UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the
Securities
Exchange Act of 1934
(Rule 14a-101)
Filed by the
Registrant
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Filed by a Party other than the
Registrant
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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
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Definitive
Additional Materials
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Soliciting
Material Pursuant to §240.14a-12
CKE RESTAURANTS, INC.
(Name of Registrant as Specified In
Its Charter)
Not Applicable
(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:
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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:
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55,231,928 shares of common stock and
2,958,719 options to acquire common stock with an
exercise price below $12.55.
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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 the purpose of calculating the registration fee, the
underlying value of the transaction was calculated as the
sum
of (A) 55,231,928 shares of common stock,
multiplied
by $12.55 per share and (B) 2,958,719 options to
acquire common stock with an exercise price below $12.55
multiplied
by $4.04 per option (which is the
difference between $12.55 and the $8.51 weighted average
exercise price of such options).
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(4)
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Proposed maximum aggregate value of transaction:
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$705,113,921.16
$50,274.62
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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:
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(2)
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Form, Schedule or Registration Statement No.:
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May 28,
2010
Dear Stockholder:
We cordially invite you to attend a special meeting of
stockholders of CKE Restaurants, Inc., a Delaware corporation,
which we refer to as the Company, to be held on June 28,
2010 at 10:00 a.m. local time, at 6307 Carpinteria Avenue,
Carpinteria, California, 93013.
On April 23, 2010, the Company entered into an Agreement
and Plan of Merger, effective as of April 18, 2010 (such
agreement, as it may be amended from time to time, being
referred to herein as the merger agreement), providing for the
acquisition of the Company by Columbia Lake Acquisition
Holdings, Inc., an entity owned by certain affiliates of Apollo
Management VII, L.P. 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 $12.55 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).
As you are aware, the Company had previously entered into a
merger agreement with affiliates of Thomas H. Lee Partners, L.P.
Prior to entering into the merger agreement with Columbia Lake
Acquisition Holdings, Inc., the Company terminated the merger
agreement it had entered into with affiliates of Thomas H. Lee
Partners, L.P. The per share merger consideration offered
pursuant to the merger agreement with Columbia Lake Acquisition
Holdings, Inc. represents a premium of approximately 41% to the
closing price of the Companys common stock on
February 25, 2010, the last trading day prior to the public
announcement of the execution of the merger agreement with
affiliates of Thomas H. Lee Partners, L.P., a premium of
approximately 46% to the volume-weighted average price for the
30 trading days prior to February 25, 2010, and a premium
of approximately 14% over the consideration provided by the
merger agreement previously entered into with affiliates of
Thomas H. Lee Partners, L.P.
The board of directors of the Company has unanimously determined
that the merger is fair to, and in the best interests of, the
Company and its stockholders and approved and declared advisable
the merger agreement and the merger and the other transactions
contemplated by the merger agreement. The Companys board
of directors made its determination after consultation with its
independent legal and financial advisors and consideration of a
number of factors.
The board of directors of the Company
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 pre-paid 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 will have the same
effect as a vote against approval of the proposal to adopt the
merger agreement.
If your shares of common stock of the Company 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 common stock of the Company
without instructions from you. You should instruct your bank,
brokerage firm or other nominee to vote your shares of common
stock of the Company, following 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 common stock of the Company 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.
If you have any questions or need assistance voting your shares
of common stock of the Company, please contact
Morrow & Co., LLC, the Companys proxy solicitor,
by telephone toll-free at
(800) 607-0088
(banks and brokers call collect at
(203) 658-9400))
or by email at CKE@morrowco.com.
Thank you in advance for your cooperation and continued support.
Sincerely,
Andrew F. Puzder
Chief Executive Officer
The proxy statement is dated May 28, 2010, and is first
being mailed to our stockholders on or about May 28, 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.
CKE
RESTAURANTS, INC.
6307 Carpinteria Avenue,
Suite A
Carpinteria, California 93013
NOTICE OF SPECIAL MEETING OF
STOCKHOLDERS TO BE HELD ON JUNE 28, 2010
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DATE:
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June 28, 2010
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TIME:
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10:00 a.m. local time
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PLACE:
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6307 Carpinteria Avenue, Carpinteria, California, 93013
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ITEMS OF BUSINESS:
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1. To consider and vote on a proposal to adopt the
Agreement and Plan of Merger, dated as of April 18, 2010,
as it may be amended from time to time, which we refer to as the
merger agreement, by and among the Company, Columbia Lake
Acquisition Holdings, Inc., a Delaware corporation, which we
refer to as Parent, and Columbia Lake Acquisition Corp., a
Delaware corporation and a wholly-owned subsidiary of Parent,
which we refer to as Merger Sub, pursuant to which Merger Sub
will be merged with and into the Company, with the Company
continuing as the surviving corporation and becoming a
wholly-owned subsidiary of Parent. A copy of the merger
agreement is attached as
Annex A
to the accompanying
proxy statement.
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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.
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3. To transact any other business that may properly come
before the special meeting, or any adjournment of the special
meeting, by or at the direction of the board of directors of the
Company.
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RECORD DATE:
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Only stockholders of record at the close of business on
May 10, 2010 are entitled to notice of, and to vote at, the
special meeting. All stockholders of record are cordially
invited to attend the special meeting in person.
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PROXY VOTING:
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Your vote is very important, regardless of the number of
shares of common stock of the Company 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 the Companys 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 pre-paid reply envelope or submit your proxy by
telephone or the Internet prior to the special meeting to ensure
that your shares of common stock of the Company will be
represented at the special meeting if you are unable to attend.
If you fail to return your proxy card and fail to submit your
proxy by phone or the Internet, your shares of common stock of
the Company will not be counted for purposes of determining
whether a quorum is present at the special meeting and will be
counted as a vote
AGAINST
the proposal to
adopt the merger agreement.
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If you are a stockholder of record, voting by ballot at the
special meeting will revoke any proxy previously submitted. If
you hold your shares of common stock of the Company through a
bank, brokerage firm or other nominee, you should follow the
procedures provided by your bank, brokerage firm or other
nominee in order to vote.
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RECOMMENDATION:
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The board of directors of the Company has unanimously determined
that the merger is fair to, and in the best interests of, the
Company and its stockholders and approved and declared advisable
the merger agreement and the merger and the other transactions
contemplated by the merger agreement. The Companys board
of directors made its determination after consultation with its
independent legal and financial advisors and consideration of a
number of factors.
The board of directors of the Company
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.
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ATTENDANCE:
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You are entitled to attend the special meeting only if you were
a holder of our common stock as of the close of business on
May 10, 2010, which we refer to as the record date, or hold
a valid proxy for the special meeting. Since seating is limited,
admission to the special meeting will be on a first-come,
first-served basis. You should be prepared to present photo
identification for admittance. If you are not a stockholder of
record but hold shares through a broker, bank, trustee or
nominee (i.e., in street name), you should provide
proof of beneficial ownership as of the record date, such as
your most recent account statement prior to the record date, a
copy of the voting instruction card provided by your broker,
bank, trustee or nominee, or similar evidence of ownership.
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APPRAISAL:
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Stockholders of the Company who do not vote in favor of the
proposal to adopt the merger agreement will have the right to
seek appraisal of the fair value of their shares of common stock
of the Company if they deliver a demand for appraisal before the
vote is taken on the merger agreement and comply with all the
requirements of Delaware law, which are summarized in the
accompanying proxy statement and reproduced in their entirety in
Annex D
to the accompanying proxy statement, and the
merger is consummated.
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By Order of the Board of Directors,
Byron Allumbaugh
Chairman of the Board of Directors
Dated: May 28, 2010
Carpinteria, California
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 PRE-PAID 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.
TABLE OF
CONTENTS
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1
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11
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17
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18
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18
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18
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18
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18
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19
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19
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21
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21
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21
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23
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23
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39
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42
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47
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48
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51
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52
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54
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54
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56
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56
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57
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57
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58
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58
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60
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61
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61
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64
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66
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69
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72
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80
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83
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84
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Annex A
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Agreement and Plan of Merger, dated as of April 18, 2010, by and
among Columbia Lake Acquisition Holdings, Inc., Columbia Lake
Acquisition Corp. and CKE Restaurants, Inc.
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Annex B
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Form of Company Stockholder Voting Agreement
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Annex C
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Opinion of UBS Securities LLC, dated April 23, 2010
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Annex D
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Section 262 of the Delaware General Corporation Law
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ii
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 or incorporated by reference into 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 84.
Parties
to the Merger (Page 18)
CKE Restaurants, Inc.
, or the Company, we or us, is a
Delaware corporation headquartered in Carpinteria, California,
and we, through our wholly-owned subsidiaries, own, operate,
franchise
and/or
license quick-service restaurants, primarily under the brand
names Carls
Jr.
®
and
Hardees
®
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References to the Company, we or us in this proxy statement
include the Company and our subsidiaries on a consolidated basis.
Columbia Lake Acquisition Holdings, Inc.
, or Parent, is a
Delaware corporation controlled by affiliates of Apollo
Management VII, L.P., which we refer to as Apollo Management.
Parent was organized solely for the purpose of entering into the
merger agreement and consummating the transactions contemplated
by the merger agreement, and thereafter holding Company stock.
Under the terms of the merger agreement, upon consummation of
the proposed merger, the Company will be a subsidiary of Parent.
Columbia Lake Acquisition Corp.
, or Merger Sub, is a
Delaware corporation that is wholly-owned by Parent and was
organized solely for the purpose of entering into the merger
agreement and consummating the transactions contemplated by the
merger agreement. Under the terms of the merger agreement,
Merger Sub will merge with and into the Company, with the
Company continuing as the surviving corporation. Upon
consummation of the proposed merger, Merger Sub will cease to
exist.
In this proxy statement, we refer to the Agreement and Plan of
Merger, dated as of April 18, 2010, as it may be amended
from time to time, by and 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.
The
Special Meeting (Page 18)
Time,
Place and Purpose (Page 18)
The special meeting will be held on June 28, 2010, starting
at 10:00 a.m. local time, at 6307 Carpinteria Avenue,
Carpinteria, California, 93013.
At the special meeting, holders of our common stock, par value
$0.01 per share, or common stock, will be asked to approve the
proposal to adopt the merger agreement, and to approve any
adjournment of 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 19)
You are entitled to receive notice of, and to vote at, the
special meeting if you owned shares of common stock at the close
of business on May 10, 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 common
stock that you owned on the record date. As of the record date,
there were shares of common stock outstanding and entitled to
vote at the special meeting. A majority of the shares of 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 19)
Approval of the proposal to adopt the merger agreement requires
the affirmative vote of the holders of a majority of the
outstanding shares of our common stock entitled to vote thereon.
1
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 common stock present in person or
represented by proxy and entitled to vote on the matter at the
special meeting.
As of April 18, 2010, the effective date of the merger
agreement, certain directors and executive officers of the
Company who beneficially owned and were entitled to vote, in the
aggregate, 4,463,495 shares of common stock, representing
approximately 8.08% of the outstanding shares of common stock,
have executed voting agreements with Parent (substantially in
the form of
Annex B
to this proxy statement).
Pursuant to such voting agreements, such directors and executive
officers have agreed to vote all of their shares of our 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 (Page 21)
Any stockholder of record entitled to vote at the special
meeting may submit a proxy by telephone, over the Internet, or
by returning the enclosed proxy card in the accompanying
pre-paid reply envelope, or may vote in person by appearing at
the special meeting. If your shares of common stock are held in
street name by your broker, bank, or other nominee,
you should instruct your broker, bank or other nominee on how to
vote your shares of common stock using the instructions provided
by your broker, bank or other nominee. If you fail to submit a
proxy or vote in person at the special meeting, or do not
provide your broker, bank or other nominee with instructions, as
applicable, your shares of 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 common stock will
not have an effect on the proposal to adjourn the special
meeting, if necessary or appropriate, to solicit additional
proxies.
You have the right to revoke a proxy, whether delivered over the
Internet, by telephone or by mail, at any time before it is
exercised, by executing a new proxy, voting again at a later
date through any of the methods available to you, by giving
written notice of revocation to our Corporate Secretary, which
must be filed with the Corporate Secretary by the time the
special meeting begins, or by voting by ballot at the special
meeting. Attendance at the special meeting, by itself, is not
enough to revoke a proxy.
The
Merger (Page 22)
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. Assuming timely satisfaction of
necessary closing conditions, we anticipate that the merger will
be completed in either the end of the second calendar quarter of
2010 or the beginning of the third calendar quarter of 2010.
Merger
Consideration (Page 23)
In the merger, each outstanding share of our common stock
(except for certain shares owned by Parent, the Company and
certain of their subsidiaries, and shares owned by stockholders
who have properly demanded appraisal rights) will be converted
into the right to receive $12.55 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 39)
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) determined that the
merger is fair to, and in the best interests of, the Company and
our stockholders, (ii) approved and declared advisable the
merger agreement and the merger and the other transactions
contemplated by the merger agreement, (iii) resolved that
the merger agreement be submitted for consideration by the
stockholders of the Company at a special meeting of stockholders
and (iv) recommended that our stockholders vote to adopt
the merger agreement.
2
In considering the recommendation of the board of directors with
respect to the merger and the proposal to adopt the merger
agreement, you should be aware that certain of our directors and
executive officers have interests in the merger that are
different from, or in addition to, your interests as a
stockholder. 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
stockholders of the Company. See the section entitled The
Merger Interests of Certain Persons in the
Merger beginning on page 52.
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.
Opinion
of Financial Advisor (Page 42)
In connection with the merger, the Companys board of
directors received a written opinion, dated April 23, 2010,
from the Companys financial advisor, UBS Securities LLC,
which we refer to as UBS, as to the fairness, from a financial
point of view and as of the date of such opinion, of the $12.55
per share merger consideration to be received in the merger by
holders of Company common stock (other than Parent and its
affiliates and holders of shares of the Companys common
stock as to which treatment in the merger is separately agreed
to by Parent and the holders thereof, which, together with
Parent and its affiliates, we refer to collectively as the
excluded holders). The full text of UBS written opinion,
dated April 23, 2010, is attached to this proxy statement
as
Annex C.
UBS opinion was provided for the benefit of the
Companys board of directors (solely in its capacity as
such) in connection with, and for the purpose of, its evaluation
of the $12.55 per share merger consideration, from a financial
point of view, and does not address any other aspect of the
merger. The opinion does not address the relative merits of the
merger as compared to other business strategies or transactions
(including the Companys previously proposed merger
transaction with an affiliate of Thomas H. Lee Equity Fund VI,
L.P.) that might be available with respect to the Company or the
Companys underlying business decision to effect the
merger. The opinion does not constitute a recommendation to any
stockholder as to how to vote or act with respect to the merger.
Holders of Company common stock are encouraged to read UBS
opinion carefully in its entirety for a description of the
assumptions made, procedures followed, matters considered and
limitations on the review undertaken by UBS, as more fully
described below under the caption The Merger
Opinion of Financial Advisor beginning on page 42.
Financing
of the Merger (Page 48)
We anticipate that the total amount of funds necessary to
complete the merger will be approximately $1.06 billion in
the aggregate comprised of funds needed to:
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pay our stockholders (and holders of options) the amounts due to
them under the merger agreement;
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repay certain of our existing indebtedness and existing
liabilities that will come due as a result of the
merger; and
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pay related fees and expenses in connection with the
transactions contemplated by the merger agreement;
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These payments are expected to be funded by a combination of
(i) equity contributions by certain affiliates of Apollo
Management VII, L.P., which we refer to as the Apollo Investors,
and (ii) certain debt financing. Parent has obtained equity
and debt financing commitments described below in connection
with the transactions contemplated by the merger agreement.
Parents proposed equity and debt financing may change
after the date hereof in accordance with the terms and
conditions of the merger agreement.
Equity
Financing (Page 49)
Parent has received an equity commitment letter, dated
April 18, 2010, from the Apollo Investors to provide equity
financing in an aggregate amount of up to $456,000,000. In
certain circumstances, the Apollo Investors may assign their
commitment to other investors, although such assignment will not
affect the Apollo Investors obligations under the equity
commitment letter. The funding of financing contemplated by the
equity commitment letter is subject to the satisfaction at the
closing of all conditions precedent to the obligations of Merger
Sub and Parent to consummate the transactions contemplated by
the merger agreement, the substantially contemporaneous
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merger of Merger Sub with the Company and the funding of the
debt financing on the terms and conditions described in the debt
commitment letter (as described below) or alternative debt
financing on terms satisfactory to Apollo Management and Parent.
Debt
Financing (Page 49)
In connection with Merger Subs and Parents entry
into the merger agreement, Merger Sub and Parent received a debt
commitment letter, dated April 17, 2010, from Morgan
Stanley Senior Funding, Inc., Citigroup Global Markets Inc. and
RBC Capital Markets which we refer to, together with certain of
their affiliates, collectively as the Lenders, to provide,
severally but not jointly, in the aggregate up to $700,000,000
in debt financing to Merger Sub, consisting of (i) up to
$100,000,000 in the form of a senior secured revolving credit
facility and (ii) up to $600,000,000 in the form of a
senior secured second-priority increasing rate bridge facility.
It is expected that at the closing, in lieu of the senior
secured second-priority increasing rate bridge facility,
$600,000,000 principal amount of senior secured second-priority
notes will be issued in a public offering or pursuant to
Rule 144A of the Securities Act of 1933, as amended, which
we refer to as the Securities Act, or another private placement
exemption. The Lenders may invite other institutional lenders to
participate in the debt financing described in the debt
commitment letter and to undertake a portion of the commitment
to provide such financing.
Guarantee
(Page 51)
Pursuant to a guarantee delivered by the Apollo Investors in
favor of the Company, dated April 18, 2010, the Apollo
Investors have agreed (severally and not jointly) to guarantee
the performance and discharge of certain obligations of Parent
under the merger agreement, provided that the maximum aggregate
liability of the Apollo Investors shall not exceed the sum of:
(x) a reverse termination fee of $15,471,000 (provided
that, in the limited circumstances under which Parent is
required to pay a higher reverse termination fee, $15,471,000
will be increased to $30,943,000) and (y) up to $500,000
for any costs and expenses incurred in connection with the
enforcement of Parents obligations to pay any such reverse
termination fee.
The Company cannot seek specific performance to require Parent
and Merger Sub to complete the merger, and the Companys
exclusive remedy for the failure of Parent and Merger Sub to
complete the merger is payment of the applicable reverse
termination fee and a portion of any costs and expenses incurred
in the circumstances described under The Merger
Agreement Termination Fees beginning on
page 72.
Stockholder
Voting Agreements (Page 75)
As an inducement to Parent to enter into the merger agreement,
certain members of our board of directors and executive
officers, who hold and are entitled to vote an aggregate of
approximately 8.08% of our outstanding shares of common stock as
of April 18, 2010, entered into voting agreements with
Parent, effective April 18, 2010. We refer to each of these
stockholders individually as a voting stockholder and
collectively as the voting stockholders. Under the voting
agreements, each voting stockholder agreed to cause any of his
or her shares of common stock to vote or consent at any meeting
of our stockholders or in any written consent of our
stockholders, as applicable:
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in favor of the adoption of the merger agreement and the
approval of the merger and in favor of each of the actions
contemplated by the merger agreement and any other proposals
that could reasonably be expected to facilitate the
merger; and
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against:
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any proposal or action which is intended or could reasonably be
expected to result in a breach of any covenant, representation
or warranty or any other obligation or agreement of the Company
under the merger agreement or of such stockholder under the
voting agreement;
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any proposal or action which is intended or could reasonably be
expected to result in impeding, interfering with, delaying,
postponing, discouraging or adversely affecting the merger or
any of the other transactions contemplated by the merger
agreement; and
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any competing takeover proposal or alternative takeover
agreement.
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4
Interests
of Certain Persons in the Merger (Page 52)
When considering the recommendation of the board of directors,
you should be aware that certain of our executive officers and
directors have interests in the merger that are different from,
or in addition to, your interests as a stockholder. 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 stockholders of the Company. These
interests include the following:
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the vesting and cash-out of all vested and unvested stock
options held by certain of our executive officers and directors,
which will result in an aggregate cash payment to such executive
officers and directors of approximately $5,716,168, based on
holdings as of April 27, 2010, and assuming that the merger
is completed on June 30, 2010;
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the vesting and cash-out of all unvested shares of restricted
stock held by certain of our executive officers and directors,
which will result in an aggregate cash payment to such executive
officers and directors of approximately $13,133,198, based on
holdings as of April 27, 2010, and assuming that the merger
is completed on June 30, 2010;
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pursuant to employment agreements with each of Andrew F. Puzder,
E. Michael Murphy and Theodore Abajian, and assuming the merger
is completed on June 30, 2010 and such executive officers
experience qualifying terminations during a specified period
after such date, the payment of severance payments, which will
result in an aggregate cash payment to such executive officers
of approximately $10,322,588 (exclusive of the estimated value
of employee benefit plans);
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the fact that, pursuant to the terms of the employment
agreements with certain of our executive officers, we are
scheduled to grant restricted stock (subject to performance
and/or
time-based vesting) on October 12, 2010 and, in the event
that the effective time of the merger occurs after
October 12, 2010, or in the event of certain qualifying
terminations of employment prior to the effective time of the
merger, such awards will vest in full at the effective time of
the merger; and
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the receipt by each of the members of the transaction committee
of a one-time payment in the amount of $25,000 as compensation
for such members services on the transaction committee,
whether or not the merger occurs.
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See the section entitled The Merger Interests
of Certain Persons in the Merger beginning on page 51.
In addition, certain of our executive officers are currently in
discussions with Apollo Management regarding potential
arrangements with the surviving corporation. See the section
entitled The Merger Interests of Certain
Persons in the Merger Arrangements with the
Surviving Corporation beginning on page 53.
Material
U.S. Federal Income Tax Consequences of the Merger
(Page 54)
The exchange of shares of common stock for cash pursuant to the
merger generally will be a taxable transaction to
U.S. holders for U.S. federal income tax purposes.
Stockholders who are U.S. holders and who exchange their
shares of common stock in the merger will generally recognize
gain or loss in an amount equal to the difference, if any,
between the cash payments made pursuant to the merger and their
adjusted tax basis in their shares of common stock. Backup
withholding may also apply to the cash payments made pursuant to
the merger unless the U.S. holder or other payee provides a
taxpayer identification number, certifies that such number is
correct and otherwise complies with the backup withholding
rules. You should read The Merger Material
U.S. Federal Income Tax Consequences of the Merger
beginning on page 54 for a definition of
U.S. holder and a more detailed discussion of
the U.S. federal income tax consequences of the merger. You
should also consult your tax advisor for a complete analysis of
the effect of the merger on your federal, state and local
and/or
foreign taxes.
Regulatory
Approvals (Page 56)
Under the terms of the merger agreement, the merger cannot be
completed until certain authorizations, consents, orders or
approvals required to consummate the merger pursuant to
applicable regulatory and antitrust laws, including the
Hart-Scott-Rodino
Antitrust Improvements Act of 1976, or the HSR Act, have been
obtained or
5
any applicable waiting period thereunder has been terminated or
has expired. Notwithstanding the foregoing, the merger may be
consummated if failure to obtain certain of the authorizations,
consents, orders or approvals (or the failure of the applicable
waiting periods to terminate or expire) would not reasonably be
likely to have a material adverse effect on the Company or
Parent and Merger Sub.
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 file a
notification and report form with the FTC and the Antitrust
Division of the Department of Justice, or the DOJ, under the HSR
Act and the applicable waiting period has expired or been
terminated. The Company and Parent filed such notification and
report forms on May 11, 2010 and each requested early
termination of the waiting period. On May 21, 2010, the FTC
notified the parties that their request for early termination of
the applicable waiting period had been granted.
Litigation
Relating to the Merger (Page 56)
Putative consolidated stockholder class action lawsuits were
filed in the Delaware Court of Chancery and in the Superior
Court of California for the County of Santa Barbara
regarding the proposed transaction announced on
February 26, 2010 by which affiliates of Thomas H. Lee
Partners, L.P. would acquire the Company, which we refer to as
the prior proposed merger. On May 12, 2010, the plaintiffs
in the Delaware Court of Chancery action filed an amended
complaint against the Company, each of its directors, Apollo
Management, Columbia Lake Acquisition Holdings, Inc. and
Columbia Lake Acquisition Corp. that drops the challenge to the
prior proposed merger and instead seeks to enjoin the merger. On
or about May 25, 2010, we entered into an agreement in
principle with the plaintiffs regarding the settlement of the
consolidated putative stockholder class action filed in the
Delaware Court of Chancery. See Litigation Relating to the
Merger beginning on page 56.
The
Merger Agreement (Page 57)
Treatment
of Common Stock, Options and Other Equity Awards
(Page 59)
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Common Stock.
At the effective time of
the merger, each share of common stock issued and outstanding
(except for shares of our common stock held by Parent, the
Company and certain of their subsidiaries, and shares held by
stockholders who have properly demanded appraisal rights) will
convert into the right to receive the per share merger
consideration of $12.55 in cash, without interest, less any
applicable withholding taxes.
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Options.
At the effective time of the
merger, each outstanding option to acquire shares of common
stock will vest and be cancelled and converted into the right to
receive an amount in cash equal to (x) the number of shares
of common stock subject to such option, multiplied by
(y) the excess (if any) of the per share merger
consideration of $12.55 in cash over the exercise price per
share of such option, less any applicable withholding taxes.
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Restricted Stock.
At the effective time
of the merger, each share of outstanding restricted stock will
vest and be converted into the right to receive the per share
merger consideration of $12.55 in cash, less any applicable
withholding taxes.
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Employee Stock Purchase Plan.
At the
effective time of the merger, the Employee Stock Purchase Plan,
or the ESPP, will terminate. The ESPP was suspended following
the signing of the merger agreement, and no payroll deductions
have been made and no other amounts have been set aside for the
purchase of shares under the ESPP since February 26, 2010,
the date of suspension. All amounts withheld from pay and not
applied to the purchase of shares as of the date that the ESPP
was suspended have been returned to the participants in the ESPP
without interest thereon. All Company matching contributions
that would have been used for the purchase of shares under the
ESPP had the ESPP not been suspended and then terminated have
been or will be paid to each ESPP participant in cash, provided
that the participant satisfied or satisfies all requirements
under the terms of the ESPP in effect as of the date of the
merger agreement.
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6
Solicitation
of Takeover Proposals (Page 66)
From and after April 18, 2010, the effective date of the
merger agreement, and until the effective time of the merger, 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 relating to a takeover proposal. Notwithstanding
these restrictions, under certain circumstances, we may, from
and after April 18, 2010, and prior to the time our
stockholders adopt the merger agreement, respond to an
unsolicited bona fide takeover proposal or engage in discussions
or negotiations with the person making such takeover proposal.
If at any time before the merger agreement is adopted by our
stockholders, our board of directors determines that a takeover
proposal is a superior proposal, we may terminate the merger
agreement and enter into any takeover, merger or similar
agreement, which we refer to as an alternative takeover
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 Termination Fees beginning on
page 72.
Conditions
to the Merger (Page 69)
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: (i) the
adoption of the merger agreement by our stockholders,
(ii) the receipt of required antitrust approvals and other
approvals (or termination or expiration of applicable waiting
periods), (iii) the accuracy of the representation and
warranties of the parties and (iv) compliance by the
parties with their respective obligations under the merger
agreement.
Termination
(Page 70)
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 stockholders.
The merger agreement may also be terminated and the merger
abandoned at any time prior to the effective time of the merger
as follows:
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by either Parent or the Company, if:
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the merger has not been consummated on or before August 26,
2010 (but this right to terminate will not be available to a
party if the failure to consummate the merger prior to
August 26, 2010 was primarily due to the failure of such
party to perform any of its obligations under the merger
agreement);
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a law, injunction, judgment or ruling, which we collectively
refer to as a restraint, results in enjoining, restraining,
preventing or prohibiting the consummation of the merger, and
such restraint has become final and non-appealable (but this
right to terminate will not be available to a party if the
issuance of such final, non-appealable restraint was primarily
due to the failure of such party to perform its obligations
under the merger agreement); or
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our stockholders meeting has been held and completed and
our stockholders have not adopted the merger agreement at such
meeting or any adjournment of such meeting (but this right to
terminate will not be available to the Company if the failure of
the Company to perform its obligations under the merger
agreement was the principal cause of or resulted in the failure
to obtain stockholder approval).
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we have materially breached or failed to perform any of our
representations, warranties, covenants or other agreements in
the merger agreement which breach or failure to perform
(i) would give rise to a failure of the condition to
Parents and Merger Subs obligation to close the
merger and (ii) cannot be cured by the Company, or if
capable of being cured, will not have been cured within certain
notice periods (but this right to terminate will not be
available to Parent if it is then in material breach of any of
its representations, warranties, covenants or other agreements
that would result in the conditions, with respect to the
Companys obligation to close the merger, not being
satisfied);
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we have materially breached our obligations described under
The Merger Agreement Solicitation of Takeover
Proposals and such breach, if capable of being cured, will
not have been cured within certain notice periods; or
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(i) our board of directors (a) fails to recommend to
our stockholders that the stockholders adopt the merger
agreement or fails to include the boards recommendation to
adopt the merger agreement, which we refer to as the Company
recommendation, in the proxy statement, (b) changes,
qualifies, withholds, withdraws, or modifies (or publicly
proposes to do so), in a manner adverse to Parent, the Company
recommendation, (c) takes formal action or makes any
recommendation or public statement in connection with a tender
offer or exchange offer, other than a recommendation against
such offer or other permitted communications, (d) adopts,
approves or recommends (or publicly proposes to do so) a
takeover proposal, (e) changes, qualifies, withholds,
withdraws or modifies (or publicly proposes to do so) in a
manner adverse to Parent, the Company recommendation in response
to a material event or circumstance on the business, results of
operations or financial condition of the Company that was not
known to the board of directors as of the date of the agreement,
and the board of directors has determined in good faith after
consultation with independent financial advisors and outside
legal counsel that failure to take such action would be
inconsistent with the directors fiduciary duties under
applicable law, subject to the satisfaction of certain
conditions, (f) fails to publicly reaffirm the Company
recommendation after Parent so requests, (g) fails to
recommend against any publicly announced takeover proposal and
reaffirm the Company recommendation or (h) the Company
enters into an alternative takeover agreement or (ii) the
Company or our board of directors have publicly announced its
intention to do any of the above actions.
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Parent or Merger Sub have materially breached or failed to
perform any of their representations, warranties, covenants or
agreements in the merger agreement which breach or failure to
perform (i) would give rise to a failure of a condition to
the Companys obligation to close the merger and
(ii) has not been cured prior to August 26, 2010 (but
this right to terminate will not be available to the Company if
we are then in material breach of any of our representations,
warranties, covenants or other agreements that would result in
the conditions with respect to Parents and Merger
Subs obligation to close the merger not being satisfied);
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at any time prior to the adoption of the merger agreement by our
stockholders, in order to concurrently enter into an alternative
takeover agreement with respect to a superior proposal, provided
that (i) the Company has complied in all material respects
with our obligations described under The Merger
Agreement Solicitation of Takeover Proposals
and (ii) prior to or concurrently with such termination, we
pay Parent the termination fee discussed under The Merger
Agreement Termination Fees;
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(i) the conditions to the obligations of Parent and Merger
Sub to close the merger have been satisfied (other than those
conditions that by their nature are to be satisfied by actions
taken at the closing of the merger), (ii) the merger has
not been consummated within two business days following the
final day of the marketing period as described under The
Merger Agreement Closing and Effective Time of the
Merger; Marketing Period beginning on page 58 and
(iii) we have irrevocably confirmed that all conditions to
our obligations to close the merger had been satisfied or that
we are willing to waive all such conditions; or
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(i) the conditions to the obligations of Parent and Merger
Sub to close the merger have been satisfied (other than those
conditions that by their nature are to be satisfied by actions
taken at the closing of the merger), (ii) the debt
financing contemplated by the debt commitment letter has funded
(or the conditions of the debt commitment letter, other than the
merger or the funding of the equity financing contemplated by
the equity commitment letter, have been satisfied and the debt
financing would be funded pursuant to the terms and conditions
of the debt commitment letter upon the consummation of the
equity financing), (iii) the merger has not been
consummated within five business days after the receipt of such
financing and the delivery by us of a written notice to Parent
and (iv) we have irrevocably confirmed that all conditions
to our obligations to close the merger have been satisfied or
that we are willing to waive all such conditions.
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8
Termination
Fees (Page 72)
If the merger agreement is terminated in certain circumstances
described under The Merger Agreement
Termination Fees beginning on page 72:
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the Company may be obligated to pay a termination fee of
$15,471,000, except in the event that the merger agreement is
terminated in order to enter into a definitive agreement with
respect to a takeover proposal with Thomas H. Lee Equity
Fund VI, L.P. or any of its affiliates, in which case the
Company may be obligated to pay a termination fee of $15,471,000
plus an amount equal to $9,283,000, plus certain expenses
reimbursed by the Company to affiliates of Thomas H. Lee
Partners, L.P. under the prior merger agreement with affiliates
of Thomas H. Lee Partners, L.P., which we refer to as the THL
merger agreement, and reimburse up to $5,000,000 of the
out-of-pocket
fees and expenses incurred by Parent or its affiliates; or
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Parent may be obligated to pay the Company a reverse termination
fee of $15,471,000 if the merger agreement is terminated as a
result of Parents or Merger Subs material breach of
any representation, warranty, covenant or agreement of the
merger agreement, which breach has not been cured within the
periods specified, subject to certain conditions (provided that
in certain circumstances, Parent will be required to pay a
higher reverse termination fee, in which case $15,471,000 will
be increased to $30,943,000). The Apollo Investors have agreed
to guarantee the obligation of Parent to pay the reverse
termination fee pursuant to the guarantee.
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Remedies
(Page 74)
Parent and Merger Sub are entitled to injunctions to prevent
breaches of the merger agreement and to specifically enforce the
terms and provisions of the merger agreement in addition to any
other remedy to which they are entitled at law or in equity.
The Company cannot seek specific performance to require Parent
and Merger Sub to complete the merger, and the Companys
exclusive remedy for failure of Parent and Merger Sub to
complete the merger is the payment of the applicable reverse
termination fee and a portion of any costs and expenses incurred
in the circumstances described under The Merger
Agreement Termination Fees beginning on
page 72.
In the event that the Company receives a reverse termination
fee, such fee shall be deemed to be liquidated damages for any
and all losses or damages suffered or incurred by the Company or
any other person in connection with the merger agreement, the
equity commitment letter, the debt commitment letter or the
guarantee, the transactions contemplated thereby and the
abandonment or termination thereof or any matter forming the
basis for such termination, and no other claims may be brought
against Parent, Merger Sub or any other buyer party with respect
to such matters.
Parent and Merger Subs receipt of the termination fee and
certain reimbursement payments from us, would, subject to
certain rights of equitable relief described above, be deemed to
be liquidated damages for any and all losses or damages suffered
or incurred by Parent, Merger Sub, any of their respective
affiliates or any other person in connection with the merger
agreement, the transactions contemplated thereby and the
abandonment or termination thereof or any matter forming the
basis for such termination, and no other claims may be brought
against the Company or any of its affiliates with respect to
such matters.
Market
Prices of Common Stock and Dividend Information
(Page 80)
The closing price of our common stock on the New York Stock
Exchange, or NYSE, on February 25, 2010, the last trading
day prior to the public announcement of the execution of the THL
merger agreement, was $8.91 per share of common stock. On
May 26, 2010, the most recent practicable date before this
proxy statement was mailed to our stockholders, the closing
price for the common stock on the NYSE was $12.29 per share of
common stock. You are encouraged to obtain current market
quotations for common stock in connection with voting your
shares of common stock.
9
Appraisal
Rights (Page 76)
You are entitled to appraisal rights under the Delaware General
Corporation Law, or the DGCL, in connection with the merger,
provided that you meet all of the conditions set forth in
Section 262 of the DGCL. Provided that you meet all such
conditions to making a proper demand for appraisal rights, this
means that you are entitled to have the fair value of your
shares of common stock determined by the Delaware Court of
Chancery and to receive cash payment based on that valuation
instead of receiving the per share merger consideration provided
under the merger agreement. 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, among other things,
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 75 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 common stock
through a bank, brokerage firm or other nominee and you wish to
exercise appraisal rights, you should consult with your bank,
broker or other nominee to determine the appropriate procedures
for the making of a demand for appraisal by the bank, broker or
other nominee. In view of the complexity of the procedures
specified under the DGCL, stockholders who may wish to pursue
appraisal rights should consult their legal and financial
advisors promptly.
Delisting
and Deregistration of Common Stock (Page 82)
If the merger is completed, you will no longer be a stockholder
of our Company, and our common stock will be delisted from the
NYSE and deregistered under the Securities Exchange Act of 1934,
as amended, which we refer to as the Exchange Act. As such, we
would no longer file periodic reports with the Securities and
Exchange Commission, which we refer to as the SEC, on account of
our common stock.
10
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 Company stockholder. 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. 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 84.
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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 stockholders and
the other closing conditions under the merger agreement have
been satisfied or waived, Merger Sub will merge with and into
the Company, with the Company being the surviving corporation.
We refer to this transaction as the merger. As a result of the
merger, the Company will become a subsidiary of Parent and will
no longer be a publicly-traded corporation, our common stock
will be delisted from the NYSE and deregistered under the
Exchange Act, we will no longer file periodic reports with the
SEC on account of our common stock, and you will no longer have
any interest in our future earnings or growth.
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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 $12.55 in cash, without
interest, less any applicable withholding taxes, for each share
of 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 common stock, you will receive $1,255 in cash in exchange for
your shares of 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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How does the per share merger consideration compare to the
market price of the common stock prior to announcement of the
merger?
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A.
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The per share merger consideration represents a premium of
approximately 41% to the closing price of the Companys
common stock on February 25, 2010, the last trading day
prior to the public announcement of the execution of the merger
agreement with affiliates of Thomas H. Lee Partners, L.P., a
premium of approximately 46% to the volume-weighted average
price for the 30 trading days prior to February 25, 2010,
and a premium of approximately 14% over the consideration
provided by the merger agreement previously entered into with
affiliates of Thomas H. Lee Partners, L.P.
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Q.
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How does the board of directors recommend that I vote?
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A.
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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 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 was the role of the transaction committee?
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A.
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Following the determination of the board of directors to
undertake a review of the Companys strategic alternatives,
including, if appropriate, a possible sale of the Company, the
board of directors determined that it was advisable and in the
best interests of the Company and its stockholders to form a due
diligence committee, consisting of independent directors, for
the purpose of directing this review process. The board of
directors appointed each of Byron Allumbaugh and Jerold H.
Rubinstein as members of the due diligence committee. The due
diligence committee was delegated full power and authority to
(i) continue to supervise the Companys due diligence
activities, (ii) negotiate the engagement of the board of
directors outside advisors and to interact with such
advisors regarding their respective activities, including the
screening of any preliminary indications of interest, and
(iii) update the full board of directors as appropriate. At
a later meeting, the board of directors re-
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designated the due diligence committee as the transaction
committee and added Frank P. Willey, who had previously
been assisting the due diligence committee. In addition, the
board of directors expanded the scope of such transaction
committees authority to include the power and authority to
(i) review and evaluate the terms and conditions, and
determine the advisability of, a potential transaction or any
alternatives thereto, (ii) communicate to and negotiate the
terms and conditions of a potential transaction,
(iii) consider, evaluate and negotiate the terms and
conditions of any and all alternatives to the potential
transaction with any other party the committee deems
appropriate, (iv) recommend, if appropriate, a potential
transaction, or alternative thereto, to the board of directors
as fair to, and in the best interests of, the Company and our
stockholders and (v) take any other action necessary or
appropriate in connection with the potential transaction or any
alternatives thereto. See the section entitled The
Merger Background of the Merger beginning on
page 23.
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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. Assuming timely satisfaction of necessary closing
conditions, we anticipate that the merger will be completed in
either the end of the second calendar quarter of 2010 or the
beginning of the third calendar quarter of 2010. If our
stockholders vote to approve the proposal to adopt the merger
agreement, the merger will become effective as promptly as
practicable following the satisfaction or waiver of the other
conditions to the merger. See the section entitled The
Merger Agreement Closing and Effective Time of the
Merger; Marketing Period beginning on page 58.
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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 stockholders of
the Company or if the merger is not completed for any other
reason, the stockholders of the Company will not receive any
payment for their shares of common stock in connection with the
merger. Instead, the Company will remain an independent public
company and the Companys common stock will continue to be
listed and traded on the NYSE. Under specified circumstances,
the Company may be required to pay to or receive from Parent a
fee with respect to the termination of the merger agreement
and/or reimburse Parent for expenses, as applicable, as
described under The Merger Agreement
Termination Fees beginning on page 72.
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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 common stock for cash pursuant to
the merger generally will be a taxable transaction to U.S.
holders (as defined in The Merger Material
U.S. Federal Income Tax Consequences of the Merger
beginning on page 54) for U.S. federal income tax purposes.
If you are a U.S. holder and you exchange your shares of common
stock in the merger, you will generally recognize gain or loss
in an amount equal to the difference, if any, between the cash
payments made pursuant to the merger and your adjusted tax basis
in your shares of common stock. Backup withholding may also
apply to the cash payments made pursuant to the merger unless
the U.S. holder or other payee provides a taxpayer
identification number, certifies that such number is correct and
otherwise complies with the backup withholding rules. You should
read The Merger Material U.S. Federal Income
Tax Consequences of the Merger beginning on page 54
for a more detailed discussion of the U.S. federal income tax
consequences of the merger. You should also consult your tax
advisor for a complete analysis of the effect of the merger on
your federal, state and local and/or foreign taxes.
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Q.
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Will I continue to receive regular quarterly dividends?
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A.
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Our current policy has been to provide quarterly cash dividends
on your shares of common stock. However, the terms of the merger
agreement provide that, from the date of the merger agreement
until the effective time of the merger, we may not declare, set
aside or pay any dividends on shares of our common stock without
the consent of Parent.
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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 stockholder?
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A:
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Yes. In considering the recommendation of the board of directors
with respect to the merger agreement, you should be aware that
certain of the Companys directors and executive officers
have interests in the merger that are different from, or in
addition to, the interests of our stockholders generally. The
board of directors was aware of and considered these interests,
among other matters, in evaluating and negotiating the merger
agreement and
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the merger, and in recommending that the merger agreement be
adopted by the stockholders of the Company. See The
Merger Interests of Certain Persons in the
Merger beginning on page 52.
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Q.
|
|
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 the Companys
common stock as of May 10, 2010, the record date for the
special meeting. 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 the 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 stockholders of the Company will be held
on June 28, 2010 at 10:00 a.m. local time, at
6307 Carpinteria Avenue, Carpinteria, California, 93013.
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Q.
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What am I being asked to vote on at the special meeting?
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A.
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You are being asked to consider and vote on (i) a proposal
to adopt the merger agreement that provides for the acquisition
of the Company by Parent and (ii) 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.
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Q.
|
|
What happened to the proposed merger agreement with
affiliates of Thomas H. Lee Partners, L.P.?
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A.
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As you are aware, the Company previously entered into a merger
agreement with affiliates of Thomas H. Lee Partners, L.P. Our
board of directors determined that the proposal received from
Apollo Management was superior to the proposed merger with
affiliates of Thomas H. Lee Partners, L.P. Concurrently with
the entry into the merger agreement with Parent and Merger Sub,
the Company terminated the merger agreement it had entered into
with affiliates of Thomas H. Lee Partners, L.P.
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Q.
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What vote is required for the Companys stockholders to
approve the proposal to adopt the merger agreement?
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A.
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The adoption of the merger agreement requires the affirmative
vote of the holders of a majority of the outstanding shares of
our common stock entitled to vote thereon.
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Because the affirmative vote required to approve the proposal to
adopt the merger agreement is based upon the total number of
outstanding shares of common stock, if you fail to submit a
proxy or vote in person at the special meeting, or you abstain,
or you do not provide your broker, bank or other nominee with
instructions, as applicable, this will have the same effect as a
vote
AGAINST
the proposal to adopt the merger
agreement.
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Q.
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|
What vote of our stockholders is required to approve the
proposal to adjourn the special meeting, if necessary or
appropriate, to solicit additional proxies?
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A.
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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 common stock present in person or
represented by proxy and entitled to vote on the matter at the
special meeting.
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Abstaining will have the same effect as a vote
AGAINST
the proposal to adjourn the special
meeting, if necessary or appropriate, for the purpose of
soliciting additional proxies. If your shares of the common
stock are held through a bank, brokerage firm or other nominee
and you do not instruct your bank, brokerage firm or other
nominee to vote your shares of common stock, your shares of
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.
|
|
Who can vote at the special meeting?
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A.
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All of our holders of common stock of record as of the close of
business on May 10, 2010, the record date for the special
meeting, are entitled to receive notice of, and to vote at, the
special meeting. Each holder of our common stock is entitled to
cast one vote on each matter properly brought before the special
meeting for each share of common stock that such holder owned as
of the record date.
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13
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Q.
|
|
What is a quorum?
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A.
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A majority of the shares of 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. Abstentions and broker non-votes are counted as present
for the purpose of determining whether a quorum is present.
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Q.
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How do I vote?
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A.
|
|
If you are a stockholder of record, you may have your shares of
the common stock voted on matters presented at the special
meeting in any of the following ways:
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in person you may attend the special
meeting and cast your vote there;
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by proxy stockholders of record can
choose to vote by proxy by signing and dating the proxy card you
receive and returning it in the accompanying pre-paid reply
envelope;
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over the Internet the website for
Internet voting is identified on your proxy card; or
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by using a toll-free telephone number noted on your
proxy card.
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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. 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.
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A control number, located on your proxy card, is designed to
verify your identity and allow you to vote your shares of the
common stock, and to confirm that your voting instructions have
been properly recorded, when voting over the Internet or by
telephone. Please be aware that if you vote over the Internet,
you may incur costs such as telephone and Internet access
charges for which you will be responsible.
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Q.
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What is the difference between holding shares as a
stockholder of record and as a beneficial owner?
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A.
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If your shares of the common stock are registered directly in
your name with our transfer agent, BNY Mellon Shareowner
Services, you are considered, with respect to those shares of
the common stock, the stockholder of record. This
proxy statement and your proxy card have been sent directly to
you by the Company.
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If your shares of the common stock are held through a bank,
brokerage firm or other nominee, you are considered the
beneficial owner of shares of the 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 the
common stock, the stockholder of record. As the beneficial
owner, you have the right to direct your bank, brokerage firm or
other nominee how to vote your shares of the common stock by
following their instructions for voting.
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Q.
|
|
If my shares of the common stock are held in street
name by my bank, brokerage firm or other nominee, will my
bank, brokerage firm or other nominee vote my shares of common
stock for me?
|
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A.
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|
Your bank, brokerage firm or other nominee will only be
permitted to vote your shares of common stock of the Company if
you instruct your bank, brokerage firm or other nominee how to
vote. You should follow the procedures provided by your bank,
brokerage firm or other nominee regarding the voting of your
shares of common stock. If you do not instruct your bank,
brokerage firm or other nominee to vote your shares of common
stock, your shares of common stock 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
common stock will not have an effect on the proposal to adjourn
the special meeting.
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Q.
|
|
How can I change or revoke my vote?
|
|
A.
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|
You have the right to revoke a proxy, whether delivered over the
Internet, by telephone or by mail, at any time before it is
exercised, by voting again at a later date through any of the
methods available to you, by giving written notice of revocation
to our Corporate Secretary, which must be filed with the
Corporate Secretary by the time the special meeting begins, or
by voting by ballot at the special meeting. Attending the
special meeting, by
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itself, is not enough to revoke a proxy. If you are a beneficial
owner and wish to revoke your voting instructions you should
follow the instructions provided by your bank, brokerage firm or
other nominee.
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Q.
|
|
What is a proxy?
|
|
A.
|
|
A proxy is your legal designation of another person, referred to
as a proxy, to vote your shares of stock. The
written document describing the matters to be considered and
voted on at the special meeting is called a proxy
statement. The document used to designate a proxy to vote
your shares of stock is called a proxy card. Our
board of directors has designated two of our officers, Andrew F.
Puzder and E. Michael Murphy, and each of them, with full power
of substitution, as proxies for the special meeting.
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Q.
|
|
If a stockholder gives a proxy, how are the shares of common
stock voted?
|
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A.
|
|
Regardless of the method you choose to vote, the individuals
named on the enclosed proxy card, or your proxies, will vote
your shares of 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 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.
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If you properly sign your proxy card but do not mark the boxes
showing how your shares should be voted on a matter, the shares
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 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.
|
|
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.
|
|
What do I do if I receive more than one proxy or set of
voting instructions?
|
|
A.
|
|
If you hold shares of the common stock in street
name and also directly as a record holder or otherwise,
you may receive more than one proxy and/or set of voting
instructions relating to the special meeting.
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These should each be voted and/or returned separately in
accordance with the instructions provided in this proxy
statement in order to ensure that all of your shares of common
stock are voted.
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|
Q.
|
|
What happens if I sell my shares of common stock before the
special meeting?
|
|
A.
|
|
The record date for stockholders 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
the common stock after the record date but before the special
meeting you will, unless special arrangements are made, retain
your right to vote at the special meeting but will transfer the
right to receive the merger consideration to the person to whom
you transfer your shares.
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Q.
|
|
What happens if I have lost my stock certificate(s)?
|
|
A:
|
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You will be sent a letter of transmittal promptly after
completion of the merger describing the procedures that you must
follow if you cannot locate your stock certificate(s). This will
include an affidavit that you will need to sign attesting to the
loss of your certificate. You may also be required to provide a
bond in order to cover any potential loss.
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15
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|
Q.
|
|
Who will solicit and pay the cost of soliciting proxies?
|
|
A.
|
|
The Company has engaged Morrow & Co., LLC to assist in
the solicitation of proxies for the special meeting. The Company
estimates that it will pay Morrow & Co., LLC a fee of
approximately $15,000, plus $5.00 per each call made to or
received from stockholders of the Company. The Company will
reimburse Morrow & Co., LLC for reasonable
out-of-pocket
expenses and will indemnify Morrow & Co., LLC and its
affiliates against certain claims, liabilities, losses, damages
and expenses. In addition, in the event that the merger
agreement is adopted by the stockholders of the Company, the
Company will pay Morrow & Co., LLC an additional fee
of $10,000. The Company may also reimburse brokers, banks and
other custodians, nominees and fiduciaries representing
beneficial owners of shares of common stock for their expenses
in forwarding soliciting materials to beneficial owners of our
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.
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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, including the attached annexes, please vote promptly
to ensure that your shares are represented at the special
meeting. If you hold your shares of common stock in your own
name as the stockholder of record, please vote your shares of
common stock by completing, signing, dating and returning the
enclosed proxy card in the accompanying pre-paid reply envelope,
using the telephone number printed on your proxy card, or 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?
|
|
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 common stock for the per share merger
consideration. If your shares of 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 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 the common stock?
|
|
A.
|
|
Yes, provided that you comply with all applicable requirements
and procedures. As a holder of common stock, you are entitled to
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 76.
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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
common stock, or need additional copies of the proxy statement
or the enclosed proxy card, please contact Morrow &
Co., LLC, our proxy solicitor, by telephone toll-free at
(800) 607-0088
(banks and brokers call collect at
(203) 658-9400))
or by email at CKE@morrowco.com.
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16
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, dividends 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. Investors 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-Q
and
10-K,
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 circumstance 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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|
the 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 by the
merger agreement;
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|
the inability to complete the merger due to the failure to
obtain stockholder approval, or the failure to satisfy other
conditions to completion of the merger, including obtaining
required regulatory approvals;
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|
the failure of the merger to close for any other reason;
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|
the 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 or the THL merger
agreement;
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|
the diversion of our managements attention from our
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,
(i) the information contained under this heading and
(ii) the information contained under the headings
Risk Factors and Business and in our
consolidated financial statements and notes thereto included in
our most recent filings on
Forms 10-Q
and
10-K
(see Where You Can Find More Information beginning
on page 84). We undertake 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.
17
PARTIES
TO THE MERGER
The
Company
CKE Restaurants, Inc.
6307 Carpinteria Ave., Suite A
Carpinteria, California 93013
(805) 745-7500
The Company is a Delaware corporation. We own, operate,
franchise
and/or
license more than 3,100 quick-service restaurants, primarily
under the brand names Carls
Jr.
®
and
Hardees
®
.
For more information about the Company, please visit our website
at
http://www.ckr.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 Where You Can Find More
Information beginning on page 84. Our common stock is
publicly traded on the NYSE under the symbol CKR.
Parent
Columbia Lake Acquisition Holdings, Inc.
c/o Apollo
Management VII, L.P.
9 West 57th Street,
43
rd
Floor
New York, NY 10019
(646) 607-0528
Columbia Lake Acquisition Holdings, Inc., which we refer to as
Parent, is a Delaware corporation controlled by affiliates of
Apollo Management VII, L.P. that was formed solely for the
purpose of acquiring the Company and has not engaged in any
business except for activities incidental to its formation and
as contemplated by the merger agreement. Upon consummation of
the proposed merger, the Company will be a subsidiary of Parent.
Merger
Sub
Columbia Lake Acquisition Corp.
c/o Apollo
Management VII, L.P.
9 West
57
th
Street,
43
rd
Floor
New York, NY 10019
(646) 607-0528
Columbia Lake Acquisition Corp., which we refer to as Merger
Sub, is a Delaware corporation that is wholly-owned by Parent
and was organized solely for the purpose of entering into the
merger agreement and consummating the transactions contemplated
by the merger agreement. Merger Sub has not conducted any
activities to date other than activities incidental to its
formation and in connection with the transactions contemplated
by the merger agreement. Under the terms of the merger
agreement, Merger Sub will merge with and into the Company, with
the Company continuing as the surviving corporation. Upon
consummation of the proposed merger, Merger Sub will cease to
exist.
THE
SPECIAL MEETING
Time,
Place and Purpose of the Special Meeting
This proxy statement is being furnished to our stockholders as
part of the solicitation of proxies by the board of directors
for use at the special meeting to be held on June 28, 2010,
starting at 10:00 a.m. local time, at 6307 Carpinteria
Avenue, Carpinteria, California, 93013, or at any adjournment
thereof. At the special meeting, holders of our 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.
18
Our stockholders must approve the proposal to adopt the merger
agreement in order for the merger to occur. If our stockholders
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 May 10, 2010 as the
record date for the special meeting, and only holders of record
of 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 common stock
at the close of business on the record date. On the record date,
there were 55,232,512 shares of common stock outstanding
and entitled to vote. Each share of common stock entitles its
holder to one vote on all matters properly coming before the
special meeting.
A majority of the shares of 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 common stock represented at the special
meeting but not voted, including shares of common stock for
which a stockholder directs an abstention from
voting, as well as broker non-votes (as described
below), will be counted for purposes of establishing a quorum. A
quorum is necessary to transact business at the special meeting.
Once a share of 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 to solicit additional proxies.
Attendance
Only stockholders of record or their duly authorized proxies
have the right to attend the special meeting. Since seating is
limited, admission to the special meeting will be on a
first-come, first-served basis. You should be prepared to
present photo identification for admittance. If you are not a
stockholder of record but hold shares through a broker, bank,
trustee or nominee (i.e., in street name), you
should provide proof of beneficial ownership as of the record
date, a copy of the voting instruction card provided by your
broker, bank, trustee or nominee, or similar evidence of
ownership.
Vote
Required
The adoption of the merger agreement requires the affirmative
vote of the holders of a majority of the outstanding shares of
our 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 vote in person at the special
meeting, or if you abstain, it will have the same effect as a
vote AGAINST the proposal to adopt the merger
agreement.
If your shares of the common stock are registered directly in
your name with our transfer agent, BNY Mellon Shareowner
Services, you are considered, with respect to those shares of
common stock, the stockholder of record. This proxy
statement and proxy card have been sent directly to you by the
Company.
If your shares of common stock are held through a bank,
brokerage firm or other nominee, you are considered the
beneficial owner of shares of 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 common stock,
the stockholder 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, brokers 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, brokers are
precluded from exercising their voting discretion with respect
to approving non-routine matters such as the proposal
19
to adopt the merger agreement and, as a result, absent specific
instructions from the beneficial owner of such shares of common
stock, brokers are not empowered to vote those shares of common
stock, 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
common stock present in person or represented by proxy and
entitled to vote on the matter at the special meeting, whether
or not a quorum is present. 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 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 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 stockholder of record, you may have your shares of
the common stock voted on matters presented at the special
meeting in any of the following ways:
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in person you may attend the special meeting and
cast your vote there;
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by proxy stockholders of record can choose to vote
by proxy by signing and dating the proxy card you receive and
returning it in the enclosed pre-paid reply envelope;
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over the Internet the website for Internet voting is
identified on your proxy card; or
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by using a toll-free telephone number noted on your proxy card.
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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 common stock voted. Those
instructions will identify which of the above choices are
available to you in order to have your shares voted. 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.
A control number, located on your proxy card, is designed to
verify your identity and allow you to vote your shares of common
stock, and to confirm that your voting instructions have been
properly recorded, when voting over the Internet or by
telephone. Please be aware that if you vote over the Internet,
you may incur costs such as telephone and Internet access
charges for which you will be responsible.
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 the Corporate
Secretary of the Company by the time the special meeting begins.
Please do not send in your stock certificates with your proxy
card
. When and if 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 the 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 common
stock should be voted for, 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 and submit your proxy card but do not mark
the boxes showing how your shares of common stock should be
voted on a matter, the shares of 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 there are insufficient votes at the time of the
special meeting to approve the proposal to adopt the merger
agreement.
20
If you have any questions or need assistance voting your shares,
please contact Morrow & Co., LLC, our proxy solicitor,
by telephone toll-free at
(800) 607-0088
(banks and brokers call collect at
(203) 658-9400))
or by email at CKE@morrowco.com
IT IS IMPORTANT THAT YOU VOTE YOUR SHARES OF 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 PRE-PAID
REPLY ENVELOPE, OR SUBMIT YOUR PROXY BY TELEPHONE OR THE
INTERNET. STOCKHOLDERS WHO ATTEND THE SPECIAL MEETING MAY REVOKE
THEIR PROXIES AND VOTE BY BALLOT AT THE SPECIAL MEETING.
As of April 18, 2010, certain directors and executive
officers of the Company who beneficially owned and were entitled
to vote, in the aggregate, 4,463,495 shares of common
stock, representing approximately 8.08% of the outstanding
shares of common stock, have executed voting agreements with
Parent (substantially in the form of
Annex B
to this
proxy statement). Pursuant to such voting agreements, such
directors and executive officers have agreed to vote all of
their shares of our 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. See the section
entitled Stockholder Voting Agreements beginning on
page 75.
Proxies
and Revocation
Any stockholder of record entitled to vote at the special
meeting may submit a proxy by telephone, over the Internet, or
by returning the enclosed proxy card in the accompanying
pre-paid reply envelope, or may vote in person at the special
meeting. If your shares of common stock are held in street
name by your broker, bank or other nominee, you should
instruct your broker, bank or other nominee on how to vote your
shares of common stock using the instructions provided by your
broker, bank or other nominee. If you fail to submit a proxy or
vote in person at the special meeting, or abstain, or you do not
provide your broker, bank or other nominee with instructions, as
applicable, your shares of 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.
You have the right to revoke a proxy, whether delivered over the
Internet, by telephone or by mail, at any time before it is
exercised, by voting at a later date through any of the methods
available to you, by giving written notice of revocation to our
Corporate Secretary, which must be filed with the Corporate
Secretary by the time the special meeting begins, or by voting
by ballot at the special meeting. Attending the special meeting,
by itself, is not enough to revoke a proxy. If you are a
beneficial owner and wish to revoke your voting instructions you
should follow the instructions provided by your bank, brokerage
firm or other nominee.
Adjournments
and Postponements
Although it is not currently expected, the special meeting may
be adjourned or postponed 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. Other than an announcement to be made at the
special meeting of the time, date and place of an adjourned
meeting, any adjournment may be made without notice (if the
adjournment is not for more than 30 days and a new record
date has not been fixed). Any adjournment or postponement of the
special meeting for the purpose of soliciting additional proxies
will allow the Companys stockholders 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. Assuming timely satisfaction of necessary closing
conditions, we anticipate that the merger will be completed in
either the end of the second calendar quarter of 2010 or the
beginning of the third calendar quarter of 2010. If our
stockholders vote to approve the proposal to adopt the merger
agreement, the merger will become effective as promptly as
practicable following the satisfaction or waiver of the other
conditions to the merger. See the section entitled The
Merger Agreement Closing and Effective Time of the
Merger; Marketing Period beginning on page 58.
21
Rights of
Stockholders Who Seek Appraisal
Stockholders are entitled to appraisal rights under the DGCL in
connection with the merger. If applicable conditions to making a
demand for appraisal rights are satisfied and if the merger
occurs, this means that you are entitled to have the fair value
of your shares of common stock determined by the Delaware Court
of Chancery and to receive cash payment based on that valuation
instead of receiving the per share merger consideration. 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 proposal to adopt 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 76 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 the common stock through a bank, brokerage
firm or other nominee and you wish to exercise appraisal rights,
you should consult with your bank, broker or other nominee to
determine the appropriate procedures for the making of a demand
for appraisal by the nominee. In view of the complexity of the
procedures specified under the DGCL, stockholders who may wish
to pursue appraisal rights should consult their legal and
financial advisors.
Solicitation
of Proxies; Payment of Solicitation Expenses
The Company has engaged Morrow & Co., LLC to assist in
the solicitation of proxies for the special meeting. The Company
estimates that it will pay Morrow & Co., LLC a fee of
approximately $15,000, plus $5.00 per each call made to or
received from stockholders of the Company. The Company will
reimburse Morrow & Co., LLC for reasonable
out-of-pocket
expenses and will indemnify Morrow & Co., LLC and its
affiliates against certain claims, liabilities, losses, damages
and expenses. In addition, in the event that the merger
agreement is adopted by the stockholders of the Company, the
Company will pay Morrow & Co., LLC an additional fee
of $10,000. The Company may also reimburse brokers, banks and
other custodians, nominees and fiduciaries representing
beneficial owners of shares of common stock for their expenses
in forwarding soliciting materials to beneficial owners of our
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. In addition, certain employees of Apollo
Management and its affiliates may be deemed to be participants
in the solicitation. They will also 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 contact Morrow & Co., LLC, our proxy solicitor,
by telephone toll-free at
(800) 607-0088
(banks and brokers call collect at
(203) 658-9400))
or by email at CKE@morrowco.com.
PROPOSAL 1
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.
22
Merger
Consideration
In the merger, each outstanding share of common stock (other
than shares of common stock held by Parent, Merger Sub or any
other direct or indirect wholly-owned subsidiary of Parent,
shares of common stock held by stockholders who have properly
demanded appraisal rights under the DGCL with respect to such
shares, if any, and common stock owned by the Company or any of
its direct or indirect wholly-owned subsidiaries, which we refer
to collectively as the excluded shares) will be converted into
the right to receive the per share merger consideration of
$12.55 in cash, without interest, less any applicable
withholding taxes.
Background
of the Merger
The Companys board of directors and senior management
continually review our long-term strategic plan with the goal of
maximizing stockholder value. As part of this ongoing process,
the board of directors also periodically reviews the
Companys strategic alternatives, including prospects for
mergers and acquisitions. In connection with these periodic
reviews, the board of directors has, from time to time in the
ordinary course of business, received communications and advice
from various investment banking firms regarding market
conditions and parties that may be interested in exploring a
potential transaction with the Company.
In August 2009, a representative of the investment banking
division of Bank of America/Merrill Lynch, which we refer to as
BAML, informed Andrew F. Puzder, the Companys Chief
Executive Officer and a member of the board of directors, that
he believed that an attractive merger and acquisition
transaction involving the Company may be feasible in light of
improved market conditions. The representative also noted that
private equity firms might be interested in exploring a
potential transaction with the Company. Mr. Puzder informed
various independent members of the board of directors, including
Byron Allumbaugh, the Chairman of the board of directors, and a
representative of Stradling Yocca Carlson & Rauth, the
Companys outside legal counsel, of his discussions with
the representative of BAML. After consulting with such
directors, Mr. Puzder informed the representative of BAML
that he would be interested in meeting with private equity firms
to determine if any of such firms were interested in exploring a
potential transaction with the Company. The Company did not
engage BAML as its financial advisor at this time, or at any
time, in connection with its exploration of a potential
transaction.
In September 2009, representatives of Thomas H. Lee Partners,
L.P., which we refer to as THL, and two other private equity
firms, which we refer to as Party B and Party C, informed a
representative of BAML that they had an interest in exploring a
potential transaction with the Company. The representative of
BAML subsequently informed Mr. Puzder of these expressions
of interest and BAMLs interest in serving as an advisor to
the successful bidder in the event the Company entered into a
transaction (BAML was subsequently engaged by THL as its
financial advisor in connection with this transaction).
Throughout early September 2009, Mr. Puzder informed
various independent members of the board of directors of these
events. Pursuant to these discussions, senior management was
authorized to schedule an initial meeting with each of THL,
Party B and Party C, subject to their prior entry into customary
confidentiality agreements. In September 2009, the Company
entered into confidentiality agreements with each of THL, Party
B and Party C.
From September 16, 2009 through October 2, 2009, the
Company held one management presentation meeting with each of
THL, Party B and Party C, and representatives from BAML and, in
the case of Party B and Party C, the lending division of Bank of
America, which we refer to as Bank of America, which would
potentially provide credit financing in connection with any
transaction. At these meetings, the business due diligence
discussions with THL, Party B and Party C were limited to
publicly-available information regarding the Company, and no
material non-public information was shared. At various times
during this period, including following each management
presentation, Mr. Puzder regularly consulted with various
independent members of the board of directors, including
Mr. Allumbaugh, and a representative of Stradling Yocca
Carlson & Rauth, regarding the status of discussions.
Thereafter, due to the perceived level of interest of THL, Party
B and Party C, Mr. Allumbaugh determined that such
discussions should be brought to the attention of the full board
of directors.
On October 5, 2009, the board of directors held a special
meeting. Several members of senior management and
representatives of Stradling Yocca Carlson & Rauth
participated in this meeting. At the request of the board of
directors, Mr. Puzder reviewed with the board of directors
his discussions with the representatives of BAML and Bank of
America. Mr. Puzder noted that he had reviewed the
Companys standard investor presentation with each of
23
THL, Party B and Party C, and that no non-public information was
shared with these parties. In addition, members of senior
management noted that there had been no substantive discussions
with respect to any terms, provisions, or conditions of a
potential transaction, or any possible employment or other
arrangements between any of the firms and the Companys
senior management.
Mr. Puzder advised the board of directors that he believed
that each of THL, Party B and Party C seemed interested in a
potential transaction, but that each expressed a need to receive
additional information, including confidential information,
regarding the Company. After consultation with a representative
of Stradling Yocca Carlson & Rauth, and after
extensive deliberation, the board of directors agreed that the
Company should provide additional information to THL, Party B
and Party C through an electronic data room. The board of
directors also agreed that this due diligence activity should be
supervised by Messrs. Allumbaugh and Rubinstein. The board
of directors instructed senior management not to discuss any
other aspects of a potential transaction, or any arrangements
with respect to the retention of management or any equity
investment by management in any potential transaction with any
bidders, and senior management confirmed that no such
discussions had occurred to date.
As authorized by the board of directors, during the month of
October 2009, each of THL, Party B and Party C received
non-public information concerning the Company in accordance with
the terms of the confidentiality agreements, discussed with
senior management the Companys business and prospects, and
received equal access to an electronic data room, which
contained certain financial and legal due diligence materials
and other information regarding the Company.
In October 2009, Potter Anderson & Corroon LLP, which
we refer to as Potter Anderson, was engaged as special Delaware
counsel to provide advice on matters of Delaware law.
Also, by mid-October 2009, the Company was informed that Party B
and Party C were no longer interested in pursuing a potential
acquisition of the Company and had terminated their due
diligence efforts.
During the month of November 2009, THL continued its due
diligence efforts.
On December 8, 2009, the board of directors held a
regularly-scheduled meeting. A representative of Stradling Yocca
Carlson & Rauth attended this meeting. The board of
directors discussed the status of the Companys
interactions with THL, Party B and Party C.
Messrs. Allumbaugh and Rubinstein, and members of senior
management, reviewed with the board of directors the due
diligence activities of THL, Party B and Party C to date.
Members of senior management remained present during this
portion of the meeting to respond to any questions that the
board of directors might have regarding the nature of the due
diligence activities of THL, Party B and Party C. The board of
directors was advised that Party B and Party C had terminated
their due diligence efforts, but that THL was continuing to
conduct due diligence on the Company. The board of directors
reiterated its instruction to senior management not to discuss
any other aspects of a potential transaction, or any
arrangements with respect to management retention or any equity
investment by management in any potential transaction with any
bidders, and senior management confirmed that no such
discussions had occurred to date.
In light of the continued due diligence review by THL with
respect to a potential transaction involving the Company, the
board of directors then discussed the retention of UBS to serve
as an independent financial advisor to the board of directors in
connection with any potential transaction involving the Company.
Following extensive discussion regarding the qualifications of
UBS, including its familiarity with both the Company and the
Companys industry, the board of directors authorized the
engagement of UBS. The board of directors then instructed UBS to
supervise the due diligence process, subject to the oversight of
Messrs. Allumbaugh and Rubinstein.
The board of directors then discussed the retention of outside
legal counsel. Mr. Allumbaugh stated that Potter Anderson
had previously been engaged as special Delaware counsel. The
board of directors noted Potter Andersons significant
expertise in Delaware law, including its experience in merger
and acquisition transactions involving Delaware corporations.
The board of directors also discussed the continued retention of
Stradling Yocca Carlson & Rauth, noting its experience
in merger and acquisition transactions and familiarity with the
Companys operations. Following this discussion, the board
of directors ratified the formal engagement of Potter Anderson
and Stradling Yocca Carlson & Rauth with respect to a
potential transaction.
The board of directors also formalized the role of
Messrs. Allumbaugh and Rubinstein by appointing them as
members to a two-member due diligence committee with the
authority to (i) continue to supervise the Companys
due diligence activities, (ii) negotiate the engagement of
the board of directors outside advisors and to interact
with
24
such advisors regarding their respective activities, including
the screening of any preliminary indications of interest, and
(iii) update the board of directors as appropriate.
On December 17, 2009, THL submitted a non-binding
indication of interest to acquire all of the capital stock of
the Company at a price of $10.00 per share. A copy of the
non-binding indication of interest was provided to the members
of the due diligence committee, representatives of Potter
Anderson, representatives of Stradling Yocca Carlson &
Rauth and certain members of senior management.
On December 23, 2009, the due diligence committee held a
meeting to discuss the status of due diligence activities by THL
and the indication of interest submitted by THL. Neither
Mr. Puzder nor any other member of senior management was
present at this meeting. Prior to this meeting, preliminary
materials prepared by UBS were distributed to the members of the
due diligence committee. Representatives of UBS and Stradling
Yocca Carlson & Rauth also participated in the
meeting. At the request of the due diligence committee, a
representative from Stradling Yocca Carlson & Rauth
reviewed with the due diligence committee the previous actions
of the board of directors with respect to a potential
transaction with THL. During this meeting, the due diligence
committee reviewed the terms of the proposed engagement letter
with UBS and subsequently approved the engagement letter.
Representatives of UBS then reviewed the due diligence
activities by THL and the discussions with THL to date. Prior to
discussing THLs indication of interest, at the request of
the due diligence committee, representatives of UBS reviewed
various strategic considerations. The representatives of UBS
discussed current merger and acquisition market conditions and
reviewed a number of considerations with respect to a potential
transaction with THL, and considerations with respect to
remaining a publicly-traded, independent company. The due
diligence committee and the representatives of UBS discussed how
to obtain the highest valuation if the Company were to pursue
discussions with THL, including whether the Company should
engage in some form of market check prior to or in connection
with further exploration of a possible transaction with THL. The
due diligence committee discussed a variety of additional
factors, including the universe of potential bidders capable of
entering into a transaction with the Company, the possibility
that competition between multiple bidders could result in a
higher per share price in a transaction, the increased risk of a
premature leak to the market of information regarding a
potential transaction, the board of directors view that
the Company was not for sale merely because THL had delivered an
indication of interest, the fact that three financial sponsors
had already extensively examined the Company with a view towards
a possible transaction, and the risks associated with sharing
confidential information with any competitor of the Company. The
due diligence committee also discussed the possibility that the
Company would be able to proactively seek alternative proposals
following the signing of a merger agreement with THL, which we
refer to as the THL merger agreement, through the use of a
go-shop provision, a customary superior
proposal termination right and an appropriate termination
fee. After these discussions, the due diligence committee
concluded that if a potential transaction were to be pursued,
the best strategy to obtain the highest valuation was to enter
into a definitive merger agreement with the highest available
per share merger consideration and then aggressively market that
deal during a go-shop period.
The due diligence committee then discussed with UBS the
indication of interest submitted by THL. In connection with this
discussion, UBS presented the Companys preliminary
financial forecasts, public market perspectives on the Company,
and preliminary valuation considerations. These forecasts, which
had been previously provided to UBS by the Companys
management, and preliminary valuation considerations were
discussed in detail. Following this discussion, the due
diligence committee unanimously authorized UBS to communicate to
THL that its offer was rejected and that its price was not
sufficient. However, after discussion with UBS, the due
diligence committee agreed to allow THL to continue its due
diligence efforts with the expectation that additional due
diligence would allow THL to improve the terms of its proposal.
After the conclusion of this meeting, at the instruction of the
due diligence committee, UBS was informed that senior management
had been advised that managements role at the present time
was limited to the assistance with due diligence efforts and
that it was specifically not allowed to discuss with THL, UBS or
anyone else any other aspects of a potential transaction, or any
arrangements with respect to management retention or any equity
investment by management in any potential transaction.
Following this meeting, representatives of UBS, at the direction
of the due diligence committee, communicated to THL that its
indication of interest was rejected and that its price was not
sufficient.
25
From late December 2009 through the execution of the THL merger
agreement, THL and its representatives engaged in extensive
legal, accounting and financial due diligence, including
numerous diligence calls with members of the Companys
senior management team. Also in attendance on many of these
calls were representatives of UBS.
On January 18, 2010, THL submitted a letter that reiterated
its interest in a potential acquisition of the Company. In the
letter, THL provided an update with respect to its due diligence
and financing activities to date, but did not submit a revised
purchase price.
On January 19, 2010, the board of directors held a
regularly-scheduled meeting, where senior management provided to
and discussed with the board of directors a detailed update on
the Companys business goals and prospects, including a
proposed budget for fiscal year 2011. The board of directors was
also updated on discussions with THL. Several members of senior
management and representatives of UBS, Potter Anderson and
Stradling Yocca Carlson & Rauth participated in this
meeting. The board of directors permitted the attendance of
members of senior management during this portion of the meeting
in light of their experience and knowledge of the Company, which
could assist the board of directors in evaluating the financial
information presented to it by UBS. Representatives of UBS,
Mr. Puzder and other members of senior management were
recused from a portion of the meeting when representatives of
Potter Anderson reviewed with the board of directors their
fiduciary duties under applicable law. Representatives of UBS
then reviewed with the board of directors the discussions to
date with THL, including the due diligence committees
rejection of THLs initial non-binding indication of
interest. Representatives of UBS then provided various financial
analyses to the board of directors and reviewed a number of
considerations with respect to a potential transaction and
considerations with respect to remaining a publicly-traded,
independent company. UBS included in its presentation an outline
of the significant next steps with respect to a potential
transaction, which were discussed with the board of directors.
After discussion, the board of directors adopted the approach
previously formulated by the due diligence committee at the
meeting of such committee that occurred on December 23,
2009: to enter into a definitive merger agreement with the
highest available per share merger consideration and then
aggressively market that deal during a go-shop
period.
The board of directors also discussed with its legal counsel
whether to expand the authority and membership of the due
diligence committee to permit it to actively participate in the
negotiations with THL. After discussion, the board of directors
determined that such a committee would facilitate the
negotiation process and therefore the board of directors
re-designated the committee as the transaction
committee and added Frank P. Willey as a member of such
committee, who had previously been assisting the due diligence
committee. In addition, the board of directors expanded the
scope of such committees authority to include the power
and authority to (i) review and evaluate the terms and
conditions, and determine the advisability of, a potential
transaction or any alternatives thereto, (ii) communicate
to and negotiate with THL concerning the terms and conditions of
a potential transaction, (iii) consider, evaluate and
negotiate the terms and conditions of any and all alternatives
to the potential transaction with any other party the committee
deems appropriate, (iv) recommend, if appropriate, a
potential transaction, or alternative thereto, to the board of
directors as fair to, and in the best interests of, the Company
and its stockholders and (v) take any other action
necessary or appropriate in connection with the potential
transaction or any alternatives thereto.
On January 22, 2010, the transaction committee met to
discuss the status of discussions with THL. Neither
Mr. Puzder nor any other member of senior management was
present at this meeting. Representatives of UBS and Stradling
Yocca Carlson & Rauth participated in the meeting. At
the request of the transaction committee, representatives of UBS
reviewed with the transaction committee the discussions with THL
since the last meeting of the board of directors on
January 19, 2010.
Later that same day on January 22, 2010, THL submitted a
revised non-binding indication of interest to acquire all of the
capital stock of the Company at a price of $10.50 per share to
representatives of UBS and Stradling Yocca Carlson &
Rauth. A representative of Stradling Yocca Carlson &
Rauth distributed a copy of such revised non-binding indication
of interest to the board of directors. The revised indication of
interest included a draft THL merger agreement and a list of
conditions that THL expected would be included in the debt
commitment letter, which we refer to as the THL debt commitment
letter, and equity commitment letter, which we refer to as the
THL equity commitment letter. The draft THL merger agreement
included a go-shop provision based on earlier
direction from UBS to the effect that if the Companys
discussions with THL were to result in a deal, the Company
26
would insist in all cases on preserving the contractual right,
via a go-shop provision, to conduct a fulsome
post-signing market check. In addition, in its indication of
interest, THL stated that any transaction with the Company would
be predicated on THLs ability to reach satisfactory
arrangements with management regarding equity rollover and
compensation arrangements and requested the ability to commence
discussions regarding such arrangements with management as soon
as possible.
On January 25, 2010, the transaction committee met to
discuss the revised indication of interest received from THL.
Neither Mr. Puzder nor any other member of senior
management was present at this meeting. Prior to the meeting,
preliminary materials prepared by UBS were distributed to
members of the transaction committee. Representatives of UBS,
Potter Anderson and Stradling Yocca Carlson & Rauth
participated in this meeting. At the request of the transaction
committee, representatives of UBS reviewed with the transaction
committee the revised indication of interest. Representatives of
UBS also summarized their preliminary materials, including
various financial analyses. After discussion, the transaction
committee deferred any action regarding the revised indication
of interest to a meeting of the full board of directors
scheduled for later that afternoon.
Later that same day on January 25, 2010, the board of
directors held a special meeting to discuss THLs revised
indication of interest. Several members of senior management and
representatives of UBS, Potter Anderson and Stradling Yocca
Carlson & Rauth participated in this meeting. The
board of directors permitted the attendance of members of senior
management at this meeting in light of their experience and
knowledge of the Company, which could assist the board of
directors in evaluating the Companys short- and long-term
prospects and financial information. At the request of the board
of directors, representatives of UBS reviewed their discussions
with THL and the revised indication of interest. Following the
recusal from the meeting of the representatives of UBS,
Mr. Puzder and other members of senior management, the
board of directors engaged in lengthy discussions regarding the
Companys short- and long-term prospects, current financial
information, strategic alternatives, including remaining a
publicly-traded, independent company, the state of the
Companys industry, and general market conditions.
Following this discussion, the board of directors determined
that the price was not sufficient and agreed to reject the
revised indication of interest and authorized UBS to communicate
this decision to THL. In addition, the board of directors
determined not to authorize management to commence discussions
regarding any equity rollover and compensation arrangements with
THL at such time. After consulting with its legal advisors, the
board of directors determined that the optimal strategy for
securing an improvement in the terms and conditions of a
proposal from THL was for the board of directors to not directly
engage in negotiations with THL. In lieu of direct board
engagement, the board of directors authorized the transaction
committee to continue to supervise the due diligence process, to
receive regular updates from UBS regarding the status of
discussions with THL, to evaluate additional financial analyses
prepared by UBS, to communicate directly with THL, if necessary,
and to provide regular updates to the board of directors with
respect thereto, under the view that further diligence by THL
may result in an increased purchase price.
On or about January 26, 2010, representatives of UBS
advised THL that its indication of interest was rejected, but
that THL could continue its due diligence activities.
On January 29, 2010, the transaction committee met to
discuss the status of discussions with THL. Neither
Mr. Puzder nor any other member of senior management was
present at this meeting. Representatives of UBS and Stradling
Yocca Carlson & Rauth participated in this meeting. At
the request of the transaction committee, representatives of UBS
reviewed their discussions with THL since the last meeting of
the board of directors on January 25, 2010.
On February 2, 2010, in furtherance of demonstrating its
ability to consummate a potential transaction, THL submitted a
letter that included draft THL debt commitment letters and a
draft THL equity commitment letter. In its letter, THL indicated
that the debt financing commitments were substantially
negotiated. The letter also reiterated THLs intention to
complete the potential transaction at a price of $10.50 per
share. On February 3, 2010, THL submitted a draft guarantee
to be entered into by Thomas H. Lee Equity Fund VI, L.P.,
which we refer to as the THL guarantee, pursuant to which Thomas
H. Lee Equity Fund VI, L.P. would guarantee certain payment
obligations of Western Acquisition Holdings, Inc., which we
refer to as THL Parent, under the THL merger agreement in
certain circumstances.
27
Later that same day on February 3, 2010, the transaction
committee met to discuss the status of discussions with THL.
Neither Mr. Puzder nor any other member of senior
management was present at this meeting. Representatives of UBS
and Stradling Yocca Carlson & Rauth participated in
this meeting. At the request of the transaction committee,
representatives of UBS reviewed their discussions with THL since
the last meeting of the transaction committee that occurred on
January 29, 2010. UBS also reviewed the letter submitted by
THL the previous day. The transaction committee then reviewed
the discussions that took place at the previous meeting of the
board of directors regarding the rejection of THLs
revised indication of interest. Thereafter, representatives of
UBS reviewed various financial analyses and provided a summary
of the material financial terms and conditions of the THL debt
commitment letters submitted by THL. After a lengthy discussion,
the transaction committee unanimously agreed to reject
THLs revised indication of interest in light of the fact
that the price in the revised indication of interest remained
the same as the price previously rejected by the board of
directors as not sufficient on January 25, 2010, and
instructed Mr. Allumbaugh to deliver a letter to THL to
that effect. However, the transaction committee agreed to allow
THL to continue its due diligence efforts with the expectation
that additional due diligence would allow THL to improve the
terms of its proposal.
On February 4, 2010, Mr. Allumbaugh submitted a letter
to THL that stated the board of directors determination
that the valuation proposed in THLs revised indication of
interest dated January 22, 2010 was not sufficient to
proceed with a potential transaction or the negotiation of the
draft THL merger agreement at such time.
On February 12, 2010, the transaction committee met to
discuss the status of discussions with THL. Mr. Puzder and
representatives of UBS, Potter Anderson and Stradling Yocca
Carlson & Rauth participated in this meeting.
Mr. Puzder informed the transaction committee that
management had, consistent with past practice, updated the
Companys financial forecasts for fiscal year 2011 based on
results obtained after the end of fiscal year 2010, and such
revisions resulted in improved forecasts. Mr. Puzder then
reviewed the revised financial forecasts, which we refer to as
the management forecast. The management forecast was provided to
UBS, and elements of it were provided to THL. See section
captioned Certain Company Forecasts beginning on
page 46. After his presentation, Mr. Puzder was
recused from the meeting. At the request of the transaction
committee, representatives of UBS reviewed their discussions
with THL since the last meeting of the transaction committee
that occurred on February 3, 2010, including the letter
submitted to THL on February 4, 2010. At the request of the
transaction committee, representatives of UBS reviewed various
financial analyses and preliminary valuation considerations.
After a lengthy discussion, the transaction committee authorized
UBS to continue to engage in discussions with THL to address
certain outstanding due diligence requests. Managements
revised forecast for fiscal year 2011 was distributed to THL
that same day.
On February 17, 2010, THL submitted a revised non-binding
indication of interest to acquire all of the capital stock of
the Company at a price of $10.80 per share. In addition, in its
indication of interest, THL reiterated that any transaction with
the Company would be predicated on THLs ability to reach
satisfactory arrangements with management regarding equity
rollover and compensation arrangements, and again requested the
ability to commence discussions regarding such arrangements with
management as soon as possible. THL also expressed its desire to
receive a comprehensive response to the drafts of the THL merger
agreement, THL debt commitment letter and THL equity commitment
letter and THL guarantee submitted on January 22, 2010,
February 2, 2010, and February 3, 2010, respectively.
In addition, THL requested, due to weakening conditions in the
global debt financing markets that could negatively impact the
economic terms of THLs debt financing, a response to its
revised indication of interest no later than February 18,
2010.
Later that same day on February 17, 2010, the transaction
committee met to discuss the status of discussions with THL.
Neither Mr. Puzder nor any other member of senior
management was present at this meeting. Representatives of UBS,
Potter Anderson and Stradling Yocca Carlson & Rauth
participated in this meeting. Representatives of UBS and the
transaction committee discussed the terms and conditions of the
revised indication of interest. After extensive discussion, the
transaction committee determined to distribute the revised
indication of interest to the board of directors and to schedule
a meeting of the board of directors for the following day to
discuss the revised indication of interest.
28
On February 18, 2010, the board of directors held a special
meeting to discuss the second revised indication of interest
received from THL. Members of senior management and
representatives of UBS, Potter Anderson and Stradling Yocca
Carlson & Rauth participated in this meeting. At the
request of the board of directors, representatives of UBS
reviewed their discussions with THL since the last meeting of
the board of directors. Representatives of UBS and the board of
directors discussed the terms and conditions of the revised
indication of interest. Representatives of UBS also reviewed
various financial analyses, key trading price considerations and
preliminary valuation considerations from the materials provided
to the transaction committee on February 12, 2010.
After such discussion, the board of directors called an
executive session and Mr. Puzder and other members of
senior management and representatives of UBS were recused from
the meeting. A representative of Potter Anderson discussed the
directors fiduciary duties under applicable law. During
the executive session, the independent members of the board of
directors engaged in a lengthy discussion regarding the
Companys strategic alternatives, including remaining a
publicly-traded independent company, and the state of the
Companys industry and general market conditions. During
such discussion, the independent members of the board of
directors also discussed the potential benefits and risks
associated with allowing senior management to engage in
discussions with THL regarding equity rollover and compensation
arrangements at such time. After extensive deliberation, the
independent members of the board of directors authorized
representatives of UBS to communicate to THL that its price was
not sufficient and did not meet the expectations of the board of
directors. Due to the advanced nature of the negotiations
between the parties and the need for the board of directors to
better understand whether THL had any material contingencies
relating to the proposed transaction, including whether the
proposed transaction with THL would be predicated on THLs
ability to reach satisfactory arrangements with management
regarding equity rollover and compensation, the independent
members of the board of directors also authorized senior
management to engage in discussions with THL regarding equity
rollover and compensation arrangements.
From February 18, 2010 through February 24, 2010,
representatives of UBS and THL continued to engage in
discussions regarding the status of the THL debt commitment
letter and the proposed purchase price.
On February 19, 2010, representatives of Stradling Yocca
Carlson & Rauth sent a memorandum identifying its and
Potter Andersons concerns with respect to certain
provisions of the THL merger agreement to representatives of
Ropes & Gray LLP, who we refer to as Ropes &
Gray, counsel to THL. The memorandum requested terms in the THL
merger agreement that were more favorable to the Company. In
particular, the memorandum demanded that the length of the
go-shop period in the draft THL merger agreement be
lengthened. In addition, the memorandum sought a decrease in the
amount of the termination fee payable by the Company and an
increase in the amount of the reverse termination fee and also
raised issues relating to the use of a closing adjusted leverage
condition to closing.
On February 20, 2010, in response to these issues,
Ropes & Gray communicated THLs willingness to
agree to (i) extend the length of the go-shop
period, (ii) permit the Company to continue to negotiate
for an additional
20-day
period, subject to specified conditions, with third parties
(each, an excluded party) that had presented the
Company with a competing takeover proposal prior to the
expiration of the initial
40-day
go-shop period that the board of directors had
determined constituted, or was reasonably expected to lead to, a
superior proposal (as such term was defined in the
THL merger agreement), (iii) adopt a two-tier termination
fee structure, which would permit the Company to pay a reduced
termination fee if it entered into a definitive agreement with
an excluded party prior to the end of such additional
20-day
period, and (iv) adopt a two-tier reverse termination fee
structure, which would provide for a greater reverse termination
fee in certain events.
On February 21, 2010, Ropes & Gray sent certain
proposed changes to the THL merger agreement to representatives
of Stradling Yocca Carlson & Rauth and UBS, which
reflected THLs revised positions on the ability of the
Company to negotiate with an excluded party for an additional
20-day
period, the adoption of a two-tier termination fee structure and
the adoption of a two-tier reverse termination fee structure.
On February 22, 2010, representatives of Stradling Yocca
Carlson & Rauth sent revised drafts of the THL merger
agreement and the THL guarantee to representatives of
Ropes & Gray. Representatives of Stradling Yocca
Carlson & Rauth, Potter Anderson and Ropes &
Gray engaged in discussions from February 23, 2010 through
February 26, 2010 regarding transaction documents
(including a form of voting agreement, which we refer to as the
THL voting agreement, and the THL equity commitment letter).
29
Between February 23, 2010 and February 25, 2010, THL
presented members of senior management with term sheets setting
forth proposed terms for post-closing employment and equity
arrangements with the surviving corporation.
On February 24, 2010, representatives of Ropes &
Gray sent a revised draft THL merger agreement to
representatives of Stradling Yocca Carlson & Rauth.
Also on February 24, 2010, THL revised the proposal that it
earlier submitted by making a non-binding offer to acquire all
of the capital stock of the Company at a price of $10.95 per
share, which we refer to as the February 24 Proposal.
On February 25, 2010, the transaction committee met to
discuss the status of discussions with THL, including the status
of negotiations regarding the THL merger agreement.
Representatives of UBS and Stradling Yocca Carlson &
Rauth participated in this meeting. At the request of the
transaction committee, representatives of UBS reviewed their
discussions with THL since the last meeting of the board of
directors, including the February 24 Proposal. Representatives
of UBS also reviewed with the transaction committee various
financial analyses. After extensive deliberation, the
transaction committee requested representatives of UBS to
instruct THL to provide to the board of directors its best offer
by 3:00 p.m. Pacific Time that same day. The transaction
committee then requested that Mr. Puzder join the meeting
and update the transaction committee regarding all discussions
between senior management and THL with respect to the proposed
terms of post-closing employment and equity arrangements with
senior management that had occurred to date. Mr. Puzder
indicated that such discussions were taking place, but were only
at a preliminary stage. After Mr. Puzders
presentation, he was recused from the committee meeting.
Representatives of UBS and the transaction committee further
discussed the terms and conditions of the February 24 Proposal
and other deal protection provisions. A representative from
Stradling Yocca Carlson & Rauth reviewed the status of
negotiations regarding the THL merger agreement and provided a
summary of the terms and conditions of the THL merger agreement
and the results of the negotiations thereof. The transaction
committee determined to schedule a meeting of the board of
directors for later that afternoon.
Later that same day on February 25, 2010, in response to
the board of directors request for its best offer, THL
submitted a revised non-binding indication of interest to
acquire all of the capital stock of the Company at a price of
$11.05 per share, which we refer to as the February 25 Proposal.
Later that same day on February 25, 2010, the board of
directors held a special meeting to discuss the February 25
Proposal. Prior to the meeting, materials prepared by
representatives of UBS and the revised draft of the THL merger
agreement were distributed to the members of the board of
directors. Members of senior management and representatives of
UBS, Potter Anderson and Stradling Yocca Carlson &
Rauth participated in this meeting. Representatives of UBS
reviewed the discussions with THL since the last meeting of the
board of directors and various financial analyses.
The board of directors and its advisors discussed the terms and
conditions of the February 25 Proposal, the THL merger
agreement, the THL debt commitment letter, the THL equity
commitment letter and the THL guarantee, including the
termination fees and the go-shop provision. With
respect to the go shop provision, the board of
directors and its advisors discussed in detail the
Companys ability to actively solicit takeover proposals
during the go-shop period and the two-tier
termination fee whereby the Company would be obligated to pay a
termination fee equal to (i) $9,283,000 in the event the
Company terminated the THL merger agreement in order to enter
into a definitive agreement with an excluded party prior to
12:01 p.m., New York City time on April 27, 2010, and
(ii) $15,471,000 in the event that it terminated the THL
merger agreement under all other circumstances, plus, in each
case, documented expenses up to $5,000,000. The board of
directors and its advisors also discussed the efforts that would
be undertaken by UBS on the Companys behalf during the
go-shop period.
After the presentations by UBS and a review of the February 25
Proposal, the board of directors requested that UBS deliver its
fairness opinion. Thereafter, UBS delivered to the
Companys board of directors an oral opinion, which was
confirmed by delivery of a written opinion dated
February 25, 2010, to the effect that, as of that date and
based on and subject to various assumptions, matters considered
and limitations described in its opinion, the price of $11.05
per share merger consideration to be received by holders of the
Companys common stock (other than the excluded holders) in
the merger was fair, from a financial point of view, to such
holders.
30
Then, representatives of Potter Anderson again reviewed the
directors fiduciary duties under applicable law. At the
request of the board of directors, a representative of Stradling
Yocca Carlson & Rauth discussed the material terms and
conditions of the THL merger agreement and reviewed the
negotiations that had occurred between Stradling Yocca
Carlson & Rauth and Ropes & Gray with
respect to the THL merger agreement. The board of directors and
its advisors then discussed the THL merger agreement, the
Companys short- and long-term prospects, current financial
statements, general views regarding the financial analyses
presented by UBS and the state of the market in which the
Company does business. After extensive discussion and
deliberation, the board of directors unanimously adopted and
approved the THL merger agreement and the transactions
contemplated thereby. In approving the THL merger agreement, the
board of directors determined that the Companys entering
into the THL merger agreement was in the best interests of the
Company and our stockholders, as it represented a key step in
the board of directors strategy to maximize stockholder
value. Specifically, the board of directors concluded that
stockholder value could be further enhanced through the
publicly-noticed auction process contemplated by the
go-shop provision of the THL merger agreement and
the possibility of consummating a transaction with a new bidder
whereby the Company would qualify to pay a reduced termination
fee of $9,283,000 to THL.
On February 26, 2010, the Company and THL Parent executed
the THL merger agreement. Thereafter, the Company issued a press
release announcing the execution of the THL merger agreement and
the commencement of the go-shop marketing process
during which the Company would actively solicit takeover
proposals from third parties.
Later that same day on February 26, 2010, pursuant to the
go-shop provision of the THL merger agreement, at
the direction and under the supervision of the board of
directors, representatives of UBS began contacting potential
buyers that were believed would be capable of, and might be
interested in, consummating an acquisition of the Company at a
price greater than $11.05 per share. Representatives of UBS
contacted 24 potential financial sponsor buyers, including
Apollo Management, and four potential strategic buyers. Of the
parties contacted by UBS, three potential financial sponsor
buyers, including Apollo Management, and one potential strategic
buyer entered into confidentiality agreements with the Company
and received confidential information regarding the Company.
During the go-shop period, the Company and its
representatives also continued to work to consummate the
transactions contemplated by the THL merger agreement in light
of the uncertain outcome of the go-shop process and
as required by the THL merger agreement. Among the actions taken
by the Company and its representatives in connection with the
THL merger agreement, the Company filed for and received
antitrust clearance under the HSR Act, obtained various
third-party consents and prepared and filed a preliminary proxy
statement with the SEC.
Also during the go-shop period, Apollo Management
requested copies of the THL equity commitment letter and the THL
debt commitment letter. Due to certain confidentiality
restrictions, the Company did not provide those documents to
Apollo Management.
During the period commencing on February 26, 2010 and
continuing until April 23, 2010, members of senior
management met with representatives of THL several times to
discuss the terms for post-closing employment and equity
arrangements with the surviving corporation under the THL merger
agreement. Throughout this period, members of senior management
kept members of the transaction committee and representatives of
Stradling Yocca Carlson & Rauth informed regarding
material developments relating to their ongoing discussions.
On March 12, 2010, the transaction committee met to discuss
the activities of the Companys representatives during the
go-shop period. Neither Mr. Puzder nor any
other member of senior management was present at this meeting.
Representatives of UBS and Stradling Yocca Carlson &
Rauth participated in this meeting. At the request of the
transaction committee, representatives of UBS provided an update
regarding the potential buyers contacted by representatives of
UBS and the due diligence activities of the four parties,
including Apollo Management, that had executed confidentiality
agreements.
On March 18, 2010, the board of directors held a regularly
scheduled meeting. Representatives of UBS, Potter Anderson and
Stradling Yocca Carlson & Rauth participated in this
meeting. At the request of the board of directors,
representatives of UBS provided an update regarding the
potential buyers contacted by representatives of UBS and
31
the due diligence activities of the four parties, including
Apollo Management, that had executed confidentiality agreements.
On April 2, 2010, the transaction committee met to discuss
the activities of the potential buyers during the
go-shop period. Neither Mr. Puzder nor any
other member of senior management was present at this meeting.
Representatives of UBS, Potter Anderson and Stradling Yocca
Carlson & Rauth participated in this meeting. At the
request of the transaction committee, representatives of UBS
updated the transaction committee on the status of discussions
between representatives of UBS and representatives of the four
parties that had executed confidentiality agreements, including
representatives of Apollo Management. Representatives of UBS
stated that, of the four parties that had executed
confidentiality agreements, two parties had informed UBS since
the last meeting of the board of directors that such parties had
decided to withdraw from the go-shop process and
another party had not actively participated in the
go-shop process since executing a confidentiality
agreement. With respect to Apollo Management, representatives of
UBS also informed the transaction committee that Apollo
Management had indicated to UBS that Apollo Managements
due diligence efforts were nearly complete and that the
remaining due diligence activities focused on legal and
accounting matters. In addition, representatives of UBS stated
that representatives of Apollo Management had provided
assurances that financing arrangements required for Apollo
Management to submit a takeover proposal for the Company were
nearly in place. Representatives of UBS also confirmed that
Apollo Management had not yet requested direct negotiations with
the Companys senior management with respect to proposed
terms for post-closing employment and equity arrangements with
the surviving corporation in a transaction with Apollo
Management. Representatives of Potter Anderson stated that they
would discuss with members of senior management those
members fiduciary duties to the Company, and that the
transaction committee would determine when members of senior
management could commence negotiations with Apollo Management.
On April 6, 2010, prior to the end of the
go-shop period, Apollo Management submitted a
non-binding proposal on behalf of itself and its affiliated
investment funds, subject to due diligence and other conditions,
pursuant to which Apollo Management proposed to acquire the
Company at a price of $11.50 per share, in cash, which proposal
we refer to as the Apollo Initial Proposal. In the Apollo
Initial Proposal, Apollo Management indicated that it intended
to finance the proposed transaction through an equity
contribution and through third-party debt financing, and that
Apollo Management had been working closely to obtain the debt
financing with Citigroup Capital Markets, Inc., Morgan Stanley
Senior Funding, Inc., and RBC Capital Markets. The Apollo
Initial Proposal also indicated that Apollo Management would
provide the Company with a guarantee, in favor of the Company,
guaranteeing the payment of certain monetary obligations that
might be owed by Apollo Managements acquisition vehicle to
the Company under a definitive merger agreement. The Apollo
Initial Proposal stated that the execution of a definitive
merger agreement by Apollo Management was subject to certain
conditions, including identification of Apollo Management as an
excluded party (as such term was defined in the THL
merger agreement) and termination of the THL merger agreement by
the Company prior to the cut-off date of
April 27, 2010.
Later that same day on April 6, 2010, the board of
directors held a special meeting to discuss the Apollo Initial
Proposal. Prior to this meeting, the Apollo Initial Proposal was
distributed to the members of the board of directors.
Representatives of UBS, Potter Anderson and Stradling Yocca
Carlson & Rauth participated in this meeting. The
board of directors discussed the receipt of the Apollo Initial
Proposal. Representatives of Stradling Yocca Carlson &
Rauth and UBS then reviewed the status of their discussions with
Apollo Management to date and provided a summary of the material
terms of the Apollo Initial Proposal, including the fact that
the Apollo Initial Proposal indicated that Apollo Management
planned to acquire the Company on substantially the same terms
as set forth in the THL merger agreement, including with respect
to closing conditions. At the request of the board of directors,
representatives of Potter Anderson reviewed the board of
directors fiduciary duties and contractual obligations
under the THL merger agreement with respect to the receipt of
the Apollo Initial Proposal. After extensive deliberation and
consultation with representatives of UBS, Potter Anderson and
Stradling Yocca Carlson & Rauth, the board of
directors determined, in accordance with terms and conditions of
the THL merger agreement, that the Apollo Initial Proposal was a
takeover proposal under the THL merger agreement
that constituted or was reasonably expected to lead to a
superior proposal under the THL merger agreement and
that, accordingly, Apollo Management was an excluded
party under the THL merger agreement.
32
Later that same day on April 6, 2010, at the direction of
the board of directors, representatives of Stradling Yocca
Carlson & Rauth, on behalf of the Company, notified
THL of the Companys receipt of the Apollo Initial Proposal
and the board of directors determination that Apollo
Management was an excluded party under the THL
merger agreement. Stradling Yocca Carlson & Rauth, on
behalf of the Company, also provided to THL a summary of the
material terms of the Apollo Initial Proposal and a summary of
the reasons for the board of directors determination.
As a result of the board of directors determination that
Apollo Management was an excluded party under the
THL merger agreement, the Company was permitted to continue to
engage in discussions and negotiations with Apollo Management
until April 27, 2010, provided that Apollo Management
remained an excluded party during that period. At the request of
the transaction committee, representatives of UBS agreed to
attend a meeting between members of Senior Management and
representatives of Apollo Management. Also, at the request of
the transaction committee, representatives of Potter Anderson
provided advice to members of senior management on an ongoing
basis in connection with meetings between representatives of
Apollo Management and members of senior management.
Pursuant to the THL merger agreement, the go-shop
period expired on April 7, 2010, with respect to all third
parties other than Apollo Management. The Company did not
receive any takeover proposals from third parties, other than
Apollo Management, during the go-shop period and
thus, no parties, other than Apollo Management, qualified as
excluded parties under the THL merger agreement.
Later that same day, in accordance with the requirements of the
THL merger agreement, the Company terminated discussions with
each of the three parties, other than Apollo Management, that
had previously received confidential information regarding the
Company during the go-shop period and requested that
all such confidential information be destroyed or returned to
the Company.
On April 7, 2010, the Company issued a press release
regarding the receipt of a takeover proposal (which was the
Apollo Initial Proposal) and the board of directors
determination that the party that submitted the proposal (which
was Apollo Management) was an excluded party under
the THL merger agreement.
Later that same day, on April 7, 2010, members of senior
management, with approval from the transaction committee, met
with representatives of Apollo Management to discuss potential
post-closing employment and equity arrangements with the
surviving corporation. At the direction of the transaction
committee, a representative of UBS also attended this meeting.
During the period commencing on April 7, 2010 and
continuing until April 18, 2010, representatives of UBS
discussed the Apollo Initial Proposal and potential revisions
thereto with representatives of Apollo Management.
On April 11, 2010, THL Parent sent a letter, which we refer
to as the April 11 letter, to the Companys board of
directors describing various observations of THL Parent with
respect to the board of directors determination that
Apollo Management was an excluded party (as such
term was defined in the THL merger agreement), including the
conditionality associated with Apollo Managements due
diligence review and the lack of debt and equity commitment
letters in the Apollo Initial Proposal. In the April 11 letter,
THL urged the Companys board of directors to reconsider
its initial conclusion with regard to Apollo Managements
status as an excluded party and to assess on a
continuing basis whether Apollo Management continued to warrant
such status.
On April 12, 2010, the transaction committee met to discuss
the status of negotiations with Apollo Management. Neither
Mr. Puzder nor any other member of senior management was
present at this meeting. Representatives of UBS, Potter Anderson
and Stradling Yocca Carlson & Rauth participated in
the meeting. At the request of the transaction committee,
representatives of UBS reviewed the status of discussions with
Apollo Management, including a summary of the meeting that
occurred between certain members of senior management and
representatives of Apollo Management on April 7, 2010.
On April 12, 2010, Apollo Management presented certain
members of senior management with a term sheet setting forth
proposed terms for post-closing employment and equity
arrangements with the surviving corporation.
On April 16, 2010, the transaction committee met to discuss
the status of negotiations with Apollo Management and a
potential response to the April 11 letter received from THL.
Neither Mr. Puzder nor any other
33
member of senior management was present at this meeting.
Representatives of UBS, Potter Anderson and Stradling Yocca
Carlson & Rauth participated in the meeting. At the
request of the transaction committee, representatives of UBS
reviewed the status of discussions with representatives of
Apollo Management regarding the Apollo Initial Proposal.
Representatives of UBS summarized the discussions that had
occurred on April 7, 2010 between Apollo Management and
members of senior management, and confirmed that members of
senior management had received proposed term sheets from Apollo
Management, but that members of senior management and
representatives of Apollo Management continued to negotiate such
term sheets.
Later that same day, on April 16, 2010,
Mr. Allumbaugh, on behalf of the Companys board of
directors, sent a letter to THL Parent in response to the April
11 letter. In the letter, Mr. Allumbaugh confirmed that the
Companys board of directors had made its determination
with respect to the status of Apollo Management as an
excluded party in good faith after consultation with
representatives of UBS, Potter Anderson and Stradling Yocca
Carlson & Rauth, and had otherwise complied with the
applicable requirements of the THL merger agreement with respect
to such determination.
On April 18, 2010, Apollo Management delivered a formal
binding offer, which we refer to as the Apollo Formal Proposal,
for the acquisition of all of the outstanding shares of the
Company in a merger transaction in which the Companys
stockholders would receive $12.55 in cash per share of the
Companys common stock. The Apollo Formal Proposal included
copies of a merger agreement, voting agreements, an equity
commitment letter and a guarantee, each of which were fully
executed by all parties other than the Company and the
stockholders that would be asked to execute voting agreements.
The Apollo Formal Proposal also included a copy of a debt
commitment letter, which was executed by the Lenders. The merger
agreement included in the Apollo Formal Proposal was
substantially similar to the THL merger agreement, except that
it increased the merger consideration to be received by the
Companys stockholders to $12.55 per share and eliminated
the provision that would provide the buyer with an additional
two business days to revise its offer to attempt to match an
amended takeover proposal submitted by another party during the
no-shop period, which provision we refer to as the
two business day match right. In addition, the merger agreement
included in the Apollo Formal Proposal contained a provision
that, assuming the Company entered into the agreement, would
have required the Company to pay to Apollo Management a
termination fee of $15,471,000 in the event the Company
subsequently terminated the merger agreement in order to enter
into a new merger agreement that constituted a superior
proposal. The merger agreement included in the Apollo
Formal Proposal also included a provision that, in the event the
Company subsequently terminated the merger agreement included in
the Apollo Formal Proposal in order to enter into a new merger
agreement with THL, would have required the Company to pay
(i) an amount equal to the termination fee paid to THL
Parent under the THL merger agreement ($9,283,000), plus
(ii) an amount equal to the expense reimbursement paid to
THL Parent under the THL merger agreement (which was capped in
that agreement at $5,000,000), in addition to the $15,471,000
termination fee. The merger agreement included in the Apollo
Formal Proposal also eliminated the condition to closing
contained in the THL merger agreement with respect to the
closing leverage ratio, although the debt commitment letter
included a requirement that, in order to fund at the proportion
of debt to equity set forth in the letter, the total leverage
ratio of Parent and its subsidiaries at closing should be no
greater than 5.5 to 1.0. The Apollo Formal Proposal stated that
it was not subject to any due diligence or financing condition,
but was subject to the termination of the THL merger agreement
and execution of the definitive merger agreement with Apollo
Management. The Apollo Formal Proposal indicated that it would
expire at 12:01 a.m. Eastern Daylight Time on
April 24, 2010 if the Company failed to execute and deliver
to Morgan, Lewis & Bockius, LLP, counsel to Parent,
which we refer to as Morgan Lewis, executed copies of the merger
agreement, guarantee and voting agreements. In addition, the
Apollo Formal Proposal requested that the documents contained
therein be kept confidential and not be shared with any party
other than representatives of the Company, its financial advisor
and outside legal counsel, unless the Company was expressly
required to share such documents with other parties under the
THL merger agreement. After a preliminary review by
representatives of UBS, Potter Anderson and Stradling Yocca
Carlson & Rauth, the Apollo Formal Proposal was
promptly distributed to the members of the board of directors.
Later that same day on April 18, 2010, the transaction
committee held a meeting to discuss the Apollo Formal Proposal.
Neither Mr. Puzder nor any other member of senior
management was present at this meeting. Representatives of UBS,
Potter Anderson and Stradling Yocca Carlson & Rauth
participated in this meeting. At the request of the transaction
committee, representatives of Stradling Yocca
Carlson & Rauth updated the transaction
34
committee on the status of discussions with Morgan Lewis, and
confirmed that the Company had received the Apollo Formal
Proposal. At the request of the transaction committee,
representatives of UBS summarized the material financial terms
of the Apollo Formal Proposal, noting that the merger agreement
included in the Apollo Formal Proposal eliminated the total
leverage ratio requirement contained in the THL merger agreement
as a closing condition. The representatives further noted that,
although the lenders maintained a total leverage ratio
requirement in the debt commitment letter, such ratio was more
favorable to the Company than the ratio set forth in the THL
merger agreement and THL debt commitment letter and Apollo
Management remained contractually obligated to either contribute
additional equity and satisfy the requirement in the debt
commitment letter, or pay the reverse termination fee.
Representatives of Potter Anderson and Stradling Yocca
Carlson & Rauth then reviewed the terms of the merger
agreement included in the Apollo Formal Proposal, including
(a) an elimination of the two business day match right and
(b) a provision that required the Company to pay a
termination fee of $15,471,000 plus, in the event the Company
terminated the merger agreement included in the Apollo Formal
Proposal in order to enter into a subsequent merger agreement
with THL, (i) an amount equal to the termination fee paid
to THL Parent under the THL merger agreement ($9,283,000), plus
(ii) an amount equal to the expense reimbursement paid to
THL Parent under the THL merger agreement (which was capped in
that agreement at $5,000,000), in addition to the $15,471,000
termination fee. Representatives of UBS and Potter Anderson
noted that, since THL Parent would be entitled to receive from
the Company the amounts described in clauses (i) and
(ii) of the foregoing sentence in the event the Company
terminated the THL merger agreement to enter into a merger
agreement with Apollo Management, if the Company elected
thereafter to accept a subsequent topping bid from THL Parent,
the termination fee in the Apollo Formal Proposal applicable to
THL Parent, net of the amounts described in clauses (i) and
(ii) of the foregoing sentence, would be equal to the
$15,471,000 termination fee applicable to other potential
topping bidders. Representatives of Potter Anderson also noted
that since THL Parent still had an opportunity to match the
Apollo Formal Proposal, THL Parent could avoid the termination
fee structure proposed in the Apollo Formal Proposal by matching
the Apollo Formal Proposal pursuant to the THL merger agreement.
Representatives of Potter Anderson reviewed the board of
directors fiduciary duties and contractual obligations
under the THL merger agreement with respect to the determination
as to whether the Apollo Formal Proposal constituted a
superior proposal under the THL merger agreement and
the Companys obligations thereafter. After discussion, the
members of the transaction committee decided to defer any
determination with respect to whether the Apollo Formal Proposal
constituted a superior proposal under the THL merger
agreement until the special meeting of the full board of
directors that had been scheduled for the following day.
On April 19, 2010, the Companys board of directors
held a special meeting to discuss the Apollo Formal Proposal.
Representatives of UBS, Potter Anderson and Stradling Yocca
Carlson & Rauth participated in this meeting. At the
request of the board of directors, representatives of UBS and
Stradling Yocca Carlson & Rauth updated the board of
directors on the status of discussions with Apollo Management,
and confirmed that the Company had received the Apollo Formal
Proposal. Representatives of UBS, Potter Anderson and Stradling
Yocca Carlson & Rauth discussed the material terms of
the Apollo Formal Proposal, including the increase in the per
share merger consideration to $12.55, and the elimination of the
two business day match right. In addition, representatives of
UBS, Potter Anderson and Stradling Yocca Carlson &
Rauth summarized the termination fee provisions proposed by
Apollo Management. Representatives of UBS noted that the merger
agreement included in the Apollo Formal Proposal eliminated the
total leverage ratio requirement contained in the THL merger
agreement as a closing condition. The representatives further
stated that, although the total leverage ratio remained a
requirement to the Lenders obligation to provide the debt
financing, such ratio was more favorable to the Company than the
ratio set forth in the THL merger agreement and THL debt
commitment letter. Representatives of Potter Anderson and
Stradling Yocca Carlson & Rauth also stated that,
since the total leverage ratio condition was eliminated as a
closing condition in the merger agreement submitted by Apollo
Management, in the event Apollo Management was unable to obtain
the debt financing contemplated by the debt commitment letter
submitted by Apollo Management due to the failure to meet this
requirement, Apollo Management would remain obligated to either
consummate the proposed merger with the Company by contributing
additional equity to satisfy the condition or pay the Company
the reverse termination fee. At the request of the board of
directors, Mr. Puzder updated the board of directors on the
status of negotiations that had occurred between senior
management and Apollo Management, and confirmed that although
senior management had received proposed term sheets from Apollo
Management, they had not yet reached an agreement with respect
to such term sheets. Mr. Puzder also noted that senior
management had not yet reached
35
agreement with respect to the proposed term sheets submitted by
THL. Representatives of Potter Anderson then reviewed the board
of directors fiduciary duties and contractual obligations
under the THL merger agreement with respect to the determination
as to whether the Apollo Formal Proposal constituted a
superior proposal under the THL merger agreement.
After consulting with representatives of UBS, Potter Anderson
and Stradling Yocca Carlson & Rauth, and extensive
discussion and deliberation, the board of directors determined,
in accordance with the terms of the THL merger agreement, that
(i) the Apollo Formal Proposal constituted a superior
proposal under the THL merger agreement and
(ii) failure to terminate the THL merger agreement in order
to enter into a definitive merger agreement in accordance with
the Apollo Formal Proposal would be inconsistent with the
directors fiduciary duties under applicable law.
Later that same day on April 19, 2010, Stradling Yocca
Carlson & Rauth, on behalf of the Company, notified
THL Parent of the following: (i) the Companys receipt
of the Apollo Formal Proposal, (ii) the Companys
board of directors determination that the Apollo Formal
Proposal constituted a superior proposal under the
THL merger agreement and (iii) the fact that the Company
intended to terminate the THL merger agreement in order to enter
into a definitive merger agreement with Parent and Merger Sub.
Representatives of Stradling Yocca Carlson & Rauth
also provided a summary of the material terms of the Apollo
Formal Proposal, including a detailed summary of the terms of
the debt financing that Apollo Management intended to utilize in
connection with the Apollo Formal Proposal. In accordance with
the terms of the THL merger agreement, the notice also included
copies of the merger agreement, voting agreements and guarantee
included in the Apollo Formal Proposal.
Following delivery of the notice to THL Parent on April 19,
2010, the Company and its representatives, on behalf of the
Company, negotiated with THL Parent and its representatives, in
accordance with the terms of the THL merger agreement, in an
attempt to have THL Parent revise the terms of the THL merger
agreement and other transaction documents in order to cause the
Apollo Formal Proposal to no longer constitute a superior
proposal (as such term was defined in the THL merger
agreement).
On April 20, 2010, the Company issued a press release
announcing its board of directors determination that the
Apollo Formal Proposal constituted a superior
proposal under the THL merger agreement and the
Companys notification to THL of its intent to terminate
the THL merger agreement after the expiration of the four
business day period during which THL Parent could match the
Apollo Formal Proposal. In accordance with the terms of the THL
merger agreement, representatives of Stradling Yocca
Carlson & Rauth consulted with representatives of
Ropes & Gray regarding the contents of the press
release.
On April 20, 2010, representatives of Ropes &
Gray, on behalf of THL, submitted a letter to the Companys
board of directors acknowledging receipt of the Companys
notice dated April 19, 2010 regarding the board of
directors determination that the Apollo Formal Proposal
constituted a superior proposal under the THL merger
agreement, which we refer to as the April 20 letter. The April
20 letter requested that the Company provide THL with copies of
the debt commitment letter and equity commitment letter included
in the Apollo Formal Proposal, which materials had not been
included in the materials previously provided to THL on
April 19, 2010. The April 20 letter also expressed
THLs belief that, based on its interpretation of the THL
merger agreement, the four business day period prior to the
expiration of which the Company could not terminate the THL
merger agreement would run through Monday, April 26, 2010.
On April 21, 2010, representatives of Potter Anderson, on
behalf of the Company, submitted a letter to representatives of
THL in response to the April 20 letter, objecting to statements
set forth in the April 20 letter concerning the applicable
notice period. This letter stated that the applicable notice
period expired on Friday, April 23, 2010, and confirmed
that the Company had complied in all respects with the terms of
the THL merger agreement.
On April 22, 2010, in an attempt to prepare for
contingencies in the event that THL Parent did not submit a
revised proposal, the Company requested wire transfer
instructions from THL Parent in order to prepare the wire
transfer of the $9,283,000 termination fee potentially payable
to THL Parent in the event that the Companys board of
directors determined to terminate the THL merger agreement in
order to enter into a definitive merger agreement with Apollo
Management. The Company and its representatives made subsequent
requests for THL Parents wire transfer instructions.
36
On April 23, 2010, THL Parent sent a letter to the
Companys board of directors in which THL Parent submitted
a binding formal proposal, which we refer to as the April 23
Proposal, for the acquisition of all of the outstanding shares
of the Company by a merger in which the Companys
stockholders would receive $12.55 in cash per share of the
Companys common stock. The April 23 Proposal included
complete, amended, and executed copies of a merger agreement,
voting agreements, an equity commitment letter, a debt
commitment letter, and a guarantee. The amended merger agreement
included in the April 23 Proposal was substantially similar to
the merger agreement included in the Apollo Formal Proposal,
except that it (i) included a provision whereby the Company
would be obligated to pay a termination fee equal to $29,754,000
in the event that the Company terminated the merger agreement in
order to enter into a new merger agreement with Apollo
Management or any of its affiliated funds, but the Company would
be obligated to pay a termination fee equal to $15,471,000 for
all other buyers, and (ii) included the two business day
match right. In addition, the amended debt commitment letter
included in the April 23 Proposal eliminated the total leverage
ratio requirement contained in the debt commitment letter
included in the Apollo Formal Proposal.
Later that same day on April 23, 2010, at the direction of
the transaction committee, representatives of UBS engaged in
discussions with representatives of THL regarding the April 23
Proposal. The representatives of UBS reviewed with the
representatives of THL the material differences between the
Apollo Formal Proposal and the April 23 Proposal and told them
that the April 23 Proposal, as submitted by THL, might make it
very difficult for the board of directors to determine that the
Apollo Formal Proposal no longer constituted a superior
proposal under the THL merger agreement. The
representatives of UBS made three suggestions as to how THL
could improve the April 23 Proposal: (i) increase the per
share merger consideration, (ii) eliminate the two business
day match right, and (iii) make the termination fee
applicable to a later topping bid from Apollo Management equal
to that applicable to other potential bidders. In response to
these suggestions, the representatives of THL declined to
negotiate and instead stated that they stood by the
April 23 Proposal, as submitted. The representatives of UBS
then reminded the representatives of THL of the time of the
meeting of the board of directors scheduled for later that day
and recommended that they immediately contact the
representatives of UBS any time before or during the meeting if
they wanted to make any modifications to the April 23
Proposal. The representatives of THL did not contact the
representatives of UBS following this discussion. Also on
April 23, 2010, a representative of Potter Anderson
contacted a representative of Ropes & Gray shortly
before the scheduled meeting of the board of directors to
discuss the April 23 Proposal. The representative of Potter
Anderson cautioned the representative of Ropes & Gray
that, in light of the size and discriminatory nature of the
higher termination fee applicable to Apollo Management and the
two business day match right under the April 23 Proposal,
the board of directors was unlikely to consider the
April 23 Proposal a match, but indicated that he understood
that THL was not prepared to continue to discuss the termination
fee or the two business day match right. The representative of
Ropes & Gray indicated that the representative did not
share the same concerns as the representative of Potter Anderson
about the size and discriminatory nature of the higher
termination fee applicable to Apollo Management or the two
business day match right under the April 23 Proposal, but
indicated that the representative would raise the concerns
expressed by the representative of Potter Anderson with THL and
contact the representative of Potter Anderson if THL was willing
to make any changes to the April 23 Proposal. The representative
of Ropes & Gray did not contact the representative of
Potter Anderson following this discussion. In both the
UBS / THL discussions and the Potter
Anderson / Ropes & Gray discussions, the
Companys representatives made clear that the board of
directors was meeting shortly thereafter to determine whether
the Apollo Formal Proposal continued to constitute a
superior proposal under the THL merger agreement and
that the Companys financial and legal advisors believed
that the termination fee provision and the two business day
match right might make it very difficult for the board of
directors to determine that the Apollo Formal Proposal no longer
constituted a superior proposal under the THL merger
agreement.
Later that same day on April 23, 2010, the board of
directors held a special meeting to discuss the April 23
Proposal. Representatives of UBS, Potter Anderson and Stradling
Yocca Carlson & Rauth participated in this meeting. At
the request of the board of directors, representatives of
Stradling Yocca Carlson & Rauth updated the board of
directors on the status of discussions between counsel and each
of Apollo Management and THL, and confirmed that the Company had
received the April 23 Proposal. Representatives of UBS and
Potter Anderson reported on their discussions earlier that day
that had occurred with THL and its representatives.
Representatives of UBS and Potter Anderson then reviewed the
proposed provisions of the merger agreement and the other
transaction documents included in the April 23 Proposal,
including the inclusion of the two business day match right and
the
37
termination fee provisions included in the April 23 Proposal.
Specifically, representatives of UBS noted that, although
representatives of THL had articulated their view, both to UBS
and Potter Anderson, that the April 23 Proposal included
effectively the same termination fee as set forth in the Apollo
Formal Proposal, the termination fee included in the April 23
Proposal failed to take into account the payment of $9,283,000
plus the reimbursement of expenses up to $5,000,000 payable by
the Company to THL Parent that would become payable upon
termination of the THL merger agreement in favor of a merger
agreement with Apollo Management. Representatives of UBS and
Potter Anderson noted that, in light of the termination fee
provisions in the April 23 Proposal, the April 23 Proposal might
have a preclusive effect on the ability of Apollo Management,
the only party that had submitted a proposal during the
go-shop period, to submit a later, higher takeover
proposal were the Company to enter into the merger agreement
contained in the April 23 Proposal. Representatives of UBS
also confirmed that the amended debt commitment letter included
in the April 23 Proposal eliminated the total leverage ratio
condition to the debt financing. Representatives of UBS noted
that while the debt commitment letter included in the Apollo
Formal Proposal included a total leverage ratio requirement, the
ratio was set at a level that was materially higher than the
Companys projected leverage ratio during the relevant
period based on projections of the Companys management,
and therefore, unless the Companys actual performance
during such period was materially worse than such projections,
the requirement was immaterial as it related to the likelihood
of closing the financing and the merger contemplated by the
Apollo Formal Proposal. In addition, representatives of UBS
noted that in the event the Companys leverage ratio were
to exceed the level permitted in the total leverage ratio
requirement, Apollo Management might have an incentive to
contribute sufficient additional equity to compensate for the
reduction in debt committed such that it would result in the
total leverage ratio requirement being satisfied, in order to
avoid paying the Company the reverse termination fee.
At the request of the board of directors, Mr. Puzder
updated the board of directors on the status of negotiations
that had occurred between members of senior management and
Apollo Management, and confirmed that although members of senior
management had received proposed term sheets from Apollo
Management, they had not yet reached an agreement with respect
to such term sheets. Mr. Puzder also noted that senior
management had not yet reached agreement with respect to the
proposed term sheets submitted by THL.
Representatives of Potter Anderson reviewed with the board of
directors its fiduciary duties and its contractual obligations
under the THL merger agreement with respect to the April 23
Proposal and the Apollo Formal Proposal. After extensive
discussion and deliberation, the Companys board of
directors unanimously determined that, notwithstanding the April
23 Proposal from THL, the Apollo Formal Proposal continued to
constitute a superior proposal. In making this
determination, the board of directors compared the Apollo Formal
Proposal to the April 23 Proposal and noted that the $12.55 per
share merger consideration to be received by the Companys
stockholders was the same in both proposals. The board of
directors also considered the potential for litigation created
by the termination fee provisions in the April 23 Proposal and
the increased risk to consummating the transactions contemplated
by such proposal that any such litigation might present, and how
this increased risk negatively impacted the relative value of
the April 23 Proposal. The board of directors also determined
that the terms of the merger agreement included in the Apollo
Formal Proposal represented the best course of action to
maximize stockholder value in a manner consistent with the board
of directors fiduciary duties to our stockholders.
Thereafter, UBS made a presentation to the Companys board
of directors of various financial analyses and delivered to the
Companys board of directors an oral opinion, which was
confirmed by delivery of a written opinion, dated April 23,
2010, to the effect that, as of that date and based on and
subject to various assumptions, matters considered and
limitations described in its opinion, the $12.55 per share
merger consideration to be received by holders of the
Companys common stock (other than the excluded holders) in
connection with the Apollo Formal Proposal was fair, from a
financial point of view, to such holders. After considering,
among other things, the factors described below under The
Merger Reasons for the Merger; Recommendation of the
Board of Directors the board of directors unanimously
adopted resolutions terminating the THL merger agreement,
approving the merger agreement with Apollo Management and the
transactions contemplated thereby, and recommending that the
Companys stockholders adopt the merger agreement with
Apollo Management. In connection with the termination of the THL
merger agreement, the Company made another request for THL
Parents wire transfer instructions in order to pay the
termination fee equal to $9,283,000 to THL Parent. Concurrently
with the termination of the THL merger agreement, the Company,
Parent and Merger Sub executed the merger agreement and certain
of the
38
Companys executive officers and directors entered into
voting agreements with Parent to vote their shares in favor of
adoption of the merger agreement. See the section captioned
Stockholder Voting Agreements in this proxy
statement beginning on page 75. Thereafter, the Company and
Apollo Management issued a joint press release announcing the
execution of the merger agreement.
On May 21, 2010, THL Parent sent a letter to the Company,
which included, among other things, its wire transfer
instructions and a request for payment of the termination fee
equal to $15,471,000 and an invoice for reimbursement of
expenses equal to $5,000,000. On May 24, 2010, the Company
transmitted two wire transfers to THL, one wire transfer equal
to $9,283,000, which represented the termination fee payable to
THL Parent in connection with the Companys termination of
the THL merger agreement pursuant to Section 7.1(d)(ii)
thereof, and one wire transfer equal to $5,000,000, which
represented the maximum amount allowed for reimbursement of THL
Parents expenses. Later that same day, on May 24,
2010, Mr. Allumbaugh, on behalf of the Company, provided
notice to THL that, in light of such wire transfers, all of the
Companys obligations under the THL merger agreement had
been satisfied.
Reasons
for the Merger; Recommendation of the Board of
Directors
On April 23, 2010, the board of directors met to consider
the merger. On the basis of the factors described below, the
board of directors unanimously determined that the merger
agreement is superior to the THL merger agreement, that the THL
merger agreement should be terminated, and that the required
termination fee and expense reimbursement should be paid to
certain affiliates of THL thereunder. The board of directors
also unanimously determined that the merger is fair to, and in
the best interests of, the Company and our stockholders and
approved and declared advisable the merger agreement and the
merger and the other transactions contemplated by the merger
agreement. The board of directors further resolved that the
merger agreement be submitted for consideration by our
stockholders at a special meeting of our stockholders, and
recommended that our stockholders vote to adopt the merger
agreement.
In evaluating the merger agreement, the merger, and the other
transactions contemplated by the merger agreement, the board of
directors consulted with members of the transaction committee
and our senior management team, as well as our outside legal and
financial advisors, and considered a number of factors,
including the following material factors (not in any relative
order of importance):
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managements and the board of directors views and
opinions on the quick service restaurant industry;
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the board of directors understanding of the business,
operations, financial conditions, earnings and prospects of the
Company, including the prospects of the Company as an
independent entity;
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the Companys business plan and projections;
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the board of directors belief that the merger is more
favorable to the Companys stockholders than the
alternatives to the merger, which belief was formed based on the
board of directors and the transaction committees
review, with the assistance of its financial advisors, of the
strategic alternatives available to the Company, including
remaining a publicly-traded, independent company and continuing
to execute its strategic plan;
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the board of directors belief that the merger is more
favorable to our stockholders than continuing to operate the
business as an independent company in light of (i) the
changes within the Company that the board of directors believed
would be necessary for the Company to achieve sustained sales
and earnings growth and (ii) the expected time to
effectuate such changes, the time needed for the Companys
share price to reflect the success of such changes, and the
risks and uncertainties associated with any such changes and the
timing thereof;
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the fact that the all cash per share merger consideration will
provide our stockholders with immediate fair value, in cash, for
all of their shares of the Companys common stock, while
avoiding the execution risk associated with the Companys
long-term business plan, while also providing our stockholders
certainty of value for their shares of common stock;
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39
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the fact that the per share merger consideration represents a
premium of approximately 41% to the closing price of the
Companys common stock on February 25, 2010, the last
trading day prior to the public announcement of the execution of
the merger agreement with affiliates of Thomas H. Lee Partners,
L.P., a premium of approximately 46% to the volume-weighted
average price for the 30 trading days prior to February 25,
2010, and a premium of approximately 14% over the consideration
provided by the merger agreement previously entered into with
affiliates of Thomas H. Lee Partners, L.P.;
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the presentation by UBS to the board of directors on
April 23, 2010 and the opinion of UBS that, based on and
subject to various assumptions, matters considered and
limitations described therein, the price of $12.55 per share
merger consideration to be received by the holders of the
Companys common stock (other than the excluded holders) in
the merger was, as of April 23, 2010, fair, from a
financial point of view, to such holders, as more fully
described below under the caption The Merger
Opinion of Financial Advisor beginning on page 42;
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the fact that, subsequent to the announcement of the transaction
with affiliates of THL, at the direction and under the
supervision of our board of directors, UBS contacted 28 parties
that might be interested in acquiring us to solicit their
interest in making a takeover proposal, and of the 28 parties,
only Apollo Management submitted either a non-binding or a
binding proposal;
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the Companys ability, under the merger agreement, at any
time from and after April 18, 2010, the effective date of
the merger agreement, and prior to the time the Companys
stockholders adopt the merger agreement, to consider and respond
to an unsolicited bona fide takeover proposal or to engage in
discussions or negotiations with the person making such a
proposal if the board of directors, prior to taking any such
actions, determines in good faith after consultation with an
independent financial advisor and outside legal counsel that
failure to take such actions would be inconsistent with the
board of directors fiduciary duties and that such takeover
proposal either constitutes a superior proposal or could
reasonably be expected to result in a superior proposal, and to,
or propose to, adopt, approve or recommend such takeover
proposal if the board complies with its obligations relating to
such action and determines in good faith after consultation with
an independent financial advisor and outside legal counsel that
such takeover proposal is a superior proposal;
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the absence of a financing condition to the consummation of the
merger;
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the Companys ability, under certain circumstances, to
terminate the merger agreement to enter into an agreement
providing for a superior proposal, provided that the Company
complies with our obligations relating to the entering into any
such agreement and immediately prior to or concurrently with the
termination of the merger agreement pay a termination fee of
$15,471,000 except in the event that the merger agreement is
terminated in order to enter into a definitive agreement with
respect to a takeover proposal with Thomas H. Lee Equity
Fund VI, L.P. or any of its affiliates, in which case the
Company may be obligated to pay a termination fee of $15,471,000
plus an amount equal to $9,283,000, plus certain expenses
reimbursed by the Company to affiliates of Thomas H. Lee
Partners, L.P. under the THL merger agreement, and up to
$5,000,000 in documented expenses, to Parent, each of which the
board of directors concluded was reasonable in the context of
termination fees and expenses payable in comparable transactions
and in light of the overall terms of the merger agreement,
including the per share merger consideration;
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the Companys ability, under the merger agreement, to
withhold, withdraw, qualify or modify our recommendation that
our stockholders vote to adopt the merger agreement under
certain circumstances, subject to Parents subsequent right
to terminate the merger agreement and, in such case, to pay to
Parent up to $15,471,000 except in the event that the merger
agreement is terminated in order to enter into a definitive
agreement with respect to a takeover proposal with Thomas H. Lee
Equity Fund VI, L.P. or any of its affiliates, in which
case the Company may be obligated to pay a termination fee of
$15,471,000 plus an amount equal to $9,283,000, plus certain
expenses reimbursed by the Company to affiliates of Thomas H.
Lee Partners, L.P. under the THL merger agreement, and up to
$5,000,000 in documented expenses, to Parent, in the event that
Parent elects to terminate the merger agreement;
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the availability of appraisal rights under the DGCL to holders
of the common stock of the Company who comply with all of the
required procedures under the DGCL, which allows such holders to
seek appraisal of the fair value of their shares of common stock
as determined by the Delaware Court of Chancery;
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the fact that the outside termination date under the merger
agreement allows for sufficient time to complete the
merger; and
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the consideration for the merger and the other terms of the
merger agreement resulted from extensive negotiations between
the board of directors and its legal and financial advisors, on
the one hand, and Apollo Management and its legal and financial
advisors, on the other hand.
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The board of directors also considered a variety of potentially
negative factors in its deliberations concerning the merger
agreement and the merger, including the following (not in any
relative order of importance):
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the merger would preclude the Companys stockholders from
having the opportunity to participate in the future performance
of our assets, future earnings growth, future appreciation of
the value of our common stock or future dividends that could be
expected if our strategic plan were successfully implemented;
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the significant costs involved in connection with entering into
and completing the merger and the substantial time and effort of
management required to complete the merger and related
disruptions to the operation of the Companys business;
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the merger agreement essentially provides Parent with an option
to acquire the Company and we cannot specifically enforce
Parents obligation to consummate the acquisition, and if
Parent breaches its agreement
and/or
does
not consummate the merger, Parents liability to us is
limited to the receipt of the $15,471,000 or $30,943,000, as
applicable, reverse termination fee;
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the restrictions on the conduct of the Companys business
prior to the completion of the merger, which could delay or
prevent the Company from undertaking business opportunities that
may arise or any other action we would otherwise take with
respect to the operations of the Company absent the pending
completion of the merger;
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the announcement and pendency of the merger, or failure to
complete the merger, may cause substantial harm to relationships
with the Companys employees, vendors, franchisees,
customers and partners and may divert management and employee
attention away from the
day-to-day
operations of our business;
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the possibility that the up to $5,000,000 in documented expenses
plus the $15,471,000, or $29,754,000, as applicable, termination
fee payable by the Company upon the termination of the merger
agreement could discourage other potential acquirers from making
a competing bid to acquire the Company;
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the cost of terminating the THL merger agreement, including the
payment to certain affiliates of THL of a termination fee of
$9,283,000 plus reimbursement of up to $5,000,000 in certain
documented expenses;
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the fact that, while the Company expects that the merger will be
consummated, there can be no assurance that all conditions to
the parties obligations, including with respect to
required antitrust approvals, to complete the merger agreement
will be satisfied, and, as a result, the merger may not be
consummated;
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the fact that Parent and Merger Sub are newly-formed
corporations with essentially no assets other than the equity
commitments of the Apollo Investors;
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the fact that an all cash transaction would be taxable to the
Companys stockholders that are U.S. holders for
U.S. federal income tax purposes;
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the risk that the financing contemplated by the debt commitment
letter for the consummation of the merger might not be
obtained; and
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certain directors and executive officers of the Company have
interests in the merger that are different from, or in addition
to, our stockholders. See The Merger Interests
of Certain Persons in the Merger.
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The foregoing discussion of the factors considered by the board
of directors is not intended to be exhaustive, but rather
includes the material factors considered by the board of
directors. In reaching its decision to approve the
41
merger, the merger agreement and the other transactions
contemplated by the merger agreement, the board of directors did
not quantify or assign any relative weights to the factors
considered and individual directors may have given different
weights to different factors. The board of directors did not
undertake to make any specific determination as to whether any
factor, or any particular aspect of any factor, supported or did
not support its ultimate determination. The board of directors
based its recommendation on the totality of the information
presented.
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 merger and the proposal to adopt the merger
agreement, you should be aware that certain directors and
executive officers of the Company 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 stockholders of the Company. See the
section entitled The Merger Interests of
Certain Persons in the Merger beginning on page 52.
Opinion
of Financial Advisor
On April 23, 2010, at a meeting of the Companys board
of directors held to evaluate the proposed merger, UBS delivered
to the Companys board of directors an oral opinion, which
opinion was confirmed by delivery of a written opinion, dated
April 23, 2010, to the effect that, as of that date and
based on and subject to various assumptions, matters considered
and limitations described in its opinion, the $12.55 per share
merger consideration to be received by holders of Company common
stock (other than Parent and its affiliates and holders of
shares of the Companys common stock as to which treatment
in the merger is separately agreed to by Parent and the holders
thereof, which, together with Parent and its affiliates, we
refer to collectively as the excluded holders) in the merger was
fair, from a financial point of view, to such holders.
The full text of UBS opinion describes the assumptions
made, procedures followed, matters considered and limitations on
the review undertaken by UBS. This opinion is attached as
Annex C
and is incorporated into this proxy
statement by reference.
Holders of Company common stock are
encouraged to read UBS opinion carefully in its entirety.
UBS opinion was provided for the benefit of the
Companys board of directors (solely in its capacity as
such) in connection with, and for the purpose of, its evaluation
of the $12.55 per share merger consideration, from a financial
point of view, and does not address any other aspect of the
merger. The opinion does not address the relative merits of the
merger as compared to other business strategies or transactions
(including the Companys previously proposed merger
transaction with an affiliate of Thomas H. Lee Equity
Fund VI, L.P.) that might be available with respect to the
Company or the Companys underlying business decision to
effect the merger. The opinion does not constitute a
recommendation to any stockholder as to how to vote or act with
respect to the merger.
The following summary of UBS
opinion is qualified in its entirety by reference to the full
text of UBS opinion.
In arriving at its opinion, UBS, among other things:
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reviewed certain publicly available business and financial
information relating to the Company;
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reviewed certain internal financial information and other data
relating to the business and financial prospects of the Company
that were not publicly available, including financial forecasts
and estimates prepared by the management of the Company that the
Companys board of directors directed UBS to utilize for
purposes of its analysis;
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conducted discussions with members of the senior management of
the Company concerning the Companys business and financial
prospects;
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reviewed publicly available financial and stock market data with
respect to certain other companies UBS believed to be generally
relevant;
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compared the financial terms of the merger with the publicly
available financial terms of certain other transactions UBS
believed to be generally relevant;
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reviewed current and historical market prices of Company common
stock;
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42
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reviewed a draft, dated as of April 18, 2010, of the merger
agreement; and
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conducted such other financial studies, analyses and
investigations, and considered such other information, as UBS
deemed necessary or appropriate.
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In connection with its review, with the consent of the
Companys board of directors, UBS assumed and relied upon,
without independent verification, the accuracy and completeness
in all material respects of the information provided to or
reviewed by UBS for the purpose of its opinion. In addition,
with the consent of the Companys board of directors, UBS
did not make any independent evaluation or appraisal of any of
the assets or liabilities (contingent or otherwise) of the
Company, and was not furnished with any such evaluation or
appraisal. With respect to the financial forecasts and estimates
referred to above, UBS assumed, at the direction of the
Companys board of directors, that such forecasts and
estimates were reasonably prepared on a basis reflecting the
best currently available estimates and judgments of the
Companys management as to the future financial performance
of the Company. UBS opinion was necessarily based on
economic, monetary, market and other conditions as in effect on,
and the information available to UBS as of, the date of its
opinion.
At the direction of the Companys board of directors, UBS
was not asked to, and it did not, offer any opinion as to the
terms, other than the $12.55 per share merger consideration to
the extent expressly specified in UBS opinion, of the
merger agreement or any related documents or the form of the
merger. In addition, UBS expressed no opinion as to the fairness
of the amount or nature of any compensation to be received by
any officers, directors or employees of any parties to the
merger, or any class of such persons, relative to the $12.55 per
share merger consideration. In rendering its opinion, UBS
assumed, with the consent of the Companys board of
directors, that (i) the final executed form of the merger
agreement would not differ in any material respect from the
draft that UBS reviewed, (ii) the parties to the merger
agreement would comply with all material terms of the merger
agreement and (iii) the merger would be consummated in
accordance with the terms of the merger agreement without any
adverse waiver or amendment of any material term or condition of
the merger agreement. UBS also assumed that all governmental,
regulatory or other consents and approvals necessary for the
consummation of the merger would be obtained without any
material adverse effect on the Company or the merger. At the
request of the Companys board of directors, UBS contacted
third parties to solicit indications of interest in a possible
transaction with the Company and held discussions with certain
of these parties prior to the date of its opinion. Except as
described above, the Company imposed no other instructions or
limitations on UBS with respect to the investigations made or
the procedures followed by UBS in rendering its opinion. The
issuance of UBS opinion was approved by an authorized
committee of UBS.
In connection with rendering its opinion to the Companys
board of directors, UBS performed a variety of financial and
comparative analyses which are summarized below. The following
summary is not a complete description of all analyses performed
and factors considered by UBS in connection with its opinion.
The preparation of a financial opinion is a complex process
involving subjective judgments and is not necessarily
susceptible to partial analysis or summary description. With
respect to the selected companies analysis and the selected
transactions analysis summarized below, no company or
transaction used as a comparison was identical to the Company or
the merger. These analyses necessarily involve complex
considerations and judgments concerning financial and operating
characteristics and other factors that could affect the public
trading or acquisition values of the companies concerned.
UBS believes that its analyses and the summary below must be
considered as a whole and that selecting portions of its
analyses and factors or focusing on information presented in
tabular format, without considering all analyses and factors or
the narrative description of the analyses, could create a
misleading or incomplete view of the processes underlying
UBS analyses and opinion. UBS did not draw, in isolation,
conclusions from or with regard to any one factor or method of
analysis for purposes of its opinion, but rather arrived at its
ultimate opinion based on the results of all analyses undertaken
by it and assessed as a whole.
The estimates of the future performance of the Company provided
by the Companys management or derived from public sources
in or underlying UBS analyses are not necessarily
indicative of future results or values, which may be
significantly more or less favorable than those estimates. In
performing its analyses, UBS considered industry performance,
general business and economic conditions and other matters, many
of which were beyond the control of the Company. Estimates of
the financial value of companies do not purport to be appraisals
or necessarily reflect the prices at which companies or
securities actually may be sold or acquired.
43
The merger consideration was determined through negotiation
between the Company and Parent and the decision by the Company
to enter into the merger was solely that of the Companys
board of directors. UBS opinion and financial analyses
were only one of many factors considered by the Companys
board of directors in its evaluation of the merger and should
not be viewed as determinative of the views of the
Companys board of directors or management with respect to
the merger or the merger consideration.
The following is a brief summary of the material financial
analyses performed by UBS and reviewed with the Companys
board of directors on April 23, 2010 in connection with
UBS opinion relating to the proposed merger.
The
financial analyses summarized below include information
presented in tabular format. In order for UBS financial
analyses to be fully understood, 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.
Considering the data below without considering the full
narrative description of the financial analyses, including the
methodologies and assumptions underlying the analyses, could
create a misleading or incomplete view of UBS financial
analyses.
Selected
Companies Analysis
UBS compared selected financial and stock market data of the
Company with corresponding data of all of the other publicly
traded burger quick service restaurant companies with market
capitalizations in excess of $250 million that are listed on
U.S. stock exchanges, which we refer to as Burger QSR Operators.
The Burger QSR Operators consist of the following two regional
operators and three national operators:
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Burger QSR Operators Regional
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Burger QSR Operators National
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Jack in the Box Inc.
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McDonalds Corporation
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Sonic Corporation
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Burger King Corporation
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Wendys International, Inc./Arbys Restaurant Group,
Inc.
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UBS reviewed, among other things, enterprise values of the
selected companies, calculated as diluted equity value based on
closing stock prices on April 21, 2010, plus debt at book
value and minority interests at book value, less cash and cash
equivalents as multiples of last twelve months, which we refer
to as LTM, and estimated calendar year 2010 (1) EBITDA and
(2) EBITDA less capital expenditures. UBS also calculated
share prices as of April 21, 2010 as multiples of estimated
calendar year 2010 and 2011 earnings per share, which we refer
to as P/E ratios. UBS then compared these multiples implied for
the selected companies with corresponding multiples implied for
the Company based on both the closing price of Company common
stock on February 25, 2010 of $8.91 per share (which was
the last closing price before the announcement of the
Companys previously proposed merger transaction with an
affiliate of Thomas H. Lee Equity Fund VI, L.P.) and the
$12.55 per share merger consideration. Financial data for the
selected companies were based on consensus estimates provided by
the Institutional Brokerage Estimate System, which we refer to
as IBES (a data service that compiles estimates issued by
securities analysts) and public filings. Estimated financial
data for the Company were based both on IBES consensus estimates
and internal estimates of the Companys management. This
analysis indicated the following implied high,
44
mean, median and low multiples and P/E ratios for the selected
companies, as compared to the corresponding multiples implied
for the Company:
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Implied Multiples for the Company
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Based on:
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Closing Stock
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$12.55 per Share
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Price on 2/25/2010
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Merger
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Implied Multiples for
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and
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Consideration and
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Selected Companies
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IBES
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Management
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Management
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High
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Mean
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Median
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Low
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Estimates
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Estimates
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Estimates
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Enterprise Value as Multiple of EBITDA
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LTM
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11.1
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x
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8.2
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x
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8.1
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x
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5.1
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x
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5.2
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x
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5.2
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x
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6.6
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x
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Calendar Year 2010E
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10.1
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x
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8.2
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x
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8.0
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x
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5.8
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x
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5.1
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x
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5.2
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x
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6.5
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x
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Enterprise Value as Multiple of EBITDA Capex
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LTM
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14.8
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x
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11.7
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x
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10.9
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x
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8.5
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x
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15.5
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x
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15.5
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x
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19.5
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x
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Calendar Year 2010E
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14.1
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x
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12.4
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x
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12.4
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x
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10.4
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x
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12.1
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x
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12.9
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x
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16.2
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x
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P/E Ratio
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Calendar Year 2010E
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32.0
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x
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19.1
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x
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15.9
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x
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12.2
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x
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10.9
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x
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12.8
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x
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18.0
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x
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Calendar Year 2011E
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23.7
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x
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15.6
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x
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14.5
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x
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10.6
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x
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9.1
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x
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12.6
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x
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17.8
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x
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Selected
Transactions Analysis
UBS reviewed certain publicly available information relating to
the three selected transactions set forth below, which were
announced after December 1, 2002, had enterprise values
greater than $250 million and involved target companies in
the quick service restaurant industry primarily engaged in the
food business that were not franchisees of another
companys brands and for which data relating to the target
companys EBITDA and transaction value were publicly
available. For analytical purposes, and thus for purposes of
calculating the high, mean, median and low multiples for the
selected transactions, the
stock-for-stock
acquisition of Wendys International, Inc. by Triarc
Companies, Inc. (owner of Arbys Restaurant Group, Inc.),
which was the smaller of the two entities by market
capitalization at the time of the transaction, was reviewed both
as an acquisition of Wendys International, Inc. by Triarc
Companies, Inc. and as an acquisition of Triarc Companies, Inc.
by Wendys International, Inc., in order to present the
valuation multiples implied in the transaction viewed in either
light. Accordingly, the selected transactions reviewed by UBS
were:
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Announcement Date
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Target
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Acquiror
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4/24/2008
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Wendys International, Inc.
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Triarc Companies, Inc. (Arbys Restaurant Group, Inc.)
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4/24/2008
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Triarc Companies, Inc. (Arbys Restaurant Group, Inc.)
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Wendys International, Inc.
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11/22/2006
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Sbarro, Inc.
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MidOcean Partners LLC
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12/13/2002
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Burger King Corporation
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Texas Pacific Group, Bain Capital, Inc., Goldman Sachs Capital
Partners
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UBS reviewed, among other things, enterprise values in the
selected transactions, calculated as the purchase price paid for
a target companys equity, plus debt at book value, less
cash and cash equivalents, as multiples of (1) LTM EBITDA
and (2) LTM EBITDA less capital expenditures. UBS then
compared these multiples implied for the selected transactions
with corresponding multiples implied for the Company based on
the $12.55 per share merger consideration. Multiples for the
selected transactions were based on publicly available
information at the time of announcement of the relevant
transaction. Estimated financial data for the Company were based
on internal
45
estimates of the Companys management. This analysis
indicated the following implied high, mean, median and low
multiples for the selected transactions, as compared to
corresponding multiples implied for the Company:
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Implied Multiples for the
|
|
|
Implied Multiples for Selected
|
|
Company Based on
|
|
|
Transactions
|
|
$12.55 per Share
|
|
|
High
|
|
Mean
|
|
Median
|
|
Low
|
|
Merger Consideration
|
|
Enterprise Value as a Multiple of LTM EBITDA
|
|
|
8.8
|
x
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|
|
7.4
|
x
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|
|
7.1
|
x
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|
|
6.5
|
x
|
|
|
6.6
|
x
|
Enterprise Value as a Multiple of LTM EBITDA Capex(1)
|
|
|
15.4
|
x
|
|
|
12.3
|
x
|
|
|
11.9
|
x
|
|
|
9.7
|
x
|
|
|
19.5
|
x
|
|
|
|
(1)
|
|
LTM EBITDA less capital expenditures for the Burger King
Corporation transaction was a negative number, resulting in a
multiple that was not meaningful for valuation purposes.
Therefore, this multiple was excluded from the calculation of
the high, mean, median and low multiples for the selected
transactions.
|
Discounted
Cash Flow Analysis
UBS performed a discounted cash flow analysis of the Company
using financial forecasts and estimates prepared by the
Companys management. UBS calculated a range of implied
present values as of May 18, 2010 of the standalone
unlevered, after-tax free cash flows that the Company was
forecasted to generate from the second quarter of fiscal year
2011 through fiscal year 2015. UBS calculated a range of
terminal values for the Company by applying to the
Companys fiscal year 2015 estimated EBITDA a range of
EBITDA terminal multiples of 5.0x to 6.0x. Present values of
cash flows and terminal values were calculated as of
May 18, 2010 using discount rates ranging from 10.0% to
11.0%. This discounted cash flow analysis resulted in a range of
implied present values of approximately $9.50 to $12.25 per
share of Company common stock, as compared to the $12.55 per
share merger consideration.
Miscellaneous
Under the terms of UBS engagement, the Company agreed to
pay UBS for its financial advisory services in connection with
the merger an aggregate fee currently estimated to be
approximately $8.1 million, $250,000 of which was payable
as a retainer fee, $1.0 million of which was payable in
connection with UBS opinion rendered in connection with
the Companys previously proposed merger transaction with
an affiliate of Thomas H. Lee Equity Fund VI, L.P.,
$1.0 million of which was payable in connection with
UBS opinion rendered in connection with the merger and
approximately $5.9 million of which is contingent upon
consummation of the merger. The Company also agreed to pay UBS a
termination fee equal to 10% of any
break-up
fee
or other compensation payable to the Company in the event that
the merger is not consummated. In addition, the Company agreed
to reimburse UBS for its reasonable expenses, including fees,
disbursements and other charges of counsel, and to indemnify UBS
and related parties against liabilities, including liabilities
under federal securities laws, relating to, or arising out of,
its engagement.
In the past, UBS and its affiliates have provided investment
banking and other financial services to affiliates of Parent,
which we refer to as Apollo Affiliates, including, among others,
Apollo Investment Corporation, Apollo Management Holding L.P.
and certain portfolio companies of Apollo Management and its
affiliates, unrelated to the merger, for which UBS and its
affiliates have received compensation, fees and other payments,
including having acted as (i) financial advisor in
connection with several acquisitions and divestitures,
(ii) bookrunner, lead manager or co-manager on several debt
and equity offerings, (iii) arranger or agent on several
leveraged buyout financings and credit facilities and
(iv) private placement agent for several funds sponsored by
certain Apollo Affiliates. UBS and its affiliates have also
been, and in certain cases continue to be, a participant in
various credit facilities of several Apollo Affiliates and have
received, and continue to receive, fees and other payments in
respect thereof. In addition, UBS acted as financial advisor to
the Companys board of directors in connection with the
Companys previously proposed merger transaction with an
affiliate of Thomas H. Lee Equity Fund VI, L.P. and is
entitled to receive compensation for certain of UBS
services in connection therewith. In the ordinary course of
business, UBS and its affiliates may hold or trade, for their
own accounts and the accounts of their customers, securities of
the Company and securities of certain Apollo Affiliates and,
accordingly, may at any time hold a long or short position in
such
46
securities. In addition, an affiliate of UBS and certain
employees of UBS or its affiliates were, as of the date of
UBS opinion, investors in Apollo Investment Fund VII,
L.P. and may have been investors in other Apollo Affiliates.
The Company selected UBS as its financial advisor in connection
with the merger because UBS is an internationally recognized
investment banking firm with substantial experience in similar
transactions and because of UBS familiarity with the
Company and its business. UBS is regularly engaged in the
valuation of businesses and their securities in connection with
mergers and acquisitions, leveraged buyouts, negotiated
underwritings, competitive bids, secondary distributions of
listed and unlisted securities and private placements.
Certain
Company Forecasts
The Company does not, as a matter of course, publicly disclose
financial forecasts as to future financial performance, earnings
or other results and we are especially cautious of making
financial forecasts for extended periods due to unpredictability
of the underlying assumptions and estimates. However, in
connection with the evaluation of a possible transaction
involving the Company, the Companys management team
prepared and provided to Apollo Management, the board of
directors, the transaction committee and the board of
directors advisors certain non-public financial forecasts
that were not prepared with a view toward public disclosure.
A summary of these financial forecasts 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 because
these financial forecasts were made available to Apollo
Management, the board of directors, the transaction committee
and the board of directors advisors. The inclusion of this
information should not be regarded as an indication that our
board of directors, the transaction committee, the board of
directors 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. Managements
internal financial forecasts, upon which the financial forecasts
were based, are subjective in many respects. There can be no
assurance that these financial forecasts will be realized or
that actual results will not be significantly higher or lower
than forecasted. The financial forecasts 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 financial forecasts in this proxy statement
should not be relied on as necessarily predictive of actual
future events.
In addition, the financial forecasts were prepared solely for
internal use in assessing strategic direction, related capital
and resource needs and allocations and other management
decisions and to provide performance targets for management, and
not with a view toward public disclosure or toward complying
with generally accepted accounting principles, which we refer to
as GAAP, the published guidelines of the SEC regarding
projections and the use of non-GAAP measures or the guidelines
established by the American Institute of Certified Public
Accountants for preparation and presentation of prospective
financial information. The financial forecasts included below
were prepared by, and are the responsibility of, our management.
Neither our independent registered public accounting firm, nor
any other independent accountants, have compiled, examined or
performed any procedures with respect to the financial forecasts
contained herein, nor have they expressed any opinion or any
other form of assurance on such information or its
achievability. The report of the independent registered public
accounting firm, which is incorporated by reference in this
proxy statement, relates to the Companys historical
financial information. It does not extend to the financial
forecasts and should not be read to do so.
These financial forecasts were based on numerous variables and
assumptions that are inherently uncertain and may be beyond the
control of the Company. Important factors that may affect actual
results and cause these financial forecasts to not be achieved
include, but are not limited to, risks and uncertainties
relating to the Companys business (including its ability
to achieve strategic goals, objectives and targets over the
applicable periods), industry performance, the regulatory
environment, general business and economic conditions and other
factors described under Cautionary Statement Concerning
Forward-Looking Information beginning on page 17 of
this proxy statement. In addition, the forecasts do not reflect
revised prospects for the Companys business, changes in
general business or economic conditions, or any other
transaction or event that has occurred or that may occur and
that was not anticipated at the time the financial forecasts
were prepared. Accordingly, there can be no assurance that these
financial forecasts will be realized or that the Companys
future financial results will not materially vary from these
financial forecasts.
47
Readers of this proxy statement are cautioned not to rely on the
forecasted financial information. We have not updated and do not
intend to update, or otherwise revise the financial forecasts to
reflect circumstances existing after the date when made or to
reflect the occurrence of future events, even in the event that
any or all of the assumptions are shown to be in error. The
Company has made no representation to Apollo Management, Parent,
Merger Sub or any other person in the merger agreement or
otherwise, concerning these financial forecasts.
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 17.
The following is a summary of the financial forecasts prepared
by management of the Company and given to Apollo Management, the
board of directors, the transaction committee and the board of
directors advisors:
Summary
Financial Forecasts
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|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ending January,
|
|
|
2011(1)
|
|
2012(1)
|
|
2013(1)
|
|
2014(1)
|
|
2015(1)
|
|
|
(Dollars in millions, except EPS)
|
|
Income Statement Data:
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Revenue
|
|
$
|
1,454
|
|
|
$
|
1,539
|
|
|
$
|
1,608
|
|
|
$
|
1,681
|
|
|
$
|
1,758
|
|
Net Income
|
|
$
|
38
|
|
|
$
|
39
|
|
|
$
|
45
|
|
|
$
|
51
|
|
|
$
|
54
|
|
Fully Diluted EPS(2)
|
|
$
|
0.68
|
|
|
$
|
0.71
|
|
|
$
|
0.82
|
|
|
$
|
0.93
|
|
|
$
|
0.98
|
|
Other Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA(3)
|
|
$
|
166
|
|
|
$
|
177
|
|
|
$
|
186
|
|
|
$
|
199
|
|
|
$
|
208
|
|
Unlevered Free Cash Flow(4)
|
|
$
|
33
|
|
|
$
|
55
|
|
|
$
|
65
|
|
|
$
|
77
|
|
|
$
|
80
|
|
Depreciation and Amortization
|
|
$
|
76
|
|
|
$
|
79
|
|
|
$
|
81
|
|
|
$
|
84
|
|
|
$
|
88
|
|
Capital Expenditures
|
|
$
|
91
|
|
|
$
|
79
|
|
|
$
|
76
|
|
|
$
|
72
|
|
|
$
|
76
|
|
|
|
|
(1)
|
|
Forecasted values.
|
|
(2)
|
|
Fiscal years 2011, 2012, 2013, 2014 and 2015 based on
fully-diluted share count of 56 million, 55 million,
55 million, 55 million and 55 million,
respectively.
|
|
(3)
|
|
Adjusted for add-back of share based compensation, transaction
cost and non-cash facility action charges.
|
|
(4)
|
|
Unlevered free cash flow was calculated as the Companys
tax-effected earnings before interest, less capital expenditures
and plus depreciation and amortization, non-cash facility action
charges and decreases in working capital. Unlevered free cash
flow treats share based compensation expense as a cash expense.
|
In preparing the summary financial forecasts, the Company made
the following assumptions for the period from fiscal year 2011
to 2015:
|
|
|
|
|
no legislative changes affecting our business;
|
|
|
|
improvement in customer and economic environment;
|
|
|
|
continued growth from, and the development of, new Company and
franchisee-operated restaurants; and
|
|
|
|
no significant change in the cost and expense structure.
|
Financing
of the Merger
We anticipate that the total amount of funds necessary to
complete the merger will be approximately $1.06 billion, in
the aggregate, comprised of:
|
|
|
|
|
approximately $706.5 million to pay our stockholders (and
holders of options) the amounts due to them under the merger
agreement;
|
48
|
|
|
|
|
approximately $277.7 million to repay certain of our
existing indebtedness and existing liabilities that will come
due as a result of the merger; and
|
|
|
|
approximately $78.8 million to pay related fees and
expenses in connection with the transactions contemplated by the
merger agreement.
|
These payments are expected to be funded by a combination of
(i) equity contributions by the Apollo Investors and
(ii) certain debt financing. Parent has obtained equity and
debt financing commitments described below in connection with
the transactions contemplated by the merger agreement.
Parents proposed equity and debt financing may change
after the date hereof in accordance with the terms and
conditions of the merger agreement.
Equity
Financing
Parent has entered into an equity commitment letter with the
Apollo Investors, dated April 18, 2010, pursuant to which
the Apollo Investors have committed to provide equity financing
in an aggregate amount up to $456,000,000. In certain
circumstances, the Apollo Investors may assign their commitment
to other investors, although such assignment will not affect the
obligations of the Apollo Investors under the equity commitment
letter. The funding of financing contemplated by the equity
commitment letter is subject to the satisfaction at the closing
of all conditions precedent to the obligations of Merger Sub and
Parent to consummate the transactions contemplated by the merger
agreement, the substantially contemporaneous merger of Merger
Sub with the Company and the funding of the debt financing on
the terms and conditions described in the debt commitment letter
(as described below) or alternative debt financing on terms
satisfactory to Apollo Management and Parent.
The obligation of the Apollo Investors to fund their equity
commitment will automatically terminate upon the earliest to
occur of (i) the closing of the merger, (ii) the
termination of the merger agreement pursuant to its terms,
(iii) August 26, 2010, if the merger is not closed on
or before that date and (iv) the assertion by Parent or the
Company or any of their affiliates of any claim against any of
the Apollo Investors in connection with the merger agreement,
the guarantee or the equity commitment letter, other than a
claim against the Apollo Investors under the guarantee.
Debt
Financing
In connection with Merger Subs and Parents entry
into the merger agreement, Merger Sub and Parent received a debt
commitment letter, dated April 17, 2010, from Morgan
Stanley Senior Funding, Inc., Citigroup Global Markets Inc. and
RBC Capital Markets which we refer to, together with certain of
their affiliates, collectively as the Lenders, to provide,
severally but not jointly, in the aggregate up to $700,000,000
in debt financing to Merger Sub, consisting of (i) up to
$100,000,000 in the form of a senior secured revolving credit
facility and (ii) up to $600,000,000 in the form of a
senior secured second-priority increasing rate bridge facility.
It is expected that at the closing, in lieu of the senior
secured second-priority increasing rate bridge facility,
$600,000,000 principal amount of senior secured second-priority
notes will be issued in a public offering or pursuant to
Rule 144A of the Securities Act, or another private
placement exemption. The Lenders may invite other institutional
lenders to participate in the debt financing described in the
debt commitment letter and to undertake a portion of the
commitment to provide such financing.
Conditions
The facilities contemplated by the debt financing are subject to
certain closing conditions, including without limitation:
|
|
|
|
|
the execution and delivery of definitive loan documents
consistent with the terms set forth in the debt commitment
letter and otherwise reasonably satisfactory to each of the
Lenders, Merger Sub and Parent;
|
|
|
|
that, since April 17, 2010, there has not occurred, and
there does not exist, a Company material adverse effect (as
defined in the merger agreement);
|
|
|
|
the accuracy of certain specified representations and warranties
in the definitive loan documents and certain representations in
the merger agreement that are material to the interests of the
Lenders to the extent that a breach thereof gives rise to a
right of the Parent to terminate its obligations under the
merger agreement;
|
49
|
|
|
|
|
the completion of a marketing period of no less than 20
consecutive days for the sale of senior secured second-priority
notes beginning upon the delivery to the Lenders of a prospectus
or confidential offering memorandum or private placement
memorandum with respect thereto; provided that the 20
consecutive day period shall either be completed prior to
August 21, 2010 or shall commence after September 7,
2010;
|
|
|
|
Parent having received the proceeds of the equity contribution
under the equity commitment letter and having contributed (or
substantially simultaneously or substantively concurrent with
the closing under the senior secured revolving credit facility
shall have contributed) the same to the Company;
|
|
|
|
consummation of the merger substantially simultaneously or
substantively concurrent with the closing under the senior
secured revolving credit facility in accordance with applicable
law and on the terms described in the debt commitment letter and
the merger agreement (without any amendments, modifications or
waivers that are materially adverse to the Lenders, it being
understood that any consent expressly contemplated by the merger
agreement shall not constitute an amendment or waiver)
simultaneously or substantively concurrent with the closing
under the senior secured revolving credit facility;
|
|
|
|
Merger Sub having used commercially reasonable efforts to
obtain: (i) a corporate family rating, not later than
30 days prior to the closing date (as defined in the debt
commitment letter) and (ii) ratings for the senior secured
revolving credit facility, and the senior secured
second-priority notes (and, if reasonably requested by certain
Lenders, the senior secured second-priority increasing rate
bridge facility) from each of Standard & Poors
and Moodys Investors Service, Inc.;
|
|
|
|
there being no competing offering, placement, arrangement or
announcement of any debt securities or bank financing (other
than those contemplated by the debt commitment letter, other
debt in the ordinary course of business of the Company and its
subsidiaries for capital expenditures and working capital
purposes, debt permitted to be incurred under the merger
agreement and unfunded commitments to provide debt being
procured by or to be procured by any bidder which is not
affiliated with Apollo Management in connection with a competing
bid or bids to acquire the Company) by or on behalf of Parent,
Merger Sub or the Company or any of their respective
subsidiaries;
|
|
|
|
substantially simultaneously or substantively concurrent with
the closing under the senior secured revolving credit facility,
payment in full of all amounts due or outstanding under the
existing credit agreement, termination of all commitments
thereunder and discharge and release of all guarantees thereof
and security therefor.
|
|
|
|
Parent and its subsidiaries having no debt outstanding other
than the indebtedness contemplated by the debt commitment letter
and other debt permitted to be outstanding pursuant to the
merger agreement;
|
|
|
|
the total leverage ratio (as defined in the debt commitment
letter) of Parent and its subsidiaries calculated as of the
closing date after giving effect to the transactions (as defined
in the debt commitment letter) shall not be greater than 5.5 to
1.0;
|
|
|
|
substantially concurrently with the initial fundings
contemplated by the debt commitment letter, as a condition to
the funding of the senior secured revolving credit facility, the
Company shall have received at least $600,000,000 in the
aggregate gross cash proceeds from the issuance of the senior
secured second-priority notes
and/or
the
borrowing of bridge loans under the senior secured
second-priority increasing rate bridge facility;
|
|
|
|
payment, to the extent due, of all fees and invoiced expenses,
as applicable, and compliance with all obligations under the fee
arrangements; and
|
|
|
|
delivery of certain customary closing documents (including,
among other things, a customary solvency certificate and
evidence of insurance), guarantees executed by the subsidiary
guarantors (as defined in the debt commitment letter) in favor
of the Lenders, specified items of collateral and certain
Company financial statements.
|
The debt commitments expire upon the first to occur of
(i) the termination of the merger agreement without the
consummation of the merger having occurred or
(ii) October 16, 2010.
50
Subject to the terms and conditions of the merger agreement,
each of Parent and Merger Sub has agreed to use its commercially
reasonable efforts to obtain the financing on the terms and
conditions described in the equity commitment letter and the
debt commitment letter, and not to permit any amendment,
modification or replacement thereto, which (x) reduces the
aggregate amount of the financing or (y) imposes new or
additional conditions or otherwise expands, amends or modifies
any of the conditions to the financing in a manner that would
reasonably be expected to (i) delay or prevent the funding
of the financing (or satisfaction of the conditions thereto) on
the closing date or (ii) adversely impact the ability of
Parent, Merger Sub or the Company, as applicable, to enforce its
rights against other parties to the equity commitment letter or
the debt commitment letter or the definitive agreements with
respect thereto in any material respect.
Although the debt financing described in this proxy statement is
not subject to due diligence or a market out
provision, which allows lenders not to fund their commitments if
certain conditions in the financial markets prevail, there is
still a risk that such 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.
Guarantee;
Remedies
Pursuant to a guarantee delivered by the Apollo Investors in
favor of the Company, dated April 18, 2010, the Apollo
Investors have agreed (severally but not jointly) to guarantee
the performance and discharge of certain obligations of Parent
under the merger agreement; provided, however, that the maximum
aggregate liability of the Apollo Investors shall not exceed the
sum of: (x) a reverse termination fee of $15,471,000
(provided that, in certain circumstances, Parent is required to
pay a higher reverse termination fee, in which case $15,471,000
will be increased to $30,943,000) and (y) up to $500,000
for any costs and expenses incurred in connection with the
enforcement of Parents obligations to pay any such reverse
termination fee. See the section entitled The Merger
Agreement Termination Fees beginning on
page 72.
Subject to certain exceptions, the guarantee will terminate upon
the earliest to occur of (i) the effective time of the
merger, if the closing occurs, (ii) the first anniversary
of August 26, 2010 if the closing has not occurred and no
claim is brought under the guarantee prior to such first
anniversary, (iii) the termination of the merger agreement
in accordance with its terms by mutual consent of the parties or
under circumstances in which Parent would not be obligated to
pay the reverse termination fee, (iv) the final resolution
of any and all claims brought under the guarantee prior to
termination and (v) any time when the Company or any of its
affiliates asserts that certain provisions of the guarantee are
illegal, invalid or unenforceable or that the Apollo Investors
are liable in excess of or to a greater extent than its maximum
aggregate liability as set forth in the guarantee.
The Company cannot seek specific performance to require Parent
and Merger Sub to complete the merger, and the Companys
exclusive remedy for the failure of Parent and Merger Sub to
complete the merger is the payment of the applicable reverse
termination fee and a portion of any costs and expenses incurred
in the circumstances described under The Merger
Agreement Termination Fees beginning on
page 72.
In the event that the Company receives a reverse termination
fee, such fee shall be deemed to be liquidated damages for any
and all losses or damages suffered or incurred by the Company or
any other person in connection with the merger agreement, the
equity commitment letter, the debt commitment letter, the
guarantee or the transactions contemplated thereby and the
abandonment or termination thereof or any matter forming the
basis for such termination and no other claims may be brought
against Parent, Merger Sub or any other buyer party with respect
to such matters. Except in the case of fraud, the Companys
right to receive a reverse termination fee is the sole and
exclusive remedy of the Company and its affiliates against the
Apollo Investors and any other buyer party in respect of any
liabilities or obligations arising under, or in connection with,
the merger agreement, the equity commitment letter, the debt
commitment letter, the guarantee or the transactions
contemplated thereby. Parent and Merger Sub are entitled to seek
specific performance of the terms and provisions of the merger
agreement, including seeking an injunction to prevent breaches
of the merger agreement. In addition, the Company is not
entitled to seek specific performance with respect to the
obligations of Parent or Merger Sub.
Parent and Merger Subs receipt of the termination fee and
certain reimbursement payments from us, will, subject to certain
rights of equitable relief described above, be deemed to be
liquidated damages for any and all
51
losses or damages suffered or incurred by Parent, Merger Sub,
any of their respective affiliates or any other person in
connection with the merger agreement, the transactions
contemplated thereby and the abandonment or termination thereof
or any matter forming the basis for such termination and no
other claims may be brought against the Company or any of its
affiliates with respect to such matters.
Interests
of Certain Persons in the Merger
In considering the recommendation of our board of directors that
you vote to approve the merger agreement, you should be aware
that certain of our directors and executive officers have
financial interests in the merger that are different from, or in
addition to, those of our stockholders 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 stockholders of the Company. For the
purposes of all of the agreements and plans described below, the
completion of the transactions contemplated by the merger
agreement will constitute a change in control.
Equity
Compensation Awards
At the effective time of the merger, each outstanding option to
purchase shares of the Companys common stock granted under
existing plans that is outstanding and unexercised as of
immediately prior to the effective time of the merger, whether
vested or unvested, will vest and be converted into the right to
receive a cash payment equal to the number of shares of common
stock subject to such option multiplied by the amount (if any)
by which $12.55 exceeds the exercise price per share of such
option, less any applicable withholding taxes. At the effective
time of the merger, each restricted share will vest and be
converted into the right to receive a cash payment equal to
$12.55, less any applicable withholding taxes. Certain
restricted stock awards (subject to performance
and/or
time-based vesting) are scheduled to be granted on
October 12, 2010, pursuant to the terms of certain
executive officers employment agreements, and would vest
at the effective time if they were granted prior to the
effective time, provided that the executive officers remain
employed on such date. In the event that any such executive
officers employment is terminated without cause or he
resigns for good reason prior to the effective time, such
executive officer will be entitled to the grant of such
restricted stock that will be vested as of the date of grant.
Based on the equity compensation holdings in the Company as of
May 10, 2010, and assuming that the merger is completed on
June 30, 2010, upon completion of the merger, the number of
unvested options to purchase shares of the Companys common
stock (at exercise prices ranging from $8.07 to $11.34 held by
each of Messrs. Puzder, Murphy, Abajian, Haley, Starke and
nine directors (as a group) that would vest are 0, 0, 0, 39,999,
39,999 and 22,500, respectively (with such unvested options
having a total in the money value of approximately
$0, $0, $0, $150,965, $150,965 and $65,400 respectively, based
upon a $12.55 price per share), and the number of shares of
unvested restricted stock granted under existing company equity
compensation plans, held by each of Messrs. Puzder, Murphy,
Abajian, Haley, Starke and nine directors (as a group) that
would vest and become free of restrictions and entitle the
holder to a cash payment equal to $12.55 per share are 529,648,
132,412, 132,412, 3,499, 3,499 and 245,000 respectively (with
such unvested restricted stock having a total value of
approximately $6,647,082, $1,661,771, $1,661,771, $43,912,
$43,912 and $3,074,750, respectively, based upon a $12.55 price
per share). In addition, the number of vested options to
purchase shares of Company common stock held by
Messrs. Puzder, Murphy, Abajian, Haley, Starke and the nine
directors (as a group) are 687,275, 216,000, 232,987, 155,001,
48,334 and 507,166, respectively (with such vested options
having a total in the money value of approximately
$1,465,051, $869,625, $1,208,667, $557,985, $47,035 and
$1,200,475, respectively, based upon a $12.55 price per share).
Employment
Agreements
We previously entered into employment agreements with
Messrs. Puzder, Murphy, and Abajian.
Mr. Puzders employment agreement provides for the
payment of certain severance benefits if Mr. Puzder
terminates his employment for good reason during the
period commencing 60 days and expiring 365 days, after
a change in control. Good reason is defined in his
employment agreement as a required relocation of his principal
place of employment or a change in control. For
Messrs. Murphy and Abajian, the employment agreements
provide
52
for the payment of certain severance benefits if such officers
terminate their employment with good reason, within
90 days of a change in control. For Messrs. Murphy and
Abajian, good reason is also defined in each
executive officers employment agreement as a required
relocation of the principal place of such officers
employment or a change in control. In this proxy statement, we
refer to a termination for good reason within the period
specified in the employment agreement as a qualifying
termination. As of the date of this proxy statement, no
discussions have occurred between Messrs. Puzder, Murphy or
Abajian and the Company indicating that any such qualifying
termination will occur.
In the event of a qualifying termination, Mr. Puzder is
entitled to receive: (1) all amounts owed through the date
of such qualifying termination; (2) the sum of: (A) an
amount equal to his base salary multiplied by three, plus
(B) an amount equal to the product of 100% of his base
salary multiplied by three; (3) the accelerated vesting of
options, restricted stock awards and other forms of equity
compensation granted to him that had not vested as of the date
of the qualifying termination; (4) the grant and immediate
vesting (subject to certain limitations) of all restricted
shares which the Company has agreed to grant after the date of
such qualifying termination as of the date of the qualifying
termination; (5) continued participation in all employee
benefit plans (except the Companys stock incentive plans)
and programs that he was entitled to participate in immediately
prior to the date of the qualifying termination, for the period
commencing on the date of the qualifying termination and ending
on December 31st of the second calendar year following
the calendar year in which the qualifying termination occurred;
and (6) a
gross-up
payment for excise taxes, if any, not to exceed $1,000,000, for
tax incurred under Section 4999 of the Internal Revenue
Code of 1986, as amended.
In the event of a qualifying termination, each of
Messrs. Murphy and Abajian is entitled to receive:
(1) all amounts owed through the date of termination;
(2) the sum of: (A) an amount equal to the
executives base salary multiplied by three, plus
(B) an amount equal to the pro rata portion of the bonus
based on an annualized calculation as of the date of termination
for the year in which the qualifying termination occurs;
(3) the accelerated vesting of options, restricted stock
awards, and other forms of equity compensation granted to the
executive, which had not vested as of the date of the qualifying
termination; (4) the grant and immediate vesting (subject
to certain limitations) of all restricted shares which the
Company has agreed to grant after the date of such qualifying
termination; and (5) continued participation in all
employee benefit plans (except the Companys stock
incentive plans) and programs that the executive was entitled to
participate in immediately prior to the date of the qualifying
termination, for the period commencing on the date of the
qualifying termination and ending on December 31st of
the second calendar year following the calendar year in which
the qualifying termination occurred.
Based on the executives compensation levels as of
May 10, 2010, and assuming that the merger is completed on
June 30, 2010, and the executive experiences a qualifying
termination shortly thereafter, the amount of the cash severance
payment (including the pro rata target annual bonus payment)
that would be payable to Messrs. Puzder, Murphy and Abajian
is approximately $6,420,000, $2,284,021 and $1,618,567,
respectively, and the estimated value of the employee benefit
plans each of them would receive is approximately $57,656,
$55,715 and $62,484, respectively. Assuming these payments are
made together with any additional payments or benefits that
could be made or provided, as applicable, as described below
under the caption The Merger Interests of
Certain Persons in the Merger Fiscal Year 2011 Cash
Bonuses and Equity Awards, we expect Mr. Puzder to be
eligible to receive a 280G
gross-up.
Fiscal
Year 2011 Equity Awards
Pursuant to the terms of the employment agreements of
Messrs. Puzder, Murphy and Abajian, we are scheduled to
grant restricted stock (subject to performance
and/or
time-based vesting) on October 12, 2010. If the effective
time occurs after that date, the restricted shares granted will
vest at the effective time, and be converted to the right to
receive $12.55 per share, provided that the executives remain
employed on such date. In the event that any such
executives employment is terminated without cause or he
resigns for good reason prior to the effective time, such
executive would be entitled to the grant of such restricted
stock that will then become vested as of the date of grant.
Arrangements
with the Surviving Corporation
Parent has previously indicated its belief that the continued
involvement of our management team is integral to the
Companys future success; however, as of the date of this
proxy statement, no members of our current management team have
entered into any agreement with Parent, Merger Sub or their
affiliates regarding
53
employment with, or the right to convert into or reinvest or
participate in the equity of, the surviving corporation or
Parent or any of its subsidiaries.
As of the date of this proxy statement, discussions have
occurred between members of our current management team and
representatives of Parent
and/or
Apollo Management with respect to such agreements. Parent has
stated that it expects that (i) no member of our current
management team, with the exception of Mr. Puzder, would
occupy a seat on the board of directors of the surviving
corporation, (ii) the terms of employment arrangements for
members of our current management team following the proposed
transaction would be substantially similar to their current
employment arrangements, and (iii) no member of our current
management team would receive significant increases in
compensation as a result of the proposed transaction. Parent has
also indicated that it would prefer that certain members of our
current management team, consisting of Messrs. Puzder,
Murphy and Abajian, invest 50% of the after-tax proceeds
received by them in connection with the proposed transaction in
the equity securities of the surviving corporation (or its
direct or indirect parent). Assuming that each of
Messrs. Puzder, Murphy and Abajian invested this amount,
they, as a group, would beneficially own approximately 2% of the
post-closing equity of the surviving corporation (or its direct
or indirect parent) on a fully-diluted basis. In addition,
Parent has indicated that, concurrent with the closing of the
proposed transaction, Parent plans for the surviving corporation
(or its direct or indirect parent) to adopt a new equity
incentive plan pursuant to which executives, new hires and
certain other employees could share in up to 10% of any increase
in the equity value of the surviving corporation (or its direct
or indirect parent). Parent expects that awards relating to 6.5%
of any appreciation in the equity value of the surviving
corporation (or its direct or indirect parent) will be granted
to Messrs. Puzder, Murphy and Abajian under the new equity
incentive plan. It is anticipated that all such grants will be
subject to vesting over a period of four years of continued
employment and approximately half of such grants will be subject
to the achievement of certain performance targets.
Although it is likely that certain members of our current
management team will enter into arrangements with Parent or its
affiliates regarding employment (and severance arrangements)
with, and the right to purchase or participate in the equity of,
Parent (and/or a subsidiary of Parent), as of the date of this
proxy statement no definitive agreements have been reached
between members of our current management team and
representatives of Parent
and/or
Apollo Management, and there can be no assurance that any
parties will reach an agreement. Any new arrangements are
currently expected to be entered into at or prior to the
completion of the merger and would not become effective until
after the merger is completed.
Except as disclosed in this proxy statement, there is no present
or proposed material agreement, arrangement, understanding or
relationship between Parent, Merger Sub, Apollo Management, or
any of their respective executive officers, directors,
controlling persons or subsidiaries, on the one hand, and the
Company or any of its respective executive officers, directors,
controlling persons or subsidiaries, on the other hand.
Transaction
Committee Fees
In accordance with the resolutions of the board of directors,
each member of the transaction committee is entitled to receive
a one-time payment in the amount of $25,000 in compensation for
such members services on the transaction committee,
whether or not the merger occurs.
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 U.S. federal
income tax consequences of the merger to U.S. holders (as
defined below) whose shares of common stock are converted into
the right to receive cash in the merger. This summary does not
purport to consider all aspects of U.S. federal income
taxation that might be relevant to our stockholders. For
purposes of this discussion, we use the term
U.S. holder to mean a beneficial owner of
shares of common stock that is, for U.S. federal income tax
purposes:
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an individual who is a citizen or resident of the United States;
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a corporation (or other entity taxable as a corporation for
U.S. federal income tax purposes) created or organized
under the laws of the United States or any of its political
subdivisions;
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a trust that (i) is subject to the supervision of a court
within the United States and the control of one or more
U.S. persons or (ii) has a valid election in effect
under applicable U.S. Treasury regulations to be treated as
a U.S. person; or
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an estate that is subject to U.S. federal income tax on its
income regardless of its source.
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If a partnership (including an entity treated as a partnership
for U.S. federal income tax purposes) holds common stock,
the tax treatment of a partner generally will depend on the
status of the partner and the activities of the partnership. A
partner of a partnership holding common stock should consult the
partners tax advisor regarding the U.S. federal
income tax consequences of the merger to such partner.
This discussion is based upon the Internal Revenue Code of 1986,
as amended, which we refer to in this proxy statement as the
Code, and Treasury Regulations, Internal Revenue Service rulings
and judicial decisions now in effect, all of which are subject
to change (possibly with retroactive effect) or different
interpretations. The discussion applies only to beneficial
owners who hold shares of common stock as capital assets, and
does not apply to shares of common stock received in connection
with the exercise of employee stock options or otherwise as
compensation, stockholders who hold an equity interest, actually
or constructively, in Parent or the surviving corporation after
the merger, stockholders who validly exercise their rights under
the DGCL to object to the merger or to certain types of
beneficial owners who may be subject to special rules (such as
insurance companies, banks, tax-exempt organizations, financial
institutions, broker-dealers, partnerships, S corporations
or other pass-through entities, mutual funds, traders in
securities who elect the
mark-to-market
method of accounting, stockholders subject to the alternative
minimum tax, stockholders that have a functional currency other
than the U.S. dollar or stockholders who hold common stock
as part of a hedge, straddle, constructive sale or conversion
transaction). This discussion also does not address the
U.S. tax consequences to any stockholder who, for
U.S. federal income tax purposes, is a non-resident alien
individual, foreign corporation, foreign partnership or foreign
estate or trust, and does not address the receipt of cash in
connection with the cancellation of options to purchase shares
of common stock or any other matters relating to equity
compensation or benefit plans (including the 401(k) plan). This
discussion does not address any aspect of state, local, foreign,
estate or gift tax laws.
Exchange
of Shares of Common Stock for Cash Pursuant to the Merger
Agreement
The exchange of shares of common stock for cash in the merger
will be a taxable transaction for U.S. federal income tax
purposes. In general, a U.S. holder whose shares of common
stock are converted into the right to receive cash in the merger
will recognize capital gain or loss for U.S. federal income
tax purposes 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 the
U.S. holders adjusted tax basis in such shares. A
U.S. holders adjusted tax basis will generally equal
the price the U.S. holder paid for such shares. Gain or
loss will be determined separately for each block of shares of
common stock (i.e., shares of common stock acquired at the same
cost in a single transaction). Such gain or loss will be
long-term capital gain or loss provided that the
U.S. holders holding period for such shares of common
stock is more than 12 months at the time of the completion
of the merger. Long-term capital gains of non-corporate
U.S. holders are eligible for reduced rates of taxation.
There are limitations on the deductibility of capital losses.
Backup
Withholding and Information Reporting
Backup withholding of tax (at the rate of 28%) may apply to cash
payments to which a non-corporate U.S. holder is entitled
under the merger agreement, unless the U.S. holder or other
payee provides a taxpayer identification number, certifies that
such number is correct, and otherwise complies with the backup
withholding rules. Each of our U.S. holders should complete
and sign, under penalty of perjury, the Substitute
Form W-9
included as part of the letter of transmittal that will be sent
promptly after the completion of the merger (but in no event
more than three business days thereafter) and return it to the
paying agent, in order 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.
55
Backup withholding is not an additional tax. Any amounts
withheld from cash payments to a U.S. holder pursuant to
the merger under the backup withholding rules will be allowable
as a refund or a credit against such U.S. holders
U.S. federal income tax liability provided the required
information is timely furnished to the Internal Revenue Service.
Cash payments made pursuant to the merger will also be subject
to information reporting unless an exemption applies.
The U.S. 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 stockholder should consult the
stockholders tax advisor regarding the applicability of
the rules discussed above to the stockholder and the particular
tax effects to the stockholder of the merger in light of such
stockholders particular circumstances, the application of
state, local and foreign tax laws, and, if applicable, the tax
consequences of the receipt of cash in connection with the
cancellation of options, including the transactions described in
this proxy statement relating to our other equity compensation
and benefit plans.
Regulatory
Approvals
Under the terms of the merger agreement, the merger cannot be
completed until (a) the waiting period applicable to the
consummation of the merger under the HSR Act has expired or been
earlier terminated and (b) all other authorizations,
consents, orders or approvals of, or declarations or filings
with any governmental authority required to consummate the
merger have been filed or obtained or any applicable waiting
period imposed by any governmental authority has expired,
provided that the merger may be consummated if failure to file
or obtain such authorizations, consents, orders or approvals,
declarations or filings or the failure of such waiting period to
expire would not reasonably be likely to have a material adverse
effect on us or Parent and Merger Sub.
Under the HSR Act, and the rules promulgated thereunder by the
FTC, the merger cannot be completed until each of the Company
and Parent file a notification and report form with the FTC and
the DOJ under the HSR Act and the applicable waiting period has
expired or been terminated. The Company and Parent filed such
notification and report forms on May 11, 2010 and each
requested early termination of the waiting period. On
May 21, 2010, the FTC notified the parties that their
request for early termination of the applicable waiting period
had been granted. At any time before or after consummation of
the merger, notwithstanding the termination or expiration of the
waiting period under the HSR Act, 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 or expiration of the waiting period under the HSR
Act, any state could take such action under 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
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,
ability 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.
Litigation
Relating to the Merger
Between March 1, 2010 and March 26, 2010, seven
putative stockholder class actions were filed in the Delaware
Court of Chancery and the Superior Court of California for the
County of Santa Barbara against the Company, each of its
directors, THL and its affiliates alleging the directors
breached their fiduciary duties regarding the prior proposed
merger and that THL and its affiliates aided and abetted those
breaches. On March 26, 2010, the Superior Court of
California for the County of Santa Barbara consolidated the
four cases filed in that court as
In re CKE Restaurants, Inc.
Shareholder Litigation
, Lead Case No. 1342245, which we
refer to as the California Action. On March 29, 2010, the
Delaware Court of Chancery consolidated the three cases filed in
that court as
In re CKE
56
Restaurants, Inc. Shareholder Litigation
, Consolidated
C.A.
No. 5290-VCP,
which we refer to as the Delaware Action.
On April 1, 2010, plaintiffs in the Delaware Action filed a
consolidated complaint, and on April 8, 2010, plaintiffs in
the California Action filed a consolidated complaint. On
April 12, 2010, the Delaware Court of Chancery granted the
Delaware Action plaintiffs motion for expedited
proceedings and request for a hearing to consider preliminarily
enjoining the prior proposed merger, and a hearing was scheduled
for May 28, 2010. On April 16, 2010, the Superior
Court of California for the County of Santa Barbara granted
the defendants motion for a stay of the California Action
pending resolution of the Delaware Action.
On May 12, 2010, the plaintiffs in the Delaware Action
filed an amended consolidated complaint against the Company, its
Directors, Apollo Management, Columbia Lake Acquisition
Holdings, Inc. and Columbia Lake Acquisition Corp. that drops
the challenge to the prior proposed merger and instead alleges
the directors breached their fiduciary duties regarding the
merger, including that the directors had breached their duty of
disclosure in the preliminary proxy statement, and that Apollo
Management and its affiliates aided and abetted those breaches.
On May 12, 2010, the plaintiffs also filed a motion for
expedited discovery and the scheduling of a hearing to
preliminarily enjoin the merger.
On or about May 25, 2010, we entered into an agreement in
principle with the plaintiffs regarding the settlement of the
consolidated putative stockholder class action filed in the
Delaware Court of Chancery.
The Company believes that no further disclosure is required
under applicable laws; however, to avoid the risk of the
putative stockholder class actions delaying or adversely
affecting the merger and to minimize the expense of defending
such actions, the Company has agreed, pursuant to the terms of
the proposed settlement, to make certain supplemental
disclosures related to the proposed merger, all of which are set
forth herein. Subject to completion of certain confirmatory
discovery by counsel to the plaintiffs, the agreement in
principle contemplates that the parties will enter into a
stipulation of settlement. The stipulation of settlement will be
subject to customary conditions, including court approval
following notice to the Companys stockholders. In the
event that the parties enter into a stipulation of settlement, a
hearing will be scheduled at which the Delaware Court of
Chancery will consider the fairness, reasonableness, and
adequacy of the settlement. If the settlement is finally
approved by the court, it will resolve and release all claims in
all actions that were or could have been brought challenging any
aspect of the proposed merger, the merger agreement, and any
disclosure made in connection therewith (but excluding claims
for appraisal under Section 262 of the DGCL), pursuant to
terms that will be disclosed to stockholders prior to final
approval of the settlement. In addition, in connection with the
settlement, the parties contemplate that plaintiffs
counsel will file a motion in the Delaware Court of Chancery for
an award of attorneys fees and expenses to be paid by the
Company or its successor, which the defendants may oppose. The
Company or its successor shall pay or cause to be paid those
attorneys fees and expenses awarded by the Delaware Court
of Chancery. There can be no assurance that the parties will
ultimately enter into a stipulation of settlement or that the
Delaware Court of Chancery will approve the settlement even if
the parties were to enter into such stipulation. In such event,
the proposed settlement as contemplated by the agreement in
principle may be terminated.
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 84.
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
57
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 close
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 stockholders and reports and documents
filed with the SEC. 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. Any material facts that the Company is aware of as of
the date of this proxy statement that would otherwise materially
modify the representations and warranties in the merger
agreement have been disclosed elsewhere in this proxy statement,
or in the documents incorporated by reference in this proxy
statement. See Where You Can Find More Information
beginning on page 83.
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. The officers of the Company at the
effective time of 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 appointed and qualified or
until their earlier death, resignation or removal.
The certificate of incorporation of the surviving corporation
will be in the form of the certificate of incorporation of
Merger Sub (except with respect to the name of the Company),
until amended in accordance with its terms or by applicable law.
The bylaws of the surviving corporation will be in the form of
the bylaws of Merger Sub (except with respect to the name of the
Company) until amended in accordance with their terms or by
applicable law.
Following the completion of the merger, we expect our common
stock to be delisted from the NYSE and deregistered under the
Exchange Act, and cease to be publicly traded.
Closing
and Effective Time of the Merger; Marketing Period
The closing of the merger will take place no later than the
third business day following the date on which the last of the
conditions to closing of the merger (described under the heading
The Merger Agreement Conditions to the
Merger beginning on page 69) have been satisfied or
waived (other than the conditions that by their nature are to be
satisfied at the closing of the merger, but subject to the
fulfillment or waiver of those conditions). However, if the
marketing period (as defined below) has not ended at such time,
neither Parent nor Merger Sub will be required to effect the
closing of the merger until the earlier to occur of (i) a
date during the marketing period specified by Parent on no less
than three business days prior written notice to the
Company or (ii) the final day of the marketing period.
The marketing period is the first period of 21 consecutive
business days throughout and on the last day of which
(i) delivery by the Company to Parent, Merger Sub and their
financing sources of offering and syndication documents and
materials, including certain financial statements specified in
the debt commitment letter and any other information relating to
the Company and our subsidiaries to the extent reasonably
requested by Parent to prepare a confidential information
memorandum and lender presentation that are contemplated by the
debt commitment letter (which information we refer to as the
required information); (ii) all general conditions and all
conditions to the obligations of Parent and Merger Sub to close
have been satisfied (other than those that by their nature will
not be satisfied until the effective time of the merger) and
nothing has occurred and no condition exists
58
that would cause any of such conditions not to be satisfied
assuming the effective time of the merger were to be scheduled
for any time during such consecutive 21 business day period; and
(iii) we have provided all cooperation which we are
obligated to provide with respect to the financing as set forth
in the merger agreement. Notwithstanding the foregoing, the
marketing period will not be deemed to have commenced if before
the completion of the marketing period, (a) we have
announced any intention to restate any financial statements or
financial information included in the required information or
that any such restatement is under consideration or may be a
possibility, in which case the marketing period will be deemed
not to commence unless and until such restatement has been
completed and the applicable required information has been
amended or we have announced our conclusion that no restatement
will be required, (b) we have failed to file any report
with the applicable securities authorities when due, in which
case the marketing period will be deemed not to commence unless
and until all such reports have been filed, or (c) the
required information would not be compliant (as defined below)
throughout and on the last day of such 21 business day period,
in which case a new 21 business day period will commence upon
the date on which Parent, Merger Sub and their financing sources
receive updated required information that would be compliant,
and the requirements in clauses (i) and (ii) above
would be satisfied throughout and on the last day of such new 21
business day period.
In this proxy statement, we refer to, with respect to the
required information, that (i) such required information
does not contain any untrue statement of a material fact or omit
to state any material fact necessary in order to make such
required information, in light of the circumstances under which
it was made, not misleading; (ii) such required information
is, and remains throughout the marketing period, compliant in
all material respects with all requirements of
Regulation S-K
and
Regulation S-X
under the Securities Act for offerings of debt securities that
customarily would be included in a preliminary offering
memorandum or registration statement, subject to certain
exceptions; (iii) our auditors have not withdrawn any
opinion with respect to any financial statements contained in
the required information; (iv) our auditors have delivered
drafts of customary comfort letters; and (v) the financial
statements and other financial information included in the
required information are, and remain throughout the marketing
period, sufficient to permit (A) a registration statement
using such financial statements to be declared effective by the
SEC on the last day of the marketing period and (B) Parent
and Merger Subs financing sources to receive customary
comfort letters from our independent auditors on the financial
information contained in the required information to consummate
any offering of debt securities on the last day of the marketing
period, as compliant.
The effective time of the merger will occur 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).
Treatment
of Common Stock, Options and Other Equity Awards
Common
Stock
At the effective time of the merger, each share of common stock
issued and outstanding immediately prior thereto (other than
excluded shares) will convert into the right to receive the per
share merger consideration of $12.55, without interest, less any
applicable withholding taxes. Common stock owned by Parent,
Merger Sub or any other direct or indirect wholly-owned
subsidiary of Parent will be cancelled without payment of
consideration. Common stock owned by the Company or any of our
wholly-owned subsidiaries will, at the election of Parent,
either convert into stock of the surviving corporation or be
cancelled without payment of consideration. Common stock owned
by stockholders who have perfected and not withdrawn a demand
for, or lost the right to, appraisal rights under the DGCL will
be cancelled without payment of consideration. Such stockholders
will instead be entitled to the appraisal rights provided under
the DGCL as described under Appraisal Rights.
Options
At the effective time, each outstanding option will vest and be
converted into the right to receive cash in an amount equal to
the product of (x) the total number of shares of common
stock subject to such option immediately prior to the effective
time and (y) the excess, if any, of the per share merger
consideration of $12.55 over the exercise price per share of
such option, less any applicable withholding taxes.
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Restricted
Shares
At the effective time, each outstanding restricted share of
common stock will fully vest and be converted into the right to
receive cash in an amount equal to the per share merger
consideration of $12.55, without interest, less any applicable
withholding taxes.
Employee
Stock Purchase Plan
At the effective time, the Employee Stock Purchase Plan, or
ESPP, shall terminate. The ESPP was suspended following the
signing of the merger agreement and no payroll deductions have
been made and no other amounts have been set aside for the
purchase of shares under the ESPP since February 26, 2010,
the date of suspension. All amounts withheld from pay and not
applied to the purchase of shares as of the date that the ESPP
was suspended were returned to the participants in the ESPP
without interest thereon. All Company matching contributions
that would have been used for the purchase of shares under the
ESPP had the ESPP not been suspended and then terminated, have
been or will be paid to each ESPP participant in cash, provided
that the participant satisfied or satisfies all requirements
under the terms of the ESPP as in effect as of the date of the
merger agreement.
Exchange
and Payment Procedures
At or prior to the effective time, Parent will deposit, or will
cause to be deposited, with the paying agent a cash amount in
immediately available funds necessary for the paying agent to
make payment of the aggregate per share merger consideration to
the holders of shares of our common stock.
Each record holder of shares of common stock will be sent a
letter of transmittal and instructions describing how it may
exchange its shares of common stock for the per share merger
consideration promptly after the completion of the merger (but
in no event more than three business days thereafter).
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.
No interest will be paid or accrued on the cash payable as the
per share merger consideration as provided above. Parent, the
surviving corporation and the paying agent will be entitled to
deduct and withhold any applicable taxes from the per share
merger consideration. Any sum that is withheld will be deemed to
have been paid to the person with regard to whom it is withheld.
From and after the effective time of the merger, there will be
no transfers on our stock transfer books of shares of common
stock that were outstanding immediately prior to the effective
time of the merger. If, after the effective time of the merger,
any person presents to the surviving corporation any
certificates for any reason, such certificates shall be
cancelled and exchanged for the per share merger consideration
as provided above to the extent that the per share merger
consideration has not already been paid in respect of the shares
of common stock represented by such certificates.
Any portion of the per share merger consideration deposited with
the paying agent that remains unclaimed by former record holders
of common stock for one year after the effective time of the
merger will be delivered to the surviving corporation. Record
holders of common stock who have not complied with the
above-described exchange and payment procedures will thereafter
only look to Parent and the surviving corporation for payment of
the per share merger consideration. None of the surviving
corporation, Parent or the paying agent will be liable to any
former record holders of common stock for any cash delivered to
a public official pursuant to any applicable abandoned property,
escheat or similar laws.
If you have lost a certificate, or if it has been stolen or
destroyed, then before you will be entitled to receive the per
share merger consideration, you will have to make an affidavit
of the loss, theft or destruction, and if required by the
surviving corporation, post a bond in a reasonable amount as
indemnity against any claim that may be made against it with
respect to such certificate. These procedures will be described
in the letter of transmittal that you will receive, which you
should read carefully in its entirety.
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Financing
Covenant; Company Cooperation
Subject to the terms and conditions of the merger agreement,
each of Parent and Merger Sub has agreed to use its commercially
reasonable efforts to obtain the financing on the terms and
conditions described in the equity commitment letter and the
debt commitment letter, and not to permit any amendment,
modification or replacement thereto, which (x) reduces the
aggregate amount of the financing or (y) imposes new or
additional conditions or otherwise expands, amends or modifies
any of the conditions to the financing in a manner that would
reasonably be expected to (i) delay or prevent the funding
of the financing (or satisfaction of the conditions thereto) on
the closing date or (ii) adversely impact the ability of
Parent, Merger Sub or the Company, as applicable, to enforce its
rights against other parties to the equity commitment letter,
the debt commitment letter or the definitive documents with
respect thereto in any material respect.
Parent and Merger Sub will use their commercially reasonable
efforts to:
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negotiate definitive agreements with respect to the debt
commitment letter on the terms and conditions contained in the
debt commitment letter;
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satisfy all conditions to funding in the debt commitment letter
applicable to them that are within their control and to
consummate the financing at or prior to the closing; and
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enforce their rights under the debt commitment letter.
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Parent and Merger Sub acknowledge in the merger agreement that
the obtaining of the financing is not a condition to the
consummation of the merger.
Parent has agreed to keep us reasonably informed of the status
of its efforts to arrange the financing.
We have agreed to use our commercially reasonable efforts to
provide to Parent and Merger Sub (at Parents sole expense)
all cooperation reasonably requested by Parent or Merger Sub and
all cooperation that is customary, necessary or advisable in
connection with the arrangement of the financing for the merger,
including assisting with the preparation of offering and
syndication documents and materials, preparing and furnishing
certain financial information and the required information,
participating in certain meetings with third parties, obtaining
accountants comfort letters and consents from our
independent auditors, assisting in the preparation of, execution
of and delivery of, definitive financing documents, facilitating
the pledging of collateral for the financing, using commercially
reasonable efforts to ensure that Parent and Merger Subs
financing sources benefit from our existing lending
relationships, using commercially reasonable efforts to obtain
such consents, approvals, authorizations and instruments which
may be reasonably requested by Parent or Merger Sub in
connection with the financing, and otherwise facilitating the
consummation of the financing.
Representations
and Warranties
We made customary representations and warranties in the merger
agreement that are subject, in some cases, to specified
exceptions and qualifications contained in the merger agreement
or in the disclosure schedules the Company delivered in
connection therewith. These representations and warranties
relate to, among other things:
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due organization, existence, good standing and authority to
carry on our businesses;
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our capitalization;
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our corporate power and authority to enter into, and consummate
the transactions under, the merger agreement, and the
enforceability of the merger agreement against us;
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the approval and declaration of advisability of the merger
agreement and the merger by the board of directors, the
determination that the merger agreement and the merger are fair
and in the best interests of us and our stockholders and the
resolution to recommend that our stockholders adopt the merger
agreement, subject to certain exceptions;
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the absence of violations of, or conflicts with, our governing
documents, applicable law and certain agreements as a result of
our entering into and performing our obligations under the
merger agreement;
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the required governmental consents and approvals;
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our SEC filings since January 30, 2007 and the financial
statements, exhibits and schedules included therein;
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the absence of certain undisclosed liabilities;
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material compliance with the Sarbanes-Oxley Act of 2002 and the
listing and corporate governance rules and regulations of the
NYSE;
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our disclosure controls and procedures and internal controls
over financial reporting;
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the conduct of business in all material respects in accordance
with the ordinary course consistent with past practice and the
absence of a Company material adverse effect (as described
below) since January 26, 2009;
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the absence of certain other changes or events since
November 2, 2009;
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the absence of any pending or threatened legal or administrative
proceeding, investigation or action that would reasonably be
expected to have a material adverse effect on the Company;
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compliance with applicable laws, licenses and permits;
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the absence of certain undisclosed related party transactions;
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tax matters;
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employee benefits;
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certain labor and employment matters;
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environmental matters;
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intellectual property;
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real property;
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the absence of any outstanding rights under the Companys
rights agreement and inapplicability of any anti-takeover law to
the merger;
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material contracts and the absence of any default under any
material contract;
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franchise matters;
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suppliers;
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quality and safety of food and beverage products;
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insurance;
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swap agreements;
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the receipt of an opinion from UBS; and
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the absence of any undisclosed brokers or finders
fees.
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Many of our representations and warranties made in the merger
agreement were qualified by, among other things, exceptions
relating to the absence of a material adverse
effect, which means any change, event or occurrence that
would reasonably be expected to have a material adverse effect
on the business, results of operations or financial condition of
the Company and our subsidiaries, taken as a whole, or would, or
would reasonably be expected to prevent or materially impair or
delay the consummation of the transactions contemplated by the
merger agreement, provided that none of the following, and no
effect arising out of or resulting from the following, will
constitute or be taken into account in determining whether a
material adverse effect has occurred or may, would
or could occur:
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changes, events, occurrences or effects:
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generally affecting the industry in which we and our
subsidiaries operate;
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generally affecting the economy, credit or financial or capital
markets, including changes in interest or exchange rates;
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resulting from the announcement of the merger agreement, the
pendency of the merger or the transactions contemplated by the
merger agreement; or
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resulting from any action taken by the Company or our
subsidiaries that is required by the merger agreement or to
which Parent has approved, consented to, or requested in
writing, or failure to take any action that is prohibited by the
merger agreement or to which Parent has approved, consented to,
or requested in writing;
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changes, events, occurrences or effects resulting from:
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changes in law or in GAAP or in accounting standards;
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acts of war, sabotage or terrorism, or any escalation or
worsening of any such acts of war, sabotage or terrorism; or
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earthquakes, hurricanes, tornadoes or other natural disasters,
other than any earthquakes occurring in or affecting California,
and any and all effects or consequences resulting therefrom;
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to the extent such changes, events, occurrences or effects do
not have a materially disproportionate adverse effect on the
Company and our subsidiaries, taken as a whole, relative to
other participants in the industry in which the Company and our
subsidiaries operate; or
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changes, events, occurrences or effects resulting from:
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any decline in the market price, or change in trading volume, of
our capital stock; or
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any failure to meet any internal or public projections,
forecasts or estimates of revenue or earnings in and of itself;
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provided, however, that the exceptions provided in the bullet
points immediately above do not prevent or otherwise affect a
determination that the underlying cause of the decline, change
or failure is a material adverse effect.
The merger agreement also contains customary representations and
warranties made by Parent and Merger Sub that are subject, in
some cases, to specified exceptions and qualifications contained
in the merger agreement or in the disclosure schedules that
Parent delivered in connection therewith. The representations
and warranties of Parent and Merger Sub relate to, among other
things:
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their due organization, existence, and good standing;
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their corporate power and authority to enter into, and
consummate the transactions under, the merger agreement, and the
enforceability of the merger agreement against them;
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the absence of violations of, or conflicts with, their governing
documents, applicable law and certain agreements as a result of
entering into and performing under the merger agreement and
completing the merger;
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the required governmental consents and approvals;
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the ownership and operations of Merger Sub;
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delivery of the equity commitment letter and the debt commitment
letter;
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the absence of any default under the equity commitment letter
and the debt commitment letter;
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the absence of conditions precedent to the funding of the
financing other than as set forth in the equity commitment
letter or the debt commitment letter;
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payment of fees under the equity commitment letter and the debt
commitment letter;
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sufficiency of funds to consummate the merger, subject to
certain conditions;
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validity and enforceability of the guarantee;
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solvency of the surviving corporation immediately following
consummation of the merger;
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the absence of certain agreements between Parent, Merger Sub and
Apollo Management, on the one hand, and any member of our
management, on the other hand;
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the absence of legal proceedings against Parent and Merger
Sub; and
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the absence of any undisclosed brokers or finders
fees.
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The representations and warranties in the merger agreement of
each of the Company, Parent and Merger Sub will terminate upon
the consummation of the merger or the termination of the merger
agreement pursuant to its terms.
Conduct
of Our Business Pending the Merger
Under the merger agreement, we have agreed that, subject to
certain exceptions in the merger agreement and disclosure
schedules we delivered in connection with the merger agreement,
between the date of the merger agreement and the effective time
of the merger, unless Parent gives its prior written approval
(which will not be unreasonably withheld, delayed or
conditioned), we and our subsidiaries will cause our businesses
to be conducted in the ordinary course consistent with past
practice and we and our significant subsidiaries will use our
reasonable best efforts to preserve our business organizations
intact and maintain existing relations with key customers,
distributors, suppliers, franchisees, employees and business
associates.
Subject to certain exceptions set forth in the merger agreement
and the disclosure schedules we delivered in connection with the
merger agreement, we will not, and we will not permit our
subsidiaries to, take any of the following actions without
Parents written approval (which will not be unreasonably
withheld, delayed or conditioned):
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subject to certain exceptions, issue, sell or grant any shares
of our capital stock (or securities convertible into
exchangeable or exercisable for capital stock, or any rights,
warrants or options to purchase shares of capital stock);
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subject to certain exceptions, redeem, purchase or acquire any
outstanding shares of capital stock, or any rights, warrants or
options to acquire any shares of our capital stock;
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establish a record date for, declare, set aside for payment or
pay any dividend on, or make any other distribution in respect
of, any shares of our capital stock;
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split, combine, subdivide or reclassify any shares of our
capital stock;
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enter into any collective bargaining agreement or other
agreement with a labor union or works council;
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subject to certain exceptions, (a) incur, issue, modify,
renew, syndicate or refinance any indebtedness, (b) enter
into swap, hedging or other derivative transactions other than
in the ordinary course of business consistent with past
practice; or (c) make any loans, capital contributions or
advances to any person;
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adopt or implement a stockholder rights plan;
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subject to certain exceptions, sell or lease any of our
properties or assets whose value or purchase price exceeds
$2,500,000 in the aggregate;
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make or authorize capital expenditures, except as set forth in
the capital budget provided pursuant to the disclosure schedules
we delivered in connection with the merger agreement;
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subject to certain exceptions, make any acquisition of the
capital stock or material portion of the assets of any other
person for consideration in excess of $2,000,000;
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subject to certain exceptions, (a) increase the
compensation or benefits of any of our officers, directors or
employees, (b) provide increases in salaries, wages and
benefits to our employees who are not officers or
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directors or (c) enter into any severance,
change-in-control,
retention or other agreement with any employee or independent
contractor;
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subject to certain exceptions, (a) make any material change
in financial or tax accounting methods, principles or practices
or (b) accelerate the collection of receivables or delay
the payment of accounts payable;
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grant any material refunds, credits, rebates or other allowances
to any franchisee, supplier, vendor or distributor, in each
case, other than in the ordinary course of business consistent
with past practice;
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amend our organizational documents;
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enter into a new line of business material to us, taken as a
whole;
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(a) fail to make any material filing, pay any fee, or take
any other action necessary to maintain any of our intellectual
property rights that is material to the conduct of our business
or (b) enter into any license or transfer agreement
granting or transferring to a third party an exclusive right to
use our intellectual property, subject to certain exceptions;
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adopt a plan or agreement of liquidation or dissolution, merger,
consolidation, restructuring, recapitalization or other
reorganization;
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(a) grant any liens in any material assets (except for
certain permitted liens) other than to secure certain
indebtedness or (b) secure obligations other than
indebtedness in the ordinary course of business consistent with
past practice;
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fail to use our reasonable best efforts to maintain in full
force and effect all existing insurance policies;
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(a) modify, amend, terminate or waive any rights under any
material contract other than in the ordinary course of business
consistent with past practice, (b) enter into any contract,
which, if entered prior to the date of the merger agreement,
would have been a material contract, or (c) enter into any
new contract that contains a change in control provision that
would give rise to any rights to the other party in connection
with the transactions contemplated by the merger agreement;
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enter into any distribution contract or renew, modify, amend,
terminate or waive any existing distribution contract providing
for the distribution of goods to any restaurant operated by us
or any of our franchisees;
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enter into any contract or modify, amend, terminate or waive any
existing contract covering development of ten or more
restaurants;
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terminate any franchise agreement to which a material franchisee
is a party;
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settle any litigation which (a) requires payment by us of
more than $250,000 individually or $1,000,000 in the aggregate,
(b) involves injunctive or equitable relief or restrictions
on our business activities, (c) would involve the issuance
of any of our securities, or (d) relates to the
transactions contemplated by the merger agreement;
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subject to certain exceptions, (a) make any material change
in any method of tax accounting or any annual tax accounting
period, (b) make, change or rescind any material tax
election, (c) settle or compromise any material tax
liability, audit claim or assessment, (d) surrender any
right to any claim for a material tax refund, (e) file any
amended tax return involving a material amount of additional
taxes, (f) enter into any closing agreement, or
(g) waive or extend the statute of limitations in respect
of any income or other material taxes other than pursuant to
extensions of time to file tax returns obtained in the ordinary
course of business consistent with past practice;
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waive, release, grant or transfer any right of material value,
waive any material benefits of, agree to modify in any material
adverse respect, fail to enforce, or consent to any material
matter with respect to which Parents consent is required,
in each case, under any material confidentiality, standstill or
similar agreement to which we are a party;
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subject to certain exceptions, amend or terminate any of our
existing employee benefit plans or stock plans, or establish or
adopt any plan, program or arrangement that would be an employee
benefit plan or stock plan if in existence as of the date of the
merger agreement;
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enter into, amend, waive or terminate any related party
transaction;
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make payments in violation of the Foreign Corrupt Practices
Act; or
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authorize, commit or agree to do any of the foregoing.
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Solicitation
of Takeover Proposals
Except as permitted by the terms of the merger agreement
described below, we have agreed in the merger agreement that our
board of directors will not (i) fail to recommend to our
stockholders that the stockholders adopt the merger agreement or
fail to include the Company recommendation to adopt the merger
agreement, which we refer to as the Company recommendation, in
the proxy statement; (ii) change, qualify, withhold,
withdraw, or modify (or publicly propose to do so), in a manner
adverse to Parent, the Company recommendation; (iii) take
formal action or make any recommendation or public statement in
connection with a tender offer or exchange offer, other than a
recommendation against such offer or other permitted
communications; (iv) adopt, approve or recommend (or
publicly propose to do so) a takeover proposal;
(v) authorize, cause or permit the Company or any of our
subsidiaries to enter into any letter of intent, agreement or
agreement in principle with respect to a takeover proposal; or
(vi) take any action to terminate the merger agreement in
light of a superior proposal.
From and after April 18, 2010, the effective date of the
merger agreement, we are required to immediately cease any
solicitation, encouragement, discussions or negotiations with
any persons that may be ongoing with respect to any takeover
proposals, request that such persons promptly return or destroy
all confidential information concerning the Company and our
subsidiaries, and promptly provide Parent a written summary of
the material terms of any takeover proposal. At any time from
and after April 18, 2010, the effective date of the merger
agreement, and until the effective time of the merger or, if
earlier, the termination of the merger agreement, we, our
subsidiaries and our representatives may not, directly or
indirectly:
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solicit, initiate or knowingly facilitate or encourage
(including by way of furnishing non-public information) any
inquiry regarding or the making of any proposals or offers that
constitute, or could reasonably be expected to lead to, takeover
proposals;
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engage in, continue or otherwise participate in discussions or
negotiations regarding, or furnish to any other party
information in connection with the purposes of encouraging or
facilitating any takeover proposal; or
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enter into any letter or intent, agreement or agreement in
principle with respect to any takeover proposal.
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However, at any time from and after April 18, 2010, the
effective date of the merger agreement, and prior to the time
our stockholders adopt the merger agreement, if the Company
receives an unsolicited written takeover proposal from any
person, and if our board of directors, prior to taking any such
actions, determines in good faith after consultation with
independent financial advisors and outside legal counsel that
(x) failure to take such action would be inconsistent with
the directors fiduciary duties and (y) such takeover
proposal either constitutes a superior proposal or could
reasonably be expected to result in a superior proposal, we may:
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furnish to such third party requested information pursuant to an
acceptable confidentiality and standstill agreement; and
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engage in and otherwise participate in discussions or
negotiations with such person;
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in each case, provided that, we promptly provide to Parent (and
in any event within 48 hours) a copy of any takeover
proposal made in writing provided to the Company or any of our
subsidiaries, the identity of the party making the takeover
proposal, and a written summary of the material terms of any
takeover proposal not made in writing.
At any time before the merger agreement is adopted by our
stockholders, we may terminate the merger agreement and enter
into an alternative takeover agreement with respect to a
superior proposal, so long as we
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comply with certain terms of the merger agreement, including the
payment of a termination fee to Parent. See The Merger
Agreement Termination Fees.
Prior to the time our stockholders adopt the merger agreement,
our board of directors may effect a change of recommendation or
terminate the merger agreement in order to enter into an
agreement with respect to a takeover proposal if, prior to
taking such action, our board of directors determines in good
faith, after consultation with independent financial advisors
and outside legal counsel, that (x) failure to do so would
be inconsistent with the directors fiduciary duties and
(y) such takeover proposal constitutes a superior proposal.
In the case of any change of recommendation that is the result
of a superior proposal or termination of the merger agreement by
us to enter into an alternative takeover agreement with respect
to a superior proposal:
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we must provide at least four business days prior written
notice to Parent of our intention to effect a change of
recommendation or terminate the merger agreement to enter into
an alternative takeover agreement specifying the material terms
and conditions of any such superior proposal, including the
identity of the person making such superior proposal;
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we must provide a copy to Parent of the relevant proposed
transaction agreements with the party making such proposal;
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prior to taking any such action, we must negotiate with Parent
in good faith (to the extent Parent desires to negotiate) to
enable Parent to revise the terms of the merger agreement, the
commitment letters and the guarantee as would obviate the need
for any such action in response to such a superior
proposal; and
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our board of directors must have considered in good faith any
changes to the merger agreement, the commitment letters and the
guarantee proposed in writing by Parent and must have determined
that the superior proposal would still constitute a superior
proposal if such changes were given effect.
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Notwithstanding the above, at any time before the merger
agreement is adopted by our stockholders, the board of directors
may change, qualify, withhold, withdraw or modify (or publicly
propose to do so) in a manner adverse to Parent, the Company
recommendation in response to a material event or circumstance
on the business, results of operations or financial condition of
the Company that was not known to the board of directors as of
the date of the agreement, if the board of directors has
determined in good faith after consultation with independent
financial advisors and outside legal counsel that failure to
take such action would be inconsistent with the directors
fiduciary duties under applicable law, subject to the
satisfaction of certain conditions.
Except to the extent provided in certain provisions of the
merger agreement, nothing in the provisions of the merger
agreement relating to takeover proposals prevents us from
complying with our disclosure obligations under
U.S. federal or state law with regard to a takeover
proposal, including taking and disclosing to our stockholders a
position contemplated by
Rule 14e-2(a),
Rule 14d-9
or Item 1012(a) of
Regulation M-A
under the Exchange Act.
In this proxy statement, we refer to any inquiry, proposal or
offer from any person or group within the meaning of
Section 13(d) of the Exchange Act with respect to any
(i) acquisition of assets of the Company and our
subsidiaries equal to more than 20% of the Companys
consolidated assets or to which more than 20% of the
Companys revenues or earnings on a consolidated basis are
attributable; (ii) acquisition of more than 20% of the
Companys outstanding common stock; (iii) tender offer
or exchange offer that if consummated would result in any person
beneficially owning more than 20% of the Companys
outstanding common stock; (iv) merger, consolidation, share
exchange, business combination, recapitalization, liquidation,
dissolution or similar transaction involving the Company; or
(v) any combination of the foregoing if the sum of the
percentage of consolidated assets, consolidated revenues or
earnings and the Companys common stock involved is more
than 20%, in each case, other than the transactions contemplated
by the merger agreement, as a takeover proposal.
In this proxy statement, we refer to any bona fide written
takeover proposal that the board of directors has determined in
its good faith judgment is reasonably likely to be consummated
in accordance with its terms, taking into account all legal,
regulatory, and financial aspects of the proposal and the person
making the proposal, and if consummated, would result in a
transaction more favorable to our stockholders from a financial
point of view than the merger, as a superior
proposal, provided that for purposes of the definition of
superior proposal, the references to 20% in the
definition of takeover proposal shall be deemed references to
50%.
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Stockholders
Meeting
Unless the merger agreement is terminated, we are required to
take all actions in accordance with applicable law, our charter
documents and the rules of the NYSE to convene a meeting of our
stockholders, as promptly as practicable after the mailing of
this proxy statement to consider and vote on the adoption of the
merger agreement. We may adjourn the stockholders meeting
(i) after consultation with Parent and with Parents
consent, to the extent necessary to ensure that any required
supplement or amendment to the proxy statement is provided to
our stockholders within a reasonable amount of time in advance
of the stockholders meeting or (ii) for the absence
of a quorum. Subject to the provisions of the merger agreement
discussed above under The Merger Agreement
Solicitation of Takeover Proposals, the board of directors
will recommend that our stockholders vote to adopt the merger
agreement and the Company will take all other action reasonably
necessary to solicit adoption of the merger agreement.
Filings;
Consents; Other Actions
We and Parent will cooperate and use our respective 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 to consummate the merger and the other transactions
contemplated by the merger agreement as soon as practicable and
to prepare and file promptly and fully all documentation to
effect all necessary filings, notices, petitions, statements,
registrations, submissions of information, applications and
other documents (including effecting the regulatory filings
described under the heading The Merger
Regulatory Approvals beginning on page 56) and obtain all
approvals, consents, registrations, permits, authorizations and
other confirmations from any governmental authority necessary,
proper and advisable to consummate the transactions contemplated
by the merger agreement. We and Parent will use our respective
commercially reasonable efforts to obtain any third party
approvals, consents, authorizations and other confirmations that
are (i) necessary to consummate the transactions
contemplated by the merger agreement or (ii) in the case of
the Company and our subsidiaries, (a) required to prevent a
material adverse effect from occurring prior to the effective
time or (b) otherwise reasonably required by Parent from
time to time, subject to certain exceptions.
We and Parent have agreed, subject to certain exceptions, to use
reasonable best efforts to:
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cooperate in all respects with each other in connection with any
filing or submission with a governmental authority, in
connection with the transactions contemplated by the merger
agreement (including any proceeding initiated by a private
party), and in connection with any investigation or other
inquiry by or before a governmental authority relating to the
transactions contemplated by the merger agreement; and
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keep the other party informed in all material respects and on a
reasonably timely basis of any material communication received
by such party from, or given by such party to, the FTC, the DOJ
or any other governmental authority and of any material
communication received or given in connection with any
proceeding by a private party, relating to the transactions
contemplated by the merger agreement.
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Employee
Benefit Matters
Parent has agreed that it will, and will cause the surviving
corporation after the completion of the merger to:
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from the effective time of the merger until the one year
anniversary of the effective time of the merger, provide our
employees and the employees of our subsidiaries with annual base
salaries or base wages, cash incentive compensation
opportunities and benefits (excluding equity-based compensation)
that are no less favorable, in the aggregate, than the annual
base salaries or base wages, cash incentive compensation
opportunities and benefits (excluding equity-based compensation)
that we provided immediately prior to the effective time;
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cause any employee plan in which our employees or the employees
of our subsidiaries are entitled to participate to credit all
service by such employees for purposes of vesting, eligibility
and levels of benefits (but not actual accrual) to the extent
such service was credited under one of our comparable employee
benefit plans;
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use reasonable best efforts (i) to provide our employees
immediate eligibility to participate, without any waiting time,
in any and all employee benefit plans of Parent and its
subsidiaries to the extent coverage under such plans is
replacing comparable coverage under any of our employee benefit
plans in which such employees participated prior to the
effective time, and (ii) for purposes of each employee
benefit plan of Parent and its subsidiaries providing medical,
dental, pharmaceutical
and/or
vision benefits to any of our employees, to cause all
pre-existing condition exclusions and actively-at-work
requirements of such employee benefit plans of Parent and its
subsidiaries to be waived for our employees and their covered
dependents to the extent such conditions were inapplicable or
waived under any of our employee benefit plans in which such
employees participated prior to the effective time; and
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use commercially reasonable efforts to cause any eligible
expenses incurred by any of our employees and his or her covered
dependents during the portion of the plan year of our employee
benefit plans that ends with the date the employees
participation in the Parents corresponding plan begins to
be taken into account under Parents corresponding plan for
purposes of satisfying all deductible, coinsurance, and maximum
out-of-pocket
requirements applicable to the employee and his or her
dependents as if such amounts had been paid in accordance with
Parents corresponding plan.
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Conditions
to the Merger
The respective obligations of the Company, Parent and Merger Sub
to consummate the merger are subject to the satisfaction or
waiver of the following conditions:
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the merger agreement must have been duly adopted by our
stockholders;
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(i) the waiting period applicable to the consummation of
the merger under the HSR Act having expired or early terminated,
and (ii) except for any authorizations, consents, orders or
approvals, declarations or filings or expirations the failure of
which to obtain would not reasonably be expected to result in a
material adverse effect on the Company or Parent and its
subsidiaries, all other authorizations, consents, orders or
approvals of, or declarations or filings with, or expirations of
waiting periods imposed by, any governmental authority in
connection with the merger and the transactions contemplated by
the merger agreement have been received, or any applicable
waiting period thereunder having expired or early terminated;
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except for any Company approvals the failure of which to obtain
would not reasonably be expected to result in a material adverse
effect on the Company or Parent and its subsidiaries, all
Company approvals have been obtained in connection with the
transactions contemplated by the merger agreement; and
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no law, injunctions, judgment or ruling enacted, promulgated,
issued, entered, amended or enforced by any governmental
authority will be in effect enjoining, restraining, preventing
or prohibiting the consummation of the merger or making the
consummation of the merger illegal.
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In this proxy statement, we refer to any approvals set forth in
the disclosure schedules, as the Company approvals.
The obligations of Parent and Merger Sub to effect the merger
are also subject to the satisfaction or waiver by Parent at or
prior to the effective time of the merger of the following
additional conditions:
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our representations and warranties regarding (i) the fair
presentation of our financial position in our financial
statements, the absence of a Company material adverse effect,
and our rights agreement and anti-takeover statutes and
regulations must be true and correct as of the date of the
closing of the merger as if made on and as of such date;
(ii) our capitalization, and the absence of any outstanding
agreements of any kind which obligate the Company or our
subsidiaries to repurchase, redeem or otherwise acquire any of
our securities, or obligating us to grant, extend or enter into
any such agreements relating to our securities, including any
agreements granting any preemptive rights, subscription rights,
anti-dilutive rights, rights of first refusal and similar rights
with respect to our securities, must be true and correct in all
but de minimis respects as of the date of the closing of the
merger as if made on and as of such date (except for those
representations and warranties which address matters only as of
an earlier date, which shall have been true and correct as of
such earlier date); (iii) each of (A) the absence of
any mortgages, indentures, guarantees, loans or credit
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agreements, security agreements or other contracts relating to
the borrowing of money, extension of credit, surety bonds or
guarantees of indebtedness, in each case in excess of $1,000,000
individually or $5,000,000 in the aggregate, (B) the
receipt by us of the opinion of our financial advisor and
(C) the absence of any brokers or finders fees
must be true and correct in all material respects as of the date
of the closing of the merger as if made on and as of such date
(except for those representations and warranties which address
matters only as of an earlier date, which shall have been true
and correct as of such earlier date); and (iv) our other
representations and warranties set forth in the merger
agreement, and disregarding all qualifications and exceptions
relating to materiality or material adverse effect, must be true
and correct as of the date of the closing of the merger as if
made on and as of such date (or, if given as of a specific date,
at and as of such date) except where the failure to be true and
correct does not have, and would not reasonably be expected to
have, individually or in the aggregate, a material adverse
effect;
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the Company has performed in all material respects its
obligations under the merger agreement at or prior to the date
of the closing of the merger;
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the Company has delivered to Parent a certificate signed by an
executive officer of the Company certifying that all of the
above conditions with respect to the representations and
warranties and performance of the obligations of the Company
have been satisfied; and
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the absence of any material adverse effect since the date of the
merger agreement.
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Our obligation to effect the merger is subject to the
satisfaction or waiver by us at or prior to the effective time
of the merger of the following additional conditions:
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the representations and warranties of Parent set forth in the
merger agreement must be true and correct as of the date of the
closing of the merger as though made on and as of such date
(except to the extent they address matters only as of an earlier
date, in which case they shall be true and correct as of such
earlier date) except where such failures to be so true and
correct would not prevent consummation of the merger;
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each of Parent and Merger Sub has performed in all material
respects its obligations under the merger agreement at or prior
to the date of the closing of the merger;
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Parent has delivered to the Company a certificate signed by an
executive officer of Parent certifying that all of the above
conditions with respect to the representations and warranties
and performance of the obligations of Parent and Merger Sub have
been satisfied; and
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Parent has delivered to the Company a solvency certificate
signed by the chief financial officer of Parent in the same form
as the solvency certificate delivered to the Lenders pursuant to
the debt commitment letter or any definitive documents entered
into in connection with the financing of the merger.
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The conditions to each of the parties obligations to
complete the merger are for the sole benefit of such party and
may be waived by such party in whole or in part (to the extent
permitted by applicable laws).
Termination
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 stockholders.
The merger agreement may also be terminated and the merger
abandoned at any time prior to the effective time of the merger
as follows:
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by either Parent or the Company, if:
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the merger has not been consummated on or before August 26,
2010 (but this right to terminate will not be available to a
party if the failure to consummate the merger prior to
August 26, 2010 was primarily due to the failure of such
party to perform any of its obligations under the merger
agreement);
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a law, injunction, judgment or ruling, which we collectively
refer to as a restraint, resulting in enjoining, restraining,
preventing or prohibiting the consummation of the merger has
become final and non-
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appealable (but this right to terminate will not be available to
a party if the issuance of such final, non-appealable restraint
was primarily due to the failure of such party to perform its
obligations under the merger agreement); or
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our stockholders meeting has been held and completed and
our stockholders have not adopted the merger agreement at such
meeting or any adjournment or postponement of such meeting (but
this right to terminate will not be available to the Company if
the failure of the Company to perform our obligations under the
merger agreement was the principal cause of or resulted in the
failure to obtain stockholder approval).
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we have materially breached or failed to perform any of our
representations, warranties, covenants or other agreements in
the merger agreement which breach or failure to perform
(i) would give rise to a failure of the condition to
Parents and Merger Subs obligation to close the
merger and (ii) cannot be cured by the Company, or if
capable of being cured, will not have been cured within certain
notice periods (but this right to terminate will not be
available to Parent if it is then in material breach of any of
its representations, warranties, covenants or other agreements
that would result in the closing conditions with respect to the
Companys obligation to close the merger not being
satisfied);
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we have materially breached our obligations described under
The Merger Agreement Solicitation of Takeover
Proposals above and such breach, if capable of being
cured, will not have been cured within certain notice
periods; or
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(A) our board of directors (i) fails to recommend to
our stockholders that the stockholders adopt the merger
agreement or fails to include the boards recommendation to
adopt the merger agreement, which we refer to as the Company
recommendation, in the proxy statement; (ii) changes,
qualifies, withholds, withdraws, or modifies (or publicly
proposes to do so), in a manner adverse to Parent, the Company
recommendation; (iii) takes formal action or makes any
recommendation or public statement in connection with a tender
offer or exchange offer, other than a recommendation against
such offer or other permitted communications; (iv) adopts,
approves or recommends (or publicly proposes to do so) a
takeover proposal; (v) changes, qualifies, withholds,
withdraws or modifies (or publicly proposes to do so) in a
manner adverse to Parent, the Company recommendation in response
to a material event or circumstance on the business, results of
operations or financial condition of the Company that was not
known to the board of directors as of the date of the agreement,
and the board of directors has determined in good faith after
consultation with independent financial advisors and outside
legal counsel that failure to take such action would be
inconsistent with the directors fiduciary duties under
applicable law, subject to the satisfaction of certain
conditions; (vi) fails to publicly reaffirm the Company
recommendation after Parent so requests; (vii) fails to
recommend against any publicly announced takeover proposal and
reaffirm the Company recommendation; or (viii) the Company
enters into an alternative takeover agreement or (B) the
Company or our board of directors have publicly announced its
intention to do any of the above actions.
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Parent or Merger Sub have materially breached or failed to
perform any of their representations, warranties, covenants or
agreements in the merger agreement, which breach or failure to
perform (i) would give rise to a failure of a condition to
the Companys obligation to close the merger and
(ii) has not been cured prior to August 26, 2010 (but
this right to terminate will not be available to the Company if
we are then in material breach of any of our representations,
warranties, covenants or other agreements that would result in
the conditions with respect to Parents and Merger
Subs obligations to close the merger not being satisfied);
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at any time prior to the adoption of the merger agreement by our
stockholders in order to concurrently enter into an alternative
takeover agreement with respect to a superior proposal if
(i) the Company has complied in all material respects with
our obligations described under The Merger
Agreement Solicitation of Takeover Proposals
and (ii) prior to or concurrently with such termination, we
pay Parent
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the termination fee discussed under the heading The Merger
Agreement Termination Fees beginning on page
72;
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(i) the conditions to the obligations of Parent and Merger
Sub to close the merger have been satisfied (other than those
conditions that by their nature are to be satisfied by actions
taken at the closing of the merger); (ii) the merger has
not been completed within two business days following the final
day of the marketing period; and (iii) we have irrevocably
confirmed that all conditions to our obligations to close the
merger had been satisfied or that we are willing to waive all
such conditions; or
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(i) the conditions to the obligations of Parent and Merger
Sub to close the merger have been satisfied (other than those
conditions that by their nature are to be satisfied by actions
taken at the closing of the merger); (ii) the debt
financing contemplated by the debt commitment letter has funded
(or the conditions of the debt commitment letter, other than the
merger or the funding of the equity financing contemplated by
the equity commitment letter have been satisfied and the debt
financing would be funded pursuant to the terms and conditions
of the debt commitment letter upon the consummation of the
equity financing); (iii) the merger has not been completed
within five business days after the receipt of such financing
and the delivery by us of a written notice to Parent; and
(iv) we have irrevocably confirmed that all conditions to
our obligations to close the merger had been satisfied or that
we are willing to waive all such conditions.
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Termination
Fees
We must pay Parent a termination fee equal to $15,471,000,
except in the event that the merger agreement is terminated in
order to enter into a definitive agreement with respect to a
takeover proposal from Thomas H. Lee Equity Fund VI, L.P.
or any of its affiliates, in which case the Company may be
obligated to pay a termination fee of $15,471,000 plus an amount
equal to $9,283,000, plus certain expenses reimbursed by the
Company to affiliates of THL under the THL merger agreement, and
in each case, reimburse up to $5,000,000 of the
out-of-pocket
fees and expenses incurred by Parent or its affiliates in
connection with the merger agreement or the transactions
contemplated therein. The occurrence of the following events
will result in our obligation to pay Parent the applicable
termination fee described above:
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(i) a takeover proposal has been made, proposed or
communicated after the date of the merger agreement and not
withdrawn before adoption of the merger agreement by our
stockholders or prior to the termination of the merger agreement
if a meeting of our stockholders has not occurred;
(ii) following such event, the merger agreement is
terminated by (a) the Company or Parent if the merger is
not consummated prior to August 26, 2010, or the Company or
Parent terminates the merger agreement due to the failure of our
stockholders to adopt the merger agreement at the
stockholders meeting or (b) by Parent if we
materially breach or fail to perform any of our representations,
warranties, covenants or agreements, subject to certain cure
periods, and (iii) within 12 months of such
termination, we enter into a definitive agreement with respect
to a takeover proposal for the (a) acquisition of assets of
the Company and our subsidiaries equal to more than 50% of the
Companys consolidated assets or to which more than 50% of
the Companys revenues or earnings on a consolidated basis
are attributable, (b) acquisition of more than 50% of the
Companys outstanding common stock, (c) tender offer
or exchange offer that if consummated would result in any person
beneficially owning more than 50% of the Companys
outstanding common stock, (d) merger, consolidation, share
exchange, business combination, recapitalization, liquidation,
dissolution or similar transaction involving the Company, or
(e) any combination of the foregoing if the sum of the
percentage of consolidated assets, consolidated revenues or
earnings and the Companys common stock involved is more
than 50%, and such takeover proposal is consummated;
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before adoption of the merger agreement by our stockholders, we
terminate the merger agreement in order to concurrently enter
into an alternative takeover agreement with respect to a
superior proposal;
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Parent terminates the merger agreement in circumstances where
(i) our board of directors (a) fails to recommend to
our stockholders that the stockholders adopt the merger
agreement or fails to include the boards recommendation to
adopt the merger agreement, which we refer to as the Company
recommendation, in the proxy statement; (b) changes,
qualifies, withholds, withdraws, or modifies (or publicly
proposes to do so), in a manner adverse to Parent, the Company
recommendation; (c) takes formal action or
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makes any recommendation or public statement in connection with
a tender offer or exchange offer, other than a recommendation
against such offer or other permitted communications;
(d) adopts, approves or recommends (or publicly proposes to
do so) a takeover proposal; (e) changes, qualifies,
withholds, withdraws or modifies (or publicly proposes to do so)
in a manner adverse to Parent, the Company recommendation in
response to a material event or circumstance on the business,
results of operations or financial condition of the Company that
was not known to the board of directors as of the date of the
agreement, and the board of directors has determined in good
faith after consultation with independent financial advisors and
outside legal counsel that failure to take such action would be
inconsistent with the directors fiduciary duties under
applicable law, subject to the satisfaction of certain
conditions; (f) fails to publicly reaffirm the Company
recommendation after Parent so requests; (g) fails to
recommend against any publicly announced takeover proposal and
reaffirm the Company recommendation; or (h) the Company
enters into an alternative takeover agreement or (ii) the
Company or our board of directors have publicly announced its
intention to do any of the above actions; or
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the Company or Parent terminates the merger agreement due to the
failure of our stockholders to adopt the merger agreement at the
stockholders meeting and prior to such stockholders
meeting, the board of directors makes a change of recommendation
in response to a material event or circumstance of the business,
results of operations, or financial condition of the Company
that was not known to the board of directors as of the date of
the merger agreement, and the board of directors has determined
in good faith after consultation with independent financial
advisors and outside legal counsel that failure to take such
action would be inconsistent with the directors fiduciary
duties under applicable law, subject to the satisfaction of
certain conditions.
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Parent
Fee
Parent must pay us a termination fee, which we refer to as the
reverse termination fee, of $15,471,000 in the event we
terminate the merger agreement because:
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there has been a material breach of any representation,
warranty, covenant or agreement made by Parent or Merger Sub in
the merger agreement, which breach or failure to be true would
give rise to the failure of the condition to the closing of the
merger, and such breach or failure has not been cured by
August 26, 2010 (provided that we are not in breach of any
of our representations, warranties, covenants or other
agreements under the merger agreement that would result in the
conditions to the obligations of Parent and Merger Sub to close
the merger not being satisfied); or
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(i) the conditions to the obligations of Parent and Merger
Sub to close the merger have been satisfied (other than those
conditions that by their nature are to be satisfied by actions
taken at the closing of the merger); (ii) the merger has
not been completed within two business days following the final
day of the marketing period; and (iii) we have irrevocably
confirmed that all conditions to our obligations to close the
merger had been satisfied or that we are willing to waive all
such conditions.
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Parent must pay us a reverse termination fee of $30,943,000 in
the event we terminate the merger agreement because (i) the
conditions to the obligations of Parent and Merger Sub to close
the merger have been satisfied (other than those conditions that
by their nature are to be satisfied by actions taken at the
closing of the merger); (ii) the debt financing
contemplated by the debt commitment letter has funded (or the
conditions of the debt commitment letter, other than the merger
or the funding of the equity financing contemplated by the
equity commitment letter, have been satisfied and the debt
financing would be funded pursuant to the terms and conditions
of the debt commitment letter upon the consummation of the
equity financing); (iii) the merger has not been completed
within five business days after the receipt of such financing,
and the delivery by us of a written notice to Parent; and
(iv) we have irrevocably confirmed that all conditions to
our obligations to close the merger had been satisfied or that
we are willing to waive all such conditions.
The Apollo Investors have agreed to guarantee the obligation of
Parent to pay the applicable reverse termination fee pursuant to
the guarantee.
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Expenses
All costs and expenses incurred in connection with the merger
agreement, the merger and the other transactions contemplated by
the merger agreement will be paid by the party incurring such
expense, except that Parent and Merger Sub will reimburse the
Company for expenses incurred by the Company or its subsidiaries
in connection with the cooperation of the Company and our
subsidiaries with respect to the arrangement of the financing of
the merger.
Remedies
Parent and Merger Sub are entitled to injunctions to prevent
breaches of the merger agreement and to specifically enforce the
terms and provisions of the merger agreement, in addition to any
other remedy to which they are entitled at law or in equity.
The Company cannot seek specific performance to require Parent
and Merger Sub to complete the merger, and the Companys
exclusive remedy for the failure of Parent and Merger Sub to
complete the merger is the payment of the applicable reverse
termination fee and a portion of any costs and expenses incurred
in the circumstances described under the heading The
Merger Agreement Termination Fees beginning on
page 72.
In the event that the Company receives a reverse termination
fee, such fee shall be deemed to be liquidated damages for any
and all losses or damages suffered or incurred by the Company or
any other person in connection with the merger agreement, the
equity commitment letter and debt commitment letter or the
guarantee, the transactions contemplated thereby and the
abandonment or termination thereof or any matter forming the
basis for such termination and no other claims may be brought
against Parent, Merger Sub or any other buyer party with respect
to such matters. Except in the case of fraud, the Companys
right to receive a reverse termination fee is the sole and
exclusive remedy of the Company and its affiliates against the
Apollo Investors and any other buyer party in respect of any
liabilities or obligations arising under, or in connection with,
the merger agreement, the equity commitment letter and debt
commitment letter or the guarantee or the transactions
contemplated thereby. Parent and Merger Sub are entitled to seek
specific performance of the terms and provisions of the merger
agreement, including seeking an injunction to prevent breaches
of the merger agreement. In addition, the Company is not
entitled to seek specific performance with respect to the
obligations of Parent or Merger Sub.
Parent and Merger Subs receipt of the termination fee and
certain reimbursement payments from us, will, subject to certain
rights of equitable relief described above, be deemed to be
liquidated damages for any and all losses or damages suffered or
incurred by Parent, Merger Sub, any of their respective
affiliates or any other person in connection with the merger
agreement, the transactions contemplated thereby and the
abandonment or termination thereof or any matter forming the
basis for such termination and no other claims may be brought
against the Company or any of its affiliates with respect to
such matters.
Indemnification;
Directors and Officers Insurance
From and after the effective time until six years after the
effective time, Parent and the surviving corporation will
indemnify and hold harmless (and Parent will advance expenses
to) our present and former officers and directors against any
and all claims, liabilities, losses, damages, judgments, fines,
penalties, costs (including amounts paid in settlement or
compromise) and expenses (including fees and expenses of legal
counsel) in connection with any claim, suit, action, proceeding
or investigation (whether civil, criminal, administrative or
investigative), whenever asserted, based on, arising out of or
related to such officers or directors service as an
officer or director of the Company or its subsidiaries (or
services performed at our request) at or prior to the effective
time of the merger (including in connection with the merger
agreement or the transactions contemplated thereby) to the
fullest extent permitted by law. From and after the effective
time until six years after the effective time, unless otherwise
required by law, Parent shall cause the certificate of
incorporation and by-laws of the surviving corporation to
contain provisions no less favorable to our present and former
officers and directors with respect to the limitation of
liability of our officers and directors and indemnification than
those set forth in our charter documents as of the date of the
merger agreement, which provisions will not be amended, repealed
or otherwise modified in a manner that would adversely affect
the rights of our present and former officers and directors
thereunder.
74
Prior to the effective time, we may, with Parents prior
written consent, purchase a six-year pre-paid tail
policy on terms and conditions providing at least substantially
equivalent benefits as the current policies of directors
and officers liability that we maintain with respect to
matters existing or occurring prior to the effective time,
covering, without limitation, the transactions contemplated by
the merger agreement. If we fail to purchase such
tail policy, then Parent has agreed to cause the
surviving corporation to maintain in effect the Companys
current directors and officers liability insurance
covering acts or omissions occurring at or prior to the
effective time with respect to those persons who are currently
(and any additional persons who prior to the effective time
become) covered by the Companys directors and
officers liability insurance policy on terms and scope
with respect to such coverage, and in amount, no less favorable
to such individuals than those of such policy in effect as of
the date of the merger agreement, provided that if the aggregate
annual premiums for such insurance exceed 300% of the current
aggregate annual premium, then Parent will provide or cause to
be provided a policy for the applicable individuals with the
best coverage as shall then be available at an annual premium
not in excess of 300% of the current aggregate annual premium.
The present and former directors and officers of the Company
will have the right to enforce the provisions of the merger
agreement relating to their indemnification.
Amendment
or Supplement
At any time prior to the effective time of the merger, the
parties to the merger agreement may amend or supplement the
merger agreement, whether before or after the stockholder
approval, by written agreement of each of the parties and by
action of their respective boards of directors. However,
following stockholder approval, the parties may not amend the
provisions of the merger agreement in any manner which would
require further approval by our stockholders under applicable
law.
STOCKHOLDER
VOTING AGREEMENTS
The following description summarizes the material provisions of
the voting agreements and is qualified by reference to the
complete text of the form of voting agreement, which is attached
as
Annex B
to this proxy statement and is
incorporated herein by reference. This summary may not contain
all of the information about the voting agreements that is
important to you. We encourage you to read the form of voting
agreement carefully and in its entirety.
As an inducement to Parent to enter into the merger agreement,
on April 18, 2010, certain members of our board of
directors and executive officers, who hold and are entitled to
vote an aggregate of approximately 8.08% of our outstanding
shares of common stock as of the record date, entered into
voting agreements with Parent. We refer to each of these
stockholders individually as a voting stockholder and
collectively as the voting stockholders. Under the voting
agreements, each voting stockholder agreed to cause any of his
or her shares of common stock to vote or consent at any meeting
of our stockholders or in any written consent of our
stockholders, as applicable:
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in favor of the adoption of the merger agreement and the
approval of the merger and in favor of each of the actions
contemplated by the merger agreement and any other proposals
that could reasonably be expected to facilitate the
merger; and
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against:
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any proposal or action which is intended or could reasonably be
expected to result in a breach of any covenant, representation
or warranty or any other obligation or agreement of the Company
under the merger agreement or of such stockholder under the
voting agreement;
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any proposal or action which is intended or could reasonably be
expected to result in impeding, interfering with, delaying,
postponing, discouraging or adversely affecting the merger or
any of the other transactions contemplated by the merger
agreement; and
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any competing takeover proposal or alternative takeover
agreement.
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75
Pursuant to the voting agreements, each voting stockholder has
agreed not to sell, transfer, pledge or otherwise dispose of
securities of the Company beneficially owned by such voting
stockholder prior to the earliest to occur of (i) the
closing of the merger, (ii) such date and time as the
merger agreement is terminated or (iii) upon mutual
agreement of each of the parties to such voting agreement. None
of the voting stockholders have received any additional
consideration with respect to the voting agreements.
APPRAISAL
RIGHTS
Under the DGCL, if you do not wish to accept the per share
merger consideration provided for in the merger agreement, you
have the right to seek appraisal of your shares of the
Companys common stock and to, if the merger is completed,
receive payment in cash for the fair value of your
Companys common stock, 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 common
stock as determined by the Delaware Court of Chancery may be
more or less than, or the same as, the $12.55 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 stockholders 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 may 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
stockholder must follow in order to seek and perfect appraisal
rights. This summary, however, is not a complete statement of
all applicable requirements, and it 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
stockholders exercise their appraisal rights under
Section 262.
Section 262 requires that where a merger agreement is to be
submitted for adoption at a meeting of stockholders, the
stockholders 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 stockholders 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 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 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
the Companys common stock who intends to demand appraisal
of his, her or its shares of 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 the Companys common stock as provided for
in the merger agreement, but you will have no appraisal rights
with respect to your shares of the Companys common stock.
A holder of shares of the Companys common stock wishing to
exercise appraisal rights must hold of record the shares of
common stock on the date the written demand for appraisal is
made and must continue to hold the shares of common stock of
record through the effective time of the merger, because
appraisal rights will be lost if the shares of 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
stockholders right of appraisal and will nullify any
previously delivered written demand for appraisal. Therefore, a
stockholder who submits a proxy and who
76
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 CKE
Restaurants, Inc., 6307 Carpinteria Avenue, Suite A,
Carpinteria, California 93013, Attn: Corporate Secretary, 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 common stock. The demand must reasonably inform
the Company of the identity of the stockholder and the intention
of the stockholder to demand appraisal of his, her or its shares
of common stock.
To be effective, a demand for appraisal by a stockholder of the
Companys common stock must be made by, or in the name of,
the registered stockholder, fully and correctly, as the
stockholders name appears on the stockholders 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
common stock of record. The beneficial holder must, in such
cases, have the registered owner, such as a broker or other
nominee, submit the required demand in respect of those shares
of common stock.
If you hold your shares of the
Companys common stock through a bank, brokerage firm or
other nominee and you wish to exercise appraisal rights, you
should consult with your bank, broker or the other nominee to
determine the appropriate procedures for the making of a demand
for appraisal by the nominee.
If shares of 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 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 authorized agent for two or more joint
owners, may execute the demand for appraisal for a stockholder
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 broker, who holds shares of common stock
as a nominee for others, may exercise his or her right of
appraisal with respect to the shares of 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 common stock as to which
appraisal is sought. Where no number of shares of common stock
is expressly mentioned, the demand will be presumed to cover all
shares of 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 stockholders 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
stockholder who has not commenced an appraisal proceeding or
joined a proceeding as a named party may withdraw the demand for
appraisal and accept the cash payment specified by the merger
agreement for that stockholders shares of the
Companys 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 stockholder 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
stockholder 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
stockholder 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
stockholder 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 common stock
held by all stockholders entitled to appraisal. Upon the filing
of the petition by a stockholder, service of a copy of such
petition shall be made upon the
77
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 stockholder to file such a
petition within the period specified could nullify the
stockholders previous written demand for appraisal. In
addition, within 120 days after the effective time of the
merger, any stockholder 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 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
the Companys 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 or request from the surviving
corporation such statement.
If a petition for appraisal is duly filed by a stockholder 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 stockholders who
have demanded an appraisal of their shares of common stock and
with whom agreements as to the value of their shares of common
stock have not been reached. After notice to stockholders 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 stockholders 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 stockholders who have demanded payment for
their shares of common stock to submit their stock certificates
to the Delaware Register in Chancery for notation of the
pendency of the appraisal proceedings, and if any stockholder
fails to comply with that direction, the Delaware Court of
Chancery may dismiss the proceedings as to that stockholder.
After determination of the stockholders entitled to appraisal of
their shares of the Companys common stock, the Delaware
Court of Chancery will appraise the shares of 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 stockholders
of the certificates representing their shares of 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
stockholders 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 stockholder 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 common stock is less than the per share merger
consideration. In determining fair value, the
Delaware Court of Chancery 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
78
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 stockholders participating in
the appraisal proceeding by the Delaware Court of Chancery, as
it deems equitable in the circumstances. Upon the application of
a stockholder, the Delaware Court of Chancery may order all or a
portion of the expenses incurred by any stockholder 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 common stock
entitled to appraisal. Any stockholder who demanded appraisal
rights will not, after the effective time of the merger, be
entitled to vote shares of 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 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 stockholder otherwise fails to perfect,
successfully withdraws or loses such holders right to
appraisal, then the right of that stockholder to appraisal will
cease and that stockholder will be entitled to receive the
$12.55 per share cash payment (without interest) for his, her or
its shares of the Companys common stock pursuant to the
merger agreement.
In view of the complexity of Section 262 of the DGCL,
Companys stockholders who may wish to pursue appraisal
rights should consult their legal and financial advisors.
79
MARKET
PRICES OF COMMON STOCK AND DIVIDEND INFORMATION
The common stock is listed for trading on the NYSE under the
symbol CKR. The table below shows, for the periods
indicated, the price range of the common stock, as reported by
Bloomberg L.P., and the dividends per share declared during each
of the fiscal quarters of fiscal years 2009, 2010 and 2011 (to
date). Our fiscal year ends on the last Monday in January each
year.
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Common Stock
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Price
|
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Dividends
|
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High
|
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Low
|
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Declared
|
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2009
|
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|
|
|
|
|
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Quarter ended May 19
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$
|
13.35
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$
|
10.25
|
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$
|
.06
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Quarter ended August 11
|
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$
|
14.32
|
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$
|
8.82
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$
|
.06
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Quarter ended November 3
|
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$
|
14.45
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$
|
6.36
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$
|
.06
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Quarter ended January 26
|
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$
|
10.09
|
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$
|
4.88
|
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$
|
.06
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2010
|
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|
|
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Quarter ended May 18
|
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$
|
10.16
|
|
|
$
|
5.65
|
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|
$
|
.06
|
|
Quarter ended August 10
|
|
$
|
9.86
|
|
|
$
|
7.60
|
|
|
$
|
.06
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|
Quarter ending November 2
|
|
$
|
11.52
|
|
|
$
|
8.51
|
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|
$
|
.06
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Quarter ended January 25
|
|
$
|
9.63
|
|
|
$
|
8.00
|
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$
|
.06
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2011
|
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|
|
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|
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Quarter ended May 17
|
|
$
|
8.34
|
|
|
$
|
12.87
|
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$
|
.00
|
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Quarter ending August 8 (through May 26)
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$
|
12.05
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$
|
12.41
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$
|
.00
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The closing price of the common stock on the NYSE on
February 25, 2010, the last trading day prior to the public
announcement of the execution of the merger agreement with
affiliates of THL, was $8.91 per share of common stock. On
May 26, 2010, the most recent practicable date before this
proxy statement was mailed to our stockholders, the closing
price for the common stock on the NYSE was $12.29 per share of
common stock. You are encouraged to obtain current market
quotations for common stock in connection with voting your
shares of common stock.
Our current policy has been to provide quarterly cash dividends
on your shares of common stock. However, the terms of the merger
agreement provide that, from the date of the merger agreement
until the effective time of the merger, we may not declare, set
aside or pay any dividends on shares of our common stock without
the consent of Parent.
80
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the
beneficial ownership of our common stock as of May 10,
2010, by (i) each of our directors, (ii) our principal
executive officer, principal financial officer and each of our
other three most highly compensated executive officers for
fiscal year 2010, which we collectively refer to as the named
executive officers, and (iii) all of our directors and
executive officers as a group. Except as otherwise indicated,
beneficial ownership includes both voting and investment power.
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Shares Beneficially Owned
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Common Stock
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Total Share
|
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Percentage of All
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Name
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Common Stock
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Equivalents(1)
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Ownership
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Shares(2)
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Directors:
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Daniel D. (Ron) Lane
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801,451
|
(3)
|
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50,000
|
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851,451
|
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1.5
|
%
|
Byron Allumbaugh
|
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261,285
|
(4)
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105,000
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366,285
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*
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Peter Churm
|
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91,765
|
(5)
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120,000
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211,765
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*
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Carl L. Karcher
|
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643,845
|
(6)
|
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60,000
|
|
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|
703,845
|
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1.3
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%
|
Daniel E. Ponder, Jr.
|
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80,865
|
(7)
|
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45,000
|
|
|
|
125,865
|
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|
*
|
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Frank P. Willey
|
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440,202
|
|
|
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50,000
|
|
|
|
490,202
|
|
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*
|
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Andrew F. Puzder, Principal Executive Officer
|
|
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1,356,947
|
(8)
|
|
|
687,275
|
|
|
|
2,044,222
|
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|
|
3.7
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%
|
Janet E. Kerr
|
|
|
62,333
|
|
|
|
25,000
|
|
|
|
87,333]
|
|
|
|
*
|
|
Matthew Goldfarb
|
|
|
48,657
|
(9)
|
|
|
32,500
|
|
|
|
81,151
|
|
|
|
*
|
|
Jerold H. Rubinstein
|
|
|
30,000
|
|
|
|
19,666
|
|
|
|
49,666
|
|
|
|
*
|
|
Named Executive Officers:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
E. Michael Murphy
|
|
|
275,263
|
|
|
|
216,000
|
|
|
|
491,263
|
|
|
|
*
|
|
Theodore Abajian, Principal Financial Officer
|
|
|
370,888
|
|
|
|
232,987
|
|
|
|
603,875
|
|
|
|
1.1
|
%
|
Bradford R. Haley
|
|
|
38,558
|
|
|
|
155,001
|
|
|
|
193,559
|
|
|
|
*
|
|
Robert Starke
|
|
|
5,969
|
|
|
|
48,334
|
|
|
|
54,303
|
|
|
|
*
|
|
Directors and Executive Officers as a Group
(15 persons)
|
|
|
4,532,488
|
|
|
|
1,971,764
|
|
|
|
6,504,252
|
|
|
|
11.8
|
%
|
|
|
|
*
|
|
Represents less than 1% of our common stock.
|
|
|
|
(1)
|
|
Common Stock Equivalents include stock options or
other convertible securities exercisable within 60 days
after May 10, 2010.
|
|
|
|
(2)
|
|
Calculated based on 55,232,512 shares of our common stock
outstanding on May 10, 2010.
|
|
|
|
(3)
|
|
Includes 232,147 shares of our common stock held indirectly
by Mr. Lane through Daniel V., a Nevada corporation of
which Mr. Lane is sole stockholder and director, as well as
175,288 shares of common stock held by a family trust.
|
|
(4)
|
|
Includes 208,785 shares of our common stock held indirectly
by a family trust.
|
|
(5)
|
|
Includes 23,865 shares of our common stock held indirectly
by Mr. Churm through a community property trust as well as
400 shares of common stock held by Mr. Churms
wife.
|
|
(6)
|
|
Includes 438,400 shares of our common stock held indirectly
by Mr. Karcher through the Karcher Childrens Trust
and 182,945 shares of common stock held by the Carl L.
Karcher Family Trust.
|
|
(7)
|
|
Includes 43,365 shares of our common stock pledged as
security with respect to a personal loan.
|
|
(8)
|
|
Includes 46,710 shares of our common stock held indirectly
by Mr. Puzder through UTMA accounts owned for the benefit
of his children.
|
|
(9)
|
|
Includes 27,901 shares of our common stock pledged as
security with respect to a margin account.
|
81
DELISTING
AND DEREGISTRATION OF COMPANY COMMON STOCK
If the merger is completed, our 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
the common stock. In addition, if the merger is completed, our
common stock will no longer be publicly-traded.
PROPOSAL 2
ADJOURNMENT OF THE SPECIAL MEETING
If we fail to receive a sufficient number of votes to adopt the
merger agreement, we may propose to adjourn the special meeting
for the purpose of soliciting additional proxies to adopt the
merger agreement. We currently do not intend to propose
adjournment of our special meeting if there are sufficient votes
to adopt the merger agreement.
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 common stock present in person or
represented by proxy and entitled to vote on the matter at the
special meeting.
Our board of directors recommends that you vote
FOR the proposal to adjourn the special meeting to
solicit additional proxies if there are insufficient votes at
the time of the meeting to adopt the merger agreement.
OTHER
MATTERS
Our board of directors currently knows of no other business that
will be presented for consideration at the special meeting.
Nevertheless, should any business other than that set forth in
the notice of special meeting of stockholders properly come
before the meeting, the enclosed proxy confers discretionary
authority to vote with respect to such matters, including
matters that our board of directors does not know, a reasonable
time before proxy solicitation, are to be presented at the
meeting. If any of these matters are presented at the meeting,
then the proxy holders named in the enclosed proxy card will
vote in accordance with their judgment.
STOCKHOLDER
PROPOSALS
If the merger is completed, we will not have public stockholders
and there will be no public participation in any future meeting
of stockholders. However, if the merger is not completed, or if
we are otherwise required to do so under applicable law, we
would hold a 2010 annual meeting of stockholders. If the merger
is not consummated, any stockholder nominations or proposals for
other business intended to be presented at our next annual
meeting must be submitted to us as set forth below.
Any stockholder who intends to present a proposal at the Annual
Meeting of Stockholders to be held in the year 2010 must deliver
the proposal to our Corporate Secretary at 6307 Carpinteria
Avenue, Suite A, Carpinteria, California 93013 by the
following deadlines:
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|
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|
|
Not later than January 14, 2010, if the proposal is
submitted for inclusion in our proxy materials for that meeting
pursuant to
Rule 14a-8(e)(2)
under the Exchange Act. As the rules of the SEC make clear,
simply submitting a proposal does not guarantee its inclusion.
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|
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|
Not later than March 27, 2010 (based on a tentative Annual
Meeting date of June 25, 2010 or, if later, the seventh day
following the first public announcement of the date of such
meeting), provided that the proposal meets the requirements set
forth in our amended bylaws, which are summarized below. Even if
a stockholder complies with the necessary conditions set forth
in our amended Bylaws, there is no requirement that we include
the proposal in our proxy materials.
|
We amended our bylaws in September 2008 to include additional
notice requirements with respect to stockholder proposals. In
order for business to be properly brought before any meeting of
the stockholders by a stockholder, other than the nomination of
a person for election as a director, which is described below,
the stockholder must have given written notice to our Corporate
Secretary not less than 90 days in advance of such meeting
or, if later, the seventh day following the first public
announcement of the date of such meeting. In addition,
82
the stockholder providing such notice must be a stockholder of
record both at the time the notice is given and at the time of
the annual meeting at which the business referenced in the
notice will be considered. A stockholders notice to the
Corporate Secretary shall set forth as to each matter the
stockholder proposes to bring before the meeting (i) a
brief description of the business desired to be brought before
the meeting and the reasons for conducting such business at the
meeting; (ii) the name and address of the stockholder
proposing such business; (iii) the class and number of
shares of our common stock that are beneficially owned by the
stockholder; (iv) whether and the extent to which any
hedging or other transaction or series of transactions has been
entered into by or on behalf of, or any other agreement,
arrangement or understanding (including, but not limited to, any
derivative position, short position, or any borrowing or lending
of shares) has been made, the effect or intent of which is to
mitigate loss to or manage risk or benefit of share price
changes for, or to increase or decrease the voting power of,
such stockholder or any affiliate of such stockholder;
(v) any material interest of the stockholder or any
affiliate of such stockholder in such business; and
(vi) whether the stockholder or any affiliate of the
stockholder intends to conduct a proxy solicitation. In
addition, a stockholder providing such notice shall promptly
provide any other information we reasonably request.
Nominations for the election of directors may be made by any
stockholder entitled to vote in the election of directors,
provided, however, that a stockholder may nominate a person for
election as a director at a meeting only if written notice of
such stockholders intent to make such nomination has been
given to our Corporate Secretary not later than 90 days in
advance of such meeting or, if later, the seventh day following
the first public announcement of the date of such meeting. Each
such notice shall set forth: (i) the name and address of
the stockholder who intends to make the nomination;
(ii) the name and address of the person or persons to be
nominated; (iii) a representation that the stockholder is a
holder of record of our common stock entitled to vote at such
meeting and intends to appear in person or by proxy at the
meeting and nominate the person or persons specified in the
notice; (iv) a description of all arrangements or
understandings between the stockholder or any affiliate of such
stockholder on the one hand, and any nominee for election as a
director on the other hand, pursuant to which the nomination or
nominations are to be made by the stockholder; (v) such
other information regarding each nominee proposed by such
stockholder as would be required to be included in a proxy
statement filed pursuant to the proxy rules of the SEC had the
nominee been nominated, or intended to be nominated, by our
board of directors; (vi) the consent and commitment of each
nominee to serve as a director and to comply with our corporate
governance standards if so elected; (vii) whether and the
extent to which any hedging or other transaction or series of
transactions has been entered into by or on behalf of, or any
other agreement, arrangement or understanding (including, but
not limited to, any derivative position, short position, or any
borrowing or lending of shares) has been made, the effect or
intent of which is to mitigate loss to or manage risk or benefit
of share price changes for, or to increase or decrease the
voting power of, such stockholder or any affiliate of such
stockholder; and (viii) whether the stockholder or any
affiliate of such stockholder intends to conduct a proxy
solicitation. In addition, the stockholder making such
nomination shall promptly provide any other information we
reasonably request.
HOUSEHOLDING
OF PROXY MATERIAL
The SEC has adopted rules that permit companies and
intermediaries (e.g., banks, brokers and other nominees) to
satisfy the delivery requirements for proxy statements with
respect to two or more stockholders sharing the same address by
delivering a single proxy statement addressed to those
stockholders. This process, which is commonly referred to as
householding, potentially means extra convenience
for stockholders and cost savings for companies. Each
stockholder who participates in householding will continue to
receive a separate proxy card.
A number of brokers with account holders who are our
stockholders will be householding our proxy
materials. A single proxy statement report will be delivered to
multiple stockholders sharing an address unless contrary
instructions have been received from the affected stockholders.
Once you have received notice from your broker that they will be
householding communications to your address,
householding will continue until you are notified
otherwise or until you revoke your consent. If, at any time, you
no longer wish to participate in householding and
would prefer to receive a separate proxy statement, please
notify your bank, broker, or other nominee and direct a written
request to Investor Relations, CKE Restaurants, 6307 Carpinteria
Avenue, Suite A, Carpinteria California 93013. If any
stockholders in your household wish to receive a separate copy
of this proxy statement, they may call or write to Investor
Relations and we will provide such additional copies.
Stockholders
83
who currently receive multiple copies of the proxy statement at
their address and would like to request householding
of their communications should contact their bank, broker or
other nominee.
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., 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 Investors page of our corporate website at www.ckr.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.
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|
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|
|
Annual Report on
Form 10-K
for the fiscal year ended January 25, 2010 (filed with the
SEC on March 25, 2010) and Amendment No. 1 thereto
(filed with the SEC on May 25, 2010);
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|
|
|
|
|
Current Reports filed on
Form 8-K
filed with the SEC on March 29, 2010, April 15, 2010
and April 20, 2010, and April 27, 2010; and
|
|
|
|
Definitive Proxy Statement for our 2009 Annual Meeting filed
with the SEC on May 14, 2009.
|
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 CKE Restaurants, Inc.,
6307 Carpinteria Avenue, Suite A, Carpinteria, California
93013, Attn: Corporate Secretary or by telephone at
(805) 745-7500,
on the Investors page of our corporate website at www.ckr.com;
or from our proxy solicitor, Morrow & Co., LLC by
telephone toll-free at
(800) 607-0088
(banks and brokers call collect at
(203) 658-9400
or by email at CKE@morrowco.com; 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 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 , .
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 STOCKHOLDERS DOES NOT
CREATE ANY IMPLICATION TO THE CONTRARY.
84
ANNEX A
EXECUTION
VERSION
AGREEMENT
AND PLAN OF MERGER
Dated as of April 18, 2010
among
COLUMBIA LAKE ACQUISITION HOLDINGS, INC.,
COLUMBIA LAKE ACQUISITION CORP.,
and
CKE RESTAURANTS, INC.
TABLE OF
CONTENTS
|
|
|
|
|
|
|
|
|
|
|
Page
|
|
ARTICLE I
|
|
The Merger
|
|
|
A-1
|
|
Section
1.1
|
|
The Merger
|
|
|
A-1
|
|
Section
1.2
|
|
Closing
|
|
|
A-1
|
|
Section
1.3
|
|
Effective Time
|
|
|
A-2
|
|
Section
1.4
|
|
Effects of the Merger
|
|
|
A-2
|
|
Section
1.5
|
|
Certificate of Incorporation and By-laws of the Surviving
Corporation
|
|
|
A-2
|
|
Section
1.6
|
|
Directors and Officers of the Surviving Corporation
|
|
|
A-2
|
|
|
|
|
|
|
|
|
ARTICLE II
|
|
Effect of the Merger on the Capital Stock of the Constituent
Corporations; Exchange of Certificates; Company Stock Options
|
|
|
A-2
|
|
Section
2.1
|
|
Effect on Capital Stock
|
|
|
A-2
|
|
Section
2.2
|
|
Exchange of Certificates
|
|
|
A-3
|
|
Section
2.3
|
|
Appraisal Rights
|
|
|
A-4
|
|
Section
2.4
|
|
Company Stock Options and Restricted Stock
|
|
|
A-5
|
|
Section
2.5
|
|
Employee Stock Purchase Plan
|
|
|
A-6
|
|
Section
2.6
|
|
Adjustments to Merger Consideration
|
|
|
A-6
|
|
|
|
|
|
|
|
|
ARTICLE III
|
|
Representations and Warranties of the Company
|
|
|
A-6
|
|
Section
3.1
|
|
Organization, Standing and Corporate Power
|
|
|
A-6
|
|
Section
3.2
|
|
Capitalization
|
|
|
A-7
|
|
Section
3.3
|
|
Authority; Noncontravention; Voting Requirements
|
|
|
A-8
|
|
Section
3.4
|
|
Governmental Approvals
|
|
|
A-10
|
|
Section
3.5
|
|
Company SEC Documents; Undisclosed Liabilities; Information
Provided
|
|
|
A-10
|
|
Section
3.6
|
|
Absence of Certain Changes
|
|
|
A-12
|
|
Section
3.7
|
|
Legal Proceedings
|
|
|
A-12
|
|
Section
3.8
|
|
Compliance With Laws; Permits; Regulations
|
|
|
A-12
|
|
Section
3.9
|
|
Company Related Party Transactions
|
|
|
A-12
|
|
Section
3.10
|
|
Tax Matters
|
|
|
A-13
|
|
Section
3.11
|
|
Employee Benefits
|
|
|
A-14
|
|
Section
3.12
|
|
Labor and Employment Matters
|
|
|
A-15
|
|
Section
3.13
|
|
Environmental Matters
|
|
|
A-16
|
|
Section
3.14
|
|
Intellectual Property
|
|
|
A-16
|
|
Section
3.15
|
|
Properties
|
|
|
A-17
|
|
Section
3.16
|
|
Rights Agreement; Anti-Takeover Provisions
|
|
|
A-18
|
|
Section
3.17
|
|
Contracts
|
|
|
A-18
|
|
Section
3.18
|
|
Franchise Matters
|
|
|
A-20
|
|
Section
3.19
|
|
Suppliers
|
|
|
A-22
|
|
Section
3.20
|
|
Quality and Safety of Food & Beverage Products
|
|
|
A-22
|
|
Section
3.21
|
|
Insurance
|
|
|
A-23
|
|
Section
3.22
|
|
Swap Agreements
|
|
|
A-23
|
|
Section
3.23
|
|
Opinion of Financial Advisor
|
|
|
A-23
|
|
Section
3.24
|
|
Brokers and Other Advisors
|
|
|
A-23
|
|
Section
3.25
|
|
No Other Parent or Merger Sub Representations or Warranties
|
|
|
A-23
|
|
Section
3.26
|
|
Prior Merger Agreement
|
|
|
A-24
|
|
A-i
|
|
|
|
|
|
|
|
|
|
|
Page
|
|
ARTICLE IV
|
|
Representations and Warranties of Parent and Merger Sub
|
|
|
A-24
|
|
Section
4.1
|
|
Organization; Standing
|
|
|
A-24
|
|
Section
4.2
|
|
Authority; Noncontravention
|
|
|
A-24
|
|
Section
4.3
|
|
Governmental Approvals
|
|
|
A-24
|
|
Section
4.4
|
|
Ownership and Operations of Merger Sub
|
|
|
A-25
|
|
Section
4.5
|
|
Financing
|
|
|
A-25
|
|
Section
4.6
|
|
Guarantee
|
|
|
A-25
|
|
Section
4.7
|
|
Solvency
|
|
|
A-25
|
|
Section
4.8
|
|
Certain Arrangements
|
|
|
A-26
|
|
Section
4.9
|
|
Litigation
|
|
|
A-26
|
|
Section
4.10
|
|
Brokers and Other Advisors
|
|
|
A-26
|
|
Section
4.11
|
|
No Other Company Representations or Warranties
|
|
|
A-26
|
|
|
|
|
|
|
|
|
ARTICLE V
|
|
Additional Covenants and Agreements
|
|
|
A-26
|
|
Section
5.1
|
|
Conduct of Business
|
|
|
A-26
|
|
Section
5.2
|
|
No Solicitation
|
|
|
A-29
|
|
Section
5.3
|
|
Preparation of the Proxy Statement; Stockholders Meeting
|
|
|
A-31
|
|
Section
5.4
|
|
Filings; Consents; Other Actions
|
|
|
A-32
|
|
Section
5.5
|
|
Financing
|
|
|
A-33
|
|
Section
5.6
|
|
Public Announcements
|
|
|
A-35
|
|
Section
5.7
|
|
Access to Information; Confidentiality
|
|
|
A-36
|
|
Section
5.8
|
|
Notification of Certain Matters
|
|
|
A-36
|
|
Section
5.9
|
|
Indemnification and Insurance
|
|
|
A-36
|
|
Section
5.10
|
|
Rule 16b-3
|
|
|
A-38
|
|
Section
5.11
|
|
Employee Matters
|
|
|
A-38
|
|
Section
5.12
|
|
Employee Stock Purchase Plan
|
|
|
A-39
|
|
Section
5.13
|
|
Notification of Certain Matters
|
|
|
A-39
|
|
Section
5.14
|
|
SEC Filings
|
|
|
A-39
|
|
Section
5.15
|
|
Director Resignations
|
|
|
A-39
|
|
Section
5.16
|
|
Prior Merger Agreement Termination and Termination Fee
|
|
|
A-39
|
|
|
|
|
|
|
|
|
ARTICLE VI
|
|
Conditions Precedent
|
|
|
A-39
|
|
Section
6.1
|
|
Conditions to Each Partys Obligation to Effect the Merger
|
|
|
A-39
|
|
Section
6.2
|
|
Conditions to Obligations of Parent and Merger Sub
|
|
|
A-40
|
|
Section
6.3
|
|
Conditions to Obligations of the Company
|
|
|
A-40
|
|
|
|
|
|
|
|
|
ARTICLE VII
|
|
Termination
|
|
|
A-41
|
|
Section
7.1
|
|
Termination
|
|
|
A-41
|
|
Section
7.2
|
|
Effect of Termination
|
|
|
A-42
|
|
Section
7.3
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Termination Fee
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Page
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ARTICLE VIII
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Miscellaneous
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Section
8.1
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No Survival of Representations and Warranties
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Section
8.2
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Fees and Expenses
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Section
8.3
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Amendment or Supplement
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Section
8.4
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Extension of Time, Waiver, Etc
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Section
8.5
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Assignment
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Section
8.6
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Counterparts
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Section
8.7
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Entire Agreement; No Third-Party Beneficiaries
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Section
8.8
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Governing Law; Jurisdiction
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Section
8.9
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Remedies
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Section
8.10
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WAIVER OF JURY TRIAL
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Section
8.11
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Notices
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Section
8.12
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Severability
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Section
8.13
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Definitions
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Section
8.14
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Interpretation
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EXHIBIT A
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Company Stockholder Voting Agreement
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A-iii
AGREEMENT
AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER, dated as of April 18,
2010 (this
Agreement
), is among Columbia Lake
Acquisition Holdings, Inc., a Delaware corporation
(
Parent
), Columbia Lake Acquisition Corp., a
Delaware corporation and a wholly-owned Subsidiary of Parent
(
Merger Sub
), and CKE Restaurants, Inc., a
Delaware corporation (the
Company
). Certain
capitalized terms used in this Agreement are defined in
Section 8.13.
WHEREAS, concurrently with entering into this Agreement, the
Company (i) terminated the Agreement and Plan of Merger,
dated as of February 26, 2010, among Western Acquisition
Holdings, Inc. (
Western Parent
), Western
Acquisition Corp. and the Company (the
Prior Merger
Agreement
) pursuant to, and in accordance with,
Section 7.1(d)(ii) of the Prior Merger Agreement and
(ii) paid Western Parent the Go-Shop Termination
Fee (as defined in the Prior Merger Agreement);
WHEREAS, the parties intend that Merger Sub be merged with and
into the Company, with the Company surviving that merger on the
terms and subject to the conditions set forth in this Agreement
as a result of which the Company will become a wholly-owned
Subsidiary of Parent (the
Merger
);
WHEREAS, the Board of Directors of the Company has unanimously
(i) determined in accordance with Section 5.2 of the
Prior Merger Agreement that the Merger and the consummation of
the transactions contemplated hereby constitute a Superior
Proposal (as defined in the Prior Merger Agreement);
(ii) determined that it is in the best interests of the
Company and its stockholders, and declared it advisable, to
terminate the Prior Merger Agreement (in accordance with
Section 7.1(d)(ii) of the Prior Merger Agreement) and enter
into this Agreement, (iii) determined that failure to enter
into this Agreement would be inconsistent with the
directors fiduciary duties under applicable Law;
(iv) approved the execution, delivery and performance by
the Company of this Agreement and the consummation of the
transactions contemplated hereby, including the Merger and
(v) resolved to recommend adoption of this Agreement by the
stockholders of the Company;
WHEREAS, the Board of Directors of each of Parent and Merger Sub
have approved this Agreement and declared it advisable for
Parent and Merger Sub, respectively to enter into this Agreement;
WHEREAS, concurrently with the execution and delivery of this
Agreement, and as a condition and inducement to the
Companys willingness to enter into this Agreement, certain
parties (the
Guarantors
) are entering into a
limited guarantee in favor of the Company (the
Guarantee
) with respect to certain
obligations of Parent and Merger Sub under this
Agreement; and
WHEREAS, concurrently with the execution and delivery of this
Agreement, and as a condition and inducement to Parents
willingness to enter into this Agreement, certain stockholders
of the Company have entered into a Company Stockholder Voting
Agreement, dated as of the date of this Agreement, in the form
attached hereto as
Exhibit A
(the
Company
Stockholder Agreement
), pursuant to which such
stockholders have, among other things, agreed to vote all of the
shares of voting capital stock of the Company that such
stockholders own in favor of the Merger and the adoption of this
Agreement.
NOW, THEREFORE, in consideration of the representations,
warranties, covenants and agreements contained in this
Agreement, and intending to be legally bound hereby, Parent,
Merger Sub and the Company hereby agree as follows:
ARTICLE I
The
Merger
Section
1.1
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
), at the Effective Time, Merger Sub
shall be merged with and into the Company, and the separate
corporate existence of Merger Sub shall thereupon cease, and the
Company shall be the surviving corporation in the Merger (the
Surviving Corporation
).
Section
1.2
Closing
.
The
closing of the Merger (the
Closing
) shall
take place at 10:00 a.m. (New York City time), on a date to
be specified by Parent and the Company (the
Closing
Date
), which shall be no later than
A-1
the third business day after satisfaction or waiver (to the
extent permitted by applicable Law) of the conditions set forth
in Article VI (other than those conditions that by their
nature are to be satisfied at the Closing, but subject to the
satisfaction or waiver of those conditions at such time), at the
offices of Morgan, Lewis and Bockius LLP, 101 Park Avenue, New
York, New York 10178, unless another date, time, or place is
agreed to in writing by Parent and the Company;
provided
,
that notwithstanding the satisfaction or waiver of the
conditions set forth in Article VI hereof, if the Marketing
Period has not ended at the time of the satisfaction or waiver
of such conditions (other than those conditions that by their
nature are to be satisfied at the Closing, but subject to the
satisfaction or waiver of those conditions at such time),
neither Parent nor Merger Sub shall be required to effect the
Closing until the earlier of (a) a date during the
Marketing Period specified by Parent on no less than three
business days written notice to the Company and
(b) the final day of the Marketing Period.
Section
1.3
Effective
Time
.
Subject to the provisions of this
Agreement, as soon as practicable on the Closing Date the
parties shall file with the Secretary of State of the State of
Delaware a certificate of merger, executed in accordance with,
and in such form as is required by, the relevant provisions of
the DGCL (the
Certificate of Merger
) and
shall make all other filings or recordings required under the
DGCL. The Merger shall become effective upon the filing of the
Certificate of Merger or at such later time as is agreed to by
the parties hereto and specified in the Certificate of Merger
(the time at which the Merger becomes effective is herein
referred to as the
Effective Time
).
Section
1.4
Effects
of the Merger
.
The Merger shall have the
effects set forth in the DGCL. Without limiting the generality
of the foregoing, and subject thereto, at the Effective Time,
all the properties, rights, privileges, powers and franchises of
the Company and Merger Sub shall vest in the Surviving
Corporation, and all debts, liabilities and duties of the
Company and Merger Sub shall become the debts, liabilities and
duties of the Surviving Corporation.
Section
1.5
Certificate
of Incorporation and By-laws of the Surviving
Corporation
.
At the Effective Time, the
certificate of incorporation and by-laws of the Company, as in
effect immediately prior to the Effective Time, shall be amended
and restated as of the Effective Time to be in the form of
(except with respect to the name of the Company) the certificate
of incorporation and by-laws of Merger Sub, and as amended shall
be the certificate of incorporation and by-laws of the Surviving
Corporation until thereafter amended as provided therein or by
applicable Law (subject to Section 5.9 hereof).
Section
1.6
Directors
and Officers of the Surviving Corporation
.
(a) Each of the parties hereto shall take all necessary
action to cause the directors of Merger Sub immediately prior to
the Effective Time to be the directors of the Surviving
Corporation immediately following the Effective Time, until
their respective successors are duly elected or appointed and
qualified or their earlier death, resignation or removal in
accordance with the certificate of incorporation and by-laws of
the Surviving Corporation.
(b) The officers of the Company immediately prior to the
Effective Time shall be the officers of the Surviving
Corporation until their respective successors are duly appointed
and qualified or their earlier death, resignation or removal in
accordance with the certificate of incorporation and by-laws of
the Surviving Corporation.
ARTICLE II
Effect of
the Merger on the Capital Stock of the Constituent Corporations;
Exchange of
Certificates; Company Stock Options
Section
2.1
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 common stock, par value $.01 per share,
of the Company (
Company Common Stock
) or any
shares of capital stock of Merger Sub:
(a)
Capital Stock of Merger
Sub
.
Each issued and outstanding share of
capital stock of Merger Sub shall be converted into and become
one validly issued, fully paid and nonassessable share of common
stock, par value $.01 per share, of the Surviving Corporation.
A-2
(b)
Cancellation of Treasury Stock and Parent-Owned
Stock
.
All shares of Company Common Stock
that are owned by the Company as treasury stock and any shares
of Company Common Stock owned by Parent, Merger Sub or any other
wholly-owned Subsidiary of Parent immediately prior to the
Effective Time shall be canceled and shall cease to exist and no
consideration shall be delivered in exchange therefor. Any
shares of Company Common Stock owned by any direct or indirect
wholly-owned Subsidiary of the Company shall not represent the
right to receive the Merger Consideration and shall, at the
election of Parent, either: (i) convert into shares of a
class of stock of the Surviving Corporation designated by Parent
in connection with the Merger, or (ii) be canceled.
(c)
Conversion of Company Common
Stock
.
Each issued and outstanding share of
Company Common Stock (other than shares to be canceled in
accordance with Section 2.1(b) and Dissenting Shares) shall
be converted automatically into and shall thereafter represent
the right to receive an amount in cash equal to $12.55, without
interest (the
Merger Consideration
). As of
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, which 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 to be paid in consideration therefor upon
surrender of such Certificate in accordance with
Section 2.2(b), without interest.
Section
2.2
Exchange
of Certificates
.
(a)
Paying Agent
. Prior to the
Effective Time, Parent shall designate a bank or trust company,
which must be reasonably acceptable to the Company, to act as
agent for the holders of shares of Company Common Stock in
connection with the Merger (the
Paying Agent
)
to receive, on terms reasonably acceptable to the Company, for
the benefit of holders of shares of Company Common Stock, the
aggregate Merger Consideration to which holders of shares of
Company Common Stock shall become entitled pursuant to
Section 2.1(c). Parent shall deposit or cause to be
deposited such aggregate Merger Consideration with the Paying
Agent at or prior to the Effective Time. Such aggregate Merger
Consideration deposited with the Paying Agent shall, pending its
disbursement to such holders, be invested by the Paying Agent as
directed by Parent in (i) short-term direct obligations of
the United States of America, (ii) short-term obligations
for which the full faith and credit of the United States of
America is pledged to provide for the payment of principal and
interest, (iii) short-term commercial paper rated
A-1
or
P-1
or
better by Moodys Investors Service, Inc. or Standard and
Poors Ratings Services, respectively, (iv) in
certificates of deposit, bank repurchase agreements or
bankers acceptances of commercial banks with capital
exceeding $1 billion, or (v) money market funds having
a rating in the highest investment category granted by a
recognized credit rating agency at the time of such investment.
To the extent that there are any losses with respect to any such
investments, or the aggregate Merger Consideration deposited
with the Paying Agent diminishes for any reason below the level
required for the Paying Agent to make cash payment under
Section 2.1(c), Parent shall, or shall cause the Surviving
Corporation to, promptly replace or restore the cash on deposit
with the Paying Agent so as to ensure that the Paying Agent at
all times has cash on deposit maintained at a level sufficient
for the Paying Agent to make such aggregate payments under
Section 2.1(c).
(b)
Payment Procedures
. Promptly
after the Effective Time (but in no event more than three
business days thereafter), the Surviving Corporation shall cause
the Paying Agent to mail to each holder of record of Company
Common Stock (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 delivery of the
Certificates to the Paying Agent, and which shall be in such
form and shall have such other customary provisions as Parent
and the Company may reasonably agree) and (ii) instructions
for use in effecting the surrender of the Certificates in
exchange for payment of the Merger Consideration. Upon surrender
of a Certificate for cancellation to the Paying Agent, together
with such letter of transmittal, duly completed and validly
executed in accordance with the instructions (and such other
customary documents as may reasonably be required by the Paying
Agent), the holder of such Certificate shall be entitled to
receive in exchange therefor the Merger Consideration, without
interest, for each share of Company Common Stock formerly
represented by such Certificate, and the Certificate so
surrendered shall immediately be canceled. If payment of the
Merger Consideration is to be made to a Person other than the
Person in whose name the surrendered Certificate is registered,
it shall be a condition of payment that (x) the Certificate
so surrendered shall be properly endorsed or shall otherwise be
in proper form for transfer and (y) the Person requesting
such payment shall have
A-3
paid any transfer and other taxes required by reason of the
payment of the Merger Consideration to a Person other than the
registered holder of such Certificate surrendered and shall have
established to the reasonable satisfaction of the Surviving
Corporation that such tax either has been paid or is not
applicable. Until surrendered as contemplated by this
Section 2.2, each Certificate shall be deemed at any time
after the Effective Time to represent only the right to receive
the Merger Consideration as contemplated by this
Article II, without interest.
(c)
Transfer Books; No Further Ownership Rights in
Company Stock
. The Merger Consideration paid
in respect of shares of Company Common Stock upon the surrender
for exchange of Certificates in accordance with the terms of
this Article II shall be deemed to have been paid in full
satisfaction of all rights pertaining to the shares of Company
Common Stock previously represented by such Certificates, and at
the Effective Time, the stock transfer books of the Company
shall be closed and thereafter 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. From
and after the Effective Time, the holders of Certificates that
evidenced ownership of shares of Company Common Stock
outstanding immediately prior to the Effective Time shall cease
to have any rights with respect to such shares of Company Common
Stock. Subject to the last sentence of Section 2.2(e), if,
at any time after the Effective Time, Certificates are presented
to the Surviving Corporation for any reason, they shall be
canceled and exchanged as provided in this Article II.
(d)
Lost, Stolen or Destroyed
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 the Surviving
Corporation, 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 will pay, in exchange for such
lost, stolen or destroyed Certificate, the applicable Merger
Consideration to be paid in respect of the shares of Company
Common Stock formerly represented by such Certificate, as
contemplated by this Article II.
(e)
Termination of Fund
. At any
time following the first anniversary of the Closing Date, the
Surviving Corporation shall be entitled to require the Paying
Agent to deliver to it any funds (including any interest
received with respect thereto) that had been made available to
the Paying Agent and which have not been disbursed to holders of
Certificates, and thereafter such holders shall be entitled to
look only to Parent and the Surviving Corporation (subject to
abandoned property, escheat or other similar Laws) as general
creditors thereof with respect to the payment of any Merger
Consideration that may be payable upon surrender of any
Certificates held by such holders, as determined pursuant to
this Agreement, without any interest thereon. Any amounts
remaining unclaimed by such holders at such time at which such
amounts would otherwise escheat to or become property of any
Governmental Authority shall become, to the extent permitted by
applicable Law, the property of Parent, free and clear of all
claims or interest of any Person previously entitled thereto.
(f)
No Liability
. Notwithstanding
any provision of this Agreement to the contrary, none of the
parties hereto, the Surviving Corporation or the Paying Agent
shall be liable to any Person for Merger Consideration delivered
to a public official pursuant to any applicable abandoned
property, escheat or similar Law.
(g)
Withholding Taxes
. Parent, the
Surviving Corporation and the Paying Agent shall be entitled to
deduct and withhold from the consideration otherwise payable
pursuant to this Agreement such amounts as may be required to be
deducted and withheld with respect to the making of such payment
under the Internal Revenue Code of 1986, as amended, and the
rules and regulations promulgated thereunder (the
Code
), or under any provision of state, local
or foreign Tax Law. To the extent amounts are so withheld, the
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.
Section
2.3
Appraisal
Rights
. Notwithstanding anything in this
Agreement to the contrary, shares of Company Common Stock that
are issued and outstanding immediately prior to the Effective
Time and which are held by a stockholder who did not vote in
favor of the Merger (or consent thereto in writing) and 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
Dissenting Stockholders
), shall not be
converted into or be exchangeable for the right to receive the
Merger Consideration (the
Dissenting Shares
),
but instead such holder shall be entitled to receive such
consideration as may be determined to be due to such Dissenting
Stockholder
A-4
pursuant to Section 262 of the DGCL (and at the Effective
Time, such Dissenting Shares shall no longer be outstanding and
shall automatically be canceled and shall cease to exist, and
such holder shall cease to have any rights with respect thereto,
except the rights set forth in Section 262 of the DGCL),
unless and until such holder shall have failed to perfect or
shall have effectively withdrawn or lost rights to appraisal
under the DGCL. If any Dissenting Stockholder shall have failed
to perfect or shall have effectively withdrawn or lost such
right, such holders shares of Company Common Stock shall
thereupon be treated as if they had been converted into and
become exchangeable for the right to receive, as of the
Effective Time, the Merger Consideration for each such share of
Company Common Stock, in accordance with Section 2.1,
without any interest thereon. The Company shall give Parent
(i) prompt notice and a copy of any written demands for
appraisal of any shares of Company Common Stock, attempted
withdrawals of such demands and any other instruments served
pursuant to the DGCL and received by the Company relating to
stockholders rights of appraisal, and (ii) the
opportunity to participate in all negotiations and proceedings
with respect to demands for appraisal under the DGCL. The
Company shall not make any payment or settlement offer prior to
the Effective Time with respect to any such demand, notice or
instrument unless Parent shall have given its written consent to
such payment or settlement.
Section
2.4
Company
Stock Options and Restricted Stock
.
(a) At or prior to the Effective Time, the Company shall
take all actions necessary (including obtaining any necessary
determinations
and/or
resolutions of the Board of Directors of the Company or a
committee thereof and amending any Company Stock Plan) to:
(i) terminate each Company Stock Plan,
(ii) provide that each outstanding option to purchase
shares of Company Common Stock granted under the Company Stock
Plans (each, an
Option
) that is outstanding
and unexercised (without regard to the exercise price of such
Option) as of immediately prior to the Effective Time, whether
vested or unvested, shall become fully vested and exercisable
immediately prior to and contingent on the Closing,
(iii) cancel, as of the Effective Time, each Option that is
outstanding and unexercised (without regard to the exercise
price of such Option), as of the Effective Time (in each case,
without the creation of additional liability to the Company or
any Subsidiaries), subject, if applicable, to the payment
pursuant to this Section 2.4, and
(iv) provide that each restricted share of Company Common
Stock, granted under the Company Stock Plans that is outstanding
as of immediately prior to the Effective Time shall become fully
vested immediately prior to and contingent on the Closing, and
provide that each such share shall be treated as a share of
Company Common Stock for all purposes of this Agreement.
(b) Each holder of an Option that is outstanding and
unexercised as of the Effective Time and has an exercise price
per share that is less than the per share Merger Consideration
shall be entitled to receive as soon as reasonably practicable
after the Effective Time (but in any event no later than three
days after the Effective Time) a cash amount equal to the
Designated Consideration for each share of Company Common Stock
then subject to the Option (subject to applicable tax
withholding). For purposes of this Agreement,
Designated Consideration
means, with respect
to any share of Company Common Stock issuable under a particular
Option, an amount equal to the excess, if any, of (i) the
Merger Consideration per share of Company Common Stock over
(ii) the exercise price payable in respect of such share of
Company Common Stock issuable under such Option.
(c) As soon as practicable following the execution of this
Agreement, the Company shall mail to each person who is a holder
of an Option a letter describing the treatment of and, if
applicable, payment for such Option pursuant to this
Section 2.4 and providing instructions for use in obtaining
payment for such Option. Parent shall maintain, or shall cause
to be maintained, at all times from and after the Effective Time
sufficient liquid funds to pay the Designated Consideration and
to satisfy its obligations to holders of Options pursuant to
this Section 2.4.
(d) The Surviving Corporation shall be entitled to deduct
and withhold from the amounts otherwise payable pursuant to this
Section 2.4 to any holder of Options or restricted stock
that becomes vested by reason of the transactions contemplated
by this Agreement, such amount as the Surviving Corporation is
required to deduct and withhold with respect to the making of
such payment under the Code, or any provision of state, or local
Tax Law,
A-5
and the Surviving Corporation shall make any required filings
with and payments to Taxing authorities relating to any such
deduction or withholding. To the extent that amounts are so
deducted and withheld by the Surviving Corporation, such
withheld amounts shall be treated for the purposes of this
Agreement as having been paid to the holder of Options or
restricted stock, as the case may be, in respect of which such
deduction and withholding was made by the Surviving Corporation.
(e) Nothing in this Section 2.4, express or implied,
is intended to confer upon any Person not a party hereto any
right, benefit or remedy of any nature whatsoever, including any
right to employment or continued employment for any period of
time by reason of this Agreement, or any right to a particular
term or condition of employment. Notwithstanding anything to the
contrary contained in this Agreement, no provision of this
Agreement is intended to, or does, constitute the establishment
of, or an amendment to, any Company Plan or any other employee
benefit plan of the Company or any of its Subsidiaries.
Section
2.5
Employee
Stock Purchase Plan
. The Board of Directors
of the Company shall take all actions with respect to the
Companys Employee Stock Purchase Plan (the
ESPP
) as are required by Section 5.12.
Section
2.6
Adjustments
to Merger Consideration
. The Merger
Consideration shall be adjusted, without duplication, to reflect
fully the effect of any reclassification, stock split, reverse
split, stock dividend (including any dividend or distribution of
securities convertible into Company Common Stock),
reorganization, recapitalization or other like change with
respect to Company Common Stock occurring after the date hereof
and prior to the Effective Time.
ARTICLE III
Representations
and Warranties of the Company
The Company represents and warrants to Parent and Merger Sub
that the statements contained in this Article III are true
and correct, except as set forth herein or in the corresponding
Section of the disclosure schedule delivered by the Company to
Parent and Merger Sub and dated as of the date of this Agreement
(the
Company Disclosure Schedule
) or as
disclosed in any Company SEC Document (as hereinafter defined)
filed on or after January 26, 2009 and prior to the date
hereof (the
Filed SEC Documents
), other than
the exhibits and schedules to the Filed SEC Documents or
disclosures in such Company SEC Documents referred to in the
Risk Factors and Forward Looking
Statements sections thereof or any other disclosures in
the Filed SEC Documents which are forward-looking in nature (it
being understood that any disclosure in the Filed SEC Documents
shall be deemed disclosed with respect to any Section of this
Article III only to the extent that it is readily apparent
from a reading of such disclosure that it is applicable to such
Section).
Section
3.1
Organization,
Standing and Corporate Power
.
(a) The Company is a corporation duly organized, validly
existing and in good standing under the Laws of the State of
Delaware and has all requisite corporate power and authority
necessary to own or lease all of its properties and assets and
to carry on its business as it is now being conducted. The
Company is duly licensed or qualified to do business and is in
good standing in each jurisdiction in which the nature of the
business conducted by it or the character or location of the
properties and assets owned or leased by it makes such licensing
or qualification necessary, except where the failure to be so
licensed, qualified or in good standing has not had and would
not reasonably be expected to have a Material Adverse Effect (as
defined below) on the Company. For purposes of this Agreement,
Material Adverse Effect
shall mean any
effect, change, event, circumstance or occurrence (each, an
Effect
) that, individually or in the
aggregate, would reasonably be expected to have, a material
adverse effect on the business, results of operations or
financial condition of the Company and its Subsidiaries taken as
a whole, or would or would reasonably be expected to prevent or
materially impair or delay the consummation of the transactions
contemplated by this Agreement, other than any Effect
(i) generally affecting (A) the industry in which the
Company and its Subsidiaries operate or (B) the economy,
credit or financial or capital markets, in the United States or
elsewhere in the world, including changes in interest or
exchange rates, or (ii) resulting from (A) changes
after the date hereof in Law or in generally accepted accounting
principles or in accounting standards, (B) the announcement
of this Agreement, the pendency of the Merger or the
consummation of the transactions expressly contemplated hereby,
(C) acts of war, sabotage or terrorism, or any escalation
or worsening of any such acts of war,
A-6
sabotage or terrorism, (D) earthquakes, hurricanes,
tornadoes or other natural disasters, other than any earthquakes
occurring in or affecting California and any and all effects or
consequences resulting therefrom or related thereto which shall
not be excluded under Section 3.1(a)(i) or (ii),
(E) any actions taken or failure to take action, in each
case, to which the Parent has approved, consented to or
requested in writing, or compliance with the terms of or the
taking of any action required by this Agreement (including
actions required under Section 2.4 but excluding the first
sentence of Section 5.1(a)), (F) any decline in the
market price, or change in trading volume, of the capital stock
of the Company, or (G) any failure to meet any internal or
public projections, forecasts or estimates of revenue or
earnings in and of itself (for the avoidance of doubt, the
exceptions in clauses (F) and (G) shall not prevent or
otherwise affect a determination that the underlying cause of
any such failure is a Material Adverse Effect);
provided
,
however
, that any Effect referred to in
Sections 3.1(a)(i), 3.1(a)(ii)(A), (C), or (D) shall
be taken into account for purposes of each such respective
clause only so long as such Effect does not adversely affect the
Company and its Subsidiaries, taken as a whole, in a materially
disproportionate manner as compared to other participants in
industry in which the Company and its Subsidiaries operate. With
respect to
Material Adverse Effect
in the
representations and warranties set forth in
Sections 3.3(d), 3.4, 3.17(b)(vi) and 3.18(b)(vi), the
exception set forth in Section 3.1(a)(ii)(B) shall not
apply.
(b) Each of the Companys Subsidiaries is duly
organized, validly existing and in good standing (to the extent
such concepts are applicable) under the laws of the jurisdiction
of its organization and has all requisite company power and
authority necessary to own or lease all of its properties and
assets and to carry on its business as it is now being
conducted. Where applicable as a legal concept, each Subsidiary
of the Company is duly licensed or qualified to do business and
is in good standing in each jurisdiction in which the nature of
the business conducted by it or the character or location of the
properties and assets owned or leased by it makes such licensing
or qualification necessary, except where the failure to be so
licensed, qualified or in good standing has not had and would
not reasonably be expected to have a Material Adverse Effect.
(c) The Company has made available to Parent complete and
correct copies of the certificate of incorporation and by-laws
of the Company, as amended to the date of this Agreement (the
Company Charter Documents
).
Section
3.2
Capitalization
.
(a) The authorized capital stock of the Company consists of
100,000,000 shares of Company Common Stock and
5,000,000 shares of preferred stock, par value $.01 per
share (
Company Preferred Stock
). At the close
of business on January 25, 2010,
(i) 55,290,626 shares of Company Common Stock were
issued and outstanding, (ii) no shares of Company Common
Stock were held by the Company in its treasury, and
(iii) no shares of Company Preferred Stock were issued or
outstanding. At the close of business on February 22, 2010,
4,427,641 shares of Company Common Stock were reserved for
issuance pursuant to outstanding Options under the Company Stock
Plans.
(b) Section 3.2(b) of the Companys Disclosure
Schedule sets forth, as of February 22, 2010, (i) a
list of all holders of Options under the Company Stock Plans,
the date of grant, the number of shares of Common Stock subject
to such Option, the Company Stock Plan under which it was
granted, and the price per share at which such Option may be
exercised and (ii) a list of all holders of restricted
shares of Company Common Stock, the date of grant, the number of
restricted shares owned by each such holder, the Company Stock
Plan under which such shares were granted and the vesting
schedule thereof.
(c) As of January 25, 2010, there were (i) no
outstanding shares of capital stock of, or other equity or
voting interest in, the Company, (ii) no outstanding
securities of the Company convertible into or exchangeable for
shares of capital stock of, or other equity or voting interest
in, the Company, (iii) no outstanding options, warrants,
rights or other commitments or agreements to acquire from the
Company, or that obligate the Company to issue, any capital
stock of, or other equity or voting interest in, or any
securities convertible into or exchangeable for shares of
capital stock of, or other equity or voting interest in, the
Company, (iv) no obligations of the Company to grant,
extend or enter into any subscription, warrant, right,
convertible or exchangeable security or other similar agreement
or commitment relating to any capital stock of, or other equity
or voting interest (including any voting debt) in, the Company
(the items in clauses (i), (ii), (iii) and (iv), together
with the capital stock of the Company, being referred to
collectively as
Company Securities
) and
(v) no other obligations by the Company or any of its
Subsidiaries to make any payments based on the price or value of
any Company Securities or dividends paid thereon or revenues,
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earnings or financial performance or any other attribute of the
Company. There are no outstanding agreements of any kind which
obligate the Company or any of its Subsidiaries to repurchase,
redeem or otherwise acquire any Company Securities, or
obligating the Company to grant, extend or enter into any such
agreements relating to any Company Securities, including any
agreements granting any preemptive rights, subscription rights,
anti-dilutive rights, rights of first refusal or similar rights
with respect to any Company Securities. No direct or indirect
Subsidiary of the Company owns any Company Common Stock. None of
the Company or any Subsidiary is a party to any
stockholders agreement, voting trust agreement,
registration rights agreement, rights agreement, poison
pill anti-takeover plan or other similar agreement or
understanding relating to any Company Securities or any other
agreement relating to the disposition, voting or dividends with
respect to any Company Securities. All outstanding shares of
Company Common Stock have been duly authorized and validly
issued and are fully paid, nonassessable and free of preemptive
rights. Since January 25, 2010, except as set forth in
Section 3.2(c) of the Companys Disclosure Schedule,
the Company has not (1) issued any Company Securities,
other than or pursuant to the Options referred to above, that
were outstanding as of February 22, 2010, or
(2) established a record date for, declared, set aside for
payment or paid any dividend on, or made any other distribution
in respect of, any shares of its capital stock.
(d) The Company Common Stock constitutes the only
outstanding class of securities of the Company registered under
the Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder (the
Securities
Act
).
(e) Section 3.2(e) of the Company Disclosure Schedule
sets forth, as of the date of this Agreement, the name and
jurisdiction of organization of each Subsidiary of the Company
and sets forth a complete and accurate list of all outstanding
securities of each Subsidiary and the registered and beneficial
owner thereof. All of the outstanding shares of capital stock
of, or other equity or voting interests in, each Subsidiary of
the Company (except for directors qualifying shares or the
like) are owned directly or indirectly, beneficially and of
record, by the Company free and clear of all liens, pledges,
security interests and transfer restrictions, except for such
transfer restrictions of general applicability as may be
provided under the Securities Act, and other applicable
securities laws or other encumbrances (including any restriction
on the right to vote, sell or otherwise dispose of such shares
of capital stock or other equity or voting interests). Each
outstanding share of capital stock of each Subsidiary of the
Company, which is held, directly or indirectly, by the Company,
is duly authorized, validly issued, fully paid, nonassessable
and free of preemptive rights, and there are no subscriptions,
options, warrants, rights, calls, contracts or other
commitments, understandings, restrictions or arrangements
relating to the issuance, acquisition, redemption, repurchase or
sale of any shares of capital stock or other equity or voting
interests of any Subsidiary of the Company, including any right
of conversion or exchange under any outstanding security,
instrument or agreement, any agreements granting any preemptive
rights, subscription rights, anti-dilutive rights, rights of
first refusal or similar rights with respect to any securities
of any Subsidiary. None of the Subsidiaries has any outstanding
equity compensation plans or policies relating to the capital
stock of, or other equity or voting interests in, any Subsidiary
of the Company. Neither the Company nor any of its Subsidiaries
has any obligation to make any payments based on the price or
value of any securities of any Subsidiary of the Company or
dividends paid thereon or revenues, earnings or financial
performance or any other attribute of any Subsidiary of the
Company.
(f) The Company does not (i) have any Company Joint
Ventures or (ii) control directly or indirectly or have any
direct or indirect equity participation or similar interest in
(and none of the Company or any of its Subsidiaries has any
obligation to make an investment in or capital contribution to)
any corporation, partnership, limited liability company, joint
venture, trust or other business association or entity which is
not a Subsidiary of the Company.
Section
3.3
Authority;
Noncontravention; Voting Requirements
.
(a) The Company has all necessary corporate power and
authority to terminate the Prior Merger Agreement, pay the
Go-Shop Termination Fee (as defined in the Prior
Merger Agreement) and the Parent Expenses (as
defined in the Prior Merger Agreement), execute and deliver this
Agreement and, subject to obtaining the Company Stockholder
Approval, to perform its obligations hereunder and to consummate
the Transactions. The termination of the Prior Merger Agreement,
the payment of the Go-Shop Termination Fee (as
defined in the Prior Merger Agreement) and the Parent
Expenses (as defined in the Prior Merger Agreement), the
execution, delivery and performance by the Company of this
Agreement, and the consummation by it of the Transactions, have
been duly
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authorized and approved by its Board of Directors, and no other
corporate action on the part of the Company is necessary to
authorize the termination of the Prior Merger Agreement, the
payment of the Go-Shop Termination Fee (as defined
in the Prior Merger Agreement) and the Parent
Expenses (as defined in the Prior Merger Agreement), and,
except for obtaining the Company Stockholder Approval, the
execution, delivery and performance by the Company of this
Agreement and the consummation by it of the Transactions. This
Agreement has been duly executed and delivered by the Company
and, assuming due authorization, execution and delivery hereof
by the other parties hereto, constitutes a legal, valid and
binding obligation of the Company, enforceable against the
Company in accordance with its terms, except that such
enforceability (i) may be limited by bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and
other similar laws of general application affecting or relating
to the enforcement of creditors rights generally and
(ii) is subject to general principles of equity, whether
considered in a proceeding at law or in equity (the
Bankruptcy and Equity Exception
).
(b) The Board of Directors of the Company has unanimously
(i) determined in accordance with Section 5.2 of the
Prior Merger Agreement that the Merger and the consummation of
the transactions contemplated hereby constitute a Superior
Proposal (as defined in the Prior Merger Agreement);
(ii) determined that failure to enter into this Agreement
would be inconsistent with the directors fiduciary duties
under applicable Law; (iii) determined that the termination
of the Prior Merger Agreement (in accordance with
Section 7.1(d)(ii) of the Prior Merger Agreement), the
payment of the Go-Shop Termination Fee (as defined
in the Prior Merger Agreement) and the Parent
Expenses (as defined in the Prior Merger Agreement), and
the Merger are fair to, and in the best interests of, the
Company and its stockholders, (iv) declared advisable this
Agreement and the Merger and the Transactions, (v) approved
the termination of the Prior Merger Agreement, the payment of
the Go-Shop Termination Fee (as defined in the Prior
Merger Agreement) and the Parent Expenses (as
defined in the Prior Merger Agreement), and the entry into this
Agreement and the Merger and the Transactions and
(vi) resolved, subject to Section 5.2, to recommend
adoption of this Agreement to the holders of Company Common
Stock. The Board of Directors of the Company has directed that
this Agreement be submitted to the holders of Company Common
Stock for their adoption. The only vote of the stockholders of
the Company required to adopt this Agreement and approve the
transactions contemplated hereby is the Company Stockholder
Approval.
(c) At a meeting duly called and held and at which all
directors were present, the Board of Directors of the Company
has unanimously (i) determined in accordance with
Section 5.2 of the Prior Merger Agreement that the Merger
and the consummation of the transactions contemplated hereby
constitute a Superior Proposal (as defined in the
Prior Merger Agreement); (ii) approved the termination of
the Prior Merger Agreement and the payment of the Go-Shop
Termination Fee (as defined in the Prior Merger Agreement)
and the Parent Expenses (as defined in the Prior
Merger Agreement), (iii) approved and declared advisable
this Agreement and the Transactions, including the Merger,
(iv) determined that the termination of the Prior Merger
Agreement and the payment of the Go-Shop Termination
Fee (as defined in the Prior Merger Agreement) and the
Parent Expenses (as defined in the Prior Merger
Agreement), the entry into this Agreement and the transactions
contemplated hereby, upon the terms and conditions contained
herein, are fair and in the best interests of the Company and
the holders of Company Common Stock, and (v) resolved,
subject to Section 5.2, to recommend that stockholders of
the Company adopt this Agreement and that, subject to
Section 5.3(a), such matter be submitted for consideration
at the Company Stockholders Meeting.
(d) Neither the execution and delivery of this Agreement by
the Company nor the consummation by the Company of the
Transactions, nor performance or compliance by the Company with
any of the terms or provisions hereof, will (i) conflict
with or violate any provision of the Company Charter Documents
or of the similar organizational documents of any of the
Companys Subsidiaries or (ii) assuming that the
authorizations, consents and approvals referred to in
Section 3.4 and the Company Stockholder Approval are
obtained and the filings referred to in Section 3.4 are
made, (x) violate any Law, judgment, writ or injunction of
any Governmental Authority applicable to the Company or any of
its Subsidiaries, (y) violate or constitute a default under
any of the terms, conditions or provisions of any loan or credit
agreement, debenture, note, bond, mortgage, indenture, deed of
trust, lease, sublease, license, contract or other agreement
(each, a
Contract
) to which the Company or
any of its Subsidiaries is a party or accelerate the
Companys or, if applicable, its Subsidiaries,
obligations under any such Contract, or (z) result in the
creation of any Lien on any properties or assets of the Company
or any of its Subsidiaries, except, in the case of clause (ii),
for such violations, defaults or accelerations as would not
reasonably
A-9
be expected to have a Material Adverse Effect. Neither the
execution and delivery of this Agreement by the Company nor the
consummation by the Company of the Transactions, nor performance
or compliance by the Company with any of the terms or provisions
hereof, will violate or constitute a default under any of the
terms, conditions or provisions of the Prior Merger Agreement.
(e) The affirmative vote (in person or by proxy) of the
holders of a majority of the outstanding shares of Company
Common Stock at the Company Stockholders Meeting, or any
adjournment or postponement thereof, in favor of the adoption of
this Agreement (the
Company Stockholder
Approval
) is the only vote or approval of the holders
of any class or series of capital stock of the Company or any of
its Subsidiaries which is necessary to adopt this Agreement and
approve the Transactions.
Section
3.4
Governmental
Approvals
. Except for (i) the filing
with the Securities and Exchange Commission (the
SEC
) of a proxy statement relating to the
Company Stockholders Meeting (as amended or supplemented from
time to time, the
Proxy Statement
) and other
filings required under, and in compliance with other applicable
requirements of, the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder
(the
Exchange Act
), and the rules of the New
York Stock Exchange, (ii) the filing of the Certificate of
Merger with the Secretary of State of the State of Delaware
pursuant to the DGCL, (iii) filings required under, and
compliance with other applicable requirements of, the HSR Act
and (iv) the approvals set forth on Section 3.4 of the
Company Disclosure Schedule (the
Company
Approvals
), no consents or approvals of, or filings,
licenses, permits or authorizations, declarations or
registrations with, any Governmental Authority or any stock
market or stock exchange on which shares of Company Common Stock
are listed for trading are necessary for the execution and
delivery of this Agreement by the Company, the performance by
the Company of its obligations hereunder and the consummation by
the Company of the Transactions, other than such other consents,
approvals, filings, licenses, permits or authorizations,
declarations or registrations that, if not obtained, made or
given, would not reasonably be expected to have a Material
Adverse Effect.
Section
3.5
Company
SEC Documents; Undisclosed Liabilities; Information
Provided
.
(a) The Company has filed with or furnished to the SEC, on
a timely basis, all required registration statements,
certifications, reports and proxy statements with the SEC from
January 30, 2007 (collectively, and in each case including
all exhibits and schedules thereto and documents incorporated by
reference therein, the
Company SEC
Documents
). As of their respective effective dates (in
the case of Company SEC Documents that are registration
statements filed pursuant to the requirements of the Securities
Act) and as of their respective SEC filing dates (in the case of
all other Company SEC Documents), the Company SEC Documents
complied in all material respects with the requirements of the
Exchange Act, the Securities Act and the Sarbanes-Oxley Act of
2002 (the
Sarbanes-Oxley Act
), as the case
may be, and the rules and regulations of the SEC thereunder,
applicable to such Company SEC Documents, and none of the
Company SEC Documents as of such respective dates (or, if
amended prior to the date of this Agreement, the date of the
filing of such amendment, with respect to the disclosures that
are amended) contained any untrue statement of a material fact
or omitted to state a material fact required to be stated
therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading. As
of the date of this Agreement, there are no outstanding or
unresolved comments in comment letters received from the SEC or
its staff. There has been no correspondence between the SEC and
the Company since January 30, 2007. To the Knowledge of the
Company, none of the Company SEC Documents, other than the
preliminary proxy statement, filed March 19, 2010, is the
subject of ongoing SEC review. As of the date of this Agreement,
none of the Companys Subsidiaries is subject to the
reporting requirements of Section 13(a) or 15(d) under the
Exchange Act.
(b) The consolidated financial statements of the Company
included or incorporated by reference in the Company SEC
Documents complied as to form, as of their respective dates of
filing with the SEC, in all material respects with all
applicable accounting requirements and with the published rules
and regulations of the SEC with respect thereto (except, in the
case of unaudited statements, as permitted by
Form 10-Q
of the Exchange Act), have been prepared in accordance with GAAP
applied on a consistent basis during the periods involved
(except (i) with respect to financial statements included
in Company SEC Documents filed as of the date of this Agreement,
as may be indicated in the notes thereto or (ii) as
permitted by
Regulation S-X)
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 changes in shareholders
equity and cash flows of such companies as of
A-10
the dates and for the periods shown. Since January 30,
2007, there has been no material change in the Companys
accounting methods or principles that would be required to be
disclosed in the Companys financial statements in
accordance with GAAP, except as described in the notes thereto.
(c) Neither the Company nor any of its Subsidiaries has any
liabilities or obligations of any nature (whether accrued,
absolute, contingent or otherwise) except liabilities or
obligations (i) disclosed in the balance sheet of the
Company and its Subsidiaries as of January 25, 2010 (the
Balance Sheet Date
) (other than in the notes
thereto) included in the Filed SEC Documents, (ii) incurred
after the Balance Sheet Date in the ordinary course of business,
(iii) as contemplated by this Agreement or otherwise in
connection with the Transactions, or (iv) as would not
reasonably be expected to have a Material Adverse Effect. There
are no unconsolidated Subsidiaries of the Company or any
off-balance sheet arrangements of any type (including any
off-balance sheet arrangement required to be disclosed pursuant
to Item 303(a)(4) of
Regulation S-K
promulgated under the Securities Act) that have not been so
described in the Company SEC Documents nor any obligations to
enter into any such arrangements. Neither the Company nor any of
its Subsidiaries has any liabilities or obligations of any
nature (whether accrued, absolute, contingent or otherwise)
under or with respect to the Prior Merger Agreement other than
the payment of the Go-Shop Termination Fee (as
defined in the Prior Merger Agreement) and the payment of the
Parent Expenses (as defined in the Prior Merger
Agreement).
(d) (i) Since January 30, 2007, subject to any
applicable grace periods, the Company has been and is in
compliance in all material respects with (A) the applicable
provisions of the Sarbanes-Oxley Act and (B) the applicable
listing and corporate governance rules and regulations of the
NYSE.
(ii) The Company has implemented disclosure controls and
procedures (as defined in
Rule 13a-15(e)
of the Exchange Act) that are reasonably designed to ensure that
material information relating to the Company, including its
Subsidiaries, required to be included in reports filed under the
Exchange Act is made known to the chief executive officer and
chief financial officer of the Company by others within those
entities. Neither the Company nor, to the Companys
Knowledge, the Companys independent registered public
accounting firm, has identified or been made aware of
significant deficiencies or material
weaknesses (as defined by the Public Company Accounting
Oversight Board) in the design or operation of the
Companys internal controls and procedures which could
reasonably adversely affect the Companys ability to
record, process, summarize and report financial data, in each
case which has not been subsequently remediated. To the
Companys Knowledge, there is no fraud, whether or not
material, that involves the Companys management or other
employees who have a significant role in the preparation of
financial statements or the internal control over financial
reporting utilized by the Company and its Subsidiaries.
(iii) No executive officer of the Company has failed to
make the certifications required of him or her under
Section 302 or 906 of the Sarbanes-Oxley Act. Neither the
Company nor any of its executive officers has received notice
from any Governmental Authority challenging or questioning the
accuracy, completeness, form or manner of filing of such
certifications. To the Companys Knowledge, there are no
facts or circumstances that would prevent its principal
executive officer and principal financial officer from giving
the certifications and attestations required pursuant to the
rules and regulations adopted pursuant to Section 404 of
the Sarbanes-Oxley Act, without qualification, when next due.
(iv) Neither the Company nor any of its Subsidiaries has
outstanding, extensions of credit to directors or
executive officers of the Company within the meaning of
Section 402 of the Sarbanes-Oxley Act of 2002.
(e) The Proxy Statement (including any amendment or
supplement) to be sent to the stockholders of the Company in
connection with the Company Stockholders Meeting (including any
amendment or supplement or document to be incorporated by
reference) shall not, on the date the Proxy Statement (including
any amendment or supplement) is first mailed to stockholders of
the Company or at the time of the Company Stockholders Meeting,
contain any statement which is false or misleading with respect
to any material fact, or omit to state any material fact
required to be stated therein or necessary in order to make the
statements made therein not false or misleading in light of the
circumstances under which they are made; or, with respect to the
Proxy Statement, omit to state any material fact required to be
stated therein or necessary to correct any statement in any
earlier communication with respect to the solicitation of
proxies for the Company Stockholders Meeting which has become
false or misleading. The Proxy Statement will comply as to form
in all material respects with the requirements of the Exchange
Act.
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Notwithstanding the foregoing, the Company makes no
representation with respect to information supplied by or on
behalf of Parent or Merger Sub for inclusion or incorporation by
reference in the Proxy Statement.
Section
3.6
Absence
of Certain Changes
.
(a) Since January 26, 2009 through the date of this
Agreement, (i) except for the entry into and termination of
the Prior Merger Agreement and the discussions and negotiations
related thereto, the payment of the Go-Shop Termination
Fee (as defined in the Prior Merger Agreement) and the
Parent Expenses (as defined in the Prior Merger
Agreement), the execution and performance of this Agreement and
the discussions and negotiations related thereto, the business
of the Company and its Subsidiaries has been carried on and
conducted in all material respects, in the ordinary course of
business and (ii) there has not been any Material Adverse
Effect or any Effects that, individually or in the aggregate,
would reasonably be expected to have a Material Adverse Effect.
(b) Since November 2, 2009 through the date of this
Agreement, except for the entry into and termination of the
Prior Merger Agreement and the payment of the Go-Shop
Termination Fee (as defined in the Prior Merger Agreement)
and the Parent Expenses (as defined in the Prior
Merger Agreement), there has not been any other action or event
that would have required the consent of Parent or be prohibited
by Section 5.1 of this Agreement had such action or event
occurred after the date of this Agreement.
(c) Since the date of this Agreement, there has not been
any Material Adverse Effect or any Effects that, individually or
in the aggregate, would reasonably be expected to have a
Material Adverse Effect.
Section
3.7
Legal
Proceedings
. Except as would not reasonably
be expected to have a Material Adverse Effect, there is no
pending or, to the Knowledge of the Company, threatened, legal
or administrative proceeding, claim, suit, inquiry,
investigation, arbitration or action (an
Action
) against the Company or any of its
Subsidiaries, nor is there any injunction, order, judgment,
ruling, decree, writ or other requirement imposed upon the
Company or any of its Subsidiaries, in each case, by or before
any Governmental Authority. As of the date of this Agreement, to
the Knowledge of the Company, no director or officer of the
Company or any of its Subsidiaries is a defendant in any suit,
action, or proceeding to which the Company or any of its
Subsidiaries is not also a defendant, including as a nominal
defendant, in connection with his or her status as a director or
officer of the Company or any of its Subsidiaries. Except as
would not reasonably be expected to have a Material Adverse
Effect, there are no injunctions, orders, judgments, rulings,
decrees, awards, writs, stipulations, arbitration awards or
other requirements of any kind outstanding against the Company
or any of its Subsidiaries or to which the Company or any of its
Subsidiaries are subject.
Section
3.8
Compliance
With Laws; Permits; Regulations
.
(a) The Company and its Subsidiaries are, and since
January 30, 2007 have been, in compliance with all, and
have not breached or violated any state or federal laws,
statutes, common laws, ordinances, codes, rules, orders,
judgments, injunctions, writs, decrees, governmental guidelines
or interpretations having the force of law, permits, proprietary
interests, regulations, decrees and orders of Governmental
Authorities (collectively,
Laws
) applicable
to the Company or any of its Subsidiaries, except for such
non-compliance as would not reasonably be expected to have a
Material Adverse Effect.
(b) The Company and each of its Subsidiaries hold all
licenses, franchises, permits, certificates, approvals and
authorizations from Governmental Authorities necessary for the
lawful conduct of their respective businesses (collectively,
Permits
), except where the failure to hold
the same would not reasonably be expected to have, individually
or in the aggregate, a Material Adverse Effect. The Company and
its Subsidiaries are in compliance with the terms of all
Permits, except for such non-compliance as would not reasonably
be expected to have, individually or in the aggregate, a
Material Adverse Effect.
Section
3.9
Company
Related Party Transactions
. Except as
expressly disclosed in the Filed SEC Documents, since
January 27, 2009, there are no transactions, or series of
related transactions, agreements, arrangements or
understandings, nor are there any currently proposed
transactions, or series of related transactions, between the
Company or any of its Subsidiaries, on the one hand, and any
current or former director or officer, other Affiliate of the
Company or any of its Subsidiaries or any Person who
beneficially owns five percent (5%) or more of the Company
Common Stock (or any Affiliate of any of the foregoing), on the
other hand, that, individually or
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aggregate, exceeds or would exceed $120,000 per year (together
with any such transactions expressly disclosed in the Filed SEC
Documents, a
Company Related Party
Transaction
).
Section
3.10
Tax
Matters
.
(a) (i) The Company and each of its Subsidiaries has
prepared (or caused to be prepared) and timely filed (taking
into account valid extensions of time within which to file) all
Tax Returns required to be filed by any of them and all such
filed Tax Returns (taking into account all amendments thereto)
are true complete and accurate in all material respects;
(ii) the Company and each of its Subsidiaries timely paid
all Taxes that are owed by it (whether or not shown on any Tax
Returns); (iii) as of the date of this Agreement, there are
not pending or, to the Knowledge of the Company, threatened, any
audits, examinations, investigations or other proceedings in
respect of any Taxes of the Company or any of its Subsidiaries;
(iv) there are no Liens for Taxes on any of the assets of
the Company or any of its subsidiaries other than Permitted
Liens; (v) none of the Company or any of its Subsidiaries
has been a controlled corporation or a
distributing corporation in any distribution
occurring during the two-year period ending on the date hereof
that was purported or intended to be governed by
Section 355 of the Code (or any similar provision of state,
local or foreign Law); (vi) all amounts of Tax required to
be withheld by the Company and each of its Subsidiaries have
been timely withheld and paid over to the appropriate
Governmental Authority; (vii) no deficiency for any Tax has
been asserted or assessed by any Governmental Authority in
writing against the Company or any of its Subsidiaries (or, to
the Knowledge of the Company, has been threatened or proposed),
except for deficiencies which have been satisfied by payment in
full, settled or been withdrawn or which are being diligently
contested in good faith by appropriate proceedings and for which
adequate reserves have been established in accordance with GAAP;
(viii) neither the Company nor any of its Subsidiaries has
waived any statute of limitations in respect of Taxes or agreed
to any extension of time with respect to an assessment or
deficiency for Taxes (other than pursuant to extensions of time
to file Tax Returns obtained in the ordinary course);
(ix) no written requests for waivers of the time to assess
any Taxes of the Company or its Subsidiaries are pending;
(x) neither the Company nor any of its Subsidiaries
(A) has been a member of an affiliated group filing a
consolidated federal income Tax Return (other than a group the
common parent of which was the Company) or (B) has any
liability for the Taxes of any person (other than the Company or
any of its Subsidiaries) under Treasury
Regulation Section 1.1502-6
(or any similar provision of state, local or foreign Law), as a
transferee or successor, or pursuant to any indemnification,
allocation or sharing agreement with respect to Taxes that could
give rise to a payment or indemnification obligation (other than
agreements among the Company and its Subsidiaries and other than
customary Tax indemnifications contained in credit or other
commercial agreements the primary purpose of which does not
relate to Taxes); (xi) neither the Company nor any of its
subsidiaries has engaged in any listed transaction
within the meaning of Treasury
Regulation Section 1.6011-4(b)(2);
(xii) the Company is not, and has not been at any time
within the last five years, a United States real property
holding corporation within the meaning of Section 897
of the Code; (xiii) neither the Company nor any of its
Subsidiaries owns any property of a character, the indirect
transfer of which, pursuant to this Agreement, would give rise
to documentary, stamp or other transfer Tax; and
(xiv) neither the Company nor any of its Subsidiaries has
made any payments, or has been or is a party to any agreement,
contract, arrangement or plan that could result in it making
payments, that have resulted or would result, separately or in
the aggregate, in the payment of any parachute
payment within the meaning of Code section 280G or in
the imposition of an excise Tax under Code section 4999 (or
any corresponding provisions of state, local or foreign Tax law)
or that were or would not be deductible under Code
sections 162 or 404.
(b) For purposes of this Agreement:
(x)
Tax
shall mean any and all federal,
state, local or foreign taxes, fees, levies, duties, tariffs,
imposts, and other similar charges (together with any and all
interest, penalties and additions to tax) imposed by any
governmental or taxing authority including: taxes or other
charges on or with respect to income, franchises, windfall or
other profits, gross receipts, property, sales, use, capital
stock, payroll, employment, social security, workers
compensation, unemployment compensation, or net worth; taxes or
other charges in the nature of excise, withholding, ad valorem,
stamp, transfer, value added, or gains taxes; license,
registration and documentation fees; and customs duties,
tariffs, and similar charges, together with any interest or
penalty, addition to tax or additional amount imposed by any
Governmental Authority; and liability for the payment of any of
the foregoing as a result of (A) being a transferee or
successor, (B) being a member of an affiliated,
consolidated, combined or unitary group, (C) being party to
any tax sharing agreement and (D) any express or implied
obligation to indemnify any other person with respect to the
payment of any of the foregoing and (y)
Tax
Returns
shall mean
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returns, reports, claims for refund, declarations of estimated
Taxes and information statements, including any schedule or
attachment thereto or any amendment thereof, with respect to
Taxes required to be filed with the IRS or any other
governmental or taxing authority, domestic or foreign, including
consolidated, combined and unitary tax returns.
Section
3.11
Employee
Benefits
.
(a) Section 3.11 of the Company Disclosure Schedule
contains true and complete lists, by country, of each Company
Plan. The Company has made available to Parent true, correct and
complete copies of (1) each Company Plan document,
including any amendments thereto and in the case of unwritten
Company Plans, written descriptions thereof, (2) the two
most recent annual reports (Form 5500 series or local law
equivalent) required to be filed with the IRS (or equivalent
Governmental Authority under local Law) with respect to each
Company Plan (if any such report was required) and the two most
recent actuarial valuations or similar reports with respect to
each Company Plan for which such report is available, (3) a
correct and complete copy of the most recent IRS determination
or opinion letter received with respect to each Company Plan,
(4) the most recent summary plan description for each
Company Plan for which such summary plan description is
required, (5) each insurance or group annuity contract or
other funding vehicle relating to any Company Plan,
(6) each employee handbook or other similar employee
communication, and (7) copies of any 280G calculation
prepared (whether or not final) with respect to any employee,
director or independent contractor of the Company in connection
with the transactions contemplated by this Agreement (together
with the underlying documentation on which such calculation is
based).
(b) Except as would not reasonably be expected to have a
Material Adverse Effect, (i) each Company Plan has been, in
all material respects, administered in compliance with its terms
and applicable Laws, including ERISA and the Code, as
applicable, (ii) each Company Plan intended to be
qualified within the meaning of Section 401(a)
of the Code has received a favorable determination letter from
the IRS or is entitled to rely upon a favorable opinion issued
by the IRS, and to the Knowledge of the Company, there are no
existing circumstances or any events that have occurred that
could reasonably be expected to affect adversely the qualified
status of any such Company Plan, (iii) neither the Company
nor its Subsidiaries is or reasonably could be subject to either
a liability pursuant to Section 502 of ERISA or a tax
imposed pursuant to Section 4975 or 4976 of the Code,
(iv) there are no pending, or to the Knowledge of the
Company, threatened or anticipated claims (other than routine
claims for benefits) by, on behalf of or against any Company
Plan or any trust related thereto which could reasonably be
expected to result in any liability to the Company or any of its
Subsidiaries; and (v) no audit or other proceeding by a
Governmental Authority is pending, or to the Knowledge of the
Company threatened or anticipated.
(c) To the Knowledge of the Company, all contributions or
other material amounts payable by the Company or its
Subsidiaries as of or prior to the date hereof with respect to
each Company Plan in respect of current or prior plan years have
been paid on a timely basis or if not yet paid has been accrued
in accordance with GAAP.
(d) Neither the Company nor any other Person that would be
or, at any relevant time, would have been considered a single
employer with the Company under the Code or ERISA has ever
maintained, contributed to, or been required to contribute to a
plan subject to Title IV of ERISA or Code Section 412,
including any single employer defined benefit plan
or any multiemployer plan each as defined in
Section 4001 of ERISA.
(e) Except as required under Section 601
et
seq
. of ERISA, no Company Plan provides benefits or coverage
in the nature of health, life or disability insurance following
retirement or other termination of employment.
(f) Except as set forth in Section 3.11(f) of the
Company Disclosure Schedule, the consummation of the
transactions contemplated by this Agreement will not, either
alone or in combination with another event, (i) entitle any
employee, director or officer of the Company or any of its
Subsidiaries to severance pay, unemployment compensation or any
other payment, (ii) accelerate the time of payment or
vesting, or increase the amount of compensation due to any such
employee, director or officer, (iii) directly or indirectly
cause the Company to transfer or set aside any assets to fund
any benefits under any Company Plan or any employment or
individual consulting agreement, (iv) otherwise give rise
to any material liability under any Company Plan or any
employment or individual consulting agreement or (v) limit
or restrict the right to amend, terminate or transfer the assets
of any Company Plan on or following the Effective Time.
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(g) To the Knowledge of the Company, each Company Plan that
is a nonqualified deferred compensation plan (as
defined in Section 409A of the Code and the Treasury
Regulation promulgated thereunder) did not fail to be operated
in good faith compliance with Section 409A of the Code and
the Treasury Regulations promulgated thereunder from
January 1, 2005 through December 31, 2008 and has not
failed to be maintained and operated in compliance with
Section 409A of the Code and the Treasury Regulations
promulgated thereunder from January 1, 2009 until the
Closing Date.
(h) Each Company Plan may be amended or terminated without
penalty other than the payment of benefits, fees or charges
accrued or incurred through the date of termination.
(i) The Company has received a determination letter with
respect to any voluntary employees beneficiary
association, within the meaning of Section 501(c)(9)
of the Code (
VEBA
), which remains in full
force and effect. The operations of the VEBA and Companys
funding policy with respect to the VEBA complies in all material
respects with the applicable provisions of the Code and ERISA.
(j) To the Knowledge of the Company, all Foreign Plans have
been established, maintained, and administered in all material
respects in compliance with their terms and all applicable
statutes, laws, ordinances, rules, orders, decrees, judgments,
writs and regulations of any controlling governmental authority
or instrumentality.
(k) To the Knowledge of the Company, with respect to the
Foreign Plans, except as would not result in material liability
to the Company or its Subsidiaries: (i) all required
contributions have been made in accordance with applicable local
statutory requirements or accrued to the extent required by
applicable local statutory requirements; (ii) the fair
market value of the assets of each funded Foreign Plan, the
liability of each insurer for any Foreign Plan funded through
insurance or the book reserve established for any Foreign Plan,
together with any accrued contributions, is sufficient to
procure or provide for the benefits determined on any ongoing
basis (actual or contingent) accrued to the Closing Date (i.e.,
on an accrued benefit obligation basis as is defined
in SFAS 87) with respect to all current and former
participants under such Foreign Plan according to the actuarial
assumptions and valuations most recently used to determine
employer contributions to such Foreign Plan, and none of the
transactions contemplated by this Agreement shall cause such
assets or insurance obligations or book reserves to be less than
such benefit obligations; and (iii) there is no liability
with respect to any funded Foreign Plan which will result by
reason of the transactions contemplated by this Agreement.
(l) Section 3.11(l) of the Company Disclosure Schedule
sets forth the Companys accrued liability in respect of
Company matching contributions under the ESPP as of the date of
this Agreement.
Section
3.12
Labor
and Employment Matters
.
(a) Except as disclosed in Section 3.12(a) of the
Company Disclosure Schedule or, in the case of clauses (vi)
and (vii), as would not reasonably be expected to have a
Material Adverse Effect: (i) neither the Company nor any of
its Subsidiaries is a party to any collective bargaining
agreement or other agreement with a labor union or like
organization; (ii) to the Knowledge of the Company, as of
the date hereof, there are no activities or proceedings of any
labor organization to organize any employees of the Company or
any of its Subsidiaries and no demand for recognition as the
exclusive bargaining representative of any employees has been
made by or on behalf of any labor or like organization;
(iii) no employees of the Company or any of its
Subsidiaries are represented by any labor union or works
council; (iv) as of the date hereof, there is no pending
or, to the Knowledge of the Company, threatened strike, lockout,
slowdown, or work stoppage ; (v) there is no unfair labor
practice charge against the Company or any of its Subsidiaries
pending before the National Labor Relations Board or any
comparable labor relations authority; (vi) there is no
pending or, to the Knowledge of the Company, threatened
grievance, charge, complaint, audit or investigation by or
before any Governmental Authority with respect to any current or
former employees of the Company or any of its Subsidiaries; and
(vii) the Company has complied with all applicable Laws
related to employment, employment practices, wages, hours and
other terms and conditions of employment (including the
classification and compensation of employees for purposes of the
Fair Labor Standards Act and cognate state laws) and other Laws
in respect of any reduction in force, including notice,
information and consultation requirements.
(b) True and complete information as to the name, current
job title and compensation for each of the last three years of
all current directors and executive officers of the Company and
its Subsidiaries has been provided to Parent. As of the date
hereof, to the Knowledge of the Company, no current executive,
key employee or group of employees
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has given notice of termination of employment or otherwise
disclosed plans to terminate employment with the Company or any
Company Subsidiary.
Section
3.13
Environmental
Matters
. Except for those matters that would
not reasonably be expected to have a Material Adverse Effect,
(A) each of the Company and its Subsidiaries is and has
been in compliance with all applicable Laws, regulations or
other legal requirements relating to the protection of the
environment or human health and safety (
Environmental
Laws
), which compliance includes obtaining,
maintaining or complying with all Permits required under
Environmental Laws for the operation of their respective
businesses as currently conducted, (B) there is no
investigation, suit, claim, action or proceeding relating to or
arising under Environmental Laws that is pending or, to the
Knowledge of the Company, threatened against the Company or any
of its Subsidiaries or any real property owned, operated or
leased by the Company or any of its Subsidiaries,
(C) neither the Company nor any of its Subsidiaries has
received any notice of or entered into any obligation,
liability, order, settlement, judgment, injunction or decree
involving uncompleted, outstanding or unresolved requirements
relating to or arising under Environmental Laws and
(D) there are no Hazardous Materials present on any real
property owned or leased by the Company or any of its
Subsidiaries.
Section
3.14
Intellectual
Property
.
(a) The Company and its Subsidiaries are the sole and
exclusive owners of all of the Registered Intellectual Property,
and the Registered Intellectual Property is not subject to any
Lien other than Permitted Liens. To the Knowledge of the
Company, all of the Registered Intellectual Property is valid
and enforceable and none of the Registered Intellectual Property
is being misappropriated, violated, or infringed by any third
party.
(b) Except as would not reasonably be expected to have a
Material Adverse Effect on the Company, the Company and its
Subsidiaries either own or have sufficient rights to use under
valid and enforceable written agreements all Intellectual
Property used in the conduct of the business of the Company and
its Subsidiaries as currently conducted (the
Company
Intellectual Property
).
(c) Except as would not reasonably be expected to have a
Material Adverse Effect and except as set forth in
Section 3.14(c) of the Company Disclosure Schedule, no
claims are pending or, to the Knowledge of the Company,
threatened, (i) challenging the ownership, enforceability,
scope, validity, or use by the Company or any Subsidiary of any
Company Intellectual Property owned by the Company, or
(ii) alleging that the Company or any of its Subsidiaries
is violating, misappropriating or infringing the rights of any
Person with regard to any Intellectual Property.
(d) Except as would not reasonably be expected to have a
Material Adverse Effect, (i) no Person is infringing the
rights of the Company or any of its Subsidiaries with respect to
any Intellectual Property owned by the Company or a Subsidiary
and (ii) to the Knowledge of the Company, the operation of
the business of the Company and its Subsidiaries as currently
conducted or contemplated to be conducted does not violate,
misappropriate or infringe the Intellectual Property of any
other Person.
(e) Except as would not reasonably be expected to have a
Material Adverse Effect the Company
and/or
its
Subsidiaries take and have taken commercially reasonable actions
to maintain and preserve any Intellectual Property owned by the
Company or its Subsidiaries, including requiring, through signed
written agreement or binding employment policy, all persons who
receive trade secret or confidential or proprietary data or
information of the Company or a Subsidiary not to disclose such
trade secrets, data or information to any third party, and not
to use such trade secrets, data or information for any purpose
other than the purposes of the Company and its Subsidiaries.
(f) Except as would not reasonably be expected to have a
Material Adverse Effect, the Company and its Subsidiaries
maintain policies and procedures regarding data security,
privacy, data transfer, and the use of data that are
commercially reasonable and, if followed, ensure that the
Company and its Subsidiaries are in compliance with all
applicable Laws. Except as would not reasonably be expected to
have a Material Adverse Effect, the Company and its Subsidiaries
are in compliance with all such policies and other legal
requirements pertaining to data privacy and data security.
Except as set forth in Section 3.14(f) of the Company
Disclosure Schedule, to the Knowledge of the Company:
(i) there have been no material losses or thefts of data or
security breaches relating to data used in the business of the
Company and its Subsidiaries; (ii) violations of any
security policy regarding any such data; (iii) any
A-16
unauthorized access or unauthorized use of any data; and
(iv) no unintended or improper disclosure of any personally
identifiable information in the possession, custody or control
of the Company or a Subsidiary or a contractor or agent acting
on behalf of the Company or a Subsidiary.
(g) The Company and its Subsidiaries possess or control:
(i) the source code, object code and documentation for all
Owned Software; and (ii) to the extent necessary to
develop, support or maintain Software as developed, supported or
maintained, as applicable, in their business, the object code or
the source code and documentation for Licensed Software. No
person other than the Company and its Subsidiaries has any
ownership right or interest in or with respect to the material
Owned Software. The Company and its Subsidiaries have disclosed
source code to material Owned Software only pursuant to written
confidentiality terms that reasonably protect the Company or its
Subsidiarys rights in such Owned Software. To the
Knowledge of the Company, no material Owned Software is subject
to any obligation that would require the Company or its
Subsidiaries to divulge to any person any source code or trade
secret that is part of any material Owned Software.
Section
3.15
Properties
.
(a) Section 3.15(a)(i) of the Company Disclosure
Schedule identifies by street address or location each parcel of
Material Owned Real Property and Section 3.15(a)(ii) of the
Company Disclosure Schedule identifies by street address or
location of each Material Leased Real Property and lists, with
respect to each such Lease, the date of such Lease and any
material amendments thereto. Except as has not had and would not
reasonably be expected to have, individually or in the
aggregate, a Material Real Property Adverse Effect, the Company
or one of its Subsidiaries has (A) good, valid and
marketable fee simple title to all Owned Real Property and
(B) valid leasehold estates in all Leased Real Property, in
all cases free and clear of all Liens except for Permitted
Liens. Neither the Company nor any of its Subsidiaries, and to
the Knowledge of the Company, no other party, is in breach of or
default under the terms of any Lease, Operating Agreement or,
except as would not reasonably be expected to have a Material
Real Property Adverse Effect, other Lien encumbering the Real
Property (or has taken or failed to take any action which, with
notice, lapse of time, or both, would constitute a default) or
has received any notice of default, termination or non-renewal
under any Lease, Operating Agreement or, except as would not
reasonably be expected to have a Material Real Property Adverse
Effect, other such Lien encumbering the Real Property except as
set forth in Section 3.15(a)(iii) of the Company Disclosure
Schedule. Each Lease is a valid and binding obligation of the
Company or one of its Subsidiaries, enforceable in accordance
with its terms.
(b) Section 3.15(b) of the Company Disclosure Schedule
identifies each Lease accounted for by the Company or the
applicable subsidiary as a capital lease.
(c) Section 3.15(c) of the Company Disclosure Schedule
identifies by street address or location each parcel of Real
Property leased, subleased or otherwise licensed by the Company
or any of its Subsidiaries (whether as landlord, sublandlord or
licensor) to, or otherwise occupied by, any Franchisee or any
other Person (collectively, the
Subleased Real
Property
) pursuant to a Third Party Lease and also
lists, with respect to each such Third Party Lease, the date of
such Third Party Lease and any material amendments thereto.
Neither the Company nor any of its Subsidiaries, and to the
Knowledge of the Company, no other party, is in breach of or
default under the terms of any Third Party Lease (or has taken
or failed to take any action which, with notice, lapse of time,
or both, would constitute a default) or has received any notice
of default, termination or non-renewal under any Third Party
Lease. Each Third Party Lease is a valid and binding obligation
of the Company or one of its Subsidiaries, enforceable in
accordance with its terms. Except for the Company, its
Subsidiaries and the counterparties to the Third Party Leases
and the rights of parties under Permitted Liens and Permitted
Encumbrances or as set forth in Section 3.15(c) of the
Company Disclosure Schedule, neither the Company nor any of its
Subsidiaries has entered into any lease, sublease, license or
other Contract granting any Person the right to use or occupy
all or any portion of the Real Property.
(d) A true and correct copy of each Material Lease and any
related (i) notices or memoranda of lease,
(ii) subordination, non-disturbance and attornment
agreements, (iii) estoppel certificates and
(iv) material correspondence related thereto and as of the
date of this Agreement has been made available to Parent.
(e) Except as would not reasonably be expected to have,
individually or in the aggregate, a Material Real Property
Adverse Effect, the consummation of the Transactions
contemplated by this Agreement will not cause the expiration,
termination or breach of any Permit, Operating Agreement, Lease
or Third Party Lease or the
A-17
acceleration of any payment obligation or the alteration of any
material terms of, or result in the creation or imposition of
any Lien (other than Permitted Liens) under, any Permit,
Operating Agreement, Lease or Third Party Lease or require the
prior consent or approval of or notice to any other party to any
Permit, Operating Agreement, Lease or Third Party Lease.
(f) Except as has not had and would not reasonably be
expected to have, individually or in the aggregate, a Material
Real Property Adverse Effect, the Company and its Subsidiaries
have good and marketable title to, or valid and enforceable
rights to use under existing franchises, easements or licenses,
or valid and enforceable leasehold interests in, all of its
tangible personal properties and assets necessary to carry on
their businesses as is now being conducted, free and clear of
all Liens except for Permitted Liens.
(g) The restaurants, warehouses, stores, plants, production
facilities, processing facilities, fixtures, trade fixtures and
improvements owned or leased by the Company and any Subsidiary
or otherwise used by the Company or any Subsidiary in connection
with the operation of their businesses are (as to physical plant
and structure) structurally sound, in good operating condition
and repair, ordinary wear and tear excepted, and are adequate
for the uses to which they are being put, in each case with such
exceptions as would not reasonably be expected to have,
individually or in the aggregate, a Material Real Property
Adverse Effect.
(h) Neither the Company nor a Subsidiary has received
written notice of any pending condemnation, expropriation,
eminent domain or similar Action affecting all or any portion of
the Real Property, and, to the Companys Knowledge, no such
Action is threatened.
(i) Except as would not reasonably be expected to have,
individually or in the aggregate, a Material Real Property
Adverse Effect, all Permits necessary in connection with the
construction upon, and present use and operation of, the Real
Property and the lawful occupancy thereof in the business of the
Company and its Subsidiaries have been issued by the appropriate
Governmental Authorities. The current use of the Real Property
is, in all material respects, in accordance with the
certificates of occupancy relating thereto and the terms of any
such Permits. Except as would not reasonably be expected to
have, individually or in the aggregate, a Material Real Property
Adverse Effect, neither the Company nor any Subsidiary is in
violation of any Law relating to Real Property, including
setback requirements and zoning restrictions and ordinances.
(j) Except as would not reasonably be expected to have,
individually or in the aggregate, a Material Real Property
Adverse Effect, each parcel of Material Real Property is
supplied with utilities and other services necessary for the
operation of such Material Real Property as the same is
currently operated, all of which utilities and other services
are provided via public roads or via permanent, irrevocable
appurtenant easements benefiting such Material Real Property.
Each parcel of Material Real Property abuts on, and has direct
vehicular access to, a public road, or has access to a public
road via a permanent, irrevocable appurtenant easement
benefiting the parcel of Material Real Property, in each case,
to the extent necessary for the conduct of the business of the
Company and its Subsidiaries as it is currently being conducted.
Section
3.16
Rights
Agreement; Anti-Takeover Provisions
. The
Company does not have any outstanding rights under the Rights
Agreement or any similar rights. The Board of Directors of the
Company has taken all necessary action so that any takeover,
anti-takeover, moratorium, fair price, control
share or other similar Law enacted under any Law
applicable to the Company or similar provisions under the
Company Charter Documents do not, and will not, apply to this
Agreement, the Merger or the other transactions contemplated
hereby.
Section
3.17
Contracts
.
(a) Section 3.17(a) of the Company Disclosure Schedule
sets forth a list of all Material Contracts as of the date of
this Agreement except for any Contract which has been filed as
an exhibit to any Filed SEC Documents. For purposes of this
Agreement,
Material Contract
means all
Contracts to which the Company or any of its Subsidiaries is a
party or by which the Company, any of its Subsidiaries or any of
their respective properties or assets
A-18
is bound (other than Company Plans or Franchise Agreements,
except as set forth in Section 3.17(a)(xv) below) that:
(i) are or 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 or disclosed by the Company on a
Current Report on
Form 8-K;
(ii) with respect to a joint venture, partnership, limited
liability or other similar agreement or arrangement, relate to
the formation, creation, operation, management or control of any
partnership or joint venture that is material to the business of
the Company and its Subsidiaries, taken as a whole;
(iii) are mortgages, indentures, guarantees, loans or
credit agreements, security agreements or other Contracts
relating to the borrowing of money, extension of credit, surety
bonds or guarantees of Indebtedness in each case in excess of
$1,000,000 individually or $5,000,000 in the aggregate, other
than (a) accounts receivables and payables and
(b) loans to direct or indirect wholly-owned Subsidiaries,
in each case, in the ordinary course of business;
(iv) were entered into after November 2, 2009, and
relate to the acquisition from another person or disposition to
another Person, directly or indirectly (by merger, license or
otherwise), of assets or capital stock or other equity interests
of another Person for aggregate consideration under such
Contract (or series of related Contracts) in excess of
$2,500,000 (other than acquisitions or dispositions of inventory
in the ordinary course of business);
(v) are Contracts (or a series of related Contracts) for
the purchase of materials, supplies, goods, services, equipment
or other assets providing for either (a) annual payments by
the Company and its Subsidiaries of $5,000,000 or more or
(b) aggregate payments by the Company and its Subsidiaries
of $7,500,000 or more, in each case that cannot be terminated on
not more than 60 days notice without payment by the
Company or any Subsidiary of any material penalty;
(vi) are sales, distribution or other similar Contracts
providing for the sale by the Company or any Subsidiary of
materials, supplies, goods, services, equipment or other assets
that provides for either (a) annual payments to the Company
and its Subsidiaries of $5,000,000 or more or (b) aggregate
payments to the Company and its Subsidiaries of $7,500,000 or
more;
(vii) are Contracts providing for any quantity discount,
volume purchase rebate or bill back sales arrangement that will
continue after the Effective Time and is material to the conduct
of the business of the Company and its Subsidiaries, taken as a
whole;
(viii) are Material Leases;
(ix) are Contracts (or a series of related Contracts) with
any agency or department of the United States federal government
for the purchase of goods
and/or
services from the Company or any of its Subsidiaries which would
reasonably be expected to result in payments to the Company or
any of its Subsidiaries in excess of $1,000,000;
(x) relate to an acquisition, divestiture, merger, license
or similar transaction and contains representations, covenants,
indemnities or other obligations (including indemnification,
earn-out or other contingent obligations), that are
still in effect and, individually, could reasonably be expected
to result in payments by the Company or any of its Subsidiaries
in excess of $1,000,000;
(xi) prohibits the payment of dividends or distributions in
respect of the capital stock of the Company or any of its
wholly-owned Subsidiaries, prohibits the pledging of the capital
stock of the Company or any wholly-owned Subsidiary of the
Company or prohibits the issuance of guarantees by any
wholly-owned Subsidiary of the Company;
(xii) are license agreements pursuant to which the Company
or any of its Subsidiaries is a named party and licenses in
Intellectual Property or licenses out Intellectual Property
owned by the Company or its Subsidiaries (other than license
agreements for commercially available software on standard
terms);
A-19
(xiii) contains provisions that prohibit the Company or any
of its Subsidiaries or any Person that controls, or is under
common control with, the Company from competing in any material
line of business or grants a right of exclusivity to any third
party which prevents the Company or a Subsidiary from entering
any territory, market, or field or freely engaging in business
anywhere in the world (including any agreement to which the
Company or any of its Subsidiaries or any Person that controls,
or is under common control with, the Company are subject that
grants to any party most-favored-nation or similar rights);
(xiv) accounted for aggregate revenue to the Company or any
of its Subsidiaries of (A) more than $30,000,000 during the
Companys 2009 fiscal year or (B) more than
$30,000,000 during the Companys 2010 fiscal year;
(xv) are Franchise Agreements or other Contracts relating
to any Company Related Party Transaction;
(xvi) provides for the indemnification of any officer,
director, manager or employee by the Company or any of its
Subsidiaries;
(xvii) provides for the payment, increase or vesting of any
benefits or compensation in connection with the Transactions;
(xviii) provides compensation, severance or other benefits
or rights to any officer, director, employee, consultant, or
other individual (other than a Company Plan); or
(xix) relates to any material settlement, other than
(A) releases immaterial in nature or amount entered into
with former employees or independent contractors of the Company
or any of its Subsidiaries in the ordinary course of business in
connection with the routine cessation of such employees or
independent contractors relationship with the Company or
any of its Subsidiaries, (B) settlement agreements for cash
only (which has been paid) and does not exceed $1,000,000 as to
such settlement or (C) settlement agreements entered into
more than one year prior to the date of this Agreement under
which neither the Company nor any of its Subsidiaries has any
continuing material financial obligations, liabilities or rights
(excluding releases).
(b) (i) Each Material Contract is valid and binding on
the Company and any of its Subsidiaries to the extent such
Subsidiary is a party thereto, as applicable, and to the
Knowledge of the Company, each other party thereto, and is in
full force and effect and enforceable in accordance with its
terms, (ii) the Company and each of its Subsidiaries, and,
to the Knowledge of the Company, any other party thereto, has
performed all obligations required to be performed by it under
each Material Contract, (iii) neither the Company nor any
of its Subsidiaries has received notice of, the existence of any
event or condition which constitutes, or, after notice or lapse
of time or both, will constitute, a default on the part of the
Company or any of its Subsidiaries under any such Material
Contract, (iv) there are no events or conditions which
constitute, or, after notice or lapse of time or both, will
constitute a default on the part of any counterparty under such
Material Contract, (v) to the Knowledge of the Company, the
Company has not received any notice from any counterparty that
such counterparty intends to terminate, or not renew, any
Material Contract, or is seeking the renegotiation thereof in
any material respect or substitute performance thereunder in any
material respect, and (vi) the completion of the
transactions contemplated by this Agreement will not cause the
expiration, termination or breach of any Material Contract, or
the acceleration of any payment obligation or the alteration of
any material terms of any Material Contract. As of the date
hereof, with respect to Material Contracts either made available
to Parent by the Company or publicly filed with the SEC, the
versions of such Material Contracts either made available or
publicly filed contain all of the material terms thereof.
Section
3.18
Franchise
Matters
.
(a) Section 3.18(a) of the Company Disclosure Schedule
sets forth a list of all Franchise Agreements that are currently
in effect between the Company or one of its Subsidiaries and any
Franchisee, which list identifies (i) the name of the
Franchisee and the Franchise brand, (ii) the date of the
Franchise Agreement, and (iii) the location of the
franchised business or area in which the Franchisee has the
right to develop franchised businesses. Each of the Franchise
Agreements for a Franchise to be operated in the United States
is substantially similar to the form of Franchise Agreement
incorporated into the current FDD that is applicable to the type
of Franchise granted to such Franchisee, except (A) as
disclosed in Section 3.18(a) of the Company Disclosure
Schedule or (B) changes that would not reasonably be
expected to have a Material Adverse Effect. The Company has made
available to Parent
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accurate and complete copies of each of the Franchise Agreements
for a Franchise to be operated outside of the United States.
(b) (i) Each Franchise Agreement is valid and binding
on the Company
and/or
any
of its Subsidiaries to the extent such Subsidiary is a party
thereto, as applicable, and to the Knowledge of the Company,
each other party thereto, and is in full force and effect and
enforceable in accordance with its terms, except for where the
failure to be valid, binding, enforceable and in full force and
effect, either individually or in the aggregate, would not
reasonably be expected to have, a Material Adverse Effect,
(ii) the Company and each of its Subsidiaries, and, to the
Knowledge of the Company, any other party thereto, has performed
all obligations required to be performed by it under each
Franchise Agreement, except where such noncompliance, either
individually or in the aggregate, would not reasonably be
expected to have a Material Adverse Effect, (iii) neither
the Company nor any of its Subsidiaries has received written
notice of the existence of any event or condition which
constitutes, or, after notice or lapse of time or both, will
constitute, a default on the part of the Company or any of its
Subsidiaries under any Franchise Agreement, (A) from any
Material Franchisee, or (B) from any other Franchisee
except where such default, either individually or in the
aggregate, would not reasonably be expected to have a Material
Adverse Effect, (iv) there are no events or conditions
which constitute, or, after notice or lapse of time or both,
will constitute a default on the part of any counterparty under
such Franchise Agreement, except as does not have, and would not
reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect; (v) to the Knowledge
of the Company, neither the Company nor any Subsidiary has
received any notice from any Material Franchisee that such
Material Franchisee intends to terminate, or not renew, any
Franchise Agreement, or is seeking the renegotiation thereof in
any material respect or substitute performance thereunder in any
material respect; and (vi) the completion of the
transactions contemplated by this Agreement will not cause the
expiration, termination or breach of any Material Franchise
Agreement, or the acceleration of any payment obligation or the
alteration of any material terms of any Franchise Agreement,
except as would not reasonably be expected to have a Material
Adverse Effect. The Franchise Agreements and the Manual
materially comply with and are enforceable in all material
respects under all applicable Laws. No Franchise Agreement
contains a provision that requires the consent or approval of
the Franchisee to the Merger, and to the Knowledge of the
Company, neither the Company nor any Subsidiary has made any
oral or written representation, warranty or covenant to any
Franchisee that a change of control of the Company or any of its
Subsidiaries will not occur or that such Franchisees its
consent to any change of control would be sought or obtained
prior to or as part of any such change of control. No Franchise
Agreement is subject to any right of rescission, set-off,
counterclaim or defense, and neither the terms of the Franchise
Agreement, nor the exercise of any rights thereunder, will
render the Franchise Agreement unenforceable, in whole or in
part, nor give to the Franchisee any right of rescission,
set-off, counterclaim or defense, except as would not, either
individually or in the aggregate, reasonably be expected to have
a Material Adverse Effect.
(c) Except for Persons who have signed Commitment
Agreements (as defined in the applicable Subsidiarys FDDs)
substantially in the form attached to the Subsidiaries
current FDDs and existing Franchise Agreements under which the
Material Franchisee has the right to develop multiple franchised
businesses and which are identified on Section 3.18(a) of
the Company Disclosure Schedule, no Franchisee or other Person
has any enforceable right of first refusal, option or other
right or arrangement to sign any Franchise Agreement or acquire
any Franchise. To the Knowledge of the Company, except existing
Franchise Agreements which are identified on
Section 3.18(a) of the Company Disclosure Schedule, neither
the Company nor any of its Subsidiaries has granted any
protected territory or exclusive territory or is otherwise
limited in its right to grant Franchises, subject to
Franchisees rights under applicable Law.
(d) To the Knowledge of the Company, all funds administered
by or paid to the Company or any Subsidiary on behalf of one or
more Franchisees at any time since January 1, 2006,
including funds that Franchisees contributed for advertising and
promotion and rebates and other payments made by suppliers and
other third parties on account of Franchisees purchases
from those suppliers and third parties, have been administered
and spent in accordance with all Laws and the Franchise
Agreements.
(e) Except for countries where there are operating
franchised restaurants, neither the Company nor any of its
Subsidiaries has offered or sold Franchises anywhere in the
world since January 1, 2006.
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(f) Either the FDD or Section 3.18(f) of the Company
Disclosure Schedule contains a summary of all Franchise-related
arbitrations, litigation, class proceedings, material complaints
or disputes, or other Actions which are pending or, to the
Knowledge of the Company, threatened (i) from any Material
Franchisee or association purporting to represent a group of
Franchisees (including the Star Franchise Association and the
Independent Hardees Franchisee Association), or
(ii) from any other Franchisee except where such Action,
either individually or in the aggregate, would not reasonably be
expected to have a Material Adverse Effect.
(g) Section 3.18(g) of the Company Disclosure Schedule
sets forth a list of all FDDs that the Company or any of its
Subsidiaries have used to offer or sell Franchises at any time
since January 1, 2006. The Company has made available to
Parent accurate and complete copies of each such FDD. All FDDs
that the Company or any of its Subsidiaries have used to offer
or sell franchises at any time since January 1, 2006 have
contained all information required by the FTC Rule and other
Franchise Laws and have otherwise been prepared and delivered to
prospective Franchisees in compliance with the Franchise Laws,
and no such FDD contains any statement which is false or
misleading with respect to any material fact, or omits to state
any material fact required to be stated therein or necessary in
order to make the statements made therein not false or
misleading in light of the circumstances under which they are
made.
(h) Section 3.18(h) of the Company Disclosure Schedule
sets forth, with respect to each applicable Subsidiary, a list
of the jurisdictions in which the Company or any of its
Subsidiaries is currently registered or authorized to offer and
sell Franchises, or is exempt from such registration, under a
Franchise Law. There are no stop orders or other proceedings in
effect or, to the Knowledge of the Company, threatened that
would prohibit or impede the Companys ability to offer or
sell Franchises or enter into Franchise Agreements immediately
following the Effective Time, except for any amendment filings
and changes to the FDD that might be required to describe the
Merger.
(i) The Company and the Subsidiaries are, and since
January 1, 2006 have been, in compliance with all Franchise
Laws and have not offered or sold any Franchise in violation of
any Franchise Law (including by filing on a timely basis all
required amendments and renewals of the registrations and
exemptions under the Franchise Laws), except for such
non-compliance as would not either individually or in the
aggregate reasonably be expected to have a Material Adverse
Effect.
(j) To the Knowledge of the Company, with respect to all
terminations, non-renewals, and transfers of Franchises since
January 1, 2006, the Company and the applicable Subsidiary
have complied with all applicable franchise termination, unfair
practices,
and/or
relationship laws, including to those laws requirements
with respect to the proper notice of default, time to cure, and
the actual termination of any Franchisee.
Section
3.19
Suppliers
. Section 3.19
of the Company Disclosure Schedule sets forth a true, correct
and complete list of the ten (10) largest suppliers or
vendors (
Suppliers
) to the Company and its
Subsidiaries (based on purchases from January 1, 2009,
through December 31, 2009), together with the volume of
purchases made from such Suppliers during such period. No
Supplier is a sole source of supply of any material goods,
materials or services used by the Company or any Subsidiary. No
Supplier has reduced or otherwise discontinued, or threatened to
reduce or discontinue, supplying such goods, materials or
services to the Company or any Subsidiary on reasonable terms,
except for such matters as, individually or in the aggregate,
would not reasonably be expected to have a Material Adverse
Effect. None of the Suppliers has canceled or otherwise
terminated, or to the Knowledge of the Company, threatened to
cancel or otherwise terminate its relationship with the Company
or any Subsidiary.
Section
3.20
Quality
and Safety of Food & Beverage
Products
. To the Knowledge of the Company,
the manufacturing and storage practices, preparation,
ingredients, composition, and packaging and labeling for each of
the food or beverage products of the Company or any Subsidiary,
(i) are in compliance with all applicable Laws, including
Laws relating to food and beverage manufacturing, storage,
preparation, packaging and labeling; and (ii) are in
material compliance with all internal quality management
policies and procedures of the Company and its Subsidiaries.
Except as would not reasonably be expected to have a Material
Adverse Effect, all labeling used on such food or beverage
products has been filed or registered with
and/or
approved by each applicable Governmental Authority that requires
such filing, registration
and/or
approval. Since January 30, 2007, (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,
A-22
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. The Company has made available
to Parent complete and accurate copies of all reports resulting
from any audits and inspections of the quality or safety
management practices conducted by the Company or a Subsidiary,
or by any other Person since January 30, 2007 in the
Companys custody and control.
Section
3.21
Insurance
. The
Company and its Subsidiaries own or hold policies of insurance,
or are self-insured, in amounts providing reasonably adequate
coverage against all risks customarily insured against by
companies and subsidiaries in similar lines of business as the
Company and its Subsidiaries, and in amounts sufficient to
comply with all Material Contracts and Franchise Agreements to
which the Company or its Subsidiaries are parties or are
otherwise bound. All such insurance policies are in full force
and effect, no notice of cancellation or modification has been
received, and there is no existing default or event which, with
the giving of notice or lapse of time or both, would constitute
a default, by any insured thereunder, except for such defaults
that would not be reasonably expected to have, individually or
in the aggregate, a Material Adverse Effect. There is no
material claim pending under any of such policies as to which
coverage has been questioned, denied or disputed by the
underwriters of such policies and there has been no threatened
termination of, or material premium increase with respect to,
any such policies.
Section
3.22
Swap
Agreements
. As of January 25, 2010,
(a) the gross notional amount outstanding under all
existing currency and interest rate swap transactions to which
the Company or any of its wholly-owned Subsidiaries is a party
was approximately $200,000,000, (b) the estimated fair
value of the Companys and its wholly-owned
Subsidiaries interest rate swap agreements was
approximately $15,481,825 under GAAP and (c) the estimated
fair value of the Companys and its wholly-owned
Subsidiaries interest rate swap agreements, as reported by
the counterparties, was approximately $15,887,778. The Company
is not a party to any currency swap or forward agreements.
Section
3.23
Opinion
of Financial Advisor
. The Board of Directors
of the Company has received the opinion of UBS Securities LLC to
the effect that, as of the date of such opinion, the Merger
Consideration to be received by holders of shares of Company
Common Stock (other than as set forth in such opinion) is fair,
from a financial point of view, to such holders. A copy of such
opinion will be provided to Parent promptly for information
purposes only following receipt thereof by the Company.
Section
3.24
Brokers
and Other Advisors
. Except for UBS Securities
LLC, the fees and expenses of which will be paid by the Company,
no broker, investment banker, financial advisor or other Person
is entitled to any brokers, finders, financial
advisors or other similar fee or commission, or the
reimbursement of expenses, in connection with the Transactions
based upon arrangements made by or on behalf of the Company or
any of its Subsidiaries. The Company has made available to
Parent a complete and accurate copy of all agreements pursuant
to which any person identified in this Section 3.24 is
entitled to any fees and expenses in connection with the
Transactions.
Section
3.25
No
Other Parent or Merger Sub Representations or
Warranties
. Except for the representations
and warranties set forth in Article IV, the Company hereby
acknowledges that neither Parent, Merger Sub nor any of their
respective Subsidiaries, nor any of their respective
stockholders, directors, officers, employees, Affiliates,
advisors, agents or representatives, nor any other Person, has
made or is making any other express or implied representation or
warranty with respect to Parent, Merger Sub or any of their
respective Subsidiaries or their respective business or
operations, including with respect to any information provided
or made available to the Company. Neither Parent, Merger Sub nor
any of their respective Subsidiaries, nor any of their
respective stockholders, directors, officers, employees,
Affiliates, advisors, agents or representatives, will have or be
subject to any liability or indemnification obligation to the
Company resulting from the delivery, dissemination or any other
distribution to the Company or its stockholders, directors,
officers, employees, Affiliates or representatives, or the use
by the Company or its stockholders, directors, officers,
employees, Affiliates or representatives of any information,
documents, estimates, projections, forecasts or other
forward-looking information, business plans or other material
provided or made available to the Company or its stockholders,
directors, officers, employees, Affiliates or representatives,
including without limitation in certain data rooms,
confidential information
A-23
memoranda or management presentations in anticipation or
contemplation of any of the Transactions, other than fraud in
connection therewith.
Section
3.26
Prior
Merger Agreement
.
(a) The Company has provided Parent with a true and
complete copy of the Prior Merger Agreement, including all
schedules and exhibits thereto, except for the Parent
Disclosure Schedule (as defined in the Prior Merger
Agreement).
(b) The Company has validly terminated the Prior Merger
Agreement pursuant to Section 7.1(d)(ii) thereof prior to
entering into this Agreement, and prior to such termination was
not in breach of, had not previously breached and has not
received any notice of any allegation of breach of the Prior
Merger Agreement.
(c) The Company determined on or before the No-Shop
Period Start Date (as defined in the Prior Merger
Agreement) that Apollo Management VII, L.P. and its Affiliates
(
Apollo
) were Excluded Parties
(as defined in the Prior Merger Agreement) and has not
withdrawn, modified or rescinded such determination in any
manner. Immediately prior to the termination of the Prior Merger
Agreement, there were no Excluded Parties (as
defined in the Prior Merger Agreement) other than Apollo. The
Termination Fee (as defined in the Prior Merger Agreement)
payable in connection with the termination of the Prior Merger
Agreement is the Go-Shop Termination Fee (as defined in the
Prior Merger Agreement).
ARTICLE IV
Representations
and Warranties of Parent and Merger Sub
Parent and Merger Sub jointly and severally represent and
warrant to the Company that the statements contained in this
Article IV are true and correct, except as set forth herein
or in the corresponding section of the disclosure schedule
delivered by Parent and Merger Sub to the Company and dated as
of the date of this Agreement (the
Parent Disclosure
Schedule
).
Section
4.1
Organization;
Standing
. Parent is a corporation duly
organized, validly existing and in good standing under the Laws
of the State of Delaware and Merger Sub is a corporation duly
organized, validly existing and in good standing under the Laws
of the State of Delaware.
Section
4.2
Authority;
Noncontravention
.
(a) Each of Parent and Merger Sub has all necessary
corporate power and authority to execute and deliver this
Agreement, to perform their respective obligations hereunder and
to consummate the Transactions. The execution, delivery and
performance by Parent and Merger Sub of this Agreement, and the
consummation by Parent and Merger Sub of the Transactions, have
been duly authorized by all necessary corporate action on the
part of Parent and Merger Sub. This Agreement has been duly
executed and delivered by Parent and Merger Sub and, assuming
due authorization, execution and delivery hereof by the Company,
constitutes a legal, valid and binding obligation of each of
Parent and Merger Sub, enforceable against each of them in
accordance with its terms, subject to the Bankruptcy and Equity
Exception.
(b) Neither the execution and delivery of this Agreement by
Parent and Merger Sub, nor the consummation by Parent or Merger
Sub of the Transactions, nor performance or compliance by Parent
or Merger Sub with any of the terms or provisions hereof, will
(i) conflict with or violate any provision of the
certificate of incorporation or by-laws of Parent or Merger Sub
or (ii) assuming that the authorizations, consents and
approvals referred to in Section 4.3 are obtained and the
filings referred to in Section 4.3 are made,
(x) violate any Law, judgment, writ or injunction of any
Governmental Authority applicable to Parent or any of its
Subsidiaries, or (y) violate or constitute a default under
any of the terms, conditions or provisions of any Contract to
which Parent, Merger Sub or any of their respective Subsidiaries
is a party, except, in the case of clause (ii), for such
violations or defaults as would not reasonably be expected to
impair in any material respect the ability of Parent or Merger
Sub to perform its obligations hereunder or prevent or
materially delay consummation of the Transactions.
Section
4.3
Governmental
Approvals
. Except for (i) any filings
required under, and in compliance with other applicable
requirements of, the Exchange Act and the rules of The New York
Stock Exchange, (ii) the filing of
A-24
the Certificate of Merger with the Secretary of State of the
State of Delaware pursuant to the DGCL and (iii) any
filings required under, and in compliance with other applicable
requirements of, the HSR Act and any other applicable Antitrust
Laws, no consents or approvals of, or filings, licenses, permits
or authorizations, declarations or registrations with, any
Governmental Authority or any stock market or stock exchange on
which shares of Parent are listed for trading are necessary for
the execution, delivery and performance of this Agreement by
Parent and Merger Sub or the consummation by Parent and Merger
Sub of the Transactions, other than such other consents,
approvals, filings, licenses, permits or authorizations,
declarations or registrations that, if not obtained, made or
given, would not reasonably be expected to impair in any
material respect the ability of Parent or Merger Sub to perform
its obligations hereunder or prevent or materially delay
consummation of the Transactions.
Section
4.4
Ownership
and Operations of Merger Sub
. Parent owns
beneficially and of record all of the outstanding capital stock
of Merger Sub. Merger Sub was formed solely for the purpose of
engaging in the Transactions, has engaged in no other business
activities and has conducted its operations only as contemplated
hereby.
Section
4.5
Financing
. Parent
has delivered to the Company true, correct and complete copies,
as of the date of this Agreement, of (i) an executed
commitment letter (the
Equity Funding Letter
)
from certain parties (the
Equity Providers
)
to provide, subject to the terms and conditions therein, equity
financing in the aggregate amount set forth therein (being
collectively referred to as the
Equity
Financing
), and (ii) an executed commitment
letter and a redacted form of fee letter, dated as of the date
of this Agreement, from the financial institutions identified
therein (the
Debt Commitment Letter
and,
together with the Equity Funding Letter, the
Financing
Letters
) to provide, subject to the terms and
conditions therein, debt financing in an aggregate amount set
forth therein (being collectively referred to as the
Debt Financing
, and together with the Equity
Financing collectively referred to as the
Financing
). As of the date hereof, neither
the Equity Funding Letter nor Debt Commitment Letter has been
amended or modified and the respective commitments contained in
such letters have not been withdrawn or rescinded in any
respect. Parent or Merger Sub has fully paid any and all
commitment fees or other fees in connection with the Equity
Funding Letter and the Debt Commitment Letter that are payable
on or prior to the date hereof. Assuming the Financing is funded
in accordance with the terms and conditions of the Financing
Letters and assuming the accuracy of the representations and
warranties set forth in Article III and performance by the
Company of its obligations under Section 5.1, the net
proceeds contemplated by the Equity Funding Letter and Debt
Commitment Letter will, together with the cash or cash
equivalents available to the Company, in the aggregate be
sufficient for Merger Sub and the Surviving Corporation to
consummate the Transactions upon the terms and conditions
contemplated by this Agreement. 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 or Merger Sub under the Equity Funding Letter
or the Debt Commitment Letter;
provided
that Parent and
Merger Sub are not making any representation regarding the
effect of the inaccuracy of the representations and warranties
in Article III. As of the date of this Agreement, assuming
the accuracy of the representations and warranties set forth in
Article III and performance by the Company of its
obligations under Section 5.1, Parent does not have any
reason to believe that any of the conditions to the Financing
will not be satisfied or that the Financing will not be
available to Parent or Merger Sub on the date of the Closing.
The Financing Letters contain all of the conditions precedent to
the obligations of the parties thereunder to make Financing
available to Parent on the terms therein.
Section
4.6
Guarantee
. Concurrently
with the execution of this Agreement, Parent has delivered to
the Company a duly executed limited guarantee of the Guarantors
with respect to the Guarantee. The Guarantee is in full force
and effect and is the valid, binding and enforceable obligation
of the Guarantors, and no event has occurred, which, with or
without notice, lapse of time or both, would constitute a
default on the part of the Guarantors under such Guarantee.
Section
4.7
Solvency
. Neither
Parent nor Merger Sub is entering into the Transactions with the
intent to hinder, delay or defraud either present or future
creditors. To the knowledge of Parent, based on information
available to Parent as of the date of this Agreement,
immediately after giving effect to all of the Transactions,
including the Financing, and the payment of the aggregate Merger
Consideration, the Designated Consideration, and any other
repayment or refinancing of debt that may be contemplated in the
Debt Commitment Letter, assuming (a) satisfaction of the
conditions to Parents obligation to consummate the Merger
as set forth herein, (b) the accuracy of the
representations and warranties of the Company set forth in
Article III hereof (for such purposes,
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such representations and warranties shall be true and correct in
all material respects), (c) the Required Information fairly
presents the consolidated financial condition of the Company and
its Subsidiaries as at the end of the periods covered thereby
and the consolidated results of operations of the Company and
its Subsidiaries for the periods covered thereby and
(d) any estimates, projections or forecasts of the Company
and its Subsidiaries have been prepared in good faith based upon
assumptions that were and continue to be reasonable, the
Surviving Corporation (i) as of such date will be able to
pay its debts as they become due and shall own property having a
fair saleable value greater than the amounts required to pay its
debts (including a reasonable estimate of the amount of all
contingent liabilities) as they become absolute and mature; and
(ii) shall not have, as of such date, unreasonably small
capital to carry on its business.
Section
4.8
Certain
Arrangements
. Except as set forth in
Section 4.8 of the Parent Disclosure Schedule, there are no
Contracts between Parent, Merger Sub or the Guarantors, on the
one hand, and any member of the Companys management or
directors, on the other hand, as of the date hereof that relate
in any way to the Company or the Transactions.
Section
4.9
Litigation
. As
of the date of this Agreement, there are no civil, criminal or
administrative actions, suits, claims, hearings, investigations
or proceedings pending or, to the knowledge of Parent,
threatened against Parent or Merger Sub that seek to enjoin, or
would reasonably be likely to have the effect of preventing,
making illegal, or otherwise interfering with, any of the
Transactions, except as would not, individually or in the
aggregate, reasonably be likely to prevent, materially delay or
materially impede the ability of Parent and Merger Sub to
consummate the Transactions.
Section
4.10
Brokers
and Other Advisors
. No broker, investment
banker, financial advisor or other Person is entitled to any
brokers, finders, financial advisors or other
similar fee or commission in connection with the Transactions
based upon arrangements made by or on behalf of Parent or any of
its Subsidiaries except for Persons whose fees and expenses will
be paid by Parent.
Section
4.11
No
Other Company Representations or
Warranties
. Except for the representations
and warranties set forth in Article III, Parent and Merger
Sub hereby acknowledge that neither the Company nor any of its
Subsidiaries, nor any of their respective stockholders,
directors, officers, employees, Affiliates, advisors, agents or
representatives, nor any other Person, has made or is making any
other express or implied representation or warranty with respect
to the Company or any of its Subsidiaries or their respective
business or operations, including with respect to any
information provided or made available to Parent or Merger Sub.
Neither the Company nor any of its Subsidiaries, nor any of
their respective stockholders, directors, officers, employees,
Affiliates, advisors, agents or representatives, will have or be
subject to any liability or indemnification obligation to Parent
or Merger Sub resulting from the delivery, dissemination or any
other distribution to Parent, Merger Sub or their respective
stockholders, directors, officers, employees, Affiliates or
representatives, or the use by Parent, Merger Sub or their
respective stockholders, directors, officers, employees,
Affiliates or representatives of any information, documents,
estimates, projections, forecasts or other forward-looking
information, business plans or other material provided or made
available to Parent, Merger Sub or their respective
stockholders, directors, officers, employees, Affiliates or
representatives, including without limitation in certain
data rooms, confidential information memoranda or
management presentations in anticipation or contemplation of any
of the Transactions, other than fraud in connection therewith.
ARTICLE V
Additional
Covenants and Agreements
Section
5.1
Conduct
of Business
.
(a) Except as required by applicable Law or expressly
contemplated or permitted by this Agreement or as contemplated
by Section 5.1(a) of the Company Disclosure Schedule,
during the period from the date of this Agreement until the
Effective Time (or such earlier date on which this Agreement may
be terminated), unless the Parent otherwise consents in writing
(which consent shall not be unreasonably withheld, delayed or
conditioned), the Company shall, and shall cause each of its
Subsidiaries to, carry on its business in all material respects
in the ordinary course of business and shall use its reasonable
best efforts to preserve its and its Subsidiaries business
A-26
organizations intact and maintain existing relations with key
customers, distributors, suppliers, Franchisees, employees and
other persons with whom the Company or its Subsidiaries have
business relationships, assets, rights and properties. Without
limiting the generality of the foregoing, and except as required
by applicable Law or any Governmental Authority or expressly
contemplated or permitted by this Agreement or as contemplated
by Section 5.1(a) of the Company Disclosure Schedule,
during such period, the Company shall not, and shall not permit
any of its Subsidiaries to, unless Parent otherwise consents
(which shall not be unreasonably withheld, delayed, or
conditioned):
(i) (A) issue, sell or grant any shares of its capital
stock, or any securities or rights convertible into,
exchangeable or exercisable for, or evidencing the right to
subscribe for any shares of its capital stock, or any rights,
warrants or options to purchase any shares of its capital stock,
or any securities or rights convertible into, exchangeable or
exercisable for, or evidencing the right to subscribe for, any
shares of its capital stock,
provided
that the Company
may issue shares of Company Common Stock as required to be
issued upon exercise or settlement of Options or other equity
rights or obligations under the Company Stock Plans or Company
Plans outstanding on the date hereof in accordance with the
terms of the applicable Company Stock Plan or Company Plan in
effect on the date hereof; (B) redeem, purchase or
otherwise acquire any of its outstanding shares of capital
stock, or any rights, warrants or options to acquire any shares
of its capital stock, except (x) pursuant to written
commitments in effect as of the date hereof only from former
employees or directors in connection with any termination of
services to the Company or any of its Subsidiaries or
(y) in connection with withholding to satisfy tax
obligations with respect to Options, acquisitions in connection
with the forfeiture of equity awards, or acquisitions in
connection with the net exercise of Options; (C) establish
a record date for, declare, set aside for payment or pay any
dividend on, or make any other distribution in respect of, any
shares of its capital stock; or (D) split, combine,
subdivide or reclassify any shares of its capital stock;
(ii) enter into any collective bargaining agreement or
other agreement with a labor union or works council;
(iii) (A) incur, issue, modify, renew, syndicate or
refinance any Indebtedness (excluding any letters of credit
issued in the ordinary course of business), attempt to do any of
the foregoing, announce or authorize the announcement of any of
the foregoing or engage in any discussions concerning any of the
foregoing except for Indebtedness incurred under the
Companys existing credit facility listed on
Schedule 3.17(a) of the Company Disclosure Schedule,
(B) enter into any swap or hedging transaction or other
derivative agreements other than in the ordinary course of
business;
provided
, that the Company shall consult in
good faith with Parent prior to entering into, amending or
otherwise modifying or agreeing in principle to any Contract
relating to or reflecting any material hedging arrangement, or
(C) make any loans, capital contributions or advances to
any Person (other than the Company and any wholly-owned
Subsidiary of the Company);
(iv) adopt or implement any stockholder rights plan;
(v) sell or lease, in a single transaction or series of
related transactions, any of its properties or assets whose
value or purchase price, individually or in the aggregate,
exceeds $2,500,000, except (A) dispositions of obsolete or
worthless assets or (B) in the ordinary course of business;
(vi) make or authorize any capital expenditures except as
set forth in the capital budget set forth in
Section 5.1(a)(vi) of the Company Disclosure Schedule;
(vii) make any acquisition (including by merger) of the
capital stock or (except in the ordinary course of business or
as otherwise permitted by this Agreement) a material portion of
the assets of any other Person for consideration in excess of
$2,000,000;
(viii) (A) increase the compensation, or benefits in
respect of, any of its officers, directors or employees, other
than as required by the terms of any applicable agreement or
benefit plan on the date of execution of this Agreement or as
required by applicable Law, (B) provide increases in
salaries, wages and benefits of employees who are not officers
or directors of the Company other than in the ordinary course of
business, or (C) enter into any severance,
change-in-control,
retention or other agreement with any employee or independent
contractor;
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(ix) (A) make any material changes in financial or tax
accounting methods, principles or practices (or change an annual
accounting or period), except insofar as may be required by
applicable Law, including without limitation a change in GAAP or
(B) accelerate the collection of receivables or delay the
payment of accounts payables;
(x) grant any material refunds, credits, rebates or other
allowances by the Company or its Subsidiaries to any Franchisee,
supplier, vendor or distributor, in each case, other than in the
ordinary course of business;
(xi) amend the Company Charter Documents or organizational
documents of any Subsidiary;
(xii) enter into any new line of business material to the
Company and its Subsidiaries, taken as a whole;
(xiii) fail to make any material filing, pay any fee, or
take another action necessary to maintain in full force and
effect any Intellectual Property right owned by the Company or
any Subsidiary that is material to the conduct of the business
of the Company or any Subsidiary, or enter into any license or
transfer agreement granting or transferring to a third party an
exclusive right to use any such Intellectual Property, other
than licenses providing territorial exclusivity to Franchisees
entered into in the ordinary course of business;
(xiv) adopt a plan or agreement of complete or partial
liquidation or dissolution, merger, consolidation,
restructuring, recapitalization or other reorganization of the
Company or any of its Subsidiaries;
(xv) (A) grant any Lien (other than Permitted Liens)
in any of its material assets other than to secure Indebtedness
permitted under Section 5.1(a)(iii) or (B) secure,
directly or indirectly, obligations other than Indebtedness in
the ordinary course of business;
(xvi) fail to use its reasonable best efforts to maintain
in full force and effect the existing insurance policies or to
replace such insurance policies with comparable insurance
policies covering the Company, its Subsidiaries and their
respective properties, assets and businesses or substantially
equivalent policies;
(xvii) (A) modify, amend, terminate or waive any
rights under any Material Contract other than in the ordinary
course of business, (B) enter into any Contract, which if
entered into prior to the date hereof would have been a Material
Contract or (C) enter into any new Contract that contains a
change in control provision in favor of the other party or
parties thereto or would otherwise require a payment to or give
rise to any rights to such other party or parties in connection
with the transactions contemplated hereby;
(xviii) enter into any distribution Contract or renew,
modify, amend, terminate or waive any existing distribution
Contract (including the MBM Contract and the SYGMA Contract)
providing for the distribution of goods to any restaurant
operated by the Company, any Subsidiary or any Franchisee;
(xix) enter into any Contract or modify, amend, terminate
or waive any existing Contract covering the development of ten
or more restaurants;
(xx) terminate any Franchise Agreement to which a Material
Franchisee is a party;
(xxi) pay, discharge, settle or compromise any pending or
threatened suit, action or claim which (A) requires payment
to or by the Company or any Subsidiary (exclusive of
attorneys fees) in excess of $250,000 in any single
instance or in excess of $1,000,000 in the aggregate,
(B) involves injunctive or equitable relief or restrictions
on the business activities of the Company or any of its
Subsidiaries, (C) would involve the issuance of Company
Securities or (D) relates to the transactions contemplated
by this Agreement or by the Prior Merger Agreement;
(xxii) except as required by Law or as otherwise is in the
ordinary course of business (a) make any material change
(or file any such change) in any method of Tax accounting or any
annual Tax accounting period; (b) make, change or rescind
any material Tax election; (c) settle or compromise any
material Tax liability, audit claim or assessment;
(d) surrender any right to claim for a material Tax refund;
(e) file any amended Tax Return involving a material amount
of additional Taxes; (f) enter into any closing agreement;
or (g) waive or extend the statute of limitations in
respect of any Income or other material Taxes other than
pursuant to extensions of time to file Tax Returns obtained in
the ordinary course of business;
A-28
(xxiii) waive, release, grant or transfer any right of
material value, other than in the ordinary course of business or
waive any material benefits of, or agree to modify in any
material adverse respect, or, subject to the terms hereof, fail
to enforce, or consent to any material matter with respect to
which its consent is required under, any material
confidentiality, standstill or similar agreement to which the
Company or any of its Subsidiaries is a party;
(xxiv) amend or terminate any Company Plan or establish or
adopt any plan, program or arrangement that if in existence at
the date hereof would be a Company Plan, except as required by
applicable Law;
(xxv) enter into, amend, waive or terminate any Company
Related Party Transaction;
(xxvi) permit any of its Subsidiaries or Affiliates or any
of its or their respective directors, officers, managers,
employees, independent contractors, representatives or agents to
promise, authorize or make any payment to, or otherwise
contribute any item of value to, directly or indirectly, any
non-U.S. official,
in each case, in violation of the Foreign Corrupt Practices Act
of 1977, as amended, and any rules or regulations promulgated
thereunder (
FCPA
); or
(xxvii) authorize any of, or commit or agree, in writing or
otherwise, to take any of, the foregoing actions.
Section
5.2
No
Solicitation
.
(a) On the date of this Agreement, the Company shall, and
shall cause each of its Subsidiaries and each of its and its
Subsidiaries respective officers, directors, employees,
consultants, agents, advisors, Affiliates and other
representatives (collectively,
Representatives
) to (i) immediately
cease any solicitation, encouragement, discussions or
negotiations with any Persons that may be ongoing with respect
to a Takeover Proposal, and (ii) request such Person to
promptly return or destroy all confidential information
concerning the Company and the Companys Subsidiaries.
Except as permitted by this Section 5.2, the Company shall
and shall cause each of its Subsidiaries and Representatives not
to, from the date of this Agreement until the Effective Time or,
if earlier, the termination of this Agreement in accordance with
Article VII, directly or indirectly, (A) solicit,
initiate or knowingly facilitate or encourage (including by way
of furnishing non-public information) any inquiries regarding,
or the making of any proposal or offer that constitutes, or
could reasonably be expected to lead to, a Takeover Proposal,
(B) engage in, continue or otherwise participate in any
discussions or negotiations regarding, or furnish to any other
party information in connection with or for the purpose of
encouraging or facilitating, a Takeover Proposal or
(C) enter into any letter of intent, agreement or agreement
in principle with respect to a Takeover Proposal.
(b) Notwithstanding anything to the contrary contained
herein, if at any time on or after the date of this Agreement
and prior to obtaining the Company Stockholder Approval, the
Company or any of its Representatives receives a written
Takeover Proposal from any Person, which Takeover Proposal was
made or renewed on or after the date of this Agreement and that
did not result from any breach of this Section 5.2, if the
Board of Directors of the Company determines in good faith,
after consultation with independent financial advisors and
outside legal counsel, that failure to take such action would be
inconsistent with the directors fiduciary duties under
applicable Law and that such Takeover Proposal constitutes or is
reasonably expected to lead to a Superior Proposal, then the
Company and its Representatives may (x) furnish, pursuant
to an Acceptable Confidentiality Agreement, information
(including non-public information) with respect to the Company
and its Subsidiaries to the Person or group of Persons who has
made such Takeover Proposal;
provided
that the Company
shall promptly provide to Parent any material non-public
information concerning the Company or its Subsidiaries that is
provided to any Person given such access which was not
previously provided to Parent or its Representatives; and
(y) engage in or otherwise participate in discussions or
negotiations with the Person or group of Persons making such
Takeover Proposal; provided, further that the Company shall
promptly provide to Parent (and in any event within
48 hours) (i) a copy of any Takeover Proposal made in
writing provided to the Company or any of its Subsidiaries, and
the identity of the Person making the Takeover Proposal, and
(ii) a written summary of the material terms of any such
Takeover Proposal not made in writing. From and after the date
hereof, the Company shall not grant any waiver, amendment or
release under any standstill agreement without the prior written
consent of Parent. For the purposes of this Agreement,
Acceptable Confidentiality Agreement
means
any confidentiality and standstill agreement that contains
provisions that are no less favorable to the Company than those
contained in the Confidentiality
A-29
Agreement, it being understood that such confidentiality
agreements need not prohibit the submission of Takeover
Proposals or amendments thereto to the Companys Board of
Directors.
(c) Following the date of this Agreement, the Company shall
keep Parent reasonably informed of any material developments,
discussions or negotiations regarding any Takeover Proposal
(whether made before or after the date hereof) on a current
basis (and in any event within 48 hours) and shall notify
Parent of the status of such Takeover Proposal. The Company
agrees that it and its Subsidiaries will not enter into any
confidentiality agreement with any Person subsequent to the date
hereof which prohibits the Company from providing any
information to Parent in accordance with this Section 5.2.
(d) Except as expressly permitted by this
Section 5.2(d) or Section 5.2(e), the Board of
Directors of the Company shall not (i)(A) fail to recommend to
its stockholders that the Company Stockholder Approval be given
(the
Company Board Recommendation
) or fail to
include the Company Board Recommendation in the Proxy Statement,
(B) change, qualify, withhold, withdraw or modify, or
publicly propose to change, qualify, withhold, withdraw or
modify, in a manner adverse to Parent, the Company Board
Recommendation, (C) take any formal action or make any
recommendation or public statement in connection with a tender
offer or exchange offer other than a recommendation against such
offer or a temporary stop, look and listen
communication by the Board of Directors of the Company pursuant
to
Rule 14d-9(f)
of the Exchange Act, or (D) adopt, approve or recommend, or
publicly propose to approve or recommend to the stockholders of
the Company a Takeover Proposal (actions described in this
clause (i) being referred to as a
Company Adverse
Recommendation Change
), (ii) authorize, cause or
permit the Company or any of its Subsidiaries to enter into any
letter of intent, agreement or agreement in principle with
respect to any Takeover Proposal (other than an Acceptable
Confidentiality Agreement) (each, a
Company Acquisition
Agreement
) or (iii) take any action pursuant to
Section 7.1(d)(ii). Notwithstanding anything to the
contrary herein, prior to the time the Company Stockholder
Approval is obtained, but not after, the Board of Directors of
the Company may make a Company Adverse Recommendation Change or
enter into a Company Acquisition Agreement with respect to a
Takeover Proposal, if and only if, prior to taking such action,
the Board of Directors of the Company has determined in good
faith, after consultation with independent financial advisors
and outside legal counsel, (x) that failure to take such
action would be inconsistent with the directors fiduciary
duties under applicable Law and (y) that such Takeover
Proposal constitutes a Superior Proposal;
provided
,
however
, that (w) the Company has given Parent at
least four business days prior written notice of its
intention to take such action (which notice shall specify the
material terms and conditions of any such Superior Proposal
(including the identity of the party making such Superior
Proposal) and has contemporaneously provided a copy of the
relevant proposed transaction agreements with the party making
such Proposal), (x) the Company has negotiated, and has
caused its Representatives to negotiate, in good faith with
Parent during such notice period to the extent Parent wishes to
negotiate, to enable Parent to revise the terms of this
Agreement, the Financing Letters and the Guarantee such that it
would cause such Superior Proposal to no longer constitute a
Superior Proposal, (y) following the end of such notice
period, the Board of Directors of the Company shall have
considered in good faith any changes to this Agreement, the
Financing Letters and the Guarantee proposed in writing by
Parent, and shall have determined that the Superior Proposal
would continue to constitute a Superior Proposal if such
revisions were to be given effect, and (z) in the event of
any material change to the material terms of such Superior
Proposal, the Company shall, in each case, have delivered to
Parent an additional notice; and
provided
,
further
, that the Company has complied in all material
respects with its obligations under this Section 5.2 and
provided
,
further
, that any purported termination
of this Agreement pursuant to this sentence shall be void and of
no force and effect, unless the Company termination is in
accordance with Section 7.1 and the Company pays Parent the
Termination Fee in accordance with Section 7.3 prior to or
concurrently with such termination.
(e) Notwithstanding anything to the contrary herein, prior
to the time the Company Stockholder Approval is obtained, but
not after, the Board of Directors of the Company may change,
qualify, withhold, withdraw or modify, or publicly propose to
change, qualify, withhold, withdraw or modify, in a manner
adverse to Parent, the Company Board Recommendation
(
Change of Recommendation
) in response to an
Intervening Event if the Board of Directors of the Company has
determined in good faith, after consultation with independent
financial advisors and outside legal counsel, that failure to
take such action would be inconsistent with the directors
fiduciary duties under applicable Law;
provided
,
however
, that prior to taking such action, (x) the
Board of Directors of the Company has given Parent at least four
business days prior written notice of its intention to
take such action and a description of
A-30
the Intervening Event, (y) the Company has negotiated, and
has caused its Representatives to negotiate, in good faith with
Parent during such notice period to the extent Parent wishes to
negotiate, to enable Parent to revise the terms of this
Agreement, the Financing Letters and the Guarantee in such a
manner that would obviate the need for taking such action as a
result of an Intervening Event and (z) following the end of
such notice period, the Board of Directors of the Company shall
have considered in good faith any changes to this Agreement, the
Financing Letters and the Guarantee proposed in writing by
Parent, and shall have determined in good faith, after
consultation with independent financial advisors and outside
legal counsel, that failure to effect a Change of Recommendation
in response to an Intervening Event would be inconsistent with
the directors fiduciary duties under applicable Law.
(f) Except to the extent provided in Section 5.2(d) or
Section 5.2(e), nothing in this Section 5.2 shall
prohibit the Board of Directors of the Company from taking and
disclosing to the stockholders of the Company a position
contemplated by
Rule 14e-2(a),
Rule 14d-9
or Item 1012(a) of
Regulation M-A
promulgated under the Exchange Act, if failure to do so would
violate applicable Law.
(g) As used in this Agreement,
Takeover
Proposal
shall mean any inquiry, proposal or offer
from any Person (other than Parent and its Subsidiaries but
including, for the avoidance of doubt, Western Parent, Thomas H.
Lee Equity Fund VI, L.P. and their respective Affiliates)
or group, within the meaning of Section 13(d)
of the Exchange Act, relating to, in a single transaction or
series of related transactions, any (A) acquisition of
assets of the Company and its Subsidiaries equal to more than
20% of the Companys consolidated assets or to which more
than 20% of the Companys revenues or earnings on a
consolidated basis are attributable, (B) acquisition of
more than 20% of the outstanding Company Common Stock,
(C) tender offer or exchange offer that if consummated
would result in any Person beneficially owning more than 20% of
the outstanding Company Common Stock, (D) merger,
consolidation, share exchange, business combination,
recapitalization, liquidation, dissolution or similar
transaction involving the Company or (E) any combination of
the foregoing types of transactions if the sum of the percentage
of consolidated assets, consolidated revenues or earnings and
Company Common Stock involved is more than 20%; in each case,
other than the Transactions.
(h) As used in this Agreement,
Superior
Proposal
shall mean any bona fide written Takeover
Proposal that the Board of Directors of the Company has
determined in its good faith judgment is reasonably likely to be
consummated in accordance with its terms, taking into account
all legal, regulatory and financial aspects of the proposal and
the Person making the proposal, and if consummated, would result
in a transaction more favorable to the Companys
stockholders from a financial point of view than the Merger
(including any changes to the terms of this Agreement proposed
by Parent in response to such proposal or otherwise),
provided
that for purposes of the definition of
Superior Proposal, the references to 20%
in the definition of Takeover Proposal shall be deemed to be
references to 50%.
Section
5.3
Preparation
of the Proxy Statement; Stockholders Meeting
.
(a) Subject to Section 5.3(b), the Company, acting
through the Board of Directors, shall take all actions in
accordance with applicable Law, its Company Charter Documents
and the rules of the New York Stock Exchange to promptly and
duly call, give notice of, convene and hold as promptly as
practicable a meeting of its stockholders (including any
adjournment or postponement thereof (the
Company
Stockholders Meeting
) for the purpose of obtaining the
Company Stockholder Approval. Subject to Section 5.2, the
Company shall use its reasonable best efforts to solicit from
its stockholders proxies giving the Company Stockholder Approval
and shall take all other action reasonably necessary or
advisable to secure the vote or consent of the stockholders of
the Company required by the Company Charter Documents, the rules
of the New York Stock Exchange or the DGCL. Notwithstanding
anything to the contrary contained in this Agreement, the
Company may adjourn or postpone the Company Stockholders Meeting
(i) after consultation with Parent and with Parents
consent, to the extent necessary to ensure that any required
supplement or amendment to the Proxy Statement is provided to
the stockholders of the Company within a reasonable amount of
time in advance of the Company Stockholders Meeting or
(ii) if as of the time for which the Company Stockholders
Meeting is originally scheduled (as set forth in the Proxy
Statement) there are insufficient shares of Company Common Stock
represented (either in person or by proxy) to constitute a
quorum necessary to conduct the business of the Company
Stockholders Meeting.
(b) The Company shall prepare (with the assistance of
Parent) and file a preliminary Proxy Statement or an amendment
to the Companys preliminary proxy statement, dated
March 19, 2010, and, if applicable, a
Rule 13e-3
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Transaction Statement on
Schedule 13E-3,
in each case as soon as practicable following the date hereof
(and, in any event, within 15 days from the date of this
Agreement) with the SEC and the Company and the Company shall
file it with the SEC and the Company and Parent shall cooperate
with each other in connection with the preparation of the
foregoing. The Company shall use its reasonable best efforts to
respond (with the assistance of Parent) as promptly as
practicable to any comments of the SEC or its staff, and, to the
extent permitted by Law, to cause the Proxy Statement to be
mailed to the Companys stockholders at the earliest
practicable time after the resolution of all such comments. The
Company shall notify Parent promptly of the receipt of any
comments from the SEC or its staff and of any request by the SEC
or its staff for amendments or supplements to the Proxy
Statement or for additional information and will supply Parent
with copies of all correspondence between the Company or any of
the Companys Representatives, on the one hand, and the SEC
or its staff, on the other hand, with respect to the Proxy
Statement or the Transactions. If at any time prior to the
Company Stockholders Meeting there shall occur any event that
should be set forth in an amendment or supplement to the Proxy
Statement, the Company shall promptly after becoming aware
thereof, inform Parent of such fact or event and prepare (with
the assistance of Parent) and mail to its stockholders such an
amendment or supplement, in each case to the extent required by
applicable Law. Parent shall cooperate with the Company in the
preparation of the Proxy Statement or any amendment or
supplement thereto. Without limiting the generality of the
foregoing, each of Parent and Merger Sub will furnish to the
Company in writing 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. Parent shall
ensure that such information supplied by it in writing for
inclusion (or incorporation by reference) in the Proxy Statement
will not, on the date it is first mailed to stockholders of the
Company and at the time of the Company 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 the light of the
circumstances under which they are made, not misleading. Subject
to applicable Law, notwithstanding anything to the contrary
contained herein, prior to filing or mailing the Proxy Statement
or filing any other required filings (or, in each case, any
amendment or supplement thereto) or responding to any comments
of the SEC with respect thereto, the Company shall provide
Parent with a reasonable opportunity to review and comment on
the Proxy Statement or respond and shall consider in good faith
and include in such document or response comments reasonably
proposed by Parent. The Company shall ensure that the Proxy
Statement (i) will not, on the date it is first mailed to
stockholders of the Company and at the time of the Company
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 and (ii) will comply as to form in all material
respects with the applicable requirements of the Exchange Act.
Notwithstanding the foregoing, the Company makes no
representation or warranty with respect to the information
supplied to it in writing by or on behalf of Parent or Merger
Sub for inclusion or incorporation by reference in the Proxy
Statement.
Section
5.4
Filings;
Consents; Other Actions
.
(a) Subject to the terms and conditions of this Agreement,
each of the parties hereto shall cooperate with the other
parties and use (and shall cause their respective Subsidiaries
to use) their respective reasonable best efforts to promptly
(i) take, or cause to be taken, all actions, and do, or
cause to be done, all things, necessary, proper or advisable to
cause the conditions to Closing to be satisfied as promptly as
practicable and to consummate and make effective, in the most
expeditious manner practicable, the Transactions, including
preparing and filing promptly and fully all documentation to
effect all necessary filings, notices, petitions, statements,
registrations, submissions of information, applications and
other documents (including any required or recommended filings
under applicable Antitrust Laws), and (ii) obtain the
Company Approvals and all other approvals, consents,
registrations, permits, authorizations and other confirmations
from any Governmental Authority necessary, proper or advisable
to consummate the Transactions. The Company and Parent shall,
and the Company shall cause its Subsidiaries to, use their
respective commercially reasonable efforts to obtain any third
party approvals, consents, authorizations and other
confirmations that are (i) necessary to consummate the
Merger and the other Transactions or (ii) in the case of
the Company and its Subsidiaries, (A) required to prevent a
Material Adverse Effect from occurring prior to the Effective
Time or (B) otherwise reasonably requested by Parent from
time to time prior to the time that the Company mails the Proxy
Statement to its stockholders. In the event that the Company
shall fail to obtain any third party approval, consent,
authorization or other confirmation described in the immediately
preceding sentence, the Company shall use commercially
reasonable efforts, and shall take such actions as are
reasonably requested by
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Parent, to minimize any adverse effect upon the Company and
Parent resulting, or which could reasonably be expected to
result, after the Effective Time, from the failure to obtain
such approval, consent, authorization or other confirmation. In
no event shall Parent or Merger Sub (or any of their respective
Affiliates) be required to divest, hold separate, agree to
conduct, license or otherwise limit the use of any of their (or
any of their Subsidiaries) properties or assets
(including, after the Merger, the properties and assets of the
Company or any of its Subsidiaries). For purposes hereof,
Antitrust Laws
means the Sherman Act, as
amended, the Clayton Act, as amended, the HSR Act, the Federal
Trade Commission Act, as amended, and all other applicable Laws
issued by a Governmental Authority that are designed or intended
to prohibit, restrict or regulate actions having the purpose or
effect of monopolization or restraint of trade or lessening of
competition through merger or acquisition.
(b) In furtherance and not in limitation of the foregoing,
(i) each party hereto agrees to make an appropriate filing
of a Notification and Report Form pursuant to the HSR Act with
respect to the Transactions as promptly as practicable and in
any event, the Company shall use best efforts to file such
Notification and Report Form within ten business days of the
date hereof and to supply as promptly as practicable any
additional information and documentary material that may be
requested pursuant to the HSR Act and use its reasonable best
efforts to take, or cause to be taken, all other actions
consistent with this Section 5.4 necessary to cause the
expiration or termination of the applicable waiting periods
under the HSR Act (including any extensions thereof) as soon as
practicable; and (ii) the Company and Parent shall each use
its reasonable best efforts to (x) take all action
necessary to ensure that the restrictions of state takeover
statute or similar Law are not applicable to any of the
Transactions and (y) if the restrictions of any state
takeover statute or similar Law become applicable to any of the
Transactions, take all action necessary to ensure that the
Transactions may be consummated as promptly as practicable on
the terms contemplated by this Agreement and otherwise minimize
the effect of such Law on the Transactions.
(c) Each of the parties hereto shall use its reasonable
best efforts to (i) cooperate in all respects with each
other in connection with any filing or submission with a
Governmental Authority in connection with the Transactions and
in connection with any investigation or other inquiry by or
before a Governmental Authority relating to the Transactions,
including any proceeding initiated by a private party, and
(ii) keep the other party informed in all material respects
and on a reasonably timely basis of any material communication
received by such party from, or given by such party to, the
Federal Trade Commission, the Antitrust Division of the
Department of Justice or any other Governmental Authority and of
any material communication received or given in connection with
any proceeding by a private party, in each case regarding any of
the Transactions. Subject to applicable Laws relating to the
exchange of information, each of the parties hereto shall have
the right to review in advance, and to the extent practicable
each will consult the other on, all the information relating to
the other parties and their respective Subsidiaries, as the case
may be, that appears in any filing made with, or written
materials submitted to, any third party
and/or
any
Governmental Authority in connection with the Transactions,
other than 4(c) documents as that term is used in
the rules and regulations under the HSR Act.
(d) In furtherance and not in limitation of the covenants
of the parties contained in this Section 5.4, each of the
parties hereto shall use its reasonable best efforts to resolve
such objections, if any, as may be asserted by a Governmental
Authority with respect to the application of Antitrust Laws to
the Transactions.
Section
5.5
Financing
.
(a) Subject to the terms and conditions of this Agreement,
each of Parent and Merger Sub shall use its commercially
reasonable efforts to obtain the Financing on the terms and
conditions described in the Financing Letters and shall not
permit any amendment, modification or replacement of the
Financing Letters, if such amendment, modification or
replacement (x) reduces the aggregate amount of the
Financing or (y) imposes new or additional conditions or
otherwise expands, amends or modifies any of the conditions to
the Financing in a manner that would reasonably be expected to
(i) delay or prevent the funding of the Financing (or
satisfaction of the conditions to the Financing) on the Closing
Date or (ii) adversely impact the ability of Parent, Merger
Sub or the Company, as applicable to enforce its rights against
other parties to the Financing Letters or the definitive
documents with respect thereto in each of clauses (i) and
(ii) in any material respect. Parent shall deliver to the
Company copies of any such amendment, modification or
replacement. For purposes of this Section 5.5, references
to
Financing
shall include the financing
contemplated by the Financing Letters as permitted to be
amended, modified or replaced by this Section 5.5(a) and
references to
Debt Commitment Letter
shall
include such
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documents as permitted to be amended, modified or replaced by
this Section 5.5(a). Each of Parent and Merger Sub shall
use its commercially reasonable efforts (i) to negotiate
definitive agreements with respect to the Debt Commitment Letter
on the terms and conditions contained in the Debt Commitment
Letter, (ii) to satisfy all conditions to funding in the
Debt Commitment Letter applicable to it that are within its
control and consummate the Financing at or prior to the Closing,
and (iii) to enforce its rights under the Debt Commitment
Letter. Parent shall keep the Company reasonably informed of the
status of its efforts to arrange the Financing and provide to
the Company copies of the material definitive documents for the
Financing. If any portion of the Debt Financing becomes
unavailable on the terms and conditions contemplated by the Debt
Commitment Letter, (A) Parent and Merger Sub shall promptly
notify the Company and (B) Parent and Merger Sub shall use
their commercially reasonable efforts to arrange and obtain
alternative financing from alternative sources in an amount
sufficient to consummate the Transactions with terms and
conditions no less favorable, taken as a whole, to Parent and
Merger Sub (or their affiliates) than the terms and conditions
set forth in the Financing Letters as promptly as practicable
following the occurrence of such event but no later than the
final day of the Marketing Period. Parent and Merger Sub
acknowledge and agree that the obtaining of the Financing, or
any alternative financing, is not a condition to Closing.
Notwithstanding anything contained in this Section 5.5 or
in any other provision of this Agreement, in no event shall
Parent or Merger Sub be required (1) to amend or waive any
of the terms or conditions hereof or (2) to consummate the
Closing any earlier than the final day of the Marketing Period.
Notwithstanding anything contained in this Section 5.5 or
in any other provision of this Agreement, Parent and Merger Sub
shall give the Company prompt written notice: (i) of any
material breach or default by any party to any Financing Letters
or definitive document related to the Financing of any
provisions of the Financing Letters; (ii) of the receipt of
any written notice or other written communication from any
financing source with respect to any: (A) material breach,
default, termination or repudiation by any party to any
Financing Letters of any provisions of the Financing Letters or
(B) material dispute or disagreement between or among any
parties to any Financing Letters; and (iii) if for any
reason Parent or Merger Sub believes in good faith that it is
reasonably likely that it will not be able to obtain all or any
material portion of the Financing in the amounts or from the
sources contemplated by the Financing Letters and that it is not
reasonably likely that it will be able to obtain acceptable
alternative financing prior to the final day of the Marketing
Period;
provided
, that Parent and Merger Sub shall be
under no obligation to disclose any information that is subject
to an attorney-client or similar privilege.
(b) The Company shall provide to Parent and Merger Sub, and
shall cause its Subsidiaries to provide, at Parents sole
expense, and shall use commercially reasonable efforts to cause
its Representatives, including legal and accounting, to provide,
all cooperation reasonably requested by Parent or Merger Sub and
all cooperation that is customary, necessary or advisable in
connection with arranging and obtaining of the Financing or any
permitted replacement, amended, modified or alternative
financing (collectively with the Financing, the
Available Financing
) and the other
Transactions (
provided
that such requested cooperation
does not unreasonably interfere with the ongoing operations of
the Company and its Subsidiaries), including (i) assisting
with the preparation of offering and syndication documents and
materials, including prospectuses, private placement memoranda,
information memoranda and packages, lender and investor
presentations, rating agency presentations, and similar
documents and materials, in connection with the Available
Financing (all such documents and materials, collectively, the
Offering Documents
), (ii) preparing and
furnishing Parent and Merger Sub and their financing sources as
promptly as practicable with all Required Information and all
other information and disclosures relating to the Company and
its Subsidiaries (including their businesses, operations,
financial projections and prospects) as may be reasonably
requested by Parent or Merger Sub to assist in preparation of
the Offering Documents (including execution of customary
authorization and management representation letters and
certificates), (iii) participating in a reasonable number
of meetings, presentations, road shows, due diligence sessions,
drafting sessions and sessions with rating agencies in
connection with the Available Financing, including direct
contact between senior management and Representatives of the
Company and its Subsidiaries and Parents and Merger
Subs financing sources and potential lenders and investors
in the Available Financing, and obtaining any corporate, credit
and ratings from rating agencies contemplated by the Debt
Commitment Letter, (iv) obtaining accountants comfort
letters and consents from the Companys independent
auditors, (v) assisting in the preparation of, and
executing and delivering, definitive financing documents,
including guarantee and collateral documents, hedging agreements
and other certificates and documents as may be requested by
Parent or Merger Sub (including a certificate of the chief
financial officer of the Company and its Subsidiaries with
respect to solvency matters), (vi) facilitating the
pledging
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of collateral for the Available Financing, including taking
commercially reasonable actions necessary to permit the
financing sources of the Available Financing to evaluate the
Companys and its Subsidiaries real property and
current assets, cash management and accounting systems, policies
and procedures for the purpose of establishing collateral
arrangements and establishing, as of the Effective Time, bank
and other accounts and blocked account agreements and lockbox
arrangements in connection with the Available Financing,
(vii) using commercially reasonable efforts to ensure that
the financing sources benefit from the existing lending
relationships of the Company and its Subsidiaries,
(viii) using commercially reasonable efforts to obtain such
consents, approvals, authorizations and instruments which may be
reasonably requested by Parent or Merger Sub in connection with
the Available Financing and collateral arrangements, including
customary payoff letters, lien releases, instruments of
termination or discharge, legal opinions, surveys, title
insurance and landlord consents, waivers and access agreements
and (ix) facilitating the consummation of the Available
Financing, including cooperating with Parent and Merger Sub to
satisfy the conditions precedent to the Available Financing to
the extent within the control of the Company and its
Subsidiaries, and taking all corporate actions, subject to the
occurrence of the Effective Time, reasonably requested by Parent
or Merger Sub to permit the consummation of the Available
Financing and to permit the proceeds thereof to be made
available to the Surviving Corporation immediately upon the
Effective Time;
provided
,
however
, that, no
obligation of the Company or any of its Subsidiaries under any
certificate, document or instrument (other than the
authorization and representation letters and certificates
referred to above) shall be effective until the Effective Time
and, none of the Company or any of its Subsidiaries shall be
required to pay any commitment or other similar fee or incur any
other liability in connection with the Available Financing prior
to the Effective Time. The Company hereby consents to the use of
its and its Subsidiaries logos in connection with the
Available Financing;
provided
, that such 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. Parent shall promptly, upon request by the
Company, reimburse the Company for all reasonable
out-of-pocket
costs and expenses (including reasonable attorneys fees)
incurred by the Company or any of its Subsidiaries in connection
with the cooperation of the Company and its Subsidiaries
contemplated by this Section 5.5(b) and shall indemnify and
hold harmless the Company, its Subsidiaries and their respective
Representatives from and against any and all losses, damages,
claims, costs or expenses suffered or incurred by any of them in
connection with the arrangement of the Financing and any
information used in connection therewith, except with respect to
any information prepared or provided by the Company or any of
its Subsidiaries. All material non-public information provided
by the Company or any of its Representatives pursuant to this
Section 5.5(b) shall be kept confidential in accordance
with the Confidentiality Agreement, except that (i) Parent
and Merger Sub shall be permitted to disclose such information
to potential sources of capital, rating agencies and prospective
lenders and investors during syndication of the Available
Financing subject to the potential sources of capital, ratings
agencies and prospective lenders and investors entering into
customary confidentiality undertakings with respect to such
information (including through a notice and undertaking in a
form customarily used in confidential information memoranda for
senior credit facilities) and (ii) upon reasonable notice
from Parent, the Company agrees to file with the SEC a
Form 8-K
or Form FD, in form and substance reasonably satisfactory
to the Company, containing any material non-public information
with respect to the Company or its subsidiaries contained in any
offering memorandum to be used in connection with the offering
of high yield debt securities contemplated by the Debt
Commitment Letter.
Section
5.6
Public
Announcements
. The press release announcing
this Agreement shall be a joint press release to be reasonably
agreed upon by Parent and the Company. Except with respect to
any Company Adverse Recommendation Change or any action taken
pursuant thereto, and in accordance with Section 5.2 and
Article VII, so long as this Agreement is in effect,
neither the Company nor Parent shall issue or cause the
publication of any press release or other public announcement,
including communications to the Companys employees or
Franchisees and communications to prospective Franchisees in any
FDD or otherwise (to the extent not previously issued or made in
accordance with this Agreement) with respect to the Merger, this
Agreement or the other Transactions without the prior consent of
the other party (which consent shall not be unreasonably
withheld or delayed), except as may be required by Law,
applicable fiduciary duties or by any applicable listing
agreement with a national securities exchange as determined in
the good faith judgment of the party proposing to make such
release or other public announcement (in which case such party
shall not issue or cause the publication of such press release
or other public announcement without prior consultation with the
other party).
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Section
5.7
Access
to Information; Confidentiality
. Subject to
applicable Laws relating to the exchange of information and upon
reasonable notice, the Company shall afford to Parent and
Parents representatives reasonable access during normal
business hours to the Companys officers, employees,
agents, properties, books, Contracts and records and the Company
shall furnish promptly to Parent such information concerning its
business, personnel, assets, liabilities and properties as
Parent may reasonably request (other than any publicly available
document filed by it pursuant to the requirements of Federal or
state securities Laws);
provided
that Parent and its
representatives shall conduct any such activities in such a
manner as not to interfere unreasonably with the business or
operations of the Company;
provided
,
however
, that the Company shall not be obligated to
provide such access or information if the Company determines, in
its reasonable judgment, that doing so would violate applicable
Law or a Contract or obligation of confidentiality owing to a
third-party, waive the protection of an attorney-client
privilege or attorney work product doctrine, or expose the
Company to risk of liability for disclosure of sensitive or
personal information. Without limiting the foregoing, in the
event that the Company does not provide access or information in
reliance on the preceding sentence, it shall use its reasonable
best efforts to communicate, to the extent feasible, the
applicable information in a way that would not violate the
applicable Law, Contract or obligation or risk waiver of such
privilege. Without limiting the generality of this
Section 5.7, from the date of this Agreement until the
Effective Time, the Company will furnish to the Parent promptly
after becoming available, monthly financial statements including
an unaudited balance sheet, income statement and statement of
cash flows for each month through the Closing Date, as well as
any update of its outlook for the quarter or the balance of the
fiscal year, as it may prepare for managements internal
use. Until the Effective Time, the information provided will be
subject to the terms of the letter agreement, dated as of
February 26, 2010, between the Company and Apollo
Management VII, L.P. (as it may be amended from time to time,
the
Confidentiality Agreement
), and, without
limiting the generality of the foregoing, Parent shall not, and
shall cause its representatives not to, use such information for
any purpose unrelated to the consummation of the Transactions.
Section
5.8
Notification
of Certain Matters
. The Company shall give
prompt notice to Parent, and Parent shall give prompt notice to
the Company, of (i) any notice or other communication
received by such party from any Governmental Authority in
connection with the Transactions or from any Person alleging
that the consent of such Person is or may be required in
connection with the Transactions, if the subject matter of such
communication or the failure of such party to obtain such
consent could be material to the Company, the Surviving
Corporation or Parent and (ii) any actions, suits, claims,
investigations or proceedings commenced or, to such partys
knowledge, threatened against, relating to or involving or
otherwise affecting such party or any of its Subsidiaries which
relate to the Transactions or any assets of the Company or any
Subsidiary that are material to the ongoing operations of the
Company or such Subsidiary in the ordinary course of business.
Section
5.9
Indemnification
and Insurance
.
(a) From and after the Effective Time, through the sixth
anniversary of the date on which the Effective Time occurs, each
of Parent and the Surviving Corporation shall (i) indemnify
and hold harmless, each individual who at the Effective Time is,
or at any time prior to the Effective Time was, a director or
officer of the Company or of a Subsidiary of the Company (in all
of such individuals capacities as such officer or
director) (each, an
Indemnitee
and,
collectively, the
Indemnitees
) with respect
to and against all claims, liabilities, losses, damages,
judgments, fines, penalties, costs (including amounts paid in
settlement or compromise) and expenses (including fees and
expenses of legal counsel) in connection with any claim, suit,
action, proceeding or investigation (whether civil, criminal,
administrative or investigative), whenever asserted, based on,
arising out of, or related to, in whole or in part, such
Indemnitees service and for such Indemnitees acts or
omissions, as a director or officer of the Company or such
Subsidiary or service performed by such Indemnitee at the
request of the Company or a Subsidiary, in each case, at, or at
any time prior to, the Effective Time (including, for the
avoidance of doubt, (i) any claim, suit, action, proceeding
or investigation relating in whole or in part to the
Transactions and (ii) actions to enforce this provision or
any other indemnification or advancement right of any
Indemnitee), and (iii) without limiting clauses (i)
and (ii), assume all obligations of the Company and its
Subsidiaries to the Indemnitees in respect of indemnification
and exculpation from liabilities for acts or omissions occurring
at or prior to the Effective Time as provided in the Company
Charter Documents and the organizational documents of its
Subsidiaries as currently in effect, all of the foregoing, to
the fullest extent permitted by applicable law. Without limiting
the foregoing, Parent, from and after the Effective Time until
six years from the Effective Time, shall cause, unless otherwise
required by Law, the
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certificate of incorporation and by-laws of the Surviving
Corporation to contain provisions no less favorable to the
Indemnitees with respect to limitation of liabilities of
directors and officers and indemnification than are set forth as
of the date of this Agreement in the Company Charter Documents,
which provisions shall not be amended, repealed or otherwise
modified in a manner that would adversely affect the rights
thereunder of the Indemnitees. In addition, from and after the
Effective Time until six years from the Effective Time, Parent
shall, and shall cause the Surviving Corporation to, pay any
expenses (including fees and expenses of legal counsel) of any
Indemnitee under this Section 5.9 (including in connection
with enforcing the indemnity and other obligations referred to
in this Section 5.9) as incurred to the fullest extent
permitted under applicable Law, provided that the person to whom
expenses are advanced provides an undertaking to repay such
advances if it shall be determined that such person is not
entitled to be indemnified pursuant to this Section 5.9(a).
The rights of the Indemnitees under this Section 5.9(a)
shall be in addition to any rights such Indemnitees may have
under the Company Charter Documents and the organizational
documents of its Subsidiaries as currently in effect.
(b) The Surviving Corporation shall have the right, but not
the obligation, to assume and control the defense of any
litigation, claim or proceeding relating to any acts or
omissions covered under this Section 5.9 (each, a
Claim
). The Surviving Corporation and the
Indemnitees shall cooperate in the defense of any Claim and
shall provide access to properties and individuals as reasonably
requested and furnish or cause to be furnished records,
information and testimony, and attend such conferences,
discovery proceedings, hearings, trials or appeals, as may be
reasonably requested in connection therewith.
(c) For the six-year period commencing immediately after
the Effective Time, the Surviving Corporation shall maintain in
effect the Companys current directors and
officers liability insurance covering acts or omissions
occurring at or prior to the Effective Time with respect to
those persons who are currently (and any additional persons who
prior to the Effective Time become) covered by the
Companys directors and officers liability
insurance policy on terms and scope with respect to such
coverage, and in amount, no less favorable to such individuals
than those of such policy in effect on the date hereof (or
Parent may substitute therefor policies, issued by reputable
insurers, of at least the same coverage with respect to matters
existing or occurring prior to the Effective Time, including a
tail policy);
provided
,
however
, that, if the aggregate annual premiums for
such insurance shall exceed 300% of the current aggregate annual
premium (such 300%, the
Maximum Premium
),
then Parent shall provide or cause to be provided a policy for
the applicable individuals with the best coverage as shall then
be available at an annual premium not in excess of the Maximum
Premium. The Company may prior to the Effective Time, with
Parents prior written consent, purchase a six-year prepaid
tail policy on terms and conditions providing at
least substantially equivalent benefits as the current policies
of directors and officers liability insurance
maintained by the Company and its Subsidiaries with respect to
matters existing or occurring prior to the Effective Time,
covering without limitation the transactions contemplated
hereby. If such prepaid tail policy has been
obtained by the Company, it shall be deemed to satisfy all
obligations to obtain insurance pursuant to this
Section 5.9(c) and the Surviving Corporation shall use its
reasonable best efforts to cause such policy to be maintained in
full force and effect, for its full term, and to honor all of
its obligations thereunder.
(d) The provisions of this Section 5.9 are
(i) intended to be for the benefit of, and shall be
enforceable by, each Indemnitee, his or her heirs and his or her
representatives and (ii) 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. 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 Indemnified Party as
provided in the Charter Documents or any indemnification
agreement between such Indemnitee 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 the rights thereunder of any such Indemnitee.
The obligations of Parent and the Surviving Corporation under
this Section 5.9 shall not be terminated or modified in
such a manner as to adversely affect the rights of any
Indemnitee to whom this Section 5.9 applies unless
(x) such termination or modification is required by
applicable Law or (y) the affected Indemnitee shall have
consented in writing to such termination or modification (it
being expressly agreed that the Indemnitees to whom this
Section 5.9 applies shall be third party beneficiaries of
this Section 5.9).
(e) In the event that Parent, the Surviving Corporation or
any of their respective successors or assigns
(i) consolidates with or merges into any other Person and
is not the continuing or surviving corporation or entity of
A-37
such consolidation or merger or (ii) transfers or conveys
all or substantially all of its properties and assets to any
Person, then, and in each such case, proper provision shall be
made so that the successors and assigns of Parent and the
Surviving Corporation shall assume all of the obligations
thereof set forth in this Section 5.9.
(f) Nothing in this Agreement is intended to, shall be
construed to or shall release, waive or impair any rights to
directors and officers insurance claims under any
policy that is or has been in existence with respect to the
Company or any of its Subsidiaries for any of their respective
directors, officers or other employees, it being understood and
agreed that the indemnification provided for in this
Section 5.9 is not prior to or in substitution for any such
claims under such policies.
Section
5.10
Rule 16b-3
. Prior
to the Effective Time, the Company shall take such steps as may
be reasonably requested by any party hereto to cause
dispositions of Company equity securities (including derivative
securities) pursuant to the Transactions by each individual who
is a director or officer of the Company to be exempt under
Rule 16b-3
promulgated under the Exchange Act.
Section
5.11
Employee
Matters
.
(a) For a period of one (1) year following the
Effective Time, Parent shall provide, or shall cause to be
provided, to active employees of the Company and its
Subsidiaries (
Company Employees
) annual base
salary and base wages, cash incentive compensation opportunities
and benefits (excluding equity-based compensation), that are no
less favorable, in the aggregate, than such annual base salary
and base wages, cash incentive compensation opportunities and
benefits (excluding equity-based compensation) provided to the
Company Employees immediately prior to the Effective Time;
provided
,
however
, that nothing in this Agreement
shall prohibit the Surviving Corporation from, consistent with
the Companys past practice, terminating the employment of
any employee of the Company or demoting any such employee (with
a corresponding change, if applicable, to such employees
base salary or wages and benefits).
(b) For purposes of vesting, eligibility to participate and
levels of benefits (but not actual accrual) under the employee
benefit plans of Parent and its Subsidiaries providing benefits
to any Company Employee after the Effective Time (including the
Company Plans) (the
New Plans
), each Company
Employee shall be credited with his or her years of service with
the Company and its Subsidiaries and their respective
predecessors before the Effective Time, to the same extent as
such Company Employee was entitled, before the Effective Time,
to credit for such service under any similar Company employee
benefit plan in which such Company Employee participated or was
eligible to participate immediately prior to the Effective Time,
provided
that the foregoing shall not apply to the extent
that its application would result in a duplication of benefits
with respect to the same period of service. In addition, the
Company shall use reasonable best efforts, to provide that
(i) each Company Employee shall be immediately eligible to
participate, without any waiting time, in any and all New Plans
to the extent coverage under such New Plan is replacing
comparable coverage under a Company Plan in which such Company
Employee participated immediately before the Effective Time
(such plans, collectively, the
Old Plans
),
and (ii) for purposes of each New Plan providing medical,
dental, pharmaceutical
and/or
vision benefits to any Company Employee, all pre-existing
condition exclusions and actively-at-work requirements of such
New Plan to be waived for such Company Employee and his or her
covered dependents, to the extent such conditions were
inapplicable or waived under the comparable Old Plans of the
Company or its Subsidiaries in which such Company Employee
participated immediately prior to the Effective Time. Parent
shall use commercially reasonable efforts to cause any eligible
expenses incurred by any Company Employee and his or her covered
dependents during the portion of the plan year of the Old Plan
ending on the date such Company Employees participation in
the corresponding New Plan begins to be taken into account under
such New Plan for purposes of satisfying all deductible,
coinsurance and maximum
out-of-pocket
requirements applicable to such Company Employee and his or her
covered dependents for the applicable plan year as if such
amounts had been paid in accordance with such New Plan.
(c) The provisions of this Section 5.11 are solely for
the benefit of the parties to this Agreement, and no provision
of this Section 5.11 is intended to, or shall, constitute
the establishment or adoption of or an amendment to any employee
benefit plan for purposes of ERISA or otherwise and no current
or former employee or any other individual associated therewith
shall be regarded for any purpose as a third party beneficiary
of the Agreement or have the right to enforce the provisions
hereof.
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Section
5.12
Employee
Stock Purchase Plan
.
(a) The Company shall take all actions necessary to
(i) suspend the ESPP as of the date hereof and terminate
the ESPP in its entirety as of the Effective Date,
(ii) ensure that (A) no payroll deductions shall be
made and no other amounts shall be set aside for the purchase of
shares under the ESPP on or after the date of this Agreement,
(B) no offering period shall be commenced on or after the
date of this Agreement, and (C) any amount withheld from
pay and not yet applied to the purchase of shares as of the date
hereof shall be returned to the participants pursuant to the
terms of the ESPP without any interest thereon, and
(iii) provide that the amount of any matching contribution
that would otherwise be or become payable in accordance with the
terms of the ESPP in effect on the date of this Agreement shall
be paid in cash to the appropriate person (subject to applicable
tax withholding) at the same date on which such matching
contributions otherwise would have become vested under the ESPP,
provided
that each such person has satisfied or satisfies
all requirements (including the service requirement) under the
terms of the ESPP in effect as of the date of this Agreement.
(b) After the Effective Time, Parent shall take all such
actions as are reasonably necessary to cause the Company to
provide that the amount of any matching contribution that would
otherwise be or become payable in accordance with the terms of
the ESPP in effect on the date of this Agreement shall be paid
in cash to the appropriate person (subject to applicable tax
withholding) at the same date on which such matching
contributions otherwise would have become vested under the ESPP,
provided
that each such person has satisfied or satisfies
all requirements (including the service requirement) under the
terms of the ESPP in effect as of the date of this Agreement.
Section
5.13
Notification
of Certain Matters
. Prior to the Effective
Time, Parent shall give prompt notice to the Company, and the
Company shall give prompt notice to Parent, of (a) the
occurrence, or failure to occur, of any event, which occurrence
or failure to occur is reasonably likely to cause any
representation or warranty of such party contained in this
Agreement to be untrue or inaccurate in any material respect, in
each case at any time from and after the date of this Agreement
until the Effective Time, or (b) any material failure of
Parent and Merger Sub or the Company, as the case may be, or of
any officer, director, employee or agent thereof, to comply with
or satisfy any covenant, condition or agreement to be complied
with or satisfied by it under this Agreement. Notwithstanding
the above, the delivery of any notice pursuant to this
Section 5.13 will not limit or otherwise affect the
remedies available hereunder to the party receiving such notice
or the conditions to such partys obligation to consummate
the Merger.
Section
5.14
SEC
Filings
. Prior to the Effective Time, the
Company shall file with or furnish to the SEC, on a timely
basis, all required registration statements, certifications,
reports and proxy statements with the SEC.
Section
5.15
Director
Resignations
. Prior to the Closing, the
Company shall deliver to Parent resignations executed by each
director of the Company in office immediately prior to the
Effective Time, which resignations shall be effective at the
Effective Time and which resignations shall not have been
revoked.
Section
5.16
Prior
Merger Agreement Termination and Termination
Fee
. Prior to the execution of this
Agreement, the Company has made a payment to Western Parent (or
its designee) of $9,283,000 which amount represents the
Go-Shop Termination Fee (as such term is defined in
the Prior Merger Agreement) (such payment the
Western
Termination Fee
). Under the terms of the Prior Merger
Agreement, the Company is obligated to reimburse Western Parent
(or its designee) for up to $5,000,000 in Parent
Expenses (as such term is defined in the Prior Merger
Agreement) and shall pay such amount promptly as required by the
terms of the Prior Merger Agreement (such amount the
Western Expense Reimbursement
).
ARTICLE VI
Conditions
Precedent
Section
6.1
Conditions
to Each Partys Obligation to Effect the
Merger
. The respective obligations of each
party hereto to effect the Merger shall be subject to the
satisfaction (or waiver, if permissible under applicable Law) on
or prior to the Closing Date of the following conditions:
(a)
Company Stockholder
Approval
. The Company Stockholder Approval
shall have been obtained;
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(b)
Antitrust Approvals
. The
waiting period (and any extension thereof) applicable to the
Merger under the HSR Act shall have been terminated or shall
have expired and any required approvals thereunder shall have
been obtained, without imposition of any conditions that would
be material relative to the aggregate Merger Consideration;
(c)
Governmental Approvals
. Other
than the filing of the Certificate of Merger, all
authorizations, consents, orders or approvals of, or
declarations or filings with, or expirations of waiting periods
imposed by, any Governmental Authority in connection with the
Merger and the consummation of the Transactions shall have been
filed or been obtained or occurred, as of the Effective Time,
other than such authorizations, consents, orders or approvals,
declarations or filings or expirations the failure of which to
obtain, file or occur, individually or in the aggregate, would
not reasonably be expected to result in a Material Adverse
Effect or a Parent Material Adverse Effect;
(d)
Company Approvals
. The Company
Approvals shall have been obtained for the consummation, as of
the Effective Time, of the Transactions, other than any Company
Approvals the failure of which to obtain, individually or in the
aggregate, would not reasonably be expected to result in a
Material Adverse Effect or a Parent Material Adverse
Effect; and
(e)
No Injunctions or
Restraints
. No Law, injunction, judgment or
ruling enacted, promulgated, issued, entered, amended or
enforced by any Governmental Authority (collectively,
Restraints
) shall be in effect enjoining,
restraining, preventing or prohibiting consummation of the
Merger or making the consummation of the Merger illegal.
Section
6.2
Conditions
to Obligations of Parent and Merger Sub
. The
obligations of Parent and Merger Sub to effect the Merger are
further subject to the satisfaction (or waiver, if permissible
under applicable Law) on or prior to the Closing Date of the
following conditions:
(a)
Representations and
Warranties
. The representations and
warranties of the Company (1) set forth in
Sections 3.5(b), 3.6(c) and 3.16 shall be true and correct
as of the Closing Date as if made on and as of the Closing Date,
(2) set forth in Sections 3.2(a) through
(c) shall be true and correct in all but de minimis
respects as if made on and as of the Closing Date (except for
those representations and warranties which address matters only
as of an earlier date which shall have been true and correct as
of such earlier date), (3) set forth in
Sections 3.17(a)(iii), 3.23 and 3.24 shall be true and
correct in all material respects as of the Closing Date as if
made on and as of the Closing Date (except for those
representations and warranties which address matters only as of
an earlier date which shall have been true and correct as of
such earlier date) and (4) set forth in this Agreement
other than those Sections specifically identified in clause (1),
(2) or (3) of this paragraph disregarding all
qualifications and exceptions contained therein relating to
materiality or Material Adverse Effect, shall be true and
correct as of the Closing Date as if made on and as of the
Closing Date (or, if given as of a specific date, at and as of
such date), except, in the case of this clause (4), where the
failure to be true and correct does not have and would not
reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect. Parent shall have received
a certificate signed on behalf of the Company by an executive
officer of the Company to such effect.
(b)
Performance of Obligations of the
Company
. (i) The Company shall have
performed in all material respects all obligations required to
be performed by it under this Agreement at or prior to the
Closing Date, and (ii) Parent shall have received a
certificate signed on behalf of the Company by an executive
officer of the Company to such effect.
(c)
No Material Adverse
Effect
. Since the date of this Agreement,
there shall have not occurred any Material Adverse Effect.
Section
6.3
Conditions
to Obligations of the Company
. The obligation
of the Company to effect the Merger is further subject to the
satisfaction (or waiver, if permissible under applicable Law) on
or prior to the Closing Date of the following conditions:
(a)
Representations and
Warranties
. The representations and
warranties of Parent and Merger Sub set forth in this Agreement
shall be true and correct as of the date of this Agreement and
as of the Effective Time
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(except to the extent that such representation and warranty
expressly speaks as of an earlier date, in which case such
representation and warranty shall be true and correct as of such
earlier date) except where such failures to be so true and
correct would not prevent consummation of the Merger. The
Company shall have received a certificate signed on behalf of
Parent by a senior executive officer of Parent as to the effect
of the preceding sentence.
(b)
Performance of Obligations of Parent and Merger
Sub
. Parent and Merger Sub shall have
performed in all material respects all obligations required to
be performed by them under this Agreement at or prior to the
Closing Date, and the Company shall have received a certificate
signed on behalf of Parent by an executive officer of Parent to
such effect.
(c)
Solvency Certificate
. Parent
shall have delivered to the Company a solvency certificate of
the chief financial officer of Parent in the same form as the
solvency certificate to be delivered to the lenders pursuant to
the Debt Commitment Letter or any definitive documents entered
into in connection with the Financing.
ARTICLE VII
Termination
Section
7.1
Termination
. This
Agreement may be terminated and the Transactions abandoned at
any time prior to the Effective Time, whether before or after
receipt of the Company Stockholder Approval (except as otherwise
expressly noted):
(a) by the mutual written consent of the Company and
Parent; or
(b) by either of the Company or Parent (if, in the case of
the Company, it has not materially violated Section 5.2):
(i) if the Merger shall not have been consummated on or
before the Walk-Away Date;
provided
,
however
, that
the right to terminate this Agreement pursuant to this
Section 7.1(b)(i) shall not be available to a party if the
failure of the Merger to have been consummated on or before the
Walk-Away Date was primarily due to the failure of such party to
perform any of its obligations under this Agreement; or
(ii) if any Restraint having the effect set forth in
Section 6.1(e) shall be in effect and shall have become
final and nonappealable;
provided
,
however
, that
the right to terminate this Agreement under this
Section 7.1(b)(ii) shall not be available to a party if the
issuance of such final, non-appealable Restraint was primarily
due to the failure of such party to perform any of its
obligations under this Agreement; or
(iii) if the Company Stockholder Approval shall not have
been obtained at the Company Stockholders Meeting duly convened
therefor or at any adjournment or postponement thereof;
provided
,
however
, that the right to terminate
this Agreement under this Section 7.1(b)(iii) shall not be
available to the Company if the failure by the Company to
perform any of its obligations under this Agreement has been the
principal cause or resulted in the failure to obtain the Company
Stockholder Approval; or
(c) by Parent,
(i) if: (A) the Company shall have materially breached
or failed to perform any of its representations, warranties,
covenants or agreements set forth in this Agreement (except the
covenants and agreements in Section 5.2), which breach or
failure to perform (i) would give rise to the failure of a
condition set forth in Section 6.2 and (ii) cannot be
cured by the Company, or if capable of being cured, shall not
have been cured within 20 days following receipt by the
Company of written notice of such breach or failure to perform
from Parent (or, if earlier, the Walk-Away Date);
provided
that, Parent shall not have the right to
terminate this Agreement pursuant to this Section 7.1(c)(i)
if it is then in material breach of any representations,
warranties, covenants or other agreements hereunder that would
result in the conditions to Closing set forth in
Section 6.3 not being satisfied; or (B) the Company
shall have breached in any material respect its obligations
under Section 5.2, which breach, if curable by the
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Company, shall not have been fully cured by the Company within
5 days following receipt by the Company of written notice
of such breach; or
(ii) if: (A) the Board of Directors of the Company
shall have failed to include the Company Board Recommendation in
the Proxy Statement or shall have effected a Company Adverse
Recommendation Change; (B) the Board of Directors of the
Company shall have effected a Change of Recommendation in
response to an Intervening Event; (C) the Board of
Directors of the Company shall have failed to publicly reaffirm
its recommendation of this Agreement in the absence of a
publicly announced Takeover Proposal within two business days
after Parent so requests in writing; (D) the Board of
Directors of the Company shall have failed to recommend against
any publicly announced Takeover Proposal and reaffirm the
Company Board Recommendation, in each case, within ten business
days following the public announcement of such Takeover Proposal
and in any event at least two business days prior to the Company
Stockholder Meeting; (E) the Company enters into a Company
Acquisition Agreement; or (F) the Company or the Board of
Directors of the Company shall have publicly announced its
intention to do any of the foregoing; or
(d) by the Company:
(i) if Parent or Merger Sub shall have materially breached
or failed to perform any of its representations, warranties,
covenants or agreements set forth in this Agreement, which
breach or failure to perform (A) would give rise to the
failure of a condition set forth in Section 6.3 and
(B) has not been cured by the Walk-Away Date;
provided
that, the Company shall not have the right to
terminate this Agreement pursuant to this Section 7.1(d)(i)
if it is then in material breach of any representations,
warranties, covenants or other agreements hereunder that would
result in the conditions to Closing set forth in
Section 6.2 not being satisfied; or
(ii) prior to the receipt of the Company Stockholder
Approval, in order to concurrently enter into a Company
Acquisition Agreement that constitutes a Superior Proposal, if,
(A) the Company has complied in all material respects with
the requirements of Section 5.2 and (B) prior to or
concurrently with such termination, the Company pays the fee due
under Section 7.3; or
(iii) if (A) the conditions set forth in
Sections 6.1 and 6.2 (other than those conditions that by
their nature are to be satisfied by actions taken at the
Closing) have been satisfied and (B) the Company has
irrevocably confirmed that all conditions set forth in
Section 6.3 have been satisfied or that it is willing to
waive all conditions in Section 6.3 and within five
business days after the Company has delivered written notice to
Parent of the satisfaction of such conditions and such
confirmation, the Merger shall not have been consummated within
two business days after the final day of the Marketing Period,
provided
that such conditions in Sections 6.1 and
6.2 remain satisfied at the close of business on such fifth
business day; or
(iv) if (A) the conditions set forth in
Sections 6.1 and 6.2 (other than those conditions that by
their nature are to be satisfied by actions taken at the
Closing) have been satisfied; (B) (x) the Debt Financing
contemplated by the Debt Commitment Letters has funded or
(y) the conditions of the Debt Commitment Letters, other
than the Merger and the funding of the Equity Financing
contemplated by the Equity Funding Letter, have been satisfied
and the Debt Financing would be funded pursuant to the terms and
conditions set forth in such Debt Commitment Letters upon the
consummation of such Equity Financing; and (C) the Company
has irrevocably confirmed that all conditions set forth in
Section 6.3 have been satisfied or that it is willing to
waive all conditions in Section 6.3, and the Merger shall
not have been consummated within five business days after the
receipt of such Financing and the Companys delivery of a
written notice to Parent of the satisfaction of such conditions
and such confirmation,
provided
that such conditions in
Sections 6.1 and 6.2 remain satisfied at the close of
business on such fifth business day.
Section
7.2
Effect
of Termination
. In the event of the
termination of this Agreement as provided in Section 7.1,
written notice thereof shall be given to the other party or
parties, specifying the provision hereof pursuant to which such
termination is made, and this Agreement shall forthwith become
null and void (other than Sections 7.2 and 7.3,
Article VIII, the expense reimbursement and indemnification
provisions of Section 5.5(b) and
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the Confidentiality Agreement and the Guarantee in accordance
with their terms, all of which shall survive termination of this
Agreement), and there shall be no liability on the part of
Parent, Merger Sub or the Company or their respective directors,
officers and Affiliates, except (i) the Company or the
Parent may have liability as provided in Section 7.3, and
(ii) nothing shall relieve any party from liability for
fraud.
Section
7.3
Termination
Fee
.
(a) In the event that:
(i) (A) a Takeover Proposal shall have been made,
proposed or communicated, after the date hereof and not
withdrawn prior to the Company Stockholders Meeting or prior to
the termination of this Agreement if there has been no Company
Stockholders Meeting, and (B) following the occurrence of
an event described in the preceding clause (A), this Agreement
is terminated by the Company or Parent pursuant to
Section 7.1(b)(i) or Section 7.1(b)(iii) or by Parent
pursuant to Section 7.1(c)(i) and (C) within
12 months of the date this Agreement is terminated, the
Company enters into a definitive agreement with respect to any
Takeover Proposal and such Takeover Proposal is consummated (in
each case whether or not the Takeover Proposal was the same
Takeover Proposal referred to in clause (A));
provided
that for purposes of clause (C) of this
Section 7.3(a)(i), the references to 20% in the
definition of Takeover Proposal shall be deemed to be references
to 50%; or
(ii) this Agreement is terminated by the Company pursuant
to Section 7.1(d)(ii); or
(iii) (A) this Agreement is terminated by Parent
pursuant to Section 7.1(c)(ii) or (B) this Agreement
is terminated by the Company or Parent pursuant to
Section 7.1(b)(iii) and prior to the Company Stockholders
Meeting the Board of Directors of the Company has made a Change
of Recommendation related to an Intervening Event;
then, in any such event under clause (i), (ii) or
(iii) of this Section 7.3(a), the Company shall pay as
directed by Parent the Termination Fee (as defined below), by
wire transfer of same day funds (x) in the case of
Section 7.3(a)(iii), within two business days after such
termination, (y) simultaneously with such termination if
pursuant to Section 7.1(d)(ii), or (z) in the case of
Section 7.3(a)(i), two business days after the earlier of
the entry into a Company Acquisition Agreement or the
consummation of a Takeover Proposal; it being understood that in
no event shall the Company be required to pay the Termination
Fee on more than one occasion. As used herein,
Termination Fee
shall mean a cash amount
equal to $15,471,000, except in the event that this Agreement is
terminated by the Company pursuant to Section 7.1(d)(ii) in
order to enter into a definitive agreement with respect to a
Takeover Proposal with Thomas H. Lee Equity Fund VI, L.P.
or any of its Affiliates, in which case the Termination Fee
shall mean a cash amount equal to $15,471,000 plus an amount
equal to the Western Termination Fee plus the Western Expense
Reimbursement. In the event that Parent shall receive full
payment pursuant to this Section 7.3(a) and
Section 7.3(c), the receipt of the Termination Fee and
Parent Expenses shall be deemed to be liquidated damages for any
and all losses or damages suffered or incurred by Parent, Merger
Sub, any of their respective Affiliates or any other person in
connection with this Agreement (and the termination hereof), the
transactions contemplated hereby (and the abandonment thereof)
or any matter forming the basis for such termination, and none
of Parent, Merger Sub, any of their respective Affiliates or any
other Person shall be entitled to bring or maintain any claim,
action or proceeding against the Company or any of its
Affiliates arising out of or in connection with this Agreement,
any of the transactions contemplated hereby or any matters
forming the basis for such termination;
provided
,
however
, that nothing in this Section 7.3(a) shall
limit the rights of Parent and Merger Sub under Section 8.9.
(b) In the event that the Company shall terminate this
Agreement pursuant to Section 7.1(d)(i),
Section 7.1(d)(iii) or Section 7.1(d)(iv), then:
(i) in the case of a termination pursuant to
Section 7.1(d)(i) or Section 7.1(d)(iii), if at such
time, the Company is not in material breach of any
representations, warranties, covenants or other agreements
hereunder that would result in the conditions to Closing set
forth in Section 6.2 not being satisfied and all conditions
to Parents and Merger Subs obligations to consummate
the Merger shall have been satisfied, then Parent shall pay to
the Company a termination fee of $15,471,000 in cash; or
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(ii) in the case of a termination pursuant to
Section 7.1(d)(iv), if at such time, the Company is not in
material breach of any representations, warranties, covenants or
other agreements hereunder that would result in the conditions
to Closing set forth in Section 6.2 not being satisfied and
all conditions to Parents and Merger Subs
obligations to consummate the Merger shall have been satisfied,
then Parent shall pay to the Company a termination fee of
$30,943,000 in cash;
(such payment, as applicable, the
Parent Termination
Fee
), such payment to be made by wire transfer of same
day funds within two business days after the termination of this
Agreement; it being understood that in no event shall Parent be
required to pay the Parent Termination Fee on more than one
occasion. In the event that the Company shall receive full
payment pursuant to this Section 7.3(b), the receipt of the
Parent Termination Fee shall be deemed to be liquidated damages
for any and all losses or damages suffered or incurred by the
Company or any other Person in connection with this Agreement,
the Financing Letters or the Guarantee (and the termination
hereof), the transactions contemplated hereby and thereby (and
the abandonment or termination thereof) or any matter forming
the basis for such termination, and neither the Company nor any
other Person shall be entitled to bring or maintain any claim,
action or proceeding against Parent, Merger Sub or any other
Buyer Party arising out of or in connection with this Agreement,
the Financing Letter or the Guarantee, any of the transactions
contemplated hereby or thereby (or the abandonment or
termination thereof) or any matters forming the basis for such
termination. Notwithstanding anything to the contrary, if a
court of competent jurisdiction has ordered Parent or Merger Sub
to pay the Parent Termination Fee pursuant to this
Section 7.3(b), the Company shall not be entitled to
enforce such order if (x) Parent delivers to the Company,
within five business days following the issuance of such order,
a notice electing to consummate the Closing in accordance with
Article II of this Agreement and (y) the Closing
occurs within three business days following the delivery of such
notice.
(c) In the event that:
(i) The Company shall terminate this Agreement pursuant to
Section 7.1(b)(iii) or Section 7.1(d)(ii); or
(ii) Parent shall terminate this Agreement pursuant to
Section 7.1(b)(iii), Section 7.1(c)(i) or
Section 7.1(c)(ii);
then in any such event, the Company shall pay Parent or its
designees, as promptly as possible (but in any event within two
business days) following the delivery by Parent of an invoice
therefor, all
out-of-pocket
fees and expenses incurred by Parent or its Affiliates in
connection with the transactions contemplated by this Agreement
(
Parent Expenses
);
provided
that the
Company shall not be required to pay more than an aggregate of
$5.0 million in Parent Expenses pursuant to this
Section 7.3(c). The expenses payable pursuant to this
Section 7.3(c) shall be paid by wire transfer of same day
funds within ten business days after demand therefor following
the occurrence of the termination event giving rise to the
payment obligation described in this Section 7.3(c). The
payment of the expense reimbursement pursuant to this
Section 7.3(c) shall not relieve the Company of any
subsequent obligation to pay the Termination Fee pursuant to
Section 7.3(a).
(d) Each of the parties hereto acknowledge that the
agreements contained in this Section 7.3 are an integral
part of the Transactions, and that without these agreements, the
other party would not enter into this Agreement; accordingly, if
the Company or Parent, as the case may be, fails to timely pay
any amount due pursuant to this Section 7.3, and, in order
to obtain the payment, Parent or the Company, as the case may
be, commences a suit which results in a judgment against the
other party for the payment set forth in this Section 7.3,
such paying party shall pay the other party its reasonable and
documented costs and expenses (including reasonable and
documented attorneys fees) in connection with such suit,
together with interest on such amount at the prime rate as
published in The Wall Street Journal in effect on the date such
payment was required to be made through the date such payment
was actually received.
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ARTICLE VIII
Miscellaneous
Section
8.1
No
Survival of Representations and
Warranties
. This Article VIII and the
agreements of the Company, Parent and Merger Sub contained in
Article II, Section 5.9 (Indemnification and
Insurance) and the indemnification and reimbursement obligations
of Parent pursuant to Section 5.5(b) (Financing) and
Section 7.2 (Effect of Termination), the Confidentiality
Agreement and the Guarantee shall survive the termination of
this Agreement (in the case of the Confidentiality Agreement and
the Guarantee, subject to the terms thereof). All other
representations, warranties, covenants and agreements in this
Agreement shall not survive the consummation of the Merger or
the termination of this Agreement.
Section
8.2
Fees
and Expenses
. Whether or not the Merger is
consummated, all fees and expenses incurred in connection with
the Merger, this Agreement and the Transactions shall be paid by
the party incurring or required to incur such fees or expenses,
except as otherwise set forth in this Agreement.
Section
8.3
Amendment
or Supplement
. At any time prior to the
Effective Time, this Agreement may be amended or supplemented in
any and all respects, whether before or after receipt of the
Company Stockholder Approval, by written agreement of each of
the parties hereto, by action taken by their respective Boards
of Directors;
provided
,
however
, that following
approval of the Transactions by the stockholders of the Company,
there shall be no amendment or change to the provisions hereof
which by Law would require further approval by the stockholders
of the Company without such approval.
Section
8.4
Extension
of Time, Waiver, Etc
. At any time prior to
the Effective Time, any party may, subject to applicable Law,
(a) waive any inaccuracies in the representations and
warranties of any other party hereto, (b) extend the time
for the performance of any of the obligations or acts of any
other party hereto or (c) waive compliance by the other
party with any of the agreements contained herein or, except as
otherwise provided herein, waive any of such partys
conditions. Notwithstanding the foregoing, no failure or delay
by the Company, Parent or Merger Sub in exercising any right
hereunder shall operate as a waiver thereof nor shall any single
or partial exercise thereof preclude any other or further
exercise thereof or the exercise of any other right hereunder.
Any agreement on the part of a party hereto to any such
extension or waiver shall be valid only if set forth in an
instrument in writing signed on behalf of such party.
Section
8.5
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;
provided
,
however
, that the Parent or Merger Sub may assign this
Agreement to any Subsidiary thereof (
provided
that such
designation shall not impede or delay the consummation of the
Transactions or otherwise materially impede the rights of the
stockholders of the Company under this Agreement). No assignment
by any Party shall relieve such Party of any of its obligations
hereunder. Subject to the preceding two sentences, this
Agreement shall be binding upon, inure to the benefit of, and be
enforceable by, the parties hereto and their respective
successors and permitted assigns. Any purported assignment not
permitted under this Section 8.5 shall be null and void.
Section
8.6
Counterparts
. This
Agreement may be executed in counterparts (each of which shall
be deemed to be an original but all of which taken together
shall constitute 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.
Section
8.7
Entire
Agreement; No Third-Party Beneficiaries
. This
Agreement, including the Company Disclosure Schedule, the Parent
Disclosure Schedule, and the exhibits hereto, together with the
other instruments referred to herein, including the Financing
Letters, Confidentiality Agreement and the Guarantee constitute
the entire agreement, and supersede all other prior agreements
and understandings, both written and oral, among the parties and
their Affiliates, or any of them, with respect to the subject
matter hereof and thereof. Except for: (i) if the Effective
Time occurs, (A) the right of the Companys
stockholders to receive the Merger Consideration at the
Effective Time and (B) the right of the holders of Options
to receive the Designated Consideration promptly after the
Effective Time; and (ii) the provisions set forth in
Section 5.9, this Agreement is not intended, and shall not
be deemed, to confer any rights or remedies upon any person
other than the parties hereto and their respective
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successors and permitted assigns, to create any agreement of
employment with any person or to otherwise create any
third-party beneficiary hereto. Notwithstanding the foregoing,
each Financing Source is intended to be, and shall be, a third
party beneficiary of, and shall be entitled to enforce, the
agreements contained in Section 7.3(b), 8.8(b), 8.8(c),
8.9(b), 8.9(c) and 8.10.
Section
8.8
Governing
Law; Jurisdiction
.
(a) This Agreement shall be governed by, and construed in
accordance with, the laws of the State of Delaware, applicable
to contracts executed in and to be performed entirely within
that State.
(b) All actions and proceedings arising out of or relating
to this Agreement shall be heard and determined in the Chancery
Court of the State of Delaware and any state appellate court
therefrom within the State of Delaware (or, if the Chancery
Court of the State of Delaware declines to accept jurisdiction
over a particular matter, any state or federal court within the
State of Delaware) and the parties hereto hereby irrevocably
submit to the exclusive jurisdiction and venue of such courts in
any such action or proceeding and irrevocably waive the defense
of an inconvenient forum to the maintenance of any such action
or proceeding. The consents to jurisdiction and venue set forth
in this paragraph shall not constitute general consents to
service of process in the State of Delaware and shall have no
effect for any purpose except as provided in this paragraph and
shall not be deemed to confer rights on any Person other than
the parties hereto. The parties hereto agree that a final
judgment in any such 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 applicable Law;
provided
,
however
, that nothing in the foregoing
shall restrict any partys rights to seek any post-judgment
relief regarding, or any appeal from, such final trial court
judgment.
(c) Each of the parties hereto agrees that it will not
bring or support any action, cause of action, claim, cross-claim
or third-party claim of any kind or description, whether in law
or in equity, whether in contract or in tort or otherwise,
against the Financing Source in any way relating to this
Agreement or any of the transactions contemplated by this
agreement, including, but not limited to any dispute arising out
of or relating in any way to the Financing Letters or the
performance thereof, 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
8.9
Remedies
.
(a) The parties hereto agree that irreparable damage would
occur in the event that any of the provisions of this Agreement
were not performed by the Company in accordance with their
specific terms or were otherwise breached by the Company. It is
accordingly agreed that Parent and Merger Sub shall be entitled
to an injunction or injunctions to prevent breaches of this
Agreement and to enforce specifically the terms and provisions
of this Agreement, in each case without posting a bond or
undertaking, this being in addition to any other remedy to which
they are entitled at law or in equity. Notwithstanding anything
herein to the contrary, the parties further acknowledge that the
Company shall not be entitled to an injunction or injunctions to
prevent breaches of this Agreement against Parent or Merger Sub
or otherwise obtain any equitable relief or remedy against
Parent or Merger Sub and that the Companys sole and
exclusive remedy shall be set forth in Section 7.3.
(b) Notwithstanding anything herein to the contrary, the
maximum aggregate liability of the Company under or relating to
this Agreement to any Person shall be limited to the Termination
Fee
plus
the Parent Expenses if the Company is required
to pay the Termination Fee
plus
any amounts that may be
payable by the Company under Section 7.3(d) (the
Company Liability Limitation
), and the
maximum aggregate liability of Parent and Merger Sub under or
relating to this Agreement to any Person shall be limited to the
amount of the applicable Parent Termination Fee described in
Section 7.3(b) (inclusive of any amounts owed pursuant to
Section 5.5(b) and Section 5.9) plus any amounts that
may be payable under Section 7.3(d) (the
Parent
Liability Limitation
), and in no event shall
(i) the Company or any of its Affiliates seek any recovery,
judgment or damages of any kind, including consequential,
indirect, or punitive damages, in connection with this
Agreement, the Financing Letters or the Guarantee or the
transactions contemplated hereby or thereby, against Parent,
Merger Sub, the Guarantors or any other Buyer Parties (as
defined below), other than against Parent or Merger Sub pursuant
to this Agreement or against Guarantors pursuant to the
Guarantee, in each such case not to exceed the Parent Liability
Limitation, and in no event shall the Company and its Affiliates
be entitled to more than one payment of an amount equal in the
A-46
aggregate to the Parent Liability Limitation and
(ii) Parent or Merger Sub seek any other recovery, judgment
or damages of any kind, including consequential, indirect, or
punitive damages, against the Company, its Subsidiaries or any
other Company Parties in excess of the Company Liability
Limitation in connection with this Agreement or the transactions
contemplated hereby;
provided
,
however
, that
nothing in this clause (b) of Section 8.9 shall limit
the rights of Parent or Merger Sub under clause (a) of this
Section 8.9 or under the Company Stockholder Agreement. The
Company acknowledges and agrees that it has no right of recovery
against, and no personal liability shall attach to, in each case
with respect to damages of the Company and its Affiliates, any
of the Buyer Parties (as defined below) (other than the Parent
and the Merger Sub to the extent provided in this Agreement and
the Guarantors to the extent provided in the Guarantee), through
the Parent or otherwise, whether by or through attempted
piercing of the corporate, limited partnership or limited
liability company veil, by or through a claim by or on behalf of
the Parent against the Guarantors or any other Buyer Party, by
the enforcement of any assessment or by any legal or equitable
proceeding, by virtue of any statute, regulation or applicable
Law, or otherwise, except for its rights to recover from the
Guarantors (but not any other Buyer Party) under and to the
extent provided in the Guarantee and subject to the Parent
Liability Limitation and the other limitations described
therein. Recourse against the Guarantors under the Guarantee
shall be the sole and exclusive remedy of the Company and its
Affiliates against the Guarantors and any other Buyer Party
(other than Parent and the Merger Sub to the extent provided in
this Agreement) in respect of any liabilities or obligations
arising under, or in connection with, this Agreement, the
Financing Letters or the Guarantee or the transactions
contemplated hereby or thereby.
(c) For purposes hereof:
Buyer Parties
shall mean, collectively, Parent, Merger Sub, the Guarantors,
the Financing Sources and any of their respective former,
current or future equity holders, controlling persons,
directors, officers, employees, agents, general or limited
partners, managers, management companies, members, stockholders,
Affiliates or assignees and any and all former, current or
future equity holders, controlling persons, directors, officers,
employees, agents, general or limited partners, managers,
management companies, members, stockholders, Affiliates or
assignees of any of the foregoing, and any and all former,
current or future heirs, executors, administrators, trustees,
successors or assigns of any of the foregoing, and (ii)
Company Parties
shall mean,
collectively, any and all former, current or future equity
holders, controlling persons, directors, officers, employees,
agents, general or limited partners, managers, management
companies, members, stockholders, Affiliates or assignees of the
Company and its Subsidiaries and any and all former, current or
future equity holders, controlling persons, directors, officers,
employees, agents, general or limited partners, managers,
management companies, members, stockholders, Affiliates or
assignees of any of the foregoing, and any and all former,
current or future heirs, executors, administrators, trustees,
successors or assigns of any of the foregoing.
Section
8.10
WAIVER
OF JURY TRIAL
. EACH OF THE PARTIES HERETO
IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY
LEGAL PROCEEDING BETWEEN THE PARTIES HERETO ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY.
Section
8.11
Notices
. All
notices, requests and other communications to any party
hereunder shall be in writing and shall be deemed given if
delivered personally, facsimiled (which is confirmed) or sent by
overnight courier (providing proof of delivery) to the parties
at the following addresses:
If to Parent or Merger Sub, to:
Apollo Management VII, L.P.
9 West 57th Street
43rd Floor
New York, NY 10019
Attention: Laurie Medley
Facsimile:
646-607-0528
A-47
with a copy (which shall not constitute notice) to:
Morgan, Lewis & Bockius LLP
101 Park Avenue
New York, NY 10178
|
|
|
|
Attention:
|
Robert G. Robison, Esq.
|
R. Alec Dawson, Esq.
Jonathan D. Morris, Esq.
Facsimile:
212-309-6001
If to the Company, to:
6307 Carpinteria Avenue, Suite A
Carpinteria, CA
93013-2901
Attention: General Counsel
Facsimile:
714-781-2729
with a copy (which shall not constitute notice) to:
Stradling Yocca Carlson & Rauth
660 Newport Center Drive, Suite 1600
Newport Beach, California 92660
Attention: C. Craig Carlson, Esq.
Facsimile:
949-725-4100
and
Potter Anderson & Corroon LLP
1313 N. Market Street
Wilmington, DE 19801
Attention: Mark Morton, Esq.
Facsimile:
302-778-6078
or such other address or facsimile number as such party may
hereafter specify by like notice to the other parties hereto.
All such notices, requests and other communications shall be
deemed received on the date of receipt by the recipient thereof
if received prior to 7 P.M. local time in the place of
receipt and such day is a business day in the place of receipt.
Otherwise, any such notice, request or communication shall be
deemed not to have been received until the next succeeding
business day in the place of receipt.
Section
8.12
Severability
. If
any term or other provision of this Agreement is determined by a
court of competent jurisdiction to be invalid, illegal or
incapable of being enforced by any rule of law or public policy,
all other terms, provisions and conditions of this Agreement
shall nevertheless remain in full force and effect. Upon such
determination that any term or other provision is invalid,
illegal or incapable of being enforced, the parties hereto 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 are fulfilled to the
extent possible.
Section
8.13
Definitions
.
(a) As used in this Agreement, the following terms have the
meanings ascribed thereto below:
Affiliate
shall mean, as to any
Person, (i) any other Person that, directly or indirectly,
controls, or is controlled by, or is under common control with,
such Person. For this purpose, control (including,
with its correlative meanings, controlled by and
under common control with) shall mean the
possession, directly or indirectly, of the power to direct or
cause the direction of management or policies of a Person,
whether through the ownership of securities or partnership or
other ownership interests, by contract or otherwise and
(ii) with respect to any natural Person, any Member of the
Immediate Family of such natural Person.
business day
shall mean a day except a
Saturday, a Sunday or other day on which the SEC or banks in the
City of New York are authorized or required by Law to be closed.
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Company Joint Venture
means any entity
(including partnerships, limited liability companies and other
business associations and joint ventures) that is not a
Subsidiary in which the Company or a Subsidiary of the Company,
directly or indirectly, owns an equity or ownership interest and
(i) does not have voting power under ordinary circumstances
to elect a majority of the board of directors, board of
managers, executive committee or other Person or body performing
similar functions but in which the Company or a Subsidiary of
the Company has rights with respect to the management of such
person
and/or
(ii) which is a general partner or managing partner or
equivalent of an entity which operates, or receives financial
benefits of operating, one or more restaurants.
Company Plan
means each plan, program,
policy, agreement or other arrangement (in each case, other than
as required by statute) whether covering a single individual or
group of individuals, that is (i) an employee welfare plan
within the meaning of Section 3(1) of ERISA, (ii) an
employee pension benefit plan within the meaning of
Section 3(2) of ERISA, (iii) a Company Stock Plan, or
(iv) a material bonus, deferred compensation,
profit-sharing, vacation, severance or employment or
fringe-benefit plan, program, policy, agreement or other
arrangement, in each case that is sponsored, maintained or
contributed to by the Company or any of its Subsidiaries or to
which the Company or any of its Subsidiaries contributes or is
obligated to contribute to or has or may have any liability.
Company Stock Plans
shall mean the
plans and agreements listed in
Section 3.11(c)(1)
of
the Company Disclosure Schedule.
Compliant
means, with respect to the
Required Information, that (i) such Required Information
does not contain any untrue statement of a material fact or omit
to state any material fact necessary in order to make such
Required Information, in light of the circumstances under which
they were made, not misleading, (ii) such Required
Information is, and remains throughout the Marketing Period,
compliant in all material respects with all requirements of
Regulation S-K
and
Regulation S-X
under the Securities Act (excluding information required by
Regulation S-X
Rule 3-10)
for offerings of debt securities that customarily would be
included in a preliminary offering memorandum or registration
statement, (iii) the Companys auditors have not
withdrawn any audit opinion with respect to any financial
statements contained in the Required Information, (iv) the
Companys auditors have delivered drafts of customary
comfort letters, including, without limitation, as to customary
negative assurances and change period, and such auditors have
confirmed they are prepared to issue subject only to completion
of customary procedures, and (v) the financial statements
and other financial information included in such Required
Information are, and remain throughout the Marketing Period,
sufficient to permit (A) a registration statement using
such financial statements to be declared effective by the SEC on
the last day of the Marketing Period and (B) the financing
sources (including underwriters, placement agents or initial
purchasers) to receive customary comfort letters from the
Companys independent auditors on the financial information
contained in the Offering Documents, including, without
limitation, as to customary negative assurances and change
period, to consummate any offering of debt securities on the
last day of the Marketing Period.
Condominium Documents
shall mean, with
respect to each parcel of Real Property that is part of a
condominium, collectively, the Condominium Declaration, the
by-laws of the condominium, the floor plans attached to the
Condominium Declaration, and any other similar written
agreements among or otherwise binding upon any unit owners of
the condominium in their capacity as such and that govern or
otherwise relate to the establishment, continuance, maintenance
or operation of the condominium, as the same may be amended,
restated, replaced, supplemented or otherwise modified from time
to time.
Encumbrance
shall mean any mortgage,
deed of trust, lease, license, condition, covenant, restriction,
hypothecation, option to purchase or lease or otherwise acquire
any interest, right of first refusal or offer, conditional sales
or other title retention agreement, adverse claim of ownership
or use, easement, encroachment, right of way or other title
defect, third party right or encumbrance of any kind or nature.
ERISA
means the Employee Retirement
Income Security Act of 1974, as amended.
FDD
means the franchise disclosure
document prepared in accordance with the FTC Rule (or its
predecessor) or any applicable Franchise Law.
A-49
Financing Source
means the entities
that have committed to provide or otherwise entered into
agreements in connection with the Financing or other financings
in connection with the transactions contemplated hereby,
including the parties to the Financing Letters and any joinder
agreements, credit agreements, indentures (or other definitive
documentation) relating thereto.
Foreign Plan
means each Company Plan
maintained outside of the United States which provides benefits
in respect of current or former employees, directors,
consultants, or independent contractors of the Company or its
Subsidiaries that are working outside of the United States or
the beneficiaries or dependents of any such persons.
Franchise
means any grant by the
Company, any of its Subsidiaries or any Company Joint Venture to
any Person of the right to engage in or carry on a business, or
to sell or offer to sell any product or service, under or in
association with any Trademark, which constitutes a
franchise, as that term is defined under
(a) the FTC Rule, regardless of the jurisdiction in which
the franchised business is located or operates; or (b) the
Franchise Law applicable in the jurisdiction in which the
franchised business is located or operates, if any.
Franchisee
means a Person (including
any Affiliate of the Company, any of its Subsidiaries or their
respective officers or directors) who is a party to a Franchise
Agreement with the Company, any of its Subsidiaries or any
Company Joint Venture.
Franchise Agreement
means any oral or
written Contracts, commitments, arrangements or understandings
pursuant to which the Company, any of its Subsidiaries or any
Company Joint Venture grants or has granted any Franchise or the
right or option (whether or not subject to certain
qualifications) to acquire any Franchise, including any
addendum, amendment, extension or renewal thereof, and together
with any guarantee or other instrument or agreement relating
thereto to which the Company, any Subsidiary or any Company
Joint Venture is a party (including any software license and
support agreement, distribution services agreement). Without
limiting the foregoing, Franchise Agreement includes area
development agreements, area license or franchise agreements,
multi-unit
license or franchise agreements, master license or franchise
agreements, area representative agreements, and similar
agreements that cover the development or franchising of
Franchises within any area or country or the delegation of
duties by the Company, any Subsidiary or any Company Joint
Venture with respect to its obligations as a franchisor or
otherwise under any such agreements. Notwithstanding the
foregoing, the term Franchise Agreement does not
include any Franchise Lease.
Franchise Law
means the FTC Rule and
any other Law regulating the offer
and/or
sale
of franchises, business opportunities, seller-assisted marketing
plans or similar relationships.
Franchise Leases
shall mean all
leases, subleases and other agreements or Contracts pursuant to
which the Company or any of its Subsidiaries has granted a
Franchisee the right to lease, use or occupy any Real Property.
Notwithstanding the foregoing, the term Franchise
Leases does not include any Franchise Agreements.
FTC Rule
means the Federal Trade
Commission trade regulation rule entitled Disclosure
Requirements and Prohibitions Concerning Franchising, 16
C.F.R. Section 436.1
et seq
.
GAAP
shall mean generally accepted
accounting principles in the United States, consistently applied.
Governmental Authority
shall mean any
government, court, regulatory or administrative agency,
commission or authority or other governmental instrumentality,
and any arbitrator or arbitral authority, whether federal, state
(including any state franchise authority) or local, domestic,
foreign or multinational.
Hazardous Materials
shall mean
(i) any petroleum products or byproducts, radioactive
materials, friable asbestos or polychlorinated biphenyls or
(ii) any waste, material or substance defined as a
hazardous substance, hazardous material,
or hazardous waste, pollutant or
analogous terminology under any applicable Environmental Law.
Headquarters and Distribution Center
Leases
shall mean lease agreements for the
properties of the Company or a Subsidiary commonly known as
1325 N. Anaheim Blvd., Anaheim, CA, 6307 Carpenteria
Avenue, Carpenteria, CA, 1051 N. Winville Avenue,
Ontario, CA, 100 N. Broadway, Suites 1200 and 1300,
A-50
St. Louis, MO, 100 N. Broadway, Suite 150,
St. Louis, MO and 1405 1625 N. Church
Street, Rocky Mount, NC, and all amendments and modifications
thereto.
HSR Act
shall mean the
Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended, and the rules
and regulations promulgated thereunder.
Indebtedness
shall mean (i) any
indebtedness for borrowed money (including the issuance of any
debt security) to any Person other than the Company or any of
its Subsidiaries, (ii) any obligations evidenced by notes,
bonds, debentures or similar Contracts to any Person other than
the Company or any of its Subsidiaries, (iii) any
obligations for the deferred purchase price of property, goods
or services to any Person other than the Company or any of its
Subsidiaries (other than trade payables incurred in the ordinary
course of business), (iv) any capital lease obligations to
any Person other than the Company or any of its Subsidiaries,
(v) any obligations in respect of letters of credit and
bankers acceptances, (vi) any keep well
or other agreement to maintain any financial statement condition
of any Person (other than the Company or any of its
Subsidiaries) or any other arrangement having the economic
effect of a Guarantee; or (vii) any Guarantee of any such
obligations described in clauses (i) through (vi) of
any Person other than the Company or any of its Subsidiaries.
Intellectual Property
shall mean all
intellectual property rights of any type or nature, whether
established by Law or contractual agreement, however,
denominated, throughout the world, including trademarks, trade
names, service marks, service names, mark registrations, logos,
assumed names, domain names, the goodwill in any of the
foregoing; works, registered and unregistered copyrights,
software, data, databases; technology, inventions, trade
secrets, patents and patent applications, moral rights, rights
of privacy and publicity, along with all rights to prosecute and
perfect the same through administrative prosecution,
registration, recordation, or other administrative proceeding,
and all choses in action and rights to sue or seek other
remedies arising from or relating to the foregoing.
Intervening Event
means a material
event or circumstance on the business, results of operations or
financial condition of the Company and its Subsidiaries taken as
a whole that was not known to the Board of Directors of Company
on the date of this Agreement (or if known, the consequences of
which are not known to or reasonably foreseeable by the Board of
Directors of the Company as of the date hereof), which event or
circumstance, or any material consequences thereof, becomes
known to the Board of Directors of the Company prior to the time
at which the Company receives the Company Stockholder Approval;
provided
,
however
, that such event, circumstance
or consequence shall not constitute an Intervening Event if any
Takeover Proposal shall have been made, proposed or communicated
to the Board of Directors of the Company prior to or
contemporaneous with such event, circumstance or consequence;
provided
further that in no event shall the receipt,
existence or terms of a Takeover Proposal or any matter relating
thereto or consequence thereof constitute an Intervening Event.
Knowledge
shall mean, in the case of
the Company, the actual knowledge (after reasonable inquiry), as
of the date of this Agreement, of Andrew Puzder, E. Michael
Murphy, Theodore Abajian, Bradford R. Haley, John Dunion, Rich
Buxton, Rick Fortman, Bob Starke, Noah Griggs, Chip Seigel, Bill
Werner, Jeff Chasney, Ned Lyerly, Bob Bartlett, Steve Evans,
Bruce Frazer, Steve Lemley, Reese Stewart and Jack Willingham.
Leases
shall mean (I) all leases,
subleases and other agreements under which the Company or any of
its Subsidiaries leases, uses or occupies, or has the right to
use or occupy, any real property, and all amendments and
modifications thereto and (II) any lease, sublease,
guarantee or other agreement under which the Company or any of
its Subsidiaries has (A) guaranteed or (B) remains
liable for, subsequent to the assignment of such agreement, the
obligations of a Franchisee or any other Person.
Leased Real Property
shall mean all
real property that the Company or any of its Subsidiaries
leases, subleases or otherwise uses or occupies, or has the
right to use or occupy, pursuant to a Lease.
Licensed Software
means all computer,
software or firmware programs, modules or libraries licensed to
the Company or any of its Subsidiaries and incorporated into or
used by the Company or its Subsidiaries in, to develop, to
maintain or to support any of the products or services of their
respective businesses.
A-51
Liens
shall mean any pledges, claims,
liens, licenses, charges, encumbrances, options to purchase or
lease or otherwise acquire any interest, and security interests
of any kind or nature whatsoever.
Manuals
mean the Carls Jr.
Development Guide, the Carls Jr. Operations Procedures
Manual, the Green Burrito Operations Procedures Manual, the
Hardees Development Guide, the Hardees Operations
and Procedures Manual, the Red Burrito Conversion Manual, and
any other documents and communications, in whatever form or
medium, which the Company or its Subsidiary has made available
to Franchisees relating to the standards, specifications,
operating procedures and rules for the operation of the business
under a Franchise Agreement.
Marketing Period
means the first
period of 21 consecutive business days throughout and on the
last day of which (a) Parent, Merger Sub and their
financing sources shall have received completed Offering
Documents including Required Information (including the Required
Information with respect to the Companys fiscal year ended
January 25, 2010) for all of the Available Financing,
and such Required Information contained in all of the Offering
Documents is Compliant, (b) all conditions set forth in
Section 6.1 and Section 6.2 (other than those that by
their nature will not be satisfied until the Effective Time)
have been satisfied and nothing has occurred and no condition
exists that would cause any of the conditions set forth in
Section 6.1 or Section 6.2 not to be satisfied
assuming the Effective Time were to be scheduled for any time
during such consecutive 21 business day period, and (c) the
Company shall have provided all cooperation which it is
obligated to provide under the terms of Section 5.5.
Notwithstanding the foregoing, the Marketing Period
shall not commence and shall be deemed not to have commenced if,
on or prior to the completion of such consecutive 21 business
day period, (x) the Company shall have announced any
intention to restate any financial statements or financial
information included in the Required Information or that any
such restatement is under consideration or may be a possibility,
in which case the Marketing Period will be deemed not to
commence unless and until such restatement has been completed
and the applicable Required Information has been amended or the
Company has announced that it has concluded that no restatement
shall be required, (y) the Company shall have failed to
file any report with the applicable Securities Authorities when
due, in which case the Marketing Period will be deemed not to
commence unless and until all such reports have been filed, or
(z) the Required Information would not be Compliant
throughout and on the last day of such 21 business day period,
in which case a new 21 business day period shall commence upon
Parent, Merger Sub and their financing sources receiving updated
Required Information that would be Compliant, and the
requirements in clauses (a) and (b) above would be
satisfied throughout and on the last day of such new 21 business
day period. In no event may a Marketing Period
commence any later than July 27, 2010, unless at
Parents election a Marketing Period commenced after such
date terminates no later than August 24, 2010.
Material Franchisee
means any
Franchisee who, together with any of its Affiliates, either
(a) owns or operates ten or more franchised businesses, or
(b) has the right to develop multiple franchised business
in a specified area under a development agreement,
multi-unit
franchise agreement, or similar agreement.
Material Lease
shall mean the
Franchise Leases, the Headquarters and Distribution Center
Leases, any other Lease of Material Leased Real Property and any
other Lease that qualifies as a Material Contract under the
definition thereof (other than pursuant to
Section 3.17(a)(viii)).
Material Leased Real Property
shall
mean the (i) Real Property leased pursuant to the
Headquarters and Distribution Center Leases and (ii) any
other Leased Real Property used or operated by the Company or
any subsidiary or any Franchisee or licensee pursuant to a
Franchise Lease as administrative offices, a distribution
center, test kitchen or warehouse or as a restaurant (including
any Real Property presently under development or closed for
remodeling/refurbishment).
Material Owned Real Property
shall
mean (i) the Owned Real Property used or operated by the
Company or any Subsidiary or any Franchisee or licensee pursuant
to a Franchise Lease, in any such case as administrative
offices, distribution center, test kitchen or warehouse or as a
restaurant (including any Real Property presently under
development or closed for remodeling/refurbishment) and
(ii) any other parcel of Owned Real Property having a book
value of greater than $750,000.
A-52
Material Real Property
means,
collectively, the Material Owned Real Property and the Material
Leased Real Property.
Material Real Property Adverse Effect
shall mean any event or condition that has a material adverse
effect on the use or operation of any individual parcel of
Material Real Property by the Company or any of its Subsidiaries
in the operation of the business conducted thereon in the
ordinary course that is not covered by insurance.
MBM Contract
means that certain
Distribution Agreement by and between Hardees Food
Systems, Inc. and Meadowbrook Meat Company, Inc. d/b/a MBM, Inc.
dated as of January 1, 2003 (including all exhibits and
schedules thereto), as the same may be modified, amended or
supplemented.
Member of the Immediate Family
shall
mean, with respect to any natural Person, each spouse or child
or other descendants of such individual, each trust created
solely for the benefit of one or more of the aforementioned
Persons and their spouses and each custodian or guardian of any
property of one or more of the aforementioned Persons in his or
her capacity as such custodian or guardian.
Operating Agreements
shall mean,
collectively, the REAs and the Condominium Documents.
ordinary course of business
or
ordinary course
means the ordinary
course of business of the Company and its Subsidiaries, taken as
a whole, consistent with past practice (including with respect
to quantity and frequency).
Owned Real Property
shall mean any
real estate owned by Company or any of its Subsidiaries,
together with all buildings, structures, fixtures and
improvements thereon and all of Companys and its
Subsidiaries rights thereto.
Owned Software
means all computer,
software or firmware programs, modules or libraries owned or
purported to be owned by the Company or any of its Subsidiaries.
Parent Material Adverse Effect
means
any Effect that would individually or in the aggregate, prevent,
materially delay or materially impair the ability of Parent or
Merger Sub to consummate the transactions contemplated by this
Agreement.
Permitted Encumbrances
shall mean,
with respect to any parcel of Real Property, (a) easements,
rights-of-way,
encroachments, restrictions, conditions and other similar
encumbrances incurred or suffered in the ordinary course of
business and which, individually or in the aggregate,
(A) are not substantial in character, amount or extent in
relation to the applicable Real Property and (B) do not and
would not materially impair the use (or contemplated use),
utility or value of the applicable Real Property or otherwise
materially impair the present or contemplated business
operations at such location and (b) zoning, entitlement,
building and other land use regulations imposed by Governmental
Entities having jurisdiction over such Real Property, which are
not violated by the current use and operation of such Real
Property.
Permitted Liens
shall mean
(a) statutory liens for Taxes, assessments or other charges
by Governmental Entities not yet due and payable or the amount
or validity of which is being contested in good faith and by
appropriate proceedings and for which adequate reserves have
been established in the Company SEC Documents,
(b) mechanics, materialmens, carriers,
workmens, warehousemans, repairmens,
landlords and similar liens granted or which arise in the
ordinary course of business and which are not delinquent or the
amount or validity of which is being contested in good faith and
by appropriate proceedings and for which adequate reserves have
been established in the Company SEC Documents, (c) with
respect to property other than Real Property, such other liens,
encumbrances or imperfections that are not material in amount or
do not materially detract from the value of or materially impair
the existing use of the property affected by such lien,
encumbrance or imperfection and (d) with respect to any
parcel of Real Property, Permitted Encumbrances.
Person
shall mean an individual, a
corporation, a limited liability company, a partnership, an
association, a trust or any other entity, including a
Governmental Authority.
REAs
shall mean, collectively, any
recorded construction, operation and reciprocal easement
agreement or similar agreement (including any
separate agreement or other agreement between the
Company or
A-53
any of its Subsidiaries and one or more other parties to an REA
with respect to such REA) affecting all or any portion of any
parcel of Material Real Property.
Real Property
means the Leased Real
Property and the Owned Real Property.
Registered Intellectual Property
shall
mean patents, patent applications, registered copyrights,
registered marks (including trademarks, service marks, and trade
dress, to the extent registered), applications to register
marks, registered domain names, and registered industrial
designs that are material to the conduct of the business of the
Company and its Subsidiaries as currently conducted, as set
forth in Section 3.14(a) of the Company Disclosure Schedule.
Required Information
means all
financial and other pertinent information regarding the Company
and its Subsidiaries as may be reasonably requested by Parent or
Merger Sub, including financial statements prepared in
accordance with GAAP, pro forma financial information, audit
reports, a draft of a customary comfort letter with respect to
such financial information by auditors of the Company which such
auditors are prepared to issue upon completion of customary
procedures letter and other information and data regarding the
Company and the Subsidiaries of the type and form required by
Regulation S-X
and
Regulation S-K
under the Securities Act for registered offerings of securities
on
Form S-1
(or any successor form) under the Securities Act, and of the
type and form, and for the periods, customarily included in
Offering Documents used to syndicate credit facilities of the
type to be included in the Available Financing and in Offering
Documents used in private placements of debt securities under
Rule 144A of the Securities Act, to consummate the
offerings or placements of any debt securities, in each case
assuming that such syndication of credit facilities and
offering(s) of debt securities were consummated at the same time
during the Companys fiscal year as such syndication and
offering(s) of debt securities will be made (but in any event
including such information with respect to the Companys
fiscal year ended January 25, 2010), all of which shall be
Compliant.
Rights Agreement
shall mean the Rights
Agreement between the Company and Mellon Investor Services LLC,
as Rights Agent, dated as of January 5, 2009, as amended
from time to time.
Software
means the Licensed Software
and the Owned Software.
Subsidiary
when used with respect to
any party, shall mean any corporation, limited liability
company, partnership, association, trust or other entity of
which securities or other ownership interests representing more
than 50% of the equity or more than 50% of the ordinary voting
power (or, in the case of a partnership, more than 50% of the
general partnership interests) are, as of such date, owned by
such party or one or more Subsidiaries of such party or by such
party and one or more Subsidiaries of such party.
SYGMA Contract
means that certain
Distribution Service Agreement by and between Carls Jr.
Enterprises, Inc. and The SYGMA Network, Inc. dated as of
January 1, 2006 (including all exhibits and schedules
thereto), as the same may be modified, amended and supplemented
from time to time.
Third Party Leases
shall mean
(I) all leases, subleases and other agreements or Contracts
pursuant to which the Company or any of its Subsidiaries has
granted any Person (other than the Company or any of its
Subsidiaries) the right to use or occupy any Real Property,
including Franchise Leases, and all amendments and modifications
thereto and (II) any lease, sublease, guarantee or other
agreement under which the Company or any of its Subsidiaries has
(A) guaranteed or (B) remains liable for, subsequent
to the assignment of such agreement, the obligations of a
Franchisee or any other Person.
Transactions
refers collectively to
this Agreement and the transactions contemplated hereby,
including the Merger.
Walk-Away Date
shall mean
August 26, 2010.
A-54
The following terms are defined in the Sections of this
Agreement set forth after such term below:
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Term
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Section
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Acceptable Confidentiality Agreement
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5.2(b)
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Action
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3.7
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Agreement
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Preamble
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Antitrust Laws
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5.4(a)
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Apollo
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3.26(c)
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Available Financing
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5.5(b)
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Balance Sheet Date
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3.5(c)
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Bankruptcy and Equity Exception
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3.3(a)
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Buyer Parties
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8.9(c)
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Certificate
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2.1(c)
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Certificate of Merger
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1.3
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Change of Recommendation
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5.2(f)
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Claim
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5.9(b)
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Closing
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1.2
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Closing Date
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1.2
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Code
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2.2(g)
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Company
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Preamble
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Company Acquisition Agreement
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5.2(e)
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Company Adverse Recommendation Change
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5.2(e)
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Company Approvals
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3.4
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Company Board Recommendation
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5.2(e)
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Company Charter Documents
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3.1(c)
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Company Common Stock
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2.1
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Company Disclosure Schedule
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Article III
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Company Employees
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5.11(a)
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Company Intellectual Property
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3.14(b)
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Company Liability Limitation
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8.9(b)
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Company Parties
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8.9(c)
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Company Preferred Stock
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3.2(a)
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Company Related Party Transaction
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3.9
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Company SEC Documents
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3.5(a)
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Company Securities
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3.2(c)
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Company Series A Preferred Stock
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3.2(a)
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Company Stockholder Agreement
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Recitals
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Company Stockholder Approval
|
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3.3(e)
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Company Stockholders Meeting
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5.3(a)
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Confidentiality Agreement
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5.7
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Contract
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3.3(d)
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Debt Commitment Letter
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4.5, 5.5(a)
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Debt Financing
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4.5
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Designated Consideration
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2.4(b)
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A-55
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Term
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Section
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DGCL
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1.1
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Dissenting Shares
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2.3
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Dissenting Stockholders
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2.3
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Effect
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3.1(a)
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Effective Time
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1.3
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Environmental Laws
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3.13
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Equity Financing
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4.5
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Equity Funding Letter
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4.5
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Equity Providers
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4.5
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ESPP
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2.5
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Exchange Act
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3.4
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FCPA
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5.1(a)
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Filed SEC Documents
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Article III
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Financing
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4.5, 5.5(a)
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Financing Letters
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4.5
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Guarantee
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Recitals
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Guarantors
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Recitals
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Indemnitee
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5.9(a)
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Laws
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3.8(a)
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Material Adverse Effect
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3.1(a)
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Material Contract
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3.17(a)
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Maximum Premium
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5.9(c)
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Merger
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Recitals
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Merger Consideration
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2.1(c)
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Merger Sub
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Preamble
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New Plans
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5.11(b)
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Offering Documents
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5.5(b)
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Old Plans
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5.11(b)
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Option
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2.4(a)
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Parent
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Preamble
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Parent Disclosure Schedule
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Article IV
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Parent Expenses
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7.3(c)
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Parent Liability Limitation
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8.9(b)
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Parent Termination Fee
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7.3(b)
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Paying Agent
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2.2(a)
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Permits
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3.8(b)
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Proxy Statement
|
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3.4
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Representatives
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5.2(a)
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Restraints
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6.1(e)
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Sarbanes-Oxley Act
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3.5(a)
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SEC
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3.4
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A-56
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Term
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Section
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Securities Act
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3.2(d)
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Special Committee
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Recitals
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Subleased Real Property
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3.15(c)
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Superior Proposal
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5.2(i)
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Suppliers
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3.19
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Surviving Corporation
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1.1
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Takeover Proposal
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5.2(g)
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Tax
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3.10(b)
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Tax Returns
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3.10(b)
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Termination Fee
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7.3(a)
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VEBA
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3.11(i)
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Walk-Away Date
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7.1(b)
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Western Expense Reimbursement
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5.16
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Western Termination Fee
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5.16
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Section
8.14
Interpretation
.
(a) When a reference is made in this Agreement to an
Article, a Section, Exhibit or Schedule, such reference shall be
to an Article of, a Section of, or an Exhibit or Schedule to,
this Agreement unless otherwise indicated. The table of contents
and headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. 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 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. All terms defined in this Agreement shall
have the defined meanings when used in any document made or
delivered pursuant hereto unless otherwise defined therein. 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. 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. References to a Person are
also to its permitted assigns and successors.
(b) The parties hereto have participated jointly in the
negotiation and drafting of this Agreement and, in the event an
ambiguity or question of intent or interpretation arises, this
Agreement shall be construed as jointly drafted by the parties
hereto and no presumption or burden of proof shall arise
favoring or disfavoring any party by virtue of the authorship of
any provision of this Agreement.
[signature
page follows]
A-57
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed and delivered as of the date first
above written.
COLUMBIA LAKE ACQUISITION HOLDINGS, INC.
Name: Peter Copses
COLUMBIA LAKE ACQUISITION CORP.
Name: Peter Copses
CKE RESTAURANTS, INC.
Name: Byron Allumbaugh
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Title:
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Chairman of the Board of Directors
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[Signature
page to the Merger Agreement]
A-58
Exhibit A
SEE
ANNEX B TO THE PROXY STATEMENT
A-59
ANNEX B
FORM OF
COMPANY STOCKHOLDER VOTING AGREEMENT
THIS STOCKHOLDER VOTING AGREEMENT (this
Agreement
) is made and entered into as of
April 18, 2010 by and between Columbia Lake Acquisition
Holdings, Inc., a Delaware corporation
(
Parent
), and the undersigned stockholder
(
Stockholder
) of CKE Restaurants, Inc., a
Delaware corporation (the
Company
).
WHEREAS, Parent, the Company and Columbia Lake Acquisition
Corp., a Delaware corporation and wholly-owned subsidiary of
Parent (
Merger Sub
), are entering into an
Agreement and Plan of Merger of even date herewith (the
Merger Agreement
), pursuant to which Merger
Sub will be merged with and into the Company, with the Company
surviving that merger on the terms and subject to the conditions
set forth therein as a result of which the Company will become a
wholly-owned subsidiary of Parent (the
Merger
);
WHEREAS, Stockholder is the beneficial owner (as defined in
Rule 13d-3
under the 1934 Act) of such number of shares of the
outstanding capital stock of the Company, and such number of
shares of capital stock of the Company issuable upon the
exercise of outstanding options and other rights to acquire
Company capital stock, as is indicated opposite
Stockholders name on
Schedule I
attached
hereto;
WHEREAS, in consideration of the execution and delivery of the
Merger Agreement by Parent and Merger Sub, Stockholder (in his
or her capacity as such) is willing to agree to vote the Shares
(as defined herein) over which Stockholder has voting power so
as to facilitate the consummation of the Merger; and
WHEREAS, Stockholder had previously entered into a similar
stockholder voting agreement with Western Acquisition Holdings,
Inc., and such agreement terminated by its terms upon the prior
termination of that certain Agreement and Plan of Merger, dated
as of February 26, 2010, among Western Acquisition
Holdings, Inc., Western Acquisition Corp. and the Company;
NOW, THEREFORE, in consideration of the representations,
warranties, covenants and agreements contained in this
Agreement, and intending to be legally bound hereby, the parties
hereto hereby agree as follows:
Section 1.
Certain
Definitions
.
Capitalized terms used but not
defined herein shall have the respective meanings ascribed to
them in the Merger Agreement. For all purposes of and under this
Agreement, the following terms shall have the following
respective meanings:
(a)
Constructive Sale
shall mean,
with respect to any security, a short sale with respect to such
security, entering into or acquiring an offsetting derivative
contract with respect to such security, entering into or
acquiring a future or forward contract to deliver such security
or entering into any other hedging or other derivative
transaction that has the effect of either directly or indirectly
materially changing the economic benefits or risks of ownership.
(b)
Expiration Date
shall mean
the earliest to occur of (i) the Effective Time,
(ii) such date and time as the Merger Agreement shall be
terminated pursuant to Article VII thereof or otherwise or
(iii) upon mutual written agreement of each of the parties
hereto to terminate this Agreement.
(c)
Shares
shall mean:
(i) all shares of Company Common Stock owned, beneficially
or of record, by Stockholder as of the date hereof, and
(ii) all additional shares of Company Common Stock
(including through the exercise of any stock options, warrants
or any other convertible or exchangeable securities or similar
instruments) acquired by Stockholder, beneficially or of record,
during the period commencing on the date hereof and expiring on
the Expiration Date.
(d)
Transfer
shall mean, with
respect to any security, the direct or indirect assignment,
sale, transfer, tender, pledge, hypothecation, or the grant,
creation or suffrage of a lien, security interest or encumbrance
in or upon, or the gift, placement in trust, or the Constructive
Sale or other disposition of such security (including transfers
by testamentary or intestate succession or otherwise by
operation of law) or any right, title or interest therein
(including any right or power to vote to which the holder
thereof may be entitled, whether such right or power is granted
by proxy or otherwise), or the record or beneficial ownership
thereof, the offer to make such a sale, transfer, Constructive
Sale or other disposition, and each agreement, arrangement or
understanding, whether or not in writing, to effect any of the
foregoing.
B-1
Section 2.
Transfer
of Shares
.
(a)
Transfer of
Shares
.
Stockholder hereby agrees that, at
all times during the period commencing on the date hereof until
the Expiration Date, Stockholder shall not cause or permit any
Transfer of any of the Shares to be effected or discuss,
negotiate or make an offer or enter into an agreement,
commitment or other arrangement regarding any Transfer of any of
the Shares;
provided, however
, that the Stockholder may
Transfer Shares to a family member or trust for estate planning
purposes, provided that, as a condition to any such Transfer to
a family member or trust, the transferee has agreed with Parent
in writing to be bound by the terms of this Agreement and to
hold such Shares subject to all the terms and provisions of this
Agreement.
(b)
Transfer of Voting
Rights
.
Except as otherwise permitted by this
Agreement, Stockholder hereby agrees that, at all times
commencing on the date hereof until the Expiration Date,
Stockholder shall not deposit, or permit the deposit of, any
Shares in a voting trust, grant any proxy or power of attorney
in respect of the Shares, or enter into any voting agreement or
similar arrangement, commitment or understanding in a manner
inconsistent with the terms of Section 3 hereof or
otherwise in contravention of the obligations of Stockholder
under this Agreement, with respect to any of the Shares.
Section 3.
Agreement
to Vote Shares
.
Until the Expiration Date, at
every meeting of stockholders of the Company called with respect
to any of the following, and at every adjournment or
postponement thereof, and on every action or approval by written
consent of stockholders of the Company with respect to any of
the following, Stockholder shall, or shall cause the holder of
record on any applicable record date to, vote the Shares that
are eligible to be voted, or deliver a written consent in
respect of such Shares, at any general or special meeting of the
stockholders of the Company:
(a) in favor of (i) adoption of the Merger Agreement
and approval of the Merger, (ii) each of the actions
contemplated by the Merger Agreement, and (ii) any proposal
or action that could reasonably be expected to facilitate the
Merger and the other transactions contemplated by the Merger
Agreement;
(b) against any proposal or action that is intended, or
could reasonably be expected to result in a breach of any
covenant, representation or warranty or any other obligation or
agreement of the Company under the Merger Agreement or of
Stockholder under this Agreement or otherwise impede, interfere
with, delay, postpone, discourage or adversely affect the Merger
or any of the other transactions contemplated by the Merger
Agreement; and
(c) against any Takeover Proposal or Company Acquisition
Agreement.
Until the Expiration Date, in the event that any meeting of the
stockholders of the Company is held with respect to any of the
foregoing (and at every adjournment or postponement thereof),
Stockholder shall, or shall cause the holder of record of Shares
on any applicable record date to, appear at such meeting or
otherwise cause his, her or its Shares that are eligible to be
voted at any general or special meeting of the stockholders of
the Company to be counted as present thereat for purposes of
establishing a quorum.
Section 4.
Reserved
.
Section 5.
No
Ownership Interest
.
Nothing contained in this
Agreement shall be deemed to vest in Parent any direct or
indirect ownership or incidence of ownership of or with respect
to any Shares. All rights, ownership and economic benefits of
and relating to the Shares shall remain vested in and belong to
Stockholder, and Parent shall have no authority to exercise any
power or authority to direct Stockholder in the voting of any of
the Shares, except as otherwise specifically provided herein, or
in the performance of Stockholders duties or
responsibilities as stockholders of the Company.
Section 6.
Solicitation
.
Stockholder
hereby represents and warrants that he or she has read
Section 5.2 of the Merger Agreement. In addition,
Stockholder, in his or her capacity as a Stockholder, agrees not
to, directly or indirectly, take any action, or permit any of
its Affiliates to take any action, that would violate or
otherwise be inconsistent with Section 5.2 of the Merger
Agreement as if Stockholder and its Affiliates were
Representatives thereunder.
B-2
Section 7.
Representations,
Warranties and Other Agreements of
Stockholder
.
Stockholder hereby represents
and warrants to Parent that, as of the date hereof:
(a) Stockholder is (and, except to the extent a Transfer is
made pursuant to the proviso in Section 2(a), will be) the
beneficial owner of the shares of capital stock of the Company,
and the options and other rights to acquire shares of capital
stock of the Company, set forth on
Schedule I
attached hereto, with full power to vote or direct the voting of
the Shares, or grant a consent or approval in respect of such
Shares, in each case for and on behalf of all beneficial owners
of the Shares (that are eligible to be voted at any general or
special meeting of the stockholders of the Company);
(b) the Shares are free and clear of any Liens, options,
rights of first refusal, co-sale rights or other encumbrances of
any kind or nature (other than restrictions on transfer imposed
by applicable securities Laws);
(c) Stockholder does not beneficially own any securities of
the Company other than the shares of capital stock of the
Company, and options and other rights to acquire shares of
capital stock of the Company, set forth on
Schedule I
attached hereto;
(d) Stockholder has full power and authority to make, enter
into and carry out the terms of this Agreement;
(e) Stockholder agrees that it will not bring, commence,
institute, maintain, prosecute, participate in or voluntarily
aid any action, claim, suit or cause of action, in law or in
equity, in any court or before any Governmental Authority, which
alleges that (i) the execution and delivery of this
Agreement by Stockholder, either alone or together with any
other Company Stockholder Agreements and proxies to be delivered
in connection with the execution of the Merger Agreement, or
(ii) the approval of the Merger Agreement by the Board of
Directors of the Company, breaches any fiduciary duty of the
Board of Directors of the Company or any member thereof;
(f) the execution and delivery of this Agreement by
Stockholder does not, and the performance of this Agreement by
Stockholder will not, result in a violation or breach of, or
constitute (with or without due notice or lapse of time or both)
a default (or give rise to any right of termination,
cancellation, modification or acceleration) (whether after the
giving of notice of or the passage of time or both) under any
applicable Law or any Contract to which Stockholder is a party
or which is binding on it, him or her or its, his or her assets
and will not result in the creation of any Lien on any of the
assets or properties of Stockholder;
(g) this Agreement has been duly executed by Stockholder
and constitutes the valid and legally binding obligation of
Stockholder, enforceable against Stockholder in accordance with
its terms, except that such enforceability (i) may be
limited by bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and other similar laws of general
application affecting or relating to the enforcement of
creditors rights generally and (ii) is subject to
general principles of equity, whether considered in a proceeding
at law or in equity;
(h) the execution and delivery of this Agreement by
Stockholder does not, and the performance of this Agreement by
Stockholder will not, require any consent, approval,
authorization or permit of, or filing with or notification to,
any Governmental Authority by Stockholder except for applicable
requirements, if any, of the Exchange Act, and except where the
failure to obtain such consents, approvals, authorizations or
permits, or to make such filings or notifications, would not
prevent or delay the performance by Stockholder of his or her
obligations under this Agreement in any material
respect; and
(i) Stockholder understands and acknowledges that Parent is
entering into the Merger Agreement in reliance upon
Stockholders execution and delivery of this Agreement and
the representations and warranties of Stockholder contained
herein.
Section 8.
Consent
.
Stockholder
consents and authorizes the Company, Parent and their respective
Affiliates to (a) publish and disclose in the Proxy
Statement, any Current Report of the Company on
Form 8-K
and any other documents required to be filed with the SEC or any
regulatory authority in connection with the Merger Agreement,
Stockholders identity and ownership of the Shares and the
nature of its commitments,
B-3
arrangements and understandings under this Agreement and
(b) file this Agreement as an exhibit to any required
filing with the SEC or any regulatory authority relating to the
Merger.
Section 9.
Stockholder
Capacity
.
To the extent that Stockholder is
an officer or director of the Company or any of its
Subsidiaries, nothing in this Agreement shall be construed as
preventing or otherwise affecting any actions taken by
Stockholder in his or her capacity as an officer or director of
the Company or any of its Subsidiaries or from fulfilling the
obligations of such office (including the performance of
obligations required by the fiduciary duties of Stockholder
acting solely in his or her capacity as an officer or director),
and none of such actions in such capacity as an officer or
director shall be deemed to constitute a breach of this
Agreement.
Section 10.
Legending
of Shares
.
If so requested by Parent,
Stockholder hereby agrees that the Shares shall bear a legend
stating that they are subject to this Agreement.
Section 11.
Termination
.
This
Agreement and any undertaking or waiver granted by Stockholder
hereunder shall terminate and be of no further force or effect
as of the Expiration Date;
provided
, that upon
termination of this Agreement, Parent shall take such actions as
are reasonably requested by Stockholder to remove any legend
placed upon any Shares pursuant to Section 10;
provided,
further however
, Section 14 shall survive any
termination or expiration of this Agreement and any such
termination shall not relieve any party from liability for any
willful breach of its obligations hereunder or acts of bad faith
committed prior to such termination.
Section 12.
Appraisal
Rights
.
Each Stockholder irrevocably waives
and agrees not to exercise any rights (including, without
limitation, under Section 262 of the DGCL) to demand
appraisal of any of the Shares which may arise with respect to
the Merger.
Section 13.
Further
Assurances
.
Stockholder (in his or her
capacity as such) shall execute and deliver any additional
certificate, instruments and other documents, and take any
additional actions, as Parent may deem necessary or desirable,
in the reasonable opinion of Parent, to carry out and effectuate
the purpose and intent of this Agreement.
Section 14.
Miscellaneous
.
(a)
Expenses
.
All costs and
expenses incurred in connection with this Agreement shall be
paid by the party incurring such cost or expense.
(b)
Waiver
.
No failure or delay by
either party in exercising any right hereunder shall operate as
a waiver thereof nor shall any single or partial exercise
thereof preclude any other or further exercise thereof or the
exercise of any other right hereunder. Any agreement on the part
of a party hereto to any such extension or waiver shall be valid
only if set forth in an instrument in writing signed on behalf
of such party.
(b)
Severability
.
If any term or
other provision of this Agreement is determined by a court of
competent jurisdiction to be invalid, illegal or incapable of
being enforced by any rule of law or public policy, all other
terms, provisions and conditions of this Agreement shall
nevertheless remain in full force and effect. Upon such
determination that any term or other provision is invalid,
illegal or incapable of being enforced, the parties hereto 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.
(c)
Binding Effect;
Assignment
.
Stockholder may not assign this
Agreement or any of its rights, interests, or obligations
hereunder without the prior written approval of Parent, and any
attempted assignment without such prior written approval shall
be void. Subject to the preceding sentence, this Agreement shall
be binding upon and shall inure to the benefit of the parties
hereto and their respective successors and permitted assigns.
(d)
Amendments
.
This Agreement may
not be modified, amended, altered or supplemented, except upon
the execution and delivery of a written agreement executed by
each of the parties hereto.
(e)
Specific Performance; Injunctive
Relief
.
The parties agree that irreparable
damage would occur to Parent the event that any of the
provisions of this Agreement were not performed by Stockholder
in accordance with their specific terms or were otherwise
breached and that money damages would not be an adequate remedy.
It is accordingly agreed that Parent shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement
B-4
by Stockholder and to enforce specifically the terms and
provisions of this Agreement in the Delaware Court of Chancery
or, if subject matter jurisdiction in the such court is not
available, in the United States District Court for the District
of Delaware without bond or other security being required, this
being in addition to any other remedy to which they are entitled
at law or in equity.
(f)
Governing Law
.
This Agreement
shall be governed by, and construed in accordance with, the laws
of the State of Delaware, without regard to the conflicts of law
rules of such state, applicable to contracts executed in and to
be performed entirely within that State.
(g)
Jurisdiction and Venue
.
In any
action between or among any of the parties, whether arising out
of this Agreement or otherwise: (i) each of the parties
irrevocably and unconditionally consents and submits to the
exclusive jurisdiction and venue of the state and federal courts
located in New Castle County, Delaware; (ii) if any such
action is commended in a state court, then, subject to
applicable law, no party shall object to the removal of such
action to any federal court located in New Castle County,
Delaware; and (iii) each of the parties irrevocably
consents to service of process by first class certified mail,
return receipt requested, postage prepared, to the address at
which such party is to receive notice in accordance with
Section 14(l).
(h)
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 irrevocably and
unconditionally waives any right it may have to a trial by jury
in respect of any legal action, suit or proceeding arising out
of or relating to this Agreement or the transactions
contemplated hereby (each, a
Proceeding
). Each party to this
Agreement certifies and acknowledges that (i) no
Representative of any other party has represented, expressly or
otherwise, that such other party would not seek to enforce the
foregoing waiver in the event of a Proceeding, (ii) such
party has considered the implications of this waiver,
(iii) such party makes this waiver voluntarily, and
(iv) such party has been induced to enter into this
Agreement by, among other things, the mutual waivers and
certifications in this Section 14(h).
(i)
No Agreement Until
Executed
.
Irrespective of negotiations among
the parties or the exchanging of drafts of this Agreement, this
Agreement shall not constitute or be deemed to evidence a
contract, agreement, arrangement or understanding between the
parties hereto unless and until (i) the Board of Directors
of the Company has approved, for purposes of any applicable
anti-takeover laws and regulations or any applicable provision
of the Companys Charter Documents, the transactions
contemplated by the Merger Agreement and this Agreement,
(ii) the Merger Agreement is executed by all parties
thereto and (iii) this Agreement is executed by all parties
hereto.
(j)
Entire Agreement
.
This
Agreement constitutes the entire agreement, and supersede all
other prior agreements and understandings, both written and
oral, among the parties, or any of them, with respect to the
subject matter hereof and thereof.
(k)
No Third Party
Beneficiaries
.
This Agreement is not
intended, and shall not be deemed, to confer any rights or
remedies upon any person other than the parties hereto and their
respective successors and permitted assigns, to create any
agreement of employment with any person or to otherwise create
any third-party beneficiary hereto.
(l)
Notices
.
All notices, requests
and other communications to any party hereunder shall be in
writing and shall be deemed given if delivered personally,
facsimiled (which is confirmed) or sent by overnight courier
(providing proof of delivery) to the parties at the following
addresses:
if to Parent, to:
Columbia Lake Acquisition Holdings, Inc.
c/o Apollo
Management VII, L.P.
9 West 57th Street
43rd Floor
New York, NY 10019
Facsimile No.:
646-607-0528
Attention: Laurie Medley
B-5
with a copy to:
Morgan, Lewis & Bockius LLP
101 Park Avenue
New York, NY 10178
Facsimile No.:
212-309-6001
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Attention:
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Robert G. Robison, Esq.
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If to Stockholder: To the address for notice set forth
Schedule I
attached hereto,
or such other address or facsimile number as such party may
hereafter specify by like notice to the other parties hereto.
All such notices, requests and other communications shall be
deemed received on the date of receipt by the recipient thereof
if received prior to 5:00 P.M. in the place of receipt and
such day is a business day in the place of receipt. Otherwise,
any such notice, request or communication shall be deemed not to
have been received until the next succeeding business day in the
place of receipt.
(m)
Headings
.
The headings
contained in this Agreement are for reference purposes only and
shall not affect in any way the meaning or interpretation of
this Agreement.
(n)
Counterparts
.
This Agreement
may be executed in counterparts (each of which shall be deemed
to be an original but all of which taken together shall
constitute 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 party. The exchange of
copies of this Agreement and of signature pages by facsimile or
electronic transmission shall constitute effective execution and
delivery of this Agreement as to the parties and may be used in
lieu of the original Agreement for all purposes. Signatures of
the parties transmitted by facsimile or electronic transmission
shall be deemed to be their original signatures for all purposes.
(o)
Rules of Construction
.
The
parties hereto have participated jointly in the negotiation and
drafting of this Agreement and, in the event an ambiguity or
question of intent or interpretation arises, this Agreement
shall be construed as jointly drafted by the parties hereto and
no presumption or burden of proof shall arise favoring or
disfavoring any party by virtue of the authorship of any
provision of this Agreement. 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 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 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.
[Signature
page follows]
B-6
IN WITNESS WHEREOF, the undersigned have caused this Agreement
to be duly executed as of the date first written above.
Columbia Lake Acquisition Holdings, Inc.
Name:
Title:
B-7
IN WITNESS WHEREOF, the undersigned have caused this Agreement
to be duly executed as of the date first written above.
STOCKHOLDER
Name:
B-8
SCHEDULE I
TO
COMPANY STOCKHOLDER AGREEMENT
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B-9
ANNEX
C
OPINION OF UBS SECURITIES LLC
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UBS Securities LLC
One North Wacker Drive
Chicago, IL 60606
www.ubs.com
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April 23, 2010
The Board of Directors
CKE Restaurants, Inc.
6307 Carpinteria Ave.
Carpinteria, California 93013
Dear Members of the Board:
We understand that CKE Restaurants, Inc., a Delaware corporation
(the Company), is considering a transaction whereby
Columbia Lake Acquisition Holdings, Inc., a Delaware corporation
(Parent) and an affiliate of Apollo Management VII,
L.P. (Apollo), will effect a merger involving the
Company. Pursuant to the terms of an Agreement and Plan of
Merger, draft dated as of April 18, 2010 (the Merger
Agreement), among Parent, the Company and Columbia Lake
Acquisition Corp., a Delaware corporation and wholly owned
subsidiary of Parent (Merger Sub), Merger Sub will
merge with and into the Company and the Company will become a
wholly owned subsidiary of Parent (the Transaction).
Pursuant to the terms of the Merger Agreement, all of the issued
and outstanding shares of the common stock, par value of $.01
per share, of the Company (Company Common Stock),
will be converted into the right to receive, for each
outstanding share of Company Common Stock, $12.55 in cash (the
Consideration), excluding shares of Company Common
Stock as to which treatment in the Transaction is separately
agreed by Parent and the holders thereof after the date of the
Merger Agreement (the holders of such shares being the
Rollover Holders). The terms and conditions of the
Transaction are more fully set forth in the Merger Agreement.
You have requested our opinion as to the fairness, from a
financial point of view, to the holders of Company Common Stock
(other than Apollo Affiliates (as defined below) and the
Rollover Holders (collectively, the Excluded
Holders)) of the Consideration to be received by such
holders in the Transaction.
UBS Securities LLC (UBS) has acted as financial
advisor to the Board of Directors of the Company in connection
with the Transaction and will receive a fee for its services, a
portion of which is payable in connection with this opinion and
a significant portion of which is contingent upon consummation
of the Transaction. In the past, UBS and its affiliates have
provided investment banking and other financial services to
affiliates of Parent (collectively, Apollo
Affiliates), including, among others, Apollo Investment
Corporation, Apollo Management Holding L.P. and certain
portfolio companies of Apollo and its affiliates, unrelated to
the proposed Transaction, for which UBS and its affiliates have
received compensation, fees and other payments, including having
acted as (i) financial advisor in connection with several
acquisitions and divestitures, (ii) bookrunner, lead
manager or co-manager on several debt and equity offerings,
(iii) arranger or agent on several leveraged buyout
financings and credit facilities and (iv) private placement
agent for several funds sponsored by certain Apollo Affiliates.
UBS and its affiliates have also been, and in certain cases
continue to be, a participant in various credit facilities of
several Apollo Affiliates and have received, and continue to
receive, fees and other payments in respect thereof. In
addition, UBS acted as financial advisor to the Board of
Directors of the Company in connection with the Companys
previously proposed merger transaction with an affiliate of
Thomas H. Lee Equity Fund VI, L.P. (the T.H. Lee
Merger) and is entitled to receive compensation for
certain of UBS services in connection therewith. In the
ordinary course of business, UBS and its affiliates may hold or
trade, for their own accounts and the accounts of their
customers, securities of the Company and securities of certain
Apollo Affiliates and, accordingly, may at any time hold a long
or short position in such securities. In addition, an affiliate
of UBS and certain employees of UBS or its
C-1
affiliates are currently investors in Apollo Investment
Fund VII, L.P. and may be investors in other Apollo
Affiliates. The issuance of this opinion was approved by an
authorized committee of UBS.
Our opinion does not address the relative merits of the
Transaction as compared to other business strategies or
transactions (including the T.H. Lee Merger) that might be
available with respect to the Company or the Companys
underlying business decision to effect the Transaction. Our
opinion does not constitute a recommendation to any stockholder
as to how such stockholder should vote or act with respect to
the Transaction. At your direction, we have not been asked to,
nor do we, offer any opinion as to the terms, other than the
Consideration to the extent expressly specified herein, of the
Merger Agreement or any related documents or the form of the
Transaction. In addition, we express no opinion as to the
fairness of the amount or nature of any compensation to be
received by any officers, directors or employees of any parties
to the Transaction, or any class of such persons, relative to
the Consideration. In rendering this opinion, we have assumed,
with your consent, that (i) the final executed form of the
Merger Agreement will not differ in any material respect from
the draft that we have reviewed, (ii) the parties to the
Merger Agreement will comply with all material terms of the
Merger Agreement, and (iii) the Transaction will be
consummated in accordance with the terms of the Merger Agreement
without any adverse waiver or amendment of any material term or
condition thereof. We have also assumed that all governmental,
regulatory or other consents and approvals necessary for the
consummation of the Transaction will be obtained without any
material adverse effect on the Company or the Transaction.
In arriving at our opinion, we have, among other things:
(i) reviewed certain publicly available business and
financial information relating to the Company;
(ii) reviewed certain internal financial information and
other data relating to the business and financial prospects of
the Company that were not publicly available, including
financial forecasts and estimates prepared by the management of
the Company that you have directed us to utilize for purposes of
our analysis; (iii) conducted discussions with members of
the senior management of the Company concerning the business and
financial prospects of the Company; (iv) reviewed publicly
available financial and stock market data with respect to
certain other companies we believe to be generally relevant;
(v) compared the financial terms of the Transaction with
the publicly available financial terms of certain other
transactions we believe to be generally relevant;
(vi) reviewed current and historical market prices of
Company Common Stock; (vii) reviewed the Merger Agreement;
and (viii) conducted such other financial studies, analyses
and investigations, and considered such other information, as we
deemed necessary or appropriate. At your request, we have
contacted third parties to solicit indications of interest in a
possible transaction with the Company and held discussions with
certain of these parties prior to the date hereof.
In connection with our review, with your consent, we have
assumed and relied upon, without independent verification, the
accuracy and completeness in all material respects of the
information provided to or reviewed by us for the purpose of
this opinion. In addition, with your consent, we have not made
any independent evaluation or appraisal of any of the assets or
liabilities (contingent or otherwise) of the Company, nor have
we been furnished with any such evaluation or appraisal. With
respect to the financial forecasts and estimates referred to
above, we have assumed, at your direction, that they have been
reasonably prepared on a basis reflecting the best currently
available estimates and judgments of the management of the
Company as to the future financial performance of the Company.
Our opinion is necessarily based on economic, monetary, market
and other conditions as in effect on, and the information
available to us as of, the date hereof.
Based upon and subject to the foregoing, it is our opinion that,
as of the date hereof, the Consideration to be received by the
holders of Company Common Stock (other than the Excluded
Holders) in the Transaction is fair, from a financial point of
view, to such holders.
C-2
This opinion is provided for the benefit of the Board of
Directors (solely in its capacity as such) in connection with,
and for the purpose of, its evaluation of the Consideration in
the Transaction.
Very truly yours,
/s/
UBS
SECURITIES LLC
UBS SECURITIES LLC
C-3
ANNEX D
GENERAL
CORPORATION LAW OF THE STATE OF DELAWARE
§
262. Appraisal rights.
(a) Any stockholder 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 stockholders shares of stock
under the circumstances described in subsections (b) and
(c) of this section. As used in this section, the word
stockholder 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 interest 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 stockholders
entitled to receive notice of the meeting of stockholders 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 stockholders 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 of all or substantially all
of the assets of the corporation. If the certificate of
incorporation contains such a provision, the
D-1
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 stockholders, the
corporation, not less than 20 days prior to the meeting,
shall notify each of its stockholders 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 stockholder electing to demand the appraisal of
such stockholders shares shall deliver to the corporation,
before the taking of the vote on the merger or consolidation, a
written demand for appraisal of such stockholders shares.
Such demand will be sufficient if it reasonably informs the
corporation of the identity of the stockholder and that the
stockholder intends thereby to demand the appraisal of such
stockholders shares. A proxy or vote against the merger or
consolidation shall not constitute such a demand. A stockholder
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 stockholder 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 stockholders of the effective date of the merger or
consolidation. Any stockholder 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 stockholder and that the stockholder intends
thereby to demand the appraisal of such holders shares. If
such notice did not notify stockholders 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 stockholder
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 stockholders 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 stockholder 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
stockholders. Notwithstanding the foregoing, at any time within
60 days after the effective date of the merger or
consolidation, any stockholder who has not commenced an
appraisal proceeding or joined that proceeding as a named party
shall have the right to withdraw such stockholders demand
for appraisal and to accept the terms offered upon the merger or
consolidation.
D-2
Within 120 days after the effective date of the merger or
consolidation, any stockholder 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
stockholder within 10 days after such stockholders
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 stockholder,
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 stockholders 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 stockholders 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 stockholders who have complied with this section
and who have become entitled to appraisal rights. The Court may
require the stockholders 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 stockholder fails to comply with such
direction, the Court may dismiss the proceedings as to such
stockholder.
(h) After the Court determines the stockholders 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 stockholder
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 stockholders entitled to
an appraisal. Any stockholder 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
stockholders certificates of stock to the Register in
Chancery, if such is required, may participate fully in all
proceedings until it is finally determined that such stockholder
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 stockholders entitled thereto.
Payment shall be so made to each such stockholder, 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.
D-3
(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 stockholder, the Court
may order all or a portion of the expenses incurred by any
stockholder 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 stockholder 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 stockholders 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 stockholder
shall deliver to the surviving or resulting corporation a
written withdrawal of such stockholders 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 stockholder to an appraisal
shall cease. Notwithstanding the foregoing, no appraisal
proceeding in the Court of Chancery shall be dismissed as to any
stockholder 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 stockholder who has not commenced an appraisal proceeding
or joined that proceeding as a named party to withdraw such
stockholders 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 stockholders 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
6307 CARPINTERIA AVE
SUITE A
CARPINTERIA, CA 93013
VOTE BY INTERNET OR TELEPHONE OR MAIL
24 HOURS A DAY, 7 DAYS A WEEK
YOUR TELEPHONE OR INTERNET VOTE AUTHORIZES THE NAMED
PROXIES TO VOTE THESE SHARES IN THE SAME MANNER AS IF YOU
MARKED, SIGNED AND RETURNED YOUR PROXY CARD
VOTE BY INTERNET -
www.proxyvote.com
Use the Internet to transmit your voting instructions and for electronic
delivery of information up until 11:59 p.m. Eastern Time on
June 27, 2010, (June 24, 2010, if you hold shares through CKEs Employee Stock Purchase Plan). Have
your Notice of Internet Availability of Proxy Materials and/or proxy card in
hand when you access the web site and follow the instructions to obtain your
records and to create an electronic voting instruction form.
VOTE BY PHONE - 1-800-690-6903
Use any touch-tone telephone to transmit your voting instructions up until
11:59 p.m. Eastern Time on June 27, 2010, (June 24,
2010, if you hold shares
through CKEs Employee Stock Purchase Plan). Have your proxy card in hand when
you call and then follow the instructions.
VOTE BY MAIL
Mark, sign and date your proxy card and return it in the postage-paid envelope
we have provided or return it to CKE Restaurants, Inc., c/o Broadridge, 51
Mercedes Way, Edgewood, NY 11717. Your proxy card must be received by
11:59 p.m. Eastern Time on June 27, 2010, (June 24, 2010, if you hold shares through CKEs
Employee Stock Purchase Plan).
IF YOU VOTE YOUR PROXY BY INTERNET OR BY TELEPHONE
YOU DO NOT NEED TO MAIL BACK YOUR PROXY CARD.
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TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:
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M25432-S62430
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KEEP THIS PORTION FOR YOUR RECORDS
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DETACH AND RETURN THIS PORTION ONLY
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THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
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CKE RESTAURANTS, INC.
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Vote on Proposals
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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 April 18, 2010,
as it may be amended from
time to time, by and among
CKE Restaurants, Inc.,
Columbia Lake Acquisition Holdings, Inc.,
and Columbia Lake Acquisition Corp.
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2.
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To approve an adjournment of 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 Agreement
and Plan of Merger.
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3.
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In their
discretion, the
Proxies are
authorized to vote
upon such other
business as may
properly come
before the Special Meeting
or any and all
adjournments
thereof.
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THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS GIVEN, THE PERSONS NAMED ON
THE PROXY CARD WILL VOTE FOR PROPOSALS 1 AND 2.
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Yes
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No
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Please
indicate if you plan to attend this meeting.
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Please sign exactly as the name appears above. When shares are held by joint
tenants, both should sign. When signing as an attorney, executor,
administrator, trustee or guardian, please give full title as such. If a
corporation, please sign in full corporate name by the president or other
authorized officer. If a partnership, please sign in the partnership name by an
authorized person.
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Signature [PLEASE SIGN WITHIN BOX]
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Date
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Signature (Joint Owners)
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Date
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FOLD AND DETACH HERE.
M25433-S62430
PROXY
CKE RESTAURANTS, INC.
6307 Carpinteria Avenue, Suite A
Carpinteria, California 93013-2901
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF
DIRECTORS OF CKE RESTAURANTS, INC.
The
undersigned hereby acknowledges receipt of a notice of a Special
Meeting of Stockholders and appoints Andrew F. Puzder and E. Michael
Murphy, and each of them, with
power to act without the other and with full power of substitution, as proxies and attorneys-in-fact and
hereby authorizes them to represent and to vote, as provided on the other side, all the shares of
CKE Restaurants, Inc. common stock held of record by the undersigned
on May 10, 2010, at the
Special Meeting of Stockholders to be held on June 28, 2010, at
6307 Carpinteria Avenue, Carpinteria, California, 93013, and any adjournments
thereof.
If no direction is given, the proxy will be voted
FOR Proposals 1 and 2. Any and all proxies heretofore
given are hereby revoked.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD
PROMPTLY USING THE ENCLOSED ENVELOPE.
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