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