Ryan's Restaurant Group, Inc.
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
Filed by the Registrant
x
Filed by a Party other than the Registrant
o
Check the appropriate box:
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x Preliminary
Proxy Statement |
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o Confidential,
for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) |
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o Definitive
Proxy Statement
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o Definitive
Additional Materials
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o Soliciting
Material Pursuant to §240.14a-12
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Ryans Restaurant Group, Inc.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if
other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
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No fee required.
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x |
Fee computed on table below per Exchange Act
Rules 14a-6(i)(4) and 0-11.
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(1) |
Title of each class of securities to which
transaction applies:
Common Stock, par value $1.00 per share, of Ryans Restaurant Group,
Inc.
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(2) |
Aggregate number of securities to which
transaction applies:
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42,370,510 shares of Common Stock (as of August 18, 2006) |
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2,814,051 shares of Common Stock underlying options to purchase Common Stock (as of August
18, 2006) |
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(3) |
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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the product of (i) 42,370,510 shares of Common Stock (as of August
18, 2006) and (ii) the merger consideration of $16.25 per share of
Common Stock in cash; and |
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the product of (i) 2,814,051 shares of Common Stock,
representing shares of Common Stock issuable upon exercise of options
outstanding as of August 18, 2006 and (ii) the excess, if any, of
the merger consideration of $16.25 per share over the exercise
price per share of Common Stock subject to each such option. |
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(4) |
Proposed maximum aggregate value of
transaction:
$876,000,000
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(5) |
Total fee paid:
$93,757
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o |
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) |
Amount Previously Paid:
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(2) |
Form, Schedule or Registration Statement No.:
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(4) |
Date Filed:
August 21, 2006
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RYANS
RESTAURANT GROUP, INC.
405 Lancaster Avenue (29650)
Post Office Box 100 (29652)
Greer, South Carolina
August , 2006
To Our Shareholders:
We invite you to attend a special meeting of the shareholders of
Ryans Restaurant Group, Inc., a South Carolina corporation
to be held on September , 2006 at
10:00 a.m. local time. The meeting will be held at
Ryans corporate headquarters, 405 Lancaster Avenue, Greer,
South Carolina.
At the special meeting, you will be asked to adopt the agreement
and plan of merger, dated July 24, 2006, by and among
Ryans, Buffets, Inc. and Buffets Southeast, Inc., a
wholly-owned subsidiary of Buffets, and to approve the merger of
Buffets Southeast, Inc. with and into Ryans. If the
merger is completed, each holder of shares of our common stock
will be entitled to receive $16.25 in cash in exchange for each
share of our common stock held, as more fully described in the
enclosed proxy statement, and Ryans will become a
wholly-owned subsidiary of Buffets.
After careful consideration, our board of directors approved the
merger agreement and the merger and has declared the merger
agreement and the merger advisable and in the best interests of
Ryans and our shareholders. Our board of directors
recommends that you vote FOR the adoption of the merger
agreement and the approval of the merger.
The merger agreement must be adopted and the merger approved by
the affirmative vote of holders of at least two-thirds of our
outstanding shares of common stock that are entitled to vote at
the special meeting. If the merger agreement is adopted and the
merger is approved, the merger agreement provides that the
closing of the merger will occur no later than the third
business day after the other conditions to the closing of the
merger are satisfied or waived.
The accompanying notice of special meeting of shareholders
provides specific information concerning the special meeting.
The enclosed proxy statement provides you with a summary of the
merger and the merger agreement and additional information about
the parties involved. We urge you to read carefully the enclosed
proxy statement and the merger agreement, a copy of which is
included in the proxy statement as Exhibit A, and the
fairness opinion of Brookwood Associates, LLC, a copy of which
is included in the proxy statement as Exhibit B.
Your vote is very important. Whether you plan to attend the
special meeting or not, please either complete the enclosed
proxy card and return it as promptly as possible or submit your
proxy or voting instructions by telephone or Internet. The
enclosed proxy card contains instructions regarding voting. If
you attend the special meeting, you may continue to have your
shares voted as instructed in the proxy or you may withdraw your
proxy at the special meeting and vote your shares in person.
If you fail to vote by proxy or in person, or fail to
instruct your broker on how to vote, it will have the same
effect as a vote against adoption of the merger proposal.
Sincerely,
Charles D. Way
Chairman and Chief Executive Officer
This Proxy Statement is dated August , 2006 and
is first being mailed, along with the attached proxy card, to
our shareholders on or about August , 2006.
RYANS
RESTAURANT GROUP, INC.
405 Lancaster Avenue (29650)
Post Office Box 100 (29652)
Greer, South Carolina
NOTICE OF SPECIAL MEETING OF
SHAREHOLDERS
TO BE HELD SEPTEMBER , 2006
To Our Shareholders:
NOTICE IS HEREBY GIVEN that Ryans Restaurant Group, Inc.
will hold a Special Meeting of Shareholders at Ryans
corporate headquarters at 405 Lancaster Avenue, Greer, South
Carolina, on September , 2006, at
10:00 a.m. local time for the following purposes:
(1) to consider and vote upon a proposal to adopt the
agreement and plan of merger, dated July 24, 2006, by and
among Ryans Restaurant Group, Inc.
(Ryans), Buffets, Inc., a Minnesota
corporation (Buffets), and Buffets Southeast, Inc.,
a South Carolina corporation (Merger Sub), a
wholly-owned subsidiary of Buffets, which we refer to as the
merger agreement, including approval of the merger of Buffets
Southeast with and into Ryans (the merger),
pursuant to which each holder of shares of our common stock,
will be entitled to receive $16.25 in cash, without interest in
exchange for each share held;
(2) to consider and vote upon a proposal to grant
discretionary authority to the proxy holders to vote for the
adjournment or postponement of the special meeting if there are
insufficient votes at the time of the meeting to approve the
merger proposal; and
(3) to consider and act upon any other business properly
presented at the special meeting or any adjournment or
postponement thereof.
All holders of record of shares of our common stock as of the
close of business on August 28, 2006 are entitled to notice
of and to vote at the special meeting or any postponements or
adjournments of the special meeting. Regardless of the number
of shares you own, your vote is important. If you
do not plan to attend the meeting and vote your shares of common
stock in person, please cast your vote by either marking,
signing, dating and promptly returning the enclosed proxy card
in the postage-paid envelope or by submitting your proxy or
voting instructions by telephone or Internet.
Any proxy may be revoked at any time prior to its exercise by
delivery of a later-dated proxy card or by voting in person at
the special meeting.
After careful consideration, our board of directors approved
the merger agreement and the merger and has declared the merger
agreement and the merger advisable and in the best interests of
Ryans and our shareholders. Our board of directors
recommends that you vote FOR the adoption of the merger
agreement and the approval of the merger, FOR the proposal to
grant discretionary authority to the proxy holders to vote for
adjournment of the special meeting for the purpose of soliciting
additional proxies if there are insufficient votes at the
special meeting to approve the merger proposal and FOR the
authorization of the proxies to vote on such other matters as
may properly come before the special meeting or any adjournment
or postponement thereof.
We encourage you to read this proxy statement carefully. If you
have any questions or need assistance, please call our proxy
solicitor, W. F. Doring & Company at (201)-823-4300.
These documents may also be obtained for free from Ryans
by directing a request to Ryans Restaurant Group, Inc.,
Investor Relations, Ryans Restaurant Group, Inc., Post
Office Box 100, Greer, South Carolina 29652 or at our
Investor Relations page on our corporate website at
www.ryans.com.
By Order of the Board of Directors,
Janet J. Gleitz
Secretary
August , 2006
Greer, South Carolina
IMPORTANT:
Whether or not you plan to attend the special meeting, please
promptly either complete, sign, date and mail the enclosed form
of proxy or submit your proxy or voting instructions by
telephone or Internet. A self-addressed envelope is enclosed for
your convenience. Details are outlined in the enclosed proxy
card. If you hold your shares through a broker, dealer, trustee,
bank or other nominee, you may be also able to submit your proxy
or voting instructions by telephone or by Internet in accordance
with the instructions your broker, dealer, trustee, bank or
other nominee provides. Returning a signed proxy will not
prevent you from attending the meeting and voting in person, if
you wish to do so. Please note that if you execute multiple
proxies for the same shares, the last proxy you execute revokes
all previous proxies.
TABLE OF
CONTENTS
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EXHIBITS
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Exhibit A Agreement
and Plan of Merger
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Exhibit B Opinion of
Brookwood Associates, LLC
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i
SUMMARY
This summary highlights material information in this proxy
statement relating to the merger contemplated by the merger
agreement, which we refer to in this proxy statement as the
merger, and may not contain all of the information
that is important to you. To understand the merger and the
related transactions fully and for a more complete description
of the legal terms of the transactions contemplated by the
Agreement and Plan of Merger, which we refer to in this proxy
statement as the merger agreement, dated
July 24, 2006, by and among Buffets, Inc., which we refer
to in this proxy statement as Buffets, Buffets
Southeast, Inc., a wholly-owned subsidiary of Buffets, which we
refer to in this proxy statement as Merger Sub and
Ryans Restaurant Group, Inc., which we refer to in this
proxy statement as we, us,
our or Ryans, you should carefully
read this entire document as well as the additional documents to
which it refers, including the merger agreement, which is
attached to this proxy statement as Exhibit A and
incorporated herein by reference. For instructions on obtaining
more information, see Where You Can Find Additional
Information on page . This proxy
statement is first being mailed on or about
August , 2006.
The
Parties (Page )
Ryans Restaurant Group, Inc.
405 Lancaster Avenue (29650)
Post Office Box 100 (29652)
Greer, South Carolina
(864) 879-1000
Ryans Restaurant Group, Inc., is a South Carolina
corporation that owns and operates a chain of restaurants
located principally in the southern and midwestern United
States. As of August , 2006, Ryans
operated Ryans®
brand restaurants and Fire
Mountain®
brand restaurants.
Buffets, Inc.
1460 Buffet Way
Eagan, Minnesota 55121
(651) 994-8608
Buffets, Inc., is a Minnesota corporation that currently
operates 337 restaurants in 33 states comprised of 328
buffet restaurants and nine Tahoe Joes Famous
Steakhouse®
restaurants. The buffet restaurants are principally operated
under the Old Country
Buffet®
or HomeTown
Buffet®
brands. Buffets also franchises 18 buffet restaurants in
seven states.
Buffets Southeast, Inc
1460 Buffet Way
Eagan, Minnesota 55121
(651) 994-8608
Buffets Southeast, Inc., is a South Carolina corporation and was
organized solely for the purpose of acquiring Ryans
pursuant to the merger agreement. Merger Sub has not conducted
any activities to date other than activities incidental to its
formation and in connection with the proposed MERGER. Merger Sub
is wholly-owned by Buffets.
The
Merger (Page ).
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If the merger is completed, Merger Sub will be merged with and
into Ryans with the result that Ryans will become a
wholly-owned subsidiary of Buffets. We sometimes use the term
surviving corporation in this proxy statement to
describe Ryans as the surviving entity following the
merger.
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The merger will become effective when we file articles of merger
with the Secretary of State of the State of South Carolina, or
at such later time that we and Buffets specify in the articles
of merger. We sometimes use the term effective time
in this proxy statement to describe the time the merger becomes
effective under South Carolina law.
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1
Merger
Consideration (Page ).
If the merger is completed, each share of our common stock that
is issued and outstanding immediately prior to the effective
time of the merger (other than shares of our common stock owned
by Ryans, Buffets or Merger Sub or any of their respective
subsidiaries), together with any associated rights under
Ryans rights agreement, will be cancelled and
automatically converted into the right to receive an amount in
cash equal to $16.25, without interest, less any required
withholding taxes.
The
Special Meeting (Page )
Place,
Date and Time of the Special Meeting
(Page )
The special meeting will be held at Ryans corporate
headquarters at 405 Lancaster Avenue, Greer, South Carolina,
on , September , 2006, at
10:00 a.m. local time.
Purpose
(Page )
The purpose of the special meeting is for you to consider and
vote upon a proposal to adopt the merger agreement and to
approve the merger and to vote upon a proposal to grant
discretionary authority to the proxy holders to vote for
adjournment of the special meeting for the purpose of soliciting
additional proxies if there are not sufficient votes at the
special meeting to approve the merger proposal.
Record
Date and Quorum (Page )
The holders of record of Ryans common stock as of the
close of business on the record date which was August 28,
2006 are entitled to receive notice of, and to vote at, the
special meeting. On the record date, there
were shares of Ryans common stock
outstanding. The holders of a majority of the outstanding shares
of Ryans common stock on the record date, represented in
person or by proxy, will constitute a quorum for purposes of the
special meeting. For purposes of determining whether a quorum
exists, broker non-votes and abstentions will be counted. Each
holder will have one vote at the special meeting for each share
of Ryans common stock held on the record date.
Required
Vote; Abstentions and Broker Non-Votes
(Page )
Completion of the merger requires approval of the merger by the
affirmative vote of the holders of two-thirds of the outstanding
shares of Ryans common stock entitled to vote at the
special meeting. Because the required vote is based on the
number of shares of Ryans common stock outstanding rather
than on the number of votes cast, failure to vote your shares
(including as a result of broker non-votes) and abstentions will
have the same effect as voting against approval of the merger
contemplated by the merger agreement.
Share
Ownership of Directors and Executive Officers
(Page )
As of the record date, our executive officers and directors
beneficially owned an aggregate of
approximately shares of Ryans common
stock in the form of shares and exercisable stock options,
entitling them to exercise
approximately % of the voting power of
Ryans common stock. The executive officers and directors
of Ryans have advised us that they intend to vote their
shares of Ryans common stock in favor of approval of the
merger.
Interests
of Ryans Directors and Executive Officers in the Merger
(Page )
When you consider the recommendation of Ryans board of
directors that you vote for the adoption of the merger agreement
and approval of the merger, you should be aware that certain of
our directors and
2
executive officers may have interests in the merger that are
different from, or in addition to, yours, including the
following:
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certain Ryans executive officers who are not directors
hold unvested stock options of Ryans common stock (with
respect to 1,500 shares in the aggregate), and these
options will become fully vested immediately prior to the
effective time of the merger and will be cancelled at the
effective time of the merger in exchange for the payment of
$8,685 in the aggregate under the merger agreement;
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Ryans executive officers generally are party to employment
agreements that provide, among other things, for severance
payments in certain circumstances following changes of control
such as the proposed merger; and
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the merger agreement provides for indemnification and insurance
arrangements for our current and former directors and officers
that will continue for six years following the effective time of
the merger.
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Opinion
of Ryans Fairness Advisor (Page ,
Exhibit B)
In connection with the merger, Brookwood Associates, LLC
delivered its written opinion to our board of directors that,
based upon and subject to the various qualifications and
assumptions described therein, the consideration of
$16.25 per share to be received by Ryans shareholders
in the merger is fair from a financial point of view to
Ryans shareholders. The full text of the Brookwood opinion
is attached as Exhibit B to this proxy statement. We
encourage you to read the Brookwood opinion carefully in its
entirety for a description of the procedures followed,
assumptions made, matters considered and limitations on the
review undertaken by Brookwood. The opinion of Brookwood is
directed to our board of directors and does not constitute a
recommendation to any shareholder of Ryans as to how to
vote in connection with the merger.
Buffets
Financing (Page )
Buffets and Merger Sub have obtained a debt commitment letter
from Drawbridge Special Opportunity Fund, LLC and a debt
commitment letter from Credit Suisse Securities (USA) LLC and
UBS Securities LLC providing for debt financing in an aggregate
principal amount of up to $1.5 billion for the completion
of the merger and other costs such as transaction costs relating
to the merger. In the event the committed amounts become
unavailable for any reason, Buffets and Merger Sub will use
their respective commercially reasonable efforts to arrange
alternative financing on terms and conditions that are not less
favorable in substance to Buffets and Merger Sub to those
contained in the commitment letters mentioned above.
Limitation
on Considering other Takeover Proposals
The merger agreement contains restrictions on our ability to
solicit or engage in discussions or negotiations with a third
party regarding specified transactions involving Ryans or
our subsidiaries. Notwithstanding these restrictions, under
certain circumstances, our board of directors may respond to an
unsolicited written bona fide proposal for an alternative
acquisition or terminate the merger agreement and enter into an
acquisition agreement with respect to a superior proposal.
Conditions
to Merger
Completion of the merger is subject to the satisfaction or
waiver of a number of conditions, such as:
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the affirmative vote of the holders of at least two-thirds of
the outstanding shares of Ryans common stock entitled to
vote at the special meeting to adopt the merger agreement and
approve the merger;
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there must be no order, decree, ruling, judgment or injunction
by any governmental authority of competent jurisdiction making
illegal or preventing the merger substantially on the terms
contemplated in the merger agreement;
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the waiting period under the
Hart-Scott-Rodino
Antitrust Improvements Act of 1976 (referred to in this proxy
statement as the HSR Act) must have expired or been
terminated;
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the representations and warranties of Ryans set forth in
the merger agreement, regardless of any materiality or material
adverse effect qualification, must be true and correct in all
respects as of the date the merger closes (except for any
representations or warranties made as of a specified date, which
must only be true as of such specified date), except for any
failures of such representations and warranties to be true and
correct as would not individually or in the aggregate reasonably
be expected to have a material adverse effect on Ryans;
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Ryans must have performed or complied with, in all
material respects, all obligations under the merger agreement at
or prior to the effective time of the merger; and
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Ryans, Buffets or Merger Sub, as applicable, must have
received the proceeds of the financing contemplated by the
financing commitment letters described under Buffets
Financing or alternative financing, in each case, no less
favorable in substance to Buffets, Merger Sub or the surviving
corporation, as applicable.
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Termination
of the Merger Agreement
We and Buffets may agree in writing to terminate the merger
agreement at any time without completing the merger whether
before or after the adoption of the merger agreement and
approval of the merger by Ryans shareholders.
Under certain circumstances, prior to the closing of the merger,
either we or Buffets may terminate the merger agreement without
the consent of the other party.
Termination
Fee
Upon termination of the merger agreement following the
occurrence of certain events, we may be required to pay Buffets
a termination fee and to reimburse Buffets for its documented
out-of-pocket
expenses in connection with the merger in an aggregate amount
equal to $25,000,000. Upon termination of the merger agreement
following the occurrence of certain events, Buffets may be
required to pay us a termination fee of $7,500,000.
Certain
Material United States Federal Income Tax Consequences
(Page )
If you are a U.S. holder of our common stock, receipt of
the merger consideration will be a taxable transaction to you
for federal income tax purposes. Although your tax consequences
will depend on your particular situation, you will generally
recognize gain or loss measured by the difference, if any,
between the cash you receive in the merger and your adjusted tax
basis in your shares of Ryans common stock. If you are a
non-U.S. holder
of our common stock, the merger will generally not be a taxable
transaction to you under federal income tax laws unless you have
certain connections to the United States. You should consult
your own tax advisor for a full understanding of the tax
consequences of the merger to you.
Regulatory
Approvals (Page )
Other than approval pursuant to the HSR Act, no other material
federal or state regulatory approvals are required to be
obtained by us, Buffets or Merger Sub in connection with the
merger. On August 7, 2006, Ryans and Buffets each
filed a Notification and Report Form with the Antitrust Division
of the Department of Justice and the Federal Trade Commission.
Under the HSR Act and related rules, the merger may not be
completed until the expiration or termination of the statutory
waiting period. The waiting period is scheduled to expire at
11:50 p.m. (EDT) on September 6, 2006, unless early
termination is granted or unless extended by a request for
additional information.
Litigation
Challenging the Merger (Page )
On July 28, 2006, a putative shareholder class action,
Marjorie Fretwell v. Ryans Restaurant Group, Inc.
et. al. Case
No. 06-CP-23-4828,
was filed against Ryans and its directors in the
Greenville County, South Carolina Circuit Court.
4
The complaint alleges that each of the directors of Ryans
individually breached the fiduciary duties owing to the
Ryans shareholders by voting to approve the merger
agreement and alleges that Ryans aided and abetted such
alleged breach of fiduciary duties. The complaint seeks, among
other relief, the courts designation of class action
status, a declaration that entry into the merger agreement was
in breach of the defendants fiduciary duties and therefore
was unlawful and unenforceable, and entry of an order enjoining
the defendants from taking further action to consummate the
proposed merger. Ryans and its board of directors believe
that the action is without merit and will vigorously defend it.
Market
Price of Ryans Common Stock
(Page )
Our common stock is listed on the NASDAQ National Market
(NASDAQ) under the trading symbol RYAN.
On July 24, 2006, which was the last trading day before we
made a public announcement about the merger, the closing price
of Ryans common stock was $11.22 per share. On
August , 2006, which was the last trading day
before this proxy statement was filed with the SEC, the closing
price of Ryans common stock was $ per
share.
Appraisal
Rights (Page )
Under applicable provisions of South Carolina law, no
dissenters or appraisal rights are available with respect
to the merger because our common stock is designated as a
national market system security on an interdealer quotation
system by the National Association of Securities Dealers.
5
QUESTIONS
AND ANSWERS ABOUT THE SPECIAL MEETING AND THE MERGER
The following questions and answers address briefly some
questions you may have regarding the special meeting and the
proposed merger. These questions and answers may not address all
questions that may be important to you as a shareholder of
Ryans. Please refer to the more detailed information
contained elsewhere in this proxy statement, as well as the
additional documents to which it refers or which it incorporates
by reference, including the merger agreement, a copy of which is
attached to this proxy statement as Exhibit A.
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Why am I receiving this proxy statement? |
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You are receiving this proxy statement because you are being
asked to vote to adopt the merger agreement and approve the
merger and to consider the grant of discretionary authority to
the proxy holders to vote for adjournment of the special meeting
for the purpose of soliciting additional proxies if they are
insufficient votes at the time of the meeting to approve the
merger proposal. |
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What is the proposed transaction? |
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The proposed transaction is the acquisition of Ryans by
Buffets under an agreement and plan of merger, dated
July 24, 2006, by and among Buffets, Inc., Buffets
Southeast, Inc., a wholly-owned subsidiary of Buffets and
Ryans. Once the merger has been approved by Ryans
shareholders and the other closing conditions under the merger
agreement have been satisfied or waived, Merger Sub will merge
with and into Ryans. Ryans will be the surviving
corporation in the merger, but the shares of its common stock
will not be publicly traded after the merger. |
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What will I receive in the merger? |
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You will be entitled to receive $16.25 in cash, without
interest, less any required withholding taxes, for each
outstanding share of Ryans common stock that you own as of
the effective time of the merger. |
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When do you expect to complete the merger? |
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We are working toward completing the merger as promptly as
practicable. If our shareholders vote to adopt the merger
agreement and approve the merger, and the other conditions to
the merger are satisfied or waived, then we intend to complete
the merger as soon as possible after the special meeting. The
merger agreement provides that the closing will occur no later
than the third business day after the other conditions to the
closing of the merger are satisfied or waived. We expect to
complete the merger in the fourth quarter of 2006. |
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Q: |
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Will I have appraisal rights in connection with the
merger? |
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No. Under applicable provisions of South Carolina law, no
dissenters or appraisal rights are available in connection
with the merger because our common stock is designated as a
national market system security on an interdealer quotation
system by the National Association of Securities Dealers. |
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What vote of our shareholders is required to adopt the merger
agreement? |
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Approval of the merger requires the affirmative vote of at least
two-thirds of the shares of Ryans common stock that are
outstanding and entitled to vote at the special meeting.
Because the required vote is based on the number of shares of
Ryans common stock outstanding and not the number of votes
cast, failure to vote your shares (including as a result of
broker non-votes) and abstentions will have the same effect as
voting against approval of the merger. We urge
you to either complete, sign and return the enclosed proxy card
or submit your proxy or voting instructions by telephone or
Internet to assure the representation of your shares of
Ryans common stock at the special meeting. |
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Q: |
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How does Ryans board of directors recommend that I
vote? |
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Our board of directors unanimously recommends that our
shareholders vote FOR the adoption of the
merger agreement and approval of the merger and
FOR the granting of discretionary authority
to the proxy holders to vote for adjournment of the special
meeting for the purpose of soliciting additional proxies if
there are insufficient votes to approve the merger proposal at
the time of the special meeting. For a description of the
factors considered by our board of directors, please see
Reasons for the Merger and Recommendation of Our Board of
Directors beginning on page . |
6
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What should I do now? |
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A: |
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This proxy statement contains important information regarding
the special meeting, the merger agreement and the merger, as
well as information about Ryans, Buffets and Merger Sub.
It also contains important information about some of the factors
our board of directors considered in approving the merger
agreement and the merger. We urge you to carefully read this
proxy statement, including its exhibits, and to consider how the
merger affects you. You may also want to review the documents
referenced in the section captioned Where You Can Find
More Information beginning on page . |
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If my Ryans shares are held in street name
by my broker, will my broker vote my shares for me if I do not
give instructions? |
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If you hold your shares in street name through a
broker or other nominee, your broker or nominee will not vote
your shares unless you provide instructions on how to vote. You
should instruct your broker or nominee how to vote your shares
by following the directions your broker or nominee will provide
to you. If you do not provide instructions to your broker or
nominee with respect to the merger proposal, your shares will
not be voted and this will have the same effect as a vote
against the proposal to adopt the merger agreement and approve
the merger. If a quorum is present, but you did not provide
instructions to your broker or nominee with respect to the
granting of discretionary authority with respect to adjournment,
your shares will not be voted and this will have no effect on
the outcome of the adjournment proposal. |
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Can I change my vote? |
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Yes. You may change your vote at any time before the shares
reflected on your proxy are voted at the special meeting. If you
own your shares in your name, you can do this in one of three
ways. First, you can send a written notice of revocation to our
secretary at our principal executive offices. Second, you can
either mark, sign, date and return a new proxy card or submit
your proxy or voting instructions by telephone or Internet at a
later date than your previously submitted proxy. Third, you can
attend the meeting and vote in person. Your attendance alone
will not revoke your proxy. If you have instructed a broker,
dealer, trustee, bank or other nominee to vote your shares, you
must follow the directions received from the broker, dealer,
trustee, bank or other nominee to change your instructions. |
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Should I send in my Ryans stock certificates now? |
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No. You should not send in your Ryans stock
certificates now. After we complete the merger, the paying
agent, American Stock Transfer & Trust Company, will
send you a letter of transmittal describing how you may exchange
your Ryans stock certificates for the merger
consideration. At that time, you must send in your share
certificates or execute an appropriate instrument of transfer of
your shares of Ryans common stock, as applicable, with
your completed letter of transmittal to the paying agent to
receive the merger consideration. If you do not hold any
physical share certificates, you must execute a properly
completed letter of transmittal and arrange to electronically
transfer your shares of Ryans common stock. |
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Have any shareholders already agreed to approve the
merger? |
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No. There are no agreements between the Merger Sub or
Buffets and any Ryans shareholder in which that
shareholder has agreed to vote in favor of adopting the merger
agreement and approving the merger. |
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Q: |
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What are the financial interests of Ryans directors,
officers and employees in the merger? |
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A: |
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Our directors and executive officers also hold shares of
Ryans common stock and options to purchase shares of
Ryans common stock which will be converted in the same
manner as other shareholders and option holders of Ryans.
For more information on the holdings of stock and options by
directors and executive officers, see Security Ownership
of Management and Certain Beneficial Owners, beginning on
page . In addition, the merger agreement
provides for certain indemnification arrangements for our
current and former directors and officers, and our executive
officers could be entitled to severance payments under certain
circumstances if their employment with Ryans or the
surviving corporation ends at or following the merger. See
Interests of Certain Persons in the Merger,
beginning on page . |
7
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Q: |
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Will I owe taxes as a result of the merger? |
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A: |
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The receipt of cash in exchange for shares of Ryans common
stock or options to purchase Ryans common stock pursuant
to the merger will generally be a taxable transaction for
U.S. federal income tax purposes. In general, you will
recognize a capital gain or loss equal to the difference between
the amount of merger consideration you receive for your shares
and the adjusted tax basis of your shares. See Material
U.S. Federal Income Tax Consequences, beginning on
page . You should consult your tax advisor for
a complete understanding of the specific tax consequences of the
merger to you. |
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Q: |
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What if I have additional questions? |
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A: |
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If you have questions about the merger agreement, the special
meeting or where to send your proxy, or if you would like
additional copies of this proxy statement, you should contact
the following: Secretary, Janet Gleitz, at
(864) 879-1000. |
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Q: |
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Where can I find more information about Ryans? |
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A: |
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We file certain information with the SEC under the Exchange Act.
You may read and copy this information at the SECs public
reference facilities. You may call the SEC at
1-800-SEC-0330
for information about these facilities. This information is also
available at the Internet site the SEC maintains at www.sec.gov
and at our Investor Relations page on our corporate website at
www.ryans.com. Information contained on our website is
not part of, or incorporated in, this proxy statement. You can
also request copies of these documents from us. See Where
You Can Find More Information beginning on
page . |
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Q: |
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Who will solicit and pay the cost of soliciting proxies? |
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A: |
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Ryans board of directors is soliciting your proxy.
Ryans will bear the cost of soliciting proxies. In
addition to solicitation by mail and, without additional
compensation for these services, proxies may be solicited by
telephone and facsimile, by mail, on the Internet or in person.
We will pay approximately $7,500 to our proxy solicitor. We will
also request that banking institutions, brokerage firms,
custodians, directors, nominees, fiduciaries and other like
parties forward the solicitation materials to the beneficial
owners of shares of common stock held of record by such person,
and we will, upon request of such record holders, reimburse
reasonable forwarding charges and
out-of-pocket
expenses. |
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If you have further questions, you may contact W. F.
Doring & Company by phone at
(291) 823-4300
or by mail at 866-868 Broadway, Bayonne, New Jersey, 07002. |
8
THE
SPECIAL MEETING OF RYANS SHAREHOLDERS
The
Proposal
This proxy statement is being furnished to our shareholders in
connection with the solicitation of proxies by the Ryans
board of directors for use at a special meeting to be held at
Ryans executive offices, 405 Lancaster Avenue, Greer,
South Carolina on September , 2006, at
10:00 a.m. local time. The purpose of the special meeting
is for you to consider and vote upon a proposal to adopt the
merger agreement, which provides for the merger of Merger Sub
with and into Ryans with the result that Ryans will
become a wholly-owned subsidiary of Buffets, to consider and
vote upon a proposal to grant discretionary authority to the
proxy holders to adjourn the special meeting for the purpose of
soliciting additional proxies and to transact any other business
that may properly come before the special meeting or any
adjournment or postponement thereof. A copy of the merger
agreement is attached as Exhibit A to this proxy
statement.
Record
Date; Stock Entitled to Vote; Quorum
The holders of record of our common stock as of the close of
business on August 28, 2006, which is the record date for
the special meeting, are entitled to receive notice of, and to
vote at, the special meeting.
On the record date, there were
approximately shares of our common stock
outstanding held by
approximately shareholders of record. The
presence in person or by proxy of the holders entitled to cast a
majority of the total votes of our common stock as of the record
date will constitute a quorum for purposes of the special
meeting. Each holder of our common stock is entitled to one vote
per share of our common stock held. Both abstentions and broker
non-votes will be counted as present for purposes of
determining the existence of a quorum. In the event that a
quorum is not present at the special meeting, we currently
expect that we will adjourn or postpone the meeting to solicit
additional proxies. Broker non-votes result when the
beneficial owners of shares of common stock do not provide
specific voting instructions to their brokers. Under the rules
of The Nasdaq Stock Market, brokers are precluded from
exercising their voting discretion with respect to the approval
of non-routine matters.
Vote
Required
Completion of the merger requires the approval of the merger by
the affirmative vote of the holders of two-thirds of Ryans
common stock entitled to vote at the special meeting. Approval
of the grant of discretionary authority to the proxy holders to
vote for adjournment of the special meeting for the purpose of
soliciting additional proxies will require the affirmative vote
of holders of a majority of the shares voting on the issue at
the special meeting.
Our board of directors recommends that you vote FOR the
adoption of the merger agreement and the approval of the merger,
FOR the proposal to grant discretionary authority to the proxy
holders to vote for adjournment of the special meeting for the
purpose of soliciting additional proxies if there are
insufficient votes at the special meeting to approve the merger
proposal and FOR the authorization of the proxies to vote on
such other matters as may properly come before the special
meeting or any adjournment or postponement thereof.
Each holder of shares of Ryans common stock that was
outstanding on the record date is entitled to one vote at the
special meeting. Because the required vote with respect to
the merger is based on the number of shares of Ryans
common stock outstanding rather than on the number of votes
cast, failure to vote your shares (including as a result of
broker non-votes) and abstentions with respect to the merger
proposal will have the same effect as voting against
approval of the merger. Accordingly, in order for your
shares of common stock to be included in the vote, if you are a
shareholder of record, you must either have your shares voted by
returning the enclosed proxy card or by following voting
instructions by telephone or Internet, or you must vote in
person at the special meeting.
9
Proxies
Record holders may cause their shares of Ryans common
stock to be voted using one of the following methods:
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mark, sign, date and return the enclosed proxy card by mail;
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submit your proxy or voting instructions by telephone or
Internet by following the instructions included with your proxy
card; or
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appear and vote in person by ballot at the special meeting.
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Regardless of whether you plan to attend the special meeting, we
request that you complete and return a proxy for your shares of
Ryans common stock as described above as promptly as
possible.
If you hold your shares of Ryans common stock through a
bank, brokerage firm or nominee (i.e., in street
name), you must provide voting instructions in accordance
with the instructions on the voting instruction card that your
bank, brokerage firm or nominee provides to you. You should
instruct your bank, brokerage firm or nominee as to how to vote
your shares, following the directions contained in such voting
instruction card. If you have not received such voting
instructions or require further information regarding such
voting instructions, contact your broker, who can give you
directions on how to vote your shares of Ryans common
stock.
As of the record date, our executive officers and directors
owned an aggregate of approximately shares of
Ryans common stock, entitling them to exercise
approximately % of the voting power of
Ryans common stock entitled to vote at the special
meeting. We currently expect that the executive officers and
directors of Ryans will vote their shares of Ryans
common stock in favor of approval of the merger.
Shareholders who have questions or requests for assistance in
completing and submitting proxy cards should contact our
Secretary, Janet Gleitz, at
(864) 879-1000.
Revocation
If you submit a proxy, your shares will be voted at the special
meeting as you indicate on your proxy. If no instructions are
indicated on your signed proxy card, your shares of Ryans
common stock will be voted FOR the approval
of the merger, FOR the proposal to grant
discretionary authority to the proxy holders to vote for
adjournment of the special meeting for the purpose of soliciting
additional proxies if there are insufficient votes at the
special meeting to approve the merger proposal and
FOR the authorization of the proxies to vote
on such other matters as may properly come before the special
meeting or any adjournment or postponement thereof.
You may revoke your proxy at any time, but only before the proxy
is voted at the special meeting, in any of three ways:
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by delivering a written revocation dated after the date of the
proxy that the proxy is being revoked to the Secretary of
Ryans at 405 Lancaster Avenue, Post Office Box 100,
Greer, South Carolina, 29652;
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by delivering to the Secretary of Ryans a later-dated,
duly executed proxy or by submitting your proxy or voting
instructions by telephone or Internet at a date after the date
of the previously submitted proxy relating to the same
shares; or
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by attending the special meeting and voting in person by ballot.
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Attendance at the special meeting will not, in itself,
constitute revocation of a previously granted proxy. If you hold
your shares of Ryans common stock in street name, you may
revoke or change a previously given proxy by following the
instructions provided by the bank, brokerage firm, nominee or
other party that is the registered owner of the shares.
10
Solicitation
of Proxies
Ryans will pay the costs of soliciting proxies for the
special meeting. In addition, our officers and directors and
employees may solicit proxies by telephone,
e-mail,
telegram or personal interview for no additional compensation.
We will also request that individuals and entities holding
shares in their names, or in the names of their nominees, that
are beneficially owned by others, send proxy materials to and
obtain proxies from those beneficial owners, and will reimburse
those holders for their reasonable expenses in performing those
services. We have engaged W. F. Doring & Company to
solicit proxies and distribute materials to brokerage houses,
banks, custodians, nominees and fiduciaries for a fee of
approximately $7,500. We will reimburse brokerage houses and
other custodians, nominees and fiduciaries for their reasonable
out-of-pocket
expenses for forwarding solicitation materials to shareholders.
Adjournments
and Postponements
Although we do not expect to do so, if we have not received
sufficient proxies to constitute a quorum or sufficient votes
for approval of the merger at the special meeting of
shareholders, the special meeting may be adjourned for the
purpose of soliciting additional proxies. Any signed proxies
received by us will be voted in favor of an adjournment in these
circumstances. Any adjournment or postponement of the special
meeting for the purpose of soliciting additional proxies will
allow shareholders who have already sent in their proxies to
revoke them at any time prior to their use.
Other
Business
As of the date of this proxy statement, we are not aware of any
business other than the proposed merger that may be presented
for consideration at the special meeting. If any other business
properly comes before the meeting, the shares represented by
proxies will be voted in the discretion of, and according to the
best judgment of, the proxy holders.
HOUSEHOLDING
OF PROXY MATERIALS
Some banks, brokerages and other nominee record holders may be
participating in the practice of householding proxy
statements. This means that only one copy of this proxy
statement may have been sent to multiple shareholders in your
household. Ryans will promptly deliver a separate copy of
this proxy statement to you if you call or write Ryans at
the following address or telephone number: Ryans
Restaurant Group, Inc., 405 Lancaster Avenue, Post Office
Box 100, Greer, South Carolina, 29652, telephone
864-879-1000,
Attention: Janet J. Gleitz. If you want to receive separate
copies of Ryans proxy statement in the future, or if you
are receiving multiple copies and would like to receive only one
copy for your household, you should contact your bank, broker or
other nominee record holder, or you may contact Ryans at
the above address and telephone number.
FORWARD-LOOKING
STATEMENTS
This document contains statements, which to the extent they are
not statements of historical or present fact, constitute forward
looking statements. These forward-looking statements are
identified by their use of terms and phrases such as
anticipate, believe, could,
estimate, expect, intend,
may, plan, predict,
project, will and similar terms and
phrases, and may also include references to assumptions. We or
our representatives may also make similar forward-looking
statements from time to time orally or in writing. Such
statements are based upon our current beliefs and expectations
and are subject to significant risks and uncertainties. There
are a number of important factors that could cause actual
results or events to differ materially from those indicated by
such forward-looking statements, including:
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we may be unable to obtain Ryans shareholder approval
required to consummate the merger;
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conditions to the closing may not be satisfied or the merger
agreement may be terminated prior to closing;
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11
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failure to obtain regulatory approvals of the merger or
otherwise to complete the merger, or any potential adverse
conditions to receiving regulatory approvals;
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changes in the restaurant operation business;
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changes in government regulation, including, but not limited to,
environmental, tax laws, and economic policy;
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legal actions; and
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acts of war or terrorism.
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Additional factors that may affect future results are contained
in Ryans filings with the SEC, including Ryans
Annual Report on
Form 10-K
for the year ended December 28, 2005, which are available
at the SECs Web site www.sec.gov. The information
set forth herein speaks only as of the date hereof, and any
intention or obligation to update any forward-looking statements
as a result of developments occurring after the date hereof is
hereby disclaimed except to the extent required by law.
THE
PARTIES TO THE MERGER
Ryans
Restaurant Group, Inc.
Ryans is a South Carolina corporation that owns and
operates a chain of restaurants located principally in the
southern and midwestern United States. As of ,
2006, Ryan operated
Ryans®
brand restaurants and Fire
Mountain®
brand restaurants.
Buffets,
Inc.
Buffets is a Minnesota corporation that currently operates 337
restaurants in 33 states comprised of 328 buffet
restaurants and nine Tahoe Joes Famous
Steakhouse®
restaurants. The buffet restaurants are principally operated
under the Old Country
Buffet®
or HomeTown
Buffet®
brands. Buffets also franchises 18 buffet restaurants in
seven states.
Buffets
Southeast, Inc.
Merger Sub is a South Carolina corporation and was organized
solely for the purpose of effecting the proposed transaction.
Merger Sub has not conducted any activities to date other than
activities incidental to its formation and in connection with
the proposed transaction. Merger Sub is wholly-owned by Buffets.
If the transaction is consummated, Merger Sub would cease to
exist after it merges with Ryan.
THE
MERGER
This discussion of the merger is qualified by reference to
the merger agreement, which is attached to this proxy statement
as Exhibit A. You should read the entire merger agreement
carefully as it is the legal document that governs the
merger.
Background
of the Merger
On December 8, 2005, a representative of an entity with
which Ryans had no prior relationship contacted
Ryans Chief Executive Officer, Charles D. Way, to discuss
the interest it and another entity (collectively, Company
A) had in Ryans. On December 12, 2005, Company
A sent a letter to Mr. Way suggesting a meeting between
representatives of Company A and members of Ryans
executive management team.
On December 21, 2005, members of Ryans executive
management met with representatives of Company A and discussed
Company As interest in Ryans.
12
On December 27, 2005, Ryans received an unsolicited
letter from Company A expressing an interest in a possible
acquisition of all of the outstanding shares of Ryans
common stock for a proposed purchase price between $14.50 and
$15.00 per share. A copy of this letter was sent to all
Ryans board members and a special board meeting was called
for January 4, 2006.
On January 4, 2006, Ryans board of directors held a
special meeting to discuss Company As letter and whether
the sale of Ryans should be pursued. Ryans board of
directors also discussed the process by which it should evaluate
Company As letter or otherwise pursue the sale of
Ryans, if Ryans board of directors determined to do
so. In order to avoid any potential conflicts of interest which
might arise, Ryans board of directors appointed a special
committee of the board consisting of independent directors Barry
L. Edwards, Harold K. Roberts, Jr., and Brian S. MacKenzie,
with Mr. Edwards serving as chairman. Ryans board of
directors authorized the special committee to (i) consider
Company As letter and any other proposals or alternatives
that may be received or sought by the special committee from any
other party; (ii) conduct or supervise the conduct of any
negotiations with respect to Company As letter and any
such proposals; (iii) review, evaluate and make a
determination with respect to Company As letter or any
other proposal; and (iv) make a recommendation to
Ryans board of directors with respect to Company As
letter or any proposed transaction or alternative considered by
the special committee. Ryans board of directors also
authorized the special committee to engage advisers, including
legal counsel and financial advisers, to assist the special
committee in fulfilling its duties.
The special committee retained Rogers & Hardin LLP
(Rogers & Hardin) as legal counsel to the
special committee.
On January 9, 2006, the special committee held a telephonic
meeting in which Rogers & Hardin participated. The
special committee summarized for Rogers & Hardin the
events to date with regard to Company As letter.
Rogers & Hardin discussed with the special committee
the fiduciary duties of directors with respect to a transaction
of the type contemplated by Company As letter and the role
of the special committee. The special committee also discussed
engaging Brookwood Associates, LLC (Brookwood) as
the financial advisor to the special committee.
On January 11, 2006, Company A delivered to
Mr. Edwards a request for due diligence and requested that
Company A and Ryans enter into a confidentiality
agreement. On January 18, 2006, the special committee,
through its representatives provided a form confidentiality
agreement to Company A.
On January 13, 2006, the special committee met
telephonically with Rogers & Hardin and Brookwood
present. Brookwood discussed with the special committee the due
diligence process generally, including the due diligence review
Brookwood would need to conduct in order to provide an
independent valuation of Ryans. The special committee
agreed to make available information which Brookwood requested
in order to prepare a preliminary assessment of Ryans
value. Brookwood and Rogers & Hardin further discussed
the negotiation and sale process, including the possibility of
having Brookwood contact other potential interested parties.
Immediately following this meeting, the special committee and
Rogers & Hardin met telephonically to discuss the terms
of Brookwoods proposed engagement.
From January 13, 2006 through January 24, 2006, the
special committee, with the assistance of Rogers &
Hardin, negotiated and finalized the terms of Brookwoods
engagement as the financial advisor to the special committee,
and the special committee and Brookwood executed an engagement
agreement dated January 27, 2006.
On January 30, 2006, Ryans board of directors held a
regularly scheduled board meeting at which the special committee
reported to Ryans full board of directors with respect to
the special committees progress. Rogers & Hardin
and Brookwood joined this portion of the meeting telephonically.
From January 24, 2006 through February 9, 2006,
Brookwood conducted a due diligence investigation of
Ryans, including in-person due diligence meetings at
Ryans corporate headquarters between representatives of
Brookwood and Ryans executive management team.
13
On February 1, 2006, following the negotiation of the
terms, a confidentiality agreement was executed by Ryans
and Company A.
On February 10, 2006, the special committee held a
telephonic meeting at which Brookwood reviewed with the special
committee Brookwoods preliminary financial analysis of
Ryans equity value based upon various methodologies,
including comparable selected public companies, selected merger
and acquisitions, discounted cash flows and premiums paid in
selected transactions. The special committee determined that the
purchase price proposed by Company A was not adequate and
instructed Brookwood to inform Company A of such determination.
Brookwood informed the special committee that it had considered
various parties that had sufficient resources and relevant
transaction experience to enter into a transaction with
Ryans and that it had identified seven parties, other than
Company A, that Brookwood believed would be most likely to have
an interest in acquiring Ryans, taking into account the
nature and value of Ryans assets and business and the
parties experience in the restaurant industry. The special
committee agreed to have Brookwood solicit indications of
interest from these potentially interested parties on a
confidential basis.
On February 13, 2006, Brookwood informed Company A that the
special committee had determined that Company As proposed
purchase price was too low.
During the end of February 2006, materials to be distributed to
the previously identified parties were prepared, including a
form confidentiality agreement, summary information regarding
Ryans and a letter inviting the submission of non-binding
indications of interest.
In early March, Brookwood contacted the previously identified
parties on a confidential basis to determine if they were
interested in receiving information. By March 17, 2006, six
of the parties which had been contacted by Brookwood had entered
into confidentiality agreements with Ryans and had
received summary information and a letter inviting such buyers
to submit non-binding indications of interest. Thereafter,
during the remainder of March and early April, four of the six
parties which had executed confidentiality agreements had
various discussions with Brookwood and members of Ryans
management concerning due diligence and other related matters to
permit such parties to determine a price range in which they
would have an interest in acquiring Ryans. The other two
parties determined, after review of the summary information,
that they were not interested in continuing the process.
On March 9, 2006, the special committee received a letter
from Company A which reaffirmed Company As proposal to
purchase Ryans common stock for a purchase price of
$14.50 per share, subject to Company As satisfactory
completion of due diligence. Company A requested that
Ryans execute an exclusivity agreement providing for a
45-day
exclusivity period, the payment by Ryans of a $250,000 fee
and Ryans agreement to reimburse Company A for its due
diligence expenses up to an additional $750,000.
During March 2006, Mr. Edwards and Brookwood had several
discussions with Company A regarding its
March 9th letter, including reasons why Company
As proposed purchase price should be increased.
On March 14, 2006, the special committee held a telephonic
meeting at which Brookwood and Rogers & Hardin were
present. Mr. Edwards updated the special committee with
respect to his conversations with Company A, and the special
committee discussed Company As March 9th letter
and strategies for negotiating a higher purchase price from
Company A. The special committee also discussed Company As
request for exclusivity and for fees and expense reimbursement
and agreed that Ryans should not enter into an exclusivity
agreement at that time. Brookwood updated the special committee
regarding Brookwoods progress with respect to contacting
the previously identified parties. The special committee
instructed Brookwood to attempt to obtain indications of
interest with price ranges from such parties.
Following the special committee meeting on March 14, 2006,
Mr. Edwards had a further conversation with Company A and
was informed that, while Company A might increase the range of
its proposed purchase price, Company A ultimately would not
likely be willing to pay more than $15.00 per share.
At a telephonic meeting of the special committee held on
March 16, 2006, at which Brookwood and Rogers &
Hardin were present, Mr. Edwards updated the special
committee regarding his conversations with
14
Company A. Brookwood also updated the special committee
regarding the status of Brookwoods efforts to obtain
indications of interest from the other previously identified
parties, and the special committee instructed Brookwood to
continue those efforts.
On March 21, 2006, Caxton-Iseman Capital, Inc., a New
York-based private equity firm, began its initial due diligence
related to Ryans business. Buffets is owned by an
investment partnership organized by Caxton-Iseman Capital, Inc.
and the senior management of Buffets. We refer to Caxton-Iseman
Capital, Inc. and Buffets collectively in this proxy statement,
as Caxton-Iseman.
In response to the invitation letter, on April 4, 2006, an
entity which had no prior relationship to Ryans, referred
herein as Company B, submitted to the special
committee an initial indication of interest to acquire all of
the outstanding shares of Ryans common stock for a
proposed purchase price between $13.00 and $15.50 per
share. Brookwood advised Company B that its proposed price range
was too wide.
On April 3, 2006 and April 4, 2006, Mr. Edwards
and Brookwood continued discussions with Company A and its
representatives regarding its proposal, including advising
Company A that the special committee believed its proposed
purchase price to be too low, and informed Company A that the
special committee was having discussions with other interested
buyers.
The special committee held a telephonic meeting on April 5,
2006, at which Brookwood and Rogers & Hardin were
present. At the meeting, Brookwood reported that of the six
parties who had executed confidentiality agreements (other than
Company A), two were not interested in pursuing a transaction;
two expressed a general interest in a transaction, but did not
submit indications of interest because they did not believe that
the value of Ryans supported a price that would represent
a material premium to market; the fifth, Company B, provided an
indication of interest between $13.00 and $15.50; and Brookwood
expected to receive shortly a written indication of interest
from the sixth, Caxton-Iseman. The special committee discussed
the proposal from Company B and the continuing discussions with
Company A, including the risks that Company B may not be willing
to pay at least $15.00 per share and that Company A might
decrease its proposed purchase price after completing due
diligence.
In response to the invitation letter, on April 7, 2006,
Caxton-Iseman submitted to the special committee an initial
indication of interest to acquire all of the outstanding shares
of Ryans common stock for a proposed purchase price
between $15.25 to $16.00 per share.
At a meeting of Ryans board of directors held on
April 10, 2006 at which Brookwood was present by telephone,
Brookwood updated Ryans board of directors regarding the
results of Brookwoods solicitation of indications of
interest from the previously identified parties. Brookwood
reported that, based on the indications of interest received by
the special committee, Brookwood, under the direction of the
special committee, was continuing the process with Company A and
the two other parties which submitted indications of interest.
Brookwood suggested that each of the three parties be invited to
Ryans corporate offices for further discussion.
Between April 24, 2006 and May 10, 2006, Company A,
Company B and Caxton-Iseman participated in meetings with
Ryans executive management, conducted site visits of
Ryans restaurants and corporate offices, and were given
access to additional due diligence materials. In addition,
during April and May 2006, Brookwood and Ryans had
numerous conversations with representatives of Company A,
Company B and Caxton-Iseman with respect to such parties
due diligence review of Ryans.
Brookwood, at the request of the special committee, instructed
Company A, Company B and Caxton-Iseman to submit to the special
committee their highest and final indication of interest no
later than May 26, 2006.
On May 5, 2006, the last remaining party originally
contacted by Brookwood executed a confidentiality agreement, was
provided with the summary information, was asked to provide an
indication of interest with a price range and was advised of the
May 26 deadline. This company did not provide Brookwood with a
price range or indication of interest.
15
On May 17, 2006, Company A sent a letter to the special
committee increasing Company As proposed purchase price to
$15.10 per share.
Between May 17, 2006 and May 30, 2006,
Mr. Edwards and Brookwood had several conversations with
Company A and its financial adviser indicating that
$15.10 per share was too low and that the fees and
reimbursement of expenses requested by Company A were too high.
On May 30, 2006, Company A sent another letter to the
special committee increasing Company As proposed purchase
price to $15.25 per share, conditioned upon Ryans
agreeing to a
45-day
exclusivity period during which Company A would conduct
confirmatory due diligence and negotiate the terms of an
acquisition agreement and upon Ryans agreeing to reimburse
Company A for one-half of its costs and expenses up to $500,000
if no acquisition agreement was entered into.
On the morning of June 1, 2006, the special committee had a
telephonic meeting with Brookwood and Rogers & Hardin
to discuss the proposals from Company A, Company B and
Caxton-Iseman. Brookwood informed the special committee that,
based on recent discussions with Company B and Caxton-Iseman,
Brookwood expected that Company B would be increasing its
proposed purchase price to $15.25 per share and that
Caxton-Iseman had orally proposed a purchase price of
$15.25 per share (both of which would be subject to
completion of confirmatory due diligence, negotiation of a
definitive acquisition agreement and entering into an
exclusivity period). The special committee discussed the
advantages and disadvantages of each proposal, including the due
diligence conducted by each party, the risks that any particular
bidder would reduce its proposed purchase price, the risks
associated with the financing needs of each bidder to consummate
the proposed transaction and the impact of the respective
proposals on Ryans employees and operations and the
related risks to Ryans if the transaction failed to close
(including the potential loss of employees).
On the afternoon of June 1, 2006, Company B submitted to
the special committee a draft letter of intent in which Company
B increased its proposed purchase price to $15.25 per
share. The draft letter of intent included a
45-day
exclusivity period for Company B to complete confirmatory due
diligence and negotiate the terms of an acquisition agreement.
Mr. Edwards, Brookwood and representatives of Company B had
discussions regarding Company Bs proposal. Company B also
had discussions with Mr. Way with regard to Company
Bs proposal.
On June 2, 2006, Ryans board of directors held a
telephonic meeting with Brookwood present. Mr. Edwards
updated Ryans full board of directors with respect to the
status of the negotiations and, based upon the advantages and
disadvantages of each proposal as previously discussed by the
special committee on June 1, 2006, the special committee
determined that Company As proposal was the most
favorable and unanimously recommended that Ryans enter
into an exclusivity agreement with Company A.
Following this meeting, Brookwood informed Company B and
Caxton-Iseman that the special committee had determined to enter
into exclusive discussions with another party regarding the
acquisition of Ryans. Later on June 2, 2006,
Brookwood had further discussions with Caxton-Iseman in which
Caxton-Iseman indicated that it might be willing to increase its
purchase price.
On the evening of June 2, 2006, Caxton-Iseman contacted
Brookwood and increased its proposed purchase price from $15.25
to $16.75 per share. Caxton-Iseman also sent a letter to
the special committee reflecting the $16.75 per share
purchase price, subject to confirmatory due diligence, and
indicating that Caxton-Iseman would provide to Ryans upon
request financing commitments from Caxton-Isemans lenders.
Caxton-Iseman indicated that it was only prepared to move
forward on this basis if Ryans and Caxton-Iseman entered
into an exclusivity agreement.
Later that evening, the special committee had a telephonic
meeting with Brookwood and Rogers & Hardin present and
discussed the increased proposal by Caxton-Iseman and the terms
of their exclusivity agreement. The special committee determined
that Caxton-Isemans revised proposal was more favorable
than the other proposals and further determined to enter into a
45-day
exclusivity period with Caxton-Iseman, subject to
Caxton-Isemans agreement to provide financing commitments
from Caxton-Isemans lenders by June 13, 2006.
16
On June 3, 2006, Rogers & Hardin negotiated and
finalized with Caxton-Isemans legal counsel, Paul, Weiss,
Rifkind, Wharton & Garrison LLP (Paul
Weiss) the terms of an exclusivity agreement, which was
executed by Ryans and Caxton-Iseman on such date. The
exclusivity agreement provided, among other things, for a
45-day
exclusivity period which would terminate if Caxton-Iseman did
not deliver to Ryans by June 13, 2006 a financing
commitment from Credit Suisse or another financial institution
reasonably acceptable to Ryans on terms customary for
transactions similar to the proposed merger.
On June 5, 2006, Caxton-Iseman commenced its confirmatory
due diligence related to Ryans business.
On June 7, Company B sent an unsigned letter to Brookwood
indicating that it was having discussions on a no-name basis
with a competitor of Ryans and that it believed that it
could increase its purchase price range to between $16 and $17,
assuming that it reached an agreement with the competitor. After
discussing the letter with Mr. Edwards, Brookwood advised
Company B that its unsigned letter was too contingent and
uncertain and that Ryans had entered into an exclusivity
agreement with another party.
On June 13, 2006, Caxton-Iseman provided Brookwood with
draft financing commitment letters from Credit Suisse and
Drawbridge Special Opportunities Fund LP.
On July 7, 2006, Paul Weiss circulated to the special
committee an initial draft of the merger agreement. The initial
draft did not permit Ryans to terminate the merger
agreement upon expiration or termination of Caxton-Isemans
financing commitments and, upon termination of the merger
agreement following certain events, required Ryans to pay
Buffets a termination fee of $25,000,000 and to reimburse
Buffets for all documented
out-of-pocket
expenses incurred by Buffets in connection with the transactions
contemplated by the merger agreement, provided the aggregate fee
and expenses payable by Ryans would not exceed
$30,000,000. Further, the initial draft did not require Buffets
to pay a termination fee to Ryans in any circumstance.
The special committee met telephonically on July 13, 2006
with Brookwood and Rogers & Hardin present to discuss
the principal terms of the merger agreement and to identify the
issues raised by the merger agreement. At the meeting, the
special committee also discussed the anticipated timeline for
the execution of the merger agreement and the pending expiration
of the exclusivity agreement and considered the possibility that
Caxton-Iseman might request to extend the exclusivity period.
Based on these discussions and instructions provided by the
special committee, Rogers & Hardin sent a revised
merger agreement reflecting the comments of the special
committee and Ryans to Paul Weiss. The revised merger
agreement, among other things, proposed to reduce the
termination fee payable by Ryans, reduce the aggregate fee
and expenses to be paid by Ryans and provide Ryans
with the right to terminate the merger agreement if
Caxton-Isemans financing commitments expire or terminate.
In addition, the revised merger agreement proposed a termination
fee payable by Buffets to Ryans upon termination of the
merger agreement by Ryans following the occurrence of
certain events and reduced the number of conditions to
Buffets obligation to close the transaction.
From July 14, 2006 through July 24, 2006,
Rogers & Hardin and Paul Weiss engaged in negotiations
regarding the merger agreement, including negotiations
concerning the termination fees payable by Ryans and
Buffets, expenses payable by Ryans and closing and
termination provisions. During the same time period,
Rogers & Hardin conferred with Mr. Edwards
regarding each revised draft of the merger agreement circulated
by Paul Weiss and discussed with Mr. Edwards the issues
raised by such drafts.
On or about July 17, 2006, Caxton-Iseman, through legal
counsel, requested that the exclusivity period be extended in
order to provide sufficient time to complete due diligence
related to Ryans business, negotiate the remaining terms
and conditions of the merger agreement and obtain final
financing commitment letters from Caxton-Isemans lenders.
On July 18, 2006, Caxton-Isemans financial advisers
discussed with Brookwood Caxton-Isemans concerns regarding
Ryans declining store sales, anticipated expenses and
defense or settlement costs with respect to certain wage and
hour lawsuits filed against Ryans, increased financing
costs to Caxton-Iseman in connection with the proposed merger
and the impact that general economic conditions may have on
Ryans business.
17
On July 18, 2006, Brookwood and Rogers & Hardin
discussed with Mr. Edwards the unresolved issues in the
merger agreement, Caxton-Isemans concerns regarding
Ryans performance and the increased financing costs and
Caxton-Isemans request to extend the exclusivity period.
After conferring with the other members of the special
committee, Mr. Edwards informed Brookwood and
Rogers & Hardin that the special committee had agreed
to extend the exclusivity period through July 24, 2006.
On July 18, 2006, Ryans and Caxton-Iseman amended the
exclusivity agreement to extend the exclusivity period through
and including July 24, 2006.
On July 20, 2006, Brookwood and Rogers & Hardin
discussed with Mr. Edwards the remaining unresolved issues
in the merger agreement, the status of the negotiations and the
possibility that Caxton-Iseman might reduce its proposed
purchase price in response to the concerns previously expressed
by Caxton-Iseman.
On July 21, 2006, Caxton-Iseman notified Brookwood that, as
a result of concerns previously raised with Brookwood on
July 18, 2006, Caxton-Iseman was reducing its proposed
purchase price from $16.75 to $16.25 per share.
On July 23, 2006, Mr. Edwards discussed with Brookwood
and Rogers & Hardin the recent revisions to the merger
agreement, including how certain issues in the merger agreement
had been addressed, and the reduction in Caxton-Isemans
proposed purchase price.
On July 24, 2006, the special committee held a telephonic
meeting at which Brookwood and Rogers & Hardin were
present. Prior to the meeting, each member of the special
committee had received a draft of the most recent version of the
proposed merger agreement, a copy of discussion materials
prepared by Brookwood and other related materials.
Rogers & Hardin reviewed with the special committee the
material legal points in the proposed merger agreement,
including how certain issues in the merger agreement had been
addressed. Rogers & Hardin also reviewed with the
special committee the directors fiduciary duties in
connection with the proposed transaction. Brookwood then
reviewed with the special committee Brookwoods financial
analysis of the merger consideration and rendered to the special
committee an oral opinion, which was confirmed by delivery of a
written opinion later that day, to the effect that, as of the
date of its opinion and based on and subject to the matters
described in the opinion, the $16.25 per share merger
consideration to be paid to Ryans shareholders was fair,
from a financial point of view, to the Ryans shareholders.
After an extensive discussion in which the special committee,
together with Brookwood and Rogers & Hardin, discussed,
among other things, the potential risks and benefits of the
merger transaction, the reduction in the maximum aggregate
amount of the termination fee and expenses payable by
Ryans from $30,000,000 to $25,000,000, the size of the
proposed termination fee as compared to similar transactions,
the requirement that Buffets pay a termination fee of $7,500,000
to Ryans in certain circumstances, the possibility of
Ryans terminating the merger agreement for a superior
proposal subject to the termination fee, the possibility of
Ryans terminating the merger agreement if Buffets
financing commitments expire or terminate and replacement
financing reasonably acceptable to Ryans is not obtained
within 30 days, and the closing conditions to the merger, the
special committee unanimously approved a motion recommending
that Ryans full board of directors approve and adopt the
merger agreement and approve the merger.
Following the meeting of the special committee, Ryans full
board of directors also met telephonically to review the
recommendation of the special committee and the proposed sale of
Ryans to Caxton-Iseman. Brookwood reviewed with
Ryans board of directors its financial analysis of the
merger consideration as presented to the special committee
earlier in the day. Ryans board of directors was also
informed by Mr. Edwards of the special committees
recommendation and that Brookwood had rendered an oral opinion
to the special committee, which would be confirmed by the
delivery of a written opinion later that day, that based upon
and subject to the various qualifications and assumptions
described therein, the consideration of $16.25 per share to
be received by Ryans shareholders in the merger is fair
from a financial point of view to Ryans shareholders.
Ryans board of directors then discussed the proposed
transaction, the opinion of Brookwood and the recommendation of
the special committee. Ryans board of directors
unanimously determined that the merger
18
and the merger agreement are advisable, fair to and in the best
interest of the Ryans shareholders, approved the merger
and the merger agreement, and resolved to recommend that
Ryans shareholders adopt the merger agreement and approve
the merger.
Later on the night of July 24, 2006, the merger agreement
was executed by Ryans, Buffets and Merger Sub.
On July 25, 2006, prior to the opening of the trading
markets, Ryans issued a press release announcing the
execution of the merger agreement with Buffets. Later that day,
Ryans filed a Current Report on
Form 8-K
with the SEC reporting the execution of the merger agreement and
related matters. The press release, the Merger Agreement and the
amendment to Ryans Shareholder Rights Agreement were filed
as exhibits to the Current Report on
Form 8-K.
Reasons
for the Merger and Recommendation of Our Board of
Directors
The special committee unanimously recommended that Ryans
full board of directors approve and adopt the merger agreement
and approve the merger.
Based, in part, on the unanimous recommendation of the special
committee, the board of directors of Ryans determined that
the merger and the merger agreement are advisable and are fair
to, and in the best interest of, Ryans and its
shareholders and that the consideration to be paid for each
share of Ryans common stock in connection with the merger
is fair to Ryans shareholders. Ryans board of
directors recommends that Ryans shareholders vote to
approve and adopt the merger agreement and the transactions
contemplated thereby.
In making these determinations, the special committee and the
board of directors consulted with legal and financial advisors
and with management and considered a number of factors and
potential benefits of the merger, including those discussed
below:
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the value of the consideration to be received by Ryans
shareholders pursuant to the merger agreement, as well as the
fact that Ryans shareholders will receive the
consideration in cash, which provides liquidity and certainty of
value to Ryans shareholders;
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the risks and uncertainties associated with continuing to
operate on a stand-alone basis, including the uncertainty
regarding future operating results and value after considering
Ryans current and historical financial performance and
condition, operations, management and competitive position, and
current industry, economic and market conditions;
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the current and historical market prices of Ryans common
stock, including the fact that the merger consideration of
$16.25 per share represents a 45% premium over the closing
stock price of $11.22 on the last trading day prior to
Ryans public announcement on July 25, 2006 that it
had executed a merger agreement with Buffets;
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the fact that, of the potentially interested parties identified
by the special committee and its financial advisor prior to
entering into the merger agreement who conducted due diligence
and made proposals, Buffets proposed purchase price was
the highest, as described under Background of the
Merger;
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the fact that $16.25 per share represented an increase from
Buffets original proposed price of $15.25 per share and is
greater than the proposed purchase price of Company A and
Company B, as described under Background of the
Merger;
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the level of certainty that Buffets would have sufficient cash
to complete the merger based on the financing commitment letters
provided by Drawbridge Special Opportunity Fund, LLC and Credit
Suisse Securities (USA) LLC and UBS Securities, LLC with respect
to the financing of the merger;
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the fact that, under certain circumstances described under
The Merger Agreement Termination Fee,
Buffets may be required to pay a termination fee of
$7.5 million if Buffets exercises its right not to complete
the merger based on the failure to complete its financings on
terms no less favorable to Buffets than those terms set forth in
the commitment letters;
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the presentation of Brookwood (including the assumptions and
methodologies underlying the analyses in connection therewith)
and the opinion, dated July 24, 2006, of Brookwood as to
the fairness, from a financial point of view and as of the date
of the opinion, of the merger consideration to be paid to the
holders of Ryans common stock, as more fully described
below under Opinion of the Special Committees
Financial Advisor;
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the ability of Ryans, under the terms of the merger
agreement, to terminate the merger agreement if Ryans
board of directors determines in good faith that any unsolicited
proposal constitutes a superior proposal, and authorizes
Ryans to enter into a definitive agreement with respect to
such superior proposal, subject to payment to Buffets of a
termination fee and expenses not to exceed $25 million in
the aggregate, in accordance with the terms of the merger
agreement;
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the belief of the special committee, after consultation with its
legal and financial advisors, that the termination fee was
within the range of termination fees observed in similar
transactions; and
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the other terms and conditions of the merger agreement and the
fact that the merger agreement was the product of
arms-length negotiations between representatives of
Buffets and representatives of the special committee.
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The special committee and Ryans board of directors also
considered and balanced against the foregoing factors a number
of risks and other countervailing factors concerning the merger,
including those described below:
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the risk that the merger might not be completed in a timely
manner or at all as a result of the failure of any of the
closing conditions to be satisfied or waived, including as a
result of the failure of Buffets to complete its financings as
described below;
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the fact that completion of the financings contemplated by the
commitment letters issued to Buffets, or alternate financing on
terms and conditions no less favorable to Buffets, is a
condition to Buffets obligation to complete the merger;
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the risks to Ryans if the merger does not close as a
result of the diversion of management, employees and resources
from other opportunities and from operational matters, the
potential loss of employees and the effect on business and
employee relationships;
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the fact that following the merger, Ryans shareholders
will not participate in any future earnings or growth of the
business; and
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the restrictions in the merger agreement on Ryans ability
to solicit or engage in negotiations with other third parties
regarding other proposals with regard to specified transactions
and the requirement that Ryans pay Buffets a
$25 million termination fee if Ryans board of
directors terminates the merger agreement as the result of a
superior proposal.
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After considering these factors, the special committee and
Ryans board of directors determined that the positive
factors relating to the merger outweighed the risks and
countervailing factors.
The foregoing discussion of the factors considered by the
special committee and the board of directors is not intended to
be exhaustive, but rather includes the material factors
considered by the special committee and the board of directors.
The special committee and the board of directors did not assign
relative weights to the above factors or the other factors
considered by them. In addition, the special committee and the
board of directors did not reach any specific conclusion on each
factor considered, but, with the assistance of their advisors,
conducted an overall analysis of these factors. Individual
members of the special committee and the board of directors may
have given different weights to different factors.
Ryans board of directors has unanimously determined
that the merger is fair to and in the best interests of
Ryans shareholders and has approved the merger.
Ryans board of directors unanimously recommends that
Ryans shareholders vote FOR the approval of
the merger agreement and the merger.
20
Fairness
Opinion of Brookwood Associates
The special committee retained Brookwood to act as its financial
advisor and, if requested, to render to the special committee an
opinion as to the fairness, from a financial point of view, of
the merger consideration to be received by Ryans
shareholders pursuant to the Agreement, other than Buffets,
Merger Sub and their respective subsidiaries.
On July 24, 2006, the special committee met to review the
proposed merger. During this meeting, Brookwood reviewed with
the special committee certain financial analyses, which are
summarized below. Also at this meeting, Brookwood delivered its
oral opinion, which was subsequently confirmed in writing, to
the effect that, as of July 24, 2006, and based upon and
subject to the factors, assumptions and limitations set forth in
its opinion, the $16.25 per share cash merger consideration
proposed to be paid by affiliates of Buffets pursuant to the
Agreement was fair, from a financial point of view, to
Ryans shareholders, other than Buffets, Merger Sub and
their respective subsidiaries.
The full text of the opinion, dated July 24, 2006, which
sets forth, among other things, the assumptions made, procedures
followed, matters considered and limitations on the scope of the
review undertaken by Brookwood, is attached to this proxy
statement as Exhibit B and is incorporated in its
entirety herein by reference. You are urged to carefully read
the opinion in its entirety. The opinion addresses only the
fairness, from a financial point of view as of the date of the
opinion, of the merger consideration to Ryans
shareholders, other than Buffets, Merger Sub and their
respective subsidiaries. It does not address any other terms or
agreements related to the merger. The opinion does not address,
the basic business decision to proceed with or effect the
merger, or the merits of the merger relative to any alternative
transaction or business strategy that may be available to
Ryans. The opinion was addressed to the special committee
and was not intended to be, and does not constitute, a
recommendation as to how any shareholder should vote or act on
any matter relating to the proposed merger. The summary of
Brookwoods opinion in this proxy statement is qualified in
its entirety by reference to the full text of the opinion.
In arriving at its opinion, Brookwood, among other things,
reviewed:
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the financial terms of the July 24, 2006 draft of the
Agreement;
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certain publicly available financial, business and operating
information related to Ryans;
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certain internal financial, operating and other data with
respect to Ryans prepared and furnished to Brookwood by
the management of Ryans;
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certain internal financial projections for Ryans that were
prepared for financial planning purposes and furnished to
Brookwood by the management of Ryans;
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certain publicly available market and securities data of
Ryans;
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certain financial data and the imputed prices and trading
activity of certain other publicly-traded companies that
Brookwood deemed relevant for purposes of its opinion;
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the financial terms, to the extent publicly available, of
certain merger transactions that Brookwood deemed relevant for
purposes of its opinion; and
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other information, financial studies, analyses and
investigations and other factors that Brookwood deemed relevant
for purposes of its opinion.
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In addition, Brookwood performed a discounted cash flow analysis
for Ryans on a stand-alone basis. Brookwood also conducted
discussions with members of the senior management of Ryans
concerning the financial condition, historical and current
operating results, business and prospects for Ryans. The
analyses performed by Brookwood in connection with this opinion
were going-concern analyses.
Brookwood relied upon and assumed the accuracy, completeness and
fair presentation of the financial, accounting and other
information provided to it by Ryans or otherwise made
available to it, and did not independently verify this
information. Brookwood also assumed, in reliance upon the
assurances of
21
management, that the information provided by Ryans was
prepared on a reasonable basis in accordance with industry
practice and, with respect to financial forecasts, projections
and other estimates and other business outlook information,
reflected the best currently available estimates and judgments
of management, was based on reasonable assumptions, and that
there was not, and the management of Ryans was not aware
of, any information or facts that would make the information
provided to Brookwood incomplete or misleading. The forecasts
and estimates of Ryans future performance provided by
Ryans management in or underlying Brookwoods
analyses are not necessarily indicative of future results or
values, which may be significantly more or less favorable than
those estimates. Brookwood expressed no opinion as to such
financial forecasts, projections and other estimates and
business outlook information or the assumptions on which they
are based. Furthermore, in arriving at its opinion, Brookwood
was not requested to make, and did not make, any physical
inspection of the properties or facilities of Ryans.
Brookwood did not perform any appraisals or valuations of any
specific assets or liabilities (fixed, contingent or other) of
Ryans, and has not been furnished with any such appraisals
or valuations. Brookwood did not undertake any independent
analysis of any outstanding, pending or threatened litigation,
regulatory action, possible unasserted claims or other
contingent liabilities to which Ryans, or any of its
respective affiliates is a party or may be subject. With the
consent of the special committee, Brookwood relied upon and
assumed the accuracy of information provided by senior
management as to Walker v. Ryans Family Steak
Houses, Inc., No. 3 D2 1078 (M.D. Tenn. Apr. 19,
2006), but Brookwoods opinion made no assumption
concerning, and therefore did not consider, the possible
assertion of claims, outcomes or damages arising out of any
other pending or threatened litigation, regulatory action,
unasserted claims or other contingent liabilities, or the
outcomes or damages arising out of any such matters.
Brookwood assumed that the final form of the Agreement would be
substantially similar to the last draft it had reviewed.
Brookwood also assumed that all necessary regulatory approvals
and consents required for the merger would be obtained in a
manner that would not result in the disposition of any material
portion of the assets of Ryans, or otherwise adversely
affect Ryans, and that would not alter the terms of the
Agreement.
Brookwoods opinion was necessarily based on economic,
monetary, market and other conditions as in effect on, and the
information made available to Ryans as of, the date of its
opinion. In performing its analyses, Brookwood considered
industry performance, general business and economic conditions
and other matters, many of which are beyond Ryans control.
Estimates of the financial value of companies do not purport to
be appraisals or reflect the prices at which companies may
actually be sold.
The following is a summary of the material financial analyses
performed by Brookwood in connection with the preparation of its
fairness opinion. The preparation of analyses and a fairness
opinion is a complex analytic process involving various
determinations as to the most appropriate and relevant methods
of financial analysis and the application of those methods to
the particular circumstances and, therefore, this summary does
not purport to be a complete description of the analyses
performed by Brookwood or of its presentation to the special
committee on July 24, 2006.
Accordingly, Brookwood believes that its analyses and the
summary below must be considered as a whole and that selecting
portions of its analyses and factors, without considering all
analyses and factors, could create a misleading or incomplete
view of the processes underlying Brookwoods analyses and
opinion. Brookwood did not form an opinion as to whether any
individual analysis or factor, whether positive or negative,
considered in isolation, supported or failed to support
Brookwoods opinion. Rather, Brookwood arrived at its
ultimate opinion based on the results of all analyses undertaken
by it and assessed as a whole, and believes that the totality of
the factors considered and analyses it performed in connection
with its opinion operated collectively to support its
determination as to the fairness of the merger consideration
from a financial point of view as of the date of
Brookwoods opinion. The fact that any specific analysis
has been referred to in the summary below is not meant to
indicate that this analysis was given greater weight than any
other analysis.
This summary includes information presented in tabular format,
which tables must be read together with the corresponding text,
and considered as a whole, in order to fully understand the
financial analyses presented by Brookwood. The tables alone do
not constitute a complete summary of the financial analyses.
Considering
22
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 Brookwoods
financial analyses. The order in which these analyses are
presented below, and the results of those analyses, should not
be taken as any indication of the relative importance or weight
given to these analyses by Brookwood or Ryans board of
directors. Except as otherwise noted, the following quantitative
information, to the extent that it is based on market data, is
based on market data as it existed on or before July 21,
2006, and is not necessarily indicative of current market
conditions.
Summary
of Implied Share Values
Brookwood assessed the fairness of the per share merger
consideration to the holders of shares of Ryans common
stock, other than Buffets, Merger Sub and their respective
subsidiaries, by assessing the value of Ryans using
several methodologies, including a comparable public companies
analysis, a precedent transactions analysis, a discounted cash
flow analysis and a premiums paid analysis, each of which is
described in more detail in the summaries set forth below. Each
of these methodologies was used to generate implied valuation
ranges that were compared to the per share merger consideration
of $16.25.
The following table shows the ranges of implied valuation per
common share of Ryans derived under each of these
methodologies. The table should be read together with the more
detailed summary of each of these valuation analyses as set
forth below.
|
|
|
|
|
|
|
|
|
|
|
Implied Valuation per Common Share
|
|
Valuation Methodology
|
|
Minimum
|
|
|
Maximum
|
|
|
Comparable Public Company Analysis
|
|
$
|
10.32
|
|
|
$
|
14.18
|
|
Precedent Transactions Analysis
|
|
$
|
13.34
|
|
|
$
|
15.34
|
|
Discounted Cash Flow Analysis
|
|
$
|
11.38
|
|
|
$
|
15.06
|
|
Premiums Paid Analysis
One Day Prior
|
|
$
|
12.10
|
|
|
$
|
12.81
|
|
Premiums Paid Analysis
30 Days Prior
|
|
$
|
13.56
|
|
|
$
|
14.06
|
|
Historical
Stock Price Analysis
Brookwood compared the historical stock prices for Ryans
common stock against the merger consideration, as shown in the
table below.
|
|
|
|
|
|
|
|
|
|
|
Closing
|
|
|
Implied
|
|
|
|
Stock Price
|
|
|
Premium
|
|
|
Merger Consideration
|
|
$
|
16.25
|
|
|
|
|
|
Closing Stock Price as of
July 21, 2006
|
|
$
|
10.80
|
|
|
|
50.5
|
%
|
One Month Prior
|
|
$
|
11.30
|
|
|
|
43.8
|
%
|
Three Months Prior
|
|
$
|
12.99
|
|
|
|
25.1
|
%
|
Six Months Prior
|
|
$
|
12.01
|
|
|
|
35.3
|
%
|
One Month Average
|
|
$
|
11.29
|
|
|
|
43.9
|
%
|
Three Month Average
|
|
$
|
12.17
|
|
|
|
33.5
|
%
|
Six Month Average
|
|
$
|
12.76
|
|
|
|
27.3
|
%
|
52-Week High
|
|
$
|
14.68
|
|
|
|
10.7
|
%
|
52-Week Low
|
|
$
|
10.04
|
|
|
|
61.9
|
%
|
During the fifty-two weeks ended July 21, 2006, Ryans
low and high share prices were $10.04 and $14.68, respectively,
compared to the $16.25 per share merger consideration.
Brookwood also noted that the price of Ryans common stock
as of the close of business the day prior to the date of
announcement was $11.22.
23
Comparable
Public Companies Analysis
Brookwood reviewed selected financial data of publicly traded
companies in the restaurant industry. Brookwood identified and
analyzed ten comparable public companies:
|
|
|
|
|
Bob Evans Farms, Inc.
|
|
|
|
CBRL Group, Inc.
|
|
|
|
Dennys Corporation
|
|
|
|
Friendly Ice Cream Corporation
|
|
|
|
Frischs Restaurants, Inc.
|
|
|
|
Landrys Restaurants, Inc.
|
|
|
|
Lone Star Steakhouse & Saloon, Inc.
|
|
|
|
Lubys, Inc.
|
|
|
|
OCharleys Inc.
|
|
|
|
RARE Hospitality International, Inc.
|
No company used in the comparable public companies analysis
possessed characteristics identical to those of Ryans.
Accordingly, an analysis of the results of the comparable public
companies necessarily involves complex considerations and
judgments concerning differences in financial and operating
characteristics of the selected companies, as well as other
factors that could affect the public trading value of the
selected companies and Ryans.
Brookwood calculated certain financial ratios for Ryans
using the per share merger consideration and for the comparable
companies using the stock prices as reported at the close of
trading on July 21, 2006 and other recent publicly
available information, available as of the date of the opinion:
|
|
|
|
|
Enterprise Value to last twelve months (LTM)
Revenues;
|
|
|
|
Enterprise Value to LTM EBITDA;
|
|
|
|
Enterprise Value to LTM EBIT.
|
The enterprise value is the sum of the fully diluted
market value of any common equity plus short-term debt and
long-term debt minus cash and equivalents. For Ryans, in
calculating the enterprise value, Brookwood took into account
the unpaid portion of the settlement of the Tennessee wage and
hour class action lawsuit and the estimated after-tax proceeds
from assets held for sale.
This analysis indicated the following low, mean, median and high
enterprise value multiples for Ryans and the comparable
public companies:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Merger
|
|
|
Comparable Company Values
|
|
|
|
Consideration
|
|
|
Low
|
|
|
Mean
|
|
|
Median
|
|
|
High
|
|
|
Enterprise Value to LTM Revenues
|
|
|
1.0x
|
|
|
|
0.5x
|
|
|
|
0.7x
|
|
|
|
0.7x
|
|
|
|
0.9x
|
|
Enterprise Value to LTM EBITDA
|
|
|
8.6x
|
|
|
|
5.8x
|
|
|
|
7.0x
|
|
|
|
6.8x
|
|
|
|
9.2x
|
|
Enterprise Value to LTM EBIT
|
|
|
14.0x
|
|
|
|
8.9x
|
|
|
|
13.2x
|
|
|
|
12.0x
|
|
|
|
19.7x
|
|
Mathematical analysis, such as determining the average or
median, is not in itself a meaningful method of using comparable
company data. Brookwood performed this analysis to understand
the multiples of revenues and earnings before interest, taxes,
depreciation and amortization, commonly referred to as EBITDA,
of these comparable public companies based upon market prices.
Based on the estimates and assumptions used in the comparable
public companies analysis, the multiples implied by the merger
consideration were above or within the range of the trading
multiples of the comparable public companies. Based on the
various judgments concerning relative comparability of each of
the selected companies to Ryans, Brookwood did not rely
solely on the quantitative results of the comparable public
companies analysis in developing a reference range or otherwise
applying its analysis. The implied valuation range for
Ryans based on the comparable public companies analysis
was $10.32 to $14.18 per share.
24
Precedent
Transactions Analysis
Brookwood performed a precedent transactions analysis, which
compares the per share merger consideration to be received by
Ryans shareholders to an implied range of per share values
derived from an analysis of selected transactions deemed
reasonably comparable. The selected transactions involved
mergers
and/or
acquisitions of companies in the restaurant industry between
January 1, 2004 and the date of the Brookwood opinion. The
selected transactions included all of the transactions falling
within these criteria in the time frame used that were
identified by Brookwood and for which Brookwood was able, based
on publicly available information, to identify reliable
valuation statistics.
|
|
|
Acquiror
|
|
Target Company
|
|
Briad Main Street
|
|
Main Street Restaurant Group
|
Wellspring Capital Management
|
|
Checkers Drive-In Restaurants
|
Circle Peak Capital
|
|
Sharis Management Corp.
|
Newcastle Partners
|
|
Fox and Hound Restaurant Group
|
Wellspring Capital Management
|
|
Dave and Busters
|
Steakhouse Partners
|
|
Roadhouse Grill
|
CBC Restaurant
Corp.(1)
|
|
Corner Bakery
|
Sun Capital Partners
|
|
Garden Fresh
|
Trimarin Capital
|
|
El Pollo Loco
|
Leonard Green and Partners
|
|
Claim Jumper
|
Castle Harlan, Inc.
|
|
Perkins Family Restaurants
|
Roark Capital
|
|
McAlisters Deli
|
Palladium Equity Partners
|
|
Taco Bueno (TB Corporation)
|
Artisan Acquisition
Corp(2)
|
|
Au Bon Pain
|
Pacific Equity Partners
|
|
Worldwide Restaurant
Concepts(3)
|
Trimarin Capital
|
|
Charlie Brown Steakhouse
|
Charlesbank Capital
Partners(4)
|
|
Captain Ds
|
Crescent Capital
|
|
Churchs Chicken
|
Bob Evans
|
|
Mimis Café Inc.
|
The Yucaipa
Companies(5)
|
|
Picadilly Cafeterias
|
|
|
|
(1) |
|
II Fornaio and Bruckmann, Rosser, Sherrill & Co |
|
(2) |
|
Au Bon Pain Mgt and PNC Equity Management |
|
(3) |
|
Parent of Sizzler and Oscars |
|
(4) |
|
Charlesbank Capital Partners and Grotech Capital Group |
|
(5) |
|
The Yucaipa Companies and Diversified Investment Management Group |
In performing its analysis, Brookwood calculated LTM net sales
and EBITDA transaction value multiples for the selected
transactions by dividing the publicly announced transaction
value of each selected transaction by the publicly available LTM
net sales and EBITDA, respectively, of the target company. The
selected transactions may differ significantly from the proposed
merger based on, among other things, the structure of the
transactions, the financial and other characteristics of the
parties to the transactions, and the dates that the transactions
were announced or consummated. The following table sets forth
the results of the analysis:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Merger
|
|
Comparable Transaction Values
|
|
|
Consideration
|
|
Low
|
|
Mean
|
|
Median
|
|
High
|
|
Enterprise Value to LTM Sales
|
|
|
1.0x
|
|
|
|
0.3x
|
|
|
|
0.8x
|
|
|
|
0.7x
|
|
|
|
1.9x
|
|
Enterprise Value to LTM EBITDA
|
|
|
8.6x
|
|
|
|
6.0x
|
|
|
|
7.6x
|
|
|
|
7.8x
|
|
|
|
10.2x
|
|
25
This precedent transactions analysis indicated that the multiple
to be received by Ryans shareholders was within the range
of the multiples of the precedent transactions. Based on the
various judgments concerning relative comparability of each of
the selected transactions to the proposed merger, Brookwood did
not rely solely on the quantitative results of the precedent
transactions analysis in developing a reference range or
otherwise applying its analysis. The implied valuation range for
Ryans based on the precedent transactions analysis was
$13.34 to $15.34 per share.
Discounted
Cash Flow Analysis
Using a discounted cash flow analysis, Brookwood calculated a
range of theoretical enterprise values for Ryans based on
(1) the net present value of implied annual cash flows of
Ryans for the seven-month period from June through
December 2006 and fiscal years 2007 through 2010 and
(2) the net present value of a terminal value, which is an
estimate of the future value of Ryans at the end of fiscal
year 2010 based upon a multiple of EBITDA. Brookwood relied on
monthly forecasts for fiscal years 2006 through 2008, furnished
by management, and yearly forecasts for fiscal years 2009
through 2010, extrapolated by Brookwood and approved by
management. Brookwood calculated the range of net present values
based on an assumed tax rate of 33.4% in fiscal 2006 and 2007
and 33.0% between fiscal years 2008 and 2010, a range of
discount rates of 10% to 14% and a range of EBITDA multiples for
a terminal value of 8.0x to 9.0x applied to the projected fiscal
year 2010 EBITDA. This analysis resulted in an implied per share
value of Ryans ranging from a low of $11.38 to a high of
$15.06.
Premiums
Paid Analysis
Brookwood compared the premium proposed to be paid in the merger
with the premiums paid for all public target transactions in the
United States announced since January 1, 2003 with an
enterprise value between $500 million and
$1.0 billion. Brookwood calculated the premiums paid
relative to the targets share price one day and
30 days prior to the date on which the merger agreement was
executed and on which the presentation to the special committee
was made. The table below compares the premiums paid in these
transactions to the premium that would be paid to Ryans
shareholders based on the per share merger consideration.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Per Share
|
|
|
All Selected
|
|
|
Cash Only
|
|
|
|
Merger
|
|
|
Transactions
|
|
|
Transactions
|
|
Premium Paid
|
|
Consideration
|
|
|
Mean
|
|
|
Median
|
|
|
Mean
|
|
|
Median
|
|
|
One Day Prior
|
|
|
50.5
|
%(1)
|
|
|
18.6
|
%
|
|
|
13.0
|
%
|
|
|
16.0
|
%
|
|
|
12.0
|
%
|
30 Days Prior
|
|
|
43.8
|
%(2)
|
|
|
24.4
|
%
|
|
|
20.5
|
%
|
|
|
23.0
|
%
|
|
|
20.0
|
%
|
|
|
|
(1) |
|
Ryans premium based on the closing stock price of $10.80
on July 21, 2006. |
|
(2) |
|
Ryans premium based on the closing stock price of $11.30
on June 22, 2006. |
Based on the mean and median premiums paid in the selected
transactions at one day prior and 30 days prior to
announcement, the implied valuation range for Ryans was
$12.10 to $14.06 per share.
Miscellaneous
Brookwood is an investment banking firm and is regularly engaged
as a financial advisor in connection with mergers and
acquisitions. The special committee selected Brookwood to render
its fairness opinion in connection with the proposed merger on
the basis of Brookwoods experience and reputation in
acting as a financial advisor in connection with mergers and
acquisitions and particularly because of its familiarity with
acquisitions in the restaurant industry.
Brookwood acted as financial advisor to Ryans in
connection with the merger and will receive a fee from
Ryans for its services upon consummation of the merger. A
substantial portion of Brookwoods fee is contingent upon
the consummation of the merger. Brookwood also received a fee of
$400,000 from Ryans for providing its opinion, which will
be credited against the fee for financial advisory services.
This opinion fee is not contingent upon the consummation of the
merger. Ryans has also agreed to indemnify Brookwood
against
26
certain liabilities in connection with its services and to
reimburse it for certain expenses in connection with its
services. In the past, Brookwood has provided financial advisory
services to Ryans and has received fees for the rendering
of those services.
Delisting
and Deregistration of Ryans Common Stock
If the merger is completed, our common stock will be delisted
from The Nasdaq National Market and deregistered under the
Securities Exchange Act of 1934, and we will no longer file
periodic reports with the SEC.
INTERESTS
OF CERTAIN PERSONS IN THE MERGER
Ryans
Stock Options
As of the record date, there were shares
of our common stock subject to stock options granted to our
directors and executive officers under each of Ryans stock
option plans, which we refer to in this proxy statement as the
option plans.
All unvested outstanding options to acquire shares of
Ryans common stock were granted under Ryans 2002
Stock Option Plan, which provides for automatic vesting in the
event of certain change of control transactions, including the
merger with Merger Sub. Accordingly, all unvested outstanding
options to acquire shares of Ryans stock will become fully
vested immediately prior to the effective time of the merger
and, pursuant to the merger agreement, will be cancelled at the
effective time of the merger. Each option holder will have the
right to receive, within five business days of the effective
time of the merger, a cash payment, without interest (less any
required withholding taxes) equal to the product of (1) the
excess, if any, of $16.25 over the applicable exercise price per
share of the option and (2) the number of shares of common
stock of Ryans issuable upon exercise of the option
(whether or not the option is vested or exercisable).
The following table summarizes the vested and unvested options
held by each of our directors and executive officers as of
August 28, 2006, and the consideration (calculated prior to
any reduction for any required withholding taxes) that each of
them will receive pursuant to the merger agreement in connection
with the cancellation of his or her options:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
Approximate
|
|
|
|
|
|
|
Exercise
|
|
|
Aggregate
|
|
Name of Director, Officer or Beneficial Owner
|
|
Stock Options
|
|
|
Price ($)
|
|
|
Value ($)
|
|
|
Charles D. Way
|
|
|
[220,000]
|
|
|
|
[11.88]
|
|
|
|
[961,400]
|
|
G. Edwin McCranie
|
|
|
[222,500]
|
|
|
|
[10.29]
|
|
|
|
[1,327,150]
|
|
Fred T. Grant, Jr.
|
|
|
[138,600]
|
|
|
|
[10.48]
|
|
|
|
[800,162]
|
|
Michael R. Kirk
|
|
|
[71,150]
|
|
|
|
[11.14]
|
|
|
|
[363,295]
|
|
James R. Hart
|
|
|
[136,800]
|
|
|
|
[9.85]
|
|
|
|
[875,931]
|
|
Ilene T. Turbow
|
|
|
[93,875]
|
|
|
|
[9.08]
|
|
|
|
[673,449]
|
|
Janet J. Gleitz
|
|
|
[66,600]
|
|
|
|
[9.54]
|
|
|
|
[447,074]
|
|
Richard D. Sieradzki
|
|
|
[20,375]
|
|
|
|
[11.61]
|
|
|
|
[94,534]
|
|
Edward R. Tallon, Sr.
|
|
|
[19,061]
|
|
|
|
[11.72]
|
|
|
|
[86,441]
|
|
James M. Shoemaker, Jr.
|
|
|
[50,000]
|
|
|
|
[10.25]
|
|
|
|
[300,050]
|
|
Barry L. Edwards
|
|
|
[57,500]
|
|
|
|
[9.63]
|
|
|
|
[380,375]
|
|
Harold K. Roberts, Jr.
|
|
|
[22,500]
|
|
|
|
[13.38]
|
|
|
|
[64,525]
|
|
Brian S. MacKenzie
|
|
|
[65,000]
|
|
|
|
[9.12]
|
|
|
|
[463,325]
|
|
Vivian A. Wong
|
|
|
[10,000]
|
|
|
|
[12.33]
|
|
|
|
[39,250]
|
|
27
Indemnification
of Officers and Directors
The merger agreement provides for indemnification and insurance
arrangements for Ryans current and former directors and
officers that will continue for six years following the
effective time of the merger. The merger agreement provides that
from and after the effective time of the merger, Buffets will,
and will cause Ryans as the surviving corporation in the
merger to, fulfill and honor in all respects, the obligations of
Ryans pursuant to any indemnification, exculpation or
advancement of expenses provisions in favor of the current or
former directors, officers, employees or agents of Ryans
or any of its subsidiaries, or certain other parties, under the
constitutional documents of Ryans or its subsidiaries or
any agreement between these indemnified persons and Ryans
or its subsidiaries in effect as of the date of the merger
agreement. The merger agreement also provides that for a period
of six years following the effective time of the merger the
articles of incorporation and bylaws of Ryans as the
surviving corporation will contain provisions with respect to
indemnification, exculpation and advancement of expenses that
are at least as favorable to the beneficiaries of these
provisions as those contained in Ryans articles of
incorporation and bylaws in effect on the date of the merger
agreement.
The merger agreement also provides that for a period of six
years after the effective time of the merger Buffets will cause
to be maintained directors and officers liability insurance and
fiduciary liability insurance arrangements substantially
equivalent in scope and amount of coverage (and on terms and
conditions no less advantageous to the insureds) to the policies
maintained by Ryans as of the date of the merger agreement
with respect to claims arising from or relating to actions or
omissions, or alleged actions or omissions, occurring on or
prior to the effective time of the merger. The merger agreement
provides that Buffets will not be required to make total annual
premium payments with respect to these insurance arrangements to
the extent the premiums exceed 225% of the last annual premium
paid by Ryans prior to the date of the merger agreement.
If the annual premium costs necessary to maintain this insurance
coverage exceed 225% of the last annual premium paid by
Ryans, Buffets will maintain as much comparable directors
and officers liability insurance and fiduciary liability
insurance as is reasonably obtainable for an annual premium not
exceeding 225% of the last annual premium paid by Ryans.
Potential
Severance Payments to Executive Officers
Nine of Ryans executive officers (Charles D. Way, G. Edwin
McCranie, Fred T. Grant, Jr., Michael Rick Kirk, J.
Randolph Hart, Ilene Turbow, Janet J. Gleitz, Richard Sieradzki
and Edward Tallon, each of whom we refer to in this proxy
statement as an executive for purposes of this
discussion) are parties to an Employment, Noncompetition and
Severance Agreement with Ryans. Under these agreements,
the executive is eligible for severance payments resulting from
certain termination circumstances. Severance payments, when
applicable, will be based on the sum of executives most
recent annual salary and the average of the most recent three
years of bonus payments (this sum is referred to as Annual
Compensation). If an executive is terminated by
Ryans (including the surviving corporation) without cause
after a change of control, as defined in the agreement (which
includes circumstances like the proposed merger), the severance
payment will be equal to two times Annual Compensation or, for
termination for cause after a change of control, one times
Annual Compensation. Also, following a change of control, an
involuntary termination by the executive results in
a severance payment equal to two times Annual Compensation,
while a voluntary termination by the executive after a change of
control results in a severance payment equal to one times Annual
Compensation. Involuntary termination is defined as
a termination by the executive following a change of control due
to a change in the executives position, authority, status
or duties, change in the agreements terms (including the
rolling two-year termination date), reduction in compensation or
benefits, forced relocation outside the Greenville, South
Carolina metropolitan area or significant increase in travel
requirements. In addition, termination by the executive due to a
material breach of the agreement by Ryans (after notice
and a cure period) results in a severance payment equal to two
times Annual Compensation.
Consequently, the merger, combined with other circumstances,
could result in one or more executives becoming entitled to
receive severance payments under their employment agreements.
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LITIGATION
CHALLENGING THE MERGER
On July 28, 2006, a putative shareholder class action,
Marjorie Fretwell v. Ryans Restaurant Group, Inc.
et. al. Case
No. 06-CP-23-4828,
was filed against Ryans and its directors in the
Greenville County, South Carolina Circuit Court.
The complaint alleges that each of the directors of Ryans
individually breached the fiduciary duties owing to the
Ryans shareholders by voting to approve the merger
agreement and alleges that Ryans aided and abetted such
alleged breach of fiduciary duties. The complaint seeks, among
other relief, the courts designation of class action
status, a declaration that entry into the merger agreement was
in breach of the defendants fiduciary duties and therefore
was unlawful and unenforceable, and entry of an order enjoining
the defendants from taking further action to consummate the
proposed merger. Ryans and its board of directors believe
that the action is without merit and will vigorously defend it.
REGULATORY
APPROVALS
Federal
or State Regulatory Filings Required in Connection with the
Merger
Other than the notification required to be filed pursuant to the
HSR Act, no other material federal or state regulatory approvals
are required to be obtained by us, Buffets or Merger Sub in
connection with the merger. On August 7, 2006,
Ryans and Buffets each filed a Notification and Report
Form with the Antitrust Division of the Department of Justice
and the Federal Trade Commission. Under the HSR Act and related
rules, the merger may not be completed until the expiration or
termination of the statutory waiting period. The waiting period
is scheduled to expire at 11:59 p.m. (EDT) on
September 6, 2006, unless early termination is granted or
unless extended by a request for additional information.
Amendment
to Ryans Rights Agreement
In connection with the signing of the merger agreement,
Ryans amended its rights agreement with American Stock
Transfer & Trust Company to provide that the preferred
stock purchase rights issued under the rights agreement will not
become exercisable nor will any holder of any preferred stock
purchase right be entitled to exercise any other rights
described in the agreement because of:
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the approval, execution or delivery of the merger agreement or
any amendments of the merger agreement; or
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the consummation of the merger.
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Among other things, the amendment also provides that the
preferred stock purchase rights will expire immediately prior to
the effective time of the merger.
Anti-Takeover
Considerations
The 1976 Code of Laws of South Carolina contains anti-takeover
provisions that prevent a person from engaging in specified
transactions with us or from taking specific actions after that
person has acquired a significant portion of our shares. These
protections fall into two categories: the business combination
statute, which regulates specified types of transactions with
interested shareholders; and the control share statute, which
regulates the voting power of shares held by specified large
shareholders. Because Buffets does not own any of shares of our
common stock, these business combination statutes do not apply
to the merger.
APPRAISAL
RIGHTS
Under applicable provisions of South Carolina law, no
dissenters or appraisal rights are available to holders of
shares of stock which is designated as a national market system
security on an interdealer quotation system by the National
Association of Securities Dealers. Our shareholders are not
entitled, under applicable
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provisions of South Carolina law, to dissenters or
appraisal rights in connection with the merger because our
common stock is so designated on The Nasdaq National Market.
MATERIAL
U.S. FEDERAL INCOME TAX CONSEQUENCES
The following describes generally the material United States
federal income tax consequences of the receipt of cash to
U.S. holders (i.e., an individual citizen or resident of
the United States or a domestic corporation) of our common stock
pursuant to the merger. The summary is based on the Internal
Revenue Code of 1986, as amended, which we refer to in this
proxy statement as the Code, applicable
current and proposed United States Treasury Regulations,
judicial authority, and administrative rulings and practice, all
of which are subject to change, possibly with retroactive
effect, and to differing interpretation. This discussion assumes
that U.S. holders hold the shares of our common stock as a
capital asset within the meaning of Section 1221 of the
Code. This discussion does not address all aspects of United
States federal income taxation that may be relevant to holders
in light of their particular circumstances, or that may apply to
holders that are subject to special treatment under the United
States federal income tax laws (including, for example, persons
who are not U.S. holders, insurance companies, dealers in
securities or foreign currencies, tax-exempt organizations,
financial institutions, mutual funds, partnerships or other
pass-through entities and persons holding our common stock
through a partnership or other pass-through entity, United
States expatriates, U.S. holders who hold shares of our
stock as part of a hedge, straddle, constructive sale or
conversion transaction, who are subject to the alternative
minimum tax or who acquired our common stock through the
exercise of employee stock options or other compensation
arrangements). In addition, the discussion does not address any
tax considerations under state, local or foreign laws or federal
laws other than United States federal income tax laws that may
be applicable to one of our shareholders.
If a partnership holds our common stock, the tax treatment of a
partner will generally depend on the status of the partners and
the activities of the partnership. If you are a U.S. holder
that is a partner in a partnership holding our common stock, you
should consult your tax advisor.
We urge you to consult your own tax advisor to determine the
particular tax consequences of the merger to you (including the
application and effect of any state, local or foreign income and
other tax laws), especially with respect to alternative minimum
tax.
The receipt of cash in the merger by U.S. holders of our
common stock will be a taxable transaction for United States
federal income tax purposes (and may also be a taxable
transaction under applicable state, local, foreign and other tax
laws). In general, for United States federal income tax
purposes, a U.S. holder of shares of our common stock will
recognize capital gain or loss equal to the difference, if any,
between (i) the amount of cash received in exchange for
such shares and (ii) the holders adjusted tax basis
in such shares. Such gain or loss will be long-term capital gain
or loss if the U.S. holders holding period of the
shares of our common stock is more than one year at the time the
merger is completed. Long-term gains recognized by
U.S. holders that are not corporations generally will be
subject to a maximum U.S. federal income tax rate of 15%
(subject to application of the alternative minimum tax). The
deductibility of a capital loss recognized on the exchange is
subject to limitations. If a U.S. holder acquired different
blocks of our stock at different times or different prices, such
holder must determine its tax basis and holding period
separately with respect to each block of our stock.
Backup
Withholding
Under the Codes backup withholding rules, unless an
exemption applies, the surviving corporation generally is
required to and will withhold 28% of all payments to which a
shareholder or other payee is entitled in the merger, unless the
shareholder or other payee (i) is a corporation or comes
within other exempt categories and demonstrates this fact or
(ii) provides its correct tax identification number (social
security number, in the case of an individual, or employer
identification number in the case of other shareholders),
certifies under penalties of perjury that the number is correct
(or properly certifies that it is awaiting a taxpayer
identification number), certifies as to no loss of exemption
from backup withholding and otherwise complies with the
applicable requirements of the backup withholding rules. Each
shareholder of ours and, if
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applicable, each other payee, should complete, sign and return
to the paying agent for the merger the substitute
Form W-9
that each shareholder of ours will receive with the letter of
transmittal following completion of the merger in order to
provide the information and certification necessary to avoid
backup withholding, unless an applicable exception exists and is
proved in a manner satisfactory to the paying agent. The
exceptions provide that certain shareholders of ours (including,
among others, all corporations and certain foreign individuals)
are not subject to these backup withholding and reporting
requirements. In order for a foreign individual to qualify as an
exempt recipient, however, he or she must submit a signed
Form W-8BEN, Certificate of Foreign Status of
Beneficial Owner for United States Tax Withholding. Backup
withholding is not an additional tax. Generally, any amounts
withheld under the backup withholding rules described above can
be refunded or credited against a holders United States
federal income tax liability, if any, provided that the required
information is furnished to the United States Internal Revenue
Service in a timely manner.
The foregoing discussion of certain material United States
income tax consequences is included for general information
purposes only and is not intended to be, and should not be
construed as, legal or tax advice to any holder of shares of our
common stock. We urge you to consult your own tax advisor to
determine the particular tax consequences of the merger to you
(including the application and effect of any state, local or
foreign income and other tax laws).
THE
AGREEMENT AND PLAN OF MERGER
The following is a summary of the material terms of the
merger agreement. However, because the merger agreement is the
primary legal document that governs the merger, you should
carefully read the complete text of the merger agreement for its
precise legal terms and other information that may be important
to you. The merger agreement is attached as Exhibit A
to this proxy statement to provide investors with
information concerning the terms of the merger agreement.
Information on our company is available in our Annual Reports on
Form 10-K,
our quarterly reports on
Form 10-Q
and other documents filed with the Securities and Exchange
Commission.
The merger agreement has been included to provide you with
information regarding its terms, and we recommend that you read
carefully the merger agreement in its entirety. Except for its
status as a contractual document that establishes and governs
the legal relations among the parties thereto with respect to
the merger, we do not intend for its text to be a source of
factual, business or operational information about Ryans.
The merger agreement contains representations, warranties and
covenants that are qualified by information in the disclosure
letter referenced in the merger agreement that Ryans
delivered to Buffets in connection with the execution of the
merger agreement. The assertions embodied in representations and
warranties that Ryans made to Buffets are qualified by
information in the disclosure letter contained in a company
disclosure letter that it provided to Buffets in connection with
signing the merger agreements. Representations and warranties
may be used as a tool to allocate risks between the respective
parties to the merger agreement, including where the parties do
not have complete knowledge of all facts, instead of
establishing such matters as facts. Furthermore, the
representations and warranties may be subject to different
standards of materiality applicable to the contracting parties,
which may differ from what may be viewed as material to
shareholders. While we do not believe that the disclosure letter
contains non-public information that applicable securities laws
require us to publicly disclose (other than information that has
already been disclosed or is disclosed in this proxy statement),
the disclosure letter does contain information that modifies,
qualifies and creates exceptions to the merger agreement,
including to the representations and warranties of Ryans.
Accordingly, you should not rely on the representations and
warranties as characterizations of the actual state of facts,
because (i) they were only made as of the date of the
merger agreement or a prior, specified date, (ii) in some
cases they are subject to materiality, material adverse effect
or knowledge qualifiers, and (iii) they are modified in
important part by the confidential disclosure letter. The
confidential disclosure letter contains information that has
been included in Ryans prior public disclosures, as well
as non-public information. Moreover, information concerning the
subject matter of the representations and warranties may have
changed since the date of the merger agreement, which subsequent
information may or may not be fully reflected in Ryans
public disclosures. Information about Ryans can be found
elsewhere in this proxy statement and in such other public
filings we make with the Securities and Exchange Commission,
which are available without charge at www.sec.gov.
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Form of
the Merger
The merger agreement provides that at the effective time of the
merger, Merger Sub will be merged with and into Ryans. As
a result of the merger, the separate corporate existence of
Merger Sub will cease and Ryans will continue as the
surviving corporation following the merger as a wholly-owned
indirect subsidiary of Buffets. Ryans, as the surviving
corporation, will succeed to all the properties, rights,
privileges, powers, franchises and assets, and all debts,
liabilities and duties of Ryans and Merger Sub.
Effective
Time of the Merger
The merger agreement provides that the merger will become
effective when we file articles of merger with the Secretary of
State of the State of South Carolina, or at such later time that
we and Buffets specify in the articles of merger. We will file
the articles of merger at the closing of the merger, which will
take place no later than the third business day following the
satisfaction or the waiver of the conditions set forth in the
merger agreement or at such other time as we and Buffets agree
in writing.
Directors
and Officers
The directors and officers of Merger Sub at the effective time
of the merger will be the initial directors and officers of the
surviving corporation. The directors and officers will serve in
accordance with the articles of incorporation and bylaws of the
surviving corporation.
Merger
Consideration
The merger agreement provides that each share of common stock of
Ryans (other than shares owned by Ryans, Buffets or
Merger Sub, or any of their respective subsidiaries) issued and
outstanding immediately prior to the effective time will be
cancelled and automatically converted into the right to receive
an amount in cash equal to $16.25, without interest, less any
required withholding taxes. Each share of common stock of
Ryans that is owned by Ryans, Buffets or Merger Sub,
or any of their respective subsidiaries, will be cancelled and
extinguished at the effective time of the merger and no
consideration will be delivered in exchange for those shares.
Payment
Procedures
Prior to the effective time, Buffets will appoint a paying agent
approved by us. Immediately prior to the effective time, Buffets
will deposit with the paying agent an amount in cash sufficient
to provide for the payment of the aggregate merger
consideration. No later than three business days following the
effective time, Buffets will instruct the paying agent to mail
to each shareholder a letter of transmittal and instructions
explaining how to surrender stock certificates or execute an
appropriate instrument of transfer of your shares of Ryans
common stock in exchange for the merger consideration. Upon
surrender of a certificate or appropriate instrument of transfer
representing shares of Ryans common stock to the paying
agent, together with a duly executed and completed letter of
transmittal and all other documents required by the paying
agent, each former shareholder of Ryans will be entitled
to receive $16.25 in cash, without interest, for each share of
Ryans common stock so surrendered.
Effect on
Stock Options, Stock-Based Awards and Employee Stock Purchase
Plan
All unvested outstanding options to acquire shares of
Ryans common stock were granted under the Ryans
Family Steak Houses, Inc. 2002 Stock Option Plan, which provides
for automatic vesting in the event of certain change of control
transactions, including the merger with Merger Sub. Accordingly,
all unvested outstanding options to acquire shares of
Ryans stock will become fully vested immediately prior to
the effective time of the merger and, pursuant to the merger
agreement, will be cancelled at the effective time of the
merger. The merger agreement provides that each outstanding
option to acquire shares of Ryans common stock granted
under the Ryans 1987 Stock Option Plan, the Ryans
Family Steak Houses, Inc. 1991 Stock Option Plan, the
Ryans Family Steak Houses, Inc. 1998 Stock Option Plan and
the Ryans Family Steak Houses, Inc. 2002 Stock Option Plan
will be cancelled at the effective time of the merger. Each
option holder
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will have the right to receive, within five business days of the
effective time of the merger, a cash payment, without interest
(less any required withholding taxes) equal to the product of
(1) the excess, if any, of $16.25 over the applicable
exercise price per share of the option and (2) the number
of shares of common stock of Ryans issuable upon exercise
of the option.
The merger agreement provides that our Employee Stock Purchase
Plan is to be terminated immediately following the purchases of
Ryans common stock on the day prior to the day on which
the effective time of the merger occurs and no new offering
period (as defined under the plan) will commence following the
date of the merger agreement. Under the merger agreement,
participants in the plan may not increase their payroll
deductions or purchase elections from those in effect as of the
date of the merger agreement, and each participants
outstanding right to purchase shares of Ryans common stock
under the plan terminated on the day after the date of the
merger agreement, except that all amounts allocated to each
participants account under the plan on that date will be
used to purchase whole shares of Ryans common stock at the
applicable price determined under the plan for the then
outstanding offering periods using that date as the final
purchase date for each offering period.
Representations
and Warranties
The merger agreement contains representations and warranties
made by Ryans, including, but not limited to,
representations and warranties relating to:
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corporate organization, authority to conduct business and
standing;
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capitalization;
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corporate power and authority to enter into and perform our
obligations under, and enforceability of, the merger agreement;
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voting standard required for shareholder approval of the merger;
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conflicts or violations under charter documents, contracts,
instruments or laws, required consents or approvals and creation
or imposition of any liens;
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reports, proxy statements and financial statements filed with
the Securities and Exchange Commission, the accuracy of the
information in those documents, internal control over financial
reporting, disclosure controls and procedures and required
certifications with respect thereto;
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absence of undisclosed liabilities;
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absence of certain events and changes;
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litigation matters and compliance with laws;
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material contracts and performance thereunder;
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tax matters;
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employee benefit matters;
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environmental matters;
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owned and leased real property;
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intellectual property matters;
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labor matters;
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amendment of our rights agreement;
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applicability of certain takeover laws and our satisfaction of
the requirements under those laws;
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insurance;
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brokers and finders fees; and
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receipt of an opinion from our financial advisor.
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Many of the above representations and warranties are qualified
by a material adverse effect standard. A material adverse effect
for purposes of our representations and warranties means any
event, circumstance, condition, change, development or effect
that, individually or in the aggregate, would have a material
adverse effect on the business, financial condition, assets,
liabilities, operations or results of operations of us and our
subsidiaries taken as a whole, or on our ability to consummate
the merger and perform our obligations under the merger
agreement.
In determining whether a material adverse effect has occurred,
none of the following are taken into account:
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conditions relating to financial, credit or securities markets
or economic conditions in general;
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conditions relating to changes to laws or applicable accounting
regulations or principles, or relating to the restaurant
industry generally, to the extent that these conditions do not
materially, disproportionately impact Ryans and its
subsidiaries taken as a whole relative to other companies in the
restaurant industry;
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changes in Ryans stock price or trading volume or any
failure by Ryans to meet revenue or earnings projections,
in each case, in and of itself (although the facts or
occurrences giving rise to or contributing to a change in
Ryans stock price or trading volume or a failure to meet
projections may be taken into account to determine whether there
has been a material adverse effect); or
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the announcement, pendency or consummation of the merger.
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The merger agreement contains representations and warranties
made by Buffets and Merger Sub including, but not limited to,
representations and warranties relating to:
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corporate organization, authority to conduct business and
standing;
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corporate power and authority to enter into and perform their
respective obligations under, and enforceability of, the merger
agreement;
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conflicts or violations under charter documents or laws, and
required consents or approvals;
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financing capability, including the debt financing to enable
Buffets to perform its obligations under the merger agreement,
including payment of the merger consideration and amounts
payable in respect of stock options and other awards;
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information in this proxy statement supplied by Buffets or
Merger Sub expressly for inclusion herein;
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litigation matters; and
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absence of brokers and finders fees.
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The representations and warranties of the parties will expire at
the effective time of the merger.
Conduct
of Business Pending the Merger
From the date of the merger agreement until the effective time
or the termination of the merger agreement, unless Buffets
otherwise agrees in writing, Ryans and its subsidiaries
will:
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conduct their operations in accordance with their ordinary
course of business consistent with past practice; and
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use reasonable efforts to preserve intact their business
organization, keep available the services of their current
officers and employees, preserve the goodwill of those having
business relationships with them, preserve their relationships
with customers, creditors and suppliers, maintain their books,
accounts and records and comply in all material respects with
applicable laws.
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Ryans also agreed that, until the effective time of the
merger, Ryans will not, and will cause its subsidiaries
not to, take any of the following actions without the prior
written consent of Buffets:
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amend or propose to amend its articles of incorporation or
bylaws or file any certificate of designation or similar
instrument with respect to any authorized but unissued capital
stock;
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split, combine or reclassify any shares of its capital stock,
amend the terms of any outstanding securities or repurchase,
redeem or acquire any shares of capital stock;
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declare, pay or set aside any dividend or distribution other
than dividends payable by a wholly-owned subsidiary of
Ryans to Ryans or another wholly-owned subsidiary;
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authorize for issuance, issue, sell or grant any capital stock
or any options or other securities or rights to acquire capital
stock or which are exchangeable for or convertible into capital
stock other than in connection with the exercise of options
outstanding on the date of the merger agreement or in connection
with any offering period under the employee stock purchase plan
that has commenced prior to the date of the merger agreement, or
repurchase, redeem or otherwise acquire any shares of capital
stock or any other securities exercisable or exchangeable for or
convertible into capital stock;
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merge or consolidate, liquidate, dissolve, recapitalize or
reorganize, or create any new subsidiary;
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sell, lease, license, pledge, encumber or otherwise dispose of
any material assets or interests, except in the ordinary course
of business, consistent with past practice;
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acquire any assets other than in the ordinary course of
business, consistent with past practice;
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acquire any equity interest in any entity or any business, or
enter into any joint venture, strategic alliance or other
similar arrangement with another entity, other than teaming or
other similar agreements entered into in the ordinary course of
business, consistent with past practice;
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incur, assume or guarantee any indebtedness (including the
issuance of debt securities) other than under Ryans
existing credit lines, intercompany indebtedness or in the
ordinary course of business, consistent with past practice;
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except as required by changes in law or GAAP, change any of
Ryans accounting principles or practices used as of
December 28, 2005 that would reasonably be expected to
materially affect the assets, liabilities, or results of
operation of Ryans or its subsidiaries;
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except in the ordinary course of business, consistent with past
practice, make or change any material tax election, settle or
compromise any tax liability involving a payment of more than
$1 million, change in any material respect any accounting
method in respect of taxes, file any amendment to a material tax
return, settle any claim or assessment in respect of taxes
involving a payment of more than $1 million, or consent to
any extension or waiver of the limitation period applicable to
any claim or assessment in respect of taxes;
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except as required under any existing agreement and other than
increases in cash compensation to employees who are not
directors or officers that are made in the ordinary course of
business consistent with past practice, grant any increase in
compensation, bonus, severance, pension or other benefit plan;
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except as required by the terms of any employment-related
agreement grant any severance or termination pay except to
employees who are not officers or directors in amounts
consistent with Ryans policies and past practices;
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make any individual capital expenditure, addition or improvement
in excess of $100,000 or $1,000,000 in the aggregate;
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enter into or terminate, renew or amend in any material respect
any contract that is or would be expected to be material to
Ryans and its subsidiaries taken as a whole or that could
require payments of more than $1 million in the aggregate
over its term, except for entering into certain types of
purchaser contracts for food or beverage supplies;
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waive, release or assign any material rights, claims or benefits
under any material agreement;
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engage in any reportable transaction, including any
listed transaction within the meaning of
Section 6011 of the Internal Revenue Code of 1986 or any
other applicable law;
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waive or release any of the material rights of Ryans or
its subsidiaries, taken as a whole, or pay, discharge or satisfy
any material claims, liabilities or obligations before due
except for the payment, discharge and satisfaction in the
ordinary course of business of liabilities reflected on or
reserved for in Ryans financial statements that are
included in its SEC filings or otherwise incurred in the
ordinary course of business, consistent with past practice;
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settle or compromise any pending or threatened suit, action or
proceeding involving a settlement payment by Ryans or any
of its subsidiaries in excess of $250,000 or requiring the
surviving corporation to take or refrain from taking any
material action after the effective time of the merger;
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take certain actions relating to rights to any material
intellectual property owned or licensed by Ryans outside
the ordinary course of business consistent with past
practice; or
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agree, resolve or commit to take any action described above.
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Buffets
Financing
In the merger agreement, Buffets and Merger Sub commit to use
their commercially reasonable efforts to maintain their
financing commitment letters from Drawbridge Special Opportunity
Fund, LLC and from Credit Suisse Securities (USA) LLC and UBS
Securities LLC providing for debt financing in an aggregate
principal amount of up to $1.5 billion for the completion
of the merger and other costs such as transaction costs relating
to the merger (the commitment letters) and to enter
into definitive financing agreements with respect to the
financing contemplated by the commitment letters. In the event
the committed amounts become unavailable for any reason, Buffets
and Merger Sub will use their respective commercially reasonable
efforts to arrange alternative financing on terms and conditions
that are not less favorable in substance to Buffets and Merger
Sub to those contained in the commitment letters.
Other
Proposals
In the merger agreement, we have agreed to certain limitations
on our ability to take action with respect to other acquisition
proposals prior to the effective time of the merger.
Notwithstanding these limitations, we may respond to certain
proposals prior to the adoption of the merger agreement and
approval of the merger by our shareholders. The merger agreement
provides that:
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the term acquisition proposal means any inquiry,
proposal, indication of interest or offer from any person or
other entity other than Buffets or its affiliates relating to an
acquisition or sale of 20% or more of Ryans consolidated
assets or 20% or more of Ryans or its subsidiaries
equity securities, a tender or exchange offer that would result
in any one person or entity beneficially owning 20% or more of
Ryans or any of its subsidiaries equity securities,
or a merger, consolidation, business combination,
reorganization, recapitalization, liquidation, dissolution or
other similar transaction other than the merger of Ryans
and Merger Sub contemplated by the merger agreement;
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the term superior proposal means an unsolicited,
bona fide, written acquisition proposal not received in
violation of the following paragraph for at least a majority of
Ryans outstanding common stock or all or substantially all
or a majority of its consolidated assets which is fully financed
or for which financing is reasonably likely to be available (but
excluding a sale-leaseback or similar transaction) and on terms
that Ryans board of directors determines in good faith
would result in a transaction that is more favorable to
Ryans shareholders from a financial point of view than the
merger with Merger Sub and is reasonably capable of being
completed according to its terms; and
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36
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prior to the effective time, Ryans and its representatives
may not:
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solicit, initiate, facilitate or knowingly encourage the making
or submission of any acquisition proposal;
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enter into any letter of intent, agreement, arrangement or
understanding with respect to any acquisition proposal, or agree
to approve or endorse any acquisition proposal or enter into any
agreement, arrangement or understanding that would require
Ryans to abandon, terminate or fail to consummate the
merger;
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initiate or participate in any discussions or negotiations or
furnish or disclose information in furtherance of a proposal
that constitutes or could lead to an acquisition
proposal; or
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facilitate any inquiries or the making or the submission of a
proposal that constitutes or could reasonably be expected to
lead to an acquisition proposal.
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Prior to the adoption of the merger agreement and approval of
the merger by our shareholders, Ryans is permitted to
engage in discussions and negotiations with respect to an
unsolicited, bona fide acquisition proposal and furnish
information about itself and its subsidiaries to the party
making such a proposal pursuant to a customary confidentiality
agreement that is at least as restrictive on the other party as
the confidentiality agreement between Ryans and Buffets if:
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Ryans has not violated its obligations as described in the
preceding paragraph; and
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Ryans board of directors determines in good faith, after
consulting with its financial advisor and outside legal counsel,
that the acquisition proposal is, or is reasonably likely to
result in, a superior proposal and that failure to provide such
information, or engage in such discussions or negotiations
regarding the acquisition proposal would be inconsistent with
the fiduciary duties of Ryans board of directors to
Ryans shareholders under applicable law.
|
In addition, the merger agreement provides that Ryans will:
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notify Buffets of any acquisition proposal or any request for
information or inquiry that could reasonably be expected to lead
to an acquisition proposal within 48 hours of receiving
such proposal or inquiry, which notification will include a copy
or summary of the acquisition proposal or inquiry, including the
identity of the third party making such acquisition proposal or
inquiry;
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keep Buffets advised on a reasonably current basis as to the
status and content of any discussions or negotiations involving
any acquisition proposal or inquiry and promptly make available
to Buffets any non-public information furnished in connection
with such acquisition proposal or inquiry that has not been
previously provided to Buffets; and
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notify Buffets in writing promptly after any determination by
Ryans board of directors that an acquisition proposal is,
or would reasonably be likely to result in or lead to a superior
proposal.
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Neither Ryans board of directors nor any committee thereof
may withdraw, modify or change, or propose publicly to withdraw,
modify or change, its recommendation regarding the merger in a
manner adverse to Buffets, Merger Sub or the transactions
contemplated by the merger agreement unless, prior to obtaining
shareholder approval, Ryans board of directors determines
in good faith, after consultation with its outside legal
counsel, that failing to do so would be inconsistent with the
fiduciary duties of Ryans board of directors to
Ryans shareholders. If Ryans board of directors
withdraws, modifies or changes, or proposes publicly to
withdraw, modify or change, its recommendation in response to a
superior proposal, Ryans has agreed to give Buffets three
business days written notice of the material terms and
provisions of the superior proposal and to negotiate in good
faith with Buffets during that period to amend the merger
agreement so that the acquisition proposal is no longer a
superior proposal. If at the end of such three business day
period, Ryans board of directors continues to believe in
good faith, after receiving the advice of its outside legal
counsel and financial advisors, that the acquisition proposal
continues to be a superior proposal, and Ryans satisfies
its obligations to pay any termination fee and make any expense
reimbursement, then it may withdraw, modify or change its
37
recommendation by written notice to Buffets and terminate the
merger agreement, subject to payment of a termination fee
described in Termination of the Merger Agreement
beginning on page .
Employee
Benefits
The merger agreement provides that Buffets will, for a period
beginning on the date the merger is completed and ending on
December 31, 2006, provide Ryans employees with
compensation and other benefits that are no less favorable than
the compensation and benefits provided to them immediately prior
to the closing of the merger or, at Buffets election,
substantially comparable to the employee benefits provided to
similarly situated employees of Buffets.
Other
Covenants
The merger agreement contains a number of mutual covenants of
Ryans and Buffets, including covenants relating to:
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actions relating to anti-takeover statutes;
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obtaining all necessary governmental approvals and consents;
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preparing and filing this proxy statement, the inclusion in the
proxy statement of the recommendation of Ryans board of
directors that Ryans shareholders vote in favor of
adoption of the merger agreement and approval of the merger and
the accuracy of the information furnished to each other for
inclusion in the proxy statement;
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making public announcements in connection with the merger;
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notifying the other party of certain events and supplementing
information in the confidential disclosure letter delivered in
connection with the merger agreement;
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indemnification, exculpation, advancement of expenses and
director and officer liability insurance; and
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maintaining the confidentiality of the non-public documents
furnished to each other.
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Conditions
to the Merger
The respective obligations of each party to complete the merger
are subject to the satisfaction or written waiver of the
following conditions:
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Ryans shareholders must adopt the merger agreement and
approve the merger;
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there must be no order, decree, ruling, judgment or injunction
by any governmental authority of competent jurisdiction making
illegal or preventing the merger substantially on the terms
contemplated in the merger agreement; and
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the waiting period under the HSR Act must have expired or been
terminated.
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Ryans obligations to complete the merger are also subject
to satisfaction or written waiver of the following conditions:
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the representations and warranties of Buffets and Merger Sub in
the merger agreement, regardless of any materiality or material
adverse effect qualification, must be true and correct in all
respects as of the date the merger closes (except for any
representations and warranties made as of a specified date,
which must only continue to be true as of such specified date),
except for any failures of such representations and warranties
to be true and correct as would not, individually or in the
aggregate, reasonably be expected to have a material adverse
effect on Buffets;
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Buffets and Merger Sub must have performed in all material
respects all of their respective obligations and have complied
in all material respects with all of their respective covenants
required to be performed or complied with by it under the merger
agreement at or prior to the effective time of the
merger; and
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38
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Buffets must have delivered to Ryans a certificate, dated
the date of closing and signed by an executive officer,
certifying the satisfaction of the conditions set forth above.
|
Buffets and Merger Subs obligations to complete the
merger are also subject to satisfaction or written waiver of the
following conditions:
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the representations and warranties of Ryans set forth in
the merger agreement, regardless of any materiality or material
adverse effect qualification, must be true and correct in all
respects as of the date the merger closes (except for any
representations and warranties made as of a specified date,
which must only continue to be true as of such specified date),
except for any failures of such representations and warranties
to be true and correct as would not individually or in the
aggregate reasonably be expected to have a material adverse
effect on Ryans;
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Ryans must have performed or complied with in all material
respects all obligations required to be performed or complied
with by it under the merger agreement at or prior to the
effective time of the merger;
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there must have been no material adverse effect with respect to
Ryans since the date of the merger agreement;
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Ryans must have delivered to Buffets a certificate, dated
the date of closing and signed by an executive officer,
certifying the satisfaction of the conditions set forth above;
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Ryans or its subsidiaries the must have received the
proceeds of the sale-leaseback transaction with Drawbridge
immediately prior to the merger effective time, and the Buffets
and Merger Sub must have received the other proceeds of the
financing contemplated by the commitment letters, in each case
on terms that are no less favorable in substance to Buffets,
Merger Sub or the surviving corporation than those set forth in
the commitment letters or definitive financing agreements, as
the case may be; and
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Ryans shall have delivered an affidavit meeting the
requirements of Section 1445(b)(3) of the Code.
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Termination
of the Merger Agreement
The merger agreement may be terminated at any time prior to the
effective time, whether before or, under certain circumstances,
after the adoption of the merger agreement and the approval of
the merger by the shareholders by:
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mutual written consent of Buffets and Ryans;
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either Buffets or Ryans if the merger has not been
completed by January 15, 2007, unless the failure to
complete the merger by that date is due to the terminating
partys material breach of the merger agreement;
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either Buffets or Ryans if there are any laws that
prohibit the merger, or if a final and non-appealable order,
decree, ruling, judgment or injunction has been entered by a
governmental authority permanently restraining or otherwise
prohibiting the merger and the terminating party has made
reasonable efforts to resist, resolve or remove such law, order,
decree, ruling, judgment or injunction;
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either Buffets or Ryans if shareholder approval for the
merger proposal is not obtained unless that failure was caused
by a material breach of the merger agreement by the terminating
party;
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either Buffets or Ryans if any one of the following has
occurred: (i) the waiting period applicable to the
consummation of the merger under the HSR Act has not expired or
been terminated by January 15, 2007; (ii) any
governmental authority files a complaint or otherwise commences
a proceeding seeking an injunction or order enjoining the
consummation of the merger or restraining or prohibiting the
operation of the business of Buffets or any of its subsidiaries
after the effective time; or (iii) Buffets receives notice
that either the United States Federal Trade Commission or the
United States Department of Justice has authorized its staff to
file a complaint or seek a preliminary injunction enjoining
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39
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consummation of the merger; provided that in each case the
terminating party has used its reasonable efforts to resist,
resolve or remove the impediments to the closing of the merger;
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either Buffets or Ryans if the non-terminating party fails
to satisfy its obligations relating to representations and
warranties described in the Conditions to the Merger
section beginning on page or if the
non-terminating party materially breaches or fails to perform
any of its covenants or obligations under the merger agreement
and in either case does not cure such breach, default or failure
in all material respects within 30 days after receiving
written notice;
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Ryans if prior to obtaining shareholder approval of the
merger, the Ryans board of directors authorizes
Ryans to enter into a definitive agreement for a superior
proposal and Ryans enters into a definitive agreement
immediately following the termination of the merger agreement,
provided that concurrent with and as a condition to termination
of the merger agreement Ryans pays the required
termination fee and expense reimbursement to Buffets;
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Ryans if either of the commitment letters expires or
terminates prior to January 15, 2007 (or is amended, such
that the total amount of the financing is not sufficient to
consummate the merger), and Buffets has not secured a
replacement commitment letter (on terms that are no less
favorable, in substance, to Buffets and Merger Sub than the
expired or terminated commitment letter or letters) within
30 days after the date of such expiration, termination or
amendment;
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Buffets if Ryans board of directors withdraws or adversely
modifies its recommendation to approve the merger or if the
board of directors fails to reconfirm its recommendation to
approve the merger within 10 business days of a request to do so
following notice of a public announcement of Ryans receipt
of an acquisition proposal or any material change thereto or a
public announcement of any transaction to acquire a material
portion of Ryans common stock by a person or entity other
than a party to the merger agreement; or
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Buffets if Ryans enters into a definitive agreement with
respect to any acquisition proposal or approves or recommends
any acquisition proposal.
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Termination
Fees
Ryans must reimburse Buffets for
out-of-pocket
expenses up to $10,000,000 and pay to Buffets a termination fee
of $25,000,000 (less the amount of any expenses Ryans has
reimbursed to Buffets) upon certain events, including if:
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Ryans terminates the merger agreement to accept a superior
proposal;
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Buffets terminates the merger agreement after:
(i) Ryans board of directors withdraws or adversely
modifies its recommendation in favor of the merger agreement,
(ii) Ryans board of directors fails to reconfirm its
recommendation to approve the merger within 10 business days
after a request from Buffets to do so under circumstances giving
Buffets a right to terminate the merger agreement as described
above, or (iii) Ryans board of directors approves or
recommends an acquisition proposal or enters into a definitive
agreement with respect to an acquisition proposal; or
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both the merger agreement is terminated because
(i) the closing does not occur on or prior to
January 15, 2007, (ii) Ryans shareholders do not
adopt the merger agreement, (iii) Ryans cannot
satisfy its obligations relating to representations and
warranties described beginning on page
in the Conditions to the Merger section or
(iv) Ryans breaches any of its covenants which
default or breach is not cured within 30 days after notice
thereof from Buffets and, prior to the time of
termination, there exists an acquisition proposal, and
Ryans accepts a written offer for, or otherwise enters
into an agreement to consummate, or consummates, an acquisition
proposal (for these purposes, acquisition proposal has a 50%
threshold instead of a 20% threshold) within one year of
termination of the merger agreement. No fee will be payable by
Ryans in these circumstances if a termination fee is
payable by Buffets as described below.
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40
Buffets will pay to Ryans a termination fee of $7,500,000
if:
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Ryans terminates the merger agreement after the expiration
or termination of Buffets commitment letters without
securing a replacement; or
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all conditions to the closing of the merger are satisfied (other
than Buffets financing-relating condition described
beginning on page and conditions that,
by their nature, are to be and are capable of being satisfied at
the merger closing, and the merger agreement is terminated by
either party because the merger has not been completed by
January 15, 2007.
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No termination fee will be payable by Buffets if Ryans has
breached in any material respect any of its representations,
warranties or covenants and does not cure such breach, default
or failure in all material respects within 30 days after
receiving written notice or if there has been a material adverse
effect with respect to Ryans.
Other
Fees and Expenses
Except as described above, all fees and expenses incurred in
connection with the transactions contemplated by the merger
agreement will be paid by the party incurring such fees or
expenses, whether or not the merger is consummated.
Amendment
The merger agreement may not be amended except by action taken
or authorized by the board of directors of each of Ryans,
Buffets and Merger Sub in writing, provided that after adoption
of the merger agreement by our shareholders, no amendment may be
made without the further approval of our shareholders if and to
the extent such approval is required under applicable law or in
accordance with the rules of The Nasdaq National Market.
MARKET
PRICE AND DIVIDEND DATA
Ryans common stock is listed on The Nasdaq Stock Market
under the symbol RYAN. The following tables sets
forth the high and low bid prices of our common stock for the
indicated part of our current fiscal year and for our 2005 and
2004 fiscal years, as reported on The Nasdaq National Market.
These quotations represent prices between dealers and do not
include retail mark-ups, mark-downs or other fees or commissions
and may not represent actual transactions.
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First
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Second
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Third
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Fourth
|
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Quarter
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Quarter
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Quarter
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Quarter
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2006
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High
|
|
|
13.88
|
|
|
|
14.50
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|
|
|
|
|
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Low
|
|
|
11.46
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|
|
|
10.95
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|
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|
2005
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|
|
|
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High
|
|
|
15.48
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|
|
|
14.76
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|
|
|
14.58
|
|
|
|
12.41
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Low
|
|
|
13.05
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|
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|
12.18
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|
|
11.66
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|
10.04
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2004
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High
|
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|
17.60
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|
|
|
18.82
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|
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|
16.69
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|
|
15.76
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Low
|
|
|
14.96
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15.44
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|
|
13.55
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|
13.39
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On July 24, 2006, which was the last trading day before we
made a public announcement about the merger, the closing price
of Ryans common stock on The National Stock Market was
$11.22 per share. On August , 2006,
the latest practicable date before the date of this proxy
statement, the closing price of our common stock was
$ .
If the merger is consummated, our common stock will be delisted
from The Nasdaq National Market, there will be no further public
market for shares of our common stock, and each share of our
common stock will be cancelled and converted into the right to
receive $16.25 in cash, without interest. We have never paid
cash dividends on our common stock.
41
SECURITY
OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS
The following table sets forth certain information with respect
to the beneficial ownership of shares of our common stock as of
August , 2006, by each of our directors,
executive officers, all executive officers and directors as a
group and the beneficial owner of 5% or more of our outstanding
common stock. Unless otherwise specified, the address for each
holder is 405 Lancaster Avenue, Greer, South Carolina 29650.
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Amount of
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Percent of
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Name and Address of Beneficial Owner
|
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Beneficial Ownership
|
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Class
|
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Charles D. Way
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|
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[261,076]
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|
|
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%
|
G. Edwin McCranie
|
|
|
[240,651]
|
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%
|
Fred T. Grant, Jr.
|
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[152,497]
|
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|
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%
|
Janet J. Gleitz
|
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|
[72,400]
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|
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%
|
James R. Hart
|
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|
[147,575]
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%
|
Michael R. Kirk
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|
[72,500]
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%
|
Richard D. Sieradzki
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|
[21,065]
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%
|
Edward R. Tallon, Sr.
|
|
|
[19,661]
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%
|
Ilene T. Turbow
|
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|
[101,883]
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%
|
Barry L. Edwards
|
|
|
[66,096]
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%
|
Brian S. MacKenzie
|
|
|
[81,500]
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|
|
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%
|
Harold K. Roberts, Jr.
|
|
|
[26,500]
|
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|
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%
|
James M. Shoemaker, Jr.
|
|
|
[71,844]
|
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|
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%
|
Vivian A. Wong
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[31,000]
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%
|
All executive officers and
directors as a group (14 persons)
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[1,366,248]
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%
|
FMR
Corp.(1)
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|
|
[4,056,700]
|
|
|
|
|
%
|
Edward C. Johnson
3d(1)
82 Devonshire Street
Boston, MA 02109
|
|
|
|
|
|
|
|
|
Private Capital Management,
Inc.(2)
|
|
|
[3,401,815]
|
|
|
|
|
%
|
Bruce S.
Sherman(2)
Gregg J.
Powers(2)
8889 Pelican Bay Boulevard
Naples, FL 34108
|
|
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|
|
|
|
|
|
Barclays Global Investors,
NA(3)
|
|
|
[3,210,196]
|
|
|
|
|
%
|
Barclays Global Fund
Advisors(3)
45 Fremont Street
San Francisco, CA 94105
|
|
|
|
|
|
|
|
|
Dimensional Fund Advisors,
Inc.(4)
|
|
|
[2,599,374]
|
|
|
|
|
%
|
1299 Ocean Avenue,
11th Floor
Santa Monica, CA 90401
|
|
|
|
|
|
|
|
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|
(1) |
|
FMR Corp. (FMR), together with Edward C. Johnson 3d,
Chairman of FMR, and Abigail P. Johnson, a director of FMR,
reported February 14, 2006 that FMRs wholly-owned
subsidiary, Fidelity Management & Research Company
(Fidelity) is the beneficial owner of
4,056,700 shares of common stock as a result of acting as
investment adviser to various investment companies. Fidelity
Management Trust Company, a wholly-owned subsidiary of FMR, is
the beneficial owner of 133,800 shares of common stock as a
result of its serving as investment manager of the institutional
account, and each of Mr. Johnson and FMR, through its
control of Fidelity Management Trust Company, has sole
dispositive power and sole voting power over these shares.
Fidelity Low Priced Stock Fund, one of the investment companies
for which Fidelity serves as investment adviser, owns
3,922,900 shares of Ryans common stock (the
FLPSF Shares). None of FMR, Mr. Johnson, nor
Fidelity has sole voting power as to any of the FLPSF Shares,
which power resides with the Funds Board of Trustees. Each
of FMR, Mr. Johnson and the funds has sole |
42
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power to dispose of the FLPSF Shares. Members of the Johnson
family are the predominant owners of Class B shares of
common stock of FMR (representing approximately 49% of the
voting power of FMR Corp.) and may be deemed to form a control
group with respect to FMR. |
|
(2) |
|
Private Capital Management, L.P. (PCM) reported on
June 12, 2006 that it has shared voting and dispositive
power as to 3,401,815 shares of common stock. Bruce S.
Sherman, Chief Executive Officer of PCM, and Gregg J. Powers,
President of PCM, each has shared voting and dispositive power
as to these shares of Ryans common stock owned by
PCMs clients and managed by PCM, but disclaims beneficial
ownership of these shares and disclaim the existence of a group. |
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(3) |
|
Barclays Global Investors, NA (Barclays Investors),
together with Barclays Global Fund Advisors and a number of
other Barclays entities reported on February 10, 2006 that
they have an aggregate beneficial ownership of
3,210,196 shares of common stock. Of these, Barclays
Investors has sole voting power with respect to
1,795,008 shares and sole dispositive power with respect to
2,166,383 shares, and Barclays Global Fund Advisors
has sole voting and dispositive power with respect to
1,043,813 shares. All shares reported are held by the
company in trust accounts for the economic benefit of the
beneficiaries of those accounts. |
|
(4) |
|
Dimensional Fund Advisors, Inc reported on February 1,
2006 that it beneficially owns 2,599,374 shares of common
stock, with sole voting and dispositive power as to all of those
shares. |
FUTURE
SHAREHOLDER PROPOSALS
We intend to hold an annual meeting in 2007 only if the merger
is not consummated. Any shareholder who wishes to present a
proposal at the 2007 Special Meeting of Shareholders, if such a
meeting is held, and have his or her proposal included in the
proxy statement and proxy card relating to that meeting must
deliver such proposal to Ryans no later than
October 30, 2006. The proposal must comply with the rules
of the SEC relating to shareholder proposals. With respect to a
shareholder proposal for the 2007 Special Meeting of
Shareholders that is not intended to be included in the proxy
materials relating to the meeting, the proposal must be received
by Ryans at least 45 days prior to the shareholders
meeting at which the proposal is to be presented. After that
date, the proposal will not be considered timely. Shareholders
may send their proposals to Ryans, Attention: Janet J.
Gleitz, Post Office Box 100, Greer, South Carolina 29652.
WHERE YOU
CAN FIND MORE INFORMATION
Ryans files annual, quarterly and current reports, proxy
statements and other information with the SEC under the
Securities Exchange Act of 1934, as amended. You may read and
copy this information at, or obtain copies of this information
by mail from, the SECs Public Reference Room, 100 F Street
N.E., Room 1024, Washington, D.C. 20549, at prescribed
rates. Please call the SEC at
1-800-SEC-0330
for further information about the public reference room.
The filings of Ryans with the SEC are also available to
the public from commercial document retrieval services and at
the web site maintained by the SEC at www.sec.gov. These
documents may also be obtained for free from Ryans by
directing a request to Ryans Restaurant Group, Inc.,
Investor Relations, Ryans Restaurant Group, Inc., Post
Office Box 100, Greer, South Carolina 29652 or at our
Investor Relations page on our corporate website at
www.ryans.com.
Incorporation
of Information by Reference
We are incorporating by reference information into
this proxy statement, meaning that we are disclosing important
information to you by referring you to another document filed
separately with the SEC. The information incorporated by
reference is considered to be part of this proxy statement,
except to the extent that the information is superseded by
information in this proxy statement.
This proxy statement incorporates by reference the information
contained in our Annual Report on
Form 10-K
for the year ended December 28, 2005. We also incorporate
by reference any documents filed by us pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Securities
Exchange Act of 1934 after the date of this
43
proxy statement and prior to the date of the special meeting.
The information contained in any of these documents will be
considered part of this proxy statement from the date these
documents are filed.
No persons have been authorized to give any information or to
make any representations other than those contained in this
proxy statement and, if given or made, such information or
representations must not be relied upon as having been
authorized by us or any other person. This proxy statement is
dated August , 2006. You should not
assume that the information contained in this proxy statement is
accurate as of any date other than that date, and the mailing of
this proxy statement to shareholders shall not create any
implication to the contrary.
If you have any questions about is proxy statement, the Special
Meeting or the merger or need assistance with the voting
procedures, you should contact our Secretary, Janet Gleitz, at
(864) 879-1000.
By Order of the Board of Directors,
Janet J. Gleitz
Secretary
Greer, South Carolina
August , 2006
44
Exhibit
A
AGREEMENT AND PLAN OF MERGER
dated
July 24, 2006
by and among
RYANS RESTAURANT GROUP, INC.,
BUFFETS, INC.
and
BUFFETS SOUTHEAST, INC.
TABLE OF CONTENTS
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ARTICLE I THE MERGER |
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A-1 |
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Section 1.1 The Merger |
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A-1 |
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Section 1.2 The Closing |
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A-1 |
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Section 1.3 Effective Time |
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A-2 |
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Section 1.4 Effects of the Merger |
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A-2 |
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Section 1.5 Organizational Documents |
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A-2 |
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Section 1.6 Directors and Officers |
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A-2 |
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Section 1.7 Conversion of Shares |
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A-2 |
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Section 1.8 Company Options and Equity-Based Awards |
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A-3 |
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Section 1.9 Employee Stock Purchase Plan |
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A-4 |
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Section 1.10 Adjustments |
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A-5 |
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ARTICLE II PAYMENT |
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A-5 |
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Section 2.1 Surrender of Certificates |
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A-5 |
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Section 2.2 Paying Agent; Certificate Surrender Procedures |
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A-5 |
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Section 2.3 Transfer Books |
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A-6 |
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Section 2.4 Termination of Payment Fund |
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A-6 |
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Section 2.5 Lost Certificates |
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A-7 |
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Section 2.6 No Rights as Stockholder |
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A-7 |
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Section 2.7 Withholding |
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A-7 |
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Section 2.8 Escheat |
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A-7 |
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ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY |
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A-7 |
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Section 3.1 Corporate Existence and Power |
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A-8 |
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Section 3.2 Capitalization |
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A-9 |
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Section 3.3 Authorization of Transaction |
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A-11 |
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Section 3.4 Vote Required |
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A-11 |
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Section 3.5 Noncontravention; Approvals |
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A-11 |
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Section 3.6 Company Filings; Information in the Proxy Statement |
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A-13 |
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Section 3.7 No Undisclosed Liabilities |
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A-14 |
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Section 3.8 Absence of Company Material Adverse Effect |
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A-14 |
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Section 3.9 Litigation and Legal Compliance |
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A-15 |
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Section 3.10 Contract Matters |
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A-15 |
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Section 3.11 Tax Matters |
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A-17 |
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Section 3.12 Employee Benefit Matters |
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A-19 |
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Section 3.13 Environmental Matters |
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A-21 |
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Section 3.14 Real Estate |
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A-22 |
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Section 3.15 Intellectual Property Matters |
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A-24 |
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Section 3.16 Labor Matters |
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A-26 |
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Section 3.17 Amendment to the Rights Agreement |
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A-27 |
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Section 3.18 Takeover Laws |
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A-27 |
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Section 3.19 Insurance |
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A-27 |
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A-i
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Section 3.20 Brokers Fees |
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A-28 |
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Section 3.21 Opinion of Financial Advisor |
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A-28 |
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ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE PARENT AND THE MERGER SUBSIDIARY |
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A-28 |
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Section 4.1 Corporate Existence and Power |
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A-28 |
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Section 4.2 Authorization of Transaction; Non-Contravention; Approvals |
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A-29 |
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Section 4.3 Financing Capability |
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A-29 |
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Section 4.4 Information in the Proxy Statement |
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A-30 |
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Section 4.5 Litigation |
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A-30 |
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Section 4.6 Brokers and Finders Fees |
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A-30 |
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ARTICLE V COVENANTS |
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A-31 |
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Section 5.1 General |
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A-31 |
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Section 5.2 Further Assurances |
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A-31 |
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Section 5.3 Interim Conduct of the Company |
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A-31 |
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Section 5.4 Control of Operations |
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A-35 |
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Section 5.5 Proxy Statement; Company Stockholders Meeting |
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A-35 |
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Section 5.6 Financing |
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A-36 |
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Section 5.7 Additional Reports |
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A-38 |
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Section 5.8 Acquisition Proposals |
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A-38 |
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Section 5.9 Indemnification |
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A-41 |
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Section 5.10 Public Announcements |
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A-42 |
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Section 5.11 Full Access |
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A-43 |
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Section 5.12 Actions Regarding Anti-takeover Statutes |
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A-43 |
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Section 5.13 Continued Benefit Plans |
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A-43 |
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Section 5.14 Standstill Provisions |
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A-44 |
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Section 5.15 Notification of Certain Matters; Supplemental Disclosure |
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A-44 |
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Section 5.16 Nonqualified Excess Plans |
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A-44 |
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Section 5.17 Title Insurance |
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A-45 |
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Section 5.18 Surveys |
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A-45 |
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ARTICLE VI CONDITIONS TO THE CONSUMMATION OF THE MERGER |
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A-45 |
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Section 6.1 Conditions to the Obligations of Each Party |
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A-45 |
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Section 6.2 Conditions to the Obligation of the Company |
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45 |
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Section 6.3 Conditions to the Obligation of
the Parent and the Merger
Subsidiary |
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A-46 |
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Section 6.4 Frustration of Closing Conditions |
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A-47 |
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ARTICLE VII TERMINATION |
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A-47 |
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Section 7.1 Termination |
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A-47 |
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Section 7.2 Effect of Termination |
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A-49 |
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Section 7.3 Fees and Expenses |
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A-49 |
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Section 7.4 Other Company Termination
Fee and Expense Reimbursement
Matters |
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A-50 |
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A-ii
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Section 7.5 Parent Termination Fee |
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A-51 |
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ARTICLE VIII MISCELLANEOUS |
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A-52 |
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Section 8.1 Nonsurvival of Representations |
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A-52 |
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Section 8.2 Specific Performance |
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A-52 |
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Section 8.3 Successors and Assigns |
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A-52 |
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Section 8.4 Amendment |
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A-52 |
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Section 8.5 Severability |
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A-52 |
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Section 8.6 Extension of Time; Waiver |
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A-52 |
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Section 8.7 Counterparts |
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A-53 |
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Section 8.8 Descriptive Headings |
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A-53 |
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Section 8.9 Notices |
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A-53 |
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Section 8.10 No ThirdParty Beneficiaries |
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A-54 |
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Section 8.11 Entire Agreement |
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A-54 |
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Section 8.12 Construction |
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A-54 |
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Section 8.13 Governing Law |
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A-55 |
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EXHIBITS
Exhibit A Form of Surviving Corporation Articles of Incorporation
Exhibit B Form of Surviving Corporation Bylaws
A-iii
TABLE OF DEFINED TERMS
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Defined Term |
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Section |
Acquisition Proposal
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Section 5.8(g) |
Affiliate
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Section 5.2 |
Agreement
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Preamble |
Agreement Date
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Preamble |
Antitrust Laws
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Section 3.5 |
Articles of Merger
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Section 1.3 |
Brookwood Engagement Letter
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Section 3.20 |
Certificate
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Section 2.1 |
Closing
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Section 1.2 |
Closing Date
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Section 1.2 |
Code
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Section 2.7 |
Commitment Letters
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Section 4.3(a) |
Company
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Preamble |
Company Common Stock
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Recitals |
Company Intellectual Property
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Section 3.15(a) |
Company Material Adverse Effect
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Section 3.1(b) |
Company Material Agreements
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Section 3.10(a) |
Company Options
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Section 1.8(a) |
Company Plans
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Section 3.12(a) |
Company Recommendation
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Section 5.5(a) |
Company Representatives
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Section 5.6(c) |
Company SEC Documents
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Section 3.6(a) |
Company Stock Plans
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Section 1.8(a) |
Company Stockholders
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Section 3.21 |
Company Stockholders Approval
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Section 3.4 |
Company Stockholders Meeting
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Section 5.5(a) |
Confidentiality Agreement
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Section 5.8(b) |
Construction Projects
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Section 3.14(i) |
Continuing Employees
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Section 5.13 |
Drawbridge
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Section 4.3(a) |
Effective Time
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Section 1.3 |
Employee Pension Benefit Plan
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Section 3.12(a) |
Employee Welfare Benefit Plan
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Section 3.12(a) |
Environmental Laws
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Section 3.13(b) |
ERISA
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Section 3.12(a) |
ERISA Affiliate
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Section 3.12(c) |
ESPP
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Section 1.9 |
Exchange Act
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Section 1.8(a) |
Expense Reimbursement
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Section 7.3(b) |
Financial Statements
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Section 3.6(b) |
Financing
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Section 4.3(a) |
Financing Agreements
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Section 5.6(a) |
GAAP
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Section 3.6(b) |
A-iv
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Defined Term |
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Section |
Governmental Authority
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Section 3.5 |
Hazardous Substance
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Section 3.13(c) |
HSR Act
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Section 3.5 |
Indemnified Parties
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Section 5.9(a) |
Intellectual Property
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Section 3.15(a) |
IP Licenses
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Section 3.15(a) |
Laws
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Section 3.9(b) |
Leased Real Property
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Section 3.14(b) |
Lien
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Section 3.2(e) |
Material Adverse Effect
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Section 3.1(b) |
Merger
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Section 1.1 |
Merger Consideration
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Section 1.7(a) |
Merger Subsidiary
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Preamble |
Nonqualified Excess Plan
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Section 5.16 |
Option Consideration
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Section 1.8(b) |
Owned Real Property
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Section 3.14(a) |
Parent
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Preamble |
Parent Material Adverse Effect
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Section 4.1 |
Paying Agent
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Section 2.2(a) |
Payment Fund
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Section 2.2(b) |
Permitted Leased Real Property Exceptions
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Section 3.14(b) |
Permitted Lien
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Section 3.14(a) |
Person
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Section 3.1(b) |
Proxy Statement
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Section 3.6(f) |
Real Property
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Section 3.14(c) |
Real Property Leases
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Section 3.14(b) |
Rights Agreement
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Section 3.17 |
SCBA
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Section 1.1 |
SC Code
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Section 3.3(c) |
SEC
|
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Section 5.6(e) |
Securities Act
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Section 3.6(a) |
Share
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Section 1.7(a) |
Shares
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Section 1.7(a) |
Software
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Section 3.15(a) |
SOXA
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Section 3.6(a) |
Space Leases
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Section 3.14(d) |
Structures
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Section 3.14(f) |
Subsidiary
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Section 1.7(b) |
Superior Proposal
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Section 5.8(h) |
Surviving Corporation
|
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Section 1.1 |
Tax
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Section 3.11(c) |
Taxes
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Section 3.11(c) |
Tax Returns
|
|
Section 3.11(a) |
Trade Secrets
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|
Section 3.15(a) |
Vested Options
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|
Section 1.8(a) |
WARN
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|
Section 3.16 |
A-v
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (this Agreement), dated July 24, 2006 (the
Agreement Date), by and among RYANS RESTAURANT GROUP, INC., a South Carolina corporation
(the Company), BUFFETS, INC., a Minnesota corporation (the Parent), and BUFFETS
SOUTHEAST, INC., a South Carolina corporation and a wholly-owned subsidiary of the Parent (the
Merger Subsidiary).
BACKGROUND
WHEREAS, the Board of Directors of each of the Parent, the Merger Subsidiary and the Company
deem it advisable and in the best interests of their respective companies and stockholders to
consummate the merger of the Merger Subsidiary with and into the Company, upon the terms and
subject to the conditions set forth herein, and have unanimously adopted resolutions adopting,
approving and declaring the advisability of this Agreement, the Merger and the other transactions
contemplated herein.
WHEREAS, pursuant to the Merger, shares of the Companys common stock, par value $1.00 per
share (the Company Common Stock), shall be, except as otherwise provided herein,
converted into the right to receive the Merger Consideration in the manner set forth herein, and
the Company shall become a wholly-owned subsidiary of the Parent.
NOW, THEREFORE, in consideration of the mutual agreements contained in this Agreement, and for
other good and valuable consideration, the value, receipt and sufficiency of which are
acknowledged, the parties agree as follows:
ARTICLE I
THE MERGER
Section 1.1 The Merger. Subject to the terms and conditions of this Agreement, at the Effective
Time the Merger Subsidiary shall be merged with and into the Company (the Merger) in
accordance with the provisions of the South Carolina Business Corporation Act of 1988, as amended
(the SCBA). Following the Merger, the Company shall continue as the surviving
corporation (the Surviving Corporation) and the separate corporate existence of the
Merger Subsidiary shall cease. As a result of the Merger, the Surviving Corporation shall become a
wholly-owned subsidiary of the Parent.
Section 1.2 The Closing. Unless this Agreement has been terminated pursuant to Section
7.1, the closing of the Merger (the Closing) shall take place on a date no later than
the third business day following satisfaction or waiver of the conditions set forth in Article
VI (the Closing Date), at the New York offices of Paul, Weiss, Rifkind, Wharton &
Garrison, LLP, unless another date or place is agreed to in writing by the parties.
A-1
Section 1.3 Effective Time. Upon the terms and subject to the satisfaction or waiver of the
conditions of this Agreement, at the Closing (or at such other time as the parties may agree) the
Company and the Merger Subsidiary shall (a) execute and file with the South Carolina Secretary of
State appropriate articles of merger (the Articles of Merger) in accordance with Section
33-11-105 of the SCBA and (b) make all other filings or recordings required by the SCBA in
connection with the Merger. The Merger shall be consummated upon the filing of the Articles of
Merger with the South Carolina Secretary of State or such later time as is agreed upon by the
parties and specified in the Articles of Merger. The time the Merger becomes effective in
accordance with the SCBA is referred to in this Agreement as the Effective Time.
Section 1.4 Effects of the Merger. The Merger shall have the effects set forth in this Agreement
and the relevant provisions of the SCBA.
Section 1.5 Organizational Documents. At the Effective Time, and without any further action on the
part of any Person, the articles of incorporation and bylaws of the Company shall be amended in
their entirety to read as set forth on Exhibits A and B, respectively, and thereby
shall become the articles of incorporation and bylaws of the Surviving Corporation until thereafter
amended in accordance with their respective terms and the SCBA.
Section 1.6 Directors and Officers. The directors and the officers of the Merger Subsidiary
immediately before the Effective Time shall at the Effective Time become the directors and officers
of the Surviving Corporation and shall hold office from the Effective Time in accordance with the
articles of incorporation and bylaws of the Surviving Corporation until their respective successors
are duly elected or appointed and qualified or until their earlier death, resignation or removal.
Section 1.7 Conversion of Shares. As of the Effective Time, by virtue of the Merger and without
any action on the part of the Company, the Parent or the Merger Subsidiary or their respective
stockholders:
(a) each share of Company Common Stock (a Share and collectively, the
Shares), other than Shares to be canceled in accordance with subsection (b) below, issued
and outstanding immediately prior to the Effective Time shall be converted into the right to
receive $16.25 in cash, without interest (the Merger Consideration), payable to the
holder thereof upon surrender of the Certificate formerly representing such Share in the manner
provided in Section 2.2. All such Shares, when so converted, shall no longer be
outstanding and shall automatically be canceled and shall cease to exist, and each holder of a
Certificate shall cease to have any rights with respect to such Shares, except the right to receive
the Merger Consideration, without interest, upon the surrender of such Certificate in accordance
with Section 2.2;
(b) each Share owned immediately prior to the Effective Time by the Company, the Parent, the
Merger Subsidiary or any of their respective Subsidiaries, shall be canceled and extinguished and
no consideration shall be delivered in exchange therefor. For purposes of this Section
1.7(b), Company Common Stock owned beneficially or held of record by any plan, program or
arrangement sponsored or maintained for the benefit of any current or former employee of the
Company, the Parent, the Merger Subsidiary or any of their respective Subsidiaries, shall not be
deemed to be held by the Company, the Parent, the Merger Subsidiary or any such Subsidiary,
regardless of whether the Company, the Parent, the Merger Subsidiary or any such
A-2
Subsidiary has the
power, directly or indirectly, to vote or control the disposition of such shares. For purposes of
this Agreement, the term Subsidiary means, with respect to any Person, any other Person
fifty percent (50%) or more of the outstanding voting ownership securities of which (or if there
are no such voting interests, fifty percent (50%) or more of the equity interests of which) are
owned, directly or indirectly, by such first Person; and
(c) Section 1.7 of the Company Disclosure Letter sets forth by employee each Share
that is pledged (or held in escrow) and any outstanding loan or indebtedness (including the
principal balance and interest) whether to the Company or third party lender in connection with the
Companys Operating Partner and District Partner programs, as of the Agreement Date, which list
shall be updated 2 business days prior to the Effective Time. Notwithstanding the foregoing, in
the case of any employee who has pledged Shares purchased by such employee in connection with the
Companys Operating Partner or District Partner programs as collateral for any outstanding loan or
indebtedness (whether to the Company or otherwise), the aggregate Merger Consideration, after
applicable withholding Taxes (as set forth in Section 2.7), shall be applied by the Surviving
Corporation to the repayment of such loan or indebtedness, and the employee shall be entitled to
receive any remaining Merger Consideration following such repayment; and
(d) each share of common stock, par value $0.01 per share, of the Merger Subsidiary issued and
outstanding immediately prior to the Effective Time will, by virtue of the Merger and without any
action on the part of the holder thereof, be converted into one share of common stock, par value
$0.01 per share, of the Surviving Corporation and shall constitute the only outstanding shares of
capital stock of the Surviving Corporation.
Section 1.8 Company Options and Equity-Based Awards.
(a) As soon as practicable following the Agreement Date, the Company shall take such actions
as shall be required: (i) to effectuate the cancellation of any outstanding but unvested options
(Unvested Options) and vested options (Vested Options, which term shall include
any option that would vest under its applicable Company Stock Plan (defined below) as a consequence
of the transaction contemplated by this Agreement) to purchase shares of Company Common Stock
(collectively, the Company Options) granted pursuant to the Ryans Family Steak Houses,
Inc. 1987
Stock Option Plan, the Ryans Family Steak Houses, Inc. 1991 Stock Option Plan, the Ryans
Family Steak Houses, Inc. 1998 Stock Option Plan and the Ryans Family Steak Houses, Inc. 2002
Stock Option Plan (or any other stock option plan, program, agreement or arrangement of the Company
and its Subsidiaries (collectively, the Company Stock Plans)), as of the Effective Time
and to cause all Company Options to no longer represent the right to purchase Company Common Stock
or any other equity security of the Company, the Parent, the Surviving Corporation or any other
Person; (ii) to cause, pursuant to the Company Stock Plans, each outstanding Vested Option to
represent as of the Effective Time solely the right to receive, in accordance with this Section
1.8, a lump sum cash payment in the amount of the Option Consideration, if any, with respect to
such Vested Option, and each Unvested Option shall be canceled and forfeited without the
A-3
receipt of
any consideration; and (iv) to cause the transactions contemplated by this section to be exempt
from the provisions of Section 16(b) of the Securities Exchange Act of 1934, as amended (together
with the rules and regulations promulgated thereunder, the Exchange Act).
(b) Parent shall cause the Surviving Corporation to pay to each holder of a Vested Option, in
respect and in consideration of each Vested Option so cancelled, as soon as practicable following
the Effective Time (but in any event not later than five (5) business days after the Effective
Time), an amount equal to the product of (i) the excess, if any, of (A) the Merger Consideration
over (B) the exercise price per share of Company Common Stock subject to such Vested Option,
multiplied by (ii) the total number of shares of Company Common Stock issuable upon
exercise of such Vested Option (whether or not then vested or exercisable), without any interest
thereon (the Option Consideration).
(c) As soon as practicable following the execution of this Agreement, the Company shall mail
to each person who is a holder of Company Options a letter describing the treatment of and payment
(if such option is a Vested Option) for such Company Options pursuant to this Section 1.8
and providing instructions for obtaining payment for such Vested Options. The Parent shall at all
times from and after the Effective Time cause the Surviving Corporation to maintain sufficient
liquid funds to satisfy its obligations to holders of Vested Options pursuant to this Section
1.8.
(d) As of the Effective Time, the Company Stock Plans shall terminate and all rights under any
provision of any other plan, program or arrangement providing for the issuance or grant of any
other interest in respect of the capital stock of the Company shall be canceled. At and after the
Effective Time, no Person shall have any right under the Company Options, the Company Stock Plans
or any other plan, program or arrangement with respect to equity securities of the Surviving
Corporation or any Subsidiary thereof, except the right to receive the amount payable under this
Section 1.8.
(e) No additional Company Options or other equity-based awards or other rights to acquire
Company Common Stock shall be granted pursuant to the Company Stock Plans or otherwise after the
Agreement Date.
(f) The Board of Directors of the Company shall adopt such resolutions or take such other
actions as may be required or appropriate such that, upon the Effective Time, each Company Option
and Company Stock Plan is treated in accordance with this Section 1.8.
Section 1.9 Employee Stock Purchase Plan. As soon as practicable following the Agreement Date, the
Board of Directors of the Company (or if appropriate, any committee of the Board of Directors of
the Company administering the Employee Stock Purchase Plan (the ESPP)) shall adopt such
resolutions or take such other actions as may be required to provide that (i) participants may not
increase their payroll deductions or purchase elections from those in effect as of the Agreement
Date, (ii) no offering period shall commence after the Agreement Date, (iii) each participants
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outstanding right to purchase shares of Company Common Stock under the ESPP shall terminate on the
day immediately following the Agreement Date, provided that all amounts allocated
to each participants account under the ESPP as of such date shall thereupon be used to purchase
whole shares of Company Common Stock at the applicable price determined under the ESPP for then
outstanding offering periods using such date as the final purchase date for each offering period
and (iv) the ESPP shall terminate immediately following the purchases of Company Common Stock on
the day prior to the day on which the Effective Time occurs.
Section 1.10 Adjustments. In the event of any stock split, reverse stock split, stock dividend
(including any dividend or distribution of securities convertible into capital stock),
reorganization, reclassification, combination, recapitalization, exchange, readjustment or other
like change with respect to the Company Common Stock occurring after the Agreement Date and prior
to the Effective Time, all references in this Agreement to specified numbers of shares of any class
or series affected thereby, and all calculations provided for that are based upon numbers of shares
of any class or series affected thereby, shall be adjusted to the extent necessary to provide the
parties the same economic effect as contemplated by this Agreement prior to such stock split,
reverse stock split, stock dividend, reorganization, reclassification, combination,
recapitalization, exchange, readjustment or other like change.
ARTICLE II
PAYMENT
Section 2.1 Surrender of Certificates. From and after the Effective Time, each holder of a
certificate that immediately prior to the Effective Time represented an outstanding Share (a
Certificate) shall be entitled to receive in exchange therefor, upon surrender thereof to
the Paying Agent, the Merger Consideration into which the Shares formerly evidenced by such
Certificate were converted into the right to receive pursuant to the Merger. No interest shall be
payable on the Merger Consideration to be paid to any holder of a Certificate irrespective of the
time at which such Certificate is surrendered for exchange.
Section 2.2 Paying Agent; Certificate Surrender Procedures.
(a) Prior to the Effective Time, the Parent (with the approval of the Company, not to be
unreasonably conditioned, withheld or delayed) shall designate, or shall cause to be designated, a
bank or trust company based in the United States, to act as agent for the payment of the Merger
Consideration upon surrender of Certificates (the Paying Agent).
(b) Immediately prior to the Effective Time, the Parent shall deposit, or cause to be
deposited, with the Paying Agent, an amount in cash sufficient to provide all funds necessary for
the Paying Agent to make payment of the aggregate Merger Consideration payable pursuant to
Section 1.7 (the Payment Fund). For purposes of determining the amount of Merger
Consideration to be so deposited, the Parent and the Merger Subsidiary shall assume that no holder
of Company Common Stock shall perfect any right to dissent from the Merger and obtain payment for
his, her or its Company Common Stock pursuant to Chapter 13 of the SCBA. Pending payment of such
funds to the holders of Certificates, the Payment Fund shall be held and may be invested by the
Paying Agent pursuant to the terms of the agreement entered into between the Parent and
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the Paying
Agent. The Parent shall replenish the Payment Fund to the extent of any investment losses any
monies lost through any investment made pursuant to this subsection (b).
(c) As soon as reasonably practicable, and in any event not later than three (3) business days
after the Effective Time, the Parent shall instruct the Paying Agent to mail to each record holder
of a Certificate (i) a letter of transmittal (which shall specify that delivery shall be effected,
and risk of loss and title to such Certificates shall pass, only upon delivery of the Certificates
to the Paying Agent and shall be in customary form) and (ii) instructions for use in effecting the
surrender of Certificates for the Merger Consideration. Upon the surrender to the Paying Agent of
a Certificate together with a duly executed and completed letter of transmittal and all other
documents and other materials required by the Paying Agent to be delivered in connection therewith,
the holder shall be entitled to receive promptly in exchange therefor the Merger Consideration into
which the Shares formerly represented by such Certificates so surrendered have been converted into
the right to receive in accordance with the provisions of this Agreement and the Certificates so
surrendered shall forthwith 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 precedent of payment that (i) the Certificate so surrendered shall be properly endorsed
or shall be otherwise in proper form for transfer and (ii) the Person requesting such payment shall
have 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 the Certificate surrendered or shall
have established to the satisfaction of the Surviving Corporation that such Tax either has been
paid or is not required to be paid. Until so surrendered, each outstanding Certificate shall be
deemed from and after the Effective Time, for all corporate purposes, to evidence the right to
receive the Merger Consideration without
interest thereon, into which the Shares represented by such Certificate have been converted
into the right to receive in accordance with the provisions of this Agreement.
Section 2.3 Transfer Books. The stock transfer books of the Company shall be closed at the
Effective Time, and no transfer of any shares of Company Common Stock shall thereafter be recorded
on any of the stock transfer books. In the event of a transfer of ownership of any shares of
Company Common Stock prior to the Effective Time that is not registered in the stock transfer
records of the Company at the Effective Time, the Merger Consideration into which such Company
Common Stock has been converted into the right to receive in the Merger shall be paid to the
transferee in accordance with the provisions of Section 2.2 only if the Certificate is
surrendered as provided in Section 2.2 and accompanied by all documents required to
evidence and effect such transfer (including evidence of payment of any applicable stock transfer
taxes).
Section 2.4 Termination of Payment Fund. Any portion of the Payment Fund (including any interest
received with respect thereto) that remains undistributed one hundred eighty (180) days after the
Effective Time shall be delivered to the Parent upon demand, and each holder of Company Common
Stock as of the Effective Time who has not previously surrendered Certificates in accordance with
the provisions of this Article II shall thereafter look only to the Parent (subject to
abandoned property,
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escheat or similar laws) as general creditors thereof with respect to the
Merger Consideration payable upon due surrender of their Certificates or affidavits of loss in lieu
thereof, without any interest thereon.
Section 2.5 Lost Certificates. If any Certificate shall have been lost, stolen or destroyed, upon
the making of an affidavit (in form and substance reasonably acceptable to the Parent) of that fact
by the Person making such a claim, and, if required by the Parent, the posting by such Person of a
bond in such reasonable amount as the Parent may direct as indemnity against any claim that may be
made against or with respect to such Certificate, the Paying Agent shall pay the Merger
Consideration in respect of each Share represented by such lost, stolen or destroyed Certificate.
Section 2.6 No Rights as Stockholder. From and after the Effective Time, the holders of
Certificates shall cease to have any rights as a stockholder of the Surviving Corporation except as
otherwise expressly provided in this Agreement or by applicable Laws, and the Parent shall be
entitled to treat each Certificate that has not yet been surrendered for exchange solely as
evidence of the right to receive the Merger Consideration into which the Company Common Stock
evidenced by such Certificate has been converted pursuant to the Merger.
Section 2.7 Withholding. Each of the Parent, the Merger Subsidiary, the Surviving Corporation and
the Paying Agent shall be entitled to deduct and withhold from the Merger Consideration and/or
Option Consideration payable to any former holder of Company Common Stock and
Company Options, or pursuant to Sections 1.8 and 1.9, all amounts required to be
deducted or withheld therefrom by the Internal Revenue Code of 1986, as amended (the
Code), or other applicable state, local or foreign tax Laws. To the extent that amounts
are so deducted and withheld and paid to the appropriate Governmental Authority, such amounts shall
be treated for all purposes of this Agreement as having been paid to the holder thereof in respect
of which such deduction and withholding was made by the Parent or the Surviving Corporation. All
payments to any Governmental Authority required to be made in connection with the withholding Taxes
as described in this Section 2.7 shall be paid to the relevant Governmental Authority
through the withholding tax payment systems of the Surviving Corporation.
Section 2.8 Escheat. Neither the Parent, the Merger Subsidiary nor the Company shall be liable to
any former holder of Company Common Stock for any portion of the Merger Consideration delivered to
any public official pursuant to any applicable abandoned property, escheat or similar Law. In the
event any Certificate has not been surrendered for the Merger Consideration prior to the sixth
anniversary of the Closing Date, or prior to such earlier date as of which such Certificate or the
Merger Consideration payable upon the surrender thereof would otherwise escheat to or become the
property of any Governmental Authority, then the Merger Consideration otherwise payable upon the
surrender of such Certificate will, to the extent permitted by applicable Laws, become the property
of the Surviving Corporation, free and clear of all rights, interests and adverse claims of any
person.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except (i) with respect to Sections 3.7 through 3.16 and Section 3.19, as disclosed in any
report, schedule, form, statement or other document filed with, or
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furnished to, the Securities and
Exchange Commission (the SEC) by the Company and publicly available at least two (2)
business days prior to the date of this Agreement and, for the avoidance of doubt, without giving
effect to any change of fact or circumstance subsequent to the date such document was filed or
furnished, or (ii) as set forth in the letter dated the Agreement Date from the Company to the
Parent (the Company Disclosure Letter) (it being understood that any information set forth in one
section or subsection of the Company Disclosure Letter shall be deemed to apply to and qualify the
section or subsection of this Agreement to which it corresponds in number and each other section or
subsection of this Agreement to the extent that it is reasonably apparent on its face that such
information is relevant to such other section or subsection), the Company represents and warrants
to the Parent and Merger Subsidiary that:
Section 3.1 Corporate Existence and Power.
(a) Each of the Company and its Subsidiaries is a corporation or limited liability company
duly organized, validly existing and in good standing under the laws of the jurisdiction of its
incorporation or organization, and has all requisite corporate or limited liability company power
and authority to own, lease and operate its properties
and assets and to carry on its business as presently being conducted, except when the failure
to be in good standing or have such power and authority, individually or in the aggregate, would
not reasonably be expected to have a Company Material Adverse Effect. Each of the Company and its
Subsidiaries is duly qualified or licensed to conduct business and is in good standing in each
jurisdiction in which the properties owned, leased or operated by it or the nature of the business
conducted by it makes such qualification or license necessary, except where the failure to be so
qualified or licensed and in good standing individually or in the aggregate, would not reasonably
be expected to have a Company Material Adverse Effect. The Company has made available to the
Parent or its counsel, true, correct and complete copies of the charter and bylaws or other
equivalent organizational documents, as applicable of each of the Company and its Subsidiaries, in
each case as amended and in effect on the Agreement Date. Neither the Company nor any of its
Subsidiaries is in violation of any of the provisions of its charter or bylaws or equivalent
organizational documents.
(b) For the purposes of this Agreement, Company Material Adverse Effect means a
Material Adverse Effect with respect to the Company and Material Adverse Effect means any
event, circumstance, condition, change, development or effect that, individually or in the
aggregate with all other events, circumstances, conditions, changes, developments or effects, would
have a material adverse effect on the business, financial condition, assets, liabilities,
operations or results of operations of a Person and its Subsidiaries taken as a whole, or the
ability of a Person to consummate the Merger and to perform its obligations under this Agreement.
For purposes of this Agreement, Person means an individual, a corporation, a limited
liability company, a partnership, a joint venture, an association, a trust, an unincorporated
organization or any other entity or organization, including any Governmental Authority.
Notwithstanding the foregoing, a Company Material Adverse Effect shall not include any event,
circumstance, condition, change, development or effect (i) relating to financial, credit or
securities markets or economic conditions in general; (ii) relating to changes in Law or applicable
accounting regulations or principles or interpretations thereof, to the extent such event,
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circumstances, condition, change, development or effect described in this clause (ii) does not
materially, disproportionately impact the Company and its Subsidiaries taken as a whole relative to
other companies operating in the restaurant industry; (iii) relating to the restaurant industry
generally, to the extent such event, circumstance, condition, change, development or effect
described in this clause (iii) does not materially, disproportionately impact the Company and its
Subsidiaries taken as a whole relative to other companies operating in such industry; (iv)
consisting of any change in the Company Common Stock price or trading volume, in and of itself, or
any failure, in and of itself, by the Company to meet revenue or earnings projections (it being
understood that the facts or occurrences giving rise to or contributing to such change in the
Company Common Stock price, trading volume or failure to meet revenue or earnings projections may
be taken into account in determining whether there has been a Company Material Adverse Effect); (v)
relating to the announcement of this Agreement (including any termination of, reduction in or
similar negative impact on relationships with any suppliers, distributors or employees of the
Company and its Subsidiaries, to the extent such change or effect was due to the identity of Parent
or its Affiliates) and the transactions contemplated hereby and performance of and compliance with
the terms of this Agreement. Notwithstanding
the foregoing, any occurrence of any food borne illness at any restaurant owned or operated by
the Company that results in death or serious bodily injury which would reasonably be expected to
cause the consolidated earnings before income taxes of the Company to decline by more than 10% over
a period of at least one year shall be deemed to have had a Company Material Adverse Effect.
Section 3.2 Capitalization.
(a) The authorized capital stock of the Company consists of One Hundred Million (100,000,000)
shares of Company Common Stock. As of the close of business on July 21, 2006, 42,325,415.38 shares
of Company Common Stock were issued and outstanding and 2,896,347 shares were reserved for issuance
pursuant to the Company Stock Plans. All of the issued and outstanding shares of the capital stock
of the Company are, and all shares which may be issued pursuant to the exercise of the Company
Options or pursuant to the Company Stock Plans shall be, when issued in accordance with the
respective terms thereof, duly authorized, validly issued, fully paid and non-assessable and not
subject to or issued in violation of any purchase option, call option, right of first refusal,
preemptive right, subscription right or any similar right under any provision of the SCBA, the
Companys articles of incorporation or bylaws or any contract or commitment to which the Company is
a party or otherwise bound and (ii) issued in compliance with all applicable Laws, including
federal and state securities Laws and all requirements set forth in applicable contracts governing
the issuance of such Company Options. The Company has granted no Company Options outside of the
Company Stock Plans.
(b) There are no outstanding or authorized options, calls, warrants, subscription rights,
convertible securities, conversion rights, exchange rights or other contracts, agreements or
commitments that could require the Company or any of its Subsidiaries to issue, transfer, sell or
otherwise cause to become outstanding any of its capital stock or other securities. There are no
outstanding stock appreciation, phantom stock, profit participation or similar rights with respect
to the Company or any of its Subsidiaries or other equity interest in the Company or any of its
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Subsidiaries, or securities convertible into or exchangeable for such shares or equity interests.
The Company Disclosure Letter sets forth a list of all outstanding Company Options and any other
awards, the plan under which the options or other awards were granted, as well as the respective
exercise prices, dates of grant and vesting schedules thereof. Except as set forth in Article
I, the Company is not party to or bound by any obligation to accelerate the vesting of any
Company Options.
(c) Neither the Company nor any of its Subsidiaries is a party to, bound by, or has knowledge
of, any voting trust, proxy or other agreement or understanding with respect to the voting of any
capital stock of the Company or any of its Subsidiaries.
(d) The Board of Directors of the Company has not declared any dividend or distribution with
respect to the Company Common Stock the record or payment date for which is on or after the
Agreement Date.
(e) Other than with respect to the Subsidiaries listed on Section 3.2(e) of the Company
Disclosure Letter, the Company does not directly or indirectly own any securities or beneficial
ownership interests in any other Person (including through joint ventures or partnership
arrangements) or have any investment in any other Person. All of the outstanding shares of capital
stock of the Companys Subsidiaries that are owned by the Company are duly authorized, validly
issued, fully paid and non-assessable and not subject to or issued in violation of any purchase
option, call option, right of first refusal, preemptive right, subscription right or any similar
right under any provision of the Laws applicable to such Subsidiary in such Subsidiarys state of
incorporation, such Subsidiarys articles of incorporation or bylaws (or the equivalent thereof) or
any contract or commitment to which such Subsidiary is a party or otherwise bound, and (ii) issued
in compliance with all applicable Laws, including federal and state securities laws, and are owned
by the Company or one of its Subsidiaries, free and clear of any and all Liens. For purposes of
this Agreement, Lien means any lien, pledge, mortgage, deed of trust, security interest,
claim, community property interest, equitable interest, lease, license, charge, option, right of
first refusal, easement, servitude, restrictive covenant, right of way, encroachment or other
survey defect, title defect, encumbrance, including any restriction on use, voting, transfer,
receipt of income or exercise of any other attribution of ownership or other restriction or
limitation whatsoever.
(f) As of the Agreement Date, (i) no bonds, debentures, notes or other indebtedness of the
Company having the right to vote are issued or outstanding, and (ii) there are no outstanding
contractual obligations of the Company or any of its Subsidiaries to repurchase, redeem or
otherwise acquire any shares of capital stock of the Company or any of its Subsidiaries.
(g) The Company Common Stock is listed for quotation on the NASDAQ National Market. No other
securities of the Company or any of its Subsidiaries are listed or quoted for trading on any United
States domestic or foreign securities exchange.
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(h) Holders of Company Common Stock are not entitled to dissenters rights under Chapter 13 of
the SCBA.
Section 3.3 Authorization of Transaction.
(a) The Company has full corporate power and authority and has taken all requisite corporate
action to enable it to execute and deliver this Agreement, and, subject to obtaining the Company
Stockholders Approval, to enter into this Agreement and to consummate the transactions contemplated
hereby and to perform its obligations hereunder. This Agreement has been duly authorized, executed
and delivered by the Company and, assuming the due authorization, execution and delivery thereof by
the
Parent and the Merger Subsidiary, constitutes a valid and legally binding agreement of the
Company enforceable against the Company in accordance with its terms, except that (i) such
enforcement may be limited by applicable bankruptcy, insolvency, reorganization, moratorium,
fraudulent transfer or similar Laws of general applicability relating to or affecting enforcement
of creditors rights generally and (ii) the remedy of specific performance and injunctive and other
forms of equitable relief may be subject to equitable defenses and to the discretion of the court
before which any proceeding therefor may be brought.
(b) In connection with its adoption of the resolutions of the Board of Directors of the
Company described in the Preamble to this Agreement, the Board of Directors of the Company received
the opinion of Brookwood referenced in Section 3.21.
(c) The Company has taken all action required to be taken by it in order to exempt this
Agreement and the transactions contemplated hereby from, and this Agreement, and the transactions
contemplated hereby are exempt from, the requirements of any moratorium, control share, fair
price, affiliate transaction, business combination or other anti takeover Laws of the State of
South Carolina, including Chapter 2 of Title 35 of the 1976 Code of Laws of South Carolina, as
amended (the SC Code). The Company has taken all action required to be taken by it in
order to make this Agreement and the transactions contemplated hereby comply with, and this
Agreement, and the transactions contemplated hereby do comply with, the requirements of any
articles, sections or provisions of its articles of incorporation and bylaws concerning business
combination, fair price, voting requirement, constituency requirement or other related
provisions.
Section 3.4 Vote Required. The affirmative vote of the holders of two-thirds of the outstanding
shares of Company Common Stock (the Company Stockholders Approval) is the only vote of
the holders of any class or series of the Companys capital stock necessary to adopt this Agreement
and approve the Merger and the consummation of the transactions contemplated hereby.
Section 3.5 Noncontravention; Approvals. Except for (a) filings and approvals necessary to comply
with the applicable requirements of the Exchange Act, (b) filings pursuant to the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the HSR Act), and any other applicable
competition, merger control, antitrust or similar laws or regulations (collectively with the HSR
Act, the Antitrust Laws), (c) the Company Stockholders Approval and the filing of the
Articles of Merger
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pursuant to the SCBA, and any similar certificates or filings to be made
pursuant to the corporation laws of other jurisdictions in which the Company or any of its
Subsidiaries is qualified to do business, and (d) any filings required under the rules and
regulations of the NASDAQ National Market, neither the execution and delivery of this Agreement by
the Company, nor the consummation by the Company of the transactions contemplated hereby, shall (i)
violate or conflict with any provision of the articles of incorporation or bylaws of the Company or
the equivalent organizational documents of any of its Subsidiaries, (ii) result in a violation or
breach of, be in conflict
with, or constitute or create (with or without due notice or lapse of time or both) a default (or
give rise to any right of termination, cancellation or acceleration) under any of the terms,
conditions or provisions of any Company Material Agreement, (iii) violate any Laws applicable to
the Company, any of its Subsidiaries or any of their properties or assets, (iv) require any filing
or registration with, notification to, or authorization, consent or approval of, any government or
any agency, bureau, board, commission, court, department, official, political subdivision, tribunal
or other instrumentality of any government with appropriate jurisdiction over the Company, any of
its Subsidiaries or their respective properties or assets, whether federal, state or local,
domestic or foreign (each a Governmental Authority) or (v) result in the creation or
imposition of any Lien on any of the property or assets of the Company or any of its Subsidiaries;
except in the case of clauses (ii), (iii), (iv), and (v) for such violations, breaches, defaults or
Liens that, or filings, registrations, notifications, authorizations, consents or approvals the
failure of which to obtain, individually or in the aggregate, would not reasonably be expected to
have a Company Material Adverse Effect (excluding for this purpose only clause (vi) of the
penultimate sentence of Section 3.1(b)).
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Section 3.6
Company Filings; Information in the Proxy Statement.
(a) The Company has filed on a timely basis all proxy statements, reports, schedules, forms,
statements and other documents (including exhibits thereto), and all amendments thereto, required
to be filed by it with the SEC since January 1, 2005 (collectively, together with the information
incorporated by reference therein, the Company SEC Documents). Each of the Company SEC
Documents, as of its filing date (or if amended or superseded by a filing prior to the Agreement
Date, then as of the date of such filing) complied in all material respects with the applicable
requirements of the Securities Act of 1933, as amended (together with the rules and regulations
thereunder, the Securities Act), the Exchange Act or the Sarbanes-Oxley Act of 2002
(SOXA) (as the case may be) and the applicable rules and regulations of the SEC
thereunder, and did not contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary in order to make the statements therein, in light
of the circumstances under which they were made, not misleading. No Subsidiary of the Company is
required to file any statements, reports, schedules, forms or other documents with the SEC.
(b) Each of the consolidated financial statements (including, in each case, any related notes
thereto) contained in the Company SEC Documents (the Financial Statements), (i) complied
as to form in all material respects with the published rules and regulations of the SEC with
respect thereto, (ii) was prepared in accordance with accounting principles generally accepted in
the United States (GAAP) applied on a consistent basis throughout the periods involved
(except in the case of unaudited interim statements, to the extent they may exclude footnotes or
may be condensed or summary statements as may be permitted by the SEC on Form 10-Q, 8-K or any
successor form under the Exchange Act), and (iii) fairly presented in all material respects the
consolidated financial position of the Company and its Subsidiaries as of the respective dates
thereof and the consolidated results of the Companys and its Subsidiaries operations and cash
flows for the periods indicated, subject, in the case of the unaudited interim financial
statements, to normal and recurring year-end audit adjustments. Except as reflected in the
Financial Statements, neither the Company nor any of its Subsidiaries is a party to any material
off-balance sheet arrangements (as defined in Item 303 of Regulation S-K promulgated under the
Exchange Act). As of the Agreement Date, the Company has not had any material dispute with KPMG,
LLP regarding accounting matters or policies during any of its past two full fiscal years or during
the current fiscal year that is currently outstanding or that has resulted in (x) a passed
adjustment or (y) any restatement of the Financial Statements.
(c) Without limiting the generality of the foregoing, KPMG, LLP has not resigned nor been
dismissed as independent public accountant of the Company as a result of or in connection with any
disagreement with the Company on a matter of accounting practices which materially impacts or would
require the restatement of any previously issued financial statements, covering one or more years
or interim periods for which the Company is required to provide financial statements, such that
they should no longer be relied on.
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(d) As of the Agreement Date, to the knowledge of the Company, no investigation by the SEC
with respect to the Company or any of its Subsidiaries is pending or threatened.
(e) As required by Rule 13a-15 of the Exchange Act, the Company has established and maintains
(i) internal control over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act),
which is designed to provide reasonable assurance regarding the reliability of the Companys
financial reporting and its preparation of financial statements for external purposes in accordance
with GAAP and (ii) disclosure controls and procedures (as defined in Rule 13a-15(e) of the Exchange
Act), which are designed to ensure that all material information required to be disclosed by the
Company in the Company SEC Documents is accumulated and communicated to the Companys and its
Subsidiaries management, as appropriate to allow timely decisions regarding required disclosure.
Each Company SEC Document that was required to be accompanied by the certifications required of the
Companys principal executive officer and principal financial officer pursuant to Sections 302 and
906 of SOXA and the rules and regulations promulgated thereunder was accompanied by such
certification and, at the time of filing or submission of each such certification, to the knowledge
of the Companys principal executive officer and principal financial officer, such certification
was true and accurate and complied with SOXA and the rules and regulations promulgated thereunder
as of the date filed.
(f) The proxy statement to be provided to the Companys stockholders in connection with the
Company Stockholders Meeting (such proxy statement and any amendment thereof or supplement thereto,
the Proxy Statement) on the date mailed to the Companys stockholders and at the time of
the Company Stockholders Meeting, shall not contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they were made, not misleading.
The Proxy Statement will comply in all material respects with the provisions of the Exchange Act
and the rules and regulations thereunder.
Section 3.7 No Undisclosed Liabilities. Neither the Company nor any of its Subsidiaries has any
liabilities or obligations of any nature (whether accrued or unaccrued, absolute or contingent,
liquidated or unliquidated, or due or to become due) required by GAAP to be set forth on a
consolidated balance sheet of the Company and its Subsidiaries or in the notes thereto, except for
(a) liabilities and obligations accrued or reserved in the Financial Statements as of December 28,
2005 or otherwise disclosed in the Company SEC Documents, (b) liabilities and obligations incurred
in the ordinary course of business, consistent with past practice, since December 28, 2005, (c)
other liabilities and obligations that, individually or in the aggregate, would not reasonably be
expected to have a Company Material Adverse Effect and (d) liabilities and obligations which have
been discharged or paid prior to the Agreement Date.
Section 3.8 Absence of Company Material Adverse Effect. Since December 28, 2005, (i) to the Agreement Date, there has not been a Company Material
Adverse Effect, nor does there exist or has there occurred any event, change, circumstance,
condition, development or effect that, individually or in the aggregate,
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would reasonably be
expected to have a Company Material Adverse Effect, and (ii) neither the Company nor any of its
Subsidiaries has taken or authorized the taking of any action prohibited by, or that would be, if
taken after the Agreement Date, in violation of, Section 5.3.
Section 3.9 Litigation and Legal Compliance.
(a) Except as would not, individually or in the aggregate, reasonably be expected to have a
Company Material Adverse Effect (i) there are no claims, actions, suits or proceedings pending, or
to the Companys knowledge, threatened by or against the Company or any of its Subsidiaries, (ii)
to the Companys knowledge there is no investigation pending or threatened by or against the
Company or any of its Subsidiaries and (iii) neither the Company nor any of its Subsidiaries is
subject to any outstanding judgment, injunction, order or decree of any Governmental Authority.
There are no judicial or administrative actions or proceedings pending, or to the Companys
knowledge, threatened, and to the Companys knowledge there are no investigations pending or
threatened by or against the Company, that question the validity of this Agreement or any action
taken or to be taken by the Company in connection with this Agreement.
(b) Except for instances of noncompliance that, individually or in the aggregate, would not
reasonably be expected to have a Company Material Adverse Effect, the Company and its Subsidiaries
are in compliance with each applicable federal, state, local and foreign law, statute, rule,
regulation, ordinance, code, license, permit, order, legal doctrine, writ, injunction, judgment,
decree, requirement or agreement with any Governmental Authority (including common law or the
interpretation thereof) (collectively, the Laws) to which the Company, any of its
Subsidiaries, or any of their respective assets or properties may be subject. The Company and its
Subsidiaries have all permits, licenses, approvals, authorizations of and registrations with and
under all Laws, and from all Governmental Authorities, required by the Company and its Subsidiaries
to carry on their respective businesses as currently conducted, except where the failure to have
such permits, licenses, approvals, authorizations and registrations would not, individually or in
the aggregate, reasonably be expected to have a Company Material Adverse Effect.
Section 3.10 Contract Matters.
(a) Section 3.10 of the Company Disclosure Letter lists each of the Company Material
Agreements that as of the Agreement Date are in effect or otherwise binding on the Company or any
of its Subsidiaries or their respective properties or assets, other than those contracts or
agreements that have been filed as exhibits to the Company SEC Documents. Section 3.10 of
the Company Disclosure Letter shall be deemed to be amended to include any contract or agreement
that would qualify as a Company Material
Agreement which is entered into by the Company during the period between the date of this
Agreement and the Effective Time; provided that the Company shall have delivered
written notice to the Parent of its entry into any such contract or agreement promptly, and in any
event within two business days of its execution thereof. Company Material Agreements
means (i) any credit agreement, note, bond, guarantee, mortgage, indenture, lease (excluding leases
covered by Section 3.14(b) or not required to be scheduled pursuant to that section), or
other instrument or obligation pursuant to which any
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indebtedness of the Company or any of its
Subsidiaries of more than $250,000 is outstanding or may be incurred; (ii) any contract or
agreement under which the Company or any Subsidiary has, directly or indirectly, made any advance,
loan, extension of credit or capital contribution to any person in excess of $250,000 (other than
to the Company or any Subsidiary and other than extensions of trade credit in the ordinary course
of business, consistent with past practice); (iii) any agreement, contract or binding commitment
which was, or which was required to be, filed as an exhibit to the Company SEC Documents; and (iv)
any (A) collective bargaining agreement; (B) employment agreement contract or binding commitment
providing for annual compensation or payments in excess of $250,000 in the current or any future
year; (C) agreement, contract or commitment of indemnification or guaranty not entered into in the
ordinary course of business consistent with past practice which would reasonably be expected to
exceed $250,000, as well as any agreement, contract or commitment of indemnification or guaranty
between the Company or any of its Subsidiaries and any of their respective officers or directors,
irrespective of the amount; (D) agreement, contract or binding commitment containing any covenant
directly or indirectly limiting the freedom of the Company or any of its Subsidiaries to engage in
any line of business, compete with any Person, or sell any product or service; (E) agreement,
contract or binding commitment that shall result in the payment by, or the creation of any
commitment or obligation (absolute or contingent) to pay on behalf of the Company or any of its
Subsidiaries any severance, termination, change of control, golden parachute, or other similar
payments to any current or former employee, officer, director or consultant following termination
of employment or otherwise as a result of the consummation of the transactions contemplated by this
Agreement; (F) agreement, contract or binding commitment by the Company or any of its Subsidiaries
entered into since January 1, 2005 or that has material obligations that are to be performed
subsequent to the Agreement Date, relating to the disposition or acquisition of material assets not
in the ordinary course of business or any ownership interest in any Subsidiary or other Person; (G)
material agreements, contracts or binding commitments regarding the development, ownership or use
of Intellectual Property (including material licenses to or from third parties but other than
commercial off-the-shelf software, as that term is commonly understood); (H) material partnership,
joint venture or similar agreement or arrangement; (I) any contract or agreement involving a
standstill or similar obligation of the Company or any of its Subsidiaries to a third party; (J)
any franchise agreement; (K) each contract or agreement the terms of which the Company or any
Subsidiary is or will be bound to share its profits or pay any royalties; (L) each supplier
agreement requiring payments in excess of $250,000; (M) each power of attorney granted in favor of
any Person; or (N) other agreement, contract or binding commitment which is material to the
operation of the Companys and its Subsidiaries businesses. For purposes of this section,
indebtedness shall mean, with
respect to any Person, without duplication, (1) all obligations of such Person for borrowed
money, (2) all obligations of others secured by any Lien on property or assets owned or acquired by
such Person, whether or not the obligations secured thereby have been assumed, (3) all letters of
credit issued for the account of such Person (excluding letters of credit issued for the benefit of
suppliers to support accounts payable to suppliers incurred in the ordinary course of business or
to support workers compensation insurance obligations or perf
ormance obligations under contracts
entered into in the
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ordinary course) and (4) all obligations, the principal component of which are
obligations under leases that are, or should be pursuant to GAAP, classified as capital leases;
provided that, any obligations between or among the Company and its wholly-owned
Subsidiaries shall not be considered to be indebtedness hereunder.
(b) Each Company Material Agreement is valid, binding and enforceable upon the Company or the
Subsidiary that is a party thereto, and to the Companys knowledge each other party thereto, and
is, and following consummation of the transactions contemplated by this Agreement shall remain, in
full force and effect (except that (i) such enforcement may be subject to applicable bankruptcy,
insolvency, reorganization, moratorium, fraudulent transfer and similar Laws of general
applicability relating to or affecting the enforcement of creditors rights, and (ii) the remedy of
specific performance and injunctive and other forms of equitable relief may be subject to equitable
defenses and to the discretion of the court before which any proceeding therefor may be brought).
There are no defaults or breaches under any Company Material Agreement by the Company or any of its
Subsidiaries, or to its knowledge any other party thereto.
Section 3.11 Tax Matters.
(a) The Company and each of its Subsidiaries have (i) timely filed with the appropriate
Governmental Authorities every material return, report or other document or information (including
any election, declaration, disclosure, schedule, estimate or information return) required to be
supplied to a taxing authority or agent thereof in connection with Taxes (Tax Returns)
required to be filed for all periods ending on or prior to the Effective Time, and for which a tax
return is required by applicable Law to be filed on or prior to such Effective Time (including
pursuant to extensions properly obtained), and such filed Tax Returns are correct and complete in
all material respects, (ii) timely paid in full or made adequate provision for the payment of all
Taxes and (iii) timely withheld and paid all Taxes required by applicable Laws to have been
withheld and paid as of the Effective Time in connection with amounts paid or owing to any
employee, independent contractor, creditor, or other third party. The liabilities and reserves for
Taxes reflected in the balance sheet included in the Company Reports as of and for the period ended
December 28, 2005 are adequate to cover all Taxes of the Company and its Subsidiaries for all
periods ending at and prior to the date of such balance sheet and there are no material Liens for
Taxes upon any property or asset of the Company or any of its Subsidiaries, except for Liens for
Taxes not yet due. The Company has delivered to the Parent correct and complete copies of all
federal income Tax Returns filed for 2002, 2003 and 2004 and any amended federal income Tax
Returns filed within the three-year period ending on the Agreement Date, and all state, local
and foreign income Tax Returns filed for 2004. The Company and its Subsidiaries have each
disclosed on their respective Tax Returns all positions taken therein that could give rise to a
substantial understatement of Tax within the meaning of Code Section 6662 or any similar provision
of applicable Law, and is in possession of supporting documentation as may be required under any
such provision.
(b) Neither the Company nor any of its Subsidiaries: (i) has waived any statute of
limitations in respect of Taxes or agreed to any extension of time with
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respect to a Tax assessment
or deficiency other than waivers and extensions which are no longer in effect; (ii) has received
any written notice indicating an intent to open an audit or other review, a request for information
related to Tax matters, or notice of deficiency or proposed adjustment for any amount of Tax
proposed, asserted or assessed (and no audit or administrative or judicial Tax proceeding is
pending or being conducted with respect to the Company or any of its Subsidiaries); (iii) has been
subject to a written claim by a Governmental Authority in a jurisdiction where the Company or any
of its Subsidiaries does not file Tax Returns that it is or may be subject to taxation by that
jurisdiction; (iv) is a party to any agreement providing for the allocation or sharing of Taxes
with any person that is not, directly or indirectly, a wholly owned Subsidiary of the Company; (v)
for taxable years after 2001, has participated (within the meaning of Treasury Regulation Section
1.6011-4(c)(3)(i)(A)) in any listed transaction within the meaning of Code Section 6011 or any
similar provision of state, local or foreign Law; (vi) is presently required, or shall be required,
to include any taxable income for any period ending after the Closing Date as a result of (A) a
change in method of accounting under Code Section 481 made prior to the Closing Date, (B) any
intercompany transaction, (C) an installment sale or open transaction disposition made on or prior
to the Closing Date, or (D) a prepaid amount received on or prior to the Closing Date (or under any
provision of Law of any jurisdiction with similar consequences as any of (vi)(A) through (vi)(D)
above); or (vii) is a party to any material agreement, contract, arrangement or plan (A) pursuant
to which any one of them is required to make a compensatory payment to any individual more than two
and one-half (2 1/2) months after the calendar year in which services were performed as an employee
in such calendar year commencing in 2005, (B) that has resulted or would result, separately or in
the aggregate, in the payment of any excess parachute payment within the meaning of Code Section
280G, or any amount that would not be fully deductible as a result of Code Section 162(m), or (C)
pursuant to which it is bound to compensate any Person for excise or other additional Taxes paid
pursuant to Code Sections 409A or 4999 or any similar provision of state, local or foreign Law.
There are no unresolved issues of law or fact which, to the knowledge of the Company, arise out of
a notice of deficiency, proposed deficiency or assessment from the Internal Revenue Service or any
other Governmental Authority with respect to Taxes of the Company or any of its Subsidiaries.
(c) For purposes of this Agreement, Tax or Taxes shall mean (i) any and
all taxes, fees, levies, duties, tariffs, imposts, and other like charges imposed by the United
States or any other Governmental Authority (together with any and all interest, penalties, loss,
damage, liability, expense, additions to tax and additional amounts or costs incurred or imposed
with respect thereto), whether disputed or not,
including (A) taxes or other charges on or with respect to income, estimated income,
franchise, escheat, windfall or other profits, gross receipts, real or personal property, sales,
use, capital gains, capital stock or shares, premium, payroll, employment, social security (or
similar), workers compensation, occupation, unemployment compensation, disability, environmental
(including taxes under Code Section 59A), alternative or add-on minimum, estimated or net worth;
(B) taxes or other charges in the nature of excise, withholding, ad valorem, license, registration,
stamp, transfer, value added, or gains taxes; and (C) customs duties, tariffs, import and export
taxes and similar charges; (ii) any liability for payment of amounts described in clause (i)
whether as a result of
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transferee liability, of being a member of an affiliated, consolidated,
combined or unitary group for any period, or otherwise through operation of law; and (iii) any
liability for payment of amounts described in clauses (i) and (ii) as a result of any tax sharing,
tax indemnity or tax allocation agreement or any other express or implied agreement to indemnify
any Person.
Section 3.12 Employee Benefit Matters.
(a) Each plan, program, agreement or arrangement of the Company or any of its Subsidiaries
constituting (i) an employee welfare benefit plan as defined in Section 3(1) of the Employee
Retirement Income Security Act of 1974 (as amended, ERISA) is referred to herein as an
Employee Welfare Benefit Plan and (ii) an employee pension benefit plan as defined in
Section 3(2) of ERISA is referred to herein as an Employee Pension Benefit Plan. The
Employee Welfare Benefit Plans, Employee Pension Benefit Plans and each other employee benefit
plan, agreement, program or arrangement or employment practice maintained by the Company or any of
its Subsidiaries with respect to any of its current or former employees, officers, directors or
consultants or to which the Company or any of its Subsidiaries contributes or is required to
contribute with respect to any of its current or former employees, officers, directors or
consultants are collectively referred to herein as the Company Plans. With respect to
each Company Plan:
(i) such Company Plan (and each related trust, insurance contract or fund, if applicable) has
been administered in a manner consistent in all material respects with its written terms and
complies in all material respects in form and operation with the applicable requirements of ERISA
and the Code and other applicable Laws;
(ii) all required reports, returns, similar documents and descriptions (including Form 5500
Annual Reports, Summary Annual Reports and Summary Plan Descriptions) have been filed or
distributed appropriately with respect to such Company Plan and there are no investigations by any
Governmental Authority with respect to termination proceedings or other claims (except claims for
benefits payable in the normal operation of the Company Plans), suits or proceedings against or
involving any company Plan or asserting any rights or claims to benefits under any company Plan
that would give rise to any material liability, and to the knowledge of the Company,
there are no facts that could give rise to any material liability in the event of any such
investigation, claim, suit or proceeding;
(iii) The requirements of Part 6 of Subtitle B of Title I of ERISA and Code Section 4980B have
been met in all material respects with respect to each such Company Plan which is an Employee
Welfare Benefit Plan;
(iv) all material contributions, premiums or other payments (including all employer
contributions and employee salary reduction contributions) that are required to be made under the
terms of any Company Plan have been timely made and properly provided for in the Financial
Statements contained in the most recent Company SEC Documents;
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(v) each such Company Plan which is an Employee Pension Benefit Plan intended to be a
qualified plan under Code Section 401(a) has received a favorable determination letter from the
Internal Revenue Service stating that such plan is a qualified plan and exempt from income tax
under Sections 401(a) and 501(a) of the Code, and no event has occurred which would reasonably be
expected to cause the loss, revocation or denial of any such favorable determination letter;
(vi) to the extent applicable, the Company has previously delivered to the Parent, upon its
request, correct and complete copies of the plan documents (or in the case of any unwritten Company
Plan, a description thereof) and most recent summary plan descriptions, the most recent
determination letter received from the Internal Revenue Service, the three (3) most recent Form
5500 Annual Report, has previously delivered the most recent actuarial report, the most recent
audited financial statements, and all related trust agreements, insurance contracts and other
funding agreements that implement such Company Plan; and
(vii) all Company Plans are by their terms able to be amended or terminated by the Company
without advance notice and without incurring additional liabilities.
(b) With respect to each Employee Welfare Benefit Plan or Employee Pension Benefit Plan that
the Company or any of its Subsidiaries maintains or ever has maintained, or to which any of them
contributes, ever has contributed or ever has been required to contribute, there have been no
non-exempt prohibited transactions (as defined in Section 406 of ERISA and Code Section 4975) with
respect to such plan, no fiduciary has any liability for breach of fiduciary duty or any other
failure to act or comply in connection with the administration or investment of the assets of such
plan, and no action, suit, proceeding, hearing or, to the Companys knowledge, investigation with
respect to the administration or the investment of the assets of such plan (other than routine
claims for benefits) is pending or, to the Companys knowledge, threatened.
(c)Neither the Company nor any of its Subsidiaries, nor any other entity which, together with the Company or any of its Subsidiaries, would be treated as a single employer under Section 4001 of ERISA or Section 414 of the
Code (an ERISA Affiliate) contributes to or has in the past six years sponsored, maintained, contributed to or had any liability in respect of any defined benefit pension plan (as
defined in Section 3(35) of ERISA) or plan subject to Section 412 of the Code or Section 302 of ERISA.
(d)No Company Plan is a Multiemployer Plan and neither the Company, its Subsidiaries nor any of their respective ERISA Affiliates has at any time sponsored or contributed to, or had any liability or obligation in respect of, any Multiemployer Plan.
(e)Neither the Company nor any of its Subsidiaries has any obligation to provide medical, health, life insurance or other welfare benefits for currently retired or future retired or terminated employees, their spouses or their dependents (other than in
A-20
accordance with Code Section
4980B), including any such obligations resulting from transactions contemplated by this Agreement.
(f) Neither the execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby will (either alone or in combination with another event) (i)
result in any payment becoming due, or increase the amount of any compensation due, to any current
or former employee, officer, director or consultant of the Company; (ii) increase any benefits
otherwise payable under any Company Plan; (iii) result in the acceleration of the time of payment
or vesting of any such compensation or benefits; (iv) result in the payment of any amount that
could, individually or in combination with any other such payment, constitute an excess parachute
payment, as defined in Section 280G(b)(1) of the Code; or (v) result in the triggering or
imposition of any restrictions or limitations on the rights of the Company to amend or terminate
any Company Plan.
(g) Prior to the execution of this Agreement, for each Company Stock Option Plan, the Board of
Directors or other body authorized to administer and interpret such Company Stock Option Plan has
made the determination and directed, in each case in accordance with the terms of such Company
Stock Option Plan, that the Company Stock Options shall be treated as set forth in Section
1.8 of this Agreement.
Section 3.13 Environmental Matters.
(a) (i) The Company and its Subsidiaries are and have been in compliance with all applicable
Environmental Laws and have all permits, licenses and authorizations required by such Environmental
Laws necessary for the operation of their businesses as presently conducted; (ii) there is no
order, claim, action, proceeding or demand for information pending or, to the knowledge of the
Company, threatened in writing against the Company or any of its Subsidiaries pursuant to
Environmental Laws; (iii) the Company is not otherwise subject to any liability under Environmental
Laws including any liability arising out of the release or disposal of hazardous, toxic, dangerous
or regulated substances into the environment; and (iv) the Company and its Subsidiaries have not
received any notice, demand letter or request for information from
any Governmental Authority or third party, which has not heretofore been resolved with such
Governmental Authority or third party, indicating that the Company or any of its Subsidiaries may
be in violation of, or liable under, any Environmental Laws; provided, however,
that no representation or warranty is made in the foregoing clauses (i), (ii), (iii) and (iv) with
respect to matters that, individually or in the aggregate, would not reasonably be expected to have
a Company Material Adverse Effect.
(b) For purposes of this Agreement, Environmental Laws means any Federal, state,
local or foreign Laws relating to (i) the protection, preservation or restoration of the
environment (including air, water vapor, surface water, groundwater, drinking water supply, surface
land, subsurface land, plant and animal life or any other natural resource) or (ii) the exposure
to, or the use, storage, recycling, treatment, generation, transportation, processing, handling,
labeling production, release or disposal of, Hazardous Substances, in each case as amended. The
term Environmental Laws includes the Comprehensive Environmental Response, Compensation
and Liability Act
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of 1980, 42 U.S.C. § 9601 et seq., as amended by the Superfund Amendment and
Reauthorization Act of 1986 and as further amended, the Federal Water Pollution Control Act, 33
U.S.C. § 1251 et seq., as amended, the Solid Waste Disposal Act of 1976, 42 U.S.C. § 6901 et seq.,
as amended, the Clean Air Act, 42 U.S.C. § 7401 et seq., as amended, the Toxic Substances Control
Act, 15 U.S.C. § 2601 et seq., as amended, the Hazardous Material Transportation Act, 49 Ap.
U.S.C.A. § 1801 et seq., as amended, the Federal Insecticide, Fungicide and Rodenticide Act, 7
U.S.C. § 136 et seq., as amended, and comparable state and local Laws.
(c) For purposes of this Agreement, Hazardous Substance means any substance
presently or hereafter listed, defined, designated or classified as hazardous, toxic, radioactive,
or dangerous, or otherwise regulated, under any Environmental Laws. Hazardous Substance includes
any substance to which exposure is regulated by any Governmental Authority or any Environmental
Laws including any toxic waste, pollutant, contaminant, hazardous substance, toxic substance,
hazardous waste, special waste, industrial substance or petroleum or any derivative or by-product
thereof, radon, radioactive material, asbestos, or asbestos containing material, urea formaldehyde
foam insulation, lead or polychlorinated biphenyls.
Section 3.14 Real Estate.
(a) The Company or one of its Subsidiaries is the owner of good, marketable and insurable fee
title to the land described in Section 3.14(a) of the Company Disclosure Letter and to all of the
buildings, structures and other improvements located thereon (collectively, the Owned Real
Property), free and clear of all Liens except for Permitted Liens. For purposes of this
Agreement, Permitted Lien means (i) Liens for Taxes not delinquent or the validity of
which are being contested in good faith by appropriate proceedings and as to which adequate
reserves have been established on the Companys financial statements in accordance with GAAP
consistently applied; (ii) statutory landlords, mechanics, carriers, workmens, repairmens or
other similar Liens arising or incurred in the ordinary course of business and securing amounts
that are
not past due and as to which adequate reserves have been established on the Companys
financial statements in accordance with GAAP consistently applied; and (iii) other Liens arising in
the ordinary course of business, other than liens for indebtedness or other monetary obligation,
which do not (x) interfere in any material respect with the use or occupancy of the
affected property as currently used or operated or (y) materially reduce the market value of the
Real Property below the fair market value the Real Property would have had but for such
encumbrance.
(b) Section 3.14(b)(1) of the Company Disclosure Letter contains a true, correct and
complete schedule of all leases, subleases, licenses and other agreements (including all
modifications, amendments and supplements thereto) (collectively, the Real Property
Leases) under which the Company or any of its Subsidiaries uses or occupies or has the right
to use or occupy, now or in the future, any real property (the land, buildings and other real
property improvements covered by the Real Property Leases being herein called the Leased Real
Property), which schedule sets forth the date of and parties to each Real Property Lease, the
date of and parties to each amendment, modification and supplement thereto, the term and renewal
terms (whether
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or not exercised) thereof and a brief description of the Leased Real Property
covered thereby. The Company has heretofore delivered to the Parent true, correct and complete
copies of all Real Property Leases. Each Real Property Lease is valid, binding and in full force
and effect. Except for the matters listed in Section 3.14(b)(2) of the Company Disclosure
Letter (collectively, the Permitted Leased Real Property Exceptions), the Company or its
Subsidiary, as applicable, holds the leasehold estate under and interest in each Real Property
Lease free and clear of all Liens. There are no material disputes with respect to each Real
Property Lease and except as disclosed in Section 3.14(b)(3) of the Company Disclosure
Letter, neither the Company, nor, to the knowledge of the Company, any other party to each Real
Property Lease, is in breach or default under such Real Property Lease, and no event has occurred
or failed to occur or circumstance exists which, with the delivery of notice, the passage of time
or both, would constitute such a breach or default, or permit the termination, modification or
acceleration of rent under such Real Property Lease. Except as set forth in Section
3.14(b)(4) of the Company Disclosure Letter, no consent by the landlord or other third party
under any of the Real Property Leases is required in connection with the consummation of the
transactions contemplated herein and each of the Real Property Leases will continue to be in full
force and effect on identical terms following the Closing. Except as disclosed in Section
3.14(b)(5) of the Company Disclosure Letter, the Company or its Subsidiary has non-disturbance
agreements with the landlords lender with respect to each Real Property Lease.
(c) All of the land, buildings, structures and other improvements and all appurtenances
thereto used by each of the Company and its Subsidiaries in the conduct of its business are
included in the Owned Real Property and the Leased Real Property. The Leased Real Property and the
Owned Real Property are hereinafter collectively referred to as the Real Property.
(d) Section 3.14(d) of the Company Disclosure Letter contains a true, correct and complete
schedule of all material leases, subleases, licenses and other
agreements (including all modifications, amendments and supplements thereto) (collectively,
the Space Leases) granting to any person other than the Company or any of its
Subsidiaries any right to the possession, use, occupancy or enjoyment of the Real Property or any
portion thereof. The Company has heretofore delivered to the Parent true, correct and complete
copies of all Space Leases.
(e) Neither the Company nor any of its Subsidiaries owns or holds, or is obligated under or a
party to, any option, right of first refusal, right of first offer or other contractual right to
purchase, acquire, sell or dispose of the Real Property or any portion thereof or interest therein.
(f) All buildings, structures, fixtures, building systems and equipment included in the Real
Property (the Structures) are in reasonably good condition and repair in all material
respects and sufficient for the operation of the business of the Company, subject to reasonable
wear and tear and subject to replacements and upgrades of fixed assets consistent with the
Companys capital expenditures budget and in the ordinary course of business. There are no facts
or conditions affecting any of the Structures which would interfere in any material respect with
the use or occupancy of the Structures or any portion thereof in the operation of the business of
the Company.
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(g) Neither the Company nor any of its Subsidiaries has received notice or has knowledge of
any pending, threatened or contemplated condemnation proceeding affecting the Real Property or any
part thereof or of any sale or other disposition of the Real Property or any part thereof in lieu
of condemnation.
(h) The present use of the land and Structures on the Real Property are in conformity in all
material respects with all applicable laws, rules, regulations and ordinances, including all
applicable zoning laws, land use laws and restrictions, building codes, setback requirements,
ordinances and regulations and with all registered deeds, restrictions of record, reciprocal
easement agreements or other agreements affecting such Real Property, and neither the Company nor
any of its Subsidiaries has knowledge of any proposed change therein that would so affect any of
the Real Property or its use and neither the Company nor any of its Subsidiaries has knowledge of
any violation thereof. To the Companys or any applicable Subsidiarys knowledge, there exists no
conflict or dispute with any regulatory authority or other Person relating to any Real Property or
the activities thereon which would be reasonably likely to result in a Material Adverse Effect. No
damage or destruction has occurred with respect to any of the Real Property that would reasonably
be expected to result in a Material Adverse Effect.
(i) Section 3.14(i) of the Company Disclosure Letter sets forth a list of all construction and
material alteration projects currently ongoing with respect to any Real Property (the
Construction Projects). The Construction Projects are proceeding in a workmanlike
fashion in compliance in all material respects with all applicable laws, rules, regulations and
ordinances, and, to the Companys knowledge, there are no facts or conditions affecting any of the
Construction Projects which would interfere in any significant respect with the completion of the
Construction Projects, or the use, occupancy or operation thereof, which interference would
reasonably be expected to
result in a Material Adverse Effect. No Construction Project or portion thereof is dependent
for its access, operation or utility on any land, building or other improvement not included in the
Real Property.
Section 3.15 Intellectual Property Matters.
(a) Either the Company or one of its Subsidiaries owns, or otherwise has the right pursuant to
a valid written license, sublicense or other agreement to use, all Intellectual Property used in
connection with the business of the Company or any of its Subsidiaries as presently conducted or
contemplated (the Company Intellectual Property), free and clear of all Liens.
Intellectual Property shall mean all intellectual property or other proprietary rights of
any kind, as they exist anywhere in the world, including (i) all copyrights, all renewals and
extensions thereof, and all registrations and applications thereof, (ii) domain names, Internet
addresses, and other computer identifiers, web sites, and web pages, and similar rights and items,
(iii) patents, patent applications, inventions (whether or not patentable) and other patent rights,
(iv) computer software programs, including all source code, object code, specifications, databases,
designs and related documentation (collectively, Software), (v) trademarks, service
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marks, trade dress, trade names, brand names, designs, logos, or corporate names, all registrations
and applications for registration thereof, and all goodwill associated therewith, (vi) trade
secrets, know-how, inventions, processes, procedures, customer information, confidential business
information, and technical information (collectively, Trade Secrets), and (vii) licenses,
sublicenses, distribution agreements, covenants not to sue and other agreements and permissions
relating to items (i)-(vi) (collectively, IP Licenses).
(b) Section 3.15(b)(i) of the Company Disclosure Letter sets forth a true and complete list of
all registrations, issuances, filings and applications for any Intellectual Property owned or filed
by the Company or any of its Subsidiaries as well as all material unregistered Company Intellectual
Property. All such items of Intellectual Property are valid, subsisting, enforceable and in full
force and effect.
(c) Each of the Company and its Subsidiaries has taken all necessary and desirable actions to
maintain and protect each item of Company Intellectual Property owned or purported to be owned by
the Company or any of its Subsidiaries, including taking all reasonable or necessary actions and
precautions to protect the secrecy, confidentiality, and value of its Trade Secrets and the
proprietary nature and value of its Intellectual Property.
(d) To the Companys knowledge, (i) none of the Company Intellectual Property, business
operations, products or services owned, used, developed, provided, sold, licensed, imported or
otherwise exploited by the Company or any of its Subsidiaries, or made for, used or sold by or
licensed to the Company or any of its Subsidiaries by any person nor the conduct of the Company or
its subsidiaries business infringes upon, misappropriates or otherwise violates any Intellectual
Property rights of others, and (ii) no person is infringing upon or otherwise violating the
Intellectual
Property rights of the Company or any of its Subsidiaries. There are no claims pending or, to
the Companys knowledge, threatened, and there is no fact, event, condition or circumstance that,
directly or indirectly, may give rise to or serve as a basis for the commencement of any claim, (x)
contesting the right of the Company or any of its Subsidiaries to use any of the Companys or such
Subsidiarys products or services currently or previously used by the Company or such Subsidiary or
(y) opposing or attempting to cancel any rights of the Company or such Subsidiary in or to any
Company Intellectual Property.
(e) Section 3.15(e) of the Company Disclosure Letter sets forth a true and complete
list and description of all Software used by the Company or any of its Subsidiaries (except for
off-the-shelf software, as such term is commonly understood, that is commercially available on a
retail basis under non-discriminatory pricing terms and used solely on the desktop personal
computers of the Company). All Software used by the Company or any of its Subsidiaries performs in
conformance with its documentation, is free from any material software defect and does not contain
any malicious code. The Company and each of its Subsidiaries has made back-ups of all such
Software (specifically including all databases) and has maintained such backups at a secure
off-site location. The Company and each of its Subsidiaries is in compliance with
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each IP License
relating to Software to which it is a party, and each such IP License shall remain in full force
and effect following the consummation of the transactions contemplated herein.
(f) After the consummation of the transactions contemplated herein, the Company will own all
right, title, and interest in and to or have a valid written license to use all Company
Intellectual Property on identical terms and conditions as each of the Company or its subsidiaries
enjoyed immediately prior to such transactions.
(g) Each of the Company and its Subsidiaries has security measures and safeguards in place
that are adequate and appropriate in all material respects to protect information it collects from
customers and other parties from illegal or unauthorized access or use by its personnel or third
parties or access or use by its personnel or third parties in a manner that could reasonably be
expected to lead to a violation of the privacy rights of third parties. Neither the Company nor
any of its Subsidiaries has collected, received or used such information in an unlawful manner or
in violation of the privacy rights of third parties, and to the Companys knowledge, no Person has
gained unauthorized access to or made any unauthorized use of such information in any manner that
has led or could reasonably be expected to lead to a material legal liability of the Company or its
Subsidiaries.
Section 3.16 Labor Matters. Neither the Company nor any of its Subsidiaries is a party to any
collective bargaining agreements, memoranda of understanding, settlements or other labor agreements
with any union or labor organization. There are no material disputes or controversies pending or,
to the Companys knowledge, threatened between the Company or any of its Subsidiaries and any of
their current or former employees or any labor or other collective bargaining
unit representing any such employee that, individually or in the aggregate, would reasonably be
expected to have a Company Material Adverse Effect. To the Companys knowledge, as of the
Agreement Date, there is no organizational effort presently being made or threatened by or on
behalf of any labor union with respect to employees of the Company or any of its Subsidiaries. To
the Companys knowledge, as of the Agreement Date, there are no current Department of Labor, Office
of Federal Contract Compliance Programs or Equal Employment Opportunity Commission audits pending
with respect to the Company or any of its Subsidiaries except for audits arising in the ordinary
course of business or that would not, individually or in the aggregate, reasonably be expected to
have a Company Material Adverse Effect. To the Companys knowledge, it is in material compliance
with all local, state and federal wage and hours laws (including the Federal Fair Labor Standards
Act) and all federal immigration laws. There are no material liabilities or obligations relating
to any individuals current or former employment with the Company or its Subsidiaries or related
entities arising in connection with any violation of any Laws. No individual who has performed
services for the Company or any of its Subsidiaries has
been improperly excluded from participation
in any Company Plan, and neither the Company nor any of its Subsidiaries has any direct or indirect
liability, whether actual or contingent, with respect to any misclassification of any person as an
independent contractor rather than as an employee, or with respect to any employee leased from
another employer. Neither the Company nor any of its Subsidiaries has
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incurred any liability or
obligation and none of the employees of the Company or any of its Subsidiaries have experienced or
will experience an employment loss (as defined by the federal Worker Adjustment and Retraining
Notification Act of 1988, including the regulations promulgated thereto (WARN) or any
similar state or local statute) during the 90 day period immediately prior to the Closing, or that
if such employment losses do occur, with prior written notice to the Parent, that the Company will
timely give all notices required to be issued under, and otherwise comply with, WARN and any
similar state or local statues and regulations of any applicable jurisdiction related to plant
closings, mass layoffs (or similar triggering event) caused by the Company. To the extent that,
after the Closing, the Parent operates the business of the Company and its Subsidiaries in the same
manner operated by the Company and its Subsidiaries during the six-month period prior to the
Closing, the Parent will not incur any liability under WARN or any similar state or local statute.
Section 3.17 Amendment to the Rights Agreement. The Company has taken and will maintain in effect
all necessary action to prevent the Shareholder Rights Agreement, dated as of February 18, 2005, by
and between the Company and American Stock Transfer & Trust Company, as Rights Agent, as amended
(the Rights Agreement), from being applicable to this Agreement and the transactions
contemplated hereby, including preventing any right issued or issuable under the Rights Agreement
from becoming exercisable by virtue of this Agreement, the Merger or any other transaction
contemplated by this Agreement and ensuring that (a) neither the Parent nor the Merger Subsidiary
nor any of their Affiliates (as defined in the Rights Agreement) or Associates (as defined in
the Rights Agreement) is considered to be an Acquiring Person (as defined in the Rights
Agreement) by virtue of this Agreement, the Merger or any other transaction contemplated by this
Agreement, (b) the provisions of the Rights Agreement, including the occurrence of a Share
Acquisition Date (as defined
in the Rights Agreement) or Distribution Date (as defined in the Rights Agreement), are not and
shall not be triggered by reason of the execution, announcement or consummation of this Agreement,
the Merger any other transaction contemplated by this Agreement and (c) each right issued and
outstanding immediately prior to the Effective Time shall expire without additional payment at the
Effective Time. The Company has delivered to the Parent a true and correct copy of the Rights
Agreement as amended and supplemented to the date of this Agreement.
Section 3.18 Takeover Laws. The restrictions contained in Chapter 2 of Title 35 of the SC Code do
not apply to the Company, this Agreement, the Merger or the other transactions contemplated herein.
The Company has taken all necessary action to render any other potentially applicable
anti-takeover or similar statute or regulation or provision of the articles of incorporation or
by-laws, or other organizational or constitutive document or governing instruments of the Company
or any of its Subsidiaries, inapplicable to this Agreement and the transactions contemplated by
this Agreement.
Section 3.19 Insurance. Section 3.19 of the Company Disclosure Letter sets forth a list of all
material insurance policies that the Company and each of its respective Subsidiaries maintain.
Such policies or binders of insurance cover risks in amounts adequate for the Company and its
Subsidiaries respective businesses and operations and are customary in the industry in which the
Company and its Subsidiaries
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operate. All material insurance policies maintained by the Company
and its Subsidiaries are in full force and effect, all premiums due and payable thereon have been
paid (and no further premiums or payments are due after the Effective Time with respect to any
coverage prior to the Effective Time), and the Company and its Subsidiaries are otherwise in
compliance in all material respects with the terms and conditions of such policies. No limit
imposed on any such insurance policy has been exhausted or significantly diminished and each
provider of the insurance policies listed in Section 3.19 of the Company Disclosure Letter is
solvent as of the Agreement Date. The Company has made available to the Parent true and correct
copies of all loss run reports for the past five years which have been provided to the Company, its
Subsidiaries or any of their insurance agents.
Section 3.20 Brokers Fees. Except for the fees and expenses payable by the Company to Brookwood
Associates, LLC (Brookwood) pursuant to a letter agreement dated January 27, 2006 (the
Brookwood Engagement Letter), a complete copy of which has been previously delivered to
the Parent, neither the Company nor any of its Subsidiaries has any liability or obligation to pay
any fees or commissions to any financial advisor, broker, finder or agent with respect to the
transactions contemplated by this Agreement.
Section 3.21 Opinion of Financial Advisor. The Company has received the opinion of Brookwood,
dated the Agreement Date, to the effect that, as of the date the opinion was delivered, the
consideration to be received by the holders of Company Common Stock (the Company
Stockholders) pursuant to this Agreement is fair to the Company Stockholders, other than the
Parent, the Merger
Subsidiary and their respective Subsidiaries, from a financial point of view. Upon the Companys
receipt of the written version of such opinion, the Company will promptly provide the Parent with a
copy of such opinion. The Company has received the consent of Brookwood to include its final
written opinion in the Proxy Statement subject to the terms and provisions of the Brookwood
Engagement Letter.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF
THE PARENT AND THE MERGER SUBSIDIARY
The Parent and the Merger Subsidiary, jointly and severally, represent and warrant to the
Company that:
Section 4.1 Corporate Existence and Power. Each of the Parent and the Merger Subsidiary is a
corporation duly organized, validly existing and in good standing under the Laws of the
jurisdiction of its incorporation and has all requisite corporate power and authority to own, lease
and operate its properties and assets and to carry on its business as presently being conducted,
except when the failure to be in good standing or have such power and authority, individually or in
the aggregate, would not reasonably be expected to have a material adverse effect on the ability of
the Parent or the Merger Subsidiary to consummate the Merger (a Parent Material Adverse
Effect). Each of the Parent and the Merger Subsidiary is duly qualified or licensed to
conduct business and is in good standing in each jurisdiction in which the properties owned, leased
or operated by it or the nature of the business conducted by it makes such qualification or license
necessary, except where the failure to be so qualified or licensed
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and in good standing,
individually or in the aggregate, would not reasonably be expected to have a Parent Material
Adverse Effect. Since the date of its incorporation, the Merger Subsidiary has not engaged in any
activities other than in connection with, or as contemplated by, this Agreement.
Section 4.2 Authorization of Transaction; Non-Contravention; Approvals.
(a) The Parent and the Merger Subsidiary have full corporate power and authority and have
taken all requisite corporate action to enter into this Agreement and, subject to the adoption of
this Agreement by the Parent as the sole stockholder of the Merger Subsidiary (which shall occur
promptly after the execution and delivery hereof), to consummate the transactions contemplated
hereby and to perform its obligations hereunder. This Agreement has been duly authorized, executed
and delivered by the Parent and the Merger Subsidiary and, assuming the due authorization,
execution and delivery thereof by the Company, constitutes a valid and legally binding agreement of
the Parent and the Merger Subsidiary enforceable against each of them in accordance with its terms,
except that (i) such enforcement may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, fraudulent transfer or similar Laws of general applicability relating
to or affecting enforcement of creditors rights generally and (ii) the remedy of specific
performance and injunctive and other forms of equitable relief may be
subject to equitable defenses and to the discretion of the court before which any proceeding
therefor may be brought.
(b) Except for (a) filings and approvals necessary to comply with the applicable requirements
of the Exchange Act, (b) filings pursuant to the HSR Act and any other applicable Antitrust Laws,
(c) the filing of the Articles of Merger pursuant to the SCBA and (d) any filings required under
the rules and regulations of the NASDAQ National Market, neither the execution and delivery of this
Agreement by the Parent and the Merger Subsidiary, nor the consummation by the Parent and the
Merger Subsidiary of the transactions contemplated hereby, shall (i) violate or conflict with any
provision of the articles of incorporation or bylaws of the Parent or the Merger Subsidiary, (ii)
violate any Laws applicable to the Parent or the Merger Subsidiary or any of their respective
properties or assets, or (iii) require any filing or registration with, notification to, or
authorization, consent or approval of, any Governmental Authority; except in the case of clauses
(ii) and (iii) for such violations, breaches or defaults that, or filings, registrations,
notifications, authorizations, consents or approvals that the failure to obtain, individually or in
the aggregate, would not reasonably be expected to have a Parent Material Adverse Effect.
Section 4.3 Financing Capability
(a) The Parent has entered into a sale-leaseback facility commitment letter with Drawbridge
Special Opportunity Fund, LLC dated July 23, 2006 (Drawbridge) and the Parent and the
Merger Subsidiary have entered into a debt financing commitment letter from Credit Suisse
Securities (USA) LLC and UBS Securities LLC (together with Drawbridge, the Lenders) dated
July 24, 2006 (the Commitment Letters) pursuant to which the sale-leaseback facility and
debt financing sources identified therein have committed to provide to the Parent up to $1.5
billion in
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the aggregate (the Financing), subject to the terms and conditions therein and
assuming that the conditions set forth in Sections 6.1 and 6.2 are satisfied as of the Closing.
The Parent has delivered correct and complete copies of the Commitment Letters to the Company. As
of the date hereof, the Commitment Letters (i) are in full force and effect, (ii) are binding and
enforceable against the Parent and, to the knowledge of Parent, each of the other parties thereto
in accordance with their respective terms, except that (A) such enforcement may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer or similar Laws
of general applicability relating to or affecting enforcement of creditors rights generally and
(B) the remedy of specific performance and injunctive and other forms of equitable relief may be
subject to equitable defenses and to the discretion of the court before which any proceeding
therefor may be brought, and (iii) have not been amended or terminated in any manner adverse to the
Company. As of the date of this Agreement, the Parent does not believe that the Commitment Letters
will be terminated or amended in any material respect in a manner adverse to the Company. As of
the date of this Agreement, the Lenders have not advised Parent, Merger Subsidiary or any of their
respective Affiliates of any facts which cause them to believe the financings contemplated by the
Commitment Letters will not be consummated substantially in accordance with the terms thereof. All
commitment fees
and other fees required to be paid pursuant to the Commitment Letters on or prior to the date
hereof have been paid.
(b) To the knowledge of the Parent, as of the date hereof, there are no conditions precedent
related to the funding of the Financing other than as set forth in the Commitment Letters.
Section 4.4 Information in the Proxy Statement. The information supplied by the Parent or the
Merger Subsidiary expressly for inclusion or incorporation by reference in the Proxy Statement
shall not contain any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements made therein, in the
light of the circumstances under which they were made, not misleading.
Section 4.5 Litigation. As of the Agreement Date, there are no claims, actions or proceedings
pending or, to the knowledge of the Parent, threatened against the Parent or any of its
Subsidiaries before any Governmental Authority that seek to restrain or enjoin the consummation of
the Merger or that, if adversely determined, would adversely affect in any material respect Parent
or any of its Subsidiaries ability (financial or otherwise) to consummate the Merger. As of the
Agreement Date, neither the Parent nor any of its Subsidiaries is subject to any to any outstanding
judgment, injunction, order or decree of any Governmental Authority which prohibits or restricts
the consummation of the transactions contemplated by this Agreement.
Section 4.6 Brokers and Finders Fees. Except for the fees and expenses payable by the Parent to
Berenson & Company, LLC pursuant to a letter agreement dated May 31, 2006, the Parent has not
incurred any liability for brokerage or finders fees or agents commissions or any similar charges
in connection with this Agreement or any transaction contemplated hereby.
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ARTICLE V
COVENANTS
Section 5.1 General. Subject to the terms and conditions of this Agreement, each of the parties
shall take all actions and do all things necessary, proper or advisable to perform its obligations
under this Agreement which are required to be performed on or prior to the Closing, and use its
reasonable efforts to consummate and make effective the transactions contemplated by this Agreement
as promptly as reasonably practical.
Section 5.2 Further Assurances. Prior to the Closing Date, each of the parties shall give all
required notices to third parties and Governmental Authorities and shall use its reasonable efforts
to obtain all material third party and governmental consents and approvals that it is required to
obtain in connection with this Agreement, the Merger and the other transactions contemplated
hereby. No later than ten (10) business days after the date of the execution of this Agreement,
each of the parties shall file a Notification and Report Form and related material with the Federal
Trade Commission and the Antitrust Division of the United States Department of Justice under the
HSR Act and any other applicable Antitrust Laws, shall use its respective reasonable efforts to
obtain termination of the applicable waiting period under all Antitrust Laws and shall take all
further actions and make all further filings pursuant to the Antitrust Laws that may be necessary,
proper or advisable. Notwithstanding anything to the contrary contained herein, nothing contained
in this Agreement shall be deemed to require the Parent or any of its Subsidiaries or the Company
or any of its Subsidiaries to enter into any agreement, consent decree or other commitment
requiring the Parent or any of its Subsidiaries or the Company or any of its Subsidiaries to divest
any assets or properties or to agree to any restriction on the operations of the Parent, the
Surviving Corporation, the Company or any of their respective Subsidiaries after the Effective Time
or to litigate, pursue or defend any action or proceeding by any Governmental Authority challenging
any of the transactions contemplated hereby as violative of any Antitrust Laws. In connection with
the foregoing, each party (i) shall promptly notify the other party in writing of any communication
received by that party or its Affiliates from any Governmental Authority, and subject to applicable
Laws, provide the other party with a copy of any such written communication (or written summary of
any oral communication), and (ii) not participate in any substantive meeting or discussion with any
Governmental Authority in respect of any filing, investigation or inquiry concerning the
transactions contemplated by this Agreement unless it consults with the other party in advance, and
to the extent permitted by such Governmental Authority, give the other party the opportunity to
attend and participate thereat. For purposes of this Agreement, Affiliate will mean,
with respect to any Person, any other Person that (i) owns 10% or more of the voting securities of
the first Person or any of its Subsidiaries, (ii) is a director, executive or officer of the first
Person or any of its Subsidiaries, or (iii) directly or indirectly controls, is controlled by or is
under common control with the first Person or any of its Subsidiaries.
Section 5.3 Interim Conduct of the Company.
(a) Except as expressly permitted by this Agreement, set forth in Section 5.3 of the Company
Disclosure Letter, or pursuant to the Parents prior written consent, which consent shall not be
unreasonably withheld, conditioned or delayed (it
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being understood that reasonableness for this
purpose will be assessed both from the Parents perspective assuming the Closing will take place in
accordance with this Agreement and from the Companys perspective in connection with its
operational needs), from and after the Agreement Date through the Effective Time, the Company
shall, and shall cause each of its Subsidiaries, (i) to conduct its operations in accordance with
its ordinary course of business in all material respects, consistent with past practice, and (ii)
use its reasonable efforts to preserve intact its business organization, keep available the
services of its current officers and employees, preserve the goodwill of those having business
relationships with the Company and its Subsidiaries, preserve its relationships with customers,
creditors and suppliers, maintain its books, accounts and records and comply in all material
respects with applicable Laws.
(b) Without limiting the generality of the foregoing, except as provided in this Agreement, or
in Section 5.3 of the Company Disclosure Letter, from and after the Agreement Date through the
Effective Time, the Company shall not, and shall not cause or permit any of its Subsidiaries to,
take any of the following actions without the prior written consent of the Parent:
(i) amend or propose to amend its certificate (or articles) of incorporation or bylaws or file
any certificate of designation or similar instrument with respect to any shares of its authorized
but unissued capital stock;
(ii) authorize or effect any stock split, combination or reclassification of shares of its
capital stock or amend any term of any outstanding security of the Company or repurchase, redeem or
otherwise acquire any shares of its capital stock;
(iii) declare, pay or set aside any dividend or distribution with respect to the Company
Common Stock or any other of its capital stock (other than dividends payable by a wholly-owned
Subsidiary of the Company to the Company or another wholly-owned Subsidiary), authorize for
issuance or issue, sell, grant any shares of its capital stock (other than in connection with the
exercise of Company Options outstanding on the Agreement Date and listed in the Company Disclosure
Letter or in connection with any offering period under the ESPP that has commenced prior to the
Agreement Date; provided, however, that participants may not increase their payroll
deductions or purchase selections from those in effect as of the Agreement Date.), options,
warrants, stock appreciation rights, phantom equity, commitments, subscriptions, other rights of
any kind (including Company Stock Based Awards) to acquire any shares of capital stock, or any
other securities exercisable or exchangeable for or convertible into shares of its capital stock,
or repurchase, redeem or otherwise acquire any shares of its capital stock or any other securities
exercisable or exchangeable for or convertible into shares of its capital stock;
(iv) merge or consolidate with any entity or liquidate, dissolve or effect any
recapitalization or reorganization in any form or create any new Subsidiary;
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(v) sell, lease, license, pledge, encumber or otherwise dispose of any (A) Owned Real Property
(other than in connection with any definitive agreement to sell, lease, pledge, encumber or
otherwise dispose of any such Owned Real Property entered into prior to the date hereof) or (B) any
other assets or any interests (including any shares of the capital stock of any of the
Subsidiaries) that are material to the Company and its Subsidiaries, taken as a whole, other than
assets used, consumed, replaced or sold in the ordinary course of business, consistent with past
practice;
(vi) acquire (whether by purchase of assets, purchase of stock, merger or otherwise) (A) any
assets (including any equity interests) other than in the ordinary course of business or (B) any
equity interest of any Person or any business or division of any business, or enter into any joint
venture, partnership agreement, joint
development agreement, strategic alliance agreement or other similar agreement (other than
teaming or other similar agreements entered into by the Company and/or its Subsidiaries in the
ordinary course of business, consistent with past practice);
(vii) create, incur, assume or otherwise become liable for any indebtedness for borrowed
money, or guarantee any such indebtedness; issue or sell any debt securities or warrants or rights
to acquire any debt securities of the Company or its Subsidiaries; guarantee any debt securities of
others; enter into any keep well or other contract to maintain any financial statement condition
of any Person other than a wholly-owned Subsidiary or enter into any arrangement having the
economic effect of the foregoing, other than indebtedness existing as of the Agreement Date or
incurred to refinance existing indebtedness on monetary terms, including with respect to
prepayment, no less favorable to the Company or its Subsidiaries than the indebtedness being
refinanced, borrowings under existing credit lines or any of the foregoing created, incurred or
assumed in the ordinary course of business, consistent with past practice and intercompany
indebtedness among the Company and its wholly-owned Subsidiaries;
(viii) except as required as a result of changes in Law, GAAP or Regulation S-X of the
Exchange Act, change any of the accounting principles or practices used by it as of December 28,
2005 that would reasonably be expected to materially affect the assets, liabilities or results of
operation of the Company or any of its Subsidiaries;
(ix) make or change any Tax election, settle or compromise any Tax liability involving a
payment of more than $1,000,000, change in any material respect any accounting method in respect of
Taxes, file any amendment to a material Tax Return, enter into any closing agreement, settle any
material claim or material assessment in respect of Taxes involving a payment of more than
$1,000,000, or consent to any extension or waiver of the limitation period applicable to any claim
or assessment in respect of Taxes, except, in each case, in the ordinary course of business
consistent with past practice, or make any Tax payment outside the ordinary course of business
consistent with past practice;
(x) other than (A) as set forth in Section 5.3(x) of the Company Disclosure Letter or
(B) as required to comply with applicable Laws or the
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terms of any employment-related agreement in
effect on the Agreement Date, increase the compensation payable or to become payable to any
director or officer (other than increases in cash compensation to employees who are not directors
or officers, made in the ordinary course of business, consistent with past practice) or adopt,
enter into, or increase any bonus, insurance, severance, pension or other benefit plan, payment or
arrangement made to, for or with any such directors, officers or other employees, or grant any
severance or termination pay to any officer or director or to any other employee except payments
made in connection with the termination of employees who are not officers or directors in amounts
consistent with its policies (existing immediately prior to the Agreement Date) and past practice;
(xi) enter into, adopt, amend or terminate any Company Plan or collective bargaining
agreement;
(xii) make any capital expenditure, capital addition or capital improvement in an amount
exceeding $100,000 or $1,000,000 in the aggregate;
(xiii) (A) enter into any contract, agreement or commitment (excluding purchase contracts for
food or beverage supplies that (x) either do not require any volume commitments or (y) to the
extent they do require volume commitments (I) could not require payments of $1,000,000 in the
aggregate over the term of any such contract and (II) do not expire on or after December
31, 2006) of a character that is, or would reasonably be expected to be, material to the Company
and its Subsidiaries taken as a whole, or could require payments of more than $1,000,000 in the
aggregate over the term of any such contract, agreement or commitment or (B) terminate, renew or
amend in any material respect any contract, agreement or commitment that is, or would reasonably be
expected to be, material to the Company and its Subsidiaries taken as a whole, or could require
payments of more than $1,000,000 in the aggregate over the term of any such contract, agreement or
commitment;
(xiv) waive, release or assign any material rights, claims or benefits of the Company or any
Subsidiary under any Company Material Agreement;
(xv) engage in any reportable transaction, including any listed transaction, each within
the meaning of Code Section 6011 or any other applicable federal Law, including any Internal
Revenue Service ruling, procedure, notice or other pronouncement;
(xvi) waive or release any rights that are material to the Company and its Subsidiaries, taken
as a whole, or pay, discharge or satisfy any claims, liabilities or obligations that are, or would
reasonably be expected to be, material to the Company and its Subsidiaries, taken as a whole,
before the same come due in accordance with their terms, except in either case other than the
payment, discharge and satisfaction in the ordinary course of business of liabilities reflected on
or reserved for in the Financial Statements of the Company included in the Company SEC Documents or
otherwise incurred in the ordinary course of business, consistent with past practice;
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(xvii) settle or compromise any pending or threatened suit, action or proceeding involving a
settlement payment by the Company or any of its Subsidiaries in excess of $250,000 or requiring the
Surviving Corporation to take or refrain from taking any material action after the Effective Time;
(xviii) acquire, sell, lease, license, transfer, pledge, encumber, grant or dispose of
(whether by merger, consolidation, purchase, sale or otherwise) any material Company Intellectual
Property, or enter into any material commitment or transaction or take any material action, with
respect to any Intellectual Property outside the ordinary course of business consistent with past
practice, or do any act or knowingly omit to do any act whereby any Company Intellectual Property
material
to the business of the Company or any of its Subsidiaries may become invalidated, abandoned,
unmaintained, unenforceable or dedicated to the public domain; or
(xix) agree, resolve or commit to do any of the foregoing.
Section 5.4 Control of Operations. Nothing contained in this Agreement shall give to the Parent,
directly or indirectly, rights to control or direct the operations of the Company prior to the
Effective Time. Prior to the Effective Time, the Company shall exercise, consistent with the terms
and conditions of this Agreement, complete control and supervision of its and its Subsidiaries
operations.
Section 5.5 Proxy Statement; Company Stockholders Meeting.
(a) As promptly as practicable after the Agreement Date, the Company shall commence
preparation of a Proxy Statement relating to a special meeting of the Companys stockholders
meeting (the Company Stockholders Meeting) for the purpose of obtaining the Company
Stockholders Approval, and file a preliminary Proxy Statement with the SEC or its staff. The
Company shall use its reasonable efforts to respond to any comments by the SEC or its staff to such
preliminary Proxy Statement and to cause a definitive Proxy Statement to be mailed to the Company
Stockholders as soon as possible following the Agreement Date. The Company shall notify the Parent
promptly of the receipt of and shall respond promptly to any (i) comments from the SEC or its staff
and (ii) request by the SEC or its staff for amendments or supplements to the Proxy Statement or
for additional information and shall supply the Parent with copies of all correspondence between
the Company or any of its representatives, on the one hand, and the SEC or its staff, on the other
hand, with respect to the Proxy Statement or the Merger. The Parent and its counsel shall be given
a reasonable opportunity to review and comment upon the Proxy Statement and any amendment or
supplement thereto and any such correspondence prior to its filing with the SEC or dissemination to
the Company Stockholders. If necessary, after the Proxy Statement has been so mailed, the Company
shall promptly circulate amended, supplemental or supplemented proxy materials, and if required in
connection therewith, resolicit proxies. Subject to Section 5.8(d), the Company shall
include in the definitive Proxy Statement the unanimous recommendation of the Companys Board of
Directors that the Company Stockholders vote in favor of approval of the Merger and the adoption of
this Agreement (the Company Recommendation).
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(b) The Parent shall provide the Company with information concerning or relating to the Parent
or the Merger Subsidiary that may be required in connection with the preparation and filing of the
Proxy Statement pursuant to this Section 5.5. The information supplied by the Parent and
the Company for inclusion in the Proxy Statement shall not at the time (i) the Proxy Statement is
filed with the SEC, (ii) the Proxy Statement is first mailed to the Company Stockholders, or (iii)
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 were made, not misleading.
For purposes of the foregoing, it is understood and agreed that information concerning or relating
to the Parent or the Merger Subsidiary will be deemed to have been supplied by the Parent, and all
other information will be deemed to have been supplied by the Company. The Company shall cause all
documents filed with the SEC in connection with the Merger to comply as to form and substance in
all material respects with the applicable requirements of the Exchange Act.
(c) The Company, acting through the Companys Board of Directors, shall in accordance with
applicable Law and as soon as possible following the Agreement Date, establish a record date for,
duly call, give notice of, convene and hold the Company Stockholders Meeting for the purpose of
voting upon this Agreement and the Merger, and the Company shall submit this Agreement at such
meeting. The Company shall use its reasonable efforts (it being understood that such reasonable
efforts shall not prevent the Company from withdrawing, modifying or changing its recommendation
pursuant to Section 5.8(d)) to solicit from the Company Stockholders proxies in favor of
the adoption of this Agreement and take all actions reasonably necessary or, in the reasonable
opinion of the Parent, advisable to secure the Company Stockholders Approval. Without limiting the
generality of the foregoing, the Companys obligation pursuant to the preceding two sentences will
not be affected by the commencement, public proposal, public disclosure or communication to the
Company of any Acquisition Proposal or Superior Proposal or any withdrawal of the Company
Recommendation. Subject to the Company withdrawing, modifying or changing its recommendation
pursuant to Section 5.8(d), the Company, acting through the Companys Board of Directors,
shall make the Company Recommendation at the Company Stockholders Meeting.
Section 5.6 Financing.
(a) The Parent and the Merger Subsidiary shall use commercially reasonable efforts to take, or
cause to be taken, all actions and to do, or cause to be done, all things necessary, proper or
advisable to (i) maintain in effect the Commitment Letters and to satisfy the conditions (to the
extent such conditions are under the reasonable control of the Parent) to obtaining the Financing
set forth therein, (ii) enter into definitive financing agreements (the Financing
Agreements) with respect to the Financing so that the Financing Agreements are in effect as
promptly as practicable (but no later than the third business day) following satisfaction of the
conditions to this Agreement and (iii) consummate the Financing as soon as practicable following
satisfaction of the conditions to this Agreement. The Parent shall keep the Company reasonably
informed of the status of the financing process and shall advise the Company if, at any time after
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the date hereof, any of the representations and warranties set forth in Section 4.3 are no
longer true and correct in any material respect.
(b) If the Commitment Letters or the Financing Agreements expire or are terminated, amended,
modified or supplemented for any reason, the Parent shall (i) promptly notify the Company of such
expiration, termination, amendment, modification or supplement and the reasons therefor and (ii) in
the case of the termination
or expiration of either of the Commitment Letters, use commercially reasonable efforts to
obtain alternative financing to consummate the transactions contemplated by this Agreement; it
being understood, however, that such commercially reasonable efforts would not require the Parent
to obtain financing that is on terms less favorable, in substance, to the Parent and the Merger
Subsidiary thereunder than those set forth in the Commitment Letters or the Financing Agreements,
as the case may be.
(c) The Company shall, and shall cause its Subsidiaries, to reasonably cooperate with the
Parent in connection with the fulfillment of the obligations of the Parent under Sections
5.6(a) and 5.6(b) of the Agreement and the fulfillment of the condition set forth in
Section 6.3(d) of the Agreement, including causing the Company and any of its Subsidiaries
and each of their respective directors, officers, employees, agents, attorneys, accountants,
investment bankers and other representatives (collectively, the Company Representatives)
to (i) provide, as promptly as reasonably practicable after the execution of this Agreement, the
Parent with all audited financial statements and interim financial statements of the Company that
would be required to be included in a registration statement of the Parent filed under the
Securities Act of 1933, as amended, pursuant to Rule 3-05 of Regulation S-X, (ii) provide, as
promptly as reasonably practicable after the execution of this Agreement, all financial information
required by the Parent to produce pro forma financial statements for the Parent in accordance with
Article 11 of Regulation S-X, (iii) assist with the preparation of such offering memoranda and
documentation as is required under the Commitment Letters, (iv) meet with potential lenders and
financing sources, (v) remove all Liens (other than Liens arising after the date of this Agreement
in the ordinary course of business in favor of mechanics, contractors or repairmen for amounts
which are not material to the business of the Company and its Subsidiaries, which are being
contested in good faith by appropriate proceedings diligently prosecuted, which proceedings have
the effect of preventing the forfeiture or sale of the property subject thereto, and in each case
for which adequate reserves in accordance with GAAP are being maintained) that are not Permitted
Liens from the Leased Real Property and the Owned Real Property, (vi) obtain consents, estoppel
certificates, memorandums of leases, and subordination, non-disturbance and attornments agreements
from the lessors of the Leased Real Property, (vii) permit Phase II environmental investigations on
up to 12 of the Owned Real Properties and Leased Real Properties and (viii) timely notify all third
parties holding rights of first refusal, rights of first offers and purchase options against the
Owned Real Property of the Financing and seek to obtain waivers of those rights.
(d) The Company shall, and shall cause its Subsidiaries, to provide the Parent with financial
statements and related information sufficient to permit the Parent to
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fulfill its obligations to
provide financial disclosure relating to the Company, on a timely basis in any report under the
Exchange Act.
(e) Upon the request of the Parent, the Company shall (i) use its commercially reasonable
efforts to cause its independent auditors to deliver to the SEC any auditors consent that is
required to be included in any filing with the SEC that includes or incorporates by reference the
financial statements and related information of the Company and (ii) to the extent the Parent or
any of its Subsidiaries conducts or
intends to conduct an offering of securities (and if the registration statement, prospectus or
offering memorandum for such offering includes or incorporates by reference the financial
statements relating to the Company), use its commercially reasonable efforts to cause its
independent auditors to deliver a letter containing statements and information of the type
ordinarily included in accountants cold comfort letters with respect to the financial statements
and financial information relating to the Company contained or incorporated by reference in any
such document relating to any such offering, in the case of each of (i) and (ii) above, within the
time period reasonably requested by the Parent or any of its Subsidiaries. In addition, in
connection with any SEC filing required to be made by the Parent or any of its Subsidiaries (or any
SEC review of such filing), the Company shall permit the Parent and its authorized representatives
to have reasonable access, during normal business hours and upon reasonable advance notice, to the
properties, books and records of the Company and its Subsidiaries relating to the Company solely
for the purpose of preparing any such SEC filing or responding to SEC questions, comments or
requests on such SEC filing.
Section 5.7 Additional Reports. The Company will furnish to the Parent drafts of any Company SEC
Documents within a reasonable time prior to filing with the SEC, and copies of any Company SEC
Documents that it files with the SEC on or after the date hereof, and the Company represents and
warrants that as of the respective dates thereof, such filed reports will (i) comply as to form in
all material respects with the published rules and regulations of the SEC with respect thereto,
(ii) contain financial statements prepared in accordance with GAAP applied on a consistent basis
throughout the periods involved (except as may be indicated in the notes thereto or, in the case of
unaudited interim financial statements, as may be permitted by the SEC on Form 10-Q, 8-K or any
successor form under the Exchange Act), and (iii) contain financial statements that fairly present
in all material respects the consolidated financial position of the Company and its Subsidiaries as
of the respective dates thereof and the consolidated results of the Companys and its Subsidiaries
operations and cash flows for the periods indicated, except that the unaudited interim financial
statements may not contain footnotes and may be subject to normal and recurring year-end
adjustments.
Section 5.8 Acquisition Proposals.
(a) From the Agreement Date until the Effective Time, the Company shall, and shall cause its
Subsidiaries and each of the Company Representatives, to immediately cease all existing
discussions, negotiations or other action with any other Person conducted heretofore with respect
to any Acquisition Proposal. From the Agreement Date until the Effective Time, the Company shall
not, and shall cause its Subsidiaries and each of the Company Representatives not to, (i) solicit,
initiate,
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knowingly facilitate or knowingly encourage, directly or indirectly, the making or
submission of any Acquisition Proposal, (ii) enter into any letter of intent, agreement,
arrangement or understanding with respect to any Acquisition Proposal, or agree to approve or
endorse any Acquisition Proposal or enter into any agreement, arrangement or understanding that
would require the Company to abandon, terminate or fail to
consummate the Merger or any other transaction contemplated by this Agreement, (iii) initiate
or participate in any way in any discussions or negotiations with, or furnish or disclose any
information to, any Person (other than the Parent or the Merger Subsidiary) in furtherance of any
proposal that constitutes, or could reasonably be expected to lead to, any Acquisition Proposal, or
(iv) facilitate or further in any other manner any inquiries or the making or submission of any
proposal that constitutes, or could reasonably be expected to lead to, any Acquisition Proposal.
Without limiting the foregoing, it is agreed that any violation of the foregoing restrictions by
any Company Representative, whether or not such Person is purporting to act on behalf of the
Company or any of its Subsidiaries, or otherwise, will be deemed to be a breach of this Section
5.8(a) by the Company.
(b) Notwithstanding the restrictions set forth in Section 5.8(a), if at any time prior
to obtaining the Company Stockholders Approval, the Companys Board of Directors receives a bona
fide, unsolicited Acquisition Proposal (under circumstances in which there has not been a violation
of Section 5.8(a)) and the Companys Board of Directors determines in good faith (after
consulting with its financial advisor and outside legal counsel) that such Acquisition Proposal is,
or is reasonably likely to result in a Superior Proposal (as such term is defined in subsection (h)
below) and that failure to take the action permitted under this paragraph would be inconsistent
with its fiduciary duties to the Company Stockholders under applicable Laws, the Company may (or
permit the Company Representatives), subject to providing the Parent with the information required
pursuant to subsection (c) below, (A) furnish information with respect to the Company and its
Subsidiaries to the Person making such Acquisition Proposal pursuant to a customary confidentiality
agreement not less restrictive (including with respect to standstill provisions) on the other party
than the confidentiality agreement dated March 20, 2006 (the Confidentiality Agreement),
and (B) participate in discussions or negotiations with the Person making such Acquisition
Proposal.
(c) The Company shall as promptly as practical, and in any event within forty-eight (48)
hours, notify the Parent of any Acquisition Proposal or of any request for information or inquiry
that could reasonably be expected to lead to an Acquisition Proposal, which notification shall
include a copy of the applicable Acquisition Proposal or a reasonably detailed written summary
thereof, request or inquiry (or, if oral, a written statement setting forth in reasonable detail
the material terms and conditions of such Acquisition Proposal, request or inquiry), including the
identity of the third party making such Acquisition Proposal, request or inquiry. The Company
shall keep the Parent advised on a reasonably current basis of the status and content of any
discussions or negotiations involving any Acquisition Proposal, request or inquiry and shall
promptly make available to the Parent any non-public information furnished to any third party in
connection therewith that has not been previously provided to the Parent. The Company will notify
the Parent in writing promptly after any determination by the
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Board of Directors of the Company
that an Acquisition Proposal is, or would reasonably be likely to result in or lead to, a Superior
Proposal.
(d) Neither the Companys Board of Directors nor any committee thereof will withdraw, modify
or change, or propose publicly to withdraw, modify or
change, in a manner adverse to the Parent, the Merger Subsidiary or the transactions
contemplated by this Agreement, the Company Recommendation, unless prior to obtaining the Company
Stockholders Approval, (A) the Companys Board of Directors determines in good faith (after
consultation with outside legal counsel) that the failure to take such action would be inconsistent
with its fiduciary duties to the Company Stockholders under applicable Laws, and (B) if such
withdrawal, modification or public proposal is taken in response to a Superior Proposal, then
unless the Company also first gives the Parent three (3) business days written notice of the
material terms and provisions of such Superior Proposal, during which three (3) business day period
the Company will and will cause the Company Representatives to negotiate in good faith with the
Parent, so that the Parent may propose an amendment to this Agreement for the purpose of causing
the Acquisition Proposal to no longer constitute a Superior Proposal. In the case of (i) subclause
(A) of the immediately preceding sentence, the Company may withdraw, modify or change its
recommendation and shall give the Parent prompt notification thereof; and (ii) subclause (B) of the
immediately preceding sentence, if at the end of such three (3) business day period, the Companys
Board of Directors continues to believe in good faith, after receiving the advice of its financial
advisors and outside legal counsel, that the Acquisition Proposal continues to be a Superior
Proposal, and the Company has concurrently satisfied its obligations pursuant to Sections
7.3 and 7.4, then the Company may withdraw, modify or change the Company Recommendation
by written notice to the Parent and terminate this Agreement pursuant to Section
7.1(c)(ii).
(e) Unless the Companys Board of Directors has previously withdrawn or modified, or is
concurrently withdrawing or modifying, the Company Recommendation in accordance with this section,
the Companys Board of Directors shall not recommend any Acquisition Proposal to the Company
Stockholders. Notwithstanding the foregoing, nothing contained in this Agreement shall prevent the
Companys Board of Directors from complying with Rule 14e-2(a) and Rule 14d-9 promulgated under the
Exchange Act with respect to any Acquisition Proposal or making any disclosure required by
applicable Laws.
(f) The Company shall not release nor permit the release of any Person from, or waive or
permit the waiver of any provision of, and the Company shall use its reasonable efforts to enforce
or cause to be enforced, any confidentiality, standstill or similar agreement to which any of the
Company or any of its Subsidiaries is a party, unless the Companys Board of Directors determines
in good faith (after consultation with outside legal counsel) that the failure to take such action
would be inconsistent with its fiduciary duties to the Company Stockholders under applicable Laws;
provided, however, that the Company shall not release or permit the release from,
or waive or permit the waiver of, any provision of any standstill or similar agreement the
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effect of which would be to permit such Person to effect a transaction without the approval of
the Companys Board of Directors.
(g) The term Acquisition Proposal means an inquiry, proposal, indication of interest
or offer from any Person other than Parent or any of its Affiliates relating to any (i) acquisition
or sale of (1) 20% or more of the consolidated assets of the Company and its Subsidiaries, or (2)
20% or more (in number or voting power) of the equity securities of the Company (or any of its
Subsidiaries, as applicable), (ii) tender offer or exchange offer, as defined pursuant to the
Exchange Act, that, if consummated, would result in any Person beneficially owning 20% or more (in
number or voting power) of the equity securities of the Company (or a Company Subsidiary as
applicable), or (iii) merger, consolidation, business combination, reorganization,
recapitalization, liquidation, dissolution or other similar transaction involving the Company or
any of its Subsidiaries, other than the transactions contemplated by this Agreement or a merger
involving only the Company and one or more of its wholly-owned Subsidiaries.
(h) The term Superior Proposal means a bona fide, written Acquisition Proposal that
is (i) not received in violation of Section 5.8(a); (ii) for at least a majority of the
outstanding Company Common Stock or all or substantially all or a majority of the assets of the
Company on a consolidated basis, provided that, a sale-leaseback or similar
transaction shall not be deemed a Superior Proposal; (iii) fully financed or for which financing,
to the extent required, is reasonably likely to be available; and (iv) on terms that the Companys
Board of Directors determines in good faith (A) would result in a transaction that is more
favorable to the Company Stockholders, from a financial point of view, than the transaction
contemplated hereby, and (B) is reasonably capable of being completed according to its terms.
Section 5.9 Indemnification.
(a) From and after the Effective Time, the Surviving Corporation shall fulfill and honor in
all respects the obligations of the Company pursuant to any indemnification, exculpation and
advancement of expenses provisions in favor of the current or former directors, officers, employees
or agents of the Company or any of its Subsidiaries or any other person who, at the request of the
Company or any of its Subsidiaries, served as a director, officer, member, trustee or fiduciary of
another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise
(the Indemnified Parties) under the constitutional documents of the Company and its
Subsidiaries or any agreement between an Indemnified Party and the Company or any of its
Subsidiaries in effect as of the Agreement Date. The articles of incorporation and bylaws of the
Surviving Corporation shall contain provisions with respect to indemnification, exculpation and
advancement of expenses that are at least as favorable to the Indemnified Parties as those
contained in the articles of incorporation and bylaws of the Company in effect on the Agreement
Date, and such provisions shall not be amended, repealed or otherwise modified for a period of six
(6) years from the Effective Time in any manner that would adversely affect the rights of any of
the Indemnified Parties thereunder.
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(b) The Surviving Corporation shall obtain, at the Effective Time, prepaid (or tail)
directors and officers liability insurance policies in respect of acts or omissions occurring at
or prior to the Effective Time for six (6) years from the Effective Time, covering each Indemnified
Party on terms with respect to such coverage and amounts no less favorable than those of such
policies in effect on the date of this Agreement. In the event the Surviving Corporation is unable
to obtain such tail insurance policies, then, for a period of six (6) years from the Effective
Time, the Surviving Corporation shall maintain in effect the Companys current directors and
officers liability insurance policies in respect of acts or omissions occurring at or prior to the
Effective Time, covering each Indemnified Party on terms with respect to such coverage and amounts
(including with respect to the payment of attorneys fees) no less favorable than those of such
policies in effect on the date of this Agreement. Notwithstanding the provisions of this section,
the Surviving Corporation shall not be obligated to make total annual premium payments with respect
to such policies of insurance to the extent such premiums exceed two hundred and twenty-five
percent (225%) of the last annual premium paid by the Company prior to the Agreement Date. If the
annual premium costs necessary to maintain such insurance coverage exceed the foregoing amount, the
Surviving Corporation shall maintain as much comparable directors and officers liability insurance
and fiduciary liability insurance reasonably obtainable for an annual premium not exceeding the
foregoing amount. The Company represents that the amount of the last annual premium paid by the
Company prior to the Agreement Date was the amount set forth on Section 5.9(b) of the Company
Disclosure Letter.
(c) The Parent shall cause the Surviving Corporation to honor the provisions of this
Section 5.9 and all indemnification agreements entered into by the Company and its
Subsidiaries listed in Section 5.9 of the Company Disclosure Letter.
(d) The rights of each Indemnified Party hereunder shall be in addition to any other rights
such Indemnified Party may have under the SCBA or otherwise. Notwithstanding anything to the
contrary contained in this Agreement or otherwise, the provisions of this Section 5.9 shall
survive the consummation of the Merger, and each Indemnified Party will, for all purposes, be a
third party beneficiary of the covenants and agreements contained in this Section 5.9 and,
accordingly, shall be treated as a party to this Agreement for purposes of the rights and remedies
relating to enforcement of such covenants and agreements and shall be entitled to enforce any such
rights and exercise any such remedies directly against the Parent and the Surviving Corporation.
(e) If the Surviving Corporation or any of its successors or assigns (i) consolidates with or
merges into any other Person and is not the continuing or surviving corporation or entity of such
consolidation or merger or (ii) transfers or conveys all or substantially all of its properties and
assets to any Person, then, and in each such case, to the extent necessary, proper provision will
be made so that the successors and assigns of the Surviving Corporation will assume the obligations
set forth in this Section 5.9.
Section 5.10 Public Announcements. The initial press releases issued by each party announcing the
Merger and the transactions contemplated by this
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Agreement shall be in a form that is mutually acceptable to the Parent and the Company.
Thereafter, the Parent and the Company shall consult with one another before issuing any press
releases or otherwise making any public announcements with respect to the transactions contemplated
by this Agreement, and except as may be required by applicable Laws or by the rules and regulations
of the NASDAQ National Market shall not issue any such press release or make any such announcement
prior to such consultation, except that (a) the Parent and the Company shall agree on the content
of the first announcement made to the Companys employees regarding the execution of this Agreement
and the transactions contemplated hereby and (b) the Company may otherwise communicate with the
Companys employees as it deems appropriate, provided that, in any formal
communications with such employees (other than as contemplated by Section 1.8), the Company
shall not make any commitments to the employees that might reasonably be expected to be binding
upon the Parent or the Surviving Corporation after the Closing.
Section 5.11 Full Access.
(a) Between the Agreement Date and the Effective Time, the Company shall, and shall cause its
Subsidiaries to, afford the Parent and its Representatives reasonable access during normal business
hours and upon reasonable notice, to the officers, employees, agents, properties, books and records
of the Company and its Subsidiaries.
(b) The Parent shall hold, and shall cause its directors, officers, employees, agents and
representatives to hold, all information provided to them pursuant to this Section 5.11 in
confidence in accordance with the terms of the Confidentiality Agreement and, in the event of the
termination of this Agreement for any reason, the Parent promptly shall return or destroy all such
information in accordance with the terms of the Confidentiality Agreement.
Section 5.12 Actions Regarding Anti-takeover Statutes. If (a) the provisions of Chapter 2 of Title
35 of the SC Code or (b) any other potentially applicable anti-takeover or similar statute or
regulation is or becomes applicable to the transactions contemplated by this Agreement, the Board
of Directors of the Company shall grant such approvals and take such other actions as may be
required so that the transactions contemplated hereby may be consummated as promptly as practicable
on the terms and conditions set forth in this Agreement.
Section 5.13 Continued Benefit Plans. From the date on which the Effective Time occurs through
December 31, 2006, the employees of the Company who remain in the employment of the Surviving
Corporation and its Subsidiaries (the Continuing Employees) shall receive employee
benefits that in the aggregate are either (i) substantially comparable to the employee benefits
provided under the Companys employee benefit plans to such employees immediately prior to the
Effective Time or (ii) at the Parents election, substantially comparable to the employee benefits
provided to similarly situated employees of the Parent; provided that neither the
Parent nor the Surviving Corporation nor any of their Subsidiaries shall have any obligation to
issue, or adopt any plans or arrangements providing for the issuance of, capital stock, warrants,
options, stock appreciation rights or other rights in respect of any shares of capital stock of any
entity or any securities convertible or exchangeable into such shares pursuant to
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any such plans or arrangements. Nothing contained herein shall be construed as requiring, and the
Company shall take no action that would have the effect of requiring, the Parent or the Surviving
Corporation to adopt or continue any specific plans or to continue the employment of any specific
person.
Section 5.14 Standstill Provisions. The restrictions on the Parent and the Merger Subsidiary
contained in Section 10 of the Confidentiality Agreement are hereby waived by the Company but only
to the extent reasonably necessary to permit the Parent and the Merger Subsidiary to consummate the
transactions contemplated by this Agreement and/or to comply with their obligations or exercise
their legal remedies under this Agreement.
Section 5.15 Notification of Certain Matters; Supplemental Disclosure. Each party shall give the
other reasonably prompt notice upon learning of any event that is reasonably likely to cause any of
the conditions set forth in Article VI not to be satisfied. The Company shall give prompt
written notice to the Parent of the occurrence of any event that, individually or in the aggregate,
would reasonably be expected to result in a Company Material Adverse Effect. Each of the Company,
the Parent and the Merger Subsidiary agrees to use their respective reasonable efforts to prevent
or promptly remedy, (i) the occurrence or failure to occur or the impending or threatened
occurrence or failure to occur, of any event which occurrence or failure to occur would be likely
to cause any of its representations or warranties in this Agreement to be untrue or inaccurate in
any material respect at any time from the Agreement Date to the Effective Time and (ii) any
material failure on its part to comply with or satisfy any covenant, condition or agreement to be
complied with or satisfied by it hereunder. Each party shall give prompt written notice to the
other of any material development which would give rise to a failure of a condition set forth in
Article VI. The delivery of any notice pursuant to this Section 5.15 shall not
limit or otherwise affect the remedies available hereunder to the party receiving such notice nor
be deemed to have amended any of the disclosures set forth in the Company Disclosure Letter, to
have qualified the representations and warranties contained herein or to have cured any
misrepresentation or breach of a representation or warranty that otherwise might have existed
hereunder by reason of such material development. No disclosure after the Agreement Date of the
untruth of any representation and warranty made in this Agreement will operate as a cure of any
breach of the failure to disclose the information, or of any untrue representation or warranty made
herein.
Section 5.16 Nonqualified Excess Plans. As soon as practicable following the Agreement Date, the
Board of Directors of the Company (or if appropriate, any committee of the Board of Directors of
the Company administering the Company Nonqualified Excess Plan and the Company Executive
Nonqualified Excess Plan (collectively, the Nonqualified Excess Plans)) shall adopt such
resolutions or take such other actions as may be required (in form and substance satisfactory to
Parent) to provide that the Nonqualified Excess Plans shall terminate immediately prior to the
Effective Time, provided further that the distribution or payout of account balances with respect
to the Nonqualified Excess Plans shall not be made until the last day of the month following the
six month anniversary of the termination of such plans. The Parent shall cause the Surviving
Corporation to maintain sufficient funds to meet the Companys obligation to
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pay out such account balances which amounts as of the date of this Agreement are set forth in
Section 5.16 of the Company Disclosure Letter.
Section 5.17 Title Insurance. The Company shall use reasonable efforts to assist the
Parent in obtaining, at Closing, from First American Title Insurance Company and Commonwealth Land
Title Company (collectively, the Title Company) title insurance policies, in such amounts
as the Parent reasonably determines to be the value of the Owned Real Property or Leased Real
Property insured thereunder (the Title Policies). It is anticipated that each of the
Title Policies shall provide extended coverage over the general or standard exceptions and have
those endorsements attached thereto which are customary and reasonable for a transaction involving
real property of this value and type. The Company shall provide the Title Company with such
affidavits, undertaking or other assurances as may reasonably be requested by the Title Company to
issue the Title Policies. The Parent shall pay all fees, costs and expenses with respect to the
Title Commitments and Title Policies.
Section 5.18 Surveys. The Company shall use reasonable best efforts to assist the Parent
in obtaining, before Closing, a survey for each Owned Real Property and Leased Real Property, dated
no earlier than the date of this Agreement, prepared by a licensed surveyor satisfactory to the
Parent, conforming to 2005 ALTA/ACSM Minimum Detail Requirements for Urban Land Title Surveys, and
in a form reasonably satisfactory to the Parent (the Surveys). The Parent shall pay all
fees, costs and expenses with respect to the Surveys.
ARTICLE VI
CONDITIONS TO THE CONSUMMATION OF THE MERGER
Section 6.1 Conditions to the Obligations of Each Party. The respective obligation of each party
to consummate the Merger and the other transactions contemplated hereby is subject to the
satisfaction at or prior to the Closing Date of each of the following conditions, any of which may
be waived by the written agreement of the parties:
(a) the Company shall have obtained the Company Stockholders Approval;
(b) no order, decree, ruling, judgment or injunction will have been enacted, entered,
promulgated or enforced by any Governmental Authority of competent jurisdiction making illegal or
otherwise prohibiting the Merger and the consummation of the transactions contemplated by this
Agreement substantially on the terms contemplated hereby, and continue to be in effect; and
(c) all applicable waiting periods under the HSR Act will have expired or been terminated.
Section 6.2 Conditions to the Obligation of the Company. The obligations of the Company to
consummate the Merger and the other transactions contemplated hereby, are subject to the
satisfaction at or prior to the Closing Date of each of the following conditions, any of which may
be waived, in writing, exclusively by the Company:
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(a) the representations and warranties of the Parent and the Merger Subsidiary contained
herein (which for purposes of this subparagraph shall be read as though none of them contained any
Parent Material Adverse Effect or materiality qualification) shall be true and correct in all
respects as of the Closing Date with the same effect as though made as of the Closing Date
(provided that, any representations and warranties made as of a specified date
shall be required only to continue on the Closing Date to be true and correct as of such specified
date), except for any failure of such representations and warranties to be true and correct that,
individually or in the aggregate, would not reasonably be expected to have a Parent Material
Adverse Effect;
(b) each of the Parent and the Merger Subsidiary shall have performed or complied with in all
material respects all covenants and obligations required to be performed or complied with by it
under this Agreement at or prior to the Effective Time; and
(c) the Parent shall have delivered to the Company a certificate, dated the Closing Date and
signed by an executive officer of the Parent, certifying the satisfaction of the conditions set
forth in subsections (a) and (b) above.
Section 6.3 Conditions to the Obligation of the Parent and the Merger Subsidiary. The obligations
of the Parent and the Merger Subsidiary to consummate the Merger and the other transactions
contemplated hereby, are subject to the satisfaction at or prior to the Closing Date of each of the
following conditions, any of which may be waived, in writing, exclusively by the Parent:
(a) the representations and warranties of the Company contained herein (which for purposes of
this subparagraph shall be read as though none of them contained any Company Material Adverse
Effect or materiality qualification) shall be true and correct in all respects as of the Closing
Date with the same effect as though made as of the Closing Date (provided that, any
representations and warranties made as of a specified date shall be required only to continue on
the Closing Date to be true and correct as of such specified date), except for any failure of such
representations and warranties to be true and correct that, individually or in the aggregate, would
not reasonably be expected to have a Company Material Adverse Effect;
(b) the Company shall have performed or complied with in all material respects all obligations
required to be performed or complied with by it under this Agreement at or prior to the Effective
Time;
(c) since the Agreement Date, there shall have been no Company Material Adverse Effect;
(d) the Company shall have delivered to the Parent a certificate, dated the Closing Date and
signed by an executive officer of the Company, certifying the satisfaction of the conditions set
forth in subsections (a) through (c) above;
(e) the Company or its Subsidiaries shall have received the proceeds of the sale leaseback
transaction with Drawbridge immediately prior to the Effective
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Time, and the Parent and the Merger Subsidiary shall have received the other proceeds of the
Financing, in each case on terms that are no less favorable in substance to the Parent, the Merger
Subsidiary or the Surviving Corporation thereunder than those set forth in the Commitment Letters
or the Financing Agreements, as the case may be; and
(f) the Company shall have delivered an affidavit meeting the requirements of Code Section
1445(b)(3) and the regulations promulgated thereunder, certifying that either: (i) the Company is
not and has not been a United States real property holding corporation (within the meaning of Code
Section 897(c)(2)) during the period described in Code Section 897(c)(1)(A)(ii); or (ii) as of the
Effective Time, interests in the Company are not United States real property interests by reason of
Code Section 897(c)(1)(B).
Section 6.4 Frustration of Closing Conditions. None of the Company, the Parent or the Merger
Subsidiary may rely on the failure of any condition set forth in Sections 6.1, 6.2
or 6.3, as the case may be, to be satisfied if such partys material breach of this
Agreement has been a principal cause of the failure of such condition to be satisfied.
ARTICLE VII
TERMINATION
Section 7.1 Termination. This Agreement may be terminated at any time prior to the Effective Time,
whether before or, subject to the terms hereof, after the Company Stockholders Approval has been
obtained:
(a) by mutual written agreement of the Parent and the Company;
(b) by either the Parent or the Company, if:
(i) the Closing has not occurred by January 15, 2007 (the Outside Date);
provided, that the party seeking to terminate this Agreement pursuant to this subsection
(b)(i) has not breached in any material respect its obligations under this Agreement in any manner
that has been the principal cause of, or resulted in, the failure of the Closing to occur on or
before such date;
(ii) (A) there are any Laws that prohibit or make the Merger illegal, or if an order, decree,
ruling, judgment or injunction has been entered by a Governmental Authority of competent
jurisdiction permanently restraining, enjoining or otherwise prohibiting the Merger and such order,
decree, ruling, judgment or injunction has become final and non-appealable, and (B) the party
seeking to terminate this Agreement pursuant to this subsection (b)(ii) has used its reasonable
efforts to resist, resolve or remove such Laws, order, decree, ruling, judgment or injunction;
(iii) at the Company Stockholder Meeting (including any adjournment or postponement thereof),
the Company Stockholders Approval has not been obtained, unless such failure to obtain the Company
Stockholders Approval is the result of a material breach of this Agreement by the party seeking to
terminate this Agreement; or
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(iv) any one of the following shall have occurred; provided,
however, that the party seeking to terminate this Agreement pursuant to this
subsection (b)(iv) has used reasonable efforts to resist, resolve or remove the impediments to the
Closing set forth in subparagraphs (A), (B), and (C) of this subsection (b)(iv):
(A) the waiting period applicable to the consummation of the Merger under the HSR Act shall
not have expired or been terminated by the Outside Date;
(B) any Governmental Authority files a complaint or otherwise commences a proceeding seeking a
judgment, injunction, order or decree enjoining the consummation of the Merger or restraining or
prohibiting the operation of the business of the Parent or any of its Subsidiaries or the Company
or any of its Subsidiaries after the Effective Time; or
(C) the Parent receives notice that the United States Federal Trade Commission has authorized
its staff to file a complaint, or that the Assistant Attorney General or other appropriate official
at the United States Department of Justice has authorized the staff of the Antitrust Division to
seek a preliminary injunction, as the case may be, enjoining consummation of the Merger;
(c) by the Company:
(i) if (A) the representations and warranties of the Parent and/or the Merger Subsidiary
contained in Article IV of this Agreement fail to be true and correct in any respect that
causes a failure of the condition set forth in Section 6.2(a) or (B) the Parent or the
Merger Subsidiary materially breaches or materially fails to perform its covenants and other
agreements contained herein; provided that, in each of the foregoing clauses (A)
and (B), such breach or failure cannot be or has not been cured in all material respects within
thirty (30) days after the Companys written notice thereof to the Parent or the Merger Subsidiary;
or
(ii) prior to obtaining the Company Stockholders Approval, if (A) the Board of Directors of
the Company approves and authorizes the Company to enter into a definitive agreement providing for
the implementation of a Superior Proposal, and (B) immediately following termination of this
Agreement the Company enters into such definitive agreement; provided that,
concurrent with the termination of this Agreement pursuant to this subsection and as a condition
precedent thereof, the Company pays to the Parent the Company Termination Fee and Expense
Reimbursement in accordance with Sections 7.3 and 7.4; or
(iii) if (a) either of the Commitment Letters expires or terminates prior to the Outside Date
(or is amended, such that the total amount of the Financing is not sufficient to consummate the
transactions contemplated hereby), and Parent has not secured a replacement Commitment Letter (on
terms that are no less favorable, in substance, to Parent and the Merger Subsidiary than the
expired or
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terminated Commitment Letter or Letters) within thirty (30) days after the date of such
expiration, termination or amendment.
(d) by the Parent if:
(i) (A) the representations and warranties of the Company contained in Article III of
this Agreement fail to be true and correct in any respect that causes a failure of the conditions
set forth in Section 6.3(a) of this Agreement or (B) the Company materially breaches or
materially fails to perform its covenants and other agreements contained herein; provided
that, in each of the foregoing clauses (A) and (B), such breach or failure cannot be or has
not been cured in all material respects within thirty (30) days after the Parents written notice
thereof to the Company;
(ii) (A) the Companys Board of Directors (or any committee thereof) withdraws or modifies in
a manner adverse to the Parent or Merger Subsidiary the Company Recommendation or exempts any
Person other than the Parent or Merger Subsidiary from the provisions of Chapter 2 of Title 35 of
the SC Code or the Rights Agreement; (B) the Companys Board of Directors fails to reconfirm the
Company Recommendation within ten (10) business days after receipt of a request by the Parent,
provided that, any such request may be made only after notice of any of the
following events (as any of the following events may occur from time to time): (1) the public
announcement of the receipt by the Company of an Acquisition Proposal or any material change
thereto; or (2) a public announcement of any transaction to acquire a material portion of the
Company Common Stock by a Person other than the Merger Subsidiary, the Parent or any of their
Affiliates; or
(iii) the Company enters into a definitive agreement with respect to an Acquisition Proposal,
or approves or recommends any Acquisition Proposal.
Section 7.2 Effect of Termination. If any party terminates this Agreement pursuant to Section
7.1 above, all rights and obligations of the parties hereunder shall terminate without any
liability of any party to any other party, other than the provisions of this Section 7.2,
Sections 7.3, 7.4 and 7.5 and Article VIII of this Agreement which
shall remain in full force and effect and survive any termination of this Agreement; provided,
however, that, subject to such provisions, any such termination shall not relieve any party hereto
from liability for any willful breach of this Agreement; it being understood that payment of the
amounts described in Sections 7.3 and 7.4 and 7.5 will not be in lieu of
damages incurred in the event of any such willful breach. No termination of this Agreement shall
affect the obligations of the parties contained in the Confidentiality Agreement, all of which
obligations shall survive termination of this Agreement in accordance with its terms.
Section 7.3 Fees and Expenses.
(a) Except as set forth in this Section 7.3 and in Section 7.4, all fees and
expenses incurred in connection with the transactions contemplated hereby shall be paid by the
party incurring such expenses, whether or not the Merger is consummated.
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(b) If this Agreement is validly terminated pursuant to Section 7.1(c)(ii), then the
Company shall (i) pay to the Parent a fee of $25,000,000 less the amount set forth in clause (ii)
of this Section 7.3(b) (the Company Termination Fee) and (ii) reimburse for the Parents
documented out-of-pocket expenses in connection with the transactions contemplated by this
Agreement up to $10,000,000 (the Expense Reimbursement) at the time set forth in
Section 7.4.
(c) If this Agreement is validly terminated pursuant to Section 7.1(d)(ii) or
Section 7.1(d)(iii), then the Company will pay to the Parent the Company Termination Fee
and the Expense Reimbursement at the time set forth in Section 7.4.
(d) If this Agreement is validly terminated pursuant to Section 7.1(b)(i), Section
7.1(b)(iii), or Section 7.1(d)(i), then if (A) prior to such termination there exists
an Acquisition Proposal (whether or not such offer or proposal has been rejected or has been
withdrawn prior to the time of such termination) and (B) within twelve (12) months of such
termination, the Company or any of its Subsidiaries accepts a written offer for, or otherwise
enters into a definitive agreement to consummate or consummates, an Acquisition Proposal, then the
Company shall pay to the Parent the Company Termination Fee and the Expense Reimbursement at the
time set forth in Section 7.4; provided, however, no payment shall be due
to the Parent pursuant to this Section 7.3(d) if this Agreement is terminated by the Parent
pursuant to Section 7.1(b)(i) under circumstances in which the Parent Termination Fee set
forth in Section 7.5(a) is payable. For purposes of the foregoing clause (d) only,
references in the definition of the term Acquisition Proposal to the figure 20% shall be deemed
to be replaced by the figure 50%.
(e) Notwithstanding anything to the contrary contained herein, if the Company pays the Parent
both the Company Termination Fee and the Expense Reimbursement, the Company Termination Fee shall
be reduced so that the total amount paid by the Company to the Parent shall be no more than
$25,000,000.
Section 7.4 Other Company Termination Fee and Expense Reimbursement Matters.
(a) The parties shall make all payments required by Section 7.3 by wire transfer of
immediately available funds to an account designated by the receiving party in writing.
(b) The Company Termination Fee and the Expense Reimbursement shall be paid as follows:
(i) if payments are due pursuant to Section 7.3(b), then the Expense Reimbursement and
the Company Termination Fee shall be paid to the Parent by the Company concurrently with, and as a
condition precedent to, such termination of this Agreement by the Company pursuant to Section
7.1(c)(ii);
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(ii) if payments are due pursuant to Section 7.3(c), then the Expense Reimbursement
and the Company Termination Fee, as applicable, shall be paid to the Parent by the Company within
two (2) business days following such termination of this Agreement by the Parent; and
(iii) if payments are to be made pursuant to Section 7.3(d), then the Expense
Reimbursement and the Company Termination Fee shall be paid to the Parent by the Company on the
earlier of the date of the Companys entry into a definitive agreement providing for, or
consummating, an Acquisition Proposal.
(c) The parties agree that (i) the provisions of Sections 7.3 and 7.4 are an
integral part of the transactions contemplated by this Agreement and (ii) the amount of, and basis
for payment of, the Company Termination Fee and Expense Reimbursement are reasonable and
appropriate in all respects. Accordingly, if the Company fails to pay in a timely manner a Company
Termination Fee and/or Expense Reimbursement, and in order to obtain such payment, the Parent makes
a claim that results in a judgment for the amounts set forth in Section 7.3, the Company
shall pay to the Parent its reasonable costs and expenses (including reasonable attorneys fees and
expenses) in connection with such suit, together with interest on the amount set forth in
Section 7.3 at the rate announced by Credit Suisse as its prime rate in effect on the date
such payment was required to be made hereunder.
Section 7.5 Parent Termination Fee.
(a) If this Agreement is terminated by the Company pursuant to Section 7.1(c)(iii) or
if all conditions to Closing set forth in Article VI are satisfied (other than the condition in
Section 6.3(e) and conditions that, by their nature, are to be and are capable of being satisfied
at Closing), and this Agreement is terminated pursuant to Section 7.1(b)(i) (a Parent
Payment Event), then Parent shall pay to Company an amount (the Parent Termination
Fee) equal to $7,500,000; provided that, no Parent Payment Event shall be
deemed to have occurred and no Parent Termination Fee shall be payable if the Company shall have
breached in any material respect any of its representations, warranties or covenants,
provided that, such breach cannot be or has not been cured in all material respects
within thirty (30) days after the Parents written notice thereof to the Company, or if there shall
have been a failure of the conditions set forth in Section 6.3(c). Such payment shall be made as
promptly as reasonably practicable (and, in any event, within two (2) business days following the
date such payment becomes due and payable) by wire transfer of immediately available funds.
(b) The parties agree that (i) the provisions of this Section 7.5 are an integral part
of the transactions contemplated by this Agreement and (ii) the amount of, and basis for payment
of, the Parent Termination Fee are reasonable and appropriate in all respects. Accordingly, if the
Parent fails to pay in a timely manner the Parent Termination Fee, and in order to obtain such
payment, the Company makes a claim that results in a judgment for the amounts set forth in
Section 7.5(a), the Parent shall pay to the Company its reasonable costs and expenses
(including reasonable attorneys fees and expenses) in connection with such suit, together with
interest on the amount set forth in
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Section 7.5(a) at the rate announced by Credit Suisse as its prime rate in effect on
the date such payment was required to be made hereunder.
ARTICLE VIII
MISCELLANEOUS
Section 8.1 Nonsurvival of Representations. None of the representations and warranties contained
in this Agreement or in any schedule, certificate, instrument or other writing delivered pursuant
to this Agreement shall survive the Merger or the termination of this Agreement. This Section
8.1 shall not limit any covenant or agreement of the parties hereto which by its terms
contemplates performance after the Effective Time and this Article VIII shall survive the
Effective Time.
Section 8.2 Specific Performance. The parties agree that irreparable damage would occur and the
non-breaching party could not be made whole by monetary damages in the event any of the provisions
of this Agreement were not performed in accordance with their specific terms, and it is accordingly
agreed that the parties shall be entitled to specific performance of the terms of this Agreement,
without posting a bond or other security, this being in addition to any other remedy to which they
are entitled hereunder, at law or in equity.
Section 8.3 Successors and Assigns. Neither this Agreement nor any of the rights, interests or
obligations provided by this Agreement shall be assigned by any of the parties (whether by
operation of law or otherwise) without the prior written consent of the other parties. Subject to
the preceding sentence, this Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and permitted assigns.
Section 8.4 Amendment. This Agreement may be amended in accordance with its terms by the execution
and delivery of a written instrument by or on behalf of the Parent, the Merger Subsidiary and the
Company at any time before or after the Company Stockholders Approval; provided
that, after obtaining the Company Stockholders Approval, no amendment to this Agreement
shall be made without the approval of the stockholders of the Company if and to the extent such
approval is required under applicable Law or in accordance with the rules of any relevant stock
exchange.
Section 8.5 Severability. Whenever possible, each provision of this Agreement shall be interpreted
in such manner as to be effective and valid under applicable Laws, but if any provision of this
Agreement is held to be prohibited by or invalid under applicable Laws, such provision shall be
ineffective only to the extent of such prohibition or invalidity, without invalidating the
remainder of this Agreement. The parties hereto agree to replace any such void or unenforceable
provision of this Agreement with a valid and enforceable provision that shall achieve, to the
greatest extent possible, the economic, business and other purposes of such void or unenforceable
provision.
Section 8.6 Extension of Time; Waiver. Except as set forth elsewhere in this Agreement, at any
time prior to the Effective Time, the parties may extend the time for performance of or waive
compliance with any of the covenants, agreements or conditions of the other parties to this
Agreement, and may waive any breach of the representations or warranties of such other parties. No
agreement extending or waiving
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any provision of this Agreement shall be valid or binding unless it is in writing and is executed
and delivered by or on behalf of the party against which it is sought to be enforced. Delay in
exercising any right under this Agreement shall not constitute a waiver of such right.
Section 8.7 Counterparts. This Agreement may be executed in two or more counterparts (whether by
facsimile or otherwise), each of which shall be deemed an original, but all such counterparts taken
together shall constitute one and the same Agreement.
Section 8.8 Descriptive Headings. The descriptive headings of this Agreement are inserted for
convenience only and shall not constitute a part of this Agreement.
Section 8.9 Notices. Any notice, request, instruction or other document to be given hereunder
shall be sent in writing and delivered personally, sent by reputable, overnight courier service
(charges prepaid), sent by registered or certified mail, postage prepaid, or by facsimile,
according to the instructions set forth below. Such notices shall be deemed given: at the time
delivered by hand, if personally delivered; one business day after being sent, if sent by
reputable, overnight courier service; at the time received, if sent by registered or certified
mail; and at the time when confirmation of successful transmission is received by the sending
facsimile machine, if sent by facsimile.
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If to the Parent or the Merger Subsidiary, to:
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Buffets, Inc. |
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1460 Buffet Way |
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Eagan, Minnesota 55121-1133 |
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Telephone: (651) 365-263 |
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Facsimile: (651) 365-2224 |
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Attention: H. Thomas Mitchell, Executive
Vice President |
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with a copy (which shall not
constitute notice) to:
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Paul, Weiss, Rifkind, Wharton & Garrison LLP
1285 Avenue of the Americas |
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New York, New York 10019-6064 |
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Telephone: (212) 373-3000 |
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Facsimile: (212) 757-3990 |
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Attention: Carl L. Reisner, Esq. |
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If to the Company, to:
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Ryans Restaurant Group, Inc. |
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405 Lancaster Avenue |
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P.O. Box 100 |
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Greer, SC 29652 |
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Telephone: (864) 989-2291 |
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Facsimile: (864) 877-0979 |
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Attention: Fred T. Grant, Jr., Senior |
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Vice President Finance |
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with copies (which shall not
constitute notice) to:
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Wyche, Burgess, Freeman & Parham, P.A. |
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P.O. Box 728 |
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44 East Camperdown Way (29601) |
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Greenville, South Carolina 29602 |
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Telephone: (864) 242-8203 |
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Facsimile: (864) 235-8900 |
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Attention: Lawson Vicario, Esq. |
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and
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Rogers & Hardin LLP |
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2700 International Tower |
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229 Peachtree Street, N.E. |
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Atlanta, Georgia 30303-1601 |
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Telephone: (404) 522-4700 |
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Facsimile: (404) 525-2224 |
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Attention: Steven E. Fox, Esq. |
or to such other address or to the attention of such other party that the recipient party has
specified by prior written notice to the sending party in accordance with the preceding.
Section 8.10 No Third-Party Beneficiaries. Except as provided pursuant to Section 5.9, the
terms and provisions of this Agreement will not confer third-party beneficiary rights or remedies
upon any person or entity other than the parties hereto and their respective successors and
permitted assigns. The provisions of Section 5.9 are intended to be for the benefit of,
and shall be enforceable by, the Indemnified Parties and shall be binding on the Parent and the
Surviving Corporation and their successors and assigns. In the event the Parent or the Surviving
Corporation or one of their successors or assigns (i) consolidates with or merges into any other
Person and shall not be the continuing or surviving corporation or entity in such consolidation or
merger or (ii) transfers all or substantially all of its properties and assets to any Person, then,
and in each case, proper provision shall be made so that the successors or assigns of the Parent or
the Surviving Corporation, as the case may be, honor the obligations set forth in Section
5.9.
Section 8.11 Entire Agreement. This Agreement, the Confidentiality Agreement, the Company
Disclosure Letter and the other documents referred to herein collectively constitute the entire
agreement among the parties and supersede any prior and contemporaneous understandings, agreements
or representations by or among the parties, written or oral, that may have related in any way to
the subject matter hereof.
Section 8.12 Construction. For purposes of this Agreement:
(a) References to applicable Law or Laws with respect to a particular Person, thing or
matter shall include only such Law or Laws as to which the Governmental Authority that enacted or
promulgated such Law or Laws has jurisdiction over such Person, thing or matter as determined under
such Laws.
(b) Whenever the context requires, the singular number shall include the plural, and vice
versa, the masculine gender shall include the feminine and neuter
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genders, the feminine gender shall include the masculine and neuter genders, and the neuter
gender shall include masculine and feminine genders.
(c) The words include and including, and variations thereof, shall not be deemed to be
terms of limitation, but rather shall be deemed to be followed by the words without limitation.
(d) Except as otherwise indicated, all references in this Agreement to Sections and
Exhibits are intended to refer to Sections and Exhibits to this Agreement.
(e) The terms hereof, hereunder, herein and words of similar import shall refer to this
Agreement as a whole and not to any particular provision of this Agreement.
(f) As it relates to the Company, knowledge means the actual knowledge of the persons set
forth in Section 8.12 of the Company Disclosure Letter with no further duty of inquiry.
(g) Each party hereto has participated in the drafting of this Agreement, which each party
acknowledges is the result of extensive negotiations between the parties, and consequently, this
Agreement shall be interpreted without reference to any rule or precept of Law to the effect that
any ambiguity in a document be construed against the drafter.
Section 8.13 Governing Law. THIS AGREEMENT AND THE COMPANY DISCLOSURE LETTER WILL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF SOUTH CAROLINA, WITHOUT GIVING EFFECT TO
ANY LAW OR RULE THAT WOULD CAUSE THE LAWS OF ANY JURISDICTION OTHER THAN THE STATE OF SOUTH
CAROLINA TO BE APPLIED.
* * * * *
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their
respective authorized officers as of the day and year first above written.
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BUFFETS, INC.
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By: |
/s/ R. Michael Andrews, Jr.
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Name: |
R. Michael Andrews, Jr. |
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Title: |
Chief Executive Officer |
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BUFFETS SOUTHEAST, INC.
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By: |
/s/ R. Michael Andrews, Jr.
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Name: |
R. Michael Andrews, Jr. |
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Title: |
Chief Executive Officer |
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RYANS RESTAURANT GROUP, INC.
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By: |
/s/ Charles D. Way
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Name: |
Charles D. Way |
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Title: |
Chairman and Chief Executive Officer |
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Signature Page to Agreement and Plan of Merger
A-56
EXHIBIT
B
July 24, 2006
Personal and Confidential
Special Committee of the Board of Directors
Ryans Restaurant Group, Inc.
405 Lancaster Avenue
Greer, South Carolina 29650
Members of the Special Committee of the Board of Directors:
You have requested our opinion as to the fairness, from a financial point of view, as of the date
hereof, to the holders of common stock, par value $1.00 per share (the Common Stock), of Ryans
Restaurant Group Inc., a South Carolina corporation (the Company), other than Buffets, Inc., a
Minnesota corporation (Parent), Buffets Southeast, Inc., a South Carolina corporation and a
wholly-owned subsidiary of the Parent (the Merger Subsidiary), and their respective subsidiaries,
of the consideration to be received by them pursuant to the Agreement and Plan of Merger (the
Agreement) to be entered into among the Company, Parent and Merger Subsidiary. The Agreement
provides for the merger (the Merger) of Merger Subsidiary with and into the Company, as a result
of which the Company will become a wholly-owned subsidiary of Parent. As set forth more fully in
the Agreement, in connection with the Merger, each outstanding share of Common Stock of the Company
(other than shares, if any, held by the Company, Parent or Merger Subsidiary or any of their
respective subsidiaries, which are not covered by this opinion) will be converted into the right to
receive $16.25 per share in cash, without interest (the Merger Consideration). The terms and
conditions of the Merger are more fully set forth in the Agreement.
We have acted as financial advisor to the Company in connection with the Merger and will receive a
fee from the Company, a substantial portion of which is contingent upon the consummation of the
Merger. We will also receive a fee from the Company for providing this opinion, which will be
credited against the fee for financial advisory services. This opinion fee is not contingent upon
the consummation of the Merger. The Company has also agreed to indemnify us against certain
liabilities in connection with our services and to reimburse us for certain expenses in connection
with our services. In the past, we have provided financial advisory services to the Company and
have received fees for the rendering of those services.
In arriving at our opinion, we have undertaken such review, analyses and inquiries as we have
deemed necessary and appropriate under the circumstances. We have reviewed: (i) the financial terms
of the July 24, 2006 draft of the Agreement; (ii) certain publicly available financial, business
and operating information related to the Company; (iii) certain internal financial, operating and
other data with respect to the Company prepared and furnished to us by the management of the
Company; (iv) certain internal financial projections for the Company that were prepared for
financial planning purposes and furnished to us by the management of the Company; (v) certain
publicly available market and securities data of the Company; (vi) certain financial data and the
imputed prices and trading activity of certain other publicly-traded companies that we deemed
relevant for purposes of our opinion; (vii) the financial terms, to the extent publicly available,
of certain merger transactions that we deemed relevant for purposes of our opinion; and (viii)
other information, financial studies, analyses and investigations and other factors that we deemed
relevant for purposes of our opinion. In addition, we have performed a discounted cash flow
analysis for the Company. We have also conducted discussions with members of the senior management
of the Company concerning the financial condition, historical and current operating results,
business and prospects for the Company.
In connection with our review, with your consent, we have relied upon and assumed the accuracy,
completeness and fair presentation of the financial, accounting and other information furnished or
otherwise made available to us by the Company and Parent, discussed with or otherwise reviewed by
us, or publicly available, and have not assumed responsibility independently to verify such
information or any liability therefore. We also have relied upon and assumed that there is not
(and that management of the Company is not aware of) any information or facts that would make the
information provided or otherwise made available to us incomplete or misleading. The Company has
advised us that they do not publicly disclose internal financial information of the type provided
to us and that such information was prepared for financial planning purposes and not with the
expectation of public disclosure. We have further relied upon the assurances of the management of
the Company that the financial forecasts, projections and other estimates and business outlook
information have been prepared on a reasonable basis in accordance with industry practice,
reflecting the best currently available estimates and
B-1
judgments of the management of the Company. We express no opinion as to such financial forecasts,
projections and other estimates and business outlook information or the assumptions on which they
are based. We have relied, with your consent, on advice of the outside counsel and the independent
accountants to the Company, and on the assumptions of the management of the Company, as to all
accounting, legal, tax and financial reporting matters with respect to the Company and the
Agreement. Without limiting the generality of the foregoing, for the purpose of this opinion, we
have assumed that neither the Company nor Parent is party to any material pending transaction,
including any external financing, recapitalization, acquisition or merger, divestiture or spin off
other than the Merger and other financing transactions described in the Agreement. Furthermore, in
arriving at our opinion, we have not been requested to make, and have not made, any physical
inspection of the properties or facilities of the Company.
We have assumed that the final form of the Agreement will be in all material respects identical to
the last draft reviewed by us, without modification of material terms or conditions by the Company,
Parent or any other party thereto. We have not been asked to, nor do we, take any responsibility
as to the terms and conditions of the Agreement or the form of the transaction. We have assumed
the Merger will be consummated pursuant to the terms of the Agreement without amendments thereto
and with full satisfaction of all covenants and conditions without any waiver thereof. In arriving
at our opinion, we have assumed that all necessary regulatory approvals and consents required for
the Merger will be obtained in a manner that will not result in the disposition of any material
portion of the assets of the Company or Parent, or otherwise adversely affect the Company or
Parent, and that will not alter the terms of the Merger. We express no opinion regarding whether
the necessary approvals or other conditions to the consummation of the Merger will be obtained or
satisfied.
In arriving at our opinion, we have not performed any appraisals or valuations of any specific
assets or liabilities (fixed, contingent or other) of the Company, and have not been furnished with
any such appraisals or valuations. The analyses performed by Brookwood in connection with this
opinion were going-concern analyses. We express no opinion regarding the liquidation value or
solvency of any entity. Without limiting the generality of the foregoing, we have undertaken no
independent analysis of any pending or threatened litigation, regulatory action, possible
unasserted claims or other contingent liabilities, to which the Company or any of its affiliates is
a party or may be subject. With your consent, we have relied upon and assumed the accuracy of
information provided by senior management as to Walker v. Ryans Family Steak Houses, Inc., No. 3
D2 1078 (M.D. Tenn. Apr. 19, 2006), but our opinion makes no assumption concerning, and therefore
does not consider, the possible assertion of claims, outcomes or damages arising out of any other
pending or threatened litigation, regulatory action, unasserted claims or other contingent
liabilities.
This opinion is necessarily based upon market, real estate, economic or other facts, circumstances
and conditions as they exist and can be evaluated on, and on the information available to us on,
the date hereof; events occurring after the date hereof could materially affect the assumptions
used in preparing this opinion. We are not expressing any opinion herein as to the prices at which
shares of Common Stock may trade following announcement of the Merger or at any future time, and we
express no opinion as to the underlying valuation, future performance or long-term viability of the
Company. We have not agreed or undertaken to reaffirm or revise this opinion or otherwise comment
upon any events occurring after the date hereof and do not have any obligation to update, revise or
reaffirm this opinion.
This opinion is solely for the benefit and use of the Board of Directors of the Company in
connection with its consideration of the Merger and may not be relied upon by any other person.
This opinion is not intended to be and does not constitute a recommendation to any stockholder of
the Company as to how such stockholder should vote or otherwise act with respect to the Merger, and
should not be relied upon by any stockholder as such. This opinion is not intended to confer rights
and remedies upon Parent, any stockholders of the Company or Parent or any other person (including
holders of options to purchase shares of Common Stock). Except as contemplated in the January 24,
2006 engagement letter between us, this opinion shall not be published or otherwise used, nor shall
any public references to us be made, without our prior written approval.
This opinion addresses solely the fairness, from a financial point of view, to holders of Common
Stock of the Company of the proposed Merger Consideration set forth in the Agreement and does not
address any other terms or agreements relating to the Merger. We were not requested to opine as to,
and this opinion does not address, the basic business decision to proceed with or effect the
Merger, or the merits of the Merger relative to any alternative transaction or business strategy
that may be available to the Company. During the course of our engagement, at the request of the
Special Committee of the Board of Directors of the Company, we contacted certain parties to solicit
indications of interest regarding a transaction involving the Company. This process resulted in
certain bids which culminated in the Companys decision to enter into the Agreement. We have
considered the results of such solicitation in rendering our opinion.
3525
Piedmont Road NE 5 Piedmont Center Suite 415
Atlanta, GA 30305 Phone 404.874.7433 Fax 404.564.5101
121 West Trade St. Suite 3000 Charlotte, NC 28202
Phone 704.372.1399 Fax 704.372.2528
www.brookwoodassociates.com
B-2
Based upon and subject to the foregoing and based upon such other factors as we consider relevant,
it is our opinion that the Merger Consideration to be received by the holders of Common Stock of
the Company pursuant to the Agreement is fair, from a financial point of view, as of the date
hereof, to the holders of Common Stock of the Company, other than Parent, Merger Subsidiary and
their respective subsidiaries.
Sincerely,
/s/ John E. Ball
BROOKWOOD ASSOCIATES
3525
Piedmont Road NE 5 Piedmont Center Suite 415
Atlanta, GA 30305 Phone 404.874.7433 Fax 404.564.5101
121 West Trade St. Suite 3000 Charlotte, NC 28202
Phone 704.372.1399 Fax 704.372.2528
www.brookwoodassociates.com
B-3
SPECIAL MEETING OF SHAREHOLDERS OF
RYANS RESTAURANT GROUP, INC.
September __, 2006
Please date, sign and mail
your proxy card in the
envelope provided as soon
as possible.
â Please detach along perforated line and mail in the envelope provided. â
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THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE
BELOW-LISTED PROPOSALS.
PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE.
PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE
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FOR
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Approve the Agreement and Plan of Merger, dated July 24, 2006, by and among Ryans, Buffets, Inc., and Buffets Southeast, Inc. (Merger Sub), including the approval of the merger of Merger Sub with and into Ryans, with Ryans as the surviving company.
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Grant discretionary authority to the proxies named herein to vote for the adjournment or postponement of the special meeting for the purpose of soliciting additional proxies if there are not sufficient votes at the time of the special meeting to approve Proposal No. 1.
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THIS PROXY CARD, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE
MANNER DIRECTED HEREIN. IF NO DIRECTION IS MADE, THIS PROXY WILL
BE VOTED FOR THE PROPOSALS.
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In his discretion, each person appointed proxy is authorized to vote upon such other
business as properly may come before the Special Meeting and any and all
adjournments thereof and on matters incident to the conduct of the meeting.
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If any other business is presented at the Special Meeting, this proxy card will be voted
by the person(s) appointed proxy in his or their best judgment. At the present time,
the Board of Directors knows of no other business to be presented at the Special
Meeting.
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TO INCLUDE ANY COMMENTS, USE THE COMMENTS BOX ON THE REVERSE
SIDE OF THIS CARD. |
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MARK X HERE IF YOU PLAN TO ATTEND THE MEETING.o |
To change the address on your account, please check the box
at right and indicate your new address in the address space
above. Please note that changes to the registered name(s)
on the account may not be submitted
via this method. |
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Signature
of Stockholder
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Date:
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Signature
of Stockholder
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Date:
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Please sign exactly as your name or names appear on this Proxy.
When shares are held jointly, each holder should sign. When signing
as executor, administrator, attorney, trustee or guardian, please give full
title as such. If the signer is a corporation, please sign full corporate name
by duly authorized officer, giving full title as such. If signer is a partnership,
please sign in partnership name by authorized person. |
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RYANS RESTAURANT GROUP, INC.
405 Lancaster Avenue (29650)
Post Office Box 100 (29652)
Greer, South Carolina
Dear Shareholder:
Your vote is important, and you are strongly encouraged to exercise your right to vote your
shares. On behalf of the Board of Directors, we urge you to sign, date and return the proxy
card in the enclosed postage-paid envelope as soon as possible.
Thank you in advance for your prompt consideration.
Sincerely,
Ryans Restaurant Group, Inc.
1 n
RYANS RESTAURANT GROUP, INC.
405 LANCASTER AVENUE (29650)
POST OFFICE BOX 100 (29652)
GREER, SOUTH CAROLINA
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
FOR THE 2006 SPECIAL MEETING OF SHAREHOLDERS
The undersigned shareholder of Ryans Restaurant Group, Inc. (Ryans), hereby revoking all
previous proxies,
hereby appoints Charles D. Way and G. Edwin McCranie and either of them, the attorney or attorneys
or proxy
or proxies, with full power of substitution, to act for and in the name of the undersigned to vote
all shares of
Ryans common stock that the undersigned shall be entitled to vote, at a Special Meeting of
Shareholders of
Ryans, to be held at Ryans corporate offices at 405 Lancaster Avenue, Greer, South Carolina,
on ,
September ___, 2006 at 10:00 a.m. local time, and at any and all adjournments thereof, as set forth
on the
reverse side.
The undersigned may elect to withdraw this proxy card at any time prior to its use by (i)
submitting a written
notice of revocation (dated later than this proxy card) to the Secretary of Ryans at or before the
Special Meeting,
(ii) submitting another proxy that is properly signed and dated later than this proxy card, or
(iii) voting in person
at the meeting (although attendance at the Special Meeting will not in and of itself revoke a
proxy).
Receipt of the Notice of the Meeting and the accompanying Proxy Statement is hereby
acknowledged.
(Continued and to be signed on the reverse side)
SPECIAL MEETING OF SHAREHOLDERS OF
RYANS RESTAURANT GROUP, INC.
September
__, 2006
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PROXY VOTING INSTRUCTIONS
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MAIL Date, sign and mail your proxy card in the
envelope provided as soon as possible.
- or -
TELEPHONE Call toll-free 1-800-PROXIES
(1-800-776-9437) from any touch-tone telephone
and follow the instructions. Have your proxy card
available when you call.
- OR
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INTERNET
Access www.voteproxy.com and
follow the on-screen instructions. Have your proxy
card available when you access the web page.
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COMPANY NUMBER
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ACCOUNT NUMBER
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You may enter your voting instructions at 1-800-PROXIES or www.voteproxy.com up until 11:59 PM
Eastern Time the day before the cut-off or meeting date.
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detach along perforated line and mail in the envelope provided
IF you are not voting via telephone or the internet. â
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THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE
ELECTION OF DIRECTORS AND FOR PROPOSALS.
PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE.
PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE
þ
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FOR
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AGAINST
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ABSTAIN |
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1) |
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Approve
the Agreement and Plan of Merger, dated July 24, 2006, by and among Ryans, Buffets, Inc., and Buffets Southeast, Inc. (Merger Sub), including the approval of the merger of Merger Sub with and into Ryans, with Ryans as the surviving company.
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2. |
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Grant discretionary authority to the proxies named herein to vote for the adjournment or postponement of the special meeting for the purpose of soliciting additional proxies if there are not sufficient votes at the time of the special meeting to approve Proposal No. 1.
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THIS PROXY CARD, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE
MANNER DIRECTED HEREIN. IF NO DIRECTION IS MADE, THIS PROXY WILL
BE VOTED FOR THE PROPOSALS.
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In his discretion, each person appointed proxy is authorized to vote upon such other
business as properly may come before the Special Meeting and any and all
adjournments thereof and on matters incident to the conduct of the meeting.
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If any other business is presented at the Special Meeting, this proxy card will be voted
by the person(s) appointed proxy in his or their best judgment. At the present time,
the Board of Directors knows of no other business to be presented at the Special
Meeting.
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TO INCLUDE ANY COMMENTS, USE THE COMMENTS BOX ON THE REVERSE
SIDE OF THIS CARD |
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MARK X HERE IF YOU PLAN TO ATTEND THE MEETING.o |
To change the address on your account, please check the box
at right and indicate your new address in the address space
above. Please note that changes to the registered name(s)
on the account may not be submitted
via this method. |
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Signature
of Stockholder
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Date:
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Signature
of Stockholder
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Date:
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Note: |
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Please sign exactly as your name or names appear on this Proxy.
When shares are held jointly, each holder should sign. When signing
as executor, administrator, attorney, trustee or guardian, please give full
title as such. If the signer is a corporation, please sign full corporate name
by duly authorized officer, giving full title as such. If signer is a partnership,
please sign in partnership name by authorized person. |
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