
before issuing, and give each other the opportunity to review
and comment upon, any press release or other public statements
with respect to the Offer, the Merger and the other transactions
contemplated by this Agreement, including the Financing, and
42
shall not issue any such press release or make any such public
statement prior to such consultation, except as may be required
by applicable Law, court process or the rules and regulations of
any national securities exchange or national securities
quotation system and except for any matters referred to in
Section 6.02
. The Parties agree that the initial
press release to be issued with respect to the Offer, the Merger
and the other transactions contemplated by this Agreement shall
be in the form mutually agreed to by the Parties.
(b) Upon Parents request, (i) the Company and
Parent shall promptly prepare a mutually acceptable joint
written presentations to RiskMetrics Group recommending this
Agreement and the transactions contemplated hereby, including
the Offer and Merger, and (ii) the Company shall request a
meeting with RiskMetrics Group to occur after the No-Shop Period
Start Date for purposes of obtaining its recommendation of the
adoption of this Agreement by the Companys stockholders,
if necessary;
provided
that the foregoing obligations
shall not apply in the event the Company Board shall have made
an Adverse Recommendation Change.
Section
7.08
Financing
.
(a) Each of Parent and Sub shall use, and cause its
Affiliates to use, its reasonable best efforts (unless, with
respect to any action, another standard for performance is
expressly provided for herein) to take, or cause to be taken,
all actions and to do, or cause to be done, all things
necessary, proper or advisable to consummate and obtain the
Financing on the terms and conditions (including the flex
provisions) set forth in the Financing Agreements and any
related Fee Letter (taking into account the anticipated timing
of the Marketing Period), including using reasonable best
efforts to seek to enforce (including through litigation) its
rights under the Debt Commitment Letter in the event of a
material breach thereof by the Financing sources thereunder, and
shall not permit any amendment or modification to be made to, or
consent to any waiver of any provision or remedy under, the
Financing Agreements or any related Fee Letter, if such
amendment, modification or waiver (i) reduces the aggregate
amount of the Financing (including by changing the amount of
fees to be paid or original issue discount) from that
contemplated in the Financing Agreements, (ii) imposes new
or additional conditions or otherwise expands, amends or
modifies any of the conditions to the receipt of the Financing
in a manner adverse to Parent or the Company,
(iii) decreases the aggregate Equity Financing as set forth
in the Equity Financing Commitment delivered on the date hereof,
(iv) amends or modifies any other terms in a manner that
would reasonably be expected to (x) delay or prevent the
Offer Closing or the Merger Closing Date or (y) make the
timely funding of the Financing or satisfaction of the
conditions to obtaining the Financing less likely to occur or
(v) adversely impact the ability of Parent or Sub to
enforce its rights against the other parties to the Financing
Agreements. For purposes of clarification, the foregoing shall
not prohibit Parent from amending the Debt Commitment Letter and
any related Fee Letter to add additional lender(s) (and
Affiliates of such additional lender(s)) as a party thereto. Any
reference in this Agreement to (A)
Financing
shall include the financing contemplated by the Financing
Agreements as amended or modified in compliance with this
Section 7.08(a)
, and (B)
Financing
Agreements
or
Debt Commitment
Letter
shall include such documents as amended or
modified in compliance with this
Section 7.08(a)
.
(b) Each of Parent and Sub shall use, and cause its
Affiliates to use, its reasonable best efforts (taking into
account the anticipated timing of the Marketing Period) to take,
or cause to be taken, all actions and to do, or cause to be
done, all things necessary, proper or advisable to consummate
and obtain the Financing on the terms and conditions set forth
in the Financing Agreements, including using reasonable best
efforts (i) to maintain in effect the Financing Agreements
in accordance with the terms and subject to the conditions
thereof, (ii) to satisfy all conditions and covenants
applicable to Parent and Sub in the Debt Commitment Letter
(including by consummating the financing pursuant to the terms
of the Equity Financing Commitment), (iii) to negotiate and
enter into all definitive agreements with respect to the Debt
Financing contemplated by the Debt Commitment Letter on the
terms and conditions (including the flex provisions) contained
in the Debt Commitment Letter and any related Fee Letter,
(iv) to satisfy all conditions to such definitive
agreements that are applicable to Parent and Sub (including by
consummating the financing pursuant to the terms of the Equity
Financing Commitment) and consummate the Financing at or prior
to the Offer Closing (with respect to amounts required to
consummate the Offer, if the Offer Termination has not occurred,
and make other payments due at such time, including, the
payments required by
Section 3.01
and the repayment
of the Existing Credit Agreement), and the Merger Closing (with
respect to amounts required to consummate the Merger and make
other payments due at such time in accordance with the terms
hereof), including using its
43
(or causing its Affiliates to use) reasonable best efforts to
cause the lenders and the other persons committing to fund the
Financing and (v) to comply with its obligations under the
Financing Agreements and any related Fee Letter. For the
avoidance of doubt, Parent shall be responsible for timely
provision of any post-Merger Closing pro forma cost savings,
synergies, capitalization, ownership or other pro forma
adjustments desired to be incorporated into any pro forma
financial information to be delivered by the Company pursuant to
Section 7.09
. Parent shall keep the Company
reasonably informed on a reasonably current basis and in
reasonable detail of the status of its efforts to arrange the
Financing and provide to the Company copies of all executed
definitive documents related to the Debt Financing (provided
that the Fee Letter may be redacted to omit the numerical fee
amounts and certain economic terms of the market flex provided
therein). Without limiting the generality of the foregoing,
Parent and Sub shall give the Company prompt (and in any event
within two (2) business days) written notice: (i) of
any default or breach (or any event that, with or without
notice, lapse of time or both, would reasonably be expected to
give rise to any default or breach) by any party to any
Financing Agreement or definitive document related to the
Financing of which Parent or its Affiliates becomes aware;
(ii) of the receipt of any written notice or other
communication from any person with respect to any
(x) actual or potential default, breach, termination or
repudiation by any party to any Financing Agreement or any
definitive document related to the Financing of any provisions
of the Financing Agreements or any definitive document related
to the Financing or (y) material dispute or disagreement
between or among any parties to any Financing Agreement or any
definitive document related to the Financing; and (iii) if
for any reason Parent or Sub has determined in good faith that
it will not be able to obtain all or any portion of the
Financing on the terms, in the manner or from the sources
contemplated by the Financing Agreements. As soon as reasonably
practicable, but in any event within three calendar days of the
date the Company delivers Parent or Sub a written request,
Parent and Sub shall provide any information reasonably
requested by the Company relating to any circumstance referred
to in clause (i), (ii) or (iii) of the immediately
preceding sentence.
(c) Subject to the terms and conditions of this Agreement,
if any portion of the Debt Financing becomes unavailable on the
terms and conditions (including the flex provisions)
contemplated in the Debt Commitment Letter and related Fee
Letter, Parent shall use reasonable best efforts to arrange
promptly to obtain alternative financing from alternative
sources on terms and conditions that are not materially less
favorable, in the aggregate, to Parent and Sub than those
contained in the Debt Commitment Letter and any related Fee
Letter (including flex provisions therein) and in an amount at
least equal to the Debt Financing or such unavailable portion
thereof, as the case may be (the
Alternate Debt
Financing
), and to obtain a new financing commitment
letter with respect to such Alternate Debt Financing (the
New Debt Commitment Letter
) which shall
replace the existing Debt Commitment Letter, a true, complete
and correct copy of which (together with any related fee letter)
shall be promptly provided to the Company;
provided
that
neither Parent nor Sub shall be required to execute any New Debt
Commitment Letter or arrange for such Alternate Debt Financing
on terms and conditions (including flex provisions) which are
materially less favorable (unless otherwise determined by
Parent), in the aggregate, to Parent and Sub than those included
in the Debt Commitment Letter that such New Debt Commitment
Letter is replacing. In the event any New Debt Commitment Letter
is obtained, (i) any reference in this Agreement to the
Financing
or the
Debt
Financing
shall mean the debt financing contemplated
by the Debt Commitment Letters as modified pursuant to
clause (ii) below, (ii) any reference in this
Agreement to the
Financing Agreements
or the
Debt Commitment Letter
shall be deemed to
include the Debt Commitment Letters that are not superseded by a
New Debt Commitment Letter at the time in question and the New
Debt Commitment Letters to the extent then in effect, and
(iii) any reference in this Agreement to
Fee
Letter
shall be deemed to include any fee letter
relating to the Debt Commitment Letters that are not superseded
by a New Debt Commitment Letter at the time in question and the
New Debt Commitment Letters to the extent then in effect.
Without first obtaining the Companys prior written consent
(which shall not be unreasonably withheld, conditioned or
delayed), Parent shall not directly or indirectly take any
action that would or would be reasonably expected to result in
the Financing not being available.
(d) Notwithstanding anything to the contrary contained in
this Agreement, nothing contained in this
Section 7.08
shall require, and in no event shall
the reasonable best efforts of Parent or Sub be deemed or
construed to require, either Parent or Sub to (i) seek the
Equity Financing from any source other than those counterparty
to, or in any amount in excess of that contemplated by, the
Equity Financing Commitment, or
44
(ii) pay any material fees in excess of those contemplated
by the Financing Agreements (whether to secure waiver of any
conditions contained therein or otherwise).
(e) In no event shall Parent or any of its Subsidiaries or
Affiliates (for purposes of this
Section 7.08(e)
,
Affiliates shall be deemed to include each direct or indirect
investor in Parent) taking action on behalf of or at the
direction of Sponsor, Parent or Sub, enter into agreement from
and after the date hereof to (i) award any agent, broker,
investment banker or financial advisor except Lazard
Frères & Co. LLC any financial advisory role on
an exclusive basis in connection with the Offer, the Merger or
the other transactions contemplated hereby or (ii) prohibit
or seek to prohibit any bank or investment bank or other
potential provider of debt or equity financing, from providing
or seeking to provide financing or financial advisory services
to any person in connection with a transaction relating to the
Company or its Subsidiaries or in connection with the Offer, the
Merger or the other transactions contemplated hereby. During the
period commencing on the date hereof and ending on the fifteenth
(15th) calendar day after the date of this Agreement, neither
Parent nor any of its Affiliates shall seek or obtain any equity
commitments or equity financing in respect of the Offer, the
Merger or any of the other transactions contemplated hereby, or
provide any information in respect thereof to any potential
investor in Parent, or any of Parents or any such
investors financing sources or potential financing sources
or other Representatives who have not been provided any such
information prior to the date of this Agreement, other than as
set forth in the Equity Financing Commitment as in effect on the
date of this Agreement.
(f) Each of Parent and Sub shall use, and cause its
Affiliates to use, commercially reasonable efforts to take, or
cause to be taken, all actions and to do, or cause to be done,
all things necessary, proper or advisable to consummate, or
cause to be consummated, and shall use, or cause to be used, the
proceeds of the Bridge Financing (or any Alternative Debt
Financing) within ten (10) calendar days after the date on
which all of the Offer Conditions (other than the Financing
Proceeds Condition) have been satisfied or waived or, if the
Offer Termination has occurred, all of the conditions set forth
in
Section 8.01
(other than
Section
8.01(d)
) and
Section 8.02
(other than the
actual delivery of any officer certificates described therein)
have been satisfied or waived. The obligation to use the Bridge
Financing (or such Alternative Debt Financing) as set forth in
this
Section 7.08(f)
is referred to as the
Bridge Take-Down
. Notwithstanding the
foregoing, if it shall not be commercially reasonable to
complete the Bridge Take-Down by such tenth (10th) calendar day,
Parent and Sub shall continue to use, and cause its Affiliates
to continue to use, commercially reasonable efforts to take, or
cause to be taken, all actions and to do, or cause to be done,
all things necessary, proper or advisable to consummate, or
cause to be consummated, and shall use, or cause to be used, the
proceeds of such Bridge Financing (or such Alternative Debt
Financing) as soon as reasonably practicable thereafter.
Notwithstanding anything to the contrary contained in this
Agreement, and without regard to the then market conditions or
other general economic conditions, including the interest rate
and cost of the Debt Financing, and, for the avoidance of doubt,
regardless of whether or not commercially reasonable, if all of
the Offer Conditions (other than the Financing Proceeds
Condition) have been satisfied or waived or, if the Offer
Termination has occurred, all of the conditions set forth in
Section 8.01
(other than
Section
8.01(d)
) and
Section 8.02
(other than the
conditions that by their terms are to be satisfied at the Merger
Closing) have been satisfied or waived, then Parent shall
consummate, or cause to be consummated, and shall use, or cause
to be used, the proceeds of the Bridge Financing (or such
Alternative Debt Financing) no event later than
November 18, 2010.
Section
7.09
Financing
Cooperation
.
(a) Prior to the Effective Time, the Company shall, and
shall cause each of its Subsidiaries to, and shall use its
reasonable best efforts to cause its Representatives and each of
its Subsidiaries to, provide to Parent such reasonable
cooperation, at Parents sole expense, as may be reasonably
requested by Parent to assist Parent in causing the conditions
in the Debt Commitment Letter to be satisfied and such
cooperation as is otherwise necessary and reasonably requested
by Parent in connection with the Debt Financing, the Debt Payoff
and/or
any
defeasance or satisfaction and discharge of the Existing Credit
Agreement in accordance with its terms (for the avoidance of
doubt, any references to Debt Financing or Financing in this
Section 7.09
45
shall include the issuance of the Senior Notes (as defined in
the Debt Commitment Letter)), which cooperation shall consist of:
(i) using reasonable best efforts to cause its senior
executive officers to participate in a customary and reasonable
number of meetings, presentations, road shows, due diligence
sessions, drafting sessions and sessions with rating agencies;
(ii) using reasonable best efforts to assist with the
preparation of a customary rating agency presentation, bank
information memoranda and bank syndication materials, offering
documents, private placement memoranda and similar documents
required in connection with the Debt Financing, including the
syndication thereof,
provided
, that any such bank
information memoranda and bank syndication materials, offering
documents, private placement memoranda and similar documents
shall contain disclosure and pro forma financial statements
reflecting the Surviving Corporation
and/or
its
Subsidiaries as the obligor;
(iii) (A) furnishing Parent and its Financing Sources
as promptly as practicable with (x) audited consolidated
balance sheets and related statements of income,
stockholders equity and cash flows of the Company and its
Subsidiaries, for fiscal year ended June 30, 2010,
(y) unaudited consolidated balance sheets and related
statements of income, stockholders equity and cash flows
of the Company and its Subsidiaries, for each fiscal quarter
ended after the date hereof but at least 40 days before the
Merger Closing Date;
provided
that the filing by the
Company of the required financial statements specified in
clause (x) and (y) above in its Annual Report on
Form 10-K
or its Quarterly Report on
Form 10-Q,
as applicable, will be deemed to satisfy the foregoing
requirements with respect to the Company and its Subsidiaries
for all purposes of this Agreement, and (B) using
reasonable best efforts to furnish all financial statements,
business and other financial data, audit reports and other
information regarding the Company and its Subsidiaries of the
type that would be required by
Regulation S-X
and Regulation S-K promulgated under the Securities Act for a
registered public offering of non-convertible debt securities of
the Company (provided that Parent shall be responsible for the
preparation of pro forma financial statements), to the extent
the same is of the type and form customarily included in an
offering memorandum, private placement memorandum, prospectus
and similar documents for private placements of non-convertible
high-yield bonds under Rule 144A promulgated under the
Securities Act or otherwise necessary to receive from the
Companys independent accountants customary
comfort (including negative assurance
comfort) with respect to the financial information to be
included in such offering memorandum (all such information in
this clause (iii) (other than pro forma financial statements
which shall be prepared by Parent), the
Required
Information
);
(iv) requesting the auditors of the Company to cooperate
with Parents reasonable efforts to obtain customary
comfort letters upon completion of customary procedures in
connection with the offering of the Senior Notes (as defined in
the Debt Commitment Letter);
(v) using reasonable best efforts to assist in Parent
obtaining corporate and facilities ratings for the Debt
Financing;
(vi) using reasonable best efforts to cooperate with
Parents efforts to obtain consents, landlord waivers and
estoppels, non-disturbance agreements, non-invasive
environmental assessments, legal opinions, surveys and title
insurance (including providing reasonable access to Parent and
its Representatives to all Owned Real Property and Specified
Leased Real Property) as reasonably requested by Parent;
(vii) reasonably cooperating to permit the prospective
lenders involved in the Financing to evaluate the Company and
its Subsidiaries current assets, cash management and
accounting systems, policies and procedures relating thereto for
the purpose of establishing collateral arrangements to the
extent customary and reasonable;
(viii) requesting customary payoff letters, Lien
terminations and instruments of discharge to be delivered at
Merger Closing to allow for the payoff, discharge and
termination in full on the Merger Closing Date of all
indebtedness and Liens under the Existing Credit Agreement (the
Debt Payoff
); and
46
(ix) furnishing Parent and its Financing Sources promptly,
and in any event at least five (5) days prior to the Merger
Closing Date, with all documentation and other information
required by Governmental Authorities with respect to the
Financing under applicable know your customer and
anti-money laundering rules and regulations, including the
PATRIOT Act;
provided
that, notwithstanding anything to the contrary
contained in this Agreement (including this
Section 7.09
) (1) nothing in this Agreement
(including this
Section 7.09
) shall require any such
cooperation to the extent that it would (a) require the
Company or any of its Subsidiaries or Representatives, as
applicable, to waive or amend any terms of this Agreement or
agree to pay any commitment or other fees or reimburse any
expenses prior to the Effective Time, or incur any liability or
give any indemnities or otherwise commit to take any action that
is not contingent upon the Effective Time, (b) unreasonably
interfere with the ongoing business or operations of the Company
and its Subsidiaries, (c) require the Company or any of its
Subsidiaries to take any action that will conflict with or
violate the Companys organizational documents or any Laws
or the Existing Credit Agreement or result in the contravention
of, or that would reasonably be expected to result in a
violation or breach of, or default under, any Contract to which
the Company or any of its Subsidiaries is a party,
(d) require the Company or any of its Subsidiaries to enter
into or approve any financing or purchase agreement for the
Financing, (e) result in any significant interference with
the prompt and timely discharge of the duties of any of the
Companys executive officers, or (f) result in any
officer or director of the Company or any of its Subsidiaries
incurring any personal liability with respect to any matters
relating to the Financing, (2) no action, liability or
obligation of the Company or any of its Subsidiaries or any of
their respective Representatives under any certificate,
agreement, arrangement, document or instrument relating to the
Debt Financing shall be effective until the Effective Time,
(3) any bank information memoranda and high-yield offering
prospectuses or memoranda required in relation to the Debt
Financing need not be issued by the Company or any of its
Subsidiaries and shall contain disclosure and pro forma
financial statements reflecting the Surviving Corporation
and/or
its
Subsidiaries as the obligor, (4) notwithstanding anything
to the contrary, the Parties agree that any road shows, ratings
agencies presentations, preparation of documents (including
rating agency presentation, bank information memoranda or other
offer documents in connection with the Debt Financing) and
provision of information with respect to the prospects and plans
for the Companys business and operations, in each case
under this clause (4), in connection with the Debt Financing
remains the sole responsibility of Parent and Sub and none of
the Company or any of its Subsidiaries or any of their
respective Representatives shall have any liability or incur any
losses, damages or penalties with respect thereto or be required
to provide any information or make any presentations with
respect to capital structure, or the incurrence of the Debt
Financing or other pro forma information relating thereto or the
manner in which Parent intends to operate, or cause to be
operated, the business of the Surviving Corporation and its
Subsidiaries after the Merger Closing.
(b) Parent shall promptly, upon request by the Company,
reimburse the Company for all of its documented reasonable
out-of-pocket
costs and expenses (including reasonable attorneys fees)
incurred by the Company, its Subsidiaries and their respective
Representatives in connection with any cooperation contemplated
by this
Section 7.09
.
(c) The Company, its Affiliates and their respective
officers, advisors and Representatives shall be indemnified and
held harmless by Parent and Sub for and against any and all
liabilities, losses, damages, claims, costs, expenses, interest,
awards, judgments and penalties suffered or incurred by them in
connection with the arrangement of the Debt Financing, the Debt
Payoff
and/or
the
provision of information utilized in connection therewith to the
fullest extent permitted by applicable Law.
(d) The Company hereby consents to the use of its and its
Subsidiaries trademarks, service marks or logos in
connection with the Financing;
provided
that such
trademarks, service marks or logos are used solely in a manner
that is not intended to or reasonably likely to harm or
disparage the Company or any of its Subsidiaries or the
reputation or goodwill of the Company or any of its Subsidiaries
or any of their respective intellectual property rights.
(e) All non-public or other confidential information
regarding the Company or any of its Subsidiaries obtained by
Parent, Sub or their Representatives pursuant to this
Section 7.09
shall be kept confidential in
47
accordance with the Confidentiality Agreement;
provided
that, with the Companys prior written consent (not to be
unreasonably withheld), Parent and Sub shall be permitted to
disclose such information to potential sources of capital,
rating agencies, prospective lenders and investors and their
respective Representatives in connection with the Debt Financing
so long as such persons agree to be bound by the Confidentiality
Agreement or other customary confidentiality undertaking.
(f) Subject to the terms and conditions hereof, at the
earlier of the Offer Closing and the Merger Closing Date, Parent
shall cause the indebtedness under the Existing Credit Agreement
to be satisfied and discharged in accordance with the terms
thereof.
Section
7.10
Rule 14d-10
Matters
.
Prior to the expiration of the
Offer, the Compensation Committee will take all such steps as
may be required to cause to be exempt under
Rule 14d-10(d)
under the Exchange Act any employment compensation, severance or
employee benefit arrangements that have been or will be entered
into after the date of this Agreement by the Company or its
Subsidiaries with current or future directors, officers or
employees of the Company or its Subsidiaries and to ensure that
any such arrangements fall within the safe harbor provisions of
such rule.
Section
7.11
Rule 16b-3
Matters
.
The Company shall take all
reasonable steps as may be required to cause any dispositions of
Company equity securities (including derivative securities) in
connection with this Agreement by each individual who is a
director or officer of the Company subject to Section 16 of
the Exchange Act to be exempt under
Rule 16b-3
under the Exchange Act.
Section
7.12
FIRPTA
Certificate
.
The Company shall use reasonable
best efforts to deliver to Parent, at the earlier of the Offer
Closing Date and the Effective Time, a properly completed and
executed certificate to the effect that the Common Stock of the
Company is not a U.S. real property interest (such
certificate in the form required by Treasury
Regulation Sections 1.897-2(h)
and 1.1445-2(c)(3)).
ARTICLE VIII
Conditions
Precedent
Section
8.01
Conditions
to Each Partys Obligation to Effect the
Merger
.
The respective obligation of each
party to effect the Merger is subject to the satisfaction or (to
the extent permitted by Law) waiver at or prior to the Effective
Time of the following conditions:
(a)
Stockholder Approval
.
If
required by applicable Law, the Stockholder Approval shall have
been obtained.
(b)
Regulatory Approvals
.
The
waiting period applicable to the consummation of the Merger and,
unless the Offer Termination shall have occurred, the Offer
under the HSR Act (or any extension thereof) shall have expired
or early termination thereof shall have been granted. In
addition, the consummation of the Merger and, unless the Offer
Termination shall have occurred, the Offer, is not unlawful
under any Foreign Merger Control Law of any jurisdiction set
forth in Section 8.01(b) of the Company Disclosure Letter.
(c)
No Injunctions or
Restraints
.
No temporary restraining order,
preliminary or permanent injunction, Law or other Judgment
issued by any court of competent jurisdiction (collectively,
Restraints
) shall be in effect enjoining or
otherwise preventing or prohibiting the consummation of the
Merger.
(d)
Purchase of Company Common Stock in the
Offer
.
Unless the Offer Termination shall
have occurred, Sub shall have accepted for payment all shares of
Company Common Stock validly tendered and not validly withdrawn
pursuant to the Offer.
Section
8.02
Conditions
to Obligations of Parent and Sub to Effect the
Merger
.
Solely if the Offer Termination shall
have occurred or the Offer Closing shall not have occurred, the
obligations of Parent and
48
Sub to effect the Merger are further subject to the satisfaction
or (to the extent permitted by Law) waiver at or prior to the
Effective Time of the following conditions:
(a)
Representations and
Warranties
.
The representations and
warranties of the Company (i) set forth in
Section 4.03
,
Section 4.04
,
Section 4.26
and
Section 4.27
shall be
true and correct in all material respects as of the date of this
Agreement and as of the Merger Closing Date as though made on
the Merger Closing Date, (ii) set forth in
Section 4.07
shall be true and correct as of the
date of this Agreement and as of the Merger Closing Date as
though made on the Merger Closing Date without disregarding the
Material Adverse Effect qualification set forth
therein and (iii) set forth in this Agreement, other than
those described in clauses (i) and (ii) above, shall
be true and correct (disregarding all qualifications or
limitations as to materiality, Material
Adverse Effect and words of similar import set forth
therein) as of the date of this Agreement and as of the Merger
Closing Date as though made on the Merger Closing Date, except,
in the case of this clause (iii), where the failure of such
representations and warranties to be so true and correct would
not, individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect;
provided
in each case
that representations and warranties made as of a specific date
shall be required to be so true and correct (subject to such
qualifications) as of such date only. Parent shall have received
a certificate signed on behalf of the Company by the chief
executive officer or chief financial officer thereof to such
effect.
(b)
Performance of Obligations of the
Company
.
The Company shall have performed or
complied in all material respects with its obligations required
to be performed or complied with by it under this Agreement at
or prior to the Merger Closing, and Parent shall have received a
certificate signed on behalf of the Company by the chief
executive officer or chief financial officer thereof to such
effect.
(c)
No Material Adverse
Effect
.
Since the date of this Agreement,
there shall not have occurred any change, event or occurrence
that has had or would reasonably be expected to have a Material
Adverse Effect, and Parent shall have received a certificate
signed on behalf of the Company the chief executive officer or
chief financial officer thereof to such effect.
(d)
Pre-Closing Solvency
.
As of
immediately prior to the Merger Closing Date (and, for the
avoidance of doubt, before giving effect to the incurrence of
the Debt Financing and the consummation of the transactions
contemplated by this Agreement and such Debt Financing), the
Company is Solvent, and Parent shall have received a certificate
signed on behalf of the Company by the chief executive officer
or chief financial officer thereof to such effect.
Section
8.03
Conditions
to Obligation of the Company to Effect the
Merger
.
Solely if the Offer Termination shall
have occurred or the Offer Closing shall not have occurred, then
the obligation of the Company to effect the Merger is further
subject to the satisfaction or (to the extent permitted by Law)
waiver at or prior to the Effective Time of the following
conditions:
(a)
Representations and
Warranties
.
The representations and
warranties of Parent and Sub set forth in this Agreement shall
be true and correct (disregarding all qualifications or
limitations as to materiality, Parent Material
Adverse Effect and words of similar import set forth
therein) as of the date of this Agreement and as of the Merger
Closing Date as though made on the Merger Closing Date (except
to the extent such representations and warranties expressly
relate to an earlier date, in which case as of such earlier
date), except where the failure of such representations and
warranties to be so true and correct would not, individually or
in the aggregate, reasonably be expected to have a Parent
Material Adverse Effect. The Company shall have received a
certificate signed on behalf of Parent by an executive officer
thereof to such effect.
(b)
Performance of Obligations of Parent and
Sub
.
Parent and Sub shall have performed or
complied in all material respects with its obligations required
to be performed or complied with by it under this Agreement at
or prior to the Merger Closing, and the Company shall have
received a certificate signed on behalf of Parent by an
executive officer thereof to such effect.
Section
8.04
Frustration
of Closing Conditions
.
Neither Parent nor Sub
may rely on the failure of any condition set forth in
Sections 8.01
or
8.02
to be satisfied if such
failure was caused by the failure of Parent or
49
Sub to perform any of its obligations under this Agreement. The
Company may not rely on the failure of any condition set forth
in
Sections 8.01
or
8.03
to be satisfied if
such failure was caused by its failure to perform any of its
obligations under this Agreement.
ARTICLE IX
Termination,
Amendment and Waiver
Section
9.01
Termination
.
This
Agreement may be terminated at any time prior to the Effective
Time, whether before or after receipt of the Stockholder
Approval:
(a) by mutual written consent of Parent and the Company;
(b) by either of Parent or the Company:
(i) if the Merger shall not have been consummated on or
before March 2, 2011 (the
Outside Date
);
provided
,
however
, that the right to terminate
this Agreement under this
Section 9.01(b)(i)
shall
not be available to any Party if (x) the Offer Closing
shall have occurred or (y) the failure of such Party to
perform any of its obligations under this Agreement has been a
principal cause of the failure of the Merger to be consummated
on or before such date (it being understood that Parent and Sub
shall be deemed a single party for purposes of the foregoing
proviso);
(ii) if any Restraint shall be in effect enjoining or
otherwise prohibiting the consummation of the Merger shall have
become final and nonappealable;
provided
,
however
,
that the right to terminate this Agreement pursuant to this
Section 9.01(b)(ii)
shall not be available to any Party
unless such Party shall have complied with its obligations under
Section 7.03
to prevent, oppose or remove such
Restraint; or
(iii) the Stockholder Approval shall not have been obtained
at the Stockholders Meeting duly convened therefor or at
any adjournment or postponement thereof;
(c) by Parent, if there shall be any breach or inaccuracy
in any of the Companys representations or warranties set
forth in this Agreement or the Company has failed to perform any
of its covenants or agreements set forth in this Agreement,
which inaccuracy, breach or failure to perform (i) would
give rise to (x) if the Offer Termination shall have
occurred, the failure of any condition set forth in
Section 8.02(a)
or
Section 8.02(b)
or
(y) if the Offer Termination shall not have occurred, the
failure of any Offer Condition set forth in clauses (iii)
or (iv) of paragraph (d) of Annex I, and (ii)
(A) is not capable of being cured prior to the Outside Date
or (B) is not cured within fifteen (15) calendar days
following Parents delivery of written notice to the
Company of such breach;
provided
that Parent shall not
have the right to terminate this Agreement pursuant to this
Section 9.01(c)
if (x) Parent or Sub is then in
material breach of any of its representations, warranties,
covenants or agreements hereunder or (y) the Offer Closing
shall have occurred;
(d) by the Company, if there shall be any breach or
inaccuracy in any of Parents or Subs representations
or warranties set forth in this Agreement or Parent or Sub has
failed to perform any of its covenants or agreements set forth
in this Agreement, which inaccuracy, breach or failure to
perform (i) would (x) give rise to the failure of any
condition set forth in
Section 8.03(a)
or
Section 8.03(b)
or, (y) reasonably be expected
to, individually or in the aggregate, have a Parent Material
Adverse Effect, and (ii) (A) is not capable of being cured
prior to the Outside Date or (B) is not cured within
fifteen (15) calendar days following the Companys
delivery of written notice to Parent of such breach;
provided
that the Company shall not have the right to
terminate this Agreement pursuant to this
Section 9.01(d)
if (x) the Company is then in
material breach of any of its representations, warranties,
covenants or agreements hereunder or (y) the Offer Closing
shall have occurred;
(e) by Parent, in the event that any of the following shall
have occurred: (i) an Adverse Recommendation Change;
(ii) the Company shall have delivered a notice to parent of
its intent to effect an Adverse Recommendation Change pursuant
to
Section 6.02(f)
if Parent shall have given the
Company the right to
50
enter into an Acquisition Agreement and such right has been
available to the Company for no less than twenty-four hours,
(iii) the Company failed to include in the Proxy Statement
or the
Schedule 14D-9,
in each case, when mailed, the Recommendation and a statement of
the findings and conclusions of the Company Board referred to in
Section 4.04(b)
, (iv) if, following the
disclosure or announcement of a Takeover Proposal (other than a
tender or exchange offer described in clause (v) below),
the Company Board shall have failed to reaffirm publicly the
Recommendation within five (5) business days after Parent
requests in writing that such recommendation under such
circumstances be reaffirmed publicly, or (vi) a tender or
exchange offer relating to securities of the Company shall have
been commenced and the Company shall not have announced, within
ten (10) business days after the commencement of such
tender or exchange offer, a statement disclosing that the
Company recommends rejection of such tender or exchange offer
(any such event contemplated by this
Section 9.01(e)
, a
Triggering
Event
);
provided
that Parent shall not have the
right to terminate this Agreement pursuant to this
Section
9.01(e)
if (x) the Offer Closing shall have occurred or
(y) if required by applicable Law, the Stockholder Approval
shall have been obtained;
(f) by the Company, in accordance with
Section 6.02(f)
in order to accept a Superior
Proposal and enter into the Acquisition Agreement providing for
such Superior Proposal immediately following or concurrently
with such termination;
provided
,
however
, that
payment of the Company Termination Fee pursuant to
Section 9.03(a)
shall be a condition to the
termination of this Agreement by the Company pursuant to this
Section 9.01(f)
;
(g) by the Company, if (i) (A) all the Offer
Conditions shall have been satisfied or waived as of the
expiration of the Offer, and (B) Parent shall have failed
to consummate the Offer promptly thereafter in accordance with
Section 1.01
, or (ii) (A) all the Offer
Conditions (other than the Financing Proceeds Condition) shall
have been satisfied or waived as of the expiration of the Offer,
and (B) Parent shall have failed to consummate the Offer in
accordance with
Section 1.01
, in the case of both
clause (i) and (ii) hereof, the Company shall have
given Parent written notice at least one (1) business day
prior to such termination stating the Companys intention
to terminate this Agreement pursuant to this
Section 9.01(g)
and the basis for such termination;
provided
,
however
, that the termination right set
forth in Section 9.01(g)(ii) shall only be available from
and after the close of business on November 18,
2010; or
(h) by the Company, after the close of business on
November 18, 2010, if (i) all the conditions set forth
in
Section 8.01
(other than
Section 8.01(d)
, to the extent the Offer Termination
has occurred) and
Section 8.02
have been satisfied
(other than those conditions that by their terms are to be
satisfied by actions taken at the Merger Closing, each of which
is capable of being satisfied at the Merger Closing),
(ii) Parent shall have failed to consummate the Merger by
the time set forth in
Section 2.02
, (iii) the
Company has notified Parent in writing that it stands and will
stand ready, willing and able to consummate the Merger at such
time, and (iv) the Company shall have given Parent written
notice at least one (1) business day prior to such
termination stating the Companys intention to terminate
this Agreement pursuant to this
Section 9.01(h)
and
the basis for such termination.
Any proper termination of this Agreement pursuant to this
Section 9.01
shall be effective immediately upon the
delivery of written notice of the terminating Party to the other
Parties.
Section
9.02
Effect
of Termination
.
In the event of termination
of this Agreement as provided in
Section 9.01
, this
Agreement shall forthwith become void and have no effect,
without any liability or obligation on the part of Parent, Sub
or the Company, other than the provisions of the last sentence
of
Section 1.02(b)
, the last sentence of
Section 7.02
,
Sections 7.09(b)
,
(c)
and
(e)
,
Article XI
and this
Article IX
, which provisions shall survive such
termination;
provided
,
however
, that nothing
herein shall relieve any Party from liability for any breach of
any of its representations, warranties, covenants or agreements
set forth in this Agreement prior to such termination;
provided
,
further
,
however
, that any claim
against a Party for monetary damages shall be subject to the
limitations set forth in
Section 11.11
.
51
Section
9.03
Termination
Fees and Expenses
.
(a) If this Agreement is terminated by Parent pursuant to
Section 9.01(e)
, then the Company shall pay to the
Sponsor the Company Termination Fee by wire transfer of
same-day
funds within two (2) business days following the date of
such termination of this Agreement.
(b) If this Agreement is terminated by the Company pursuant
to
Section 9.01(f)
, then the Company shall pay the
Sponsor the Company Termination Fee by wire transfer of
same-day
funds, concurrently with, and as a condition to the
effectiveness of, such termination of this Agreement.
(c) If (i) after the date of this Agreement, a
Takeover Proposal shall have become publicly known and not
withdrawn, (ii) thereafter, this Agreement is terminated
(A) by Parent or the Company pursuant to
Section 9.01(b)(i)
, (B) by Parent or the
Company pursuant to
Section 9.01(b)(iii)
, or
(C) by Parent pursuant to
Section 9.01(c)
(unless the termination fee provided in Section 9.03(e) has
already been paid pursuant to the terms thereof), and
(iii) within 12 months after such termination, the
Company enters into a definitive agreement providing for any
transaction contemplated by any Takeover Proposal (regardless of
when made) (which transaction is thereafter consummated) or
consummates any Takeover Proposal (regardless of when made),
then, in any such case, the Company shall pay to the Sponsor the
Company Termination Fee (less the amount of expenses paid
pursuant to
Section 9.03(f)
) by wire transfer of
same-day
funds on the date such transaction is consummated. Solely for
purposes of this
Section 9.03(c)
, the term
Takeover Proposal
shall have the meaning
assigned to such term in
Section 6.02(a)
, except
that all references to 20% therein shall be deemed to be
references to 50%.
(d) If this Agreement is terminated by the Company pursuant
to (i)
Section 9.01(d)
due to a breach by Parent of
any of its representations or warranties or the failure by
Parent to perform any of its covenants or agreements set forth
in this Agreement, which breach or failure to perform is the
principal factor in the failure of the Offer or the Merger to be
consummated, (ii)
Section 9.01(g)
or (iii)
Section 9.01(h)
, in each case, then Parent shall pay
to the Company the Parent Termination Fee by wire transfer of
same-day
funds as promptly as reasonably practicable (and, in any event,
within two (2) business days following the date of
termination of this Agreement).
(e) If this Agreement is terminated by Parent pursuant to
Section 9.01(c)
due to a breach by the Company of
any of its representations or warranties or the failure by the
Company to perform any of its covenants or agreements set forth
in this Agreement, which breach or failure to perform is the
principal factor in the failure of the Offer or the Merger to be
consummated, then the Company shall pay a termination fee to
Sponsor in an amount equal to $175,000,000 by wire transfer of
same-day
funds as promptly as reasonably practicable (and, in any event,
within two (2) business days following the date of
termination of this Agreement).
(f) If this Agreement is terminated by Parent or the
Company pursuant to
Section 9.01(b)(iii)
, the
Company shall reimburse Parent for all documented
out-of-pocket
fees and expenses (including all fees and expenses of counsel,
accountants, investment bankers, financing sources (including
commitment fees), experts, consultants and the costs of all
filing fees and printing costs) incurred by Sponsor, Parent or
its Affiliates in connection with this Agreement or the
transactions contemplated hereby by payment to Sponsor of the
amount thereof by wire transfer of same day funds as promptly as
reasonably practicable (and, in any event, within two
(2) business days following request therefor);
provided
,
however
, that the maximum aggregate
amount of fees and expenses for which the Company shall be
required to reimburse Sponsor is $15,000,000.
(g) Each of the Company and Parent acknowledges and agrees
that the agreements contained in this
Section 9.03
are an integral part of the transactions contemplated by this
Agreement, and that, without these agreements, neither the
Company nor Parent would have entered into this Agreement;
accordingly, if the Company or Parent, as the case may be, fails
promptly to pay the fee or reimbursement amount due pursuant to
Section 9.03
, and, in order to obtain such payment,
Parent or the Company commences arbitration that results in an
award against the other party for such fee, the Company or
Parent, as the case may be, shall pay to the other party its
costs and expenses (including attorneys fees and expenses)
in connection with such arbitration, together with interest on
the amount of the applicable fee from the date such payment was
required
52
to be made until the date of payment at the prime lending rate
as published in
The Wall Street Journal
in effect on the
date such payment was required to be made.
Section
9.04
Amendment
.
This
Agreement may be amended by the Parties at any time before or
after the Offer Closing shall have occurred or receipt of the
Stockholder Approval;
provided
,
however
, that
(x) after the Offer Closing, there shall be no amendment
that decreases the Offer Price or the Merger Consideration, and
(y) after the Stockholder Approval has been obtained, there
shall be made no amendment that by Law requires further approval
by the stockholders of the Company without such approval having
been obtained. This Agreement may not be amended except by an
instrument in writing signed on behalf of each of the Parties.
Section
9.05
Extension;
Waiver
.
At any time prior to the Effective
Time, the Parties may (a) extend the time for the
performance of any of the obligations or other acts of the other
Parties, (b) to the extent permitted by Law, waive any
inaccuracies in the representations and warranties contained
herein or in any document delivered pursuant hereto, or
(c) subject to the proviso to the first sentence of
Section 9.04
and to the extent permitted by Law,
waive compliance with any of the agreements or conditions
contained herein. Any agreement on the part of a Party to any
such extension or waiver shall be valid only if set forth in an
instrument in writing signed on behalf of such party. The
failure of any Party to this Agreement to assert any of its
rights under this Agreement or otherwise shall not constitute a
waiver of such rights.
ARTICLE X
Interpretation
Section
10.01
Certain
Definitions
.
For purposes of this Agreement:
(a) an
Acceptable Confidentiality
Agreement
means a confidentiality and standstill
agreement with terms no less favorable to the Company in any
substantive respect than those contained in the Confidentiality
Agreement;
provided
that such confidentiality and
standstill agreement shall expressly not prohibit, or adversely
affect the rights of the Company thereunder upon, compliance by
the Company with any provision of this Agreement.
(b) an
Affiliate
of any person means
another person that directly or indirectly, through one or more
intermediaries, controls, is controlled by, or is under common
control with, such first person.
(c)
business day
means any day
except a Saturday, a Sunday or any other day on which commercial
banks are required or authorized to close in the City of New
York.
(d)
Company Disclosure Letter
means the letter dated as of the date of this Agreement
delivered by the Company to Parent and Sub prior to or in
connection with the execution and delivery of this Agreement.
(e)
Company Executive Team
means,
collectively, the persons set forth in
Section 10.01(e)
of the Company Disclosure Letter.
(f)
Company Termination Fee
means
$95,000,000, except if this Agreement is terminated by the
Company pursuant to
Section 9.01(f)
prior to the
No-Shop Period Start Date, then the Company Termination Fee
means $50,000,000.
(g)
Confidentiality Agreement
means the Non-Disclosure and Standstill Agreement, dated as of
April 26, 2010, by and between 3G Capital Partners Ltd. and
the Company.
(h)
Existing Credit Agreement
means the Amended and Restated Credit Agreement, dated
February 15, 2006, among Burger King Corporation, the
Company, the lenders party thereto, JPMorgan Chase Bank, N.A.,
as administrative agent, Citicorp North America, Inc., as
syndication agent, and Bank of America, N.A., RBC Capital
Markets and Wachovia Bank, National Association, as
documentation agents, in each case, as amended from time to time.
53
(i)
Financing Sources
means the
entities that have committed to provide or otherwise entered
into agreements in connection with the Debt Financing or
Alternative Debt Financing (in each case, other than the Equity
Financing) in connection with the transactions contemplated
hereby, including the lead arranger or arranger or any of the
parties to the Debt Commitment Letters and any joinder
agreements or credit agreements relating thereto.
(j)
Fee Letter
means any fee
letter entered into in connection with the Debt Commitment
Letter.
(k)
Knowledge
means (i) with
respect to the Company, the actual knowledge of any of the
persons set forth in
Section 10.01(k)
of the Company
Disclosure Letter, and (ii) with respect to Parent or Sub,
the actual knowledge of any of the officers of Parent or Sub.
(l)
Marketing Period
means the
first period of 25 consecutive business days commencing on
September 9, 2010 and throughout which (i) Parent
shall have the Required Information (it being understood that
Parent and Sub hereby acknowledge and agree that, as of the date
hereof, it has received the Required Information and as such the
Marketing Period shall commence on September 9, 2010), and
(ii) nothing has occurred and no condition exists that
would cause any of the conditions set forth in
Section 8.02(a)
,
Section 8.02(b)
or
Section 8.02(c)
to fail to be satisfied, assuming
that the Merger Closing Date were to be scheduled for any time
during such 25 consecutive-business-day period;
provided
that (x) the Marketing Period shall end on any earlier date
that is the date on which the Debt Financing is obtained,
(y) if such 25- consecutive-business day period has
commenced but not ended on or prior to December 16, 2010
then such period may not commence until January 2, 2011,
and (z) the Marketing Period shall not be deemed to have
commenced if, after the date hereof and prior to the completion
of the Marketing Period:
(i) KPMG LLP shall have withdrawn its audit opinion with
respect to any financial statements contained in the
Companys most recently filed Annual Report on
Form 10-K,
in which case the Marketing Period shall not be deemed to
commence unless and until, at the earliest, a new unqualified
audit opinion is issued with respect to the consolidated
financial statements of the Company for the applicable periods
by KPMG LLP or another independent public accounting firm;
(ii) the Company issues a public statement indicating its
intent to restate any historical financial statements of the
Company or that any such restatement is under consideration or
may be a possibility, in which case the Marketing Period shall
not be deemed to commence unless and until, at the earliest,
such restatement has been completed and the relevant SEC
Document or SEC Documents have been amended or the Company has
announced that it has concluded that no restatement shall be
required in accordance with GAAP; or
(iii) the Company shall have been delinquent in filing any
Quarterly Report on
Form 10-Q,
in which case the Marketing Period will not be deemed to
commence unless and until, at the earliest, such delinquencies
have been cured.
(m)
Material Adverse Effect
means
any change, effect, event or occurrence that individually or in
the aggregate with all other changes, effects, events or
occurrences, has had or would reasonably be expected to have a
material adverse effect on (a) the business, condition
(financial or otherwise), assets, liabilities or results of
operations of the Company and its Subsidiaries, taken as a
whole;
provided
that none of the following shall either
alone or in combination constitute, or be taken into account in
determining whether there has been, a Material Adverse Effect
for purposes of this clause (a): any change, effect, event or
occurrence directly arises out of or directly results from
(i) general economic, credit, capital or financial markets
or political conditions in the United States or elsewhere in the
world, including with respect to interest rates or currency
exchange rates, (ii) any outbreak or escalation of
hostilities, acts of war (whether or not declared), sabotage or
terrorism, (iii) any hurricane, tornado, flood, volcano,
earthquake or other natural or man-made disaster occurring after
the date of this Agreement, (iv) any change in applicable
Law or GAAP (or authoritative interpretation or enforcement
thereof) which is proposed, approved or enacted on or after the
date of this Agreement, (v) general conditions in the
industries in which the Company and its Subsidiaries primarily
operate, (vi) the failure, in and of itself,
54
of the Company to meet any internal or published projections,
forecasts, estimates or predictions in respect of revenues,
earnings or other financial or operating metrics before, on or
after the date of this Agreement, or changes after the date of
this Agreement in the market price or trading volume of the
Company Common Stock or the credit rating of the Company (it
being understood that the underlying facts giving rise or
contributing to such failure or change may be taken into account
in determining whether there has been a Material Adverse
Effect), (vii) the announcement and pendency of this
Agreement and the transactions contemplated hereby,
(viii) any action taken by the Company or its Subsidiaries
at Parents written request or otherwise required by this
Agreement, or (ix) the identity of, or any facts or
circumstances relating to Parent, Sub or their respective
Affiliates, except in the cases of clauses (i), (ii),
(iii) or (iv), to the extent that the Company and its
Subsidiaries, taken as a whole, are materially
disproportionately affected thereby as compared with other
participants in the industries in which the Company and its
Subsidiaries primarily operate (in which case the incremental
materially disproportionate impact or impacts may be taken into
account in determining whether there has been, or is reasonably
expected to be, a Material Adverse Effect), or (b) the
ability of the Company to perform its obligations under this
Agreement or to consummate the Merger.
(n)
Ordinary Course of Business
means the ordinary course of business and consistent with past
practice.
(o)
Parent Material Adverse
Effect
means any change, effect, event or
occurrence that prevents or materially impedes, interferes with,
hinders or delays (i) the consummation by Parent or Sub of
the Offer, the Merger or any of the other transactions
contemplated by this Agreement on a timely basis, including with
respect to Financing or the conditions to the drawdown of the
Financing, or (ii) the compliance by Parent or Sub of its
obligations under this Agreement in any material respect.
(p)
Parent Termination Fee
means
$175,000,000.
(q)
PATRIOT Act
means the Uniting
and Strengthening America by Providing Appropriate Tools
Required to Intercept and Obstruct Terrorism Act of 2001, as
amended.
(r)
Permitted Liens
mean
(i) mechanics, carriers, workmens,
warehousemens, repairmens or other like Liens
arising or incurred in the Ordinary Course of Business,
(ii) Liens for taxes, assessments and other governmental
charges and levies that are not due and payable or that may
thereafter be paid without interest or penalty, (iii) Liens
affecting the interest of the grantor of any easements
benefiting Owned Real Property, (iv) Liens (other than
liens securing indebtedness for borrowed money), defects or
irregularities in title, easements,
rights-of-way,
covenants, restrictions, and other, similar matters that would
not, individually or in the aggregate, reasonably be expected to
materially impair the continued use and operation of the assets
to which they relate, (v) zoning, building and other
similar codes and regulations, (vi) any conditions that
would be disclosed by a current, accurate survey or physical
inspection, and (vii) Liens discharged at or prior to the
Offer Closing or, if the Offer Termination shall occur, the
Offer Closing.
(s)
person
means an individual,
corporation (including
not-for-profit
corporation), general or limited partnership, limited liability
company, joint venture, association, trust, estate, association,
Governmental Authority, unincorporated organization or other
entity of any kind or nature, including the media.
(t)
Representative
means, with
respect to any person, any Subsidiary of such person and such
persons and each of its respective Subsidiaries
directors, officers, employees, investment bankers, financial
advisors, attorneys, accountants or other advisors, agents or
representatives.
(u) a
Subsidiary
of any person means
another person, an amount of the voting securities, other voting
rights or voting partnership interests of which is sufficient to
elect at least a majority of its board of directors or other
governing body (or, if there are no such voting interests, more
than 50% of the equity interests of which) is owned directly or
indirectly by such first person.
55
Section
10.02
Index
of Defined Terms
.
The following terms have
the meanings ascribed to them, as indicated below:
|
|
|
|
|
Acceleration Time
|
|
|
Section 3.04
|
|
Acceptable Confidentiality Agreement
|
|
|
Section 10.01(a)
|
|
Acceptance Time
|
|
|
Section 1.04(a)
|
|
Acquisition Agreement
|
|
|
Section 6.02(e)
|
|
Adverse Recommendation Change
|
|
|
Section 6.02(e)
|
|
Affiliate
|
|
|
Section 10.01(a)
|
|
Agreement
|
|
|
Preamble
|
|
Alternative Debt Financing
|
|
|
Section 7.06(b)
|
|
Appraisal Shares
|
|
|
Section 3.01(d)
|
|
Authorizations
|
|
|
Section 4.11(a)
|
|
Bridge Financing
|
|
|
Section 5.04
|
|
Bridge Take-Down
|
|
|
Section 7.08(f)
|
|
business day
|
|
|
Section 10.01(c)
|
|
Certificate
|
|
|
Section 3.01(c)
|
|
Certificate of Merger
|
|
|
Section 2.03
|
|
Claim
|
|
|
Section 7.06(b)
|
|
Code
|
|
|
Section 1.01(i)
|
|
Company
|
|
|
Preamble
|
|
Company 401(k) Plan
|
|
|
Section 4.03(a)
|
|
Company Benefit Agreement
|
|
|
Section 4.13(n)
|
|
Company Benefit Plan
|
|
|
Section 4.13(n)
|
|
Company Board
|
|
|
Section 4.04(b)
|
|
Company By Laws
|
|
|
Section 4.01
|
|
Company Certificate of Incorporation
|
|
|
Section 4.01
|
|
Company Common Stock
|
|
|
Recitals
|
|
Company Disclosure Letter
|
|
|
Section 10.01(d)
|
|
Company DSUs
|
|
|
Section 4.03(a)
|
|
Company Employee
|
|
|
Section 7.05(a)
|
|
Company Equity Awards
|
|
|
Section 4.03(a)
|
|
Company Executive Team
|
|
|
Section 10.01(e)
|
|
Company Intellectual Property
|
|
|
Section 4.16(a)
|
|
Company Preferred Stock
|
|
|
Section 4.03(a)
|
|
Company PSUs
|
|
|
Section 4.03(a)
|
|
Company RSUs
|
|
|
Section 4.03(a)
|
|
Company Stock Options
|
|
|
Section 4.03(a)
|
|
Company Stock Plans
|
|
|
Section 4.03(a)
|
|
Company Swaps
|
|
|
Section 4.24
|
|
Company Termination Fee
|
|
|
Section 10.01(f)
|
|
Compensation Committee
|
|
|
Section 4.13(f)
|
|
Confidentiality Agreement
|
|
|
Section 10.01(g)
|
|
Contract
|
|
|
Section 4.05
|
|
Debt Commitment Letter
|
|
|
Section 5.04
|
|
Debt Financing
|
|
|
Section 5.04
|
|
56
|
|
|
|
|
Debt Payoff
|
|
|
Section 7.09(a)(viii)
|
|
DGCL
|
|
|
Section 2.01
|
|
Effective Time
|
|
|
Section 2.03
|
|
Environmental Claims
|
|
|
Section 4.17(b)
|
|
Environmental Law
|
|
|
Section 4.17(b)
|
|
Equity Award Amounts
|
|
|
Section 3.04(e)
|
|
Equity Financing
|
|
|
Section 5.04
|
|
Equity Financing Commitment
|
|
|
Section 5.04
|
|
ERISA
|
|
|
Section 4.13(a)
|
|
ERISA Affiliate
|
|
|
Section 4.13(e)
|
|
Exchange Act
|
|
|
Section 1.01(a)
|
|
Exchange Fund
|
|
|
Section 3.03(a)
|
|
Existing Credit Agreement
|
|
|
Section 10.01(h)
|
|
Fairness Opinions
|
|
|
Section 4.29
|
|
FDD
|
|
|
Section 4.19(g)
|
|
Fee Letter
|
|
|
Section 10.01(h)
|
|
Filed SEC Documents
|
|
|
Article IV
|
|
Financing
|
|
|
Section 5.04
|
|
Financing Agreements
|
|
|
Section 5.04
|
|
Financing Proceeds Condition
|
|
|
Annex I
|
|
Financing Sources
|
|
|
Section 10.01(h)
|
|
First Quarter Dividend
|
|
|
Section 4.07(a)
|
|
Foreign Company Plan
|
|
|
Section 4.13(m)
|
|
Foreign Merger Control Laws
|
|
|
Section 4.05
|
|
Franchise
|
|
|
Section 4.19(a)
|
|
Franchise Laws
|
|
|
Section 4.11(b)
|
|
Franchised Restaurant
|
|
|
Section 4.19(a)
|
|
Franchisee
|
|
|
Section 4.19(g)
|
|
FTC Rule
|
|
|
Section 4.11(b)
|
|
GAAP
|
|
|
Section 4.06(b)
|
|
Goldman
|
|
|
Section 4.28
|
|
Governmental Authority
|
|
|
Section 4.05
|
|
group
|
|
|
Section 6.02(a)
|
|
Hazardous Materials
|
|
|
Section 4.17(b)
|
|
High Yield Financing
|
|
|
Section 5.04
|
|
HSR Act
|
|
|
Section 4.05
|
|
Indebtedness
|
|
|
Section 6.01(a)(viii)
|
|
Indemnified Party
|
|
|
Section 7.06(a)
|
|
Independent Directors
|
|
|
Section 1.04(a)
|
|
Information Statement
|
|
|
Section 4.05
|
|
Initial Offer Expiration Date
|
|
|
Section 1.01(d)
|
|
Intellectual Property
|
|
|
Section 4.16(d)
|
|
Judgment
|
|
|
Section 4.05
|
|
Knowledge
|
|
|
Section 10.01(k)
|
|
Law
|
|
|
Section 4.05
|
|
57
|
|
|
|
|
Liens
|
|
|
Section 4.02
|
|
Limited Guaranty
|
|
|
Section 5.05
|
|
Litigation
|
|
|
Section 4.08
|
|
Marketing Period
|
|
|
Section 10.01(l)
|
|
Material Adverse Effect
|
|
|
Section 10.01(m)
|
|
Merger
|
|
|
Recitals
|
|
Merger Closing
|
|
|
Section 2.02
|
|
Merger Closing Date
|
|
|
Section 2.02
|
|
Merger Consideration
|
|
|
Section 3.01(c)
|
|
Minimum Tender Condition
|
|
|
Annex I
|
|
Morgan Stanley
|
|
|
Section 4.28
|
|
New Debt Commitment Letter
|
|
|
Section 7.06(b)
|
|
No-Shop Period Start Date
|
|
|
Section 6.02(a)
|
|
Notice of Intended Recommendation Change
|
|
|
Section 6.02(f)(ii)(1)
|
|
NYSE
|
|
|
Section 1.04(a)
|
|
Offer
|
|
|
6, Recitals
|
|
Offer Closing
|
|
|
Section 1.01(e)
|
|
Offer Closing Date
|
|
|
Section 1.01(e)
|
|
Offer Conditions
|
|
|
Section 1.01(b)
|
|
Offer Determination Date
|
|
|
Section 1.01(f)
|
|
Offer Documents
|
|
|
Section 1.01(g)
|
|
Offer Price
|
|
|
Recitals
|
|
Offer Termination
|
|
|
Section 1.01(f)
|
|
Offer Termination Date
|
|
|
Section 1.01(f)
|
|
Ordinary Course of Business
|
|
|
Section 10.01(n)
|
|
Outside Date
|
|
|
Section 9.01(b)(i)
|
|
Owned Real Property
|
|
|
Section 4.15(a)
|
|
Parent
|
|
|
Preamble
|
|
Parent Group
|
|
|
Section 11.11(e)
|
|
Parent Group Member
|
|
|
Section 11.11(e)
|
|
Parent Material Adverse Effect
|
|
|
Section 10.01(o)
|
|
Parent Termination Fee
|
|
|
Section 10.01(p)
|
|
Parties
|
|
|
Preamble
|
|
Party
|
|
|
Preamble
|
|
PATRIOT Act
|
|
|
Section 10.01(q)
|
|
Paying Agency Agreement
|
|
|
Section 3.03(a)
|
|
Paying Agent
|
|
|
Section 3.03(a)
|
|
PBGC
|
|
|
Section 4.13(e)
|
|
Permitted Liens
|
|
|
Section 10.01(r)
|
|
person
|
|
|
Section 10.01(s)
|
|
Promissory Note
|
|
|
Section 1.03(b)
|
|
Proxy Statement
|
|
|
Section 7.01(a)
|
|
Proxy Statement Clearance Date
|
|
|
Section 1.01(d)
|
|
PSU Shares
|
|
|
Section 3.04(c)
|
|
Qualified Go Shop Bidder
|
|
|
Section 6.02(b)
|
|
58
|
|
|
|
|
Recommendation
|
|
|
Section 4.04(b)
|
|
Relationship Laws
|
|
|
Section 4.11(b)
|
|
Release
|
|
|
Section 4.17(b)
|
|
Representative
|
|
|
Section 10.01(t)
|
|
Required Information
|
|
|
Section 7.09(a)(iii)
|
|
Restraints
|
|
|
Section 8.01(c)
|
|
Schedule 14D 9
|
|
|
Section 1.02(a)
|
|
Schedule TO
|
|
|
Section 1.01(g)
|
|
SEC
|
|
|
Section 1.01(d)
|
|
SEC Documents
|
|
|
Section 4.06(a)
|
|
Securities Act
|
|
|
Section 1.03(c)
|
|
Seller Group
|
|
|
Section 11.11(e)
|
|
Seller Group Member
|
|
|
Section 11.11(e)
|
|
Solvent
|
|
|
Section 5.12
|
|
Specified Agreements
|
|
|
Section 4.19(a)
|
|
Specified Contract
|
|
|
Section 4.09(a)(ix)
|
|
Specified Leased Real Property
|
|
|
Section 4.15(b)
|
|
Specified Real Property Leases
|
|
|
Section 4.15(b)
|
|
Sponsor
|
|
|
Section 5.04
|
|
Sponsor Tender Agreements
|
|
|
Recitals
|
|
Stockholder Approval
|
|
|
Section 4.26
|
|
Stockholders Meeting
|
|
|
Section 7.01(c)
|
|
Sub
|
|
|
Preamble
|
|
Subsidiary
|
|
|
Section 10.01(u)
|
|
Superior Proposal
|
|
|
Section 6.02(b)
|
|
Surviving Corporation
|
|
|
Section 2.01
|
|
tail
|
|
|
Section 7.06(c)
|
|
Takeover Laws
|
|
|
Section 4.04(b)
|
|
Takeover Proposal
|
|
|
Section 6.02(a)
|
|
tax return
|
|
|
Section 4.14(c)
|
|
taxes
|
|
|
Section 4.14(c)
|
|
Title IV Plan
|
|
|
Section 4.13(e)
|
|
Top-Up
|
|
|
Section 1.03(a)
|
|
Top-Up
Closing
|
|
|
Section 1.03(b)
|
|
Top-Up
Shares
|
|
|
Section 1.03(a)
|
|
Transaction Litigation
|
|
|
Section 7.03(a)
|
|
Triggering Event
|
|
|
Section 9.01(e)
|
|
Voting Company Debt
|
|
|
Section 4.03(b)
|
|
Section
10.03
Interpretation
.
(a) When a reference is made in this Agreement to an
Article, a Section, Annex or Exhibit, such reference shall be to
an Article or a Section of, or an Annex or Exhibit to, this
Agreement unless otherwise indicated.
(b) The table of contents, headings and index of defined
terms contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or
interpretation of this Agreement.
59
(c) Whenever the words include,
includes or including are used in this
Agreement, they shall be deemed to be followed by the words
without limitation. The word will shall
be construed to have the same meaning and effect of the word
shall. The words hereof,
herein and hereunder and words of
similar import when used in this Agreement shall refer to this
Agreement as a whole and not to any particular provision of this
Agreement. The word extent in the phrase to
the extent shall mean the degree to which a subject or
other thing extends, and such phrase shall not mean simply
if. The word or when used in this
Agreement is not exclusive.
(d) The phrase made available, when used in
reference to anything made available to Parent, Sub or their
Representatives shall be deemed to mean uploaded to and made
available to Parent, Sub and their Representatives in the
on-line data room hosted on behalf of the Company in the on-line
workspace captioned Project Blue or otherwise being
in the possession of Parent, Sub or their Representatives (and
in such case accessible without limitation to Parent and Sub).
(e) The Parties have participated jointly in negotiating
and drafting this Agreement. In the event that an ambiguity or a
question of intent or interpretation arises, this Agreement
shall be construed without regard to any presumption or rule
requiring construction or interpretation against the Party
drafting or causing any instrument to be drafted.
(f) References to a person are also to its permitted
successors and assigns. All terms defined in this Agreement
shall have the defined meanings when used in any certificate or
other document made or delivered pursuant hereto unless
otherwise defined therein.
(g) All capitalized terms not defined in the Company
Disclosure Letter shall have the meanings ascribed to them in
this Agreement. Any information set forth in one section or
subsection of the Company Disclosure Letter shall be deemed to
apply to and qualify the Section or subsection of this Agreement
to which it corresponds in number and each other Section or
subsection of this Agreement (other than
Section 4.03
,
Section 4.04
,
Section 4.25
,
Section 4.26
,
Section 4.27
,
Section 4.28
and
Section 4.29
, which matters shall only be disclosed
by specific disclosure in the respective corresponding section
of the Company Disclosure Letter) to the extent that it is
reasonably apparent on its face that such information is
relevant to such other Section or subsection. No disclosure in
the Company Disclosure Letter relating to any possible breach or
violation of any contract or Law shall be construed as an
admission or indication that any such breach or violation exists
or has actually occurred.
(h) The definitions contained in this Agreement are
applicable to the singular as well as the plural forms of such
terms and to the masculine as well as to the feminine and neuter
genders of such term.
(i) Any agreement, instrument or statute defined or
referred to herein or in any agreement or instrument that is
referred to herein means such agreement, instrument or statute
as from time to time amended, modified or supplemented,
including (in the case of agreements or instruments) by waiver
or consent and (in the case of statutes) by succession of
comparable successor statutes and references to all attachments
thereto and instruments incorporated therein.
(j) Whenever this Agreement requires a Subsidiary of the
Company to take any action, such requirement shall be deemed to
include an undertaking on the part of the Company to cause such
Subsidiary to take such action and, after the Effective Time, on
the part of Parent and the Surviving Corporation to cause such
Subsidiary to take such action. Whenever this Agreement requires
Sub to take any action, such requirement shall be deemed to
include an undertaking on the part of Parent to cause such Sub
to take such action.
ARTICLE XI
General
Provisions
Section
11.01
Nonsurvival
of Representations and Warranties
.
None of
the representations and warranties in this Agreement or in any
instrument delivered pursuant to this Agreement shall survive
the Effective Time. This
Section 11.01
shall not
limit any covenant or agreement of the parties which by its
terms contemplates performance after the Effective Time.
60
Section
11.02
Expenses
.
Except
as provided in
Section 9.03
, all fees and expenses
incurred in connection with this Agreement, the Offer, the
Merger and the other transactions contemplated by this Agreement
shall be paid by the party incurring such fees or expenses,
whether or not the Offer, the Merger or any of the other
transactions contemplated by this Agreement are consummated.
Section
11.03
Notices
.
Except
for notices that are specifically required by the terms of this
Agreement to be delivered orally, all notices, requests, claims,
demands and other communications hereunder shall be in writing
and shall be deemed given when received if delivered personally;
when transmitted if transmitted by facsimile (with written
confirmation of transmission); the business day after it is
sent, if sent for next day delivery to a domestic address by
overnight courier (providing proof of delivery) to the Parties
at the following addresses (or at such other address for a Party
as shall be specified by like notice):
if to Parent or Sub, to:
Blue Acquisition Holding Corporation
c/o 3G
Capital Partners Ltd.
600 Third Avenue, 37th Floor
New York, New York 10016
Fax No.:
(212) 893-6728
|
|
|
|
Attention:
|
Alexandre Behring
|
Daniel Schwartz
with a copy (which shall not constitute notice) to:
Kirkland & Ellis LLP
601 Lexington Avenue
New York, New York 10022
Fax No.:
(212) 446-6460
|
|
|
|
Attention:
|
Stephen Fraidin, Esq.
|
William B. Sorabella, Esq.
if to the Company, to:
Burger King Holdings, Inc.
5505 Blue Lagoon Drive
Miami, Florida 33126
Fax No.:
(305) 378-7112
Attention: Anne Chwat
with a copy (which shall not constitute notice) to:
Skadden, Arps, Slate, Meagher & Flom LLP
Four Times Square
New York, New York 10036
Fax No.:
(212) 735-2000
|
|
|
|
Attention:
|
Eileen T. Nugent, Esq.
|
Richard J. Grossman, Esq.
Thomas W. Greenberg, Esq.
and
Holland & Knight LLP
701 Brickell Avenue, Suite 3000
Miami, Florida 33131
Fax No.: (305)
679-6311
Attention: Kara MacCullough, Esq.
Section
11.04
Entire
Agreement
.
This Agreement, together with the
Confidentiality Agreement, the Equity Financing Commitment, the
Limited Guaranty and the Sponsor Tender Agreements, constitute
the entire agreement, and supersede all prior agreements and
understandings, both written and oral, among the Parties with
61
respect to the subject matter of this Agreement and the
Confidentiality Agreement;
provided
that the
Confidentiality Agreement (including the standstill restrictions
therein) shall survive the execution and delivery of this
Agreement except that the standstill restrictions, restrictions
on contact and restrictions on designations of approved
financing sources in the Confidentiality Agreement shall
terminate (solely with respect to 3G Capital Partners Ltd. and
its Affiliates, including Parent and Sub, and not for any other
person or for purposes of the definition of an Acceptable
Confidentiality Agreement) immediately following the execution
and delivery of this Agreement solely for purposes of permitting
the Offer or any other action contemplated hereby.
Section
11.05
No
Third-Party Beneficiaries
.
Except for the
provisions of (i)
Section 7.06
and (ii) with
respect to the Financing Sources, the provisions of
Section 11.08(c)
,
Section 11.09
and
Section 11.11(e)
, neither this Agreement nor any
other agreement contemplated hereby are not intended to or shall
confer upon any person other than the Parties hereto and thereto
any legal or equitable rights or remedies. Notwithstanding the
immediately preceding sentence, following the Effective Time,
the provisions of
Article II
relating to the payment
of the Merger Consideration shall be enforceable by holders of
Certificates or Company Equity Awards. The representations and
warranties in this Agreement are the product of negotiations
among the Parties and are for the sole benefit of the Parties.
Any inaccuracies in such representations and warranties are
subject to waiver by the Parties in accordance with
Section 9.05
without notice or liability to any
other person. The representations and warranties in this
Agreement may represent an allocation among the Parties of risks
associated with particular matters.
Section
11.06
Assignment
.
Neither
this Agreement nor any of the rights, interests or obligations
hereunder shall be assigned, in whole or in part, by operation
of law or otherwise by any of the Parties without the prior
written consent of the other Parties, and any assignment without
such consent shall be null and void;
provided
,
however
, that, prior to the Merger Closing, Parent and
Sub may assign this Agreement (in whole but not in part) to
Parent or any of its Affiliates
and/or
to
any parties providing the Financing pursuant to the terms
thereof (including for purposes of creating a security interest
herein or otherwise assign as collateral in respect of such
Financing). No assignment by any Party shall relieve such Party
of any of its obligations hereunder. Subject to the immediately
preceding sentences, this Agreement will be binding upon, inure
to the benefit of, and be enforceable by, the parties and their
respective successors and assigns.
Section
11.07
GOVERNING
LAW
.
THIS AGREEMENT AND ANY LITIGATION
(WHETHER AT LAW, IN CONTRACT OR IN TORT) THAT MAY BE DIRECTLY OR
INDIRECTLY BASED UPON, RELATING TO ARISING OUT OF THIS AGREEMENT
OR ANY TRANSACTION CONTEMPLATED HEREBY (INCLUDING THE EQUITY
FINANCING COMMITMENT OR THE DEBT COMMITMENT LETTER), OR THE
NEGOTIATION, EXECUTION OR PERFORMANCE HEREOF OR THEREOF, SHALL
BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF
THE STATE OF DELAWARE, REGARDLESS OF THE LAWS THAT MIGHT
OTHERWISE GOVERN UNDER APPLICABLE PRINCIPLES OF CONFLICTS OF
LAWS THEREOF.
Section
11.08
Jurisdiction;
Service of Process
.
(a) Each of the Parties irrevocably submits to the
exclusive jurisdiction of the courts of the State of Delaware
and to the jurisdiction of the United States District Court
sitting in New Castle County in the State of Delaware for the
purpose of any Litigation directly or indirectly based upon,
relating to arising out of this Agreement or any transaction
contemplated hereby (including the Equity Financing Commitment
or the Debt Commitment Letter) or the negotiation, execution or
performance hereof or thereof, and each of the Parties hereby
irrevocably agrees that all claims in respect to such action or
proceeding shall be brought in, and may be heard and determined,
exclusively in such state or federal courts. Each of the Parties
irrevocably and unconditionally waives any objection to the
laying of venue in, and any defense of inconvenient forum to the
maintenance of, any action or proceeding so brought. Each of the
Parties agrees that a final judgment in any action or proceeding
shall be conclusive and may be enforced in other jurisdictions
by suit on the judgment or in any other manner provided by Law.
(b) Each of the Parties irrevocably consents to the service
of the summons and complaint and any other process in any other
action or proceeding relating to the transactions contemplated
by this Agreement, on behalf of itself or its property, by
personal delivery of copies of such process to such party at the
addresses set
62
forth in
Section 11.03
. Nothing in this
Section 11.08
shall affect the right of any party to
serve legal process in any other manner permitted by Law.
(c) EACH OF THE PARTIES AGREES THAT IT WILL NOT BRING OR
SUPPORT ANY LITIGATION OF ANY KIND OR DESCRIPTION (INCLUDING ANY
CROSS-CLAIM OR THIRD-PARTY CLAIM), WHETHER IN LAW OR IN EQUITY,
WHETHER IN CONTRACT OR IN TORT OR OTHERWISE, AGAINST ANY OF THE
FINANCING SOURCES IN ANY WAY RELATING TO THIS AGREEMENT OR ANY
OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT, INCLUDING
ANY DISPUTE ARISING OUT OF OR RELATING IN ANY WAY TO THE DEBT
COMMITMENT LETTER OR THE PERFORMANCE THEREOF, IN EACH CASE, IN
ANY FORUM OTHER THAN THE SUPREME COURT OF THE STATE OF NEW YORK,
COUNTY OF NEW YORK, OR, IF UNDER APPLICABLE LAW EXCLUSIVE
JURISDICTION IS VESTED IN THE FEDERAL COURTS, THE UNITED STATES
DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK (AND
APPELLATE COURTS THEREOF).
Section
11.09
WAIVER
OF JURY TRIAL
.
EACH PARTY ACKNOWLEDGES AND
AGREES THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT
IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND
THEREFORE EACH SUCH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY
WAIVES ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN ANY
LITIGATION DIRECTLY OR INDIRECTLY BASED UPON, RELATING TO
ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED
HEREBY (INCLUDING THE EQUITY FINANCING COMMITMENT OR THE DEBT
COMMITMENT LETTER) OR THE NEGOTIATION, EXECUTION OR PERFORMANCE
HEREOF OR THEREOF. EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT
(I) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY
HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY
WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE
FOREGOING WAIVER, (II) EACH PARTY UNDERSTANDS AND HAS
CONSIDERED THE IMPLICATION OF THIS WAIVER, (III) EACH PARTY
MAKES THIS WAIVER VOLUNTARILY AND (IV) EACH PARTY HAS BEEN
INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE
MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.
Section
11.10
Specific
Performance; Remedies
.
(a) The Parties agree that irreparable damage for which
monetary damages, even if available, would not be an adequate
remedy, would occur in the event that any provision of this
Agreement (including failing to take such actions as are
required of it hereunder to consummate the Merger, the Offer or
the transactions contemplated hereby) is not performed in
accordance with its specific terms or is otherwise breached.
Accordingly, the Parties agree that, prior to the valid
termination of this Agreement in accordance with
Section 9.01
and in all cases subject to the
specific requirements set forth in
Section 11.10(b)
(as it relates to obtaining a remedy contemplated by this
Section 11.10(a)
with respect to causing the Equity
Financing to be funded) or
Section 11.10(c)
(as it
relates to obtaining a remedy contemplated by this
Section 11.10(a)
with respect to the Bridge
Take-Down), each Party shall be entitled to an injunction or
injunctions, or any other appropriate form of specific
performance or equitable relief, to prevent breaches of this
Agreement and to enforce specifically the terms and provisions
hereof in any arbitration or any court of competent
jurisdiction, in each case in accordance with
Section 11.08
, this being in addition to any other
remedy to which they are entitled under the terms of this
Agreement at law or in equity.
(b) Notwithstanding the foregoing the right of the Company
to obtain an injunction, or other appropriate form of specific
performance or equitable relief, in each case, solely with
respect to causing Parent and Sub to, or to directly, cause the
Equity Financing to be funded at any time but only
simultaneously with the receipt of the Debt Financing (whether
under this Agreement, the Equity Financing Commitment or the
Limited Guaranty) shall be subject to the requirements that:
(i) with respect to any funding of the Equity Financing to
occur at the Offer Closing, all of the Offer Conditions (other
than the Financing Proceeds Condition) shall have been satisfied
or waived as of the expiration of the Offer, and, with respect
to any funding of the Equity Financing to occur at the Merger
63
Closing, all the conditions set forth in
Section 8.01
(other than
Section 8.01(d)
, to the extent the Offer Termination
has occurred) and
Section 8.02
would have been
satisfied if the Merger Closing were to have occurred at such
time (other than those conditions that by their terms are to be
satisfied by actions taken at the Merger Closing, each of which
shall be capable of being satisfied at the Merger Closing),
(ii) the Debt Financing (or, in the case Alternative Debt
Financing has been obtained in accordance with
Section 7.08(c)
for all the Debt Financing, such
Alternative Debt Financing) has been funded or would be funded
in accordance with the terms thereof at the Offer Closing or the
Merger Closing, as applicable, if the Equity Financing is funded
at the Offer Closing or the Merger Closing, as
applicable, and
(iii) the Company has irrevocably confirmed to Parent in
writing that if the Equity Financing and the Debt Financing were
funded, it would take such actions that are within its control
to cause the Merger Closing to occur.
(c) The right of the Company to obtain an injunction, or
other appropriate form of specific performance or equitable
relief, in each case, solely with respect to causing Parent and
Sub to effect a Bridge Take-Down shall be subject to the
requirements set forth in
Section 7.08(f)
.
(d) The Parties agree not to assert that a remedy of
specific enforcement is unenforceable, invalid, contrary to Law
or inequitable for any reason, nor to assert that a remedy of
monetary damages would provide an adequate remedy. Each of the
Company and Parent acknowledges and agrees that, except as set
forth in
Section 11.10(b)
, (i) each party shall
be entitled to seek to specifically enforce the terms and
provisions of this Agreement notwithstanding the availability of
any monetary remedy set forth in
Section 9.03
,
(ii) the provisions set forth in
Section 9.03
(A) are not intended to and do not adequately compensate
for the harm that would result from a breach of this Agreement
and (B) shall not be construed to diminish or otherwise
impair in any respect any partys right to specific
enforcement, and (iii) the right of specific enforcement is
an integral part of the transactions contemplated by this
Agreement and without that right, neither the Company nor Parent
would have entered into this Agreement.
Section
11.11
Maximum
Recourse; Limitation on
Liability
.
Notwithstanding anything in this
Agreement to the contrary, but subject to
Section 11.10
:
(a)
Company Maximum Liability
.
The
maximum aggregate liability of the Company and its Subsidiaries
for monetary damages in connection with this Agreement or any of
the transactions contemplated hereby shall be limited to
$175,000,000, and in no event shall Sponsor, Parent or Sub seek
or obtain, nor shall they permit any of their respective
Representatives or any other person on its or their behalf to
seek or obtain, nor shall any person be entitled to seek or
obtain, any monetary recovery or award in excess of $175,000,000
against the Company and its Subsidiaries, and in no event shall
Sponsor, Parent or Sub be entitled to seek or obtain any
monetary damages of any kind in excess of $175,000,000 against
the Company and its Subsidiaries, including consequential,
special, indirect or punitive damages for, or with respect to,
this Agreement or the transactions contemplated hereby and
thereby (including, any breach by the Company), the termination
of this Agreement, the failure to consummate the transactions
contemplated by this Agreement or any claims or actions under
applicable Law arising out of any such breach, termination or
failure;
provided
,
however
, that in no event shall
Parent (on behalf of itself and its Affiliates) be entitled to
both (x) the receipt of the Company Termination Fee or the
$175,000,000 fee under
Section 9.03(e)
or recovery
of monetary damages against the Company or any of its
Subsidiaries, and (y) specific enforcement of this
Agreement.
(b)
Parent and Sub Maximum
Liability
.
The maximum aggregate liability of
Sponsor, Parent and Sub for monetary damages in connection with
this Agreement or any of the transactions contemplated hereby
(including the Financing) shall be limited to the amount of the
Parent Termination Fee, and in no event shall the Company seek
or obtain, nor shall it permit any of the Representatives or any
other person on its or their behalf to seek or obtain, nor shall
any person be entitled to seek or obtain, any monetary recovery
or award in excess of the amount of the Parent Termination Fee
against Sponsor, Parent or Sub, and in no event shall the
Company or any of its Subsidiaries be entitled to seek or obtain
any monetary
64
damages of any kind in excess of the amount of the Parent
Termination Fee against Sponsor, Parent or Sub, including
consequential, special, indirect or punitive damages for, or
with respect to, this Agreement or the Limited Guaranty or the
transactions contemplated hereby and thereby (including, any
breach by Sponsor, Parent or Sub), the termination of this
Agreement, the failure to consummate the transactions
contemplated by this Agreement or any claims or actions under
applicable Law arising out of any such breach, termination or
failure;
provided
,
however
, that in no event shall
the Company be entitled to both (x) the receipt of the
Parent Termination Fee or recovery of monetary damages against
Sponsor, Parent or Sub or any of their Subsidiaries, and
(y) specific enforcement of this Agreement.
(c)
Termination Fees
.
In no event
shall (i) the Company be required to pay any termination
fee (whether the Company Termination Fee or the termination fee
provided in
Section 9.03(e)
) on more than one
occasion or (ii) Parent be required to pay the Parent
Termination Fee on more than one occasion. Notwithstanding
anything to the contrary in this Agreement, (x) if Parent
receives the Company Termination Fee from the Company pursuant
to
Section 9.03
or the termination fee provided in
Section 9.03(e), then any such payment shall be the sole
and exclusive remedy of Parent and Sub against the Company and
its Subsidiaries and any of their respective former, current or
future officers, directors, partners, equity holders, managers,
members or Affiliates and none of the Company, any of its
Subsidiaries or any of their respective former, current or
future officers, directors, partners, stockholders, managers,
members or Affiliates shall have any further liability or
obligation relating to or arising out of this Agreement or the
transactions contemplated hereby, (y) if the Company
receives the Parent Termination Fee from Parent pursuant to
Section 9.03
, such payment shall be the sole and
exclusive remedy of the Company against any of Sponsor, Parent
or Sub and their respective Subsidiaries and any of their
respective former, current or future officers, directors,
partners, stockholders, managers, members or Affiliates and none
of Sponsor, Parent or Sub and their respective Subsidiaries and
any of their respective former, current or future officers,
directors, partners, stockholders, managers, members or
Affiliates shall have any further liability or obligation
relating to or arising out of this Agreement or the transactions
contemplated hereby or (z) if Parent or Sub receives any
payments from the Company in respect of any breach of this
Agreement, and thereafter Parent is entitled to receive the
Company Termination Fee under
Section 9.03
, the
amount of such Company Termination Fee shall be reduced by the
aggregate amount of any payments made by the Company to Parent
or Sub in respect of any such breaches of this Agreement.
(d)
Non-Recourse
Parties
.
Notwithstanding anything to the
contrary in this Agreement, in no event shall (i) any
Non-Recourse Parent Party (as defined in the Equity Financing
Commitment, which excludes, for the avoidance of doubt, Sponsor,
Parent and Sub) have any liability for monetary damages to the
Company or its Subsidiaries relating to or arising out of this
Agreement or the transactions contemplated hereby, other than
Sponsors obligations under the Limited Guaranty and the
Equity Financing Commitment and any liability of 3G Capital
Partners Ltd. under the Confidentiality Agreement and other than
the obligations of Parent and Sub to the extent expressly
provided herein, or (ii) any former, current or future
general or limited partners, equityholders, directors, officers,
employees, managers, members, Affiliates or agents of the
Company or its Subsidiaries have any liability to Sponsor,
Parent or Sub or any Non-Recourse Parent Party for monetary
damages relating to or arising out of this Agreement or the
transactions contemplated hereby, other than the obligations of
the Company to the extent expressly provided herein. In no event
shall the Company seek or obtain, nor shall they permit any of
the Representatives to seek or obtain, nor shall any person be
entitled to seek or obtain, any monetary recovery or monetary
award against any Non-Recourse Parent Party with respect to,
this Agreement or the Limited Guaranty or the transactions
contemplated hereby and thereby (including, any breach by
Sponsor, Parent or Sub), the termination of this Agreement, the
failure to consummate the transactions contemplated by this
Agreement or any claims or actions under applicable Law arising
out of any such breach, termination or failure, other than from
Parent or Sub to the extent expressly provided for in this
Agreement or the Sponsor to the extent expressly provided for in
the Limited Guaranty and the Equity Financing Commitment.
65
(e)
Financing Sources
.
The
Companys right to specific performance set forth in
Section 11.10
or as provided in the Equity Financing
Commitment with respect thereto, the Companys right to
receive payment of an amount up to the Parent Termination Fee
from Parent, and the guarantee thereof pursuant to the Limited
Guaranty (including in respect of any breach by Sponsor, Parent
or Sub) shall be the sole and exclusive remedy of the Company or
any of its Representatives or Affiliates (collectively, the
Seller Group
and each, a
Seller
Group Member
), against (i) the Non-Recourse
Parent Parties, (ii) any Financing Source, or
(iii) any of the respective former, current, or future
Affiliates or Representatives of Parents Lenders
(collectively, the
Parent Group
and each a
Parent Group Member
)), for all losses, claims
or liabilities suffered by any Seller Group Member as a result
of any breach of this Agreement by Parent or Sub or any breach
of the other agreements contemplated hereby, including the Debt
Commitment Letter or the Equity Financing Commitment by any
person in the Parent Group party thereto, the failure of the
Offer to be completed or the Merger to be consummated or in any
other respect with respect to this Agreement or any other
agreement contemplated hereby, and, upon payment of the Parent
Termination Fee or monetary damages in an aggregate amount equal
to the Parent Termination Fee paid by the Sponsor, Parent or Sub
or any of their Subsidiaries, none of the Parent Group Members
shall have any further liability or obligation relating to or
arising out of this Agreement, the other agreements contemplated
hereby or any of the transactions contemplated hereby or thereby
under any theory or with respect to any claim, whether sounding
in law or equity. Without modifying or qualifying in any way the
preceding sentence or implying any intent contrary thereto, for
the avoidance of doubt, in no event shall any Seller Group
Member be entitled to seek or obtain any other damages of any
kind against any such Parent Group Member (including any of the
Financing Sources), including consequential, special, indirect
or punitive damages for, or with respect to, this Agreement or
the Limited Guaranty or the transactions contemplated hereby and
thereby (including, any breach by Parent or Sub), the
termination of this Agreement, the failure to consummate the
transactions contemplated by this Agreement or any claims or
actions under applicable Law arising out of any such breach,
termination or failure. Immediately following receipt by the
Company of the Parent Termination Fee or monetary damages in an
aggregate amount equal to the Parent Termination Fee paid by the
Sponsor, Parent or Sub or any of their Subsidiaries, the Company
shall cause all Seller Group Members to dismiss with prejudice
any judicial or arbitral proceeding initiated by any of them
with respect to this Agreement or the Limited Guaranty or the
transactions contemplated hereby or thereby or the transactions
contemplated hereby or thereby against any Parent Group Member.
For the avoidance of doubt, in no event shall any Parent Group
Member be subject to, nor shall any Seller Group Member, seek to
recover, nor shall they accept, monetary damages in excess of
the Parent Termination Fee (it being understood that this
limitation shall apply in the aggregate to the entire Seller
Group).
(f)
Effect on Limitations
.
The
Parties acknowledge and agree that nothing in this
Section 11.11
shall be deemed to affect any
Partys right to specific enforcement pursuant to and in
accordance with
Section 11.10
.
Section
11.12
Severability
.
If
any term or other provision of this Agreement is invalid,
illegal or incapable of being enforced by any rule of law or
public policy, all other conditions and provisions of this
Agreement shall nevertheless remain in full force and effect so
long as the economic or legal substance of the transactions
contemplated hereby is not affected in any manner materially
adverse to any Party. Upon such determination that any term or
other provision is invalid, illegal or incapable of being
enforced, the Parties shall negotiate in good faith to modify
this Agreement so as to effect the original intent of the
parties as closely as possible to the fullest extent permitted
by applicable Law in an acceptable manner to the end that the
transactions contemplated hereby are fulfilled to the extent
possible.
Section
11.13
Counterparts;
Facsimile and Electronic Signatures
.
This
Agreement may be executed in one or more counterparts, all of
which shall be considered one and the same agreement and shall
become effective when one or more counterparts have been signed
by each of the parties and delivered to the other parties. This
Agreement or any counterpart may be executed and delivered by
facsimile copies or delivered by electronic communications by
portable document format (.pdf), each of which shall be deemed
an original.
{Remainder of page intentionally left blank.}
66
IN WITNESS WHEREOF, Parent, Sub and the Company have caused this
Agreement to be signed by their respective officers thereunto
duly authorized, all as of the date first written above.
BLUE ACQUISITION HOLDING CORPORATION
Name: Daniel Schwartz
Title: Vice President
BLUE ACQUISITION SUB, INC.
Name: Daniel Schwartz
Title: Vice President
BURGER KING HOLDINGS, INC.
Name: John W. Chidsey
Title: Chief Executive
Officer
[Signature
Page to the Merger Agreement]
67
ANNEX I
Conditions
to the Offer
Notwithstanding any other term of the Offer or this Agreement,
Sub shall not be required to, and Parent shall not be required
to cause Sub to, accept for payment or, subject to any
applicable rules and regulations of the SEC, including
Rule 14e-1(c)
under the Exchange Act (relating to Subs obligation to pay
for or return tendered shares of Company Common Stock promptly
after the termination or withdrawal of the Offer), pay for any
shares of Company Common Stock tendered pursuant to the Offer
if: (a) there shall have not been validly tendered and not
validly withdrawn prior to the expiration of the Offer that
number of shares of Company Common Stock which, when added to
the shares of Company Common Stock owned by Parent and its
Affiliates, would represent at least 79.1% of the shares of the
Company Common Stock outstanding as of the expiration of the
Offer (the
Minimum Tender Condition
);
(b) the waiting period applicable to the purchase of shares
of Company Common Stock pursuant to the Offer and the
consummation of the Merger under the HSR Act (or any extension
thereof) shall have neither expired nor terminated;
(c) Parent (either directly or through its Subsidiaries)
shall not have received the proceeds of the Debt Financing (or
any Alternative Debt Financing)
and/or
the
lenders party to the Debt Financing Letter (or New Debt
Commitment Letter for any Alternative Debt Financing) shall not
have confirmed to Parent or Sub that the Debt Financing (or any
Alternative Debt Financing) in an amount sufficient to
consummate the Offer and the Merger will be available at the
Offer Closing on the terms and conditions set forth in the Debt
Financing Letter (or New Debt Commitment Letter for any
Alternative Debt Financing) (
Financing Proceeds
Condition
), or (d) any of the following
conditions shall have occurred and be continuing as of the
expiration of the Offer:
(i) there shall be any Restraint in effect enjoining or
otherwise preventing or prohibiting the making of the Offer or
the consummation of the Merger or the Offer;
(ii) the consummation of the Offer is unlawful under any
Foreign Merger Control Law of any jurisdiction set forth in
Section 8.01(b) of the Company Disclosure Letter;
(iii) any of the representations and warranties of the
Company (A) set forth in
Section 4.03
,
Section 4.04
,
Section 4.26
and
Section 4.27
shall not be true and correct in all
material respects, (B) set forth in
Section 4.07
shall not be true and correct without
disregarding the Material Adverse Effect
qualification set forth therein and (C) set forth in this
Agreement, other than those described in clauses (A) and
(B) above, shall not be true and correct (disregarding all
qualifications or limitations as to materiality,
Material Adverse Effect and words of similar import
set forth therein), except, in the case of this clause (C),
where the failure of such representations and warranties to be
so true and correct would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect and
except, in each case, to the extent such representations and
warranties are made as of a specific date (in which case such
representations and warranties shall not be true and correct
(subject to such qualifications) as of such specific date only);
(iv) the Company shall have failed to perform or comply in
all material respects with its obligations required to be
performed or complied with by it under this Agreement;
(v) since the date of this Agreement, there shall have
occurred any change, event or occurrence that has had or would
reasonably be expected to have a Material Adverse Effect;
(vi) as of immediately prior to the Offer Closing Date
(and, for the avoidance of doubt, before giving effect to the
incurrence of the Debt Financing and the consummation of the
transactions contemplated by this Agreement and such Debt
Financing), the Company is not Solvent;
(vii) in the event that the exercise of the
Top-Up
is
necessary to ensure that Parent or Sub owns at least 90% of the
outstanding shares of Company Common Stock immediately after the
Acceptance Time, there shall exist under applicable Law or other
Restraint any restriction or legal impediment on Subs
ability and right to exercise the
Top-Up,
or
the shares of Company Common Stock issuable upon exercise of the
Top-Up
together with the shares of Company Common Stock validly
tendered in the Offer and not
I-1
properly withdrawn are insufficient for Sub to owns at least 90%
of the outstanding shares of Company Common Stock;
(viii) a Triggering Event shall have occurred; and
(ix) this Agreement shall have been terminated in
accordance with its terms.
At the request of Parent, the Company shall deliver to Parent a
certificate executed on behalf of the Company by the chief
executive officer or the chief financial officer of the Company
certifying that none of the conditions set forth in clauses
(d)(iii), (d)(iv), (d)(v) and (d)(vi) above shall have occurred
and be continuing as of the expiration of the Offer.
For purposes of determining whether the Minimum Tender Condition
and the condition set forth in clause (d)(vii) have been
satisfied, Parent and Sub shall have the right to include or
exclude for purposes of its determination thereof shares
tendered in the Offer pursuant to guaranteed delivery procedures.
The foregoing conditions shall be in addition to, and not a
limitation of, the rights and obligations of Parent and Sub to
extend, terminate or modify the Offer pursuant to the terms and
conditions of this Agreement.
The foregoing conditions are for the sole benefit of Parent and
Sub and, subject to the terms and conditions of this Agreement
and the applicable rules and regulations of the SEC, may be
waived by Parent and Sub in whole or in part at any time and
from time to time in their sole discretion (other than the
Minimum Tender Condition). The failure by Parent or Sub at any
time to exercise any of the foregoing rights shall not be deemed
a waiver of any such right and each such right shall be deemed
an ongoing right that may be asserted at any time and from time
to time.
The capitalized terms used in this Annex I and not defined
in this Annex I shall have the meanings set forth in the
Agreement and Plan of Merger, dated as of September 2,
2010, by and among Blue Acquisition Holding Corporation, Blue
Acquisition Sub, Inc. and Burger King Holdings, Inc.
I-2
Annex B
MORGAN
STANLEY OPINION
September 1,
2010
Board of Directors
Burger King Holdings, Inc.
5505 Blue Lagoon Drive
Miami, Florida 33126
Members of the Board:
We understand that Burger King Holdings, Inc. (Burger
King or the Company), Blue Acquisition Holding
Corporation (the Buyer), and Blue Acquisition Sub,
Inc., a wholly owned subsidiary of the Buyer (Acquisition
Sub), propose to enter into an Agreement and Plan of
Merger, substantially in the form of the draft dated
September 1, 2010 (the Merger Agreement), which
provides, among other things, for (i) the commencement by
Acquisition Sub of a tender offer (the Tender Offer)
for all outstanding shares of common stock, par value $0.01 per
share (the Company Common Stock) of the Company for
$24.00 per share in cash (the Consideration), and
(ii) the subsequent merger (the Merger) of
Acquisition Sub with and into the Company. Pursuant to the
Merger, the Company will become a wholly owned subsidiary of the
Buyer, and each outstanding share of the Company Common Stock,
other than shares held in treasury, shares held by the Buyer or
Acquisition Sub or shares as to which dissenters rights
have been perfected, will be converted into the right to receive
the Consideration. The terms and conditions of the Tender Offer
and the Merger are more fully set forth in the Merger Agreement.
You have asked for our opinion as to whether the Consideration
to be received by the holders of shares of the Company Common
Stock pursuant to the Merger Agreement is fair from a financial
point of view to such holders.
For purposes of the opinion set forth herein, we have:
1) Reviewed certain publicly available financial statements
and other business and financial information of the Company;
2) Reviewed certain internal financial and operating data
concerning the Company;
3) Reviewed certain financial projections prepared by the
management of the Company;
4) Discussed the past and current operations and financial
condition and the prospects of the Company with senior
executives of the Company;
5) Reviewed the reported prices and trading activity for
the Company Common Stock;
6) Compared the financial performance of the Company and
the price and trading activity of the Company Common Stock with
that of certain other comparable publicly-traded companies and
their securities;
7) Reviewed the financial terms, to the extent publicly
available, of certain comparable acquisition transactions;
B-1
8) Participated in certain discussions and negotiations
among representatives of the Company, the Buyer, certain parties
and their respective financial and legal advisors;
9) Reviewed the Merger Agreement, drafts of equity and debt
commitment letters, substantially in the forms of the drafts
dated August 31, 2010 and September 1, 2010,
respectively, from certain lenders and other parties (the
Commitment Letters) and certain related
documents; and
10) Performed such other analyses and considered such other
factors as we have deemed appropriate.
We have assumed and relied upon, without independent
verification, the accuracy and completeness of the information
that was publicly available or supplied or otherwise made
available to us by the Company, and formed a substantial basis
for this opinion. With respect to the financial projections, we
have assumed that they have been reasonably prepared on bases
reflecting the best currently available estimates and judgments
of the management of the Company of the future financial
performance of the Company. In addition, we have assumed that
the Tender Offer and the Merger will be consummated in
accordance with the terms set forth in the Merger Agreement
without any waiver, amendment or delay of any terms or
conditions and that the Buyer will obtain financing in
accordance with the terms set forth in the Commitment Letters.
Morgan Stanley has assumed that in connection with the receipt
of all the necessary governmental, regulatory or other approvals
and consents required for the proposed Merger, no delays,
limitations, conditions or restrictions will be imposed that
would have a material adverse effect on the contemplated
benefits expected to be derived in the proposed Merger. We are
not legal, tax or regulatory advisors. We are financial advisors
only and have relied upon, without independent verification, the
assessment of the Buyer and the Company and their legal, tax or
regulatory advisors with respect to legal, tax or regulatory
matters. We express no opinion with respect to the fairness of
the amount or nature of the compensation to any of the
Companys officers, directors or employees, or any class of
such persons, relative to the Consideration to be received by
the holders of shares of the Company Common Stock in the
transaction. We have not made any independent valuation or
appraisal of the assets or liabilities of the Company, nor have
we been furnished with any such appraisals. Our opinion is
necessarily based on financial, economic, market and other
conditions as in effect on, and the information made available
to us as of, the date hereof. Events occurring after the date
hereof may affect this opinion and the assumptions used in
preparing it, and we do not assume any obligation to update,
revise or reaffirm this opinion.
In arriving at our opinion, we were not authorized to solicit
and did not solicit interest from any party with respect to the
acquisition, business combination or other extraordinary
transaction, involving the Company, nor did we negotiate with
any of the parties, other than the Buyer, which expressed
interest to Morgan Stanley in the possible acquisition of the
Company or certain of its constituent businesses.
We have acted as financial advisor to the Board of Directors of
the Company in connection with this transaction and will receive
a fee for our services, a substantial portion of which is
contingent upon the closing of the Merger. In the two years
prior to the date hereof, we have provided financial advisory
and financing services for the Company and have received fees in
connection with such services. Morgan Stanley may also seek to
provide such services to the Buyer and the Company in the future
and expects to receive fees for the rendering of these services.
Please note that Morgan Stanley is a global financial services
firm engaged in the securities, investment management and
individual wealth management businesses. Our securities business
is engaged in securities underwriting, trading and brokerage
activities, foreign exchange, commodities and derivatives
trading, prime brokerage, as well as providing investment
banking, financing and financial advisory services. Morgan
Stanley, its affiliates, directors and officers may at any time
invest on a principal basis or manage funds that invest, hold
long or short positions, finance positions, and may trade or
otherwise structure and effect transactions, for their own
account or the accounts of its customers, in debt or equity
securities or loans of the Buyer or its affiliates, the Company,
or any other company, or any currency or commodity, that may be
involved in this transaction, or any related derivative
instrument.
B-2
This opinion has been approved by a committee of Morgan Stanley
investment banking and other professionals in accordance with
our customary practice. This opinion is for the information of
the Board of Directors of the Company and may not be used for
any other purpose without our prior written consent, except that
a copy of this opinion may be included in its entirety in any
filing the Company is required to make with the Securities and
Exchange Commission in connection with this transaction if such
inclusion is required by applicable law. This opinion does not
in any manner address the prices at which the Company Common
Stock will trade at any time. In addition, we express no opinion
or recommendation as to whether the holders of shares of the
Company Common Stock should tender such shares in the Tender
Offer, how such holders should vote at any shareholders
meeting that may be held in connection with the Merger or
whether such holders should take any other action with respect
to the Tender Offer or the Merger.
Based on and subject to the foregoing, we are of the opinion on
the date hereof that the Consideration to be received by the
holders of shares of the Company Common Stock pursuant to the
Merger Agreement is fair from a financial point of view to such
holders.
Very truly yours,
MORGAN
STANLEY & CO.
INCORPORATED
Carmen Molinos
Managing Director
B-3
Annex C
GOLDMAN,
SACHS & CO. OPINION
PERSONAL
AND CONFIDENTIAL
September 2,
2010
Board of Directors
Burger King Holdings, Inc.
5505 Blue Lagoon Drive
Miami, FL 33126
Gentlemen:
You have requested our opinion as to the fairness from a
financial point of view to the holders (other than Blue
Acquisition Holding Corporation (Blue) and its
affiliates) of the outstanding shares of common stock, par value
$0.01 per share (the Shares), of Burger King
Holdings, Inc. (the Company) of the $24.00 per Share
in cash to be paid to such holders pursuant to the Agreement and
Plan of Merger, dated as of September 2
,
2010 (the
Agreement), by and among Blue, Blue Acquisition Sub,
Inc., a wholly owned subsidiary of Blue (Acquisition
Sub), and the Company. The Agreement provides for a tender
offer for all of the Shares (the Tender Offer)
pursuant to which Acquisition Sub will pay $24.00 in cash for
each Share accepted. The Agreement further provides that,
following completion of the Tender Offer or if the Tender Offer
does not close, under circumstances specified in the Agreement,
Acquisition Sub will be merged with and into the Company (the
Merger) and each outstanding Share (other than
Shares directly owned by the Company as treasury stock or by
Blue or Acquisition Sub, or any Appraisal Shares (as defined in
the Agreement)) will be converted into the right to be paid
$24.00 in cash.
Goldman, Sachs & Co. and its affiliates are engaged in
investment banking and financial advisory services, commercial
banking, securities trading, investment management, principal
investment, financial planning, benefits counseling, risk
management, hedging, financing, brokerage activities and other
financial and non-financial activities and services for various
persons and entities. In the ordinary course of these activities
and services, Goldman, Sachs & Co. and its affiliates
may at any time make or hold long or short positions and
investments, as well as actively trade or effect transactions,
in the equity, debt and other securities (or related derivative
securities) and financial instruments (including bank loans and
other obligations) of the Company, Blue, any of their respective
affiliates and third parties, including affiliates and portfolio
companies of 3G Capital Partners Ltd., an affiliate of Blue
(3G), and TPG Capital (TPG) and Bain
Capital, LLC (Bain), each a significant shareholder
of the Company, or any currency or commodity that may be
involved in the transactions contemplated by the Agreement (the
Transactions) for their own account and for the
accounts of their customers. We have acted as financial advisor
to the Company in connection with, and have participated in
certain of the negotiations leading to, the Transactions. We
expect to receive fees for our services in connection with the
Transactions, the principal portion of which is contingent upon
consummation of the Transactions, and the Company has agreed to
reimburse our expenses arising, and indemnify us against certain
liabilities that may arise, out of our engagement. We have
provided certain investment banking services to the Company and
its affiliates from time to time. We have also provided from
time to time and are currently providing certain investment
banking to Bain and its affiliates and portfolio companies for
which our Investment Banking Division has received, and may
receive, compensation, including having acted as joint lead
arranger for a new term loan (aggregate principal amount of
$250,000,000) for SunGard Data Systems Inc., a portfolio company
of Bain, in September 2008; as joint bookrunner on a high
C-1
yield offering (aggregate principal amount of $1,100,000,000)
for Warner Music Group, a portfolio company of Bain, in May
2009; as joint bookrunner on high yield offerings (aggregate
principal amount of $2,900,000,000) for HCA Inc., a portfolio
company of Bain, in April 2009 and March 2010; as joint
bookrunner with respect to a high yield offering (aggregate
principal amount of $2,500,000,000) for Clear Channel
Communications Inc., a portfolio company of Bain, in December
2009; and as joint lead arranger with respect to a term loan
(aggregate principal amount of $1,500,000,000) for Warner
Chilcott Plc, a portfolio company of Bain, in August 2010. In
addition, we have provided from time to time and are currently
providing certain investment banking services to TPG and its
affiliates and portfolio companies for which our Investment
Banking Division has received, and may receive, compensation,
including having acted as joint bookrunner on a notes offering
(aggregate principal amount of $1,500,000,000) by TXU Electric
Delivery Company, a portfolio company of TPG, in September 2008;
as a joint lead arranger for a term loan (aggregate principal
amount of $250,000,000) for SunGard Data Systems Inc., a
portfolio company of TPG, in September 2008; as financial
advisor to ALLTEL Corporation, a former portfolio company of
TPG, in connection with its sale in January 2009; and as
co-manager of a high yield offering (aggregate principal amount
of $1,000,000,000) by Harrahs Entertainment Inc., a
portfolio company of TPG, in May 2009. We may also in the future
provide investment banking services to the Company, its
affiliates and 3G, TPG, Bain and their respective affiliates and
portfolio companies for which our Investment Banking Division
may receive compensation. Affiliates of Goldman,
Sachs & Co. (the GS Funds) currently own,
in the aggregate, approximately 10.3% of the outstanding Shares
and receive certain management fees from the Company. In
connection with the Transactions, the GS Funds have entered into
a Sponsor Tender Agreement (as defined in the Agreement).
Goldman, Sachs & Co. may be deemed to directly or
indirectly own the Shares which are owned directly or indirectly
by the GS Funds. Sanjeev K. Mehra, a Managing Director of
Goldman, Sachs & Co., is a director of the Company.
Affiliates of Goldman, Sachs & Co. also may have
co-invested with 3G, TPG, Bain and their respective affiliates
from time to time and may have invested in limited partnership
units of affiliates of 3G, TPG and Bain from time to time and
may do so in the future.
In connection with this opinion, we have reviewed, among other
things, the Agreement, annual reports to stockholders and Annual
Reports on
Form 10-K
of the Company for the five fiscal years ended June 30,
2010; certain interim reports to stockholders and Quarterly
Reports on
Form 10-Q
of the Company; certain other communications from the Company to
its stockholders; certain publicly available research analyst
reports for the Company; and certain internal financial analyses
and forecasts for the Company prepared by its management,
including the Refranchise Plan, which was approved for our use
by the Company (such Refranchise Plan being referred to as the
Forecast). We have also held discussions with
members of the senior management of the Company regarding their
assessment of the past and current business operations,
financial condition and future prospects of the Company. In
addition, we have also reviewed the reported price and trading
activity for the Shares; compared certain financial and stock
market information for the Company with similar information for
certain other companies the securities of which are publicly
traded; reviewed the financial terms of certain recent business
combinations in the restaurant industry specifically and in
other industries generally; and performed such other studies and
analyses, and considered such other factors, as we deemed
appropriate.
For purposes of rendering this opinion, we have relied upon and
assumed, without assuming any responsibility for independent
verification, the accuracy and completeness of all of the
financial, legal, regulatory, tax, accounting and other
information provided to, discussed with or reviewed by, us; and
we do not assume any responsibility for any such information. In
that regard, we have assumed with your consent that the Forecast
has been reasonably prepared on a basis reflecting the best
currently available estimates and judgments of the management of
the Company. We have not made an independent evaluation or
appraisal of the assets and liabilities (including any
contingent, derivative or other off-balance-sheet assets and
liabilities) of the Company or any of its subsidiaries and we
have not been furnished with any such evaluation or appraisal.
We have assumed that all governmental, regulatory or other
consents and approvals necessary for the consummation of the
Transactions will be obtained without any adverse effect on the
expected benefits of the Transactions in any way meaningful to
our analysis. We also have assumed that the Transactions will be
consummated on the terms set forth in the Agreement, without the
waiver or modification of any term or condition the effect of
which would be in any way meaningful to our analysis. Our
opinion does not address any legal, regulatory, tax or
accounting matters.
C-2
Our opinion does not address the underlying business decision of
the Company to engage in the Transactions, or the relative
merits of the Transactions as compared to any strategic
alternatives that may be available to the Company. We were not
requested to solicit, and did not solicit, interest from other
parties with respect to an acquisition of or other business
combination with the Company. This opinion addresses only the
fairness from a financial point of view, as of the date hereof,
of the $24.00 per Share in cash to be paid to the holders (other
than Blue and its affiliates) of Shares pursuant to the
Agreement. We do not express any view on, and our opinion does
not address, any other term or aspect of the Agreement or
Transactions or any term or aspect of any other agreement or
instrument contemplated by the Agreement or entered into or
amended in connection with the Transactions, including, without
limitation, the fairness of the Transactions to, or any
consideration received in connection therewith by, the holders
of any other class of securities, creditors, or other
constituencies of the Company; nor as to the fairness of the
amount or nature of any compensation to be paid or payable to
any of the officers, directors or employees of the Company, or
class of such persons, in connection with the Transactions,
whether relative to the $24.00 per Share in cash to be paid to
the holders (other than Blue and its affiliates) of Shares
pursuant to the Agreement or otherwise. In addition, we are not
expressing any opinion as to the impact of the Transaction on
the solvency or viability of the Company or Blue or the ability
of the Company or Blue to pay their respective obligations when
they become due. Our opinion is necessarily based on economic,
monetary, market and other conditions as in effect on, and the
information made available to us as of, the date hereof and we
assume no responsibility for updating, revising or reaffirming
this opinion based on circumstances, developments or events
occurring after the date hereof. Our advisory services and the
opinion expressed herein are provided for the information and
assistance of the Board of Directors of the Company in
connection with its consideration of the Transactions and such
opinion does not constitute a recommendation as to whether or
not any holder of Shares should tender such Shares in connection
with the Tender Offer or how any holder of Shares should vote
with respect to the Merger or any other matter. This opinion has
been approved by a fairness committee of Goldman,
Sachs & Co.
Based upon and subject to the foregoing, it is our opinion that,
as of the date hereof, the $24.00 per Share in cash to be paid
to the holders (other than Blue and its affiliates) of Shares
pursuant to the Agreement is fair from a financial point of view
to such holders.
Very truly yours,
(Goldman, Sachs & Co.)
C-3
Annex D
GENERAL
CORPORATION LAW OF THE STATE OF DELAWARE
§ 262.
Appraisal rights.
(a) Any shareholder of a corporation of this State who
holds shares of stock on the date of the making of a demand
pursuant to subsection (d) of this section with respect to
such shares, who continuously holds such shares through the
effective date of the merger or consolidation, who has otherwise
complied with subsection (d) of this section and who has
neither voted in favor of the merger or consolidation nor
consented thereto in writing pursuant to § 228 of this
title shall be entitled to an appraisal by the Court of Chancery
of the fair value of the shareholders shares of stock
under the circumstances described in subsections (b) and
(c) of this section. As used in this section, the word
shareholder means a holder of record of stock in a
stock corporation and also a member of record of a nonstock
corporation; the words stock and share
mean and include what is ordinarily meant by those words and
also membership or membership interests of a member of a
nonstock corporation; and the words depository
receipt mean a receipt or other instrument issued by a
depository representing an interest in one or more shares, or
fractions thereof, solely of stock of a corporation, which stock
is deposited with the depository.
(b) Appraisal rights shall be available for the shares of
any class or series of stock of a constituent corporation in a
merger or consolidation to be effected pursuant to
§ 251 (other than a merger effected pursuant to
§ 251(g) of this title), § 252,
§ 254, § 257, § 258,
§ 263 or § 264 of this title:
(1) Provided, however, that no appraisal rights under this
section shall be available for the shares of any class or series
of stock, which stock, or depository receipts in respect
thereof, at the record date fixed to determine the shareholders
entitled to receive notice of the meeting of shareholders to act
upon the agreement of merger or consolidation, were either
(i) listed on a national securities exchange or
(ii) held of record by more than 2,000 holders; and further
provided that no appraisal rights shall be available for any
shares of stock of the constituent corporation surviving a
merger if the merger did not require for its approval the vote
of the shareholders of the surviving corporation as provided in
§ 251(f) of this title.
(2) Notwithstanding paragraph (1) of this subsection,
appraisal rights under this section shall be available for the
shares of any class or series of stock of a constituent
corporation if the holders thereof are required by the terms of
an agreement of merger or consolidation pursuant to
§§ 251, 252, 254, 257, 258, 263 and 264 of this
title to accept for such stock anything except:
a. Shares of stock of the corporation surviving or
resulting from such merger or consolidation, or depository
receipts in respect thereof;
b. Shares of stock of any other corporation, or depository
receipts in respect thereof, which shares of stock (or
depository receipts in respect thereof) or depository receipts
at the effective date of the merger or consolidation will be
either listed on a national securities exchange or held of
record by more than 2,000 holders;
c. Cash in lieu of fractional shares or fractional
depository receipts described in the foregoing subparagraphs a.
and b. of this paragraph; or
d. Any combination of the shares of stock, depository
receipts and cash in lieu of fractional shares or fractional
depository receipts described in the foregoing subparagraphs a.,
b. and c. of this paragraph.
(3) In the event all of the stock of a subsidiary Delaware
corporation party to a merger effected under § 253 of
this title is not owned by the parent corporation immediately
prior to the merger, appraisal rights shall be available for the
shares of the subsidiary Delaware corporation.
(c) Any corporation may provide in its certificate of
incorporation that appraisal rights under this section shall be
available for the shares of any class or series of its stock as
a result of an amendment to its certificate of incorporation,
any merger or consolidation in which the corporation is a
constituent corporation or the sale
D-1
of all or substantially all of the assets of the corporation. If
the certificate of incorporation contains such a provision, the
procedures of this section, including those set forth in
subsections (d) and (e) of this section, shall apply
as nearly as is practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which
appraisal rights are provided under this section is to be
submitted for approval at a meeting of shareholders, the
corporation, not less than 20 days prior to the meeting,
shall notify each of its shareholders who was such on the record
date for notice of such meeting with respect to shares for which
appraisal rights are available pursuant to subsection (b)
or (c) hereof of this section that appraisal rights are
available for any or all of the shares of the constituent
corporations, and shall include in such notice a copy of this
section. Each shareholder electing to demand the appraisal of
such shareholders shares shall deliver to the corporation,
before the taking of the vote on the merger or consolidation, a
written demand for appraisal of such shareholders shares.
Such demand will be sufficient if it reasonably informs the
corporation of the identity of the shareholder and that the
shareholder intends thereby to demand the appraisal of such
shareholders shares. A proxy or vote against the merger or
consolidation shall not constitute such a demand. A shareholder
electing to take such action must do so by a separate written
demand as herein provided. Within 10 days after the
effective date of such merger or consolidation, the surviving or
resulting corporation shall notify each shareholder of each
constituent corporation who has complied with this subsection
and has not voted in favor of or consented to the merger or
consolidation of the date that the merger or consolidation has
become effective; or
(2) If the merger or consolidation was approved pursuant to
§ 228 or § 253 of this title, then either a
constituent corporation before the effective date of the merger
or consolidation or the surviving or resulting corporation
within 10 days thereafter shall notify each of the holders
of any class or series of stock of such constituent corporation
who are entitled to appraisal rights of the approval of the
merger or consolidation and that appraisal rights are available
for any or all shares of such class or series of stock of such
constituent corporation, and shall include in such notice a copy
of this section. Such notice may, and, if given on or after the
effective date of the merger or consolidation, shall, also
notify such shareholders of the effective date of the merger or
consolidation. Any shareholder entitled to appraisal rights may,
within 20 days after the date of mailing of such notice,
demand in writing from the surviving or resulting corporation
the appraisal of such holders shares. Such demand will be
sufficient if it reasonably informs the corporation of the
identity of the shareholder and that the shareholder intends
thereby to demand the appraisal of such holders shares. If
such notice did not notify shareholders of the effective date of
the merger or consolidation, either (i) each such
constituent corporation shall send a second notice before the
effective date of the merger or consolidation notifying each of
the holders of any class or series of stock of such constituent
corporation that are entitled to appraisal rights of the
effective date of the merger or consolidation or (ii) the
surviving or resulting corporation shall send such a second
notice to all such holders on or within 10 days after such
effective date; provided, however, that if such second notice is
sent more than 20 days following the sending of the first
notice, such second notice need only be sent to each shareholder
who is entitled to appraisal rights and who has demanded
appraisal of such holders shares in accordance with this
subsection. An affidavit of the secretary or assistant secretary
or of the transfer agent of the corporation that is required to
give either notice that such notice has been given shall, in the
absence of fraud, be prima facie evidence of the facts stated
therein. For purposes of determining the shareholders entitled
to receive either notice, each constituent corporation may fix,
in advance, a record date that shall be not more than
10 days prior to the date the notice is given, provided,
that if the notice is given on or after the effective date of
the merger or consolidation, the record date shall be such
effective date. If no record date is fixed and the notice is
given prior to the effective date, the record date shall be the
close of business on the day next preceding the day on which the
notice is given.
(e) Within 120 days after the effective date of the
merger or consolidation, the surviving or resulting corporation
or any shareholder who has complied with subsections (a)
and (d) of this section hereof and who is otherwise
entitled to appraisal rights, may commence an appraisal
proceeding by filing a petition in the Court of Chancery
demanding a determination of the value of the stock of all such
shareholders.
D-2
Notwithstanding the foregoing, at any time within 60 days
after the effective date of the merger or consolidation, any
shareholder who has not commenced an appraisal proceeding or
joined that proceeding as a named party shall have the right to
withdraw such shareholders demand for appraisal and to
accept the terms offered upon the merger or consolidation.
Within 120 days after the effective date of the merger or
consolidation, any shareholder who has complied with the
requirements of subsections (a) and (d) of this
section hereof, upon written request, shall be entitled to
receive from the corporation surviving the merger or resulting
from the consolidation a statement setting forth the aggregate
number of shares not voted in favor of the merger or
consolidation and with respect to which demands for appraisal
have been received and the aggregate number of holders of such
shares. Such written statement shall be mailed to the
shareholder within 10 days after such shareholders
written request for such a statement is received by the
surviving or resulting corporation or within 10 days after
expiration of the period for delivery of demands for appraisal
under subsection (d) of this section hereof, whichever is
later. Notwithstanding subsection (a) of this section, a
person who is the beneficial owner of shares of such stock held
either in a voting trust or by a nominee on behalf of such
person may, in such persons own name, file a petition or
request from the corporation the statement described in this
subsection.
(f) Upon the filing of any such petition by a shareholder,
service of a copy thereof shall be made upon the surviving or
resulting corporation, which shall within 20 days after
such service file in the office of the Register in Chancery in
which the petition was filed a duly verified list containing the
names and addresses of all shareholders who have demanded
payment for their shares and with whom agreements as to the
value of their shares have not been reached by the surviving or
resulting corporation. If the petition shall be filed by the
surviving or resulting corporation, the petition shall be
accompanied by such a duly verified list. The Register in
Chancery, if so ordered by the Court, shall give notice of the
time and place fixed for the hearing of such petition by
registered or certified mail to the surviving or resulting
corporation and to the shareholders shown on the list at the
addresses therein stated. Such notice shall also be given by 1
or more publications at least 1 week before the day of the
hearing, in a newspaper of general circulation published in the
City of Wilmington, Delaware or such publication as the Court
deems advisable. The forms of the notices by mail and by
publication shall be approved by the Court, and the costs
thereof shall be borne by the surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall
determine the shareholders who have complied with this section
and who have become entitled to appraisal rights. The Court may
require the shareholders who have demanded an appraisal for
their shares and who hold stock represented by certificates to
submit their certificates of stock to the Register in Chancery
for notation thereon of the pendency of the appraisal
proceedings; and if any shareholder fails to comply with such
direction, the Court may dismiss the proceedings as to such
shareholder.
(h) After the Court determines the shareholders entitled to
an appraisal, the appraisal proceeding shall be conducted in
accordance with the rules of the Court of Chancery, including
any rules specifically governing appraisal proceedings. Through
such proceeding the Court shall determine the fair value of the
shares exclusive of any element of value arising from the
accomplishment or expectation of the merger or consolidation,
together with interest, if any, to be paid upon the amount
determined to be the fair value. In determining such fair value,
the Court shall take into account all relevant factors. Unless
the Court in its discretion determines otherwise for good cause
shown, interest from the effective date of the merger through
the date of payment of the judgment shall be compounded
quarterly and shall accrue at 5% over the Federal Reserve
discount rate (including any surcharge) as established from time
to time during the period between the effective date of the
merger and the date of payment of the judgment. Upon application
by the surviving or resulting corporation or by any shareholder
entitled to participate in the appraisal proceeding, the Court
may, in its discretion, proceed to trial upon the appraisal
prior to the final determination of the shareholders entitled to
an appraisal. Any shareholder whose name appears on the list
filed by the surviving or resulting corporation pursuant to
subsection (f) of this section and who has submitted such
shareholders certificates of
D-3
stock to the Register in Chancery, if such is required, may
participate fully in all proceedings until it is finally
determined that such shareholder is not entitled to appraisal
rights under this section.
(i) The Court shall direct the payment of the fair value of
the shares, together with interest, if any, by the surviving or
resulting corporation to the shareholders entitled thereto.
Payment shall be so made to each such shareholder, in the case
of holders of uncertificated stock forthwith, and the case of
holders of shares represented by certificates upon the surrender
to the corporation of the certificates representing such stock.
The Courts decree may be enforced as other decrees in the
Court of Chancery may be enforced, whether such surviving or
resulting corporation be a corporation of this State or of any
state.
(j) The costs of the proceeding may be determined by the
Court and taxed upon the parties as the Court deems equitable in
the circumstances. Upon application of a shareholder, the Court
may order all or a portion of the expenses incurred by any
shareholder in connection with the appraisal proceeding,
including, without limitation, reasonable attorneys fees
and the fees and expenses of experts, to be charged pro rata
against the value of all the shares entitled to an appraisal.
(k) From and after the effective date of the merger or
consolidation, no shareholder who has demanded appraisal rights
as provided in subsection (d) of this section shall be
entitled to vote such stock for any purpose or to receive
payment of dividends or other distributions on the stock (except
dividends or other distributions payable to shareholders of
record at a date which is prior to the effective date of the
merger or consolidation); provided, however, that if no petition
for an appraisal shall be filed within the time provided in
subsection (e) of this section, or if such shareholder
shall deliver to the surviving or resulting corporation a
written withdrawal of such shareholders demand for an
appraisal and an acceptance of the merger or consolidation,
either within 60 days after the effective date of the
merger or consolidation as provided in subsection (e) of
this section or thereafter with the written approval of the
corporation, then the right of such shareholder to an appraisal
shall cease. Notwithstanding the foregoing, no appraisal
proceeding in the Court of Chancery shall be dismissed as to any
shareholder without the approval of the Court, and such approval
may be conditioned upon such terms as the Court deems just;
provided, however that this provision shall not affect the right
of any shareholder who has not commenced an appraisal proceeding
or joined that proceeding as a named party to withdraw such
shareholders demand for appraisal and to accept the terms
offered upon the merger or consolidation within 60 days
after the effective date of the merger or consolidation, as set
forth in subsection (e) of this section.
(l) The shares of the surviving or resulting corporation to
which the shares of such objecting shareholders would have been
converted had they assented to the merger or consolidation shall
have the status of authorized and unissued shares of the
surviving or resulting corporation.
(8 Del. C. 1953, § 262; 56 Del. Laws, c. 50; 56
Del. Laws, c. 186, § 24; 57 Del. Laws, c. 148,
§§ 27-29;
59 Del. Laws, c. 106, § 12; 60 Del. Laws, c. 371,
§§ 3-12; 63 Del. Laws, c. 25, § 14; 63
Del. Laws, c. 152, §§ 1, 2; 64 Del. Laws, c. 112,
§§ 46-54;
66 Del. Laws, c. 136,
§§ 30-32;
66 Del. Laws, c. 352, § 9; 67 Del. Laws, c. 376,
§§ 19, 20; 68 Del. Laws, c. 337,
§§ 3, 4; 69 Del. Laws, c. 61, § 10; 69
Del. Laws, c. 262,
§§ 1-9;
70 Del. Laws, c. 79, § 16; 70 Del. Laws, c. 186,
§ 1; 70 Del. Laws, c. 299, §§ 2, 3; 70
Del. Laws, c. 349, § 22; 71 Del. Laws, c. 120,
§ 15; 71 Del. Laws, c. 339,
§§ 49-52;
73 Del. Laws, c. 82, § 21; 76 Del. Laws, c. 145,
§§ 11-16;
77 Del. Laws, c. 14, §§ 12, 13.)
D-4
PRELIMINARY
PROXY MATERIALS SUBJECT TO COMPLETION
SPECIAL
MEETING OF SHAREHOLDERS OF
BURGER
KING HOLDINGS, INC.
[ ],
2010
Please sign, date and mail
your proxy card in the
envelope provided as soon
as possible.
â
Please
detach along perforated line and mail in the envelope
provided.
â
THE BOARD
OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSALS 1
AND 2.
PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE.
PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN
HERE
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To change the address on your account, please check the box at
right and indicate your new address in the address space above.
Please note that changes to the registered name(s) on the
account may not be submitted via this method.
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THE BOARD
OF DIRECTORS RECOMMENDS THAT YOU VOTE
FOR ITEM 1.
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FOR
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AGAINST
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ABSTAIN
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1.
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To adopt the Agreement and Plan of Merger, dated as of
September 2, 2010, as it may be amended from time to time,
by and among Burger King Holdings, Inc., Blue Acquisition Sub,
Inc. and Blue Acquisition Holding Corporation.
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THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE
FOR ITEM 2.
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2.
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To adjourn the special meeting, if necessary or appropriate, to
solicit additional proxies if there are insufficient votes at
the time of the special meeting to adopt the Agreement and Plan
of Merger.
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Signature of
Shareholder
Date: Signature of
Shareholder
Date:
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Note:
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Please sign exactly as your name or names appear on this Proxy.
When shares are held jointly, each holder should sign. When
signing as executor, administrator, attorney, trustee or
guardian, please give full title as such. If the signer is a
corporation, please sign full corporate name by duly authorized
officer, giving full title as such. If signer is a partnership,
please sign in partnership name by authorized person.
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BURGER
KING HOLDINGS, INC.
THIS
PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
The undersigned shareholder hereby acknowledges receipt of
notice of, revokes all prior proxies delivered in connection
with, and appoints [ ], or either of them, as
proxies for the undersigned with full power of substitution, to
act and vote, with the powers the undersigned would possess if
personally present at, the special meeting of shareholders of
Burger King Holdings, Inc., to be held at [ ]
on [ ], 2010, at
[ ] a.m. Eastern Standard Time at
[ ] and any adjournments or postponements
thereof, as directed on the reverse side, with respect to the
matters set forth on the reverse side and with discretionary
authority on all other matters that may properly come before the
meeting, as more fully described in the proxy statement received
by the undersigned shareholder.
If no direction is made, the
proxy will be voted FOR Item 1 and
FOR Item 2.
(Continued
and to be signed on the reverse side.)
SPECIAL
MEETING OF SHAREHOLDERS OF
BURGER
KING HOLDINGS, INC.
[ ],
2010
PROXY
VOTING INSTRUCTIONS
[TO BE PROVIDED]
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