Definitive Proxy Statement - Special Meeting to Approve Merger Agreement
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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
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     Preliminary Proxy Statement
     Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
     Definitive Proxy Statement
     Definitive Additional Materials
     Soliciting Material under §240.14a-12

 

Buffalo Wild Wings, Inc.

 

(Name of Registrant as Specified In Its Charter)

 

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

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LOGO

December 28, 2017

To our shareholders:

Buffalo Wild Wings, Inc. has entered into an agreement to be acquired by way of a merger. If the proposed merger is completed, Buffalo Wild Wings, Inc. will become a wholly owned subsidiary of Arby’s Restaurant Group, Inc. and each share of our common stock will be converted into the right to receive $157.00 in cash, without interest and less any applicable withholding taxes.

Our board of directors unanimously approved the merger agreement and has called a special meeting of our shareholders at which shareholders will have the opportunity to consider and vote upon a proposal to approve the merger agreement. Shareholder approval is one of several conditions to the proposed merger. Our board of directors unanimously recommends that you vote “FOR” each of the proposals to be considered at the special meeting, including approval of the merger agreement. The attached notice of special meeting includes further details about the special meeting, which will be held at the company’s offices located at 5500 Wayzata Boulevard, Minneapolis, Minnesota 55416, at 10:00 a.m. Central Standard Time on Friday, February 2, 2018.

You’re invited to attend the special meeting in person but, whether or not you plan to attend, please vote your shares as promptly as possible. Depending on how you hold your shares, you’ll find voting instructions on page 21 of the enclosed proxy statement and on the enclosed proxy or voting instruction card. Your vote is very important, because the merger cannot be completed unless holders of a majority of all of the outstanding shares of our common stock vote in favor of the proposal to approve the merger agreement. A failure to vote your shares of our common stock on the proposal to approve the merger agreement will have the same effect as a vote against the proposal.

The attached proxy statement provides you with detailed information about the special meeting, the merger agreement and the merger. A copy of the merger agreement is attached as Appendix A. I encourage you to read the proxy statement, including its appendices and the documents incorporated by reference, carefully and in its entirety.

If you have any questions or need assistance in voting your shares, please contact our proxy solicitor, Morrow Sodali LLC, by telephone at +1 (800) 662-5200 or by email at BWLD@morrowsodali.com.

Thank you for your continued support.

Sincerely,

 

LOGO

Sally J. Smith

Chief Executive Officer and President

Neither the Securities and Exchange Commission nor any state securities regulatory agency has approved or disapproved the merger, passed upon the merits or fairness of the merger, the merger agreement or the other transactions contemplated thereby or passed upon the adequacy or accuracy of the disclosure in this proxy statement. Any representation to the contrary is a criminal offense.

This proxy statement is dated December 28, 2017 and is first sent to shareholders on or about December 28, 2017.


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LOGO

BUFFALO WILD WINGS, INC.

 

 

NOTICE OF SPECIAL MEETING OF SHAREHOLDERS to be held Friday, February 2, 2018

 

 

 

TO THE SHAREHOLDERS OF BUFFALO WILD WINGS, INC.:

You are cordially invited to attend a special meeting of shareholders, to be held at the company’s offices located at 5500 Wayzata Boulevard, Minneapolis, Minnesota 55416, at 10:00 a.m. Central Standard Time on Friday, February 2, 2018. The purpose of the special meeting is to consider and vote upon the following proposals:

 

  1. Merger Proposal. To approve the Agreement and Plan of Merger, dated as of November 27, 2017 (which, as it may be amended from time to time, we refer to as the “merger agreement”), by and among Buffalo Wild Wings, Inc., Arby’s Restaurant Group, Inc., and IB Merger Sub I Corporation, pursuant to which Buffalo Wild Wings, Inc. would be acquired by way of a merger and become a wholly owned subsidiary of Arby’s Restaurant Group, Inc., which we refer to as the “merger.”  

 

  2. Golden Parachute Proposal. To approve, in a non-binding advisory vote, certain compensation that may be paid or become payable to our named executive officers in connection with the merger.  

 

  3. Adjournment Proposal. To approve one or more adjournments of the special meeting to a later date or dates if necessary or appropriate to solicit additional proxies if there are insufficient votes to approve the merger agreement at the time of the special meeting.  

Accompanying this notice of special meeting of shareholders is a proxy statement, which describes these proposals in more detail, and a form of proxy, which allows you to vote on these proposals. Please carefully review these materials, including the information incorporated by reference into the proxy statement.

We welcome you to attend the meeting, but whether or not you plan to attend, please submit your completed proxy via phone, mail or internet as soon as possible. Proxies are revocable and will not affect your right to vote in person in the event you revoke the proxy and attend the meeting. Instructions on how to vote are found in the section titled “The Special Meeting—How to Cast your Vote” on page 21. Our board of directors unanimously recommends our shareholders vote “FOR” each of these proposals.

Only shareholders of record as shown on our books at the close of business on Thursday, December 21, 2017 will be entitled to vote at the special meeting. Each shareholder is entitled to one vote per share on all matters to be voted on at the meeting.

 

        BY ORDER OF THE BOARD OF DIRECTORS,
    LOGO

Dated:

 

December 28, 2017

Minneapolis, Minnesota

  Emily C. Decker

Senior Vice President, General Counsel and
Secretary


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LOGO

 

BUFFALO WILD WINGS, INC.

 

PROXY STATEMENT FOR

SPECIAL MEETING OF SHAREHOLDERS

to be held Friday, February 2, 2018

 

The date of this Proxy Statement is December 28, 2017

 


Table of Contents

TABLE OF CONTENTS

 

PREFACE

    iii  

ABOUT THIS PROXY STATEMENT

    iii  

ADDITIONAL INFORMATION

    iii  

FORWARD-LOOKING STATEMENTS

    iii  

DATE OF MAILING

    v  

PROXY STATEMENT SUMMARY

    1  

THE SPECIAL MEETING

    1  

PROPOSALS UNDER CONSIDERATION

    1  

THE PARTIES

    2  

THE MERGER PROPOSAL

    3  

THE MERGER

    3  

TIMING OF THE MERGER AND RELATED CONTINGENCIES

    4  

OUR BOARDS RECOMMENDATION AND RELATED CONSIDERATIONS

    5  

CERTAIN OTHER TERMS OF THE MERGER AGREEMENT

    7  

GOLDEN PARACHUTE PAYMENTS

    10  

DISSENTERS’ RIGHTS

    11  

QUESTIONS AND ANSWERS

    12  

THE SPECIAL MEETING

    20  

THE SPECIAL MEETING

    20  

RECORD DATE – WHO CAN VOTE – SHARES OUTSTANDING

    21  

HOW TO CAST YOUR VOTE

    21  

REVOKING YOUR PROXY

    22  

VOTING INTENTIONS OF OUR DIRECTORS AND OFFICERS AND CERTAIN SHAREHOLDERS

    22  

VOTING PROCEDURES AND TECHNICALITIES

    22  

SOLICITATION OF PROXIES

    23  

PARTIES

    24  

BUFFALO WILD WINGS

    24  

ARBYS

    25  

MERGER SUB

    25  

ROARK

    25  

THE MERGER

    27  

THE MERGER AND ITS EFFECTS

    27  

BUFFALO WILD WINGS WITHOUT THE MERGER

    27  

BACKGROUND TO THE MERGER

    28  

REASONS FOR OUR BOARDS RECOMMENDATION IN FAVOR OF THE MERGER

    34  

OPINION OF OUR FINANCIAL ADVISOR

    39  

CERTAIN PROSPECTIVE FINANCIAL INFORMATION

    47  

FINANCING OF THE MERGER

    52  

INTERESTS OF OUR DIRECTORS AND EXECUTIVE OFFICERS IN THE MERGER

    54  

REGULATORY APPROVALS

    59  

EXCLUSIVE FORUM BYLAW

    60  

MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES

    61  

DISSENTERS’ RIGHTS

    63  

THE MERGER AGREEMENT

    66  

STRUCTURE AND CORPORATE EFFECTS OF THE MERGER

    66  

TIMING OF THE MERGER

    66  

EFFECT OF THE MERGER ON OUR COMMON STOCK

    67  

TREATMENT OF BUFFALO WILD WINGS EQUITY AWARDS

    68  

TREATMENT OF BUFFALO WILD WINGS EMPLOYEE STOCK PURCHASE PLAN

    68  

PAYMENT FOR COMMON STOCK IN THE MERGER

    69  

REPRESENTATIONS AND WARRANTIES; MATERIAL ADVERSE EFFECT

    69  

CONDUCT OF THE BUSINESS PENDING THE MERGER

    72  

NO SOLICITATION; ALTERNATIVE PROPOSALS

    76  

CHANGE IN BOARD RECOMMENDATION

    78  

COMPANY SHAREHOLDERS’ MEETING

    79  

EMPLOYEE MATTERS

    79  

INDEMNIFICATION AND INSURANCE

    80  

FINANCING COOPERATION

    81  

EFFORTS TO COMPLETE THE MERGER

    82  

COORDINATION ON LITIGATION

    82  

OTHER COVENANTS AND AGREEMENTS

    82  

CONDITIONS TO COMPLETION OF THE MERGER

    82  

EXPENSES

    84  

TERMINATION

    84  

TERMINATION FEES

    87  

LIMITATIONS ON REMEDIES

    88  

SPECIFIC ENFORCEMENT

    88  

ASSIGNMENT

    88  

AMENDMENT AND MODIFICATION

    89  

GOVERNING LAW

    89  
 

 

 

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VOTING AGREEMENT

    90  

PARTIES AND BACKGROUND

    90  

VOTING

    90  

WAIVER OF APPRAISAL RIGHTS

    90  

OTHER OBLIGATIONS

    90  

TERMINATION

    91  

THE MERGER PROPOSAL (PROPOSAL #1)

    92  

VOTE ON APPROVAL OF THE MERGER AGREEMENT

    92  

VOTE REQUIRED FOR APPROVAL

    92  

BOARD RECOMMENDATION

    92  

THE GOLDEN PARACHUTE PROPOSAL (PROPOSAL #2)

    93  

NON-BINDING ADVISORY VOTE ON MERGER-RELATED COMPENSATION OF NAMED EXECUTIVE OFFICERS

    93  

VOTE REQUIRED FOR APPROVAL

    94  

BOARD RECOMMENDATION

    94  

THE ADJOURNMENT PROPOSAL (PROPOSAL #3)

    95  

VOTE ON ADJOURNMENT OF THE SPECIAL MEETING TO A LATER DATE OR DATES

    95  

VOTE REQUIRED FOR APPROVAL

    95  

BOARD RECOMMENDATION

    95  
SECURITY OWNERSHIP OF PRINCIPAL SHAREHOLDERS AND MANAGEMENT     97  

MARKET PRICES AND DIVIDEND DATA

    99  

THE MARKET FOR OUR COMMON STOCK

    99  

HISTORICAL MARKET PRICES

    99  

DIVIDEND POLICY

    100  

MISCELLANEOUS

    101  

RECEIVING THE MERGER CONSIDERATION

    101  

NOTICE OF INTERNET AVAILABILITY OF PROXY MATERIALS FOR THE SPECIAL MEETING

    101  

HOUSEHOLDING

    101  

SHAREHOLDER PROPOSALS FOR OUR 2018 ANNUAL MEETING

    101  

LEGAL AND CAUTIONARY DISCLOSURES

    102  

WHERE YOU CAN FIND MORE INFORMATION

    104  

INCORPORATION BY REFERENCE

    104  

OBTAINING COPIES

    104  
 

 

APPENDICES

 

MERGER AGREEMENT

    A  

VOTING AGREEMENT

    B  

OPINION OF GOLDMAN SACHS & CO. LLC

    C  

DISSENTERS’ RIGHTS PROVISIONS

    D  
 

 

 

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PREFACE

ABOUT THIS PROXY STATEMENT

 

This document is being sent by Buffalo Wild Wings, Inc., a Minnesota corporation, which we refer to as “we,” “us,” “our,” “Buffalo Wild Wings,” or the “company,” and our board of directors to solicit proxies from our shareholders to vote their shares of our common stock at the special meeting of our shareholders to be held on Friday, February 2, 2018. At the special meeting, our shareholders will be asked, among other things, to approve the Agreement and Plan of Merger, which, as it may be amended from time to time, we refer to as the “merger agreement,” entered into on November 27, 2017, by and among Buffalo Wild Wings, Arby’s Restaurant Group, Inc., which we refer to as “Arby’s” or “Parent,” and IB Merger Sub I Corporation, which we refer to as “Merger Sub.” Pursuant to the terms of the merger agreement, Merger Sub will merge with and into Buffalo Wild Wings, with Buffalo Wild Wings continuing as the surviving corporation and becoming a wholly owned subsidiary of Arby’s, which we refer to as the “merger.”

The merger agreement permits a party to assign the merger agreement in certain circumstances, as described under “The Merger Agreement—Assignment” on page 88. References in this proxy statement to a party to the merger agreement are also to its permitted successors and assigns.

For a description of the company and some of the other parties involved in the transactions described in this proxy statement, including Roark Capital Management LLC, which we refer to as “Roark,” please see “Parties” on page 24.

ADDITIONAL INFORMATION

 

We have elected to “incorporate by reference” certain information into this proxy statement, which means that we are disclosing important information to you by referring you to certain other documents that we have filed separately with the U.S. Securities and Exchange Commission, which we refer to as the “SEC,” and certain other documents that we may file with the SEC after the date of this proxy statement but prior to the special meeting. Because these documents contain important information and may subsequently amend this proxy statement, you should monitor and review our SEC filings until the special meeting is completed. References to this proxy statement are meant to include not only the main body of this proxy statement, but also the accompanying notice of special meeting and proxy card, each of the appendices, and all of the information incorporated by reference. See “Where You Can Find More Information” on page 104.

We have not authorized anyone to provide any information other than what is contained in or incorporated by reference in this proxy statement, and take no responsibility for any information others may give you. See “Miscellaneous—Legal and Cautionary Disclosures—Other Information Not Authorized by Buffalo Wild Wings” on page 102.

FORWARD-LOOKING STATEMENTS

 

This proxy statement contains forward-looking statements, including statements related to our financial projections, the consequences of the outcome of the proposals to be considered and voted upon at the special meeting, the completion of the merger, or the consequences thereof. Forward-looking statements can usually be identified by the use of words such as “aim,”

 

 

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“anticipate,” “believe,” “continue,” “could,” “estimate,” “evolve,” “expect,” “forecast,” “intend,” “looking ahead,” “may,” “opinion,” “plan,” “possible,” “potential,” “project,” “should,” “will” and other expressions which indicate future events or trends.

These forward-looking statements are based upon certain expectations and assumptions and are subject to risks and uncertainties. Actual results could differ materially from those anticipated as a result of various factors, including:

 

  (1) Risks related to the consummation of the merger, including the risks that:

 

  a. The merger may not be consummated within the anticipated time period, or at all.

 

  b. We may fail to obtain shareholder approval of the merger agreement.

 

  c. We may fail to secure the termination or expiration of any waiting period applicable under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, which we refer to as the “HSR Act.”

 

  d. Other conditions to the consummation of the merger under the merger agreement may not be satisfied.

 

  e. All or part of the financing to be obtained by Arby’s may become unavailable.

 

  f. The significant limitations on remedies contained in the merger agreement may limit or entirely prevent us from specifically enforcing Arby’s obligations under the merger agreement or recovering damages for any breach by Arby’s.

 

  (2) The effects that any termination of the merger agreement may have on us and our business, including the risks that:

 

  a. Our stock price may decline significantly if the merger is not completed.

 

  b. The merger agreement may be terminated in circumstances requiring us to pay Arby’s a termination fee of $74 million.

 

  c. The circumstances of the termination, including the possible imposition of a 12-month tail period during which the termination fee could be payable upon certain subsequent transactions, may have a chilling effect on alternatives to the merger.

 

  (3) The effects that the announcement or pendency of the merger may have on us and our business, including the risks that:

 

  a. Our business, operating results or stock price may suffer.

 

  b. Our current plans and operations may be disrupted.

 

  c. Our ability to retain or recruit key employees may be adversely affected.

 

  d. Our business relationships (including customers, franchisees and suppliers) may be adversely affected.

 

  e. Our management’s or other employees’ attention may be diverted from other important matters.

 

  (4) The effect of limitations that the merger agreement places on our ability to operate our business, return capital to shareholders or engage in alternative transactions.

 

 

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  (5) The nature, cost and outcome of pending and future litigation and other legal proceedings, including any such proceedings related to the merger and instituted against us and others.

 

  (6) The risk that the merger and related transactions may involve unexpected costs, liabilities or delays.

 

  (7) Other economic, business, competitive, legal, regulatory, and/or tax factors.

 

  (8) The risks described from time to time in our reports filed with the SEC under the heading “Risk Factors,” including Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year ended December 25, 2016, subsequent Quarterly Reports on Form 10-Q and in our other filings with the SEC.

All forward-looking statements are qualified by, and should be considered together with, these cautionary statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date on which such statements were made.

Except as required by applicable law, we undertake no obligation to update forward-looking statements (whether as a result of new information, future events or otherwise). However, we do advise you to consult any future disclosures we make on related subjects as may be detailed in our other filings made from time to time with the SEC.

DATE OF MAILING

 

We expect that this proxy statement, the related form of proxy, and notice of special meeting will first be sent to shareholders on or about December 28, 2017.

 

 

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PROXY STATEMENT SUMMARY

Below is a very brief summary of certain of the information included in this proxy statement that we consider most significant. This summary does not address all of the material topics covered by this proxy statement, nor does it include all of the material information provided by this proxy statement on any topic. Please refer to the complete proxy statement for additional information and before you vote.

THE SPECIAL MEETING

 

Time:

 

  

10:00 a.m. Central Standard Time

 

Date:

 

  

Friday, February 2, 2018

 

Place:

 

  

The company’s offices located at 5500 Wayzata Boulevard, Minneapolis, Minnesota 55416

 

Record Date:

 

  

Thursday, December 21, 2017

 

Voting Eligibility:

 

  

Shareholders as of the close of business on the record date are entitled to vote, and each share of our common stock is entitled to one vote on all matters to be voted on. As of the close of business on the record date for the special meeting, there were 15,532,523 shares of our common stock outstanding and expected to be entitled to vote at the special meeting. There are no other securities outstanding and entitled to vote at the special meeting.

 

Admission:

 

  

Only shareholders and authorized guests may attend the meeting and all attendees will be required to show a valid form of ID (such as a government-issued form of photo identification). If you hold your shares in street name (i.e., through a bank, broker or other nominee), you must also provide proof of share ownership, such as a letter from your bank, broker or other nominee or a recent brokerage statement.

 

PROPOSALS UNDER CONSIDERATION

 

The following table summarizes each of the proposals to be considered and voted upon at the special meeting, including for each the vote required for approval, the voting recommendation of our board of directors, and the page number in this proxy statement where you can begin to find more information.

 

  No.  

 

Proposal

 

Voting Requirement

  Voting
Recommendation
  See
Page

 

1

 

 

Merger Proposal. To approve the Agreement and Plan of Merger, dated as of November 27, 2017, by and among Buffalo Wild Wings, Inc., Arby’s Restaurant Group, Inc., and IB Merger Sub I Corporation, pursuant to which Buffalo Wild Wings would be acquired by way of a merger and become a wholly owned subsidiary of Arby’s, which we refer to as the “merger proposal.”

 

 

At least 7,766,262 shares (which represents a majority of all shares of our common stock outstanding as of the record date)

 

 

FOR

 

 

92

 



 

 

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2

  Golden Parachute Proposal. To approve, in a non-binding advisory vote, certain compensation that may be paid or become payable to our named executive officers in connection with the merger, which we refer to as the “golden parachute proposal.”   More shares voted “FOR” than “AGAINST” (subject to the presence of a quorum)   FOR   93

 

3

 

 

Adjournment Proposal. To approve one or more adjournments of the special meeting to a later date or dates if necessary or appropriate to solicit additional proxies if there are insufficient votes to approve the merger agreement at the time of the special meeting, which we refer to as the “adjournment proposal.”

 

 

The greater of (a) 3,883,132 shares (which represents a majority of the minimum number of shares entitled to vote that would constitute a quorum) or (b) a majority of all shares of our common stock represented at the special meeting, in person or by proxy, and entitled to vote at the special meeting

 

 

FOR

 

 

95

THE PARTIES

 

Buffalo Wild Wings, Inc. (referred to in this proxy statement as “we,” “us,” “our,” “Buffalo Wild Wings,” or the “company) is a Minnesota corporation. We are an established and growing owner, operator, and franchisor of restaurants featuring a variety of boldly-flavored, crave-able menu items, including our Buffalo, New York-style chicken wings.

Arby’s Restaurant Group, Inc. (referred to in this proxy statement as “Arby’s” or “Parent) is a Delaware corporation. Arby’s is the parent company, owner-operator, and franchisor of the Arby’s brand.

IB Merger Sub I Corporation (referred to in this proxy statement as “Merger Sub) is a wholly owned subsidiary of Arby’s formed solely for the purpose of entering into the merger agreement and consummating the transactions contemplated by the merger agreement.

Roark Capital Management LLC (referred to in this proxy statement as “Roark) is a Delaware limited liability company. Roark is not a party to the merger agreement, but funds advised by Roark are the majority owners of Arby’s and another fund advised by Roark has committed to provide Arby’s with a portion of the equity financing needed for the merger.

For more information about these parties, see “Parties” on page 24.

The merger agreement permits a party to assign the merger agreement in certain circumstances, as described under “The Merger Agreement—Assignment” on page 88. For example, Arby’s is generally permitted to assign the merger agreement to an affiliate. References in this proxy statement to a party to the merger agreement are also to its permitted successors and assigns.

 



 

 

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THE MERGER PROPOSAL

 

We are asking you to approve a proposal to approve the merger agreement and thereby adopt the merger agreement as a plan of merger. The merger agreement provides, among other things, that at the effective time of the merger, Merger Sub will be merged with and into Buffalo Wild Wings. Buffalo Wild Wings will continue as the surviving corporation in the merger. As a result of the merger, Buffalo Wild Wings will be delisted from the Nasdaq Global Select Market, which we refer to as “Nasdaq,” and deregistered under the Securities Exchange Act of 1934, which we refer to as the “Exchange Act,” and will become a wholly owned subsidiary of Arby’s. See “The Merger—The Merger and Its Effects” on page 27 and “The Merger Agreement—Structure and Corporate Effects of the Merger” on page 66.

A copy of the merger agreement is attached as Appendix A. For a discussion of certain terms and conditions of the merger agreement, see the section entitled “The Merger Agreement” on page 66. For a discussion of certain other considerations related to the merger, see the section entitled “The Merger” on page 27. For a discussion of the merger proposal see “The Merger Proposal (Proposal #1)” on page 92. The following subsections of this summary highlight certain information contained in these sections.

THE MERGER

 

Effects of the Merger on our Common Stock; Merger Consideration

As a result of the merger, each share of our common stock that is issued and outstanding immediately prior to the effective time of the merger will be converted into the right to receive $157.00 in cash, without interest, which we refer to as the “merger consideration,” and less any applicable withholding taxes, except for (1) any shares subject to a restricted stock award, (2) any shares that are directly or indirectly owned by Arby’s, any of its subsidiaries, or any of our subsidiaries, which, collectively, we refer to as the “cancelled shares,” and (3) any dissenting shares (as described under “The Merger Agreement—Effect of the Merger on Our Common Stock” on page 67). The shares will no longer be outstanding and will automatically be cancelled and will cease to exist, and each holder thereof will cease to have any rights with respect thereto, except the right to receive the merger consideration. See “The Merger—The Merger and Its Effects” on page 27 and “The Merger Agreement—Effect of the Merger on Our Common Stock” on page 67.

Payment for Common Stock in the Merger

Promptly after the effective time of the merger, Arby’s will cause a paying agent to mail to each holder of record of shares of our common stock whose shares were converted into the right to receive the merger consideration (1) a letter of transmittal and (2) instructions for effecting the surrender of certificates or book-entry shares formerly representing shares of our common stock in exchange for the merger consideration. Upon surrender of certificates or book-entry shares, as applicable, to the paying agent together with the letter of transmittal, completed and executed in accordance with the instructions to the letter of transmittal, and such other documents as may customarily be required by the paying agent, the holder of such certificates (or effective affidavits of loss in lieu of certificates) or book-entry shares will be entitled to receive the merger consideration for all such shares, and such shares will be cancelled. Do not send in your certificates now. See “The Merger Agreement—Payment for Common Stock in the Merger” on page 69.

 



 

 

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Buffalo Wild Wings without the Merger

If the merger agreement is not approved by our shareholders or if the merger is not consummated for any other reason, our shareholders will not receive any payment for their shares of our common stock. Instead, we will remain a public company, our common stock will continue to be listed and traded on Nasdaq and registered under the Exchange Act. In addition, if the merger is not completed, we expect that management will operate the business in a manner similar to that in which it is being operated today and that our shareholders will continue to be subject to the same risks and opportunities as they currently are, including, among other things, general industry, economic and market conditions. See “The Merger—Buffalo Wild Wings Without the Merger” on page 27.

Material United States Federal Income Tax Consequences

The exchange of our common stock for cash pursuant to the merger will generally be a taxable transaction to U.S. holders (as defined under “The Merger—Material U.S. Federal Income Tax Consequences” on page 61) for United States federal income tax purposes. A more complete description of the U.S. federal income tax consequences of the merger is provided under “The Merger—Material U.S. Federal Income Tax Consequences” on page 61.

TIMING OF THE MERGER AND RELATED CONTINGENCIES

 

Timing of the Merger

The closing of the merger is to take place on the second business day after the satisfaction or waiver of the conditions set forth in the merger agreement to be satisfied or waived. However, Arby’s and Merger Sub will not be obligated to consummate the closing until three business days following the end of the marketing period (as described under “The Merger Agreement—Financing Cooperation” on page 81). In any event, we and Arby’s will agree to a mutually acceptable closing date (as defined below). We currently expect to complete the merger in the first quarter of 2018. However, we cannot predict the exact timing of completion of the merger. The date on which the closing occurs is sometimes referred to as the “closing date.” See “The Merger Agreement—Timing of the Merger” on page 66.

Conditions to Completion of the Merger

The respective obligations of us, Arby’s and Merger Sub to consummate the merger are subject to the satisfaction or waiver of certain customary conditions, including the adoption of the merger agreement by our shareholders, receipt of certain regulatory approvals, the absence of any legal prohibitions to the consummation of the merger, the accuracy of the representations and warranties of the parties, a lack of a material adverse effect on the company and compliance by the parties with their respective obligations under the merger agreement. For a description of these conditions, see “The Merger Agreement—Conditions to Completion of the Merger” on page 82.

Financing of the Merger

We anticipate that the total amount of funds necessary to consummate the merger and the related transactions will be funded through a combination of (1) debt financing as contemplated by a debt commitment letter between Arby’s and Barclays Bank plc, which we refer to as “Barclays Bank,” and certain other financial institutions party thereto pursuant to

 



 

 

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which Barclays Bank and such financial institutions have agreed to provide Arby’s with up to $2.21 billion of borrowings under committed borrowing facilities subject to the terms and conditions set forth in such debt commitment letter (or financing raised in certain capital markets transactions in lieu of a portion of such committed debt financing), (2) equity financing to be provided by a fund advised by Roark, which has agreed to capitalize Arby’s with up to $783 million, subject to the terms and conditions set forth in an equity commitment letter entered into by such fund and Arby’s, and (3) cash on hand and other available financial resources. The merger is not conditioned upon receipt of financing by Arby’s. See “The Merger—Financing of the Merger” on page 52.

We have agreed to use our reasonable best efforts to provide all cooperation that is reasonably necessary, customary or advisable and reasonably requested by Arby’s to assist Arby’s in connection with it obtaining financing for the merger. The agreement also contains provisions intended to ensure Arby’s and its debt financing sources have sufficient time and information with which to syndicate debt financing of Arby’s. In particular, Arby’s and Merger Sub are not obligated to complete the merger until three business days after we have provided certain “required information” and a subsequent “marketing period” of at least 15 consecutive business days (which marketing period is subject to early termination in certain circumstances) has elapsed. See “The Merger Agreement—Financing Cooperation” on page 81.

Regulatory Approvals

Under the terms of the merger agreement, the merger cannot be completed until the waiting period applicable to the consummation of the merger under the HSR Act has expired or been terminated.

The consummation of the merger is not conditioned on any antitrust or competition law regulatory filings in the United States or in any other jurisdiction, other than that described above.

For more information about regulatory approvals relating to the merger, see “The Merger—Regulatory Approvals” on page 59.

OUR BOARDS RECOMMENDATION AND RELATED CONSIDERATIONS

 

Board Recommendation

Our board of directors unanimously recommends that you vote “FOR” approval of the merger proposal, which we refer to as the “board recommendation.” In making the board recommendation, our board of directors considered a number of factors potentially weighing in favor of the merger, and also considered and balanced against these factors a number of uncertainties, risks, restrictions and other factors potentially weighing against the merger. For a summary of the reasons for our board of directors’ recommendation in favor of the merger, see “The Merger—Reasons for our Board’s Recommendation in Favor of the Merger” on page 34.

Additional information about the process leading to our board of directors’ approval of the merger and the execution of the merger agreement can be found under “The Merger—Background to the Merger” on page 28.

 



 

 

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Opinion of Our Financial Advisor

Goldman Sachs & Co. LLC, which we refer to as “Goldman Sachs,” delivered its opinion to our board of directors that, as of November 27, 2017 and based upon and subject to the factors and assumptions set forth therein, the $157.00 in cash per share of our common stock to be paid to the holders (other than Arby’s and its affiliates) of shares of our common stock pursuant to the merger agreement was fair from a financial point of view to such holders.

The full text of the written opinion of Goldman Sachs, dated November 27, 2017, which sets forth assumptions made, procedures followed, matters considered and limitations on the review undertaken in connection with the opinion, is attached as Appendix C. Goldman Sachs provided its opinion for the information and assistance of our board of directors in connection with its consideration of the merger. The Goldman Sachs opinion is not a recommendation as to how any holder of shares of our common stock should vote with respect to the merger or any other matter. Pursuant to an engagement letter between us and Goldman Sachs, we have agreed to pay Goldman Sachs a transaction fee that is estimated, based on the information available as of the date of announcement, at approximately $27 million, all of which is payable upon consummation of the merger.

See “The Merger—Opinion of Our Financial Advisor” on page 39.

Change in Board Recommendation

The merger agreement provides that our board of directors may not withhold, withdraw or rescind (or modify in a manner adverse to Arby’s), or publicly propose to withhold, withdraw or rescind (or modify in a manner adverse to Arby’s), the board recommendation; approve or recommend the adoption of, or publicly propose to approve, declare the advisability of or recommend the adoption of, any takeover proposal (as defined under “The Merger Agreement—No Solicitation; Alternative Proposals” on page 76); cause or permit us or our subsidiaries to execute or enter into, any acquisition agreement or other agreement related to any takeover proposal, other than confidentiality agreements executed pursuant to potential takeover proposals or superior offers under specified circumstances; or publicly propose or announce an intention to take any of the foregoing actions. Notwithstanding the foregoing, but subject to certain conditions (including Arby’s matching right described under “The Merger Agreement—Change in Board Recommendation” on page 78), at any time prior to the time the requisite company shareholder vote is obtained, our board of directors may, (x) make an adverse recommendation change in response to a superior proposal (as defined under “The Merger Agreement—No Solicitation; Alternative Proposals” on page 76) that did not result from a breach of the no-shop restrictions (as defined under “The Merger Agreement—No Solicitation; Alternative Proposals” on page 76) or in response to an intervening event (as defined under “The Merger Agreement—Change in Board Recommendation” on page 78) or (y) terminate the merger agreement in order to enter into a definitive agreement providing for the implementation of a superior proposal that did not result from a breach of the no-shop restrictions. See “The Merger Agreement—Change in Board Recommendation” on page 78.

Interests of our Directors and Executive Officers in the Merger

In considering the recommendation of our board of directors that you vote for the merger proposal, you should be aware that certain of our directors and executive officers may have interests in the merger that are different from, or in addition to, your interests as a shareholder. These interests are summarized under “The Merger—Interests of Our Directors

 



 

 

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and Executive Officers in the Merger” on page 54. Our board of directors was aware of these interests in approving the merger agreement and the merger and in recommending that the merger agreement be approved and adopted by the shareholders of the company.

The compensation that may become payable to our named executive officers in connection with the merger is subject to a non-binding advisory vote of the company’s shareholders, as described below in “The Golden Parachute Proposal (Proposal #2)” on page 93.

We currently expect that our directors and officers will vote their shares in favor of the merger proposal, the golden parachute proposal and the adjournment proposal, although they have no obligation to do so.

Voting Agreement with the Marcato Funds

Certain investment funds advised by Marcato Capital Management, LP, which collectively beneficially owned approximately 6.4% of our outstanding shares as of November 27, 2017, have entered into an agreement to vote the shares beneficially owned by such funds as of the record date in favor of approval of the merger agreement, subject to the terms and conditions of such agreement. See “Voting Agreement” on page 90.

CERTAIN OTHER TERMS OF THE MERGER AGREEMENT

 

The merger agreement contains a range of representations and warranties, covenants, and additional agreements. Certain of these terms are summarized below, and additional detail is provided in the section entitled “The Merger Agreement” on page 66. A copy of the merger agreement is attached as Appendix A. We encourage you to read the merger agreement carefully and in its entirety because the rights and obligations of the parties are governed by the express terms of the merger agreement and not by this summary or any other information contained in this proxy statement.

“No-Shop” Restrictions

The merger agreement provides that we are not permitted to, (1) directly or indirectly, solicit, initiate, knowingly facilitate or knowingly encourage the submission or announcement of any inquiries, proposals or offers that constitute or would reasonably be expected to lead to any takeover proposal, (2) participate in discussions or negotiations regarding any inquiry, proposal or offer that constitutes or would reasonably be expected to lead to a takeover proposal, (3) furnish any non-public information concerning us or our subsidiaries related to, or to any person or group who would reasonably be expected to make, any takeover proposal, (4) approve, recommend or endorse any acquisition agreement or takeover proposal, (5) otherwise knowingly facilitate any such efforts or (6) resolve or agree to do any of the foregoing.

Notwithstanding these restrictions, we may enter into and participate in discussions or negotiations with such third party in response to a bona fide written takeover proposal made after the execution of the merger agreement and that did not result from a breach of the no-shop restrictions, and may furnish information to such third party if our board of directors has determined in good faith, after consultation with outside legal counsel and our financial advisor, that such takeover proposal is or is reasonably likely to result in a superior proposal and failure to take such action would be reasonably likely to be inconsistent with our board of directors’ fiduciary duties under applicable law.

 



 

 

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For more information on these no-shop restrictions, see “The Merger Agreement—No Solicitation; Alternative Proposals” on page 76.

Termination of the Merger Agreement

The merger agreement may be terminated at any time prior to the effective time of the merger, whether before or after approval of the merger proposal by our shareholders by the mutual written consent of us and Arby’s. Subject to certain conditions and exceptions, the merger agreement may also be terminated and the merger abandoned at any time prior to the effective time of the merger as follows:

 

    by either us or Arby’s, if:

 

      the merger is not completed by 5:00 p.m., New York City time, on May 29, 2018 (which we refer to as the “outside date,” and which may be extended in certain circumstances to June 26, 2018);

 

      a final and nonappealable order, injunction, judgment or law is in effect enjoining or otherwise prohibiting the merger; or

 

      our shareholders do not approve the merger agreement when a final vote is taken on the merger proposal at the special meeting.

 

    by us:

 

      if (1) there is a breach or inaccuracy in Arby’s or Merger Sub’s representations and warranties, or if Arby’s or Merger Sub has failed to perform any of its covenants or agreements in the merger agreement, (2) such breach, inaccuracy or failure would give rise to the failure of certain closing conditions, and (3) such breach, inaccuracy or failure is not capable of being cured prior to the outside date or, if curable, is not cured within the earlier of 30 days of written notice to Arby’s of such breach, inaccuracy or failure or the outside date;

 

      in order to accept a superior proposal that did not result from a breach of the no-shop restrictions and enter into a definitive agreement providing for such superior proposal immediately following or concurrently with the termination of the merger agreement; or

 

      if, three business days following the completion of the marketing period specified in the merger agreement, (1) all of the mutual conditions precedent to the merger and the conditions to Arby’s and Merger Sub’s obligations to effect the merger have been satisfied (other than those conditions that by their nature are to be satisfied at the closing but which are then capable of being satisfied at the closing on such date) under the merger agreement, (2) we have confirmed to Arby’s in writing that our obligations to effect the merger have been satisfied or waived, and that we stand ready, willing and able to consummate the merger at such time, (3) Arby’s and Merger Sub fail to consummate the merger by the time the closing should have occurred in accordance with the merger agreement, (4) we have given Arby’s written notice at least 15 calendar days prior to such termination stating our intention to terminate the merger agreement and the basis for such termination, and (5) the closing has not been consummated by the end of such 15 calendar day period.

 



 

 

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    by Arby’s, if:

 

      (1) there is a breach or inaccuracy in our representations and warranties, or if we have failed to perform any of our covenants or agreements in the merger agreement, (2) such breach, inaccuracy or failure would give rise to the failure of certain closing conditions, and (3) such breach, inaccuracy or failure is not capable of being cured prior to the outside date or, if curable, is not cured within the earlier of 30 days of written notice to us of such breach, inaccuracy or failure or the outside date;

 

      our board of directors makes an adverse recommendation change, or we fail to include the board recommendation in this proxy statement; or

 

      a tender or exchange offer relating to our securities is commenced (other than by Arby’s or its affiliates) and we do not announce, within ten business days after such commencement, a statement recommending rejection of such tender or exchange offer, or any other takeover proposal is publicly disclosed or announced and our board of directors fails to publicly reaffirm the board recommendation within ten business days after a request by Arby’s that we do so.

For more information on the circumstances in which the merger agreement may be terminated, and the effects of any such termination, see “The Merger Agreement—Termination” on page 84.

Termination Fees

We have agreed to pay Arby’s a termination fee of $74 million, if the merger agreement is terminated in certain circumstances, including:

 

  (1) if Arby’s terminates the merger agreement due to (or either Arby’s or we terminate the merger agreement because the requisite vote of approval of our shareholders is not obtained at the special meeting and at a time when Arby’s would be entitled to terminate the agreement due to) (a) our board of directors making an adverse recommendation change; (b) our failure to include the board recommendation in favor of the merger proposal in this proxy statement; (c) following the public disclosure or announcement of a takeover proposal (other than a tender or exchange offer described below), our board of directors fails to reaffirm publicly its recommendation within ten business days of Arby’s requesting such public affirmation; or (d) a tender or exchange offer relating to our securities is commenced (other than by Arby’s or its affiliates) and we do not announce, within ten business days after such commencement, a statement disclosing that we recommend rejection of such tender or exchange offer;

 

  (2) if we terminate the merger agreement in order to accept a bona fide superior proposal; or

 

  (3)

if (a) the merger agreement is terminated by us or Arby’s for the failure to close before the outside date or for the failure to obtain shareholder approval, or the merger agreement is terminated by Arby’s for our material, uncured breach of the merger agreement, (b) after the execution and delivery of the merger

 



 

 

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  agreement but before such termination, a takeover proposal is made to our board of directors or becomes publicly known and is not withdrawn, and (c) within 12 months after the termination, we enter into a definitive agreement providing for any transaction contemplated by any takeover proposal (regardless of when made) or consummate any takeover proposal (regardless of when made).

Arby’s has agreed to pay us a termination fee of $134 million, if the merger agreement is terminated in certain circumstances following Arby’s failure to consummate the merger when required to do so.

Limitation on Remedies

The merger agreement provides that any claim or cause of action based upon, arising out of, or related to the merger agreement (or any other agreement referenced therein) may only be brought against persons that are expressly named as parties to the merger agreement (or a party to any such other agreement referenced in the merger agreement). In addition, we have specifically waived any claims or rights against any financing source, agreed not to support any suit, action or proceeding made against any financing source, and agreed to cause dismissal or termination of any suit, action or proceeding against any financing source by or on behalf of the company, its subsidiaries and representatives, in each case, relating to the merger agreement, related financing documentation and related transactions.

If paid, the payment of any termination fees are deemed to be liquidated damages for any and all losses or damages suffered or incurred by the non-paying party in connection with the merger, merger agreement and related transactions. Upon payment of any such termination fee, the party paying such termination fee shall not have any further liability, whether pursuant to a claim in contract or tort, at law or in equity or otherwise.

For more information on the limitations on remedies in connection with the merger, see “The Merger Agreement—Limitations on Remedies” on page 88.

Specific Performance

Arby’s, Merger Sub and we are entitled to an injunction or injunctions to prevent breaches of the merger agreement and to enforce specifically the performance of terms and provisions of the merger agreement. However, we are not entitled to enforce or seek enforcement of Arby’s obligations to cause the equity financing to be consummated or to consummate the merger unless certain circumstances are satisfied as described in the section entitled “The Merger Agreement—Specific Enforcement” on page 88.

GOLDEN PARACHUTE PAYMENTS

 

In addition to the merger proposal, shareholders will be asked to advise in a non-binding vote to approve certain compensation that may be paid or become payable to our named executive officers in connection with the merger. We refer to this as the golden parachute proposal. The inclusion of this proposal is required by the SEC rules; however, the approval of this proposal is not a condition to the completion of the merger and the vote on this proposal is an advisory vote by shareholders and is not binding on Buffalo Wild Wings or Arby’s. If the merger agreement is approved by our shareholders and the merger is completed, the merger-related

 



 

 

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compensation will be paid to Buffalo Wild Wings’ named executive officers in accordance with the terms of their compensation agreements and arrangements even if our shareholders do not approve this proposal.

For more information on the golden parachute proposal, see “The Golden Parachute Proposal (Proposal #2)” on page 93. For more information on the payments that our named executive officers may receive in connection with the merger, see “Interests of Our Directors and Executive Officers in the Merger” on page 54.

DISSENTERS’ RIGHTS

 

If the merger agreement is approved by our shareholders at the special meeting and the merger is consummated, any of our shareholders who do not vote in favor of the merger agreement and who otherwise strictly comply with Sections 302A.471 and 302A.473 of the Minnesota Business Corporation Act will be entitled to demand payment for their shares and an appraisal of the value of those shares. The rights of dissenting shareholders under the Minnesota Business Corporation Act are discussed under “Dissenters’ Rights” on page 63. Any exercise of dissenters’ rights must be in accordance with the procedures set forth in Sections 302A.471 and 302A.473 of the Minnesota Business Corporation Act, which sections are attached as Appendix D to this proxy statement.

 



 

 

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QUESTIONS AND ANSWERS

Below are brief answers to some of the key questions that we anticipate you might have. These questions do not address all of the material topics covered by this proxy statement, nor do the answers include all of the material information provided by this proxy statement. Please refer to the complete proxy statement for additional information and before you vote.

 

Q: Why am I receiving this document?

 

A: On November 27, 2017, Buffalo Wild Wings entered into a definitive agreement providing for Buffalo Wild Wings to be acquired by way of a merger and become a wholly owned subsidiary of Arby’s. You are receiving this document in connection with the solicitation of proxies by our board of directors in favor of the proposal to approve the merger agreement, which we refer to as the merger proposal, and related proposals to be voted on at the special meeting. In addition, this document is our formal notice to you of your dissenters’ rights under Minnesota law.

 

Q: What is a proxy?

 

A: A proxy is your legal designation of another person, referred to as a “proxy,” to vote your shares of our common stock. The written document describing the matters to be considered and voted on at the special meeting is called a “proxy statement.” The document used to designate a proxy to vote your shares of our common stock is called a “form of proxy” or “proxy card.” Our board of directors has designated each of Alexander H. Ware and Emily C. Decker, and each of them with full power of substitution, as proxies for the special meeting.

 

Q: When and where is the special meeting?

 

A: The special meeting will be held at the company’s offices located at 5500 Wayzata Boulevard, Minneapolis, Minnesota 55416, on Friday, February 2, 2018, at 10:00 a.m. Central Standard Time.

In certain circumstances, the special meeting could be adjourned to another time or place. All references in our proxy materials to the special meeting include any adjournment or postponement of the special meeting.

 

Q: Who can vote at the special meeting?

 

A: Only holders of record of our common stock as of the close of business on December 21, 2017, the record date for the special meeting, are entitled to receive these proxy materials and to vote their shares at the special meeting. As of the close of business on the record date, there were 15,532,523 shares of our common stock outstanding and entitled to vote at the special meeting, held by approximately 93 holders of record. Each share of our common stock issued and outstanding as of the record date will be entitled to one vote on each matter submitted to a vote at the special meeting.

 

 

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Q: What is the difference between holding shares as a “shareholder of record” and as a “beneficial owner”?

 

A: If your shares are registered directly in your name with our transfer agent, Continental Stock Transfer & Trust Company, you are considered, with respect to those shares, to be the “shareholder of record.” In this case, we have sent this proxy statement and your proxy card to you directly.

If your shares are held through a broker, bank or other nominee, you are considered the “beneficial owner” of the shares of our common stock held in “street name.” In that case, this proxy statement has been forwarded to you by your broker, bank or other nominee who is considered, with respect to those shares, to be the shareholder of record. As the beneficial owner, you have the right to direct your broker, bank or other nominee on how to vote your shares by following their instructions for voting. You are also invited to attend the special meeting. However, because you are not the shareholder of record, you may not vote your shares in person at the special meeting unless you request and obtain a valid legal proxy from your broker, bank or other nominee.

 

Q: What matters will be voted on at the special meeting?

 

A: You will be asked to consider and vote on the following proposals:

 

    to approve the merger agreement (which we describe in greater detail on page 92);

 

    to approve, in a non-binding advisory vote, certain compensation that may be paid or become payable to our named executive officers in connection with the merger (which we describe in greater detail on page 93); and

 

    to approve one or more adjournments of the special meeting to a later date or dates if necessary or appropriate to solicit additional proxies if there are insufficient votes to approve the merger agreement at the time of the special meeting (which we describe in greater detail on page 95).

 

Q: What is the proposed merger and what effects will it have on Buffalo Wild Wings?

 

A: The proposed merger is the acquisition of Buffalo Wild Wings by Arby’s pursuant to the merger agreement. If the merger proposal is approved by the holders of our common stock and the other closing conditions under the merger agreement are satisfied or waived, Merger Sub will merge with and into Buffalo Wild Wings, with Buffalo Wild Wings continuing as the surviving corporation. As a result of the merger, Buffalo Wild Wings will become a wholly owned subsidiary of Arby’s. We would de-list our common stock from Nasdaq and de-register our common stock under the Exchange Act as soon as reasonably practicable following the effective time of the merger, and at such time, we will no longer be a publicly traded company and will no longer file periodic reports with the SEC. If the merger is consummated, you will not own any shares of the capital stock of the surviving corporation.

 

 

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Q: What happens if the merger is not completed?

 

A: If the merger agreement is not approved by our shareholders or if the merger is not consummated for any other reason, our shareholders will not receive any payment for their shares of common stock in connection with the merger. Instead, we will remain a public company, the common stock will continue to be listed and traded on Nasdaq and registered under the Exchange Act and we will continue to file periodic reports with the SEC.

Under specified circumstances, we may receive payment from or be required to pay to Arby’s a termination fee upon the termination of the merger agreement, as described under “The Merger Agreement—Termination Fees” on page 87.

 

Q: What will I receive if the merger is completed?

 

A: Upon completion of the merger, you will be entitled to receive the merger consideration of $157.00 in cash, without interest and less any applicable withholding taxes, for each share of our common stock that you own. For example, if you own 100 shares of our common stock, you will receive $15,700.00 in cash in exchange for your shares of our common stock, less any applicable withholding taxes. Following the merger, you will not own shares in the surviving corporation.

 

Q: How does the merger consideration compare to the market price of Buffalo Wild Wings common stock prior to the public announcement of the merger agreement?

 

A: The merger consideration represents a premium of (1) approximately 34% to our closing stock price on November 13, 2017, the last trading day before the publication of articles suggesting that we and Arby’s were engaged in sale discussions, and (2) approximately 7% to our closing stock price on November 27, 2017, the last trading day before the public announcement of the merger agreement.

 

Q: What will the holders of Buffalo Wild Wings equity awards, such as options and restricted stock units, receive in the merger?

 

A: Until the effective time of the merger, equity awards will continue to be subject to vesting, exercise or forfeiture in accordance with their terms. At the effective time of the merger, all of our then-outstanding equity awards will be treated as summarized below and as described in more detail under “The Merger Agreement—Treatment of Buffalo Wild Wings Equity Awards” on page 68. These payments will be made shortly following the effective time of the merger, without interest and subject to any applicable withholding tax.

Stock Options. Each then-outstanding unexercised option to acquire shares of our common stock will be cancelled in exchange for an amount in cash equal to the excess, if any, of $157.00 over the exercise price per share of our common stock subject to such option multiplied by the number of shares of our common stock subject to such option. So-called “underwater” or out-of-the-money options, where the exercise price is more than or equal to $157.00, will be cancelled without consideration.

 

 

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Time-Based Restricted Stock Units. Each then-outstanding restricted stock unit award subject solely to time-based vesting (sometimes referred to as an “RSU”) will be cancelled in exchange for an amount in cash equal to $157.00 multiplied by the number of shares of our common stock then subject to such time-based restricted stock unit award.

Performance-Based Restricted Stock Units. Each then-outstanding restricted stock unit award subject to performance-based vesting (sometimes referred to as a “PRSU” or “PSU”) will be cancelled in exchange for an amount in cash equal to $157.00 multiplied by the number of shares of our common stock attributable to such performance-based restricted stock unit award based upon an assumed attainment of the target level of performance applicable to such award, regardless of actual performance. Performance-based restricted stock unit awards that we granted in 2015 will be forfeited as of December 31, 2017 due to failure to satisfy the performance-based objectives for the applicable performance period and, therefore, no consideration will be payable in the merger for such performance-based restricted stock unit awards.

Restricted Stock. The merger agreement also provides that, at the effective time of the merger, each then-outstanding share of restricted stock will terminate and be cancelled in exchange for $157.00. However, we currently do not have and do not expect to have any shares of restricted stock outstanding.

 

Q: What will happen to the Buffalo Wild Wings Employee Stock Purchase Plan?

 

A: If the merger is completed, our Employee Stock Purchase Plan, which we refer to as the “ESPP,” will be terminated. The accumulated contributions of each participant will be used to purchase shares of our common stock on a special exercise date shortly prior to the merger, and any remaining contributions that are not used to purchase shares of our common stock will be refunded without interest.

Pending the merger, (1) we will not commence any new offering periods under the ESPP after the current offering period expires, (2) existing payroll deductions will continue in effect until shortly prior to the effective time of the merger (or, if earlier, the expiration of the current offering period), (3) payroll deductions may not be increased (other than increases made in accordance with payroll deduction elections that were in effect as of the date of the merger agreement), and (4) individuals cannot commence participation in the ESPP.

 

Q: When do you expect the merger to be completed?

 

A: We are working toward completing the merger as soon as possible after the date of the special meeting, and currently expect to consummate the merger during the first quarter of 2018. However, the exact timing of completion of the merger cannot be predicted because the merger is subject to conditions, including approval of the merger agreement by our shareholders and the receipt of regulatory approvals. See “The Merger Agreement—Timing of the Merger” on page 66 and “The Merger Agreement—Conditions to Completion of the Merger” on page 82.

 

 

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Q: Am I entitled to appraisal or dissenters’ rights under Minnesota law?

 

A: Yes. As a holder of our common stock, you are entitled to exercise dissenters’ rights under the Minnesota Business Corporation Act in connection with the merger if you take certain actions and meet certain conditions. See “The Merger—Dissenters’ Rights” on page 63.

 

Q: Will I be subject to U.S. federal income tax upon the exchange of Buffalo Wild Wings common stock for cash pursuant to the merger?

 

A: Generally, yes, if you are a U.S. holder. The exchange of our common stock for cash pursuant to the merger generally will require a U.S. holder to recognize a gain or loss for U.S. federal income tax purposes in an amount equal to the difference, if any, between (1) the amount of cash received by such U.S. holder pursuant to the merger plus the amount used to satisfy any applicable withholding taxes and (2) such U.S. holder’s adjusted tax basis in the shares of our common stock surrendered pursuant to the merger. Backup withholding may apply to the cash payment made pursuant to the merger unless the U.S. holder or other payee provides a valid taxpayer identification number and complies with certain certification procedures (generally, by providing a properly completed and executed IRS Form W-9) or otherwise establishes an exemption from backup withholding. A more complete description of the U.S. federal income tax consequences of the merger is provided under “The Merger—Material U.S. Federal Income Tax Consequences” on page 61.

This discussion does not address U.S. federal income tax consequences with respect to holders other than U.S. holders. Because particular circumstances may differ, we recommend that you consult your own tax advisor to determine the U.S. federal income tax consequences relating to the merger in light of your own particular circumstances and any consequences arising under any state, local or non-U.S. tax laws or tax treaties.

 

Q: How do I attend the special meeting?

 

A: To attend the meeting, you will need to present valid photo identification, such as a driver’s license or passport, and proof of ownership of our common stock. If you hold your shares in street name (i.e., through a bank, broker or other nominee), you must also provide proof of share ownership as of the record date, such as a letter from your bank, broker or other nominee or a recent brokerage statement, in order to attend the meeting. If you are not a holder of record as of the record date, you will be permitted to vote at the meeting only if you have a valid legal proxy from a holder of record as of the record date.

Please do not bring weapons, cameras, recording equipment, electronic devices, large bags, briefcases or packages to the special meeting. You and your belongings may be subject to search prior to your admittance to the meeting. We may implement additional security procedures. If you do not comply with these procedures, you may not be admitted to the special meeting.

 

 

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Q: What vote of Buffalo Wild Wings shareholders is required to approve the merger agreement?

 

A: Approval of the merger agreement requires that shareholders holding a majority of the shares of our common stock outstanding at the close of business on the record date for the special meeting and entitled to be cast on such proposal vote “FOR” the merger proposal. A failure to vote your shares of our common stock or an abstention from voting will have the same effect as a vote “AGAINST” the merger proposal. If your shares are held in “street name” by your broker, bank or other nominee and you do not instruct such broker, bank or other nominee how to vote your shares, such failure to instruct your broker, bank or other nominee will have the same effect as a vote “AGAINST” the merger proposal.

 

Q: How does Buffalo Wild Wings’ board of directors recommend that I vote?

 

A: Our board of directors unanimously recommends that our shareholders vote “FOR” each of the proposals.

For a discussion of the factors that our board of directors considered in determining to recommend the approval of the merger agreement, please see the section entitled “The Merger—Reasons for our Board’s Recommendation in Favor of the Merger” on page 34. In addition, in considering the recommendations of our board of directors, you should be aware that some of our directors and executive officers have potential interests that may be different from, or in addition to, the interests of our shareholders generally. For a discussion of these interests, please see the section entitled “The Merger—Interests of Our Directors and Executive Officers in the Merger” on page 54.

 

Q: How do Buffalo Wild Wings’ directors and officers intend to vote?

 

A: We currently expect that our directors and officers will vote their shares in favor of the merger proposal and the golden parachute proposal, although they have no obligation to do so.

 

Q: Have any shareholders already agreed to vote “FOR” approval of the merger agreement?

 

A: Yes. Certain investment funds advised by Marcato Capital Management, LP, which collectively beneficially owned approximately 6.4% of our outstanding shares as of November 27, 2017, have entered into an agreement to vote the shares beneficially owned by such funds as of the record date in favor of the merger proposal, subject to the terms and conditions of such agreement. See “Voting Agreement” on page 90.

 

Q: Why am I being asked to cast a non-binding advisory vote to approve certain “golden parachute” compensation that may be payable to the company’s named executive officers in connection with the consummation of the merger?

 

A:

The inclusion of this proposal is required by the SEC rules. However, the approval of this proposal is not a condition to the completion of the merger and the vote on this proposal is an advisory vote by shareholders and is not binding on Buffalo Wild Wings or Arby’s. If the merger agreement is approved by our shareholders and the merger is completed, the merger-related compensation will be paid to Buffalo Wild Wings’ named

 

 

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  executive officers in accordance with the terms of their compensation agreements and arrangements even if shareholders do not approve this proposal. See the section entitled “The Golden Parachute Proposal (Proposal #2)” on page 93.

 

Q: What do I need to do now? How do I vote my shares of Buffalo Wild Wings common stock?

 

A: We urge you to read this entire document carefully, including its appendices and the documents incorporated by reference, and to consider how the merger affects you. Your vote is important, regardless of the number of shares of our common stock you own. You’ll find voting instructions on page 21 of this proxy statement or on the enclosed proxy card. You can vote your shares in person or by proxy over the internet, by telephone or by mail.

 

Q: Can I revoke my proxy?

 

A: Yes. You may revoke your proxy and change your vote at any time before your proxy is voted at the special meeting. To revoke your proxy, you must (1) submit a new proxy by internet or telephone no later than 11:59 p.m. Eastern Standard Time on Thursday, February 1, 2018; (2) complete, sign, date and return a new proxy card to us, which must be received by us before the time of the meeting; or (3) if you are a record shareholder (or a beneficial owner with a legal proxy from the record shareholder), attend the meeting in person and deliver a proper written notice of revocation of your proxy. Attendance at the meeting will not by itself revoke a previously granted proxy. Unless you decide to vote your shares in person, please revoke your prior proxy in the same way you initially submitted it—that is, by internet, telephone or mail.

 

Q: Will my shares of Buffalo Wild Wings common stock held in “street name” or another form of record ownership be combined for voting purposes with shares I hold of record?

 

A: No. Because any shares of our common stock you may hold in “street name” will be deemed to be held by a different shareholder (that is, your bank, broker or other nominee) than any shares of our common stock you hold of record, any shares of our common stock held in “street name” will not be combined for voting purposes with shares of our common stock you hold of record. Similarly, if you own shares of our common stock in various registered forms, such as jointly with your spouse, as trustee of a trust or as custodian for a minor, you will receive, and will need to sign and return, a separate proxy card for those shares of our common stock because they are held in a different form of record ownership. Shares of our common stock held by a corporation or business entity must be voted by an authorized officer of the entity. Please indicate title or authority when completing and signing the proxy card. Shares of our common stock held in an individual retirement account must be voted under the rules governing the account. This means that, to ensure all your shares are voted at the special meeting, you should read carefully any proxy materials received and follow the instructions included therewith.

 

Q: What does it mean if I get more than one proxy card or voting instruction card?

 

A:

If your shares of our common stock are registered differently or are held in more than one account, you will receive more than one proxy or voting instruction card. Please

 

 

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  complete and return all of the proxy cards and voting instruction cards you receive (or submit each of your proxies by telephone or the internet, if available to you) to ensure that all of your shares of our common stock are voted.

 

Q: What happens if I sell my shares of Buffalo Wild Wings common stock before completion of the merger?

 

A: In order to receive the merger consideration, you must hold your shares of our common stock through completion of the merger. Consequently, if you transfer your shares of our common stock before completion of the merger, you will have transferred your right to receive the merger consideration in the merger.

The record date for shareholders entitled to vote at the special meeting is earlier than the consummation of the merger. If you transfer your shares of our common stock after the record date but before the closing of the merger, you will have the right to vote at the special meeting but not the right to receive the merger consideration. We urge you to vote even if you have subsequently transferred your shares.

 

Q: Should I send in my stock certificates or other evidence of ownership now?

No. If the merger is completed, the paying agent will send information to our shareholders of record explaining how to exchange shares of our common stock for the merger consideration. You should not send in your Buffalo Wild Wings stock certificates before you receive these transmittal materials. If your shares of our common stock are held in “street name” by your broker, bank or other nominee, you may receive instructions from your broker, bank or other nominee as to what action, if any, you need to take to receive the merger consideration. Do not send in your certificates now.

 

Q: Where can I find the voting results of the special meeting?

 

A: We intend to announce preliminary voting results at the special meeting and publish final results in a Current Report on Form 8-K that will be filed with the SEC following the special meeting. All reports that we file with the SEC are publicly available when filed. See “Where You Can Find More Information” on page 104.

 

Q: Where can I find more information about Buffalo Wild Wings?

 

A: You can find more information about us from various sources described in the section entitled “Where You Can Find More Information” on page 104.

 

Q: Who can help answer my other questions?

 

A: If you have more questions about the merger, or require assistance in submitting your proxy or voting your shares or need additional copies of this proxy statement or the enclosed proxy card, please contact our proxy solicitor, Morrow Sodali LLC, by telephone at +1 (800) 662-5200 or by email at BWLD@morrowsodali.com.

 

 

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THE SPECIAL MEETING

THE SPECIAL MEETING

 

Date, Time, Place

We will hold a special meeting of shareholders, at the company’s offices located at 5500 Wayzata Boulevard, Minneapolis, Minnesota 55416, at 10:00 a.m. Central Standard Time on Friday, February 2, 2018.

Purpose

The purpose of the special meeting is to consider and vote upon the following proposals:

 

  1. Merger Proposal. To approve the Agreement and Plan of Merger, dated as of November 27, 2017 (as it may be amended from time to time), by and among Buffalo Wild Wings, Arby’s and Merger Sub, pursuant to which Buffalo Wild Wings would be acquired by way of a merger and become a wholly owned subsidiary of Arby’s. For more information on this proposal, see “The Merger Proposal (Proposal #1)” on page 92.

 

  2. Golden Parachute Proposal. To approve, in a non-binding advisory vote, certain compensation that may be paid or become payable to our named executive officers in connection with the merger. For more information on this proposal, see “The Golden Parachute Proposal (Proposal #2)” on page 93.

 

  3. Adjournment Proposal. To approve one or more adjournments of the special meeting to a later date or dates if necessary or appropriate to solicit additional proxies if there are insufficient votes to approve the merger agreement at the time of the special meeting. For more information on this proposal, see “The Adjournment Proposal (Proposal #3)” on page 95.

Our board of directors unanimously recommends our shareholders vote “FOR” each of these proposals.

Other Business

Our management knows of no other matters to be presented at the special meeting. Applicable Minnesota law and our bylaws prohibit the transaction at the special meeting of any business that is not stated in the notice of special meeting.

Admission

Only shareholders and authorized guests may attend the meeting and all attendees will be required to show a valid form of ID (such as a government-issued form of photo identification).

If you hold your shares in street name (i.e., through a bank, broker or other nominee), you must also provide proof of share ownership as of the record date, such as a letter from your bank, broker or other nominee or a recent brokerage statement, in order to attend the meeting.

Security Procedures

Please do not bring weapons, cameras, recording equipment, electronic devices, large bags, briefcases or packages to the special meeting. You and your belongings may be subject to

 

 

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search prior to your admittance to the meeting. We may implement additional security procedures. If you do not comply with these procedures, you may not be admitted to the special meeting.

Adjournment

Although it is not currently expected, we may adjourn the special meeting one or more times, including if necessary or appropriate to solicit additional proxies if there are insufficient votes to approve the merger agreement at the time of the special meeting. The meeting may be adjourned either (1) by our chairperson without a vote of our shareholders or (2) pursuant to a vote of our shareholders on the adjournment proposal.

All references in our proxy materials to the special meeting include any adjournment or postponement of the special meeting.

RECORD DATE – WHO CAN VOTE – SHARES OUTSTANDING

 

Our board of directors has fixed December 21, 2017 as the record date for the special meeting. Shareholders of record as shown on our books at the close of business on the record date will be entitled to vote at the special meeting. Persons who were not shareholders on the record date will not be eligible to vote.

At the close of business on the record date, there were 15,532,523 shares of our common stock issued and outstanding. The common stock is our only outstanding class of capital stock.

HOW TO CAST YOUR VOTE

 

Your vote is important! Please cast your vote as soon as possible, using the instructions on the enclosed proxy card.

The Buffalo Wild Wings board of directors unanimously recommends that you vote “FOR” each of the proposals.

Instructions for voting your shares depend on how you hold them and whether you wish to vote in-person or by proxy:

 

    Shareholders of record, who hold shares registered in their own name, can vote by signing, dating and returning the enclosed proxy card in the postage-paid return envelope, or by telephone or via the internet, following the easy instructions shown on the enclosed proxy card.

 

    Beneficial owners, who own shares through a bank, broker or other nominee, can vote by returning the voting instruction form, or by following the instructions for voting via telephone or the internet, as provided by the bank, broker or other nominee. If you own shares in different accounts or in more than one name, you may receive different voting instructions for each type of ownership. Please vote all your shares.

 

    If you are a shareholder of record or a beneficial owner who has a legal proxy to vote the shares, you may choose to vote in person at the special meeting. Even if you plan to attend the special meeting in person, please cast your vote as soon as possible by using the proxy card.

If you have any questions or need assistance voting, please contact Morrow Sodali LLC, our proxy solicitor assisting us in connection with the special meeting, toll-free at +1 (800) 662-5200 or by email at BWLD@morrowsodali.com.

 

 

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Proxies will be voted as directed therein. If you sign and return the enclosed proxy card or submit a proxy by telephone or over the internet and do not specify how your shares are to be voted, your shares will be voted “FOR” the merger proposal, “FOR” the golden parachute proposal and “FOR” the adjournment proposal.

REVOKING YOUR PROXY

 

Any shareholder giving a proxy may revoke it any time prior to its use at the special meeting (1) by giving written notice of such revocation to our corporate secretary or any one of our other officers, (2) by submitting a timely, later dated written proxy (or voting instruction form if you hold shares through a broker, bank or other nominee), or (3) providing timely subsequent telephone or internet voting instructions.

Personal attendance at the special meeting is not, by itself, sufficient to revoke a proxy unless written notice of the revocation or a later dated proxy is delivered to an officer before the revoked or superseded proxy is used at the special meeting.

VOTING INTENTIONS OF OUR DIRECTORS AND OFFICERS AND CERTAIN SHAREHOLDERS

 

We currently expect that each of our directors and executive officers will vote their shares in favor of the merger proposal and the golden parachute proposal, although they have no obligation to do so.

Certain investment funds advised by Marcato Capital Management, LP, which collectively beneficially owned approximately 6.4% of our outstanding shares as of November 27, 2017, have entered into an agreement to vote the shares beneficially owned by such funds as of the record date in favor of approval of the merger agreement, subject to the terms and conditions of such agreement. See “Voting Agreement” on page 90.

VOTING PROCEDURES AND TECHNICALITIES

 

One Vote per Share

Each share of our common stock is entitled to one vote on each matter to be voted upon at the special meeting. Holders of our common stock are not entitled to cumulative voting rights.

Quorum

A “quorum” is the minimum number of shareholders who must be present at the special meeting for business to be conducted. The holders of least 7,766,262 shares of our common stock (which represents a majority of the voting power of the shares expected to be entitled to vote at the special meeting) will be a quorum for a vote to be taken on the merger proposal and the golden parachute proposal.

If a quorum is present when the special meeting is convened, the shareholders present may continue to transact business until adjournment, even if the withdrawal of shareholders originally present leaves less than a quorum.

 

 

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Abstentions

If a shareholder indicates on their proxy that they wish to abstain from voting, including banks, brokers or other nominees holding their customers’ shares who cause abstentions to be recorded, these shares are considered present and entitled to vote at the special meeting and those shares will count toward determining whether or not a quorum is present at the meeting. An abstention will have the same effect as a vote against the merger proposal and the adjournment proposal, but will have no effect on the golden parachute proposal.

Broker Non-Votes

If a shareholder who holds their shares through a bank, broker or other nominee does not give instructions to the bank, broker or other nominee as to how to vote the shares, the bank, broker or other nominee has authority under applicable stock exchange to vote those shares for or against “routine” proposals. However, banks, brokers and other nominees without discretionary authority cannot vote on their customers’ behalf on “non-routine” proposals. All of the proposals to be considered at the special meeting are “non-routine.”

If a bank, broker or other nominee does not receive voting instructions as to a non-routine proposal and does not have discretionary authority to vote on the proposal, a “broker non-vote” may occur. Shares that are subject to broker non-votes are considered not entitled to vote, and therefore will not count toward determining whether or not a quorum is present at the meeting and will be ignored for purposes of determining the outcome of any vote on the golden parachute proposal or the adjournment proposal. However, a broker non-vote will have the same effect as a vote against the merger proposal.

SOLICITATION OF PROXIES

 

Our board of directors is soliciting your proxy, and we will bear the cost of this solicitation of proxies. This includes the charges and expenses of brokerage firms and others for forwarding solicitation material to beneficial owners of our outstanding common stock.

We have retained Morrow Sodali LLC, a proxy solicitation firm, which we refer to as “Morrow Sodali,” to assist our board of directors in the solicitation of proxies for the special meeting, and we expect to pay Morrow Sodali $25,000, plus reimbursement of out-of-pocket expenses. Proxies may be solicited by mail, personal interview, email, telephone, or via the internet by Morrow Sodali or, without additional compensation, by certain of our directors, officers and employees.

 

 

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PARTIES

BUFFALO WILD WINGS

 

Buffalo Wild Wings, Inc. (referred to in this proxy statement as “we,” “us,” “our,” “Buffalo Wild Wings,” or the “company) is a Minnesota corporation. This entity was incorporated in 1995, but our Buffalo Wild Wings brand was originally founded by a predecessor entity in 1982 at a location near The Ohio State University.

We are an established and growing owner, operator, and franchisor of restaurants featuring a variety of boldly-flavored, crave-able menu items, including our Buffalo, New York-style chicken wings. Buffalo Wild Wings restaurants create a welcoming neighborhood atmosphere that includes an extensive multi-media system, a full bar and an open layout, which appeals to sports fans and families alike. We differentiate our restaurants by the social environment we create and the connection we make with our team members, guests and the local community. Our guests have the option of watching sporting events or other popular programs on our projection screens and approximately 60 additional televisions, competing in Buzztime® Trivia or playing video games. The open layout of our restaurants offers dining and bar areas that provide distinct seating choices for sports fans and families. Our restaurants offer flexibility and allow our guests to customize their Buffalo Wild Wings experience to meet their time demands, service preferences or the experience they are seeking for a workday lunch, a dine-in dinner, a take-out meal, an afternoon or evening enjoying a sporting event or a late-night craving. Buffalo Wild Wings restaurants are the place people want to be, where any excuse to get together is a good one.

Our common stock is currently listed on Nasdaq under the ticker symbol “BWLD.” For more information about our common stock, see “Market Prices and Dividend Data” on page 99.

The members of our board of directors are:

 

    Janice L. Fields, Chair

 

    Scott O. Bergren

 

    Cindy L. Davis

 

    Andre J. Fernandez

 

    Harry A. Lawton

 

    Richard T. McGuire III

 

    Jerry R. Rose

 

    Sam B. Rovit

 

    Harmit J. Singh

Our current executive officers are:

 

    Sally J. Smith, Chief Executive Officer and President

 

    Alexander H. Ware, Executive Vice President and Chief Financial Officer

 

    Emily C. Decker, Senior Vice President, General Counsel and Secretary

 

 

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    Andrew D. Block, Senior Vice President, Talent Management Services

 

    Santiago Abraham, Chief Information Officer

Our principal executive offices are located at 5500 Wayzata Boulevard, Suite 1600, Minneapolis, Minnesota 55416, and our telephone number is +1 (952) 593-9943. Our investor website is ir.buffalowildwings.com. The information contained on, or accessible through, our website is not incorporated into this proxy statement. More information about the company, our board of directors, and our executive officers is available as described under “Where You Can Find More Information” on page 104.

ARBYS

 

Arby’s Restaurant Group, Inc. (referred to in this proxy statement as “Arby’s” or “Parent) is a Delaware corporation. It was originally incorporated in Delaware in 2004.

Arby’s is the parent company, owner-operator, and franchisor of the Arby’s brand. The Arby’s brand, founded in 1964, is the second-largest sandwich restaurant brand in the world with more than 3,300 restaurants in seven countries. Arby’s is majority owned by funds advised by Roark and is headquartered in Atlanta, Georgia.

Arby’s principal executive offices are located at 1511 Perimeter Center West, Atlanta, Georgia, 30338, and its telephone number is +1 (678) 514-4100. Its website is www.arbys.com. The information contained on, or accessible through, Arby’s website is not incorporated into this proxy statement.

MERGER SUB

 

IB Merger Sub I Corporation (referred to in this proxy statement as “Merger Sub) is a Minnesota corporation and a wholly owned subsidiary of Arby’s. Merger Sub was formed on November 22, 2017 solely for the purpose of entering into the merger agreement and consummating the transactions contemplated by the merger agreement, and it currently has no other business or operations. Upon completion of the merger, Merger Sub will cease to exist and Buffalo Wild Wings will continue as the surviving corporation.

Merger Sub’s principal executive offices are located at 1511 Perimeter Center West, Atlanta, Georgia, 30338, and its telephone number is +1 (678) 514-4100.

ROARK

 

Roark Capital Management LLC (referred to in this proxy statement as “Roark) is a Delaware limited liability company. Roark is a registered investment adviser and manages several private equity funds and other investment vehicles, including the fund that is the majority owner of Arby’s.

In connection with the merger, another fund advised by Roark, which we refer to as the “Roark fund,” has agreed to capitalize Arby’s with up to $783 million, subject to the terms and conditions set forth in an equity commitment letter entered into by the Roark fund and Arby’s. For more information about the equity commitment letter, see “The Merger—Financing of the Merger” on page 52.

Roark focuses on investing in franchised and multi-unit businesses in the retail, restaurant, consumer and business services sectors. Since inception, affiliates of Roark have invested in 62 franchise/multi-unit brands, which collectively generate approximately $27 billion in annual system revenues from approximately 29,000 locations in 50 states and 78 countries.

 

 

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Roark’s and the Roark fund’s principal executive offices are located at 1180 Peachtree St NE, Suite 2500, Atlanta, Georgia 30309, and their telephone number is +1 (404) 591-5200. Roark’s website is www.roarkcapital.com. The information contained on, or accessible through, Roark’s website is not incorporated into this proxy statement.

 

 

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THE MERGER

THE MERGER AND ITS EFFECTS

 

If the merger agreement is approved by our shareholders and the other conditions to the closing of the merger are either satisfied or waived, Merger Sub will be merged with and into Buffalo Wild Wings, and the separate corporate existence of Merger Sub will cease. Buffalo Wild Wings will be the surviving corporation in the merger and will continue its corporate existence as a Minnesota corporation and a wholly owned subsidiary of Arby’s.

Upon the terms and subject to the conditions of the merger agreement, at the effective time of the merger, each share of our common stock issued and outstanding immediately before the effective time of the merger (other than cancelled shares, dissenting shares and shares subject to restricted stock awards) will be converted into the right to receive $157.00 in cash, without interest and less any applicable withholding taxes. At the effective time of the merger, our current shareholders will cease to have ownership interests in the company or rights as its shareholders. Therefore, our current shareholders will not participate in any of our future earnings or growth and will not benefit from any appreciation in our value.

Our common stock is currently registered under the Exchange Act and is quoted on Nasdaq under the symbol “BWLD.” As a result of the merger, Buffalo Wild Wings will cease to be a publicly traded company and will be a wholly owned subsidiary of Arby’s. Following the consummation of the merger, our common stock will be delisted from Nasdaq and deregistered under the Exchange Act, and Buffalo Wild Wings will no longer be required to file periodic reports with the SEC with respect to our common stock, in each case in accordance with applicable law, rules and regulations.

The merger will be accounted for as a “purchase transaction” for financial accounting purposes.

BUFFALO WILD WINGS WITHOUT THE MERGER

 

If the merger agreement is not approved by our shareholders or if the merger is not consummated for any other reason, our shareholders will not receive any payment for their shares of our common stock. Instead, we will remain a public company, our common stock will continue to be listed and traded on Nasdaq and registered under the Exchange Act and we will continue to file periodic reports with the SEC. In addition, if the merger is not completed, we expect that management will operate the business in a manner similar to that in which it is being operated today and that our shareholders will continue to be subject to the same risks and opportunities as they currently are, including, among other things, general industry, economic and market conditions. If the merger is not consummated, there can be no assurance as to the effect of these risks and opportunities on the future value of your shares of our common stock. From time to time, if the merger is not consummated, our board of directors will evaluate and review our business operations, properties, dividend policy and capitalization and, among other things, make such changes as are deemed appropriate and continue to seek to identify strategic alternatives to maximize shareholder value. If the merger agreement is not approved by our shareholders or if the merger is not consummated for any other reason, there can be no assurance that any other transaction acceptable to us will be offered or that our business, prospects or results of operations will not be adversely impacted.

 

 

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If the merger agreement is terminated, under specified circumstances, we may receive from or be required to pay Arby’s a termination fee, as described under “The Merger AgreementTermination Fees” on page 87.

BACKGROUND TO THE MERGER

 

The following chronology summarizes certain key events and contacts that led to the signing of the merger agreement. It does not purport to catalogue every conversation among our board of directors, members of our management, or the company’s representatives and other parties.

During the past several years, as part of the company’s ongoing strategic-planning process, our board of directors and management regularly reviewed and assessed, among other things, the company’s long-term strategic goals and opportunities, competitive environment, and short- and long-term performance in light of the company’s strategic plan, with the goal of enhancing shareholder value.

During late February 2017, representatives of Roark, which advises funds that are majority owners of Arby’s, contacted Sally Smith, our chief executive officer, seeking to arrange a meeting between the two organizations.

On March 9, 2017, Neal Aronson, Roark’s managing partner, and Geoff Hill, a Roark principal, had an initial introductory meeting with Ms. Smith.

On March 23, 2017, Mr. Aronson and Ms. Smith held a meeting during which Mr. Aronson shared Roark’s long-term vision for Arby’s and Roark. Later that day, Ms. Smith connected Jerry Rose, then chair of our board of directors, with Mr. Aronson by e-mail to arrange a potential meeting.

On April 4, 2017, Mr. Aronson and Erik Morris, senior managing director of Roark, met with Mr. Rose to discuss Roark’s interest in learning more about the company and to explain Roark’s investment strategy.

On April 7, 2017, Mr. Aronson provided Ms. Smith with an initial due diligence request list of non-public company information that Roark would like to review in order to validate Roark’s interest in the company.

On April 8, 2017, Ms. Smith and Mr. Aronson had a telephone conversation about the nature of Roark’s interest in the company and the specific information requested by Roark.

On April 18, 2017, the company and Arby’s entered into a mutual non-disclosure agreement.

On May 4, 2017, the company provided Arby’s with certain of the non-public written information that Roark had requested regarding the company.

During the company’s annual meeting of shareholders held on June 2, 2017, our shareholders elected four new members to our board of directors, and Ms. Smith announced her intention to retire as the company’s chief executive officer when her successor was named, which was expected to occur prior to the end of the 2017 calendar year.

On June 27, 2017, our board of directors held an off-site orientation meeting for its new and continuing directors, during which Mr. Rose summarized for our board of directors his and Ms. Smith’s prior discussions with Roark as well as the nature of the non-public written information the company had provided to Arby’s.

 

 

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On July 7, 2017, our board of directors held a meeting to discuss Roark’s continued interest in the company.

On July 14, 2017, Andre Fernandez, the chair of the governance committee of our board of directors, called Mr. Aronson seeking clarification of what additional company information was being requested by Arby’s.

On July 18, 2017, the company provided Roark with access to an electronic data repository containing certain limited information about the company.

On July 21, 2017, Emily Decker, the company’s general counsel, and Mick McGuire, a member of our board of directors, called Mr. Morris seeking further clarification of Roark’s information request and stated that the company would provide an additional subset of the requested information.

On July 28, 2017, Ms. Decker and Alex Ware, the company’s chief financial officer, provided certain additional information to Roark.

On August 18, 2017, Mr. Aronson, Mr. Morris, and Paul Brown, chief executive officer of Arby’s, met with our board of directors at a regularly-scheduled board meeting in Minneapolis and discussed with our board of directors Roark’s investment philosophy and Arby’s interest in the company.

On August 21, 2017, Mr. Aronson contacted Jan Fields, chair of our board of directors, to advise her that Arby’s would be submitting on the next day a written indication of interest regarding a potential acquisition of the company.

On August 22, 2017, Arby’s delivered a letter to our board of directors requesting certain additional non-public information from the company and conveying a non-binding indication of interest in acquiring the company at a per-share price between $145.00 and $150.00 in cash, subject to confirmatory due diligence and the negotiation of a mutually acceptable merger agreement. The company’s closing stock price on that date was $106.85 per share.

On several occasions following the submission by Arby’s of its August 22 proposal, a representative of Barclays Capital Inc., financial advisor to Arby’s, which we refer to as “Barclays Capital,” contacted Mr. McGuire, at the request of Arby’s, to explain Arby’s perspectives on certain transaction terms and to seek clarification on the company’s positions on those terms. During such discussions on several occasions, Mr. McGuire reiterated that he believed our board of directors likely would require a higher price per share than that stated in the applicable proposal by Arby’s before exploring a potential transaction with Arby’s. In response, the representative of Barclays reiterated the position of Arby’s that, among other things, additional due diligence information will be required before Arby’s could consider increasing the proposed purchase price.

On August 25, 2017, our board of directors held a meeting to discuss Arby’s indication of interest. Ms. Decker attended the meeting, as did representatives of Faegre Baker Daniels LLP, the company’s outside legal counsel, which we refer to as “FaegreBD.” At the end of the discussion, our board of directors directed Ms. Fields to advise Roark that our board of directors was focused on its ongoing search for a new chief executive officer and executing on the company’s strategic plan and was not interested in pursuing a sale of the company.

On August 29, 2017, Ms. Fields called Mr. Morris to advise him of our board of directors’ August 25 determination.

 

 

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On September 13, 2017, Mr. Aronson called Ms. Fields to advise her that Arby’s would be submitting a revised non-binding indication of interest in acquiring the company. Later that day, Arby’s delivered a letter to our board of directors reiterating its August 22 request for certain non-public information from the company and conveying a revised non-binding indication of interest in acquiring the company at a per-share price between $150.00 and $157.00 in cash, subject to confirmatory due diligence and the negotiation of a mutually acceptable merger agreement. The company’s closing stock price on that date was $104.15 per share.

On September 14, 2017, our board of directors held a meeting to discuss the latest indication of interest from Arby’s, including whether the company should provide the additional non-public information that Arby’s requested. Mr. Ware and Ms. Decker attended the meeting, as did representatives of FaegreBD. The directors engaged in a discussion of the risks and opportunities facing the company as a stand-alone entity, including the status of our board of directors’ continuing search for a new chief executive officer and the implementation of other strategic initiatives. Our board of directors also discussed the potential merits and risks of engaging in substantive discussions with Arby’s that might lead to a potential sale of the company. At the conclusion of the meeting, our board of directors determined to take no action at the time but to continue its discussion at a meeting to be held the following week.

On September 22, 2017, our board of directors held a meeting to continue its discussion of Arby’s September 13 proposal, including Arby’s request for additional non-public information regarding the company. Mr. Ware and Ms. Decker attended the meeting, as did representatives of FaegreBD. At the conclusion of the discussion, our board of directors noted that it was not making any determination as to the advisability of selling the company but rather that it had decided to provide the requested information so as to enable Arby’s to submit a more refined indication of interest to our board of directors. In the two weeks following the meeting, Mr. Ware provided the requested information to Arby’s, as directed by our board of directors.

On October 13, 2017, Mr. Aronson called Ms. Fields to advise her that Arby’s would be submitting a further revised non-binding indication of interest in acquiring the company. Later that day, Arby’s delivered a letter dated October 12 to our board of directors conveying a revised non-binding indication of interest in acquiring the company at a per-share price of $152.00 in cash, subject to continued confirmatory due diligence and the negotiation of a mutually acceptable merger agreement. The proposal contained in the letter had a stated expiration date of October 20, 2017. The letter was accompanied by a draft merger agreement and debt and equity commitment letters. The company’s closing stock price on that date was $102.35 per share.

On October 16, 2017, our board of directors held a meeting to discuss Arby’s revised indication of interest. Ms. Smith, Mr. Ware and Ms. Decker attended the meeting, as did representatives of FaegreBD. At the end of the discussion, our board of directors directed Ms. Fields to advise Roark that our board of directors was considering the revised indication of interest but had not authorized our management to engage in substantive discussions with Roark regarding a potential transaction.

On October 17, 2017, following discussions with the other directors, Ms. Fields contacted representatives of Goldman Sachs to explore the possibility of Goldman Sachs serving as financial advisor to the company in connection with our board of directors’ review of strategic alternatives, including our board of directors’ evaluation of, and response to, indications of

 

 

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interest from Arby’s. The company subsequently engaged Goldman Sachs to serve as its financial advisor.

On October 20, 2017, Ms. Fields sent a letter to Arby’s on behalf of our board of directors. The letter stated that our board of directors was in receipt of Arby’s October 12 proposal letter and that our board of directors was in the process of considering the indication of interest.

After the close of the markets on October 25, 2017, the company publicly reported its third-quarter earnings and revised full-year forecast. On October 26, 2017, the company’s closing stock price was $120.95 per share, up from $101.15 the prior day.

On November 9, 2017, Messrs. Aronson and McGuire met, during which time Mr. Aronson expressed Roark’s continued interest in exploring a transaction with the company and inquired as to the status of our board of directors’ consideration of the October 12 proposal submitted by Arby’s. Mr. McGuire reiterated the position of our board of directors that had been previously communicated to Mr. Aronson regarding the status of our board of directors’ consideration of the proposal and noted that our board of directors planned to further consider Arby’s indication of interest at the regularly scheduled board meeting scheduled to be held the following week.

After the close of the markets on November 13, 2017, various media outlets reported unconfirmed speculation that Roark had made an offer to acquire the company for more than $150.00 per share. Consistent with its policy for such rumors, the company declined to comment in response to inquiries from media outlets and investors regarding these reports. On November 14, 2017, the company’s closing stock price was $145.35 per share, up from $117.25 the prior day. We did not receive any proposals to acquire the company from other potential acquirors in response to these reports, but three potential acquirors did contact Goldman Sachs following these reports.

On November 16 and 17, 2017, our board of directors held regularly scheduled meetings in Minneapolis, which Mr. Ware and Ms. Decker attended along with representatives of Goldman Sachs and FaegreBD. Our board of directors engaged in extensive discussions of the company’s historical and projected financial performance, operating initiatives, and strategic plans. Our board of directors also discussed its continuing efforts to hire a new chief executive officer and discussed information provided by an outside consulting firm that was engaged to assist us with an assessment of the costs and benefits associated with our current strategy as an independent public company. During the meetings, representatives of Goldman Sachs engaged in discussions with the board regarding general capital markets conditions, the performance of publicly traded restaurant companies generally, certain non-public, unaudited prospective financial information regarding the company prepared by our management, and preliminary, illustrative financial matters regarding the company. Representatives of Goldman Sachs also discussed with our board of directors the most recent indication of interest from Arby’s, including illustrative financing structures for the proposed acquisition. Representatives of FaegreBD advised the directors on their fiduciary duties under Minnesota law generally and with respect to a possible sale transaction. At the conclusion of the two-day meeting, our board of directors directed Goldman Sachs to engage with Barclays Capital, and to provide Arby’s and its representatives with additional due diligence information provided by the company, including access to Mr. Ware and Ms. Decker, in an effort to induce Arby’s to increase its proposed price per share. Our board of directors also directed Goldman Sachs to contact a limited number of potential alternative acquirors identified by our board of directors following discussions with Goldman Sachs. Finally, our board of directors directed FaegreBD to

 

 

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begin to review Arby’s proposed merger agreement and its debt and equity commitment letters. The company’s closing stock price on November 17 was $138.25 per share.

From November 17 through 20, 2017, representatives of Goldman Sachs, at the direction of our board of directors, contacted seven potential strategic and financial acquirors, including the three which had initiated contact with Goldman Sachs following the November 13 media reports. Citing the media reports but without providing any non-public information regarding the company, Goldman Sachs invited the potential acquirors to submit written indications of interest in acquiring the company. Each of the parties contacted by Goldman Sachs declined to submit such an indication of interest.

Beginning on November 19, 2017, the company granted Arby’s and its representatives access to certain additional due diligence information requested by Arby’s.

On November 20, 2017, Arby’s and its representatives conducted a due diligence call with Mr. Ware and Ms. Decker, which call was also attended by representatives of Barclays Capital and Goldman Sachs. Later that day, our board of directors held a meeting, which Mr. Ware and Ms. Decker attended along with representatives of Goldman Sachs and FaegreBD. During the meeting, our management, Goldman Sachs, and FaegreBD provided the directors with an update regarding the recent interactions with Arby’s and its representatives and other potential acquirors and discussed potential next steps. Mr. Ware also provided the directors with an update on the company’s recent financial and operational performance and recent downward trends in chicken wing prices.

On November 21, 2017, Arby’s and its representatives conducted a due diligence meeting in Minneapolis with Mr. Ware and Ms. Decker, which meeting was also attended by representatives of Barclays Capital and Goldman Sachs. Later that evening, Arby’s delivered a letter to the board containing a revised non-binding indication of interest in acquiring the company at a per-share price of $155.00 in cash. The proposal contained in the letter had a stated expiration date of November 26. The company’s closing stock price on that date was $142.60 per share.

On November 22, 2017, our board of directors held a meeting, which Mr. Ware and Ms. Decker attended along with representatives of Goldman Sachs and FaegreBD. Prior to the meeting, Goldman Sachs provided our board of directors a draft disclosure letter regarding certain of its relationships with Roark and portfolio companies owned by funds advised by Roark. During the meeting, the board discussed Arby’s revised indication of interest with representatives of Goldman Sachs and directed Goldman Sachs to continue to seek a higher per share price and to advise Arby’s that our board of directors would require that any definitive merger agreement would contain a go-shop provision.

On the morning of November 23, 2017, at the direction of Arby’s, Barclays Capital called representatives of Goldman Sachs to convey the message that Arby’s would consider raising its proposed price to $157.00 per share in cash if our board of directors agreed to engage promptly with Arby’s on the draft merger agreement and other legal documentation. That afternoon, our board of directors held a meeting, which Mr. Ware and Ms. Decker attended along with representatives of Goldman Sachs and FaegreBD. During the meeting, our board of directors discussed Arby’s revised indication of interest with representatives of Goldman Sachs and directed Goldman Sachs to make a counterproposal that our board of directors would move forward either at $157.00 per share in cash, with the understanding that the definitive merger agreement would contain a go-shop provision, or at $158.00 per share in cash with no

 

 

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go-shop provision. Later that day, FaegreBD submitted comments on the draft merger agreement and other legal documentation to Arby’s and its representatives.

From November 23 through November 27, 2017, Ms. Decker, FaegreBD, Stephen Aronson, Roark’s general counsel and counsel to Arby’s, and White & Case LLP, outside legal counsel to Arby’s, negotiated the terms and conditions of the merger agreement and other legal documentation in connection with the merger.

On November 24, 2017, our board of directors held a meeting, which Mr. Ware and Ms. Decker attended along with representatives of Goldman Sachs and FaegreBD. During the meeting, Goldman Sachs updated our board of directors regarding its discussions with Barclays Capital over the past day, and FaegreBD provided an update regarding an illustrative timetable for entry into the merger agreement and the status of other legal documentation.

On November 25, 2017, our board of directors held a meeting, which Mr. Ware and Ms. Decker attended along with representatives of Goldman Sachs and FaegreBD. During the meeting, FaegreBD updated our board of directors regarding the material open points in the merger agreement, including the absence of a go-shop provision, the existence of a reverse termination fee and the magnitude thereof, and the magnitude of the company termination fee.

On Sunday evening, November 26, 2017, certain media outlets reported unconfirmed speculation that the company was engaged in discussions with Roark and that Roark had made an improved proposal to acquire the company for approximately $155.00 per share. When contacted by media outlets and investors, the company continued to abide by its policy not to comment on such rumors. We did not receive any proposals to acquire the company from other potential acquirors in response to these reports.

Midday on November 27, 2017, Arby’s delivered a letter to our board of directors containing what Arby’s stated was its last, best, and final indication of interest in acquiring the company at a per-share price of $157.00 in cash. The proposal contained in the letter had a stated expiration date of November 28 and was accompanied by fully-negotiated debt and equity commitment letters and a proposed merger agreement that did not contain a go-shop provision but that did increase the amount of the reverse termination fee payable by Arby’s in certain circumstances from 4.0% to 5.4% of the company’s equity value.

Later in the afternoon of November 27, 2017, our board of directors held a meeting, which Mr. Ware and Ms. Decker attended along with representatives of Goldman Sachs and FaegreBD. During the meeting, Goldman Sachs discussed with our board of directors certain preliminary financial aspects of Arby’s final proposal and FaegreBD reviewed the material legal terms of Arby’s indication of interest.

During the evening of November 27, 2017, our board of directors held a second meeting of the day, which Ms. Smith, Mr. Ware, and Ms. Decker attended along with representatives of Goldman Sachs and FaegreBD. Prior to the meeting, the members of our board of directors were provided with materials relating to the proposed acquisition, including, among other things, a summary of the material terms of the merger agreement prepared by FaegreBD and certain financial analyses of the merger consideration prepared by Goldman Sachs. At the meeting:

 

   

Representatives of Goldman Sachs reviewed with our board of directors Goldman Sachs’ financial analysis of the merger consideration and delivered to our board of

 

 

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directors an oral opinion, which was confirmed by delivery of a written opinion dated November 27, 2017, to our board of directors that, as of that date and based upon and subject to factors and assumptions set forth therein, the merger consideration to be paid to the holders (other than Arby’s and its affiliates) of shares of the company’s common stock pursuant to the merger agreement was fair, from a financial point of view, to such holders.

 

    Representatives of FaegreBD presented a summary of the material terms of the merger agreement.

 

    Representatives of FaegreBD reviewed with the directors their fiduciary duties under Minnesota law in connection with their consideration of the merger.

Following consideration and discussion of the proposed merger agreement and the transactions contemplated thereby:

 

    The compensation committee of the board unanimously approved the acceleration and cash-out of the company’s equity awards, as contemplated by the merger agreement.

 

    Our board of directors unanimously (1) approved the merger agreement, the merger, and the other transactions contemplated by the merger agreement, (2) declared the merger agreement, the merger, and the other transactions contemplated by the merger agreement to be fair, advisable, and in the best interests of the company and its shareholders; (3) directed that the approval of the merger agreement be submitted to a vote at a meeting of our shareholders; and (4) recommended to our shareholders that they approve the merger agreement.

The parties executed the merger agreement late in the evening of November 27, 2017, and Arby’s and the company issued a joint press release early on November 28, 2017, announcing the parties’ entry into the merger agreement. The company’s closing stock price on November 27, 2017 was $146.40 per share.

REASONS FOR OUR BOARDS RECOMMENDATION IN FAVOR OF THE MERGER

 

In evaluating the merger agreement, the merger and the other transactions contemplated by the merger agreement, our board of directors consulted with our executive management, our outside legal counsel (FaegreBD) and an outside financial advisor (Goldman Sachs). Our board of directors also considered the results of an assessment of the costs and benefits associated with our current strategy as an independent public company, which we conducted with the assistance of an outside consulting firm in the fall of 2017.

In recommending that our shareholders vote in favor of the merger proposal, our board of directors also considered a number of factors potentially weighing in favor of the merger, including the following (which are not presented in order of relative importance):

 

    The belief of our board of directors, after a review of our current and historical financial condition, results of operations, prospects, business strategy, management team, competitive position, and the broader industry, including the potential impact (which cannot be quantified numerically) of those factors on the trading price of our common stock, that the value offered to our shareholders under the merger agreement is more favorable to our shareholders than the potential value that might have resulted from the possible alternatives to the merger, including continuing execution of our current strategy as an independent public company.

 

 

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    The challenges and risks that we have faced, and would likely continue to face, if we remained an independent company, including:

 

      turnover in our management, including the pending retirement of our chief executive officer, the recent departures of several of our other senior officers and the challenges of timely hiring qualified replacements, and concerns relating to the remaining management team’s ability to execute on our strategic plan;

 

      increases and volatility in the ingredient costs, particularly chicken wing prices;

 

      industry trends, including higher labor costs, increased litigation, lower traffic and shifting consumer preferences;

 

      the excess supply of restaurants and competitive landscape in our industry;

 

      increased need for significant investment in technology, menu improvement, supply chain processes, consumer research and marketing;

 

      the additional costs and burdens involved with being a public company; and

 

      the volatility in our financial performance resulting from various factors, including the factors described above.

 

    The risks and uncertainties inherent in our ability to execute on our strategic plan and achieve management’s related financial projections, including those relating to our proposed refranchising plan, those relating to our ability to align our franchisees with any shifts in our strategy, and the other risks and uncertainties described in the section entitled “risk factors” set forth in our Form 10-K for the fiscal year ended December 25, 2016.

 

    The relationship of the merger consideration to the historic trading ranges of our common stock and the potential trading range of the common stock absent announcement of the merger agreement, and the possibility that absent such announcement it could take a considerable period of time before our common stock would trade at a price in excess of the merger consideration on a present-value basis, including considering the fact that the merger consideration constitutes:

 

      a premium of approximately 36.5% over the volume-weighted average price per share of our common stock over the one-month period ended on November 13, 2017, the last trading day prior to media reports of speculation that Roark had made an offer to acquire our company;

 

      a premium of 16.1% over the volume-weighted average price per share of our common stock over the one-year period ended on November 13, 2017; and

 

      a premium of approximately 7.2% over the closing price of our common stock on November 27, 2017, the date the merger agreement was executed.

 

    Our board of director’s belief that the merger consideration was the best price reasonably attainable for our shareholders, considering:

 

      the absence of any expression of interest in acquiring the company on terms competitive with the proposals made by Arby’s, despite media reports speculating about a potential transaction in advance of its announcement and our financial advisor’s efforts (at the direction of our board of directors) to solicit competing proposals from other potential acquirors;

 

 

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      the improvement in the merger consideration proposed by Arby’s from a range of $145.00 to $150.00 per share at the time of its initial indication of interest on August 22, 2017 to $157.00 per share when it delivered its final indication of interest on November 27, 2017; and

 

      our board of directors’ belief, based on the nature of the negotiations and the fact that Arby’s referred to the per-share price and key terms as its “last, best and final offer,” that the price to be paid by Arby’s is the highest price per share that Arby’s was willing to pay and that the terms and conditions of the merger agreement were, in our board of directors’ view, the most favorable to us and our shareholders to which Arby’s was willing to agree.

 

    The fact that the all-cash merger consideration will provide certainty of value and liquidity to our shareholders.

 

    The oral opinion, provided to our board at its meeting on November 27, 2017 by representatives of Goldman Sachs and subsequently confirmed in writing, that, as of that date, the $157.00 in cash per share of our common stock to be paid to our shareholders (other than Arby’s and its affiliates) pursuant to the merger agreement was fair from a financial point of view to such shareholders, based upon and subject to the qualifications, assumptions and other matters considered in connection with the preparation of such opinion. The opinion of Goldman Sachs is more fully described below under “Opinion of Our Financial Advisor” on page 39, and full text of their written opinion is attached hereto as Appendix C.

 

    The likelihood that the merger would be completed based on, among other things:

 

      our board of directors’ belief that there were not likely to be significant antitrust or other regulatory impediments to the closing;

 

      the agreement of Arby’s to use reasonable best efforts to take, all actions necessary, proper or advisable to consummate the merger as promptly as reasonably practicable, subject to certain exceptions;

 

      our board of directors’ belief that the outside date provisions of the merger agreement allow for sufficient time to complete the merger;

 

      the fact that the conditions to the closing of the merger are specific and limited in scope and that the definition of “material adverse effect” in the merger agreement contains certain carve-outs that make it less likely that adverse changes in our business between announcement and closing of the merger will provide a basis for Arby’s to refuse to consummate the merger;

 

      our board of directors’ perception that Roark and Arby’s are willing to devote the resources necessary to complete the merger in an expeditious manner based upon, among other things, the business reputation and capabilities of Roark and Arby’s and the provisions of the merger agreement requiring Arby’s to pay us a termination fee of $134 million if the merger agreement is terminated in certain circumstances following Arby’s failure to consummate the merger when required to do so;

 

      the fact that there is no financing condition to the completion of the merger in the merger agreement;

 

 

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      the representation of Arby’s that it has, through a combination of committed financing and existing cash and cash equivalents, all funds necessary for the payment of the aggregate merger consideration; and

 

      the receipt of debt and equity commitment letters, the terms thereof and the reputation of the parties providing the commitment, which increase the likelihood of the financing being available.

 

    Our board of directors’ view that the terms of the merger agreement would not preclude or unreasonably restrict a superior offer from another party, considering:

 

      our board of directors’ right under the merger agreement to respond to third parties submitting unsolicited acquisition proposals by providing non-public information subject to an acceptable confidentiality agreement, and to engage in negotiations or substantive discussions with any such person, if our board of directors, prior to taking any such actions, determines in good faith (after consultation with its financial advisor and legal counsel) that (i) the failure to take such action is reasonably likely to be inconsistent with the directors’ fiduciary duties under applicable law and (ii) the competing proposal either constitutes a superior proposal or is reasonably likely to constitute a superior proposal;

 

      our ability to terminate the merger agreement to enter into an alternative acquisition agreement that our board of directors determines to be a superior proposal, subject to certain conditions, including Arby’s matching right and payment of a termination fee to Arby’s; and

 

      our board of directors’ belief that the termination fee of $74 million, or approximately 3% of the equity value of our company, is reasonable in light of, among other things, the benefits of the merger to our shareholders, the typical size of such fees in similar transactions and the likelihood that a fee of such size would not be preclusive or unreasonably restrictive of other offers.

 

    The other terms of the merger agreement.

 

    The fact that the merger is subject to approval by our shareholders, and our board of directors’ right, under certain circumstances, to withhold, withdraw, rescind or adversely modify its recommendation that our shareholders approve the merger agreement.

 

    The availability of dissenters’ rights to our shareholders who comply with specified procedures under Minnesota law.

In its deliberations concerning the merger and the other transactions contemplated by the merger agreement, our board of directors also considered and balanced against the factors potentially weighing in favor of the merger a number of uncertainties, risks, restrictions and other factors potentially weighing against the merger, including the following (not necessarily in order of relative importance):

 

    The fact that the merger would preclude our shareholders from having the opportunity to realize the potential long-term value of the successful execution of our current strategy as an independent public company or to otherwise participate in any future earnings or growth or in any future appreciation in value of shares of our common stock.

 

 

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    The fact that receipt of the all-cash merger consideration would be taxable to those of our shareholders that are treated as U.S. holders for U.S. federal income tax purposes.

 

    The fact that, under specified circumstances, we may be required to pay fees and expenses in the event the merger agreement is terminated and the effect this could have on us, including:

 

      the possibility that the $74 million termination fee payable by us to Arby’s upon the termination of the merger agreement under certain circumstances could discourage other potential acquirors from making a competing proposal, although our board of directors believed that the termination fee was reasonable in amount and would not unduly deter any other party that might be interested in acquiring us; and

 

      if the merger is not consummated, we will generally be required to pay our own expenses associated with the merger agreement and the transactions contemplated thereby.

 

    The restrictions in the merger agreement on our ability to actively solicit competing bids to acquire our company.

 

    The significant costs involved in connection with entering into and completing the merger and the substantial time and effort of management required to consummate the merger, which could disrupt our business operations.

 

    The potential harm that the announcement and pendency of the merger, or the failure to complete the merger, may cause to our relationships with our franchisees, employees (including making it more difficult to attract and retain key personnel and the possible loss of key management and other personnel), vendors and customers.

 

    The restrictions on our conduct of business prior to completion of the merger, which could delay or prevent us from undertaking business opportunities that may arise or taking other actions with respect to our operations during the pendency of the merger, whether or not the merger is completed.

 

    The fact that, although we expect the merger to be consummated if the merger proposal is approved by our shareholders, there can be no assurance that all conditions to the parties’ obligations to consummate the merger will be satisfied.

 

    The risks and potential delays related to the financing of the merger.

 

    The terms of the merger agreement and financing commitment letters that significantly limit our remedies if Arby’s fails to complete the merger when required to do so, whether as a result of a failure of its financing or otherwise.

 

    The fact that the market price of our common stock could be affected by many factors, including: (1) if the merger agreement is terminated, the reason or reasons for such termination and whether such termination resulted from factors adversely affecting us; (2) the possibility that, as a result of the termination of the merger agreement, possible acquirors may consider us to be an unattractive acquisition candidate; and (3) the possible sale of our common stock by short-term investors following an announcement that the merger agreement was terminated.

 

 

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    The fact that certain of our directors and executive officers may have interests in the merger that may be deemed to be different from, or in addition to, those of our shareholders.

 

    The fact that the completion of the merger would require antitrust clearance in the United States.

After taking into account all of the factors set forth above, as well as others, our board of directors concluded that the risks, uncertainties, restrictions and potentially negative factors associated with the merger were outweighed by the potential benefits of the merger to our shareholders.

The foregoing discussion of factors considered by our board of directors is not intended to be exhaustive, but summarizes the material factors considered by our board of directors. In light of the variety of factors considered in connection with its evaluation of the merger, our board did not find it practicable to, and did not, quantify or otherwise assign relative weights to the specific factors considered in reaching its determination and recommendation. Moreover, each member of our board of directors applied his or her own personal business judgment to the process and may have given different weight to different factors. Our board of directors did not undertake to make any specific determination as to whether any factor, or any particular aspect of any factor, supported or did not support its ultimate determination. Our board of directors based its recommendation on the totality of the information presented, including thorough discussions with, and questioning of, our executive management, financial advisor and legal counsel. It should be noted that this explanation of the reasoning of our board of directors and certain information presented in this section is forward-looking in nature and should be read in light of the factors set forth under “Preface—Forward-Looking Statements” on page iii.

OPINION OF OUR FINANCIAL ADVISOR

 

Goldman Sachs rendered its opinion to our board of directors that, as of November 27, 2017 and based upon and subject to the factors and assumptions set forth therein, the $157.00 in cash per share of our common stock to be paid to the holders (other than Arby’s and its affiliates) of shares of our common stock pursuant to the merger agreement was fair from a financial point of view to such holders.

The full text of the written opinion of Goldman Sachs, dated November 27, 2017, which sets forth assumptions made, procedures followed, matters considered and limitations on the review undertaken in connection with the opinion, is attached as Appendix C. Goldman Sachs provided its opinion for the information and assistance of our board of directors in connection with its consideration of the merger. The Goldman Sachs opinion is not a recommendation as to how any holder of shares of our common stock should vote with respect to the merger or any other matter.

In connection with rendering the opinion described above and performing its related financial analyses, Goldman Sachs reviewed, among other things:

 

    the merger agreement;

 

    annual reports to our shareholders and Annual Reports on Form 10-K of the company for the five fiscal years ended December 25, 2016;

 

    certain interim reports to our shareholders and Quarterly Reports on Form 10-Q of the company;

 

 

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    certain other communications from us to our shareholders;

 

    certain publicly available research analyst reports for the company; and

 

    certain internal financial analyses and forecasts for the company prepared by our management, as approved for Goldman Sachs’ use by the company (which are referred to as our projections and are described below under “Certain Prospective Financial Information” on page 47).

Goldman Sachs also held discussions with members of our senior management regarding their assessment of the past and current business operations, financial condition and future prospects of the company; reviewed the reported price and trading activity for shares of our common stock; compared certain financial and stock market information for the company with similar information for certain other companies the securities of which are publicly traded; reviewed the financial terms of certain recent business combinations in the U.S. restaurant industry; and performed such other studies and analyses, and considered such other factors, as it deemed appropriate.

For purposes of rendering its opinion, Goldman Sachs, with our consent, relied upon and assumed the accuracy and completeness of all of the financial, legal, regulatory, tax, accounting and other information provided to, discussed with or reviewed by, it, without assuming any responsibility for independent verification thereof. In that regard, Goldman Sachs assumed with our consent that our projections were reasonably prepared on a basis reflecting the best currently available estimates and judgments of our management. Goldman Sachs did not make an independent evaluation or appraisal of the assets and liabilities (including any contingent, derivative or other off-balance-sheet assets and liabilities) of the company or any of our subsidiaries and it was not furnished with any such evaluation or appraisal. Goldman Sachs assumed that all governmental, regulatory or other consents and approvals necessary for the consummation of the merger will be obtained without any adverse effect on the expected benefits of the merger in any way meaningful to its analysis. Goldman Sachs also assumed that the merger will be consummated on the terms set forth in the merger agreement, without the waiver or modification of any term or condition the effect of which would be in any way meaningful to its analysis.

Goldman Sachs’ opinion did not address our underlying business decision to engage in the merger, or the relative merits of the merger as compared to any strategic alternatives that may be available to the company; nor did it address any legal, regulatory, tax or accounting matters. Goldman Sachs’ opinion addressed only the fairness from a financial point of view to the holders (other than Arby’s and its affiliates) of shares of our common stock, as of the date of the opinion, of the $157.00 in cash per share of our common stock to be paid to such holders pursuant to the merger agreement. Goldman Sachs’ opinion did not express any view on, and did not address, any other term or aspect of the merger agreement or the merger or any term or aspect of any other agreement or instrument contemplated by the merger agreement or entered into or amended in connection with the merger, including the fairness of the merger to, or any consideration received in connection therewith by, the holders of any other class of securities, creditors, or other constituencies of the company; nor as to the fairness of the amount or nature of any compensation to be paid or payable to any of our officers, directors or employees, or class of such persons, in connection with the merger, whether relative to the $157.00 in cash per share of our common stock to be paid to the holders (other than Arby’s and its affiliates) of shares of our common stock pursuant to the merger agreement or otherwise. Goldman Sachs did not express any opinion as to the impact

 

 

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of the merger on the solvency or viability of the company, Arby’s or Merger Sub or the ability of the company, Arby’s or Merger Sub to pay their respective obligations when they come due. Goldman Sachs’ opinion was necessarily based on economic, monetary, market and other conditions as in effect on, and the information made available to it as of, the date of the opinion and Goldman Sachs assumed no responsibility for updating, revising or reaffirming its opinion based on circumstances, developments or events occurring after the date of its opinion. Goldman Sachs’ opinion was approved by a fairness committee of Goldman Sachs.

The following is a summary of the material financial analyses delivered by Goldman Sachs to our board of directors in connection with rendering the opinion described above. The following summary, however, does not purport to be a complete description of the financial analyses performed by Goldman Sachs, nor does the order of analyses described represent relative importance or weight given to those analyses by Goldman Sachs. Some of the summaries of the financial analyses include information presented in tabular format. The tables must be read together with the full text of each summary and are alone not a complete description of Goldman Sachs’ financial analyses. Except as otherwise noted, the following quantitative information, to the extent that it is based on market data, is based on market data as it existed on or before November 24, 2017, the last trading day before the day on which the merger agreement was executed, and is not necessarily indicative of current market conditions.

Historical Stock Trading Analysis. Goldman Sachs analyzed the merger consideration to be paid to holders of shares of our common stock pursuant to the merger agreement in relation to (1) the closing price per share of our common stock on November 24, 2017, the last trading day before the day on which the merger agreement was executed, (2) the undisturbed trading price per share of our common stock, which is the closing price per share of our common stock on November 13, 2017, the last full trading day prior to published reports that Roark had submitted a proposal to acquire the company, (3) the high and low trading prices per share of our common stock over the 52-week period ended November 13, 2017 and (4) the volume weighted average price per share of our common stock, which we refer to as “VWAP,” for the preceding one-month period ended November 13, 2017. This analysis indicated that the merger consideration to be paid to our shareholders pursuant to the merger agreement represented:

 

    a premium of 7.6% based on the closing price per share of our common stock of $145.85 on November 24, 2017;

 

    a premium of 33.9% based on the closing price per share of our common stock of $117.25 on November 13, 2017;

 

    a premium of 65.3% based on $95.00 per share of our common stock, the lowest trading price per share of our common stock over the 52-week period ended November 13, 2017;

 

    a discount of 10.3% based on $175.10 per share of our common stock, the highest trading price per share of our common stock over the 52-week period ended November 13, 2017; and

 

    a premium of 36.5% based on the VWAP for the one-month period ended November 13, 2017 of $115.05.

 

 

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Selected Companies Analysis. Goldman Sachs reviewed and compared certain financial information for the company to corresponding financial information, ratios and public market multiples for the following publicly traded corporations in the U.S. casual dining industry, which we collectively refer to as the “selected companies”:

 

    Bloomin’ Brands, Inc.;

 

    BJ’s Restaurants, Inc.;

 

    Brinker International, Inc.;

 

    The Cheesecake Factory Incorporated;

 

    Cracker Barrel Old Country Store, Inc.;

 

    Darden Restaurants, Inc.;

 

    Dave & Buster’s Entertainment, Inc.;

 

    Red Robin Gourmet Burgers, Inc.; and

 

    Texas Roadhouse, Inc.

Although none of the selected companies is directly comparable to the company, the selected companies included were chosen because they are publicly traded companies with operations that for purposes of analysis may be considered similar to certain of our operations, in Goldman Sachs’ professional judgment and experience.

Goldman Sachs calculated and compared various financial multiples based on information obtained from SEC filings, market data, Institutional Brokers’ Estimate System, which we refer to as “IBES,” estimates and research analyst reports available as of November 24, 2017 and, in the case of the company, both IBES estimates and our projections. With respect to its analysis, Goldman Sachs calculated the following financial multiples for the company, including as implied by the merger consideration, and the selected companies:

 

    Enterprise value (which is defined as fully diluted equity value plus total debt and noncontrolling interests, less total cash and cash equivalents), which we refer to as “EV,” as a multiple of earnings before interest, income taxes, depreciation and amortization, which we refer to as “EBITDA” (which, in the case of the company, excludes loss on asset disposals and impairments, proxy costs for contested election, and certain advisory, consulting and restructuring fees) for the years ended December 2017 and December 2018, which we refer to as “2017 EV/EBITDA” and “2018 EV/EBITDA,” respectively; and

 

   

Closing price per share, as of November 24, 2017, in the case of the selected companies (except in the case of Bloomin’ Brands, Inc., the closing price per share as of November 17, 2017, the last full trading day prior to the public filing by Jana Partners LLC of a Schedule 13D with the SEC with respect to Bloomin’ Brands, Inc.), and, for the company, the undisturbed trading price per share of our common stock of $117.25, as a multiple of calendarized estimated earnings per share, which we refer to as “EPS” (which, in the case of the company, excludes loss on asset disposals and impairments, proxy costs for contested election, advisory, consulting and restructuring

 

 

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fees, gain on sale of investment in affiliate, and other), for the years ended December 2017 and December 2018, which we refer to as “2017 P/E” and “2018 P/E,” respectively. The results of these analyses are summarized as follows:

 

    2017 EV/EBITDA     2018 EV/EBITDA     2017 P/E     2018 P/E  

Selected Companies

 

     

Range

    6.7x–11.6x       6.2x–10.7x       10.2x–25.0x       9.9x–22.8x  

Median

    8.8x       7.9x       18.8x       17.1x  

Company

       

Projections

    8.0x       8.2x       23.4x       21.9x  

IBES

    8.2x       7.9x       23.6x       21.0x  

Merger Consideration ($157.00)

 

     

Projections

    10.3x       10.5x       31.4x       29.4x  

IBES

    10.5x       10.1x       31.6x       28.2x  

Illustrative Discounted Cash Flow Analysis. Using our projections, Goldman Sachs performed an illustrative discounted cash flow analysis of the company. Using discount rates ranging from 7.50% to 8.50%, reflecting estimates of our weighted average cost of capital, Goldman Sachs discounted to present value as of September 24, 2017 (1) estimates of unlevered free cash flow for the company from September 24, 2017 through December 26, 2021 as reflected in our projections and (2) a range of illustrative terminal values for the company, which were calculated by applying perpetuity growth rates ranging from 2.50% to 3.50%, to a terminal year estimate of the free cash flow to be generated by the company, as reflected in our projections (which analysis implied terminal year exit LTM EV/EBITDA multiples ranging from 6.9x to 10.4x). Goldman Sachs derived such discount rates by application of the Capital Asset Pricing Model, which requires certain company-specific inputs, including our target capital structure weightings, the cost of long-term debt, future applicable marginal cash tax rate and a beta for the company, as well as certain financial metrics for the United States financial markets generally. In addition, stock based compensation expense was treated as a cash expense for purposes of determining unlevered free cash flow. The range of perpetuity growth rates was estimated by Goldman Sachs utilizing its professional judgment and experience, taking into account our projections and market expectations regarding long-term real growth of gross domestic product and inflation. Goldman Sachs derived ranges of illustrative enterprise values for the company by adding the ranges of present values it derived as described above. Goldman Sachs then subtracted, from the range of illustrative enterprise values it derived for the company, the amount of net debt and noncontrolling interests as of September 24, 2017, in each case, as per our latest reported figures to derive a range of illustrative equity values for the company. Goldman Sachs then divided the range of illustrative equity values it derived by the number of fully diluted outstanding shares of the company, as provided by our management, to derive a range of illustrative implied present values per share ranging from $111 to $167.

 

 

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Illustrative Present Value of Future Share Price Analysis. Goldman Sachs performed an illustrative analysis of the implied present value of the future value per share of our common stock, which is designed to provide an indication of the present value of a theoretical future value of a company’s equity as a function of (1) such company’s estimated future EBITDA and its assumed next 12-month EV to EBITDA multiple and (2) such company’s estimated future earnings per share of common stock and its assumed next 12-month price to future earnings per share multiple. For this analysis, Goldman Sachs used our projections for each of the fiscal years 2018 through 2021 to calculate a range of implied present values per share of our common stock as of September 24, 2017. Goldman Sachs first calculated illustrative implied future equity values per share of our common stock as of December 2020 by (a) applying the next 12-month enterprise value to EBITDA multiples, which we refer to as “NTM EV/EBITDA,” ranging from 8.0x to 10.0x to estimated EBITDA for the fiscal year 2021 and subtracting estimated net debt as of December 2020, each as reflected in our projections, and (b) applying the next 12-month price to earnings per share, which we refer to as “NTM P/E,” ranging from 20.0x to 25.0x to estimated EPS for the fiscal year 2021, as reflected in our projections. These illustrative multiple estimates were derived by Goldman Sachs utilizing its professional judgment and experience, taking into account, among other things, historical average NTM P/E and NTM EV/EBITDA multiples for our common stock during the three-year period ended November 13, 2017 and the undisturbed and current NTM P/E and NTM EV/EBITDA multiples for the company and the selected companies, respectively. These implied per share values were then discounted back to September 24, 2017, using an illustrative discount rate of 9.5%, reflecting an estimate of our cost of equity. Goldman Sachs derived such discount rate by application of the Capital Asset Pricing Model, which requires certain company-specific inputs, including a beta for the company, as well as certain financial metrics for the United States financial markets generally. This analysis resulted in a range of illustrative implied present values per share of our common stock of (i) $119 to $154 based on NTM EV/EBITDA multiples and (ii) $141 to $176 based on NTM P/E multiples.

 

 

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Selected Transactions Analysis. Goldman Sachs analyzed certain information relating to the following 13 selected transactions in the U.S. restaurant industry with an EV above $500 million since May 1, 2010, including the U.S. casual dining industry (indicated in italics). For each of the selected transactions, Goldman Sachs calculated and compared the transaction EV as a multiple of last 12-month EBITDA, which we refer to as “LTM EBITDA,” based on publicly available information and research analyst reports, which resulted in the following:

 

Announcement
Date

 

Target

 

Acquiror

  EV / LTM
EBITDA
 

 

Apr-17

 

 

Panera Bread Company

 

 

JAB Holdings B.V.

 

 

 

 

18.5x

 

 

 

Mar-17

 

 

Cheddar’s Restaurant Holding Corp.(1)

 

 

Darden Restaurants, Inc.

 

 

 

 

10.8  

 

 

 

Mar-17

 

 

Checkers Drive-In Restaurants, Inc.

 

 

Oak Hill Capital Partners

 

 

 

 

11.0  

 

 

 

Feb-17

 

 

Popeye’s Louisiana Kitchen, Inc.

 

 

Restaurant Brands International Inc.

 

 

 

 

20.6  

 

 

 

Mar-15

 

 

Del Taco Restaurants, Inc.

 

 

Levy Acquisition Corp.

 

 

 

 

8.7  

 

 

 

May-14

 

 

Red Lobster

 

 

Golden Gate Capital

 

 

 

 

9.2  

 

 

 

Feb-14

 

 

CEC Entertainment, Inc.

 

 

Apollo Global Management, LLC

 

 

 

 

7.9  

 

 

 

Jul-12

 

 

Yard House USA, Inc.(2)

 

 

Darden Restaurants, Inc.

 

 

 

 

15.0  

 

 

 

May-12

 

 

P.F. Chang’s China Bistro, Inc.

 

 

Centerbridge Partners, L.P.

 

 

 

 

8.7  

 

 

 

Nov-11

 

 

NPC International, Inc.

 

 

Olympus Partners, L.P.

 

 

 

 

7.5  

 

 

 

Sep-10

 

 

Burger King Holdings, Inc.

 

 

3G Capital Partners, Ltd.

 

 

 

 

9.0  

 

 

 

Jul-10

 

 

CKE Restaurants, Inc.

 

 

Apollo Global Management, LLC

 

 

 

 

6.8  

 

 

 

May-10

 

 

Dave & Buster’s

 

 

Oak Hill Capital

 

 

 

 

7.3  

 

 

Note: LTM EBITDA excludes adjustments for stock-based compensation and preopening costs, where applicable.

(1) Transaction EV before expected tax benefits.

(2) LTM EBITDA as of December 2011. Transaction EV before expected tax benefits.

While none of the companies that participated in the selected transactions are directly comparable to the company, the companies that participated in the selected transactions are companies with operations that, for the purposes of analysis, in Goldman Sachs’ professional judgment and experience, may be considered similar to certain of our results, market size and product profile.

Based on its review of the selected transactions, Goldman Sachs applied an illustrative range of EV/LTM EBITDA multiples of 8.0x to 11.0x to the LTM EBITDA of the company, as of September 24, 2017, as derived from our reported figures, which resulted in a range of illustrative implied prices per share of our common stock of $112 to $163.

Transaction Premia Analysis.   Using publicly available information, Goldman Sachs reviewed and analyzed the acquisition premia for publicly disclosed U.S. all-cash acquisitions announced during the period from January 1, 2010 through November 24, 2017 with an EV above $500 million. Goldman Sachs calculated, for this period, the premia represented by the prices per share paid in these transactions relative to the target companies’ closing share prices (1) one day and (2) one week prior to announcement. Using such data, Goldman Sachs calculated the 25th percentile, median, and 75th percentile acquisition premia for these transactions as 16.5%, 28.2%, and 44.2%, respectively, for these one-day premia and 17.4%, 30.9%, and 45.6%, respectively, for these one-week premia. Goldman Sachs then applied an illustrative range of acquisition premia of 15% to 45% to $117.25, the undisturbed trading price per share of our common stock, to derive a range of illustrative implied prices per share of our common stock of $135 to $170.

 

 

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The preparation of a fairness opinion is a complex process and is not necessarily susceptible to partial analysis or summary description. Selecting portions of the analyses or of the summary set forth above, without considering the analyses as a whole, could create an incomplete view of the processes underlying Goldman Sachs’ opinion. In arriving at its fairness determination, Goldman Sachs considered the results of all of its analyses and did not attribute any particular weight to any factor or analysis considered by it. Rather, Goldman Sachs made its determination as to fairness on the basis of its experience and professional judgment after considering the results of all of its analyses. No company or transaction used in the above analyses as a comparison is directly comparable to us or the merger.

Goldman Sachs prepared these analyses for purposes of Goldman Sachs’ providing its opinion to our board of directors as to the fairness from a financial point of view of the $157.00 in cash per share of our common stock to be paid to the holders (other than Arby’s and its affiliates) of shares of our common stock pursuant to the merger agreement. These analyses do not purport to be appraisals nor do they necessarily reflect the prices at which businesses or securities actually may be sold. Analyses based upon forecasts of future results are not necessarily indicative of actual future results, which may be significantly more or less favorable than suggested by these analyses. Because these analyses are inherently subject to uncertainty, being based upon numerous factors or events beyond the control of the parties or their respective advisors, none of us, Goldman Sachs or any other person assumes responsibility if future results are materially different from those forecast.

The merger consideration to be paid pursuant to the merger agreement was determined through arm’s-length negotiations between us and Arby’s and was approved by our board of directors. Goldman Sachs provided advice to us during these negotiations. Goldman Sachs did not, however, recommend any specific amount of consideration to us or our board of directors or that any specific amount of consideration constituted the only appropriate consideration for the merger.

As described above, Goldman Sachs’ opinion to our board of directors was one of many factors taken into consideration by our board of directors in making its determination to approve the merger agreement. The foregoing summary does not purport to be a complete description of the analyses performed by Goldman Sachs in connection with the fairness opinion and is qualified in its entirety by reference to the written opinion of Goldman Sachs attached as Appendix C.

Goldman Sachs and its affiliates are engaged in advisory, underwriting and financing, principal investing, sales and trading, research, investment management and other financial and non-financial activities and services for various persons and entities. Goldman Sachs and its affiliates and employees, and funds or other entities they manage or in which they invest or have other economic interests or with which they co-invest, may at any time purchase, sell, hold or vote long or short positions and investments in securities, derivatives, loans, commodities, currencies, credit default swaps and other financial instruments of the company, Arby’s, any of their respective affiliates and third parties, including Roark, an affiliate of Arby’s, and any of its affiliates and portfolio companies, or any currency or commodity that may be involved in the transaction contemplated by the merger agreement for the accounts of Goldman Sachs and its affiliates and employees and their customers. Goldman Sachs acted as financial advisor to us in connection with, and participated in certain of the negotiations leading to, the merger. Goldman Sachs has provided certain investment banking services to Roark and its affiliates and/or portfolio companies from time to time for which the Investment

 

 

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Banking Division of Goldman Sachs has received, and may receive, compensation, including having acted (1) as joint bookrunner with respect to a public offering of 5,750,000 shares of common stock of Wingstop Inc., a former portfolio company of Roark, in March 2016; and (2) as joint lead arranger and joint bookrunner with respect to senior secured credit facilities (aggregate principal amount $725,000,000) of International Car Wash Group Limited, a portfolio company of Roark, in September 2017. During the two-year period ended November 27, 2017, Goldman Sachs has received compensation for the financial advisory and/or underwriting services provided by its Investment Banking Division of approximately $6.5 million in aggregate. Goldman Sachs may also in the future provide investment banking services to our company, Arby’s and their respective affiliates, and Roark and any of its affiliates and portfolio companies, for which the Investment Banking Division of Goldman Sachs may receive compensation. Affiliates of Goldman Sachs also may have co-invested with Roark and its affiliates from time to time and may have invested in limited partnership units of affiliates of Roark from time to time and may do so in the future.

Our board of directors selected Goldman Sachs as our financial advisor because it is an internationally recognized investment banking firm that has substantial experience in transactions similar to the merger. Pursuant to a letter agreement dated November 21, 2017, we engaged Goldman Sachs to act as its financial advisor in connection with the merger. The engagement letter between us and Goldman Sachs provides for a transaction fee that is estimated, based on the information available as of the date of announcement, at approximately $27 million, all of which is contingent upon consummation of the merger. In addition, we have agreed to reimburse Goldman Sachs for certain of its expenses, including attorneys’ fees and disbursements, and to indemnify Goldman Sachs and related persons against various liabilities, including certain liabilities under the federal securities laws.

CERTAIN PROSPECTIVE FINANCIAL INFORMATION

 

We do not, as a matter of course, develop or publicly disclose long-term projections or internal projections of our future financial performance, revenues, earnings, financial condition or other results due to, among other reasons, the uncertainty of the underlying assumptions and estimates. However, in connection with our board of directors’ evaluation of the merger, our board of directors considered certain non-public unaudited prospective financial information provided by our management relating to Buffalo Wild Wings for the fiscal years ending 2017 through 2021, which we refer to as our “projections.” Our projections were also provided to Goldman Sachs for its use and reliance in connection with its financial analyses and opinion summarized under “Opinion of Our Financial Advisor” on page 39.

Limitations on Our Projections

Our projections were not prepared with a view to public disclosure, but are included in this proxy statement because such information was made available to our board of directors and Goldman Sachs and used in the process leading to the execution of the merger agreement. Our projections were not prepared with a view to compliance with generally accepted accounting principles as applied in the United States (which we refer to as “GAAP”), the published guidelines of the SEC regarding projections and forward-looking statements or the guidelines established by the American Institute of Certified Public Accountants for preparation and presentation of prospective financial information. Furthermore, our independent auditors have not examined, reviewed, compiled or otherwise applied procedures to our projections and, accordingly, assume no responsibility for, and express no opinion on, them.

 

 

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Although a summary of our projections is presented with numerical specificity, this information is not fact and should not be relied upon as being necessarily predictive of actual future results. Our projections are forward-looking statements. Important factors that may affect actual results and cause our projections not to be achieved include general economic conditions, accuracy of certain accounting assumptions, changes in actual or projected cash flows, competitive pressures, changes in tax laws, and the other factors described under “PrefaceForward-Looking Statements” on page iii. In addition, our projections do not take into account any circumstances or events occurring after the date that they were prepared and do not give effect to the merger. As a result, there can be no assurance that our projections will be realized, and actual results may be materially better or worse than those contained in our projections. The inclusion of this information should not be regarded as an indication that our board of directors, our financial advisor or any other recipient of this information considered, or now considers, our projections to be material information of the company or necessarily predictive of actual future results nor should it be construed as financial guidance, and it should not be relied upon as such. The summary of our projections is not included in this proxy statement in order to induce any shareholder to vote in favor of the merger proposal or other proposals to be voted on at the special meeting or to influence any shareholder to make any investment decision with respect to the merger, including whether or not to seek dissenters’ rights with respect to shares of our common stock.

Our projections should be evaluated, if at all, in conjunction with the historical financial statements and other information regarding Buffalo Wild Wings contained in our public filings with the SEC.

Except to the extent required by applicable federal securities laws, we do not intend, and expressly disclaim any responsibility, to update or otherwise revise our projections to reflect circumstances existing after the date when we prepared our projections or to reflect the occurrence of future events or changes in general economic or industry conditions, even in the event that any of the assumptions underlying our projections are shown to be in error. We can give no assurance that, had our projections been prepared either as of the date of the merger agreement or as of the date of this proxy statement, similar estimates and assumptions would be used. Neither Buffalo Wild Wings nor any of its affiliates, directors, officers, advisors or other representatives has made or makes any representation to any of our shareholders regarding the ultimate performance of Buffalo Wild Wings compared to the information contained in our projections or that our projections will be achieved.

In light of the foregoing factors and the uncertainties inherent in our projections and considering that the special meeting will be held several months after our projections were prepared, shareholders are cautioned not to rely on our projections included in this proxy statement.

Certain Underlying Assumptions

Our projections reflect numerous assumptions and estimates as to future events made by our management using information available to them at the time. Among other things, some of these assumptions include:

 

    Our overall store count would continue to grow, with the openings of new U.S. company-owned restaurants, U.S. franchised restaurants, and international franchised restaurants exceeding closures of such restaurants in each year throughout the period.

 

 

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    We would successfully execute on our refranchising program, selling approximately 153 of our company-owned restaurants to franchisees during the four fiscal year period ending in 2021.

 

    Traffic would modestly decline in 2018, then modestly increase each year thereafter.

 

    Chicken wing prices would remain constant throughout the period at our 2017 forecast, and overall our gross menu pricing would increase at a faster rate than our costs of goods throughout the four fiscal year period ending in 2021.

 

    Excess cash flow would be used to repurchase shares of our common stock.

 

    The U.S. tax laws in effect on the date the projections were prepared would remain in effect throughout the period.

Our Projections

Our projections included the following estimates of our future financial performance:

 

    Fiscal year  

(amounts in millions, except per share figures)

  2017E     2018E     2019E     2020E     2021E  

Revenue

  $ 2,072     $ 2,023     $ 1,950     $ 1,882     $ 1,861  

Earnings before income tax

  $ 99     $ 104     $ 119     $ 147     $ 173  

Net earnings including noncontrolling interests

  $ 71     $ 74     $ 79     $ 96     $ 111  

EBITDA(1)

  $ 259     $ 266     $ 265     $ 277     $ 296  

Adjusted EBITDA(1)

  $ 279     $ 274     $ 269     $ 281     $ 300  

Cash flows from operations

  $ 232     $ 226     $ 226     $ 219     $ 222  

Capital expenditures

  $ (80)     $ (94)     $ (117)     $ (117)     $ (114)  

Sale of franchise units

  $ 0     $ 19     $ 78     $ 95     $ 42  

Cash flows from investing activities

  $ (80)     $ (74)     $ (39)     $ (22)     $ (71)  

Unlevered free cash flow(1)(2)

  $ 148     $ 151     $ 187     $ 200     $ 159  

Net debt at end of period(3)

  $ 384     $ 377     $ 369     $ 387     $ 565  

Earnings per share (EPS)

  $ 4.44     $ 4.97     $ 5.65     $ 7.27     $ 9.25  

Adjusted earnings per share (Adjusted EPS)(1)

  $ 5.01     $ 5.35     $ 5.83     $ 7.45     $ 9.44  

 

  (1) Non-GAAP financial measure. See “Reconciliation of Non-GAAP Financial Measures” below.

 

  (2) Goldman Sachs calculated unlevered free cash flows using our projections and such unlevered free cash flows were reviewed and approved by us for Goldman Sachs’ use in connection with its financial analyses and opinion.

 

  (3) We define net debt as gross indebtedness, net of cash and marketable securities.

Reconciliation of Non-GAAP Financial Measures

Certain of the measures included in our projections may be considered non-GAAP financial measures. Non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information presented in compliance with GAAP, and non-GAAP financial measures as used by us may not be comparable to similarly titled amounts used by other companies. These non-GAAP measures are included in this proxy statement because such information was made available to our board of directors and Goldman Sachs and used in the process leading to the execution of the merger agreement, as described elsewhere in this proxy statement.

 

 

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Reconciliations of certain of these measures are provided below. The figures included in the reconciliation are part of our projections, and are subject to and should be read together with the disclosures above.

EBITDA, Adjusted EBITDA and Unlevered Free Cash Flow

EBITDA, adjusted EBITDA and unlevered free cash flow are non-GAAP financial measures. We define EBITDA as net earnings including noncontrolling interests plus interest expense, income tax expense, and depreciation and amortization minus other income (expenses). We define adjusted EBITDA as EBITDA plus loss on asset disposals and impairment, proxy costs for contested election, and certain advisory, consulting and restructuring fees. Unlevered free cash flow was calculated as adjusted EBITDA minus unlevered cash taxes and capital expenditures; plus proceeds from the sale of franchise units; and adjusted for changes in working capital. For purposes of the calculation of unlevered free cash flow, stock based compensation expense was treated as a cash expense. A reconciliation of net earnings including noncontrolling interests to EBITDA, adjusted EBITDA and unlevered free cash flow is provided below:

 

    Fiscal year  

(amounts in millions)

  2017E     2018E     2019E     2020E     2021E  

Net earnings including noncontrolling interests(1)

  $ 71     $ 74     $ 79     $ 96     $ 111  

Plus: Interest expense(1)

    13       19       19       19       24  

Plus: Income tax expense(1)

    28       30       40       51       62  

Plus: Depreciation and amortization(1)

    152       143       127       112       99  

Minus: Other income (expenses)(2)

    4                          
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

EBITDA (non-GAAP)

  $ 259     $ 266     $ 265     $ 277     $ 296  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Plus: Loss on asset disposals and impairment(1)

    11       8       4       4       4  

Plus: Proxy costs for contested election(3)

    6                          

Plus: Certain advisory, consulting and restructuring fees(4)

    3                          
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted EBITDA (non-GAAP)

  $ 279     $ 274     $ 269     $ 281     $ 300  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Minus: Unlevered cash taxes(5)

    45       46       50       59       70  

Minus: Capital expenditures(6)

    80       94       117       117       114  

Plus: Sale of franchise units(7)

          19       78       95       42  

Minus: Decrease (increase) in net working capital(8)

    (7)       (3)       7       1        
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Unlevered free cash flow (non-GAAP)

  $ 148     $ 151     $ 187     $ 200     $ 159  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

  (1) As would be shown on our consolidated statement of earnings.

 

  (2) Other income (expenses) generally consists of our gain (loss) on our minority investment in Pie Squared Holdings, changes in the valuation of our contingent consideration, and changes in the valuation of our investments held for our deferred compensation plan.

 

  (3) Represents costs related to the advisory fees and preparation of proxy materials in a contested election for the board of directors.

 

  (4) Represents costs related to consulting services pertaining to the identification of best practices and improving efficiencies, and organizational restructuring costs.

 

  (5) Represents an approximation of unlevered cash taxes used solely for purposes of this calculation, and was calculated as 35% of adjusted EBIT (adjusted EBITDA minus depreciation and amoritization).

 

  (6) Represents acquisition of property and equipment as would be shown on our consolidated statements of cash flows.

 

  (7) Represents sale of businesses as would be shown on our consolidated statements of cash flows.

 

  (8) Represents decrease (increase) of current assets minus current liabilities as would be shown on our consolidated balance sheets.

 

 

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Adjusted Net Earnings and Adjusted Earnings per Diluted Share

Adjusted net earnings and adjusted earnings per diluted share (adjusted EPS) are non-GAAP measures. We define adjusted EPS as adjusted net earnings attributable to Buffalo Wild Wings divided by our weighted average diluted shares outstanding. Adjusted net earnings attributable to Buffalo Wild Wings is calculated as earnings before income taxes plus loss on asset disposals and impairment, proxy costs for contested election, certain advisory, consulting and restructuring fees and divestiture costs; minus gain on sale of investment in affiliate; and adjusted for income tax expense and net earnings (loss) attributable to noncontrolling interests.

 

    Fiscal year  

(amounts in millions, except per share figures)

  2017E     2018E     2019E     2020E     2021E  

Earnings before income tax(1)

  $ 99     $ 104     $ 119     $ 147     $ 173  

Plus: Loss on asset disposals and impairment(1)

    11       8       4       4       4  

Plus: Proxy costs for contested election(2)

    6                          

Plus: Certain advisory, consulting and restructuring fees(3)

    3                          

Plus: Divestitures costs(4)

    0                          

Minus: Gain on sale of investment in affiliate(5)

    6                          
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted earnings before income taxes

  $ 112     $ 112     $ 123     $ 150     $ 177  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Minus: Income tax expense(6)

    32       32       42       52       63  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted earnings including noncontrolling interests

  $ 80     $ 79     $ 82     $ 98     $ 113  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Minus: Net earnings (loss) attributable to noncontrolling interests(1)

    (1)       (1)       (1)       (0)        
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted net earnings attributable to Buffalo Wild Wings

  $ 81     $ 80     $ 82     $ 98     $ 113  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Weighted average shares outstanding — diluted(1)

    16       15       14       13       12  

Adjusted earnings per share (Adjusted EPS)

  $ 5.01     $ 5.35     $ 5.83     $ 7.45     $ 9.44  

 

  (1) As would be shown on our consolidated statement of earnings.

 

  (2) Represents costs related to the advisory fees and preparation of proxy materials in a contested election for the board of directors.

 

  (3) Represents costs related to consulting services pertaining to the identification of best practices and improving efficiencies, and organizational restructuring costs.

 

  (4) Represents costs associated with the proposed divestiture of company-owned stores.

 

  (5) Represents gain recorded from the sale of our investment in affiliate, Pie Squared Holdings.

 

  (6) Our projected effective tax rates for the years ending 2017, 2018, 2019, 2020, and 2021 are 28.6%, 28.6%, 34.1%, 34.7%, and 35.6%, respectively. The calculated estimated income tax expense is based on these rates.

 

 

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FINANCING OF THE MERGER

 

We anticipate that the total amount of funds necessary to consummate the merger and the related transactions (including the funds needed to pay our shareholders the amounts due to them under the merger agreement, make payments in respect of our outstanding equity awards, refinance our existing long-term indebtedness and to pay related fees and expenses) will be funded through a combination of (1) debt financing as contemplated by a debt commitment letter, dated as of November 27, 2017, and amended and restated as of December 12, 2017 to add certain other financial institutions as parties thereto, between Arby’s and Barclays Bank and such other financial institutions, which we refer to as the “debt commitment letter,” pursuant to which Barclays Bank and such financial institutions have agreed to provide Arby’s with up to $2.21 billion of borrowings under committed borrowing facilities subject to the terms and conditions set forth in such debt commitment letter (or financing raised in certain capital markets transactions in lieu of a portion of such committed debt financing), (2) equity financing to be provided by the Roark fund, which has agreed to capitalize Arby’s with up to $783 million, subject to the terms and conditions set forth in an equity commitment letter, dated as of November 27, 2017, entered into by the Roark fund and Arby’s, which we refer to as the “equity commitment letter,” and (3) cash on hand and other available financial resources. The merger is not conditioned upon receipt of financing by Arby’s.

Equity Commitment Letter

In connection with entry into the merger agreement, Parent has entered into the equity commitment letter with the Roark fund pursuant to which the Roark fund has committed, on the terms and subject to the conditions set forth in the equity commitment letter, to provide equity financing, directly or indirectly, in an aggregate amount of up to $783 million, or such lesser amount to the extent that such amount is not required for Parent to consummate the transactions contemplated by the merger agreement.

Funding of the equity financing is subject to the conditions provided in the equity commitment letter, which include:

 

    the satisfaction or waiver in accordance with the merger agreement of all conditions to Parent’s obligation to consummate the merger set forth in the merger agreement (other than those conditions that by their nature can only be satisfied at the closing of the merger, but subject to such conditions being capable of and actually being satisfied at closing of the merger);

 

    Parent’s debt financing sources being ready and willing on the closing date to provide the debt financing to Parent pursuant to the terms and conditions set forth in the debt commitment letter; and

 

    the substantially concurrent closing of the merger in accordance with the merger agreement.

Buffalo Wild Wings is an express third party beneficiary of the equity commitment letter for the purpose of, in accordance with the terms and conditions of the merger agreement, seeking specific performance of the Roark fund’s obligation to fund the equity commitment to Parent (as further described in “The Merger Agreement—Specific Enforcement” on page 88).

Subject to certain limitations, the obligations of the Roark fund to fund the equity financing under the equity commitment letter will terminate upon the earliest to occur of:

 

    the termination of the merger agreement in accordance with its terms;

 

 

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    the closing of the merger;

 

    commencement by the company, any of its subsidiaries or any of their respective representatives of a lawsuit or other proceeding against the Roark fund or its permitted assignees (excluding Parent and Merger Sub and their respective successors and assignees) to fund the equity commitment or for any other claim in respect of the merger agreement, the equity commitment letter, or the transactions contemplated thereby, other than in connection with enforcing the company’s rights as a third party beneficiary under the equity commitment letter; and

 

    commencement by the company, any of its subsidiaries or any of their respective representatives of a lawsuit or other proceeding asserting any claim for payment or other liabilities under or in respect of the merger agreement, the equity commitment letter or the transactions contemplated thereby against any former, current or future director, officer, agent, affiliate, manager, assignee or employee of the Roark fund (or any of their respective successors or permitted assignees), against any former, current or future general or limited partner, manager, shareholder or member of the Roark fund (or any of their respective successors or permitted assignees) or any affiliate thereof or against any former, current or future director, officer, agent, employee, affiliate, assignee, general or limited partner, shareholder, manager or member of any of the foregoing, in each case, other than the Roark fund, Parent, Merger Sub and their respective successors and permitted assignees.

Upon the valid termination of the equity commitment letter, the Roark fund shall not have any further obligations or liabilities thereunder.

Debt Commitment Letter

In connection with entry into the merger agreement, Arby’s has obtained from Barclays Bank and certain other financial institutions the debt commitment letter, pursuant to which Barclays Bank and such financial institutions have committed to provide Arby’s with (1) a $1,725,000,000 senior secured credit facility, which we refer to as the “senior secured facility,” consisting of a $1,575,000,000 term loan B facility, which would be fully funded on the closing date, and a $150,000,000 revolving credit facility, which will be available on the closing date and from time to time thereafter to fund a portion of the merger consideration and/or for general corporate purposes, and (2) a $485,000,000 senior unsecured bridge facility, which we refer to as the “bridge facility.” In lieu of borrowing under the bridge facility on the closing date, Arby’s may fund a portion of the merger consideration with the proceeds of senior unsecured notes issued by Arby’s or one of its affiliates. Arby’s may fund a portion of the merger consideration with the proceeds of up to $124 million of variable funding notes issued by Arby’s Funding, LLC, a subsidiary of Arby’s, under its existing securitization facility. The senior secured credit facility would be secured by a lien on substantially all of the assets of the borrower thereunder and its restricted subsidiaries.

The availability of the senior secured credit facility and the bridge facility is subject to the following conditions:

 

    consummation of the merger in all material respects in accordance with the merger agreement (without giving effect to any amendment, modification or waiver of the merger agreement that is materially adverse to the lenders or lead arrangers, unless consented to by the lead arrangers thereunder);

 

 

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    refinancing of all of our existing third-party indebtedness for borrowed money other than indebtedness permitted to remain outstanding or be incurred under the merger agreement, certain ordinary course indebtedness and other customary exceptions;

 

    since the date of the merger agreement, except as set forth in the disclosure schedules to the merger agreement, there shall not have occurred a “Material Adverse Effect” (as defined in the merger agreement);

 

    the loan parties shall have furnished to the lead arrangers thereunder certain specified collateral and security documentation;

 

    receipt by the lenders and lead arrangers of information required by regulatory authorities under applicable “know your customer” and anti-money laundering rules and regulations;

 

    the execution and delivery of the definitive documentation with respect to the senior secured facility and the bridge facility, together with customary closing deliverables;

 

    receipt by the lead arrangers of a pro forma consolidated balance sheet and related pro forma statement of income of Arby’s, prepared after giving effect to the merger and related transactions, and certain historical financial statements;

 

    payment of all fees and expenses of the lenders and lead arrangers required to be paid on the closing date under the debt commitment letter;

 

    Arby’s use of commercially reasonable efforts to deliver a customary offering document to market senior unsecured notes for a period of not less than 15 consecutive business days prior to the closing date; and

 

    certain specified representations by Arby’s and representations and warranties by us in the merger agreement shall be true and correct in all material respects.

The commitments under the debt commitment letter will expire upon the earlier of (a) June 4, 2018 (or, if the outside date under the merger agreement is extended pursuant to the terms thereof, July 2, 2018) and (b) the consummation of the merger with or without the use of the senior secured credit facility or the bridge facility.

INTERESTS OF OUR DIRECTORS AND EXECUTIVE OFFICERS IN THE MERGER

 

When considering the recommendation of our board of directors that you vote for the proposal to approve the merger agreement, you should be aware that certain of our directors and executive officers may have interests in the merger that are different from, or in addition to, your interests as a shareholder. Our board of directors was aware of these interests in approving the merger agreement and the merger and in recommending that the merger agreement be approved by the shareholders of the company.

Our current executive officers are:

 

    Sally J. Smith, Chief Executive Officer and President

 

    Alexander H. Ware, Executive Vice President and Chief Financial Officer

 

    Emily C. Decker, Senior Vice President, General Counsel and Secretary

 

    Andrew D. Block, Senior Vice President, Talent Management Services

 

    Santiago Abraham, Chief Information Officer

 

 

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For purposes of determining Golden Parachute Compensation, our “named executive officers” are:

 

    Sally J. Smith, Chief Executive Officer and President

 

    Alexander H. Ware, Executive Vice President and Chief Financial Officer

 

    Emily C. Decker, Senior Vice President, General Counsel and Secretary

 

    Jeffrey B. Sorum, Senior Vice President and Controller

 

    James M. Schmidt, former Chief Operating Officer

 

    Judith A. Shoulak, former Executive Vice President, President North America Buffalo Wild Wings

The compensation that may become payable to our named executive officers in connection with the merger is subject to a non-binding advisory vote of the company’s shareholders, as described below in “The Golden Parachute Proposal (Proposal #2)” on page 93.

Arrangements with Arby’s

Agreements with Executive Officers

No executive officer of the company has entered into an agreement with Arby’s or Merger Sub or any of their respective affiliates regarding employment with, or the right to purchase or participate in the equity of, the surviving corporation or one or more of its affiliates. Prior to or following the closing of the merger, however, these executive officers may discuss or enter into such agreements with Arby’s, Merger Sub and/or any of their respective affiliates.

Under the merger agreement, the equity-based awards held by our directors and executive officers under our equity incentive plans will be treated as described in “The Merger AgreementTreatment of Buffalo Wild Wings Equity Awards” starting on page 68.

For an estimate of the amounts that would be payable to each of our named executive officers in settlement of their outstanding equity awards, see the “Equity” column in the “Golden Parachute Compensation” table on page 57. None of our current directors are currently party to any outstanding equity awards.

Payments to Company Executives upon Termination Following Change in Control

Employment Agreements

The company is party to an employment agreement with each of our executive officers who are current employees, other than Mr. Sorum. Each of these agreements provides for an automatic extension for successive one-year periods, each ending on the last day of the fiscal year, unless the agreement is terminated earlier or either party gives the other a non-renewal notice, and the agreements have thus been extended. The agreements set forth the position and duties of the executive officer, and describe the compensation and benefits programs provided by the company.

As provided in each agreement, the executive officer has agreed to restrictions on the uses of confidential information and intellectual property, and also has agreed to not compete with us and not hire or solicit our team members or customers, as those terms are defined, for one year following termination of employment. The agreements also provide for certain payments and benefits for certain termination of employment events. Upon an involuntary termination

 

 

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not for cause, our failure to renew an employment agreement, or resignation for good reason which, collectively, we refer to as “qualified terminations,” an executive officer is entitled to receive the following provided that he or she agrees to sign a release of claims against the company and honors the restrictive covenants of the agreement:

 

    Base salary continuation for up to six months (subject to certain limits), plus a supplemental salary continuation for either six months (if less than five years of service) or 12 months (if five years of service or more).

 

    Pro-rated annual cash incentive for the year of termination based on actual performance against established goals, with at least a target payout on individual performance.

 

    Reimbursement for the company cost portion of medical benefits for as long as the executive if eligible to continue coverage past termination under the Consolidated Omnibus Budget Reconciliation Act (COBRA) and for a period not to exceed the executive’s total number of months of salary continuation.

 

    Payment of salary continuation will be in a lump sum if the qualified termination occurs within one year of a change in control.

Upon termination for cause (generally involving criminal conduct, gross misconduct, material violation of company policies or material breach of the employment agreements) or resignation without good reason(generally involving a material diminution in base salary; a material diminution in authority, duties or responsibilities; relocation of the executive’s principal office by more than 50 miles; or a material breach of the employment agreement by us), the executive officer would not be entitled to any additional payments or benefits, other than those earned or accrued but not yet paid at the date of termination.

On November 27, 2017, the compensation committee of our board of directors approved the payment of bonuses for individual performance during 2017 under our annual cash incentive program. Accordingly, our named executive officers are not entitled to additional payments relating to the annual cash incentive program for 2017 and no such amounts are reflected in the Golden Parachute Compensation table below. The committee has not yet established, but may establish, a cash incentive program for 2018.

Retention Agreements

The compensation committee of our board of directors has approved retention bonus arrangements with certain employees, including all of our current executive officers, except Sally J. Smith. These arrangements will be evidenced in retention agreements to be entered into by us and each respective executive officer. The retention agreements will provide a cash retention bonus of $593,800 in the case of Mr. Ware, $471,900 in the case of Ms. Decker, $332,500 in the case of Mr. Block, $300,000 in the case of Mr. Abraham and $183,800 in the case of Mr. Sorum. In order for their respective cash retention bonuses to be paid, the executive officer must remain employed with the company as of the closing of the merger or through May 29, 2018, whichever is earlier, agree to a general release of claims against the company, and not be in breach of obligations under any written agreement with the company. The cash retention bonus will be paid if the executive officer is terminated without cause by us prior to the earlier of the closing of the merger or May 29, 2018. In addition, Mr. Ware is eligible to receive a portion of his cash retention bonus for remaining employed with the company through the end of the fiscal year ended December 31, 2017. If he remains

 

 

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employed through the end of the fiscal year ended December 31, 2017, he will earn $150,000 of his cash retention bonus, which amount will be payable on December 29, 2017.

Quantification of Payments and Benefits to Named Executive Officers

The table below and its footnotes show the estimated amounts of payments and benefits that each named executive officer would receive if the individual experiences a qualifying termination in connection with a hypothetical closing of the merger on December 27, 2017, based on their compensation levels and outstanding equity awards.

The amounts reflected in the table and the footnotes are determined using a per share price for the company’s common stock of $157.00, the merger consideration as specified in the merger agreement. The compensation summarized in the table and footnotes below in respect of the named executive officers is subject to a non-binding advisory vote of the company’s shareholders, as described below in “The Golden Parachute Proposal (Proposal #2)” on page 93.

The calculations in the tables below do not include amounts the officers were already entitled to receive or that were vested as of December 27, 2017, or amounts under contracts, agreements, plans or arrangements to the extent they do not discriminate in scope, terms or operation in favor of an officer and that are available generally to all of the salaried employees of the company. The estimated amounts below are based on multiple assumptions that may not actually occur, including assumptions described in this proxy statement. In addition, certain amounts will vary depending on the actual date of closing of the merger, which is presently expected to occur in the first quarter of 2018. As a result, the actual amounts, if any, to be received by an applicable individual may differ in material respects from the amounts set forth in the following table and accompanying footnotes.

GOLDEN PARACHUTE COMPENSATION

 

Named Executive Officer

   Cash(1)
            ($)            
   Equity(2)
            ($)            
   Perquisites/
Benefits(3)
             ($)            
   Total
            ($)            

Sally J. Smith

       1,312,500        3,744,526        12,798        5,069,824

Alexander H. Ware

       1,068,800        1,727,385        8,532        2,804,717

Emily C. Decker

       1,038,150        1,044,353        12,798        2,095,301

Jeffrey B. Sorum

       428,800        495,754               924,554

James M. Schmidt(4)

              979,844               979,844

Judith A. Shoulak(5)

              631,983               631,983

 

 

(1) Amounts shown include lump sum payments equal to 18 months of base salary (for Ms. Smith and Ms. Decker) or 12 months of base salary (for Mr. Ware and Mr. Sorum) that each current named executive officer would be entitled to receive as the result of a qualifying termination within one year following a change in control either pursuant to their respective employment agreement or other severance arrangements. The amounts shown in this column are based on the base salaries in effect on December 15, 2017 and the resulting salary continuation payments each as set forth below. Because shareholder approval is a closing condition for the merger, it is not possible for a closing to occur before the date of the meeting to which this proxy statement relates, which is scheduled to occur in the fiscal year ending December 30, 2018. Accordingly, because a cash incentive program has not been established for that fiscal year, severance amounts based on cash incentive program terms, if any, are not available for inclusion. Amounts shown also include amounts payable pursuant to retention bonus arrangements with Mr. Ware, Ms. Decker and Mr. Sorum, described further above.

 

 

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Named Executive Officer 

   Base Salary
                ($)                 
       Salary Continuation    
($)
       Retention Payment    
($)

Sally J. Smith

       875,000        1,312,500       

Alexander H. Ware

       475,000        475,000        593,800

Emily C. Decker

       377,500        566,250        471,900

Jeffrey B. Sorum

       245,000        245,000        183,800

If base salary levels or cash incentive arrangements change before the closing of the merger occurs, then actual payments may differ materially from those provided herein.

 

(2) Amounts shown represent aggregate merger consideration that each named executive officer would receive with respect to shares subject to unvested stock options, unvested restricted stock units subject solely to time-based vesting (“RSUs”) and unvested restricted stock units subject to performance-based vesting (“PRSUs”) that are subject to accelerated vesting in connection with the merger. Because shareholder approval is a closing condition for the merger, it is not possible for a closing to occur before the date of the meeting to which this proxy statement relates. Accordingly, PRSUs scheduled to vest on their terms upon the completion of the fiscal year ending December 31, 2017 have been omitted from this presentation. Depending on when the closing date of the merger actually occurs, additional stock options, or restricted stock units that are currently outstanding may vest in accordance with their terms prior to the closing of the merger.

 

Named Executive

Officer

  Shares
Subject to
Unvested
Options

(#)
  Total Value
of Shares
Subject to
Unvested
Options

($)
  Shares
Subject to
Unvested
RSUs

(#)
  Total Value
of Shares
Subject to
Unvested
RSUs

($)
  Shares
Subject to
Unvested
PRSUs

(#)
  Total Value
of Shares
Subject to
Unvested
PRSUs

($)
  Total
        ($)        

Sally J. Smith

      22,902       244,996                   22,290       3,499,530       3,744,526

Alexander H. Ware

      5,952       69,936       5,206       817,342       5,351       840,107       1,727,385

Emily C. Decker

      5,825       64,516       2,509       393,913       3,732       585,924       1,044,353

Jeffrey B. Sorum

      1,776       18,631       1,317       206,769       1,722       270,354       495,754

James M. Schmidt

      7,039       75,995                   5,757       903,849       979,844

Judith A. Shoulak

      4,617       49,827                   3,708       582,156       631,983

 

(3) Amounts represent reimbursement for company cost portion of medical benefits for duration of eligibility to continue coverage past termination under COBRA and for a period not to exceed total number of months of salary continuation. For Ms. Smith and Ms. Decker, amount represents reimbursement for 18 months. For Mr. Ware, amount represents reimbursement for 12 months. Medical insurance premiums are estimated to be approximately $711 per month.

 

(4) Mr. Schmidt retired from the company effective August 14, 2017.

 

(5) Ms. Shoulak retired from the company effective June 30, 2017.

Insurance and Indemnification of Directors and Executive Officers

See “The Merger Agreement—Indemnification and Insurance,” starting on page 80, for a summary of the obligations of Arby’s and the surviving corporation with respect to insurance indemnification of directors and executive officers after the effective time of the merger.

Voting Agreement

Richard T. McGuire III, one of our directors, is the managing partner of Marcato Capital Management LP, which is the investment manager of certain funds that collectively beneficially owned approximately 6.4% of our outstanding shares as of November 27, 2017, and which have entered into an agreement to vote the shares beneficially owned by such funds as of the record date in favor of the merger proposal, subject to the terms and conditions of such agreement. See “Voting Agreement” on page 90.

 

 

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REGULATORY APPROVALS

 

HSR Waiting Period

Under the HSR Act and the rules promulgated thereunder, certain transactions, including the merger, may not be completed until notifications have been given and information furnished to the U.S. Federal Trade Commission, which we refer to as the “FTC,” and the Antitrust Division of the U.S. Department of Justice, which we refer to as the “DOJ,” and all statutory waiting period requirements have been satisfied. Completion of the merger is subject to the expiration or termination of the applicable waiting period under the HSR Act.

Under the HSR Act, the merger may not be completed until the expiration of a 30-calendar day waiting period, which began when Buffalo Wild Wings and a fund advised by Roark filed Premerger Notification and Report Forms under the HSR Act with the FTC and the DOJ on December 11, 2017. The waiting period is expected to expire at 11:59 p.m., Eastern Time, on January 10, 2018, unless earlier terminated by the FTC and the DOJ or extended by a Request for Additional Information and Documentary Material, which we refer to as a “second request.” If prior to the expiration or termination of the waiting period either the FTC or the DOJ issues a second request from the filing parties, the waiting period with respect to the merger will be extended until the 30th calendar day following the date of the filing parties’ substantial compliance with that second request. After that time, absent agreement from the filing parties, the acquisition can be blocked only by court order. The FTC and the DOJ may terminate the applicable waiting period at any time before its expiration.

At any time (regardless of whether before or after the expiration or termination of the statutory waiting periods under the HSR Act, or before or after the effective time of the merger), the FTC or the DOJ may take action under the antitrust laws, including seeking to enjoin the completion of the merger, to rescind the merger, or to conditionally permit completion of the merger subject to regulatory conditions or other remedies. In addition, U.S. state attorneys general could take action under the antitrust laws as they deem necessary or desirable in the public interest, including, without limitation, seeking to enjoin the completion of the merger or permitting completion subject to regulatory conditions. Private parties may also seek to take legal action under the antitrust laws under some circumstances. Although we do not believe that the merger will violate the antitrust laws, there can be no assurance that a challenge to the merger on antitrust grounds will not be made or, if such a challenge is made, that it would not be successful.

Other Approvals

Applicable law or the terms and conditions of certain of our licenses and permits, including liquor and gaming licenses, may impose requirements to notify or obtain approval of the applicable regulator in connection with the merger. However, the merger is not conditioned upon making or obtaining any such notices or approvals.

 

 

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EXCLUSIVE FORUM BYLAW

 

On November 27, 2017, our board of directors amended our bylaws to add a new exclusive-forum bylaw, which provides that, unless we otherwise consent, the state or federal courts in Hennepin County, Minnesota, will be the sole and exclusive forum for (1) derivative actions brought by others on behalf of the company, (2) actions claiming a breach fiduciary duty owed by any of our directors, officers, employees, or agents to us or our shareholders, (3) actions arising pursuant to any provision of the Minnesota Business Corporation Act, the articles of incorporation, or our bylaws, and (4) other actions governed by the “internal affairs” doctrine. This amendment was effective immediately and should apply to any actions of these types that may be brought in connection with the merger.

 

 

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MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES

 

The following is a general discussion of certain material U.S. federal income tax consequences of the merger to U.S. holders of our common stock whose shares are exchanged for cash pursuant to the merger. This discussion does not address U.S. federal income tax consequences with respect to holders other than U.S. holders. This discussion is based on the provisions of the U.S. Internal Revenue Code of 1986, as amended, which we refer to as the “tax code,” applicable U.S. Treasury Regulations promulgated under the tax code, judicial opinions and administrative rulings and published positions of the Internal Revenue Service, which we refer to as the “IRS,” each as in effect as of the date hereof. These authorities are subject to change or differing interpretations, possibly on a retroactive basis, and any such change or interpretation could affect the accuracy of the statements and conclusions set forth in this discussion. In addition, on December 22, 2017, the President signed a bill making significant changes to U.S. federal tax laws. This discussion is general in nature and does not discuss all aspects of U.S. federal income taxation that may be relevant to a holder of shares of our common stock in light of such holder’s particular circumstances. This discussion does not address any tax consequences arising under the unearned income Medicare contribution tax pursuant to the Health Care and Education Reconciliation Act of 2010, nor does it address any tax considerations under state, local or non-U.S. laws or U.S. federal laws other than those pertaining to the U.S. federal income tax. This discussion is not binding on the IRS or the courts and, therefore, could be subject to challenge, which could be sustained. We have not sought, and no ruling will be sought from the IRS with respect to the merger.

For purposes of this discussion, the term “U.S. holder” means a beneficial owner of our common stock that is for U.S. federal income tax purposes:

 

    a citizen or individual resident of the United States;

 

    a corporation, or other entity classified as a corporation for U.S. federal income tax purposes, created or organized in or under the laws of the United States, any state thereof, or the District of Columbia;

 

    a trust if (1) a court within the United States is able to exercise primary supervision over the trust’s administration, and one or more U.S. persons are authorized to control all substantial decisions of the trust or (2) such trust has a valid election in effect under applicable U.S. Treasury Regulations to be treated as a U.S. person; or

 

    an estate the income of which is subject to U.S. federal income tax regardless of its source.

This discussion applies only to U.S. holders of shares of our common stock who hold such shares as a capital asset within the meaning of Section 1221 of the tax code (generally, property held for investment). Further, this discussion does not purport to consider all aspects of U.S. federal income taxation that may be relevant to a U.S. holder in light of its particular circumstances, or that may apply to U.S. holders subject to special treatment under U.S. federal income tax laws (including, for example, insurance companies, dealers or brokers in securities or non-U.S. currencies, traders in securities who elect the mark-to-market method of accounting, holders subject to the alternative minimum tax, U.S. holders that have a functional currency other than the U.S. dollar, tax-exempt organizations, tax-qualified retirement plans, banks and other financial institutions, mutual funds, U.S. expatriates or former citizens or long term residents of the United States, S corporations, or other

 

 

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pass-through entities, or investors in such S corporations or other pass-through entities, real estate investment trusts, regulated investment companies, U.S. holders who hold shares of our common stock as part of a hedge, straddle, constructive sale, conversion or other risk reduction strategy or integrated transaction, U.S. holders who will hold (actually or constructively) an equity interest in Arby’s immediately after the merger, U.S. holders who acquired their shares of our common stock through the exercise of employee stock options, through a tax qualified retirement plan or other compensation arrangements, and dissenters (as defined under “Dissenters’ Rights” below)).

If a partnership (including for this purpose any entity or arrangement treated as a partnership or flow-through entity for U.S. federal income tax purposes) holds shares of our common stock, the tax treatment of a partner in such partnership will generally depend on the status of the partners and the activities of the partnership. If you are, for U.S. federal income tax purposes, a partner in a partnership holding shares of our common stock, you should consult your tax advisor.

This summary of U.S. federal income tax consequences is intended only as a general summary of certain material U.S. federal income tax consequences of the merger to U.S. holders and is not tax advice. Holders of our common stock are urged to consult their own tax advisors to determine the particular tax consequences to them of the merger, including federal estate, gift and other non-income tax consequences, the applicability and effect of the alternative minimum tax, the unearned income Medicare contribution tax and any other U.S. federal, and tax consequences under state, local, non-U.S. or other tax laws, including tax treaties.

Tax Consequences of the Merger

The receipt of cash by U.S. holders in exchange for shares of our common stock pursuant to the merger will be a taxable transaction for U.S. federal income tax purposes. In general, for U.S. federal income tax purposes, a U.S. holder who receives cash in exchange for shares of our common stock pursuant to the merger will recognize capital gain or loss in an amount equal to the difference, if any, between (1) the amount of cash received plus the amount used to satisfy any applicable withholding taxes and (2) the U.S. holder’s adjusted tax basis in such shares.

Any such gain or loss will be long-term capital gain or loss if a U.S. holder’s holding period in the shares of our common stock surrendered in the merger is greater than one year as of the date of the merger. Long-term capital gains of certain non-corporate holders, including individuals, are generally subject to U.S. federal income tax at preferential rates. The deductibility of capital losses is subject to limitations. If a U.S. holder acquired different blocks of our common stock at different times and different prices, such U.S. holder must determine its adjusted tax basis, gain or loss and holding period separately with respect to each block of our common stock.

Information Reporting and Backup Withholding

Payments made in exchange for shares of our common stock pursuant to the merger generally will be subject, to information reporting and backup withholding at the applicable rate. A U.S. holder can avoid backup withholding if it provides a valid taxpayer identification number and complies with certain certification procedures (generally, by providing a properly completed and executed IRS Form W-9) or otherwise establishes an exemption from backup withholding.

 

 

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Backup withholding is not an additional tax. Amounts withheld under the backup withholding rules may be refunded or credited against a holder’s U.S. federal income tax liability, if any, provided that such holder furnishes the required information to the IRS in a timely manner.

DISSENTERS’ RIGHTS

 

The following is a summary of certain material terms of Sections 302A.471 and 302A.473 of the Minnesota Business Corporation Act. The summary is not complete and must be read together with the actual statutory provisions, copies of which are attached as Appendix D. We encourage you to read Sections 302A.471 and 302A.473 carefully and in its entirety because the rights and obligations of the company and our shareholders are governed by the express terms of these statutory provisions and other applicable law, and not by this summary or any other information contained in this proxy statement. This summary may not contain all the information about these statutory provisions that is important to you.

Applicability

As a Minnesota corporation, Buffalo Wild Wings is governed by the Minnesota Business Corporation Act. The Minnesota Business Corporation Act provides a shareholder who is entitled to vote and who objects to a merger with the right to dissent from such action and instead obtain payment for the “fair value” of his or her shares of our common stock. This right is set forth in Sections 302A.471 and 302A.473 of the Minnesota Business Corporation Act.

Exercising Dissenters’ Rights

Any Buffalo Wild Wings shareholder contemplating an attempt to assert and exercise dissenters’ rights in connection with the merger should review carefully the provisions of Sections 302A.471 and 302A.473 of the Minnesota Business Corporation Act (copies of which are attached as Appendix D), particularly the specific procedural steps required to perfect such rights. Dissenters’ rights are lost if the procedural requirements of Section 302A.473 are not fully and precisely satisfied.

In view of the complexity of these statutory provisions, any shareholders who may wish to pursue dissenters’ rights should consult their legal and financial advisors.

Filing Initial Notice of Dissent before the Special Meeting

Under Section 302A.473, subdivision 3, a shareholder who wishes to exercise dissenters’ rights, which we refer to as a “dissenter,” must file with us, before the vote on the merger proposal, a written notice of intent to demand the “fair value” of shares of our common stock owned by the shareholder.

The written notice of intent should be sent to the attention of Emily Decker, Senior Vice President, General Counsel and Secretary, at Buffalo Wild Wings, Inc., 5500 Wayzata Boulevard, Suite 1600, Minneapolis, Minnesota 55416 and a copy (which copy will not constitute notice) should also be sent to the attention of Brandon Mason at Faegre Baker Daniels LLP, 2200 Wells Fargo Center, 90 South Seventh Street, Minneapolis, Minnesota 55402.

To be effective, the notice must be filed with us before the vote on the merger proposal. In addition, the shareholder must not vote his or her shares in favor of the merger. A vote against the merger does not in itself constitute such a written notice and a failure to vote does not

 

 

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affect the validity of a timely written notice. However, the submission of a properly signed blank proxy will constitute a vote in favor of approving the merger and a waiver of statutory dissenters’ rights.

Under Section 302A.471, subdivision 2, beneficial owners of shares who desire to exercise statutory dissenters’ rights must obtain and submit the registered owner’s written consent at or before the time the notice of intent to demand fair value is due.

Notice of Procedure from Buffalo Wild Wings after Shareholder Approval

If the merger is approved by our shareholders, we will send to all dissenters who timely filed the necessary notice of intent to demand the fair value of their shares and who did not vote their shares in favor of such proposal a notice, which we refer to as a “notice of procedure,” containing certain information required by Section 302A.473, subdivision 4, including the address to which a dissenter must send a demand for payment and certificates representing shares in order to obtain payment for such shares and the date by which they must be received and a form to be used to certify the date on which the dissenter (or the beneficial owner on whose behalf the dissenter dissents) acquired such shares of stock (or an interest in them) and to demand payment.

Demand for Payment and Deposit of Shares

In order to receive the fair value of the shares under Section 302A.473, a dissenter must demand payment and deposit certificates representing shares within 30 days after our notice of procedure is given. Under Minnesota law, notice by mail is given by a corporation when deposited in the United States mail. A shareholder who fails to timely make demand for payment and to deposit certificates as required by Section 302A.473, subdivision 4, loses the right to receive the fair value of his or her shares under such section notwithstanding the timely filing of notice of intent to demand payment under Section 302A.473, subdivision 3.

Determination and Payment of “Fair Value”

Except as provided below, if demand for payment and deposit of stock certificates is duly made by a dissenter as required by the notice, then after our receipt of such demand or the effective date of the merger, whichever is later, we must pay the dissenter an amount which we estimate to be the fair value of the dissenter’s shares of our common stock, with interest, if any. For the purpose of a dissenter’s rights under Sections 302A.471 and 302A.473, “fair value” means the value of the shares of stock immediately before the effective date of such merger. It is possible that the fair value of shares of our common stock as determined pursuant to dissenters’ rights procedures may be determined to be less than the value of the merger consideration. Additionally, “interest” means interest commencing five days after the effective date of such merger until the date of payment, calculated at the rate provided in Minnesota Statutes Section 549.09 subdivision 1, paragraph (c), clause (1), which is currently 4.0%.

If a dissenter believes this payment is less than the fair value of the shares of our common stock, with interest, if any, such dissenter must give written notice to us of his or her own estimate of the fair value of the shares of stock, with interest, if any, within 30 days after the date we mail the payment, and must demand payment of the difference between his or her estimate and our payment. If such dissenter fails to give written notice of such estimate to us, or fails to demand payment of the difference, within the 30 day time period, such dissenter is entitled only to the amount of our payment.

 

 

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We may withhold such payment with respect to shares of our common stock for which a dissenter demanding payment (or persons on whose behalf such dissenter acts) was not the beneficial owner as of the first public announcement date of the merger, which is November 28, 2017. As to each such dissenter who has validly demanded payment, following the effective date of such merger or the receipt of demand, whichever is later, we must mail our estimate of the fair value of such dissenter’s shares of stock and offer to pay this amount with interest, if any, to the dissenter upon receipt of such dissenter’s agreement to accept this amount in full satisfaction. If such dissenter believes that our offer is for less than the fair value of the shares of stock, with interest, if any, such dissenter must give written notice to us of his or her own estimate of the fair value of the shares of stock, with interest, if any, and demand payment of this amount. This demand must be mailed to us within 30 days after the mailing of our offer. If the dissenter fails to make this demand within the 30-day time period, such dissenter is entitled only to the amount we offered.

If we and a dissenter (including both a dissenter who held shares of our common stock on or prior to November 28, 2017, which was the date the merger was first publicly announced, and a dissenter who purchased shares of our common stock after such date who have complied with their respective demand requirements) do not settle the dissenter’s demand within 60 days after we receive the dissenter’s estimate of the fair value of his or her shares of stock, then we must file a petition in a court of competent jurisdiction in the county in which our registered office is located, requesting that the court determine the statutory fair value of stock with interest, if any. Our registered office is currently located in Hennepin County, Minnesota, but is subject to change at any time. All dissenters whose demands are not settled within the applicable 60 day settlement period must be made parties to this proceeding.

The court will then determine whether each dissenter in question has fully complied with the provisions of Section 302A.473, and for all dissenters who have fully complied and not forfeited statutory dissenters’ rights, will determine the fair value of the shares, taking into account any and all factors the court finds relevant (including, without limitation, the recommendation of any appraisers which may have been appointed by the court), computed by any method that the court, in its discretion, sees fit to use, whether or not used by us or a dissenter. The fair value of the shares as determined by the court is binding on all dissenters. However, under the statute, dissenters are not liable to us for the amount, if any, by which payments remitted to the dissenters exceed the fair value of such shares determined by a court, with interest. The costs and expenses of such a court proceeding are assessed against us, except that the court may assess part or all of those costs and expenses against a dissenter whose action in demanding payment is found to be arbitrary, vexatious or not in good faith.

Under Section 302A.471, subdivision 2, a shareholder may not assert dissenters’ rights with respect to less than all of the shares of our common stock registered in such shareholder’s name, unless the shareholder dissents with respect to all shares beneficially owned by another person and discloses the name and address of such other person.

Limitation of Other Rights

Under Section 302A.471, subdivision 4, a shareholder has no right at law or in equity to have the merger agreement set aside or rescinded, except if approval or consummation of such merger agreement is fraudulent with respect to such shareholder or us.

 

 

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THE MERGER AGREEMENT

The following is a summary of certain material terms of the merger agreement. The summary is not complete and must be read together with the actual merger agreement, a copy of which is attached as Appendix A. We encourage you to read the merger agreement carefully and in its entirety because the rights and obligations of the parties are governed by the express terms of the merger agreement and not by this summary or any other information contained in this proxy statement. This summary may not contain all the information about the merger agreement that is important to you.

Please note that the representations, warranties, covenants and agreements in the merger agreement were made only for purposes of the merger agreement, and may not represent the actual state of facts. See “Miscellaneous—Legal and Cautionary DisclosuresContext for Assertions Embodied in Agreements” on page 102.

STRUCTURE AND CORPORATE EFFECTS OF THE MERGER

 

At the effective time of the merger, Merger Sub will merge with and into Buffalo Wild Wings, and the separate corporate existence of Merger Sub will cease. Buffalo Wild Wings will be the surviving corporation in the merger and will continue its corporate existence as a Minnesota corporation and a wholly owned subsidiary of Arby’s.

At the effective time of the merger, the articles of incorporation of the company will be amended and restated in their entirety to be identical to the articles of incorporation of Merger Sub, and such articles will be the articles of incorporation of the surviving corporation; provided that the name and date of incorporation of the corporation shall be the name and date of incorporation of the company. Also at the effective time of the merger, the bylaws of the company will be amended and restated in their entirety to be identical to the bylaws of Merger Sub, and such bylaws will be the bylaws of the surviving corporation; provided that the name of the surviving corporation shall be the name of the company.

At the effective time of the merger, the individuals holding positions as directors of Merger Sub immediately before the effective time of the merger will become the directors of the surviving corporation, and the individuals holding positions as officers of the company immediately before the effective time of the merger will continue as the officers of the surviving corporation, in each case until their resignation or removal or their respective successors are duly elected and qualified.

TIMING OF THE MERGER

 

The closing of the merger is to take place on the second business day after the satisfaction or waiver (to the extent permitted by applicable law) of the conditions set forth in the merger agreement (other than those conditions that by their nature are to be satisfied at the closing of the merger, but subject to the satisfaction or waiver of such conditions). These conditions are described under “Conditions to Completion of the Merger” on page 82). However, Arby’s and Merger Sub will not be obligated to consummate the closing until three business days following the end of the marketing period, described below under “Financing Cooperation” on page 81. In any event, we and Arby’s may mutually agree on another date or time for the closing to take place. The date on which the closing occurs is sometimes referred to as the closing date.

 

 

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At the closing, we will file articles of merger with the Secretary of State of the State of Minnesota. The merger will become effective at the time when the articles of merger are filed or at such later date or time as may be agreed by us and Arby’s and specified in the articles of merger.

As of the date of the filing of this proxy statement, we expect to complete the merger in the first quarter of 2018, within several business days following the approval of the merger agreement by our shareholders. However, completion of the merger is subject to the satisfaction or waiver of the conditions to the completion of the merger, and factors outside of our control or the control of Arby’s may delay the completion of the merger, or prevent it from being completed at all. There can be no assurances as to whether or when the merger will be completed.

EFFECT OF THE MERGER ON OUR COMMON STOCK

 

Each share of our common stock that is issued and outstanding immediately prior to the effective time of the merger will be converted into the right to receive $157.00 in cash, without interest and less any applicable withholding taxes, except for (1) any shares subject to a restricted stock award, (2) any shares that are directly or indirectly owned by Arby’s, any of its subsidiaries, or any of our subsidiaries (which we refer to as cancelled shares), and (3) any dissenting shares. At the effective time of the merger, the shares will no longer be outstanding and will automatically be cancelled and will cease to exist, and each holder thereof will cease to have any rights with respect thereto, except the right to receive the merger consideration.

Any shares subject to a restricted stock award will be treated as described under “Treatment of Buffalo Wild Wings Equity Awards” on page 68.

At the effective time of the merger, each cancelled share will be cancelled and cease to exist, and no consideration will be delivered in exchange for such cancellation.

In this proxy statement, we use the term “dissenting shares” to describe shares of our common stock issued and outstanding immediately prior to the effective time of the merger that are held by a holder who (1) has not voted in favor of approval of the merger agreement, (2) has demanded and perfected such holder’s right to dissent from the merger and to be paid the fair value of such shares in accordance with Sections 302A.471 and 302A.473 of the Minnesota Business Corporation Act, and (3) as of the effective time of the merger, has not effectively withdrawn or lost such dissenters’ rights. At the effective time of the merger, any dissenting shares will not be converted into or represent the right to receive the merger consideration, but if such holder complies in all respects with Sections 302A.471 and 302A.473 of the Minnesota Business Corporation Act, such holder will be entitled to the payment of the fair value of such dissenting shares determined in accordance with Sections 302A.471 and 302A.473 of the Minnesota Business Corporation Act (including interest determined in accordance with Section 302A.473 of the Minnesota Business Corporation Act). However, if any such holder fails to perfect or otherwise waives, withdraws or loses the right to dissent under such statutory provisions, then the right of such holder to be paid the fair value of such holder’s dissenting shares will cease and such dissenting shares will be deemed to have been converted as of the effective time of the merger into, and to have become exchangeable solely for the right to receive, the merger consideration, without interest thereon and subject to any applicable withholding taxes. For more information regarding dissenters’ rights, see “The MergerDissenters’ Rights” on page 63.

 

 

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At the effective time of the merger, each share of common stock of Merger Sub outstanding immediately prior to the effective time of the merger will be converted into and become one validly issued, fully paid and nonassessable share of common stock of the surviving corporation.

TREATMENT OF BUFFALO WILD WINGS EQUITY AWARDS

 

Stock Options.   At the effective time of the merger, each option to acquire shares of our common stock outstanding immediately prior to the effective time of the merger will be cancelled with the holder becoming entitled to receive a cash payment, without interest, equal to the product of (1) the excess, if any, of $157.00 over the exercise price per share of our common stock subject to such option multiplied by (2) the number of shares of our common stock subject to such option immediately prior to the effective time of the merger (subject to any applicable withholding tax). So-called “underwater” or out-of-the-money options, where the exercise price is greater than or equal to $157.00, will be cancelled without consideration.

Time-Based Restricted Stock Units.   At the effective time of the merger, each restricted stock unit award subject solely to time-based vesting (sometimes called an “RSU”) outstanding immediately prior to the effective time of the merger will be cancelled with the holder becoming entitled to receive a cash payment, without interest, equal to the product of (1) $157.00 multiplied by (2) the number of shares of our common stock subject to such restricted stock unit award at the effective time of the merger (subject to any applicable withholding tax).

Performance-Based Restricted Stock Units.   At the effective time of the merger, each award of restricted stock unit award subject to performance-based vesting (sometimes called a “PRSU” or “PSU”) outstanding immediately prior to the effective time of the merger, will be cancelled in exchange for an amount in cash equal to the product of (1) $157.00 multiplied by (2) the number of shares of our common stock attributable to such award based upon an assumed attainment of the target level of performance applicable to such award, regardless of actual performance (subject to any applicable withholding tax). Performance-based restricted stock unit awards that we granted in 2015 will be forfeited as of December 31, 2017 due to failure to satisfy the performance-based objectives for the applicable performance period and, therefore, no consideration will be payable in the merger for such awards.

Restricted Stock.   At the effective time of the merger, each award of restricted stock that is outstanding immediately prior to the effective time of the merger will be cancelled with the holder becoming entitled to receive a cash payment, without interest, equal to the product of (1) $157.00 multiplied by (2) the number of shares of our common stock subject to such company restricted stock award at the effective time of the merger (subject to any applicable withholding tax). However, we currently do not have and do not expect to have any shares of restricted stock outstanding.

TREATMENT OF BUFFALO WILD WINGS EMPLOYEE STOCK PURCHASE PLAN

 

With respect to our Employee Stock Purchase Plan, or ESPP, the merger agreement provides that:

 

    No new offering periods under the ESPP will commence after the date of the merger agreement.

 

    There will be no increase in the amount of payroll deductions permitted to be made by the participants under the ESPP (except those already in effect) after the date of the merger agreement.

 

 

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    No individuals may commence participation in the ESPP after the date of the merger agreement.

 

    If the closing occurs prior to the end of the offering period in existence under the ESPP as of the date of the merger agreement, a new exercise date will be established under the ESPP that is no later than the business day immediately prior to the anticipated closing date (at which time the accumulated contributions of the participants in the current offering periods will be used to purchase shares of our common stock, and the participants’ purchase rights under such offerings will terminate immediately thereafter).

 

    The amount of the accumulated contributions of each participant under the ESPP as of immediately prior to the effective time of the merger, to the extent not used to purchase shares of our common stock in accordance with the terms and conditions of the ESPP, will be refunded (without interest).

 

    The ESPP will be terminated no later than the business day immediately prior to the effective time of the merger.

PAYMENT FOR COMMON STOCK IN THE MERGER

 

At or prior to the effective time of the merger, Arby’s will deposit cash in U.S. dollars sufficient to pay the aggregate merger consideration with Continental Stock Transfer & Trust Company or another reputable bank or trust company reasonably approved in advance by us, which we refer to as the “paying agent,” in trust for the benefit of the holders of our common stock. Arby’s will also enter into an agreement with the paying agent in a form reasonably satisfactory to us.

Promptly after the effective time of the merger, Arby’s will cause the paying agent to mail to each holder of record of shares of our common stock whose shares were converted into the right to receive the merger consideration (1) a letter of transmittal and (2) instructions for effecting the surrender of certificates or book-entry shares formerly representing shares of our common stock in exchange for the merger consideration. Upon surrender of certificates (or effective affidavits of loss in lieu of certificates and, if required, the posting of a bond) or book-entry shares, as applicable, to the paying agent together with the letter of transmittal, completed and executed in accordance with the instructions to the letter of transmittal, and such other documents as may customarily be required by the paying agent, the holder of such certificates (or effective affidavits of loss in lieu of certificates) or book-entry shares will be entitled to receive the merger consideration for all such shares, and such shares will be cancelled.

REPRESENTATIONS AND WARRANTIES; MATERIAL ADVERSE EFFECT

 

The merger agreement contains representations and warranties of ours, subject to certain exceptions in the merger agreement, in the confidential disclosure letter delivered to Arby’s in connection with the merger agreement and in certain of our public filings, as to, among other things:

 

    organization, good standing and qualification to do business with respect to us and our subsidiaries in each of their jurisdictions of organization;

 

    capitalization and ownership of our subsidiaries;

 

    capital structure, including shares issued and outstanding and obligations pursuant to equity awards;

 

 

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    absence of preemptive or similar rights or debt securities that give their holders the right to vote with our shareholders;

 

    corporate authority to enter into the merger agreement and the enforceability of the merger agreement against us;

 

    resolutions adopted by our board of directors declaring the merger agreement, the merger, and the transactions contemplated by the merger agreement to be fair, approving the merger agreement, the merger, and the transactions contemplated by the merger agreement, and containing their recommendation that our shareholders approve the merger agreement;

 

    absence of violations or conflicts with our or any of our subsidiaries’ governing documents;

 

    governmental and third party consents, and other governmental filings and approvals relating to the execution, delivery and performance of the merger agreement;

 

    our SEC filings, financial statements and the absence of undisclosed liabilities or obligations;

 

    internal disclosure controls and procedures;

 

    the absence of certain events, including changes having, or which would reasonably be expected to have, a material adverse effect, since December 25, 2016;

 

    litigation matters and investigations;

 

    material contracts;

 

    compliance with applicable laws, including franchise, alcohol, and anti-corruption;

 

    labor and employment matters;

 

    employee benefit matters;

 

    tax matters;

 

    real property matters;

 

    intellectual property matters;

 

    environmental matters;

 

    insurance policies and coverage;

 

    certain franchise matters, including agreements with our franchisees and compliance with certain franchise laws;

 

    food and beverage quality and safety matters;

 

    the absence of undisclosed material transactions with affiliates during the preceding three years;

 

    the absence of certain business practices in violation of anti-bribery and anti-money laundering laws;

 

    our use of interest rate swaps and currency exchange swaps;

 

    this proxy statement;

 

 

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    suppliers;

 

    the inapplicability of anti-takeover statutes;

 

    sanctions laws;

 

    broker’s or advisor’s fees; and

 

    the receipt by our board of directors of an opinion from Goldman Sachs.

The merger agreement also contains representations and warranties of Arby’s and Merger Sub, subject to certain exceptions in the merger agreement, as to, among other things:

 

    organization, good standing and authority to do business with respect to Arby’s and Merger Sub in each of their respective jurisdictions;

 

    corporate authority to enter into the merger agreement and the enforceability of the merger agreement against Arby’s and Merger Sub;

 

    absence of violations or conflicts with Arby’s or Merger Sub’s governing documents;

 

    governmental and third party consents, and other governmental filings and approvals relating to the execution, delivery and performance of the merger agreement;

 

    the availability of funds, taking into account funds available to Arby’s from the debt financing and equity financing, to consummate the merger and pay related fees;

 

    litigation matters and investigations;

 

    information supplied for the purposes of this proxy statement;

 

    affirmation that Merger Sub has been formed solely for the purposes of the merger and has not engaged in any business activities other than pursuant to the merger agreement;

 

    Arby’s, Merger Sub’s and their affiliates’ absence of ownership interest in us and the absence (other than the merger agreement) of any agreements with company management, our board of directors or Goldman Sachs;

 

    broker’s or advisor’s fees; and

 

    Arby’s acknowledgment of limitations on representations and warranties of us and non-reliance on forward-looking information, estimates and projections provided by us.

Some of the representations and warranties in the merger agreement are qualified by materiality or knowledge qualifications or a “material adverse effect” qualification with respect to either us or Arby’s, as discussed below.

For purposes of the merger agreement, a “material adverse effect” with respect to us means any change, effect, event, occurrence or fact that, individually or in the aggregate with all other changes, effects, events, occurrences or facts has had or would reasonably be expected to have a material adverse effect on the business, financial condition, assets, liabilities or results of operations of us and our subsidiaries, taken as a whole, or would reasonably be expected to prevent, materially impede or materially delay our consummation of the merger or any of the other transactions contemplated by the merger agreement or our ability to perform our obligations under the merger agreement. However, no change, effect, event, occurrence or fact that relates to, arises out of or results from the following will (either alone or in combination) constitute, or be taken into account in determining whether there has been, a

 

 

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material adverse effect (except, in the case of the items described in the first five bullets below, to the extent such condition has had a disproportionate effect on us and our subsidiaries, taken as a whole, compared to other participants in the industries in which we and our subsidiaries primarily conduct business, incremental disproportionate impacts may be taken into account to determine whether there has been, or there is reasonably expected to be, a material adverse effect):

 

    general economic, credit, capital or financial markets or political conditions in the United States or elsewhere, including with respect to interest rates or currency exchange rates;

 

    any outbreak or escalation of hostilities, acts of war (whether or not declared), sabotage or terrorism;

 

    any natural or man-made disaster occurring after the date of the merger agreement;

 

    any change in laws or accounting policies (or authoritative interpretation or enforcement thereof) after the date of the merger agreement;

 

    general conditions in the industries in which we and our subsidiaries primarily operate;

 

    our failure to meet internal or published projections, forecasts, estimates, or predictions in respect of financial or operating metrics, or changes in the market price or trading volume of our common stock or our credit rating, in each case occurring after the date of the merger agreement; provided that the underlying facts relating to these changes may be taken into account in determining whether there has been a material adverse effect in some circumstances;

 

    actions, or the failure to take action, as requested by or consented to by Arby’s or Merger Sub or as set forth in the merger agreement; or

 

    the announcement and pendency of the merger agreement and the transactions contemplated thereby or the identity of, or any facts or circumstances relating to, Arby’s, Merger Sub or their affiliates, including the impact of the foregoing (including any loss or impairment of) on any relationships, contractual or otherwise, of us or our subsidiaries with employees, franchisees, labor unions, customers, suppliers or partners (including any fiduciary duty or disclosure litigation or any litigation with respect, or pursuant, to any contract with a third party in connection with the merger agreement, the merger, or the other transactions contemplated by the merger agreement).

For purposes of the merger agreement, a “material adverse effect” with respect to Arby’s means any change, effect, event, occurrence or fact that would reasonably be expected to prevent, materially impede or materially delay the consummation by Arby’s of the merger or any of the other transactions contemplated by the merger agreement or the ability of Arby’s to perform its obligations under the merger agreement.

CONDUCT OF THE BUSINESS PENDING THE MERGER

 

The merger agreement provides that, during the pre-closing period, except as Arby’s otherwise consents (such consent not to be unreasonably withheld, conditioned or delayed), as expressly permitted or required pursuant to the merger agreement or set forth in the confidential disclosure letter, or required by applicable law or judgment or the terms of any existing

 

 

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contract or company benefit plan as of the date of the merger agreement, we will use, and cause our subsidiaries to use, reasonable best efforts to, consistent with past practice:

 

    conduct our businesses in the ordinary course of business;

 

    preserve in all material respects our current business organization;

 

    preserve in all material respects our relationships with significant franchisees and the franchise system as a whole, key employees, and our material customers, suppliers, licensors, licensees, distributors, wholesalers, lessors and others having significant business dealings with us or our subsidiaries or franchisees; and

 

    comply in all material respects with applicable laws.

The merger agreement also provides that, during the period from the date of the merger agreement to the closing date, except as Arby’s otherwise consents (such consent not to be unreasonably withheld, conditioned or delayed), as expressly permitted or required pursuant to the merger agreement or set forth in the confidential disclosure letter or as required by applicable law or judgment, we will not, and will cause our subsidiaries not to, subject in each case to certain specified exceptions:

 

    declare, set aside or pay any dividends on, or make any other distributions in respect of our capital stock or set any record date therefor, other than dividends or distributions by one of our direct or indirect wholly owned subsidiaries to its parent;

 

    split, combine or reclassify any of our capital stock or issue or authorize the issuance of any other securities in lieu of or in substitution for shares of our capital stock;

 

    repurchase, redeem or otherwise acquire any shares of our capital stock or any options, warrants or other rights to acquire any such shares, other than (1) acquiring our own shares in connection with the surrender of shares of our common stock by our shareholders in order to pay the exercise price of our stock options, (2) the withholding of shares of our common stock to satisfy tax obligations with respect to awards granted pursuant to our stock plans, and (3) our acquiring of company equity awards in connection with the forfeiture of such awards;

 

    issue, deliver or sell any shares of our capital stock, or other voting securities or equity interests, any securities convertible or exchangeable into any such shares, voting securities or equity interests, any options, warrants or other rights to acquire any such shares, other voting securities, equity interests, or convertible or exchangeable securities, any stock based performance units, any voting company debt, or any other rights that give any person the right to receive any economic interest of a nature accruing to our shareholders, other than (1) upon the exercise or settlement of awards under our stock plans outstanding on the date of the merger agreement in accordance with their terms, (2) pursuant to the ESPP, and (3) as required to comply with any company benefit plan as in effect on the date of the merger agreement;

 

    amend our charter documents or those of our subsidiaries;

 

    acquire, directly or indirectly, any material assets other than in the ordinary course of business, or make any investment (other than acquisitions of raw materials, supplies, equipment, inventory and third party software in the ordinary course of business);

 

   

sell, transfer, lease, license, sublicense, allow to lapse, encumber, or abandon or otherwise dispose of any of the tangible or intangible properties or assets material to

 

 

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our business and that of our subsidiaries, taken as a whole, other than (1) sales of products and inventory in the ordinary course of business, (2) dispositions of equipment or intellectual property that is no longer used or useful to our operations, or (3) non-exclusive licenses of intellectual property in the ordinary course of business;

 

    incur any indebtedness for borrowed money, issue or sell any debt securities or warrants or other rights to acquire any of our debt securities, guarantee any such indebtedness or any debt securities of another person, or enter into any “keep well” or other agreement to maintain any financial statement condition of another person other than (1) indebtedness incurred in the ordinary course of business not exceeding $1,000,000 in the aggregate and (2) intercompany indebtedness;

 

    make any loans or capital contributions to, or investments in, any third party (other than any of our subsidiaries) in excess of $1,000,000 in the aggregate;

 

    increase the compensation or bonus payable or that could become payable by us or our subsidiaries to current or former directors, officers or employees, except as required by the terms of any company benefit plan in effect on the date of the merger agreement;

 

    increase the pension, welfare, severance or termination pay calculation, fringe or other benefits payable to current or former directors, officers or employees;

 

    pay any bonus to any of the current or former directors, officers, employees or consultants, except as required by the terms of any company benefit plan in effect on the date of the merger agreement;

 

    establish, adopt, enter into, amend, modify in any way or terminate any company benefit plan, other than renewals of health, welfare and insurance plans in the ordinary course of business on terms not materially more favorable to employees than those in effect on the date of the merger agreement;

 

    promote any employee who is an officer to a position more senior than such employee’s position as of the date of the merger agreement, or promote a non-officer employee to an officer position;

 

    grant any new awards under any company benefit plan;

 

    take any action to amend, waive or accelerate any rights or benefits under any company benefit plan (unless otherwise required by the terms of the company benefit plan in effect as of the date of the merger agreement);

 

    grant, amend or modify any equity or equity-based awards;

 

    hire or terminate without cause any officer, employee, independent contractor or consultant, other than in the ordinary course of business with respect to any such person who (1) has annual base salary or wages of less than $200,000 and (2) is not a vice president or more senior employee;

 

    take any action to accelerate the payment of or fund or in any other way secure the payment of, compensation or benefits under any company benefit plan, to the extent not already provided in any such company benefit plan;

 

    forgive any loans, or issue any loans (other than routine travel advances issued in the ordinary course of business), to directors, officers, contractors or employees;

 

    enter into any collective bargaining agreement or other agreement with a labor union, works council or similar organization;

 

 

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    implement any plant closing or layoff of employees that implicates the Worker Adjustment and Retraining Notification Act of 1988 or any similar law;

 

    settle any claim or litigation, in each case made or pending against us or any of our subsidiaries, other than (1) in the ordinary course of business in amounts not exceeding $1,500,000 individually or in the aggregate, and (2) the settlement of claims or litigation disclosed, reflected or reserved against in our most recent financial statements (or the notes thereto) as filed with the SEC for an amount not materially in excess of the amount so disclosed, reflected or reserved (excluding the settling of any claim or litigation that would involve injunctive or equitable relief, impose any restrictions or changes on our business or operations, involve any admission of any wrongdoing by us or our subsidiaries, involve any license, cross license or similar arrangement with respect to any of our material intellectual property, or any litigation relating to the merger);

 

    make any material change in our accounting methods, principles or practices except as required by GAAP or applicable laws;

 

    adopt a plan of merger, consolidation, complete or partial liquidation, dissolution, restructuring, recapitalization or other reorganization other than among our wholly owned subsidiaries;

 

    make, change, revoke or rescind any material election relating to our taxes, make any material amendment with respect to any material tax return, settle or compromise any material tax liability for an amount that exceeds the amount disclosed, reflected or reserved against in our publicly filed financial statements, request any rulings from or the execution of any closing agreement with any governmental authority (except in connection with a settlement of a tax liability for an amount that does not exceed the amount disclosed, reflected or reserved against in our publicly filed financial statements), surrender any right to claim a material tax refund, change an annual accounting period for tax purposes, or change any material accounting method for tax purposes, except, in each case, for actions taken in the ordinary course of business;

 

    make any capital expenditures, other than maintenance capital expenditures and required repairs, capital expenditures for new restaurants under construction in the ordinary course of business, for remodels of existing restaurants in the ordinary course of business, or capital expenditures under leases entered into prior to the date of the merger agreement;

 

    terminate, amend, modify, or waive material rights or claims under, or enter into, certain types of contracts, subject to certain exceptions;

 

    make any material change to the terms of our policies or procedures with respect to our relationships with our franchisees;

 

    except as required by any contract entered into prior to the date of merger agreement, open any restaurant or otherwise engage in operations in a country in which we do not currently operate;

 

    commence any new line of business or new franchise system;

 

    unless required by applicable law, reclassify any independent contractor as an employee having an annual base salary exceeding $200,000;

 

 

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    fail to use commercially reasonable efforts to renew or maintain insurance policies other than in the ordinary course of business or form any captive insurance company or program; or

 

    authorize any of, or commit or agree to take any of the foregoing actions.

NO SOLICITATION; ALTERNATIVE PROPOSALS

 

We and our board of directors will generally not be permitted to solicit or participate in discussions regarding any inquiry, indication of interest or proposal that would reasonably be expected to lead to a takeover proposal. For purposes of the merger agreement:

 

    takeover proposal” means any offer or proposal, including any amendment or modification to any existing offer or proposal (other than, in each case, an offer or proposal made or submitted by or on behalf of Arby’s or Merger Sub), relating to any transaction (including any single- or multi-step transaction) or series of related transactions, in each case other than the transactions contemplated by the merger agreement, with a person or group relating to (1) the issuance to such person or group or acquisition by such person or group of at least 15% of the equity interests in Buffalo Wild Wings, or (2) the acquisition by such person or group of at least 15% of the consolidated assets of Buffalo Wild Wings (including indirectly through ownership of equity our subsidiaries) and our subsidiaries, taken as a whole, pursuant to a merger, consolidation, share exchange, reorganization, recapitalization, consolidation or other business combination, sale of shares of capital stock, sale of assets, tender offer, exchange offer or other transaction.

 

    superior proposal” means any bona fide, written takeover proposal that if consummated would result in a person or group (or the shareholders of any person) owning, directly or indirectly, (1) more than 50% of the outstanding shares of our common stock or (2) more than 50% of our assets and those of our subsidiaries, taken as a whole, in either case that our board of directors determines in good faith (after consultation with our financial advisor and outside legal counsel) (a) is reasonably likely to be consummated in accordance with its terms, and (b) if consummated, would be more favorable to our shareholders from a financial point of view than the merger, in each case taking into account all financial, legal, financing, regulatory and other aspects of such takeover proposal (including the person or group making the takeover proposal) and of the merger agreement deemed relevant by our board of directors.

Except as permitted by the merger agreement, during the pre-closing period, the merger agreement requires that we will not and will cause our controlled affiliates and our and their directors and executive officers not to, and will use our reasonable best efforts to cause our other representatives not to, directly or indirectly:

 

    solicit, initiate, knowingly facilitate or knowingly encourage the submission or announcement of any inquiries, proposals or offers that constitute or would reasonably be expected to lead to any takeover proposal;

 

    provide any non-public information concerning us or our subsidiaries related to, or to any person or group who would reasonably be expected to make, any takeover proposal;

 

    engage in any discussions or negotiations with respect to any inquiry, proposal or offer that constitutes or would reasonably be expected to lead to a takeover proposal;

 

 

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    approve, support, adopt, endorse or recommend any takeover proposal or any acquisition agreement with respect thereto;

 

    otherwise knowingly cooperate with or assist or participate in, or knowingly facilitate, any such inquiries, proposals, offers, discussions or negotiations; or

 

    resolve or agree to do any of the foregoing.

Furthermore, during the pre-closing period, the merger agreement requires us to cause our controlled affiliates and our and their directors and executives officers to, and to use our reasonable best efforts to cause our other representatives to:

 

    immediately cease and cause to be terminated all existing discussions or negotiations with any person or group with respect to any takeover proposal, or any inquiry or proposal that would reasonably be expected to lead to a takeover proposal;

 

    immediately terminate access by any third party to any data room relating to any takeover proposal or any inquiry, proposal or offer that is or would reasonably be expected to lead to a takeover proposal; and

 

    promptly (and in any event within 24 hours after the date of the merger agreement) request the prompt return or destruction of any confidential information provided to third parties within the twelve months immediately preceding the date of the merger agreement in connection with any takeover proposal or any inquiry, proposal or offer that is or may reasonably be expected to lead to a takeover proposal.

Notwithstanding these restrictions, which we refer to as the “no-shop restrictions,” prior to the time, but not after, the requisite shareholder vote is obtained, we and our representatives may enter into and participate in discussions or negotiations with such third party in response to a bona fide written takeover proposal made after the execution of the merger agreement and that did not result from a breach of the no-shop restrictions, and may furnish information to such third party if (1) our board of directors has determined in good faith, after consultation with outside legal counsel and our financial advisor, that such takeover proposal is or is reasonably likely to result in a superior proposal and failure to take such action would be inconsistent with our board of directors’ fiduciary duties under applicable law, (2) we enter into a confidentiality agreement with such third party in a form that is no less favorable to us than the confidentiality agreement with Arby’s and that does not contain any provision that would prevent us from complying with any of our obligations pursuant to the merger agreement, and (3) any non-public information furnished to a third party not previously provided to Arby’s is promptly furnished to Arby’s (but not more than 24 hours after). We may also engage in discussions or negotiations with such third party and its representatives regarding the takeover proposal.

During the pre-closing period, we are also required to promptly (and, in any event, within 24 hours after the occurrence thereof) advise Arby’s of the receipt of any takeover proposal or any initial requests for non-public information concerning us related to a takeover proposal, or any discussions or negotiations sought to be initiated regarding such takeover proposal that are made or submitted by any person during such period, specifying the material terms and conditions thereof (including the identity of the party making the takeover proposal or request).

Thereafter, we are required to keep Arby’s reasonably informed, on a prompt basis (and, in any event, within 24 hours after the occurrence thereof), regarding any material changes to the status or material terms and details of any such takeover proposal or request (including copies of any written requests, proposals, offers or agreements).

 

 

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Notwithstanding anything to the contrary in the merger agreement, we are prohibited from granting any waiver or release under, or failing to enforce, any standstill or similar agreement, provided, that, prior to the time, but not after the requisite shareholder vote is obtained, we may grant a waiver or release under any standstill agreement if our board of directors has determined in good faith, after consultation with outside legal counsel, that the failure to do so would be reasonably likely to be inconsistent with our board of directors’ fiduciary duties under applicable law. We must provide written notice to Arby’s of any waiver or release of any standstill by us, including disclosure of the identities of the parties thereto and circumstances relating thereto.

CHANGE IN BOARD RECOMMENDATION

 

As described under “The MergerReasons for our Board’s Recommendation in Favor of the Merger” on page 34, and subject to the provisions described below, our board of directors has unanimously recommended that our shareholders vote “FOR” the proposal to approve the merger agreement.

The merger agreement provides that, except as described below, our board of directors may not (any of the following, an “adverse recommendation change”):

 

    withhold, withdraw or rescind (or modify in a manner adverse to Arby’s), or publicly propose to withhold, withdraw or rescind (or modify in a manner adverse to Arby’s), the board recommendation;

 

    approve or recommend the adoption of, or publicly propose to approve, declare the advisability of or recommend the adoption of, any takeover proposal;

 

    cause or permit us or our subsidiaries to execute or enter into, any letter of intent, memorandum of understanding, agreement in principle, merger agreement, acquisition agreement or other agreement related to any takeover proposal, other than confidentiality agreements executed pursuant to potential takeover proposals or superior offers; or

 

    publicly propose or announce an intention to take any of the foregoing actions.

Notwithstanding the restrictions described above and in “No Solicitation; Alternative Proposals” on page 76, at any time prior to the time the requisite company shareholder vote is obtained, our board of directors may, (x) make an adverse recommendation change in response to a superior proposal that did not result from a breach of the no-shop restrictions or in response to an intervening event or (y) terminate the merger agreement in order to enter into a definitive agreement providing for the implementation of a superior proposal that did not result from a breach of the no-shop restrictions. Our board of directors is permitted to take these actions solely if:

 

    we have provided Arby’s prior written notice at least four business days in advance advising Arby’s that we intend to take such action (and specifying, in reasonable detail, the reasons for such action and the material terms and conditions of any such superior proposal or details of such intervening event, as applicable);

 

    during such four business day period, if requested by Arby’s in good faith, we have engaged in good faith negotiations with Arby’s regarding changes to the terms of the merger agreement intended by Arby’s so that an adverse recommendation change would no longer be necessary or to cause such takeover proposal to no longer constitute a superior proposal, as applicable; and

 

 

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    our board of directors has considered any adjustments to the merger agreement (including a change to the price terms hereof) and any other agreements that may be proposed in writing by Arby’s no later than 11:59 p.m., New York City time, on the last business day of the four business day period noted above, and has determined in good faith (after consultation with its outside legal counsel and financial advisors) that, after giving effect to such proposed changed terms, the failure to make the adverse recommendation change or terminate the merger agreement, would be reasonably likely to be inconsistent with its fiduciary obligations of our board of directors under applicable law.

As used in the merger agreement, “intervening event” means a change, effect, event, occurrence or fact that materially affects us and our subsidiaries, taken as a whole (other than any change, effect, event, occurrence or fact resulting from a material breach of the merger agreement by us and other than any takeover proposal) that was not known or reasonably foreseeable to our board of directors as of the date of the merger agreement (or if known, the magnitude or material consequences of which were not known or reasonably foreseeable by our board of directors as of the date of the merger agreement), which change, effect, event, occurrence or fact becomes known to our board of directors prior to obtaining shareholder approval.

COMPANY SHAREHOLDERS’ MEETING

 

Subject to the relevant provisions of the merger agreement, including our board of directors’ right to change its recommendation in favor of the merger and our right to terminate the merger agreement to enter into a definitive agreement with respect to a superior proposal, as described in the section entitled “Change in Board Recommendation” on page 78 we have agreed to (1) convene and hold the special meeting as promptly as practicable, (2) recommend that our shareholders vote to approve the merger agreement, and (3) use our commercially reasonable efforts to solicit from our shareholders proxies in favor of the approval of the merger agreement. The adoption of the merger agreement and related transactions and a non-binding advisory vote on executive compensation will be the only matters (other than procedural matters) that we may propose to be acted on by you at the special meeting, unless other items are proposed and consented to by Arby’s.

EMPLOYEE MATTERS

 

The merger agreement provides for the following treatment with respect to those of our employees who continue to be employed by the surviving corporation or one of its subsidiaries after the effective time of the merger, whom we refer to as “company employees”:

 

    From and after the effective time of the merger through December 31, 2018, Arby’s will cause its subsidiaries to provide the following to company employees:

 

      base compensation and cash incentive opportunities that are substantially comparable in the aggregate to what was provided immediately prior to the effective time of the merger; and

 

      all other compensation and employee benefits that are substantially comparable in the aggregate to those provided immediately prior to the effective time of the merger (excluding equity-based compensation).

 

    From and after the effective time of the merger through the first anniversary thereof, Arby’s will honor our severance plan as in effect prior to the closing.

 

 

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    From and after the effective time of the merger, Arby’s will honor all company benefit plans, including employment agreements with our executives, except as otherwise provided specifically in the merger agreement and described herein.

 

    From and after the effective time of the merger, Arby’s will use commercially reasonable efforts to give each company employee credit for all service with us and our subsidiaries and their respective predecessors under any employee benefit plan of Arby’s or its subsidiaries to the extent past service was recognized by us under our comparable employee benefit plans immediately prior to the effective time of the merger.

 

    If changes are made to the welfare benefits after the effective time of the merger, then Arby’s will or it will cause us to use commercially reasonable efforts to cause (1) the waiver of all limitations as to pre-existing conditions, exclusions and waiting periods with respect to participation and coverage requirements under applicable welfare benefit plans, and (2) for the plan year in which the effective time of the merger occurs, the crediting of each company employee and their dependents with any payments made that accumulated towards all deductibles and out-of-pocket maximums paid prior to such change.

These agreements were included for the sole benefit of the parties to the merger agreement and do not create any third party beneficiary or other rights in favor of any other person, including any current or former company employee. Arby’s will generally be permitted to amend, terminate, and/or modify employee benefit plans after closing and to terminate the employee or service of any employee or service provider at any time and for any or no reason.

INDEMNIFICATION AND INSURANCE

 

Arby’s and we have agreed to use reasonable best efforts to purchase a “tail” or “runoff” officers’ and directors’ liability insurance policy in respect of acts or omissions occurring prior to the effective time of the merger covering our directors and officers currently covered by our officers’ and directors’ liability insurance policy. The new policy will be no less favorable than our policy currently in effect with respect to coverage, deductibles and amounts and will last for six years following the effective time of the merger. The price will not exceed 300% of the amount per annum we paid in our last full fiscal year prior to the date of the merger agreement.

From and after the effective time of the merger, Arby’s will cause the surviving corporation to fulfill and honor all obligations of the company and our subsidiaries pursuant to (1) each indemnification agreement in effect between us and our officers and directors that was made available to Arby’s, and (2) any indemnification provision and any exculpation provision set forth in our charter documents in effect on the date of the merger agreement, in each case, to the fullest extent permitted by applicable law. Any beneficiaries of such indemnification are the “indemnified parties.”

From the effective time of the merger through the sixth anniversary thereof, the charter documents of the surviving corporation will contain provisions no less favorable with respect to indemnification, advancement of expenses and exculpation of each indemnified party as are set out in our charter documents in effect as of the date of the merger agreement.

Except as otherwise required by applicable law, from and after the effective time of the merger, the surviving corporation (and any successor corporation) will indemnify and hold

 

 

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harmless, and provide advancement of expenses to, each indemnified party in respect of acts or omissions in their capacity as a director or officer of the company or our subsidiaries or as an officer, director, employee, fiduciary or agent of another enterprise if the indemnified party was serving in such capacity at our request, to the fullest extent permitted by applicable law or provided under our charter documents, any indemnification agreements and any other governing documents of the company and our subsidiaries in effect on the date of the merger agreement.

FINANCING COOPERATION

 

In order to complete the merger, Arby’s is pursuing various financing options. We and our subsidiaries will use reasonable best efforts to provide, and cause our representatives to provide, all cooperation that is reasonably necessary, customary or advisable and reasonably requested by Arby’s to assist Arby’s in connection with obtaining financing for the merger.

The agreement also contains provisions intended to ensure Arby’s and its debt financing sources have sufficient time and information with which to market and/or syndicate its debt financing. In particular, Arby’s and Merger Sub are not obligated to complete the merger until three business days after we have provided certain “required information” and a subsequent “marketing period” of at least 15 consecutive business days has elapsed (which marketing period is subject to early termination in certain circumstances).

The “required information” that must be delivered to Arby’s for the marketing period to commence consists of (1) audited consolidated balance sheets and related statements of income and cash flows of Buffalo Wild Wings and our consolidated subsidiaries for the three most recently completed fiscal years ended at least 90 days prior to the closing date and (2) unaudited consolidated balance sheets and related statements of income of Buffalo Wild Wings and our consolidated subsidiaries for the subsequent fiscal quarter ended at least 45 days prior to the closing date (but excluding the fourth quarter of any fiscal year). Our filing of the financial statements with our Annual Report on Form 10-K or Quarterly Report on Form 10-Q within such time periods will satisfy these requirements.

In general, the “marketing period” will commence on the latest of (1) January 2, 2018, (2) the date antitrust approval is obtained, and (3) the date we provide the required information to Arby’s. Once commenced, the marketing period will generally end after 15 consecutive business days (or, if earlier, upon consummation of Arby’s debt financing). However, the marketing period will only be deemed to have commenced if the following conditions are met throughout such period:

 

    The required information, taken as a whole, does not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make such required information not misleading, in light of the circumstances under which the statements contained in such required information were made.

 

    Any required information delivered in connection with the offering of any debt securities as part of Arby’s debt financing complies, and continues to comply throughout the marketing period, in all material respects with all applicable requirements of Regulations S-K and S-X under the Securities Act of 1933, as amended, that are applicable to such required information (other than such provisions for which compliance is not customary in a Rule 144A offering of such debt securities).

 

 

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    Our independent accountants have not have withdrawn their audit opinion with respect to any annual audited financial statements contained in the required information.

 

    We have not indicated an intent to restate any financial statements included in the required information.

 

    We have not failed to timely file any Annual Report on Form 10-K or Quarterly Report on Form 10-Q.

EFFORTS TO COMPLETE THE MERGER

 

We and Arby’s have each agreed to use our respective reasonable best efforts to take, or cause to be taken, all actions necessary, proper or advisable to consummate, as promptly as reasonably practicable, the merger and the other transactions contemplated by the merger agreement.

These reasonable best efforts include taking certain steps to secure necessary consents, approvals, waivers and authorizations of governmental authorities and third parties. However, neither we nor Arby’s are required to (1) take any actions that would be reasonably likely to result in a material adverse effect on our business, financial condition or results of operations, taken as a whole, (2) take any action with respect to the business or operations of Arby’s or its affiliates, or (3) take any action in connection with obtaining the expiration or termination of the applicable waiting periods under the HSR Act or obtaining any other governmental approvals, unless the effectiveness of such action is conditioned upon the occurrence of the closing of the merger.

COORDINATION ON LITIGATION

 

We and Arby’s have agreed to promptly advise the other of any material developments regarding any litigation that may be commenced or threatened against any party to the merger agreement or any of its affiliates relating to the merger agreement, the merger, or any of the other transactions contemplated by the merger, which we refer to as the “transaction litigation.” We will be entitled to control the defense or settlement of any transaction litigation brought against us, any of our subsidiaries or any of their or our representatives, but the merger agreement prohibits us from compromising, settling or coming to a settlement arrangement regarding any transaction litigation without Arby’s written consent (which may not be unreasonably withheld, conditioned or delayed).

OTHER COVENANTS AND AGREEMENTS

 

The merger agreement contains additional covenants, including, among others, covenants relating to the filing of this proxy statement, public announcements relating to the merger, elimination of any applicable takeover statutes, and exemptions of dispositions of our securities in connection with the merger under Rule 16b-3 of the Exchange Act.

CONDITIONS TO COMPLETION OF THE MERGER

 

Each party’s obligation to complete the transactions contemplated by the merger agreement is subject to the satisfaction or waiver (to the extent permitted by applicable law) of the following conditions:

 

    the approval of the merger agreement by our shareholders;

 

    the expiration or early termination of the waiting period applicable to the consummation of the merger under the HSR Act; and

 

 

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    the absence of any temporary restraining order, preliminary or permanent injunction or judgment issued by any court of competent jurisdiction or law that would restrain, enjoin or otherwise prevent or prohibit the consummation of the merger.

The obligations of Arby’s and Merger Sub to complete the merger are subject to the satisfaction or waiver (to the extent permitted by applicable law) at the effective time of the merger of the following additional conditions:

 

    the accuracy of the representations and warranties of the company, subject to the following standards:

 

      being true and correct in all respects as of the date of the merger agreement, with regard to the absence, since December 25, 2016, of any change, effect, event, occurrence or fact that has had or would reasonably be expected to have a material adverse effect with respect to the company;

 

      being true and correct in all material respects both at and as of the date of the merger agreement and at and as of the closing date (except for any such representations and warranties expressly made as of an earlier date, which representations and warranties must be true on and as of that earlier date), with regard to our authorization to enter into the merger agreement;

 

      being true and correct in all respects except for inaccuracies that are de minimis both at and as of the date of the merger agreement and at and as of the closing date (except for any such representations and warranties expressly made as of an earlier date, which representations and warranties must be true on and as of that earlier date), with regard to our outstanding capitalization; and

 

      with regard to all other representations and warranties, being true and correct in all respects both at and as of the date of the merger agreement and at and as of the closing date (except for any such representations and warranties expressly made as of an earlier date, which representations and warranties must be true on and as of that earlier date), other than as have not (alone or in the aggregate with other failures of our representations and warranties to be true and correct) had a material adverse effect (disregarding any qualifications based on the word “material” in any representations and warranties).

 

    our having performed and complied in all material respects with our obligations required to be performed or complied with under the merger agreement at or prior to the closing;

 

    the absence, since the date of the merger agreement, of a continuing change, event or occurrence that had, has had, or would reasonably be expected to have a material adverse effect; and

 

    our having delivered to Arby’s and Merger Sub a certificate, dated as of the closing date and signed by our chief executive officer or chief financial officer, certifying to the satisfaction of the foregoing conditions.

Our obligation to complete the merger is subject to the satisfaction or waiver (to the extent permitted by applicable law) at the effective time of the merger of the following additional conditions:

 

   

the accuracy of the representations and warranties of Arby’s and Merger Sub both at and as of the date of the merger agreement and at and as of the closing date (except

 

 

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for any such representations and warranties expressly made as of an earlier date, which representations and warranties must be true and on and as of that earlier date), subject to the following standards:

 

      being true and correct in all material respects, with regard to Arby’s and Merger Sub’s authorization to enter into the merger agreement; and

 

      with regard to all other representations and warranties, being true and correct in all respects other than as have not (alone or in the aggregate with other failures of our representations and warranties to be true and correct) had a material adverse effect (disregarding any qualifications based on the word “material” in any representations and warranties).

 

    Arby’s and Merger Sub having performed and complied in all material respects with their obligations required to be performed or complied with under the merger agreement at or prior to the closing; and

 

    Arby’s and Merger Sub having delivered to us a certificate, dated as of the closing date and signed by an officer, certifying to the satisfaction of the foregoing conditions.

In addition, Arby’s and Merger Sub will not be obligated to consummate the merger until three business days after the marketing period has expired, as described under “Financing Cooperation” on page 81.

EXPENSES

 

In general, all fees and expenses incurred in connection with the merger, the merger agreement, and all related transactions shall be paid by the party incurring such fees or expenses, whether or not the merger or any of the other related transactions are consummated. However, Arby’s has agreed to pay all filing fees and other charges for the filings under the HSR Act and any other merger control law that may be applicable and will reimburse us for any costs or liabilities we incur complying with our obligation under the merger agreement to provide assistance for Arby’s financing, subject to the cap on Arby’s and Merger Sub’s liabilities, as described under “Limitations on Remedies” on page 88.

TERMINATION

 

In general, the merger agreement may be terminated at any time prior to the effective time of the merger, whether before or after approval of the proposal to approve the merger agreement by our shareholders, (1) by the mutual written consent of us and Arby’s or (2) by written notice of either us or Arby’s in certain circumstances as summarized in the table below:

 

If this circumstance occurs....

 

Then the merger agreement may be

terminated by...

1.   If the merger is not completed by 5:00 p.m., New York City time, on the outside date

(The outside date is May 29, 2018, but if the marketing period has not expired by that date, then either we or Arby’s may extend the outside date to June 26, 2018.)

  Either us or Arby’s, except this termination right is not available to a party whose failure to perform its obligations under the merger agreement has been a principal cause of the failure of the merger to be consummated on or before such date

 

 

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If this circumstance occurs....

 

Then the merger agreement may be

terminated by...

2.   If a final and nonappealable order, injunction, judgment or law is in effect enjoining or otherwise prohibiting the merger

  Either us or Arby’s, except this termination right is not available to a party who failed to comply with its obligation to use reasonable best efforts in connection with seeking to prevent, oppose or remove such restraint

3.   Ifour shareholders do not approve the merger agreement when a final vote is taken on the merger proposal at the special meeting

  Either us or Arby’s

4.   If(a) there is a breach or inaccuracy in Arby’s or Merger Sub’s representations and warranties, or if Arby’s or Merger Sub has failed to perform any of its covenants or agreements in the merger agreement, (b) such breach, inaccuracy or failure would give rise to the failure of certain closing conditions, and (c) such breach, inaccuracy or failure is not capable of being cured prior to the outside date or, if curable, is not cured within the earlier of 30 days of written notice to Arby’s of such breach, inaccuracy or failure or the outside date

  Us, except this termination right is not available to us at any time when there is also a material breach or inaccuracy in any of our representations, warranties, covenants or agreements

5.   If(a) there is a breach or inaccuracy in our representations and warranties, or if we have failed to perform any of our covenants or agreements in the merger agreement, (b) such breach, inaccuracy or failure would give rise to the failure of certain closing conditions, and (c) such breach, inaccuracy or failure, is not capable of being cured prior to the outside date or, if curable, is not cured within the earlier of 30 days of written notice to us of such breach, inaccuracy or failure or the outside date

  Arby’s, except this termination right is not available to Arby’s at any time when there is also a material breach or inaccuracy in any of its representations, warranties, covenants or agreements.

6.   Ifour board of directors makes an adverse recommendation change (as described above under “Change in Board Recommendation” on page 78), or we fail to include the board recommendation in this proxy statement

  Arby’s, unless our shareholders have approved the merger proposal

7.   Ifa tender or exchange offer relating to our securities is commenced (other than by Arby’s or its affiliates) and we do not announce, within ten business days after such commencement, a statement recommending

  Arby’s, unless our shareholders have approved the merger proposal

 

 

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If this circumstance occurs....

 

Then the merger agreement may be

terminated by...

rejection of such tender or exchange offer, or any other takeover proposal is publicly disclosed or announced and our board of directors fails to publicly reaffirm the board recommendation within ten business days after a request by Arby’s that we do so

 

8.   Inorder to accept a superior proposal that did not result from a breach of the no-shop restrictions and enter into a definitive agreement providing for such superior proposal immediately following or concurrently with the termination of the merger agreement, subject to having complied with certain procedures

  Us, unless our shareholders have approved the merger proposal

9.   If, three business days following the completion of the marketing period specified in the merger agreement, (a) all of the mutual conditions precedent to the merger and the conditions to Arby’s and Merger Sub’s obligations to effect the merger have been satisfied (other than those conditions that by their nature are to be satisfied at the closing but which are then capable of being satisfied at the closing on such date) under the merger agreement, (b) we have confirmed to Arby’s in writing that our obligations to effect the merger have been satisfied or waived, and that we stand ready, willing and able to consummate the merger at such time, (c) Arby’s and Merger Sub fail to consummate the merger by the time the closing should have occurred in accordance with the merger agreement, (d) we have given Arby’s written notice at least 15 calendar days prior to such termination stating our intention to terminate the merger agreement and the basis for such termination, and (e) the closing has not been consummated by the end of such 15-calendar-day period

  Us

If the merger agreement is terminated as described above, the merger agreement will become void and of no effect, without any obligation or liability of any party to any other party, except for certain specified provisions of the merger agreement that survive such termination, and subject to the limitations set forth in the provisions of the merger agreement related to termination fees, specific performance and non-recourse for non-parties, nothing in the merger agreement will relieve any party from liability for any intentional and material breach of the merger agreement by such party of any of its representations, warranties, covenants or agreements set forth in the merger agreement prior to such termination.

 

 

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TERMINATION FEES

 

In certain circumstances, we or Arby’s may be obligated to pay the other a fee in connection with the termination of the merger agreement.

We will be required to pay Arby’s a termination fee in an amount equal to $74 million:

 

    if Arby’s terminates the merger agreement for any of the following (i.e., circumstances 6 or 7 in the table above under “Termination” on page 85):

 

      our board of directors makes an adverse recommendation change (as described above under “Change in Board Recommendation” on page 78);

 

      we fail to include the board recommendation in this proxy statement;

 

      following the public disclosure or announcement of a takeover proposal (other than a tender or exchange offer described below), our board of directors fails to reaffirm publicly its recommendation within ten business days of Arby’s requesting such public affirmation; or

 

      a tender or exchange offer relating to securities of the company has been commenced (other than by Arby’s or its affiliates) and the company has not announced, within ten business days after the commencement of such tender or exchange offer, a statement disclosing that the company recommends rejection of such tender or exchange offer;

 

    if either Arby’s or we terminate the merger agreement because the requisite vote of approval of our shareholders is not obtained at the special meeting (i.e., circumstance 3 in the table above under “Termination” on page 85) and at a time when Arby’s would be entitled to terminate for one of the four bullet points listed above (i.e., circumstances 6 or 7 in the table above under “Termination” on page 85);

 

    if we terminate the merger agreement in order to accept a bona fide superior proposal (i.e., circumstance 8 in the table above under “Termination” on page 86); or

 

    if (1) the merger agreement is terminated by us or Arby’s for the failure to close before the outside date (i.e., circumstance 1 in the table above under “Termination” on page 84) or for the failure to obtain shareholder approval (i.e., circumstance 3 in the table above under “Termination” on page 85), or the merger agreement is terminated by Arby’s for our material, uncured breach of the merger agreement (i.e., circumstance 5 in the table above under “Termination” on page 85), (2) after the execution and delivery of the merger agreement but before such termination, a takeover proposal is made to our board of directors or becomes publicly known and is not withdrawn, and (3) within 12 months after the termination, we enter into a definitive agreement providing for any transaction contemplated by any takeover proposal (regardless of when made) or consummate any takeover proposal (regardless of when made).

Arby’s will be required to pay us a termination fee in an amount equal to $134 million:

 

    if we terminate the merger agreement for Arby’s failure to close (i.e., circumstance 9 in the table above under “Termination” on page 86); or

 

    if either Arby’s or we terminate the merger agreement because the merger is not completed by the outside date (i.e., circumstance 1 in the table above under “Termination” on page 84) at a time when we would have been entitled to terminate for the bullet point listed immediately above (i.e., circumstance 9 in the table above under “Termination” on page 86).

 

 

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LIMITATIONS ON REMEDIES

 

The merger agreement provides that any claim or cause of action based upon, arising out of, or related to the merger agreement (or any other agreement referenced therein) may only be brought against persons that are expressly named as parties to the merger agreement (or a party to any such other agreement referenced in the merger agreement). In addition, we have specifically waived any claims or rights against any financing source, agreed not to support any suit, action or proceeding made against any financing source, and agreed to cause dismissal or termination of any suit, action or proceeding against any financing source by or on behalf of the company, its subsidiaries and representatives, in each case, relating to the merger agreement, related financing documentation and related transactions. No financing source will have any liability to us for any claims or damages, or will have any liability for any indirect, incidental, special, punitive, exemplary, or consequential damages in connection with the merger agreement, related financing documents and other related transactions.

If paid, the payment of any termination fees (as described above under “Termination Fees” on page 87) are deemed to be liquidated damages for any and all losses or damages suffered or incurred by the non-paying party in connection with the merger, merger agreement, and related transactions. Upon payment of any such termination fee, the party paying such termination fee shall not have any further liability, whether pursuant to a claim in contract or tort, at law or in equity or otherwise. Regardless of whether the termination fees are payable, the aggregate liability of Arby’s and Merger Sub under the merger agreement is limited to an amount equal to $134 million.

SPECIFIC ENFORCEMENT

 

Arby’s, Merger Sub and we are entitled to an injunction or injunctions to prevent breaches of the merger agreement and to enforce specifically the performance of terms and provisions of the merger agreement. Importantly, however, we are not entitled to enforce or seek enforcement of Arby’s obligations to cause the equity financing to be consummated or to consummate the merger unless certain circumstances are met, including (1) all of the mutual conditions precedent to the merger and the conditions to Arby’s and Merger Sub’s obligations to effect the merger having been satisfied and remaining satisfied at the time when the closing would have occurred but for the failure of the financing to be funded (other than those conditions that by their nature are to be satisfied at the closing but which are then capable of being satisfied at the closing), (2) the debt financing being available to be funded at the closing, and either having been funded or going to be funded if the equity financing is funded, (3) we having irrevocably confirmed to Arby’s in writing that if specific performance is granted and the debt and equity financing is funded, then the closing will occur, and (4) Arby’s and Merger Sub having failed to consummate the merger by the date the merger is required to have occurred pursuant to the merger agreement.

ASSIGNMENT

 

Except as provided in the following sentence, the merger agreement may not be assigned, in whole or in part, by any of the parties to the merger agreement without the prior written consent of the other parties to the merger agreement.

Prior to the closing of the merger, Arby’s and Merger Sub may assign the merger agreement (in whole but not in part) to Arby’s or any of its affiliates and/or to parent’s debt financing sources so long as such assignment would not reasonably be expected to prevent, materially impede or

 

 

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materially delay the consummation by Arby’s of the merger or any of the other transactions contemplated by the merger agreement or the ability of Parent to perform its obligations under the merger agreement.

No assignment by any party to the merger agreement will relieve such party of any of its obligations under the merger agreement.

AMENDMENT AND MODIFICATION

 

The merger agreement may be amended at any time by an instrument in writing signed on behalf of each of Arby’s, Merger Sub, and us, except that after the merger agreement has been adopted by our shareholders, any amendment that requires further shareholder approval may not be made without such further approval. At any time prior to the effective time of the merger, the parties may extend the time for performance of any obligations, to the extent permitted by law, waive any inaccuracies in the representations and warranties of the parties, and to the extent permitted by law, waive compliance with any of the agreements or conditions in the merger agreement.

Amendments or waivers to certain sections of the merger agreement that may be materially adverse to the financing sources of Arby’s and Merger Sub must be approved by such financing sources.

GOVERNING LAW

 

The merger agreement will be governed by and construed in accordance with the laws of the State of Minnesota, except that any right or obligation with respect to the financing of the merger will be governed by and construed in accordance with the laws of the State of New York.

 

 

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VOTING AGREEMENT

The following is a summary of certain material terms of the voting agreement. The summary is not complete and must be read together with the actual voting agreement, a copy of which is attached as Appendix B. We encourage you to read the voting agreement carefully and in its entirety because the rights and obligations of the parties are governed by the express terms of the voting agreement and not by this summary or any other information contained in this proxy statement. This summary may not contain all the information about the voting agreement that is important to you.

Please note that the representations, warranties, covenants and agreements in the voting agreement were made only for purposes of the merger agreement, and may not represent the actual state of facts. See “Miscellaneous—Legal and Cautionary DisclosuresContext for Assertions Embodied in Agreements” on page 102.

PARTIES AND BACKGROUND

 

Each of Marcato Capital Management LP, Marcato International Master Fund Ltd., and Marcato Special Opportunities Master Fund LP, which we refer to as the “Marcato funds,” and Arby’s has entered into a voting agreement dated as of the date of the merger agreement, which we refer to as the “voting agreement.” The Marcato funds collectively beneficially owned approximately 6.4% of our outstanding shares as of November 27, 2017.

The voting agreement expressly does not limit or restrict any affiliate of the Marcato funds from taking any action in his or her capacity as director or officer of the company.

VOTING

 

Pursuant to the voting agreement, each Marcato fund has agreed to vote all shares of our common stock beneficially owned by them as of the record date (1) in favor of the adoption and approval of the merger, the merger agreement and each of the other transactions contemplated thereby, and any other action reasonably requested by Arby’s in furtherance thereof, (2) against the approval of any competing takeover proposal or the adoption of any agreement relating to any competing takeover proposal, and (3) against any amendment of our organizational documents or other actions which amendment or action would, or would reasonably be expected to, result in a breach of the merger agreement or in any manner compete or interfere with the merger, the merger agreement or any of the other transactions contemplated by the merger agreement.

WAIVER OF APPRAISAL RIGHTS

 

Each Marcato fund has irrevocably and unconditionally waived any rights of appraisal, dissenters’ rights or similar rights that such shareholder may have in connection with the merger.

OTHER OBLIGATIONS

 

The Marcato funds also agreed in the voting agreement not to:

 

    take any action that would, or would reasonably be expected to, in any manner compete or interfere with the merger, the merger agreement or any of the other transactions contemplated by the merger agreement;

 

 

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    directly or indirectly, enter into any voting agreement, voting trust or other voting arrangements with respect to any of the shares beneficially owned by Marcato; or

 

    (1) solicit, initiate, knowingly facilitate or knowingly encourage the submission or announcement of any inquiries, proposals or offers that constitute or would reasonably be expected to lead to any takeover proposal, (2) engage in any discussions or negotiations with respect to any inquiry, proposal or offer that constitutes or would reasonably be expected to lead to a takeover proposal, (3) otherwise knowingly cooperate with or assist or participate in, or knowingly facilitate, any such inquiries, proposals, offers, discussions or negotiations, or (4) resolve or agree to do any of the foregoing.

TERMINATION

 

The voting agreement will remain in effect until the earliest of (1) the effective time of the merger, (2) the termination or amendment (in a manner adverse to our shareholders) of the merger agreement in accordance with its terms, or (3) the termination of the voting agreement with mutual written consent of the Marcato funds and Arby’s.

 

 

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THE MERGER PROPOSAL (PROPOSAL #1)

The information below regarding the merger proposal should be read together with the rest of this Proxy Statement, especially “The Special Meeting” on page 20, “The Merger” on page 27, “The Merger Agreement” on page 66, and the copy of the merger agreement attached as Appendix A.

VOTE ON APPROVAL OF THE MERGER AGREEMENT

 

We are asking you to approve a proposal to approve the merger agreement and thereby adopt the merger agreement as a plan of merger and approve the transactions contemplated thereby, including the merger. A copy of the merger agreement is attached as Appendix A. For a discussion of the terms and conditions of the merger agreement, see the section entitled “The Merger Agreement” on page 66. For a discussion of other considerations related to the merger, see the section entitled “The Merger” on page 27.

VOTE REQUIRED FOR APPROVAL

 

To be approved, the merger proposal must receive the affirmative vote of holders of at least 7,766,262 shares of our common stock, which represents a majority of all shares of our common stock outstanding as of the record date.

Abstentions, broker non-votes, and shares not present will all have the effect of a vote against this proposal.

BOARD RECOMMENDATION

 

Our board of directors unanimously recommends that you vote “FOR” approval of the merger proposal. For a summary of the reasons for our board of directors’ recommendation, see “The MergerReasons for our Board’s Recommendation in Favor of the Merger” on page 34.

 

 

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THE GOLDEN PARACHUTE PROPOSAL (PROPOSAL #2)

The information below regarding the golden parachute proposal should be read together with the rest of this Proxy Statement, especially “The Special Meeting” on page 20 and “The MergerInterests of Our Directors and Executive Officers in the Merger” on page 54.

NON-BINDING ADVISORY VOTE ON MERGER-RELATED COMPENSATION OF NAMED EXECUTIVE OFFICERS

 

We seek a non-binding advisory vote from our shareholders to approve certain compensation that may be paid or become payable to certain named executive officers in connection with the merger.

For purposes of this proposal, our named executive officers are the persons identified in the table under the “Golden Parachute Compensation” on page 57. Their merger-related compensation that is the subject of the golden parachute proposal is set forth in “The Merger—Interests of Our Directors and Executive Officers in the Merger—Quantification of Payments and Benefits to Our Named Executive Officers,” including the footnotes to the table and related narrative discussion.

In particular, our shareholders are being asked to consider and vote upon a proposal to approve the following resolution:

RESOLVED, that the shareholders approve, on a nonbinding, advisory basis, the compensation that may be paid or become payable to our named executive officers in connection with the merger, including the agreements and understandings pursuant to which such compensation may be paid or become payable, as disclosed in our proxy statement for the special meeting.

The vote on this proposal is separate and apart from the vote on the proposal to approve the merger agreement, and is not a condition to completion of the merger. Accordingly, you may vote to approve the merger agreement and vote not to approve the named executive officer merger-related compensation proposal and vice versa.

This proposal gives our shareholders the opportunity to express their views on the merger-related compensation of our named executive officers. Because the vote on this proposal is advisory only, if the merger agreement is approved and the merger is completed, the merger-related compensation will be paid to our named executive officers in accordance with the terms of their compensation agreements and arrangements, regardless of the outcome of this non-binding advisory vote.

The disclosure of the merger-related compensation subject to this proposal is required to be disclosed pursuant to Item 402(t) of Regulation S-K under the Exchange Act. The non-binding advisory vote on this proposal is required by Section 14A of the Exchange Act and the SEC rules thereunder (which implements Section 951 of the Dodd-Frank Wall Street Reform and Consumer Protection Act).

 

 

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VOTE REQUIRED FOR APPROVAL

 

Because the golden parachute proposal is a non-binding advisory vote, and not a binding act of our shareholders, we will consider the proposal to be approved if more shares are voted “FOR” the proposal than “AGAINST.” For the vote to occur, a quorum must be present at the convening of the special meeting.

An abstention will have no effect on this proposal. Assuming a quorum is present, a broker non-vote or a failure to vote shares will have no effect on this proposal.

BOARD RECOMMENDATION

 

Our board of directors unanimously recommends that you vote “FOR” approval of the golden parachute proposal.

 

 

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THE ADJOURNMENT PROPOSAL (PROPOSAL #3)

The information below regarding the adjournment proposal should be read together with the rest of this proxy statement, particularly “The Special Meeting—Adjournment” on page 20.

VOTE ON ADJOURNMENT OF THE SPECIAL MEETING TO A LATER DATE OR DATES

 

We are asking our shareholders to approve adjournment of the special meeting, if necessary or appropriate to solicit additional proxies if there are insufficient votes to approve the merger agreement at the time of the special meeting. The adjournment proposal is in addition to, and not in lieu of, the authority of our chairperson to adjourn the meeting without a vote of shareholders in appropriate circumstances.

If our shareholders approve the adjournment proposal, we could adjourn the special meeting and any adjourned session of the special meeting and use the additional time to solicit additional proxies, including the solicitation of proxies from shareholders that have previously returned properly executed proxies voting against adoption of the merger agreement. Among other things, approval of the adjournment proposal could mean that, even if we had received proxies representing a sufficient number of votes against adoption of the merger agreement such that the proposal to approve the merger agreement would be defeated, we could adjourn the special meeting without a vote on the adoption of the merger agreement and seek to convince the holders of those shares to change their votes to votes in favor of adoption of the merger agreement. Additionally, we may seek to adjourn the special meeting if a quorum is not present at the special meeting.

VOTE REQUIRED FOR APPROVAL

 

For the adjournment proposal to be approved, the proposal must receive the affirmative vote of holders of greater of (a) 3,883,132 shares (which represents a majority of the minimum number of shares entitled to vote that would constitute a quorum) or (b) a majority of all shares of our common stock represented at the special meeting, in person or by proxy, and entitled to vote at the special meeting. A quorum may, but need not, be present.

An abstention will have the effect of a vote against this proposal, but a broker non-vote or a failure to vote shares will have no effect on this proposal.

BOARD RECOMMENDATION

 

Our board of directors unanimously recommends that you vote “FOR” approval of the adjournment proposal.

In making its recommendation, our board of directors considered a variety of factors including:

 

    In certain circumstances, an adjournment of the special meeting may be the most efficient way to obtain the shareholder approval necessary for the consummation of the merger, which our board of directors believes is in the best interests of our company and our shareholders, as described under “Reasons for our Board’s Recommendation in Favor of the Merger” on page 34.

 

   

If a quorum is not present at the meeting for logistical or other reasons, the adjournment proposal could allow us to postpone the votes on the merger proposal and

 

 

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golden parachute proposal without needing to incur the costs or delay associated with calling another, separate special meeting.

 

    If defeat of the merger proposal appears likely, an adjournment could be used to ensure that our shareholders have had an adequate opportunity to consider the consequences of the vote, particularly given the adverse effects that defeat of the merger proposal could have on our company, including as described under “Buffalo Wild Wings Without the Merger” on page 27.

 

 

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SECURITY OWNERSHIP OF PRINCIPAL SHAREHOLDERS AND MANAGEMENT

The following table provides information as of December 21, 2017 (except as otherwise noted below), concerning the beneficial ownership of our common stock by (1) our named executive officers, (2) each of our directors, (3) all directors and current executive officers as a group, and (4) each person known by us to be the beneficial owner of more than 5% of our outstanding common stock. Based on information furnished by such shareholders and Schedules 13D and 13G, as applicable, filed with the SEC, we believe that each person has sole voting and dispositive power over the shares indicated as owned by such person unless otherwise indicated.

Unless otherwise indicated below in the footnotes to the table, (1) no director or executive officer has pledged as security any shares shown as beneficially owned, and (2) the address of each officer and director is c/o Buffalo Wild Wings, Inc., 5500 Wayzata Boulevard, Suite 1600, Minneapolis, Minnesota 55416. Note that the following table excludes fractional shares held by any listed beneficial owner.

 

Name or Identity of Group

  Number of Shares
Beneficially Owned(1)
  Percent of Class(2)

Sally J. Smith

      96,724 (3)       *   

Alexander H. Ware

      8,507 (4)       *   

Emily C. Decker

      18,388 (5)       *   

Jeffrey B. Sorum

      18,118 (6)       *   

Kathleen M. Benning(7)

      14,119       *   

James M. Schmidt(8)

      48,985 (9)       *   

Judith A. Shoulak(10)

      24,163 (11)       *   

Mary J. Twinem(12)

      36,239       *   

Scott O. Bergren

      699       *   

Cynthia L. Davis

      2,297       *   

Andre J. Fernandez

      1,223       *   

Janice L. Fields

      699       *   

Harry A. Lawton

      1,223       *   

Richard T. McGuire III

      992,399 (13)       6.4 %

Jerry R. Rose

      5,028       *   

Sam B. Rovit

      699       *   

Harmit J. Singh

      1,223       *   

All Current Executive Officers and Directors as a Group (15 Persons)

      1,161,678 (14)       7.4 %

BlackRock, Inc.

55 East 52nd Street

New York, NY 10055

      1,765,706 (15)       11.4 %

The Vanguard Group

100 Vanguard Blvd.

Malvern, PA 19355

      1,403,268 (16)       9.0 %

Marcato Capital Management LP

Four Embarcadero Center, Suite 2100

San Francisco, CA 94111

      992,399 (13)       6.4 %

 

* Less than one percent.
(1)  Under the rules of the SEC, shares not actually outstanding are deemed to be beneficially owned by an individual if such individual has the right to acquire the shares within 60 days. Accordingly, shares deemed beneficially owned by virtue of an individual’s right to acquire them are also treated as outstanding when calculating the percent of the class owned by such individual and when determining the percent owned by any group in which the individual is included.

 

 

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(2)  Percentages are based on 15,530,075 shares of our common stock outstanding as of December 21, 2017.
(3)  Includes 44,811 shares subject to stock options.
(4)  Includes 788 shares subject to time-vested restricted stock units scheduled to vest within 60 days of December 21, 2017; and 6,931 shares subject to stock options.
(5)  Includes 5,094 shares subject to stock options.
(6)  Includes 3,909 shares subject to stock options.
(7) Ms. Benning resigned from all positions with the company in September 2016.
(8) Mr. Schmidt retired from the company effective August 14, 2017.
(9)  Includes 8,212 shares subject to deferred settlement of previously vested restricted stock units pursuant to our Management Deferred Compensation Plan and 5,258 shares subject to stock options.
(10) Ms. Shoulak retired from the company effective June 30, 2017.
(11)  Includes 3,465 shares subject to stock options.
(12) Ms. Twinem retired from all positions with the company in February 2016.
(13) Information is based on Amendment No. 17 to Schedule 13D filed with the SEC by Marcato Capital Management LP (“Marcato”) on December 20, 2017, reflecting securities beneficially owned as of December 15, 2017. In its capacity as investment manager, Marcato reported holding shared voting and dispositive power with respect to all 992,399 shares identified above; Marcato International Master Fund Ltd. reported holding shared voting and dispositive power over 950,699 shares; and Marcato Special Opportunities Master Fund LP reported holding shared voting and dispositive power over 41,700 shares. By virtue of his position as the managing partner of Marcato, Richard T. McGuire III may be deemed to have the shared power to vote or direct the vote (and the shared power to dispose or direct the disposition) of the shares 992,399 identified and, therefore, Mr. McGuire may be deemed to be the beneficial owner of such shares.
(14) Includes 8,212 shares subject to deferred settlement of previously vested restricted stock units; 1,688 shares subject to time-vested restricted stock units scheduled to vest within 60 days of December 21, 2017; and 66,522 shares subject to stock option.
(15)  Information is based on Amendment No. 8 to Schedule 13G filed with the SEC by BlackRock, Inc. (“BlackRock”) on March 9, 2017, reflecting securities beneficially owned as of February 28, 2017. BlackRock is the parent holding company of investment adviser subsidiaries that hold shares of our common stock: BlackRock (Netherlands) B.V., BlackRock Advisors, LLC, BlackRock Asses Management Canada Limited, Black Rock Asset Management Ireland Limited, BlackRock Asset Management Schweiz AG, BlackRock Financial Management, Inc., BlackRock Fund Advisors, BlackRock Institutional Trust Company, N.A., BlackRock Investment Management (Australia) Limited, BlackRock Investment Management (UK) Ltd., BlackRock Investments Management, LLC, and FutureAdvisor, Inc. BlackRock, Inc. reported sole voting power with respect to 1,726,925 shares and sole dispositive power with respect to 1,765,706 shares.
(16)  Information is based on Amendment No. 5 to Schedule 13G filed with the SEC by The Vanguard Group on February 10, 2017, reflecting securities beneficially owned as of December 31, 2016. In its capacity as investment advisor, The Vanguard Group has sole voting power with respect to 37,196 shares, sole dispositive power with respect to 1,364,957 shares and shared dispositive power with respect to 38,311 shares.

 

 

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MARKET PRICES AND DIVIDEND DATA

THE MARKET FOR OUR COMMON STOCK

 

Currently, our common stock is listed on the Nasdaq Global Select Market, a market tier of The Nasdaq Stock Market LLC, under the symbol “BWLD.” As of the close of business on the record date there were 15,532,523 shares of our common stock outstanding, held by approximately 93 shareholders of record.

Following the merger, there will be no further market for our common stock. In particular, if the merger is completed:

 

    Our stock will be delisted from Nasdaq and deregistered under the Exchange Act.

 

    We will no longer file periodic reports with the SEC.

 

    Our stock transfer books will be closed when the merger closes, and there will be no further registration of share transfers on our stock transfer books.

 

    Subject to dissenters’ rights (described above under “The Merger—Dissenters’ Rights” on page 63), all shares of our common stock outstanding prior to the effective time of the merger will be automatically cancelled and converted into the right to receive the merger consideration.

HISTORICAL MARKET PRICES

 

The following table sets forth on a per share basis the high and low sales prices for consolidated trading in our common stock as reported on the Nasdaq during each the quarters indicated.

 

     Price Range of
Common Stock
 
     High          Low      

Fiscal Year Ended December 27, 2015

     

Quarter Ended March 29, 2015

     $ 195.83         173.83   

Quarter Ended June 28, 2015

     186.66         149.00   

Quarter Ended September 27, 2015

     205.83         155.72   

Quarter Ended December 27, 2015

     198.48         147.69   

Fiscal Year Ended December 25, 2016

     

Quarter Ended March 27, 2016

     $ 168.91         134.95   

Quarter Ended June 26, 2016

     154.34         122.25   

Quarter Ended September 25, 2016

     172.92         133.34   

Quarter Ended December 25, 2016

     175.10         133.71   

Fiscal Year Ended December 31, 2017

     

Quarter Ended March 26, 2017

     $ 163.30         140.40   

Quarter Ended June 25, 2017

     165.70         126.30   

Quarter Ended September 24, 2017

     131.10         95.00   

Quarter Ending December 31, 2017 (through December 27, 2017)

     157.00         99.05   

 

 

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The closing price of our common stock on Nasdaq on November 13, 2017, the last trading day before the publication of articles suggesting that we and Arby’s were engaged in sale discussions, was $117.25 per share. The closing price of our common stock on Nasdaq on November 27, 2017, the last trading day before the public announcement of the merger agreement, was $146.40 per share. On December 27, 2017, the latest practicable trading day before the printing of this proxy statement, the closing price of our common stock on Nasdaq was $156.40 per share. You are encouraged to obtain current market quotations for our common stock.

DIVIDEND POLICY

 

We have never declared or paid cash dividends on our common stock. Our capital allocation policy has been to allocate capital for growth and, in the event we have excess capital, to return capital to shareholders by way of our share repurchase program.

Our revolving credit facility contains customary covenants that could, among other things, limit or prohibit the payment of dividends under certain circumstances. The merger agreement prohibits the payment of dividends pending the consummation of the merger without the prior written consent of Arby’s.

 

 

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MISCELLANEOUS

RECEIVING THE MERGER CONSIDERATION

 

If the merger is completed, the paying agent will send information to our shareholders of record explaining how to exchange shares of our common stock for the merger consideration. You should not send in your Buffalo Wild Wings stock certificates before you receive these transmittal materials. If your shares of our common stock are held in “street name” by your broker, bank or other nominee, you may receive instructions from your broker, bank or other nominee as to what action, if any, you need to take to receive the merger consideration. Do not send in your certificates now.

NOTICE OF INTERNET AVAILABILITY OF PROXY MATERIALS FOR THE SPECIAL MEETING

 

This proxy statement and other related proxy materials for the special meeting are available at http//www.cstproxy.com/buffalowildwings/sm2018.

HOUSEHOLDING

 

We may deliver just one proxy statement to two or more shareholders who share an address, unless we have received contrary instructions from one or more of the shareholders. Each shareholder will receive a separate proxy card. This practice, which is commonly referred to as “householding,” is permitted by Rule 14a-3(e)(1) under the Exchange Act. It helps to reduce costs, clutter and paper waste for the company and our shareholders.

However, we will promptly deliver a separate copy if requested by any shareholder at a shared address subject to householding. Requests for additional copies of this proxy statement should be directed to proxy solicitor, Morrow Sodali LLC, by telephone at +1 (800) 662-5200, by email at BWLD@morrowsodali.com, or by mail to 470 West Avenue, Stamford CT, 06902.

In addition, shareholders who share a single address, but receive multiple copies of the proxy statement, may request that in the future they receive a single copy of any future proxy materials by contacting us at Emily Decker, Senior Vice President, General Counsel and Secretary, at Buffalo Wild Wings, Inc., 5500 Wayzata Boulevard, Suite 1600, Minneapolis, Minnesota 55416 (if your shares are registered in your own name) or your bank, broker or other nominee (if your shares are registered in their name).

SHAREHOLDER PROPOSALS FOR OUR 2018 ANNUAL MEETING

 

If the merger is completed, we will have no public shareholders and there will be no public participation in any future meetings of our shareholders. However, if the merger is not completed, our shareholders will continue to be entitled to attend and participate in our shareholders’ meetings.

We will hold our 2018 Annual Meeting of Shareholders only if the merger has not already been completed. If a shareholder desires to propose an item of business for consideration without inclusion in our proxy materials or to nominate persons for election as a director at our 2018 Annual Meeting of Shareholders (if any), then the shareholder must comply with all of the applicable requirements set forth in our bylaws, including timely written notice of such proposal or nomination delivered to our Secretary at our principal executive office. To be

 

 

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timely under our bylaws for the 2018 Annual Meeting of Shareholders, we must receive such notice not earlier than the close of business on February 2, 2018 and not later than the close of business on March 4, 2018. The deadline under our Bylaws for the submission of shareholder proposals (other than director nominations) for inclusion in our proxy materials relating to our 2018 Annual Meeting of Shareholders was December 21, 2017.

LEGAL AND CAUTIONARY DISCLOSURES

 

No Determination by Securities Regulators

Neither the SEC nor any state securities regulatory agency has approved or disapproved of the transactions described in this proxy statement, including the merger, or determined if the information contained in this proxy statement is accurate or adequate. Any representation to the contrary is a criminal offense.

No Solicitation Where Prohibited

This proxy statement does not constitute the solicitation of a proxy in any jurisdiction to or from any person to whom or from whom it is unlawful to make such proxy solicitation in that jurisdiction.

Sources of Information

We have supplied all information relating to the company. Arby’s has supplied, and we have not independently verified, all of the information relating to Arby’s, Merger Sub and the financing sources.

Other Information Not Authorized by Buffalo Wild Wings

We have not authorized anyone to provide any information other than that which is contained or incorporated by reference in this proxy statement. We have not authorized any other person to provide you with different or additional information and we take no responsibility for, and can provide no assurance as to the reliability of, any other information that others may give you. Further, you should not assume that the information contained or incorporated by reference in this proxy statement, or in any document incorporated by reference is accurate as of any date other than the respective dates thereof.

For your convenience, we have included certain website addresses and other contact information in this proxy statement. However, information obtained from those websites or contacts is not part of this proxy statement (except for any particular documents specifically incorporated by reference into this proxy statement, as set forth under “Where You Can Find More Information—Incorporation by Reference” on page 104).

Subsequent Developments

This proxy statement is dated December 28, 2017. You should not assume that the information contained in this proxy statement is accurate as of any date other than that date, and the mailing of this proxy statement to shareholders does not and will not create any implication to the contrary. Our business, financial condition, results of operations and prospects may have changed since those dates.

We may (and in certain limited circumstances may be legally required to) update this proxy statement prior to the special meeting, including by filing documents with the SEC for

 

 

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incorporation by reference into this proxy statement without delivering them to our shareholders. Therefore, you should monitor and review our SEC filings until the special meeting is completed. However, although we may update this proxy statement, we undertake no duty to do except as otherwise expressly required by law.

Context for Assertions Embodied in Agreements

The merger agreement and other agreements are being included or incorporated by reference into this proxy statement only to provide our shareholders with information regarding their respective terms, and not to provide investors with any other factual information regarding the parties, their affiliates, or their respective businesses. In particular, you should not rely on the assertions embodied in the representations, warranties, and covenants contained in these agreements, or any descriptions of them, as characterizations of any actual state of facts. The representations, warranties, and covenants in each of these agreements (1) were made only for purposes of that agreement and solely for the benefit of the parties to that agreement (and not for the benefit of our shareholders), (2) were made only as of specified dates and do not reflect subsequent information, (3) are subject to limitations agreed upon by the parties to such agreement, including in certain cases being subject to confidential disclosure schedules that modify, qualify, and create exceptions to such representations, warranties, and covenants, (4) may also be subject to a contractual standard of materiality different from that generally applicable under federal securities laws, and (5) may have been made for the purposes of allocating risk between the parties to that agreement instead of establishing matters of fact.

Forward-Looking Statements

This proxy statement contains a variety of forward-looking statements, which are subject to a number of risks and uncertainties. We caution you not to place undue reliance on forward-looking statements. See “PrefaceForward-Looking Statements” on page iii.

 

 

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WHERE YOU CAN FIND MORE INFORMATION

INCORPORATION BY REFERENCE

 

The SEC allows us to “incorporate by reference” into this document the information we file with the SEC. This means that we can disclose important information to you by referring you to those documents. The information incorporated by reference is considered to be a part of this document, and later information that we file with the SEC will update and supersede that information. Information in documents that is deemed, in accordance with SEC rules, to be furnished and not filed will not be deemed to be incorporated by reference into this document. These documents contain important information about the company and our financial condition.

We incorporate by reference (1) the documents listed below and (2) any documents filed by us pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act from the date of this document to the date of the special meeting (including any adjournment or postponement thereof):

 

    Our Annual Report on Form 10-K for the fiscal year ended December 25, 2016;

 

    Our Quarterly Reports on Forms 10-Q for the fiscal quarters ended March 26, 2017, June 25, 2017, and September 24, 2017;

 

    Portions of our Definitive Proxy Statement for the 2017 Annual Meeting, filed on April 21, 2017 that are incorporated by reference into the Annual Report on Form 10-K for the fiscal year ended December 25, 2016; and

 

    Our Current Reports on Form 8-K and Form 8-K/A, to the extent filed and not furnished with the SEC, filed on January 24, 2017, March 6, 2017, March 27, 2017, April 7, 2017, April 19, 2017, June 2, 2017, June 8, 2017, June 9, 2017, June 12, 2017, July 20, 2017, September 18, 2017 and November 28, 2017.

The documents incorporated by reference into this proxy statement are available to you as described below under “Obtaining Copies.

OBTAINING COPIES

 

Obtaining Copies from the SEC

We file annual, quarterly and current reports, proxy statements and other information with the SEC. Our SEC filings are available to the public through the internet at the SEC’s web site at www.sec.gov. You may also read and copy any document we file with the SEC at the SEC’s public reference room at 100 F Street N.E., Washington, D.C. 20549. Please call the SEC at +1 (800) SEC-0330 for further information about its public reference facilities and their copy charges.

Obtaining Copies from Buffalo Wild Wings

We also make available a copy of our SEC reports, without charge, on our investor website at ir.buffalowildwings.com as soon as reasonably practicable after we file the reports electronically with the SEC. The information included on our website is not incorporated by reference into this proxy statement.

 

 

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In addition, you may obtain a copy of the reports, without charge, by writing or telephoning us at: Buffalo Wild Wings, Inc., 5500 Wayzata Boulevard, Suite 1600, Minneapolis, Minnesota 55416, Attn: Investor Relations, +1 (952) 540-2095. In order to ensure timely delivery of such documents before the special meeting, any such request should be made promptly to us. We undertake to send any information so requested (other than exhibits to incorporated documents that are not themselves specifically incorporated by reference into such document) by first class mail or another equally prompt means within one business day of receiving your request.

 

 

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APPENDIX A

MERGER AGREEMENT

 


Table of Contents

 

AGREEMENT AND PLAN OF MERGER

by and among

ARBY’S RESTAURANT GROUP, INC.,

IB MERGER SUB I CORPORATION

and

BUFFALO WILD WINGS, INC.

dated as of

November 27, 2017


Table of Contents

TABLE OF CONTENTS

 

ARTICLE I The Merger

    A-2  

SECTION 1.01

   THE MERGER     A-2  

SECTION 1.02

   CLOSING     A-2  

SECTION 1.03

   EFFECTIVE TIME     A-2  

SECTION 1.04

   EFFECTS OF THE MERGER     A-2  

SECTION 1.05

   ARTICLES OF INCORPORATION AND BYLAWS     A-2  

SECTION 1.06

   DIRECTORS     A-3  

SECTION 1.07

   OFFICERS     A-3  

SECTION 1.08

   TAKING OF NECESSARY ACTION     A-3  

ARTICLE II Effect of the Merger on Capital Stock

    A-3  

SECTION 2.01

   EFFECT ON CAPITAL STOCK     A-3  

SECTION 2.02

   ADJUSTMENT TO MERGER CONSIDERATION     A-4  

SECTION 2.03

   EXCHANGE FUND     A-5  

SECTION 2.04

   TREATMENT OF COMPANY EQUITY AWARDS     A-7  

SECTION 2.05

   TREATMENT OF COMPANY ESPP     A-8  

SECTION 2.06

   PAYMENT OF COMPANY EQUITY AWARDS     A-8  

ARTICLE III Representations and Warranties of the Company

    A-8  

SECTION 3.01

   ORGANIZATION, STANDING AND CORPORATE POWER     A-8  

SECTION 3.02

   SUBSIDIARIES     A-9  

SECTION 3.03

   CAPITAL STRUCTURE     A-9  

SECTION 3.04

   AUTHORITY; RECOMMENDATION     A-11  

SECTION 3.05

   NON-CONTRAVENTION     A-11  

SECTION 3.06

   SEC DOCUMENTS; FINANCIAL STATEMENTS; UNDISCLOSED LIABILITIES     A-12  

SECTION 3.07

   ABSENCE OF CERTAIN CHANGES OR EVENTS     A-14  

SECTION 3.08

   LITIGATION     A-16  

SECTION 3.09

   CONTRACTS     A-16  

SECTION 3.10

   COMPLIANCE WITH LAWS     A-18  

SECTION 3.11

   LABOR AND EMPLOYMENT MATTERS     A-20  

SECTION 3.12

   EMPLOYEE BENEFIT MATTERS     A-21  

SECTION 3.13

   TAXES     A-25  

SECTION 3.14

   REAL PROPERTY     A-26  

SECTION 3.15

   INTELLECTUAL PROPERTY     A-27  

SECTION 3.16

   ENVIRONMENTAL MATTERS     A-29  

SECTION 3.17

   INSURANCE     A-30  

SECTION 3.18

   FRANCHISE MATTERS     A-30  

SECTION 3.19

   QUALITY AND SAFETY OF FOOD & BEVERAGE PRODUCTS     A-32  

SECTION 3.20

   AFFILIATE TRANSACTIONS     A-32  

SECTION 3.21

   CERTAIN BUSINESS PRACTICES     A-33  

SECTION 3.22

   COMPANY SWAPS     A-33  

SECTION 3.23

   INFORMATION SUPPLIED     A-33  

SECTION 3.24

   SUPPLIERS.     A-33  

SECTION 3.25

   STATE TAKEOVER STATUTES     A-34  

SECTION 3.26

   SANCTION LAWS     A-34  

SECTION 3.27

   BROKERS AND OTHER ADVISORS     A-34  

SECTION 3.28

   OPINION OF FINANCIAL ADVISOR     A-34  

ARTICLE IV Representations and Warranties of Parent and Merger Sub

    A-35  

SECTION 4.01

   ORGANIZATION, STANDING AND CORPORATE POWER     A-35  

SECTION 4.02

   AUTHORITY     A-35  

 

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SECTION 4.03

   NON-CONTRAVENTION     A-35  

SECTION 4.04

   FINANCING     A-36  

SECTION 4.05

   LITIGATION     A-37  

SECTION 4.06

   INFORMATION SUPPLIED     A-37  

SECTION 4.07

   OPERATION OF MERGER SUB     A-37  

SECTION 4.08

   OWNERSHIP OF COMPANY COMMON STOCK; CERTAIN ARRANGEMENTS     A-37  

SECTION 4.09

   BROKERS AND OTHER ADVISORS     A-38  

SECTION 4.10

   NON-RELIANCE ON ESTIMATES, PROJECTIONS, FORECASTS, FORWARD-LOOKING STATEMENTS AND BUSINESS PLANS     A-38  

ARTICLE V Covenants Relating to Conduct of Business

    A-38  

SECTION 5.01

   CONDUCT OF BUSINESS     A-38  

SECTION 5.02

   SOLICITATION; TAKEOVER PROPOSALS; CHANGE OF RECOMMENDATION     A-43  

ARTICLE VI Additional Agreements

    A-48  

SECTION 6.01

   PREPARATION OF THE PROXY STATEMENT; SHAREHOLDERS’ MEETING     A-48  

SECTION 6.02

   ACCESS TO INFORMATION; CONFIDENTIALITY     A-49  

SECTION 6.03

   REASONABLE BEST EFFORTS; APPROVALS; TRANSACTION LITIGATION     A-50  

SECTION 6.04

   STATE TAKEOVER STATUTES     A-52  

SECTION 6.05

   BENEFIT PLANS     A-52  

SECTION 6.06

   INDEMNIFICATION, EXCULPATION AND INSURANCE     A-54  

SECTION 6.07

   PUBLIC ANNOUNCEMENTS     A-56  

SECTION 6.08

   FINANCING     A-56  

SECTION 6.09

   FINANCING COOPERATION     A-58  

SECTION 6.10

   RULE 16B-3 MATTERS     A-61  

ARTICLE VII Conditions Precedent

    A-61  

SECTION 7.01

   CONDITIONS TO EACH PARTYS OBLIGATION TO EFFECT THE MERGER     A-61  

SECTION 7.02

   CONDITIONS TO PARENTS AND MERGER SUBS OBLIGATIONS TO EFFECT THE MERGER     A-61  

SECTION 7.03

   CONDITIONS TO COMPANYS OBLIGATIONS TO EFFECT THE MERGER     A-62  

SECTION 7.04

   FRUSTRATION OF CLOSING CONDITIONS     A-63  

ARTICLE VIII Termination, Amendment and Waiver

    A-63  

SECTION 8.01

   TERMINATION     A-63  

SECTION 8.02

   EFFECT OF TERMINATION     A-65  

SECTION 8.03

   TERMINATION FEES     A-65  

SECTION 8.04

   AMENDMENT     A-67  

SECTION 8.05

   EXTENSION; WAIVER     A-67  

ARTICLE IX Interpretation

    A-67  

SECTION 9.01

   CERTAIN DEFINITIONS     A-67  

SECTION 9.02

   INDEX OF DEFINED TERMS     A-73  

SECTION 9.03

   INTERPRETATION     A-77  

ARTICLE X General Provisions

    A-78  

SECTION 10.01

   NONSURVIVAL OF REPRESENTATIONS AND WARRANTIES, COVENANTS AND AGREEMENTS     A-78  

SECTION 10.02

   EXPENSES     A-78  

SECTION 10.03

   NOTICES     A-78  

SECTION 10.04

   ENTIRE AGREEMENT     A-79  

SECTION 10.05

   NO THIRD-PARTY BENEFICIARIES     A-79  

SECTION 10.06

   ASSIGNMENT     A-80  

SECTION 10.07

   GOVERNING LAW     A-80  

SECTION 10.08

   JURISDICTION; SERVICE OF PROCESS     A-80  

 

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SECTION 10.09

   WAIVER OF JURY TRIAL     A-81  

SECTION 10.10

   SPECIFIC PERFORMANCE     A-82  

SECTION 10.11

   NON-RECOURSE TO NON-PARTIES     A-83  

SECTION 10.12

   SEVERABILITY     A-84  

SECTION 10.13

   LEGAL REPRESENTATION     A-84  

SECTION 10.14

   COUNTERPARTS; FACSIMILE AND ELECTRONIC SIGNATURES     A-84  

 

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AGREEMENT AND PLAN OF MERGER

This AGREEMENT AND PLAN OF MERGER (this “Agreement”), dated as of November 27, 2017, is entered into by and among Arby’s Restaurant Group, Inc., a Delaware corporation (“Parent”), IB Merger Sub I Corporation, a Minnesota corporation and a Subsidiary of Parent (“Merger Sub”), and Buffalo Wild Wings, Inc., a Minnesota corporation (the “Company”). Each of Parent, Merger Sub and the Company are referred to herein as a “Party” and together as “Parties.” Capitalized terms used and not otherwise defined herein have the meanings set forth in Article IX. This Agreement is a “plan of merger” as such term is used in Section 302A.611 of the Minnesota Business Corporation Act (the “MBCA”) and is sometimes referred to as the “Plan of Merger.”

RECITALS

WHEREAS, the respective boards of directors (and any required committee thereof) of each of Merger Sub and the Company have unanimously (i) determined that this Agreement and the transactions contemplated hereby, including the Merger and the Plan of Merger, are advisable, fair to and in the best interests of their respective shareholders, (ii) approved this Agreement and the transactions contemplated hereby, including the Plan of Merger and the Merger, on the terms and subject to the conditions set forth in this Agreement and (iii) resolved to recommend that the respective shareholders of Merger Sub and the Company approve this Agreement;

WHEREAS, the board of directors of Parent has unanimously (i) determined that this Agreement and the transactions contemplated hereby, including the Merger and the Plan of Merger, are in the best interest of Parent and (ii) approved this Agreement and the transactions contemplated hereby, including the Merger, on the terms and subject to the conditions set forth in this Agreement;

WHEREAS, Parent, as the sole shareholder of Merger Sub, has approved and adopted this Agreement and the transactions contemplated hereby, including the Plan of Merger and the Merger;

WHEREAS, subject to the conditions set forth in this Agreement, Merger Sub will merge with and into the Company, with the Company continuing as the surviving corporation in the merger (the “Merger”), whereby, except as expressly provided in Section 2.01, each issued and outstanding share of common stock, no par value per share, of the Company (“Company Common Stock”) immediately prior to the Effective Time will be canceled and converted into the right to receive the Merger Consideration;

WHEREAS, simultaneously with the execution and delivery of this Agreement, Parent is entering into a voting agreement with certain shareholders of the Company (the “Voting Agreement”); and

WHEREAS, Parent, Merger Sub and the Company desire to make certain representations, warranties, covenants and agreements in connection with the Merger and also to prescribe various conditions to the Merger.

NOW, THEREFORE, in consideration of the foregoing premises and the representations, warranties, covenants and agreements contained in this Agreement, and subject to the conditions set forth herein, as well as other good and valuable consideration, the

 

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receipt and sufficiency of which are hereby acknowledged, and intending to be legally bound hereby, the Parties agree as follows:

ARTICLE I

The Merger

Section 1.01    The Merger.  Upon the terms and subject to the conditions set forth in this Agreement, and in accordance with the MBCA, Merger Sub shall be merged with and into the Company at the Effective Time. Following the Effective Time, the separate corporate existence of Merger Sub shall cease, and the Company shall continue as the surviving corporation in the Merger under the MBCA (the “Surviving Corporation”).

Section 1.02    Closing.  The closing of the Merger (the “Closing”) will take place at 10:00 a.m., New York City time, on the second business day after satisfaction or (to the extent permitted by Law) waiver of the conditions set forth in Article VII (other than those conditions that by their terms are to be satisfied at the Closing, but subject to the satisfaction or (to the extent permitted by Law) waiver of those conditions), at the offices of White & Case LLP, located at 1221 Avenue of the Americas, New York, New York 10020, unless another time, date or place is agreed to in writing by Parent and the Company; provided, however, that in no event shall Parent and Merger Sub be obligated to consummate the Closing if the Marketing Period has not ended prior to the time that the Closing would otherwise have occurred, in which case the Closing shall not occur until the earlier to occur of (i) a date before or during the Marketing Period specified by Parent on three business days’ prior written notice to the Company and (ii) the third business day immediately following the final day of the Marketing Period, subject to, in each case, the satisfaction or waiver (to the extent permitted by Law) of the conditions set forth in Article VII (other than those conditions that by their terms are to be satisfied at the Closing, but subject to the satisfaction or (to the extent permitted by Law) waiver of those conditions). The date on which the Closing occurs is referred to in this Agreement as the “Closing Date.”

Section 1.03    Effective Time.  Subject to the provisions of this Agreement, as promptly as reasonably practicable on the Closing Date, the Parties shall file articles of merger (the “Articles of Merger”) in such form as is required by, and executed and acknowledged in accordance with, the relevant provisions of the MBCA, and shall make all other filings and recordings required under the MBCA (if any). The Merger shall become effective on such date and time as the Articles of Merger are filed with the Secretary of State of the State of Minnesota or at such later date and time as Parent and the Company shall agree and specify in the Articles of Merger. The date and time at which the Merger becomes effective is referred to in this Agreement as the “Effective Time.”

Section 1.04    Effects of the Merger.  The Merger shall have the effects set forth in the applicable provisions of the MBCA. Without limiting the generality of the foregoing, from and after the Effective Time, the Surviving Corporation shall possess all properties, rights, privileges, powers and franchises of the Company and Merger Sub, and all of the claims, obligations, liabilities, debts and duties of the Company and Merger Sub shall become the claims, obligations, liabilities, debts and duties of the Surviving Corporation.

Section 1.05    Articles of Incorporation and Bylaws.

(a)        At the Effective Time, the articles of incorporation of the Company shall be amended in their entirety to read the same as the articles of incorporation of Merger Sub as

 

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in effect immediately prior to the Effective Time (which shall not be amended by Merger Sub from the date hereof until such time except as otherwise contemplated hereby), and as so amended shall be the articles of incorporation of the Surviving Corporation until thereafter changed or amended (subject to Section 6.06(b)) as provided therein or by applicable Law; provided, however, that the articles of incorporation of the Surviving Corporation, as so amended at the Effective Time, shall provide that the name of the Surviving Corporation shall be the name of the Company and the date of incorporation of the Surviving Corporation shall be the date of incorporation of the Company.

(b)    The Company shall take all necessary action so that, as of the Effective Time, the bylaws of the Company shall be amended in their entirety to read the same as the bylaws of Merger Sub as in effect immediately prior to the Effective Time, and as so amended shall be the bylaws of the Surviving Corporation until thereafter changed or amended (subject to Section 6.06(b)) as provided therein or by applicable Law; provided, however, that the bylaws of the Surviving Corporation, as so amended at the Effective Time, shall provide that the name of the Surviving Corporation shall be the name of the Company.

Section 1.06    Directors.  The directors of Merger Sub immediately prior to the Effective Time shall, from and after the Effective Time, be the directors of the Surviving Corporation, until the earlier of their resignation or removal or until their respective successors are duly elected and qualified, as the case may be.

Section 1.07    Officers.  The officers of the Company immediately prior to the Effective Time shall, from and after the Effective Time, be the officers of the Surviving Corporation, until the earlier of their resignation or removal or until their respective successors are duly elected and qualified, as the case may be.

Section 1.08    Taking of Necessary Action.  If at any time after the Effective Time any further action is necessary or desirable to carry out the purposes of this Agreement and to vest the Surviving Corporation with full right, title and possession to all assets, property, rights, privileges, powers and franchises of the Company and Merger Sub, the Surviving Corporation, the board of directors of the Surviving Corporation and the officers of the Surviving Corporation shall take all such lawful and necessary action, consistent with this Agreement, on behalf of the Company, Merger Sub and the Surviving Corporation.

ARTICLE II

Effect of the Merger on Capital Stock

Section 2.01    Effect on Capital Stock.  At the Effective Time, by virtue of the Merger and without any action on the part of the holder of any shares of Company Common Stock or any shares of capital stock of Parent or Merger Sub:

(a)        Capital Stock of Merger Sub.  Each share of capital stock of Merger Sub issued and outstanding immediately prior to the Effective Time shall be converted into and become one validly issued, fully paid and nonassessable share of common stock, no par value per share, of the Surviving Corporation.

(b)        Cancellation of Certain Company Common Stock.  Each share of Company Common Stock issued and outstanding immediately prior to the Effective Time that is directly or indirectly owned by Parent, any Subsidiary of Parent or any Subsidiary of the

 

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Company, shall automatically be canceled and shall cease to exist, and no consideration shall be delivered in exchange therefor.

(c)        Conversion of Company Common Stock.  Each share of Company Common Stock issued and outstanding immediately prior to the Effective Time (excluding (i) each Company Restricted Stock Award which shall be treated solely in accordance with Section 2.04, (ii) shares to be canceled in accordance with Section 2.01(b) and (iii) the Dissenting Shares) shall be converted into the right to receive $157.00 in cash, without interest (the “Merger Consideration”). At the Effective Time, all such shares of Company Common Stock shall no longer be outstanding and shall automatically be canceled and shall cease to exist, and each holder of a certificate (or evidence of shares in book-entry form) that immediately prior to the Effective Time represented any such shares of Company Common Stock (each, a “Certificate”) shall cease to have any rights with respect thereto, except the right to receive the Merger Consideration.

(d)        Dissenters Rights.  At the Effective Time, the Dissenting Shares shall no longer be outstanding and shall automatically be canceled and shall cease to exist, and each holder of Dissenting Shares shall cease to have any rights with respect thereto, subject to any rights the holder thereof may have under this Section 2.01(d). Notwithstanding anything in this Agreement to the contrary, shares of Company Common Stock issued and outstanding immediately prior to the Effective Time that are held by any holder who has (i) not voted in favor of approval of the Merger and adoption of the Plan of Merger, (ii) demanded and perfected such holder’s right to dissent from the Merger and to be paid the fair value of such shares of Company Common Stock in accordance with Sections 302A.471 and 302A.473 of the MBCA and (iii) as of the Effective Time, has not effectively withdrawn or lost such dissenters’ rights (the “Dissenting Shares”) shall not be converted into or represent the right to receive the Merger Consideration as provided in Section 2.01(c), but the holder thereof, if such holder complies in all respects with Sections 302A.471 and 302A.473 of the MBCA (the “Dissenters Rights”), shall be entitled to payment of the fair value (including interest determined in accordance with Section 302A.473 of the MBCA) of such Dissenting Shares in accordance with the Dissenters’ Rights; provided, however, that if any such holder shall fail to perfect or otherwise shall waive, withdraw or lose the right to dissent under the Dissenters’ Rights, then the right of such holder to be paid the fair value of such holder’s Dissenting Shares shall cease and such Dissenting Shares shall be deemed to have been converted as of the Effective Time into, and to have become exchangeable solely for the right to receive, the Merger Consideration, without interest thereon and subject to any applicable withholding Taxes specified in Section 2.03(h). The Company shall provide prompt notice to Parent of any demands, attempted withdrawals of such demands and any other instruments served pursuant to applicable Law that are received by the Company for Dissenters’ Rights with respect to any shares of Company Common Stock, and Parent shall have the right to participate in all negotiations and proceedings with respect to such demands. Prior to the Effective Time, the Company shall not, without the prior written consent of Parent, make any payment with respect to, or settle or compromise or offer to settle or compromise, any such demand, or agree to do any of the foregoing.

Section 2.02    Adjustment to Merger Consideration.  Without limiting the other provisions of this Agreement, if the outstanding shares of Company Common Stock are changed into a different number or class of shares due to any stock split, reverse stock split, stock dividend (including any dividend or distribution of securities convertible into Company

 

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Common Stock), reorganization, recapitalization, reclassification, combination, exchange of shares or other like change with respect to Company Common Stock occurring on or after the date hereof and prior to the Effective Time, the Merger Consideration as provided in Section 2.01(c) shall be equitably adjusted by Parent to reflect the effect thereof.

Section 2.03    Exchange Fund.

(a)        Paying Agent.  At or prior to the Effective Time, Parent shall deposit with a paying agent selected by Parent (which shall be the Company’s transfer agent or another reputable bank or trust company reasonably acceptable to the Company, and with whom the Parent shall enter into a paying agent agreement in form and substance reasonably satisfactory to the Company) (the “Paying Agent”) cash in an amount sufficient to pay the aggregate Merger Consideration as required to be paid pursuant to this Agreement (such cash being hereinafter referred to as the “Exchange Fund”). The Exchange Fund shall not be used for any other purpose.

(b)        Certificate Exchange Procedures.  As promptly as reasonably practicable after the Effective Time, Parent shall cause the Paying Agent to mail to each holder of record of a Certificate (i) a letter of transmittal (which shall specify that delivery shall be effected, and risk of loss and title to the Certificates shall pass, only upon proper delivery of the Certificates to the Paying Agent and which shall otherwise be in customary form (including customary provisions with respect to delivery of an “agent’s message” with respect to shares held in book-entry form)), and (ii) instructions for use in effecting the surrender of the Certificates in exchange for the Merger Consideration. Each holder of record of a Certificate shall, upon surrender to the Paying Agent of such Certificate, together with such letter of transmittal, duly executed, and such other documents as may reasonably be required by the Paying Agent, be entitled to receive in exchange therefor the amount of cash which the number of shares of Company Common Stock previously represented by such Certificate shall have been converted into the right to receive pursuant to Section 2.01(c), and the Certificate so surrendered shall forthwith be canceled. In the event of a transfer of ownership of Company Common Stock that is not registered in the transfer records of the Company, payment of the Merger Consideration may be made to a person other than the person in whose name the Certificate so surrendered is registered if such Certificate shall be properly endorsed or otherwise be in proper form for transfer and the person requesting such payment shall pay any transfer or other similar Taxes required by reason of the payment of the Merger Consideration to a person other than the registered holder of such Certificate or establish to the reasonable satisfaction of Parent that such Tax has been paid or is not applicable. Until surrendered as contemplated by this Section 2.03(b), each Certificate shall be deemed at any time after the Effective Time to represent only the right to receive upon such surrender the Merger Consideration which the holder thereof has the right to receive in respect of such Certificate pursuant to this Article II. No interest shall be paid or will accrue on any cash payable to holders of Certificates pursuant to the provisions of this Article II.

(c)        No Further Ownership Rights in Company Common Stock.  All cash paid upon the surrender of Certificates in accordance with the terms of this Article II shall be deemed to have been paid in full satisfaction of all rights pertaining to the shares of Company Common Stock formerly represented by such Certificates. At the close of business on the day on which the Effective Time occurs, the stock transfer books of the Company shall be closed, and there shall be no further registration of transfers on the stock transfer books of the Surviving Corporation of the shares of Company Common Stock that were outstanding

 

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immediately prior to the Effective Time. If, after the Effective Time, any Certificate is presented to the Surviving Corporation for transfer, it shall be canceled against delivery of cash to the holder thereof as provided in this Article II.

(d)        Termination of the Exchange Fund.  Any portion of the Exchange Fund that remains undistributed to the holders of the Certificates on the date that is twelve months after the date on which the Effective Time occurs shall be delivered to the Surviving Corporation (or its designee), upon demand, and any holders of the Certificates who have not theretofore complied with this Article II shall thereafter look only to the Surviving Corporation for, and the Surviving Corporation shall remain liable for, payment of their claims for the Merger Consideration pursuant to the provisions of this Article II.

(e)        No Liability.  None of Parent, Merger Sub, the Company, the Surviving Corporation or the Paying Agent shall be liable to any person in respect of any cash from the Exchange Fund delivered to a public official in compliance with any applicable state, federal or other abandoned property, escheat or similar Law. If any Certificate shall not have been surrendered prior to the date on which the related Merger Consideration would escheat to or become the property of any Governmental Authority, any such Merger Consideration shall, to the extent permitted by applicable Law, immediately prior to such time become the property of the Surviving Corporation, free and clear of all claims or interest of any person previously entitled thereto.

(f)        Investment of Exchange Fund.  The Paying Agent shall invest the cash in the Exchange Fund as directed by Parent; provided, however, that such investments shall be in obligations of or guaranteed by the United States of America or any agency or instrumentality thereof and backed by the full faith and credit of the United States of America, in commercial paper obligations of a domestic issuer rated A-1 or P-1 or better by Moody’s Investors Service, Inc. or Standard & Poor’s Corporation, respectively, or in certificates of deposit, bank repurchase agreements or banker’s acceptances of commercial banks with capital exceeding $10.0 billion (based on the most recent financial statements of such bank that are then publicly available). Any interest and other income resulting from such investments shall be paid solely to the Surviving Corporation (or its designee). Nothing contained herein and no investment losses resulting from investment of the Exchange Fund shall diminish the rights of any holder of Certificates to receive the Merger Consideration or any holder of a Company Equity Award to receive the holder’s Equity Award Amount, in each case as provided herein.

(g)        Lost Certificates.  If any Certificate shall have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the person claiming such Certificate to be lost, stolen or destroyed and, if reasonably required by Parent, the posting by such person of a bond in such reasonable amount as Parent may direct as indemnity against any claim that may be made against it with respect to such Certificate, the Paying Agent shall deliver in exchange for such lost, stolen or destroyed Certificate the applicable Merger Consideration.

(h)        Withholding Rights.  Notwithstanding anything in this Agreement to the contrary, Parent, Merger Sub, the Surviving Corporation or the Paying Agent shall be entitled to deduct and withhold from the consideration otherwise payable pursuant to this Agreement such amounts as Parent, Merger Sub, the Surviving Corporation or the Paying Agent are required to deduct and withhold with respect to the making of such payment under the Internal Revenue Code of 1986 (the “Code”) or any provision of Tax Law. To the extent that

 

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amounts are so withheld and paid over to the appropriate Governmental Authority by Parent, Merger Sub, the Surviving Corporation or the Paying Agent, such withheld amounts shall be treated for all purposes of this Agreement as having been paid to the holder of the shares of Company Common Stock or the holder of the Company Equity Award, as the case may be, in respect of which such deduction and withholding was made by Parent, Merger Sub, the Surviving Corporation or the Paying Agent.

Section 2.04    Treatment of Company Equity Awards.    As soon as reasonably practicable following the date of this Agreement, and in any event prior to the Effective Time, the board of directors of the Company or any appropriate committee thereof (collectively, the “Company Board”) shall adopt such resolutions and take such other actions as may be required to provide that, at the Effective Time, all unvested or partially vested Company Equity Awards shall become fully vested and:

(a)        each unexercised Company Stock Option that is outstanding immediately prior to the Effective Time shall, at the Effective Time, be canceled, with the holder thereof becoming entitled to receive, on the date which the Effective Time occurs, an amount in cash, without interest, equal to (i) the excess, if any, of (A) the Merger Consideration over (B) the exercise price per share of Company Common Stock subject to such Company Stock Option multiplied by (ii) the number of shares of Company Common Stock subject to such Company Stock Option at the Effective Time;

(b)        each Company RSU that is outstanding immediately prior to the Effective Time shall, at the Effective Time, be canceled, with the holder thereof becoming entitled to receive, on the date which the Effective Time occurs, an amount in cash, without interest, equal to (i) the Merger Consideration multiplied by (ii) the number of shares of Company Common Stock subject to such Company RSU at the Effective Time;

(c)        each Company PSU that is outstanding immediately prior to the Effective Time shall be vested as to the number of shares of Company Common Stock issuable pursuant to such Company PSU (based upon an assumed attainment of the target level of performance applicable to such Company PSU) (the “PSU Shares”), and, at the Effective Time, canceled, with the holder thereof becoming entitled to receive, on the date which the Effective Time occurs, an amount in cash, without interest, equal to (x) the Merger Consideration multiplied by (y) the number of PSU Shares attributable to such Company PSU at the Effective Time; and

(d)        each Company Restricted Stock Award that is outstanding immediately prior to the Effective Time shall, at the Effective Time, be canceled, with the holder thereof becoming entitled to receive, on the date which the Effective Time occurs, an amount in cash, without interest, equal to (i) the Merger Consideration multiplied by (ii) the number of shares of Company Common Stock subject to such Company Restricted Stock Award at the Effective Time.

(e)        The payment of all Equity Award Amounts hereunder shall be subject to appropriate withholding for Taxes in accordance with Section 2.03(h), without duplication. The term “Equity Award Amounts” means, collectively, all amounts payable pursuant to this Section 2.04. The term “Company Stock Plan” means each of (i) the 2017 Incentive Compensation Plan, (ii) the 2012 Equity Incentive Plan and (iii) the 2003 Equity Incentive Plan, in each case, as amended and restated.

 

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Section 2.05    Treatment of Company ESPP.  During the period from the date of this Agreement to the Effective Time, the Company shall take all action necessary to ensure that (i) no new offering periods under the Company’s Employee Stock Purchase Plan (the “ESPP”) will commence during the period from the date of this Agreement through the Effective Time, (ii) that there will be no increase in the amount of payroll deductions permitted to be made by the participants under the ESPP during the current offering periods, except those made in accordance with payroll deduction elections that are in effect as of the date of this Agreement, (iii) no individuals shall commence participation in the ESPP during the period from the date of this Agreement through the Effective Time, (iv) if the Closing shall occur prior to the end of the offering period in existence under the ESPP on the date of this Agreement, a new exercise date shall be established under the ESPP, which date shall be no later than the business day immediately prior to the anticipated Closing Date (the “ESPP Cut-Off Date”), and (v) the amount of the accumulated contributions of each participant under the ESPP as of immediately prior to the Effective Time shall, to the extent not used to purchase Company ESPP Shares in accordance with the terms and conditions of the ESPP (as amended pursuant to this Section 2.05), be refunded to such participant as promptly as practicable following the ESPP Cut-Off Date (without interest). The accumulated contributions of the participants in the current offering periods shall be used to purchase shares of Company Common Stock as of no later than the ESPP Cut-Off Date, and the participants’ purchase rights under such offerings shall terminate immediately after such purchase. As of no later than the business day immediately prior to the Effective Time, the Company shall terminate the ESPP.

Section 2.06    Payment of Company Equity Awards.  As soon as practicable following the Effective Time, but in any event no later than fifteen calendar days following the Effective Time, the Surviving Corporation shall make by a payroll payment through the Surviving Corporation’s or Parent’s payroll provider, subject to Section 2.04(e), the Equity Award Amounts to the applicable holders thereof; provided, that any Equity Award Amount that is considered nonqualified deferred compensation under Section 409A of the Code shall be made at the time required under the applicable arrangement.

ARTICLE III

Representations and Warranties of the Company

Except (i) as disclosed in any report, schedule, form, statement or other document filed with, or furnished to, the Securities and Exchange Commission (the “SEC”) by the Company, or incorporated by reference into such document, in each case, after December 28, 2014 and publicly available prior to the date of this Agreement (collectively, the “Filed SEC Documents”), the relevance of which disclosure is reasonably apparent in the Filed SEC Documents and other than any disclosures contained under the captions “Risk Factors” or “Forward Looking Statements” and any other disclosures contained therein that are predictive, cautionary or forward looking in nature, but being understood that this clause (i) shall not be applicable to Section 3.03 or (ii) subject to Section 9.03(g), as set forth in the Company Disclosure Letter, the Company represents and warrants to Parent and Merger Sub as follows:

Section 3.01    Organization, Standing and Corporate Power.  Each of the Company and its Subsidiaries is duly organized and validly existing under the Laws of its jurisdiction of organization and has all requisite corporate or other entity power and authority to carry on its business as presently conducted, except (other than with respect to the Company’s due organization and valid existence) as would not, individually or in the aggregate, reasonably be

 

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expected to have a Material Adverse Effect. Each of the Company and its Subsidiaries is duly qualified or licensed to do business and is in good standing (where such concept is recognized under applicable Law) in each jurisdiction where the nature of its business or the ownership, leasing or operation of its properties makes such qualification or licensing necessary, other than where the failure to be so qualified, licensed or in good standing would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. True and complete copies of the Articles of Incorporation of the Company (the “Company Articles of Incorporation”) and the Bylaws of the Company (the “Company Bylaws”), in each case as in effect on the date of this Agreement, are included in the Filed SEC Documents.

Section 3.02    Subsidiaries.  Section 3.02 of the Company Disclosure Letter lists, as of the date of this Agreement, each Subsidiary of the Company and the jurisdiction of organization thereof. All the outstanding shares of capital stock of, or other equity interests in, each Subsidiary of the Company have been validly issued and are fully paid and nonassessable and are owned, directly or indirectly, by the Company free and clear of all pledges, liens, charges, mortgages, encumbrances or security interests of any kind or nature whatsoever (collectively, “Liens”), other than Permitted Liens. Except for its interests in its Subsidiaries, the Company does not own, directly or indirectly, any capital stock of, or other equity interests in, any corporation, partnership, joint venture, association or other entity. There are no options, warrants, rights, convertible or exchangeable securities, stock-based performance units, Contracts or undertakings of any kind to which any Subsidiary of the Company is a party or by which any of them is bound (i) obligating any such Subsidiary to issue, deliver or sell, or cause to be issued, delivered or sold, additional shares of capital stock or other voting securities of or equity interests in, or any security convertible or exchangeable for any shares of capital stock or other voting securities of or equity interest in, any Subsidiary of the Company, (ii) obligating any such Subsidiary to issue, grant or enter into any such option, warrant, right, security, unit, Contract or undertaking, or (iii) that give any person the right to receive any economic interest of a nature accruing to the holders of capital stock of any of the Company’s Subsidiaries.

Section 3.03    Capital Structure.

(a)        The authorized capital stock of the Company consists of 44,000,000 shares of Company Common Stock and 1,000,000 shares of undesignated stock. At the close of business on November 24, 2017 (the “Measurement Time”), (i) 15,530,075 shares of Company Common Stock were issued and outstanding, including no shares of Company Common Stock subject to restricted stock awards that were subject to service-based vesting or delivery requirements (the “Company Restricted Stock Awards”), (ii) 11,320 shares of Company Common Stock were reserved and available for issuance pursuant to the Company’s 2003 Equity Incentive Plan (the “2003 Plan”), all of which were subject to outstanding options to acquire shares of Company Common Stock (the “2003 Plan Options”), (iii) 463,354 shares of Company Common Stock were reserved and available for issuance pursuant to the Company’s 2012 Equity Incentive Plan (the “2012 Plan”), including (A) 132,156 shares of Company Common Stock were subject to outstanding options to acquire shares of Company Common Stock (the “2012 Plan Options”), (B) 266,215 shares of Company Common Stock were reserved and available for issuance subject to restricted stock unit awards that were subject to performance-based and service-based vesting, 133,106 of which would be issued based on the attainment of performance goals at target levels (the “2012 Plan PSUs”), and (C) 64,983 shares of Company Common Stock were subject to restricted stock unit awards that were subject to time-based vesting or delivery requirements

 

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(the “2012 Plan RSUs”), (iv) 1,936,431 shares of Company Common Stock were reserved and available for issuance pursuant to the Company’s 2017 Incentive Compensation Plan (the “2017 Plan” and, collectively with the 2003 Plan and the 2012 Plan, the “Company Incentive Plan”), including (A) 744 shares of Company Common Stock were subject to outstanding options to acquire shares of Company Common Stock (such options, together with the 2003 Plan Options and 2012 Plan Options and any options granted under the 2017 Plan after the Measurement Time, the “Company Stock Options”), (B) 2,590 shares of Company Common Stock reserved and available for issuance subject to restricted stock unit awards that were subject to performance-based and service-based vesting, 1,295 of which would be issued based on the attainment of performance goals at target levels (collectively with the 2012 Plan PSUs, the “Company PSUs”), and (C) 3,580 shares of Company Common Stock subject to restricted stock unit awards that were subject to time-based vesting or delivery requirements (together with the 2012 Plan RSUs, the “Company RSUs”), and (v) 140,076 shares of Company Common Stock were reserved and available for issuance pursuant to the ESPP (the “Company ESPP Shares” and, together with the Company Stock Options, Company RSUs, Company PSUs and Company Restricted Stock Awards, the “Company Equity Awards”). Except as set forth above, as of the Measurement Time, no shares of capital stock or other voting securities of or equity interests in the Company were issued, reserved for issuance or outstanding.

(b)        Section 3.03(b) of the Company Disclosure Letter sets forth each Company Equity Award outstanding as of the Measurement Time, including (to the extent applicable) the Company Stock Plan under which such Company Equity Award was granted, the price at which such Company Equity Award may be exercised (if any) and status (vested or unvested) of each such Company Equity Award. Since the Measurement Time, (x) there have been no issuances by the Company of shares of capital stock or other voting securities of or equity interests in the Company (including Company Equity Awards), other than issuances of shares of Company Common Stock pursuant to Company Equity Awards outstanding as of the Measurement Time or pursuant to the ESPP, and (y) there have been no issuances by the Company of options, warrants, rights, convertible or exchangeable securities, stock-based performance units or other rights to acquire shares of capital stock of the Company or other rights that give the holder thereof any economic interest of a nature accruing to the holders of Company Common Stock, other than issuances pursuant to Company Equity Awards outstanding as of the Measurement Time.

(c)        All outstanding shares of Company Common Stock are, and all such shares that may be issued prior to the Effective Time will be, when issued, duly authorized, validly issued, fully paid and nonassessable and not subject to preemptive rights. There are no bonds, debentures, notes or other indebtedness of the Company having the right to vote (or convertible into, or exchangeable for, securities having the right to vote) on any matters on which holders of Company Common Stock may vote (“Voting Company Debt”). Except for any obligations pursuant to this Agreement or as otherwise set forth above, as of the Measurement Time, there were no options, warrants, rights, convertible or exchangeable securities, stock-based performance units, Contracts, agreements, arrangements or undertakings of any kind to which the Company is a party or by which the Company is bound (i) obligating the Company to issue, deliver or sell, or cause to be issued, delivered or sold, additional shares of capital stock or other voting securities of or equity interests in, or any security convertible or exchangeable for any shares of capital stock or other voting securities of or equity interest in, the Company or of any of its Subsidiaries or any Voting Company Debt, (ii) obligating the Company to issue,

 

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grant or enter into any such option, warrant, right, security, unit, Contract, agreement, arrangement or undertaking, or (iii) that give any person the right to receive any economic interest of a nature accruing to the holders of Company Common Stock, and since the Measurement Time, none of the foregoing has been issued, agreed or entered into. There are no outstanding contractual obligations of the Company to repurchase, redeem or otherwise acquire any shares of capital stock or options, warrants, rights, convertible or exchangeable securities, stock-based performance units or other rights to acquire shares of capital stock of the Company, other than pursuant to the Company Stock Plans.

(d)        The Company does not have any shareholder rights or similar plan in effect.

Section 3.04    Authority; Recommendation.

(a)        The Company has all requisite corporate power and authority to execute and deliver this Agreement and to consummate the transactions contemplated by this Agreement, subject, in the case of the Merger, to receipt of the affirmative vote of the holders of not less than a majority of all outstanding shares of Company Common Stock entitled to vote pursuant to a vote at a special meeting of shareholders (the “Shareholder Approval”). The execution and delivery of this Agreement by the Company and the consummation of the transactions contemplated by, and compliance with the provisions of, this Agreement by the Company have been duly authorized by all necessary corporate action on the part of the Company, subject, in the case of the Merger, to (i) receipt of the Shareholder Approval and (ii) the preparation, execution and filing with the Secretary of State of Minnesota of the Articles of Merger as required by the MBCA. This Agreement has been duly executed and delivered by the Company and, assuming the due authorization, execution and delivery by each of Parent and Merger Sub, constitutes a legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, subject, as to enforceability, to bankruptcy, insolvency and other Laws of general applicability relating to or affecting creditors’ rights and to general equity principles.

(b)        The Company Board has duly and unanimously adopted resolutions, which as of the date of this Agreement have not subsequently been rescinded or modified in any way, (i) declaring that this Agreement and the transactions contemplated hereby, including the Merger, are advisable, fair to, and in the best interests of, the Company and its shareholders, (ii) approving this Agreement (including the Plan of Merger) and the transactions contemplated hereby, including the Merger (such approval having been made in accordance with the MBCA, including for purposes of Section 302A.613, Subd.1 and, assuming the accuracy of the representations and warranties of Parent and Merger Sub set forth in Section 4.08, Section 302A.673 thereof) and (iii) recommending that the Company’s shareholders approve this Agreement (such recommendations, the “Recommendation” and, such actions by the Company Board, the “Board Actions”).

Section 3.05     Non-Contravention.    The execution and delivery by the Company of this Agreement do not, and the consummation of the Merger and the other transactions contemplated by this Agreement and compliance with the provisions of this Agreement will not, conflict with, or result in any violation or breach of, or default (with or without notice or lapse of time, or both) under, or give rise to a right of termination, cancellation or acceleration of any obligation or to the loss of a benefit under, or result in the creation of any Lien (other than Permitted Liens) upon any of the properties or assets of the Company or any of its

 

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Subsidiaries under (other than any such Lien created as a result of any action taken by Parent or Merger Sub), any provision of (a) the Company Articles of Incorporation, the Company Bylaws or the comparable organizational documents of any of its Subsidiaries, or (b) subject to the filings and other matters referred to in the immediately following sentence, and assuming the accuracy of the representations and warranties of Parent and Merger Sub set forth in Section 4.08, (i) any Specified Contract to which the Company or any of its Subsidiaries is a party or by which any of their respective properties or assets are bound, (ii) any supranational, federal, national, state, provincial or local statute, law (including common law), ordinance, rule or regulation of any Governmental Authority, whether or not inside, outside, including or excluding the United States, Canada or any other country (“Law”) or any judgment, order or decree of any Governmental Authority, whether or not inside, outside, including or excluding the United States, Canada or any other country (“Judgment”), in each case applicable to the Company or any of its Subsidiaries or any of their respective properties or assets, or (iii) any Authorizations of the Company or its Subsidiaries, other than, in the case of clause (b) above, any such conflicts, violations, breaches, defaults, rights, losses or Liens that would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. No consent, approval, order, waiver or authorization of, action or nonaction by, registration, declaration or filing with, or notice to, any supranational, federal, national, state, provincial or local, government, any court of competent jurisdiction or any administrative, regulatory (including any stock exchange) or other governmental agency, commission or authority, whether or not inside, outside, including or excluding the United States, Canada or any other country (each, a “Governmental Authority”) is required to be obtained or made by or with respect to the Company or any of its Subsidiaries in connection with the execution and delivery of this Agreement by the Company or the consummation by the Company of the Merger or the other transactions contemplated by this Agreement, except for (A) compliance with and the filing of a premerger notification and report form by the Company under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the “HSR Act”), (B) compliance with and the filing with the SEC of a proxy statement in preliminary and definitive form relating to the Shareholders’ Meeting (such proxy statement, as amended or supplemented from time to time, the “Proxy Statement”), and the filing of such reports under, and such other compliance with, the Securities Exchange Act of 1934 (together with the rules and regulations promulgated thereunder, the “Exchange Act”) and the Securities Act as may be required in connection with this Agreement and the transactions contemplated by this Agreement, (C) the filing with the Secretary of State of Minnesota of the Articles of Merger as required by the MBCA and of appropriate documents with the relevant authorities of other jurisdictions in which the Company or any of its Subsidiaries is qualified to do business, (D) compliance with, and any filings or notices required under, the rules and regulations of the NASDAQ Global Select Market (“NASDAQ”), (E) any filings as may be required under Chapter 80B of the Minnesota Statutes and (F) such other consents, approvals, orders, waivers, authorizations, actions, nonactions, registrations, declarations, filings and notices the failure of which to be obtained or made would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

Section 3.06    SEC Documents; Financial Statements; Undisclosed Liabilities.

(a)        The Company has filed all material reports, schedules, forms, statements and other documents with the SEC required to be filed by the Company pursuant to the Securities Act of 1933 (together with the rules and regulations promulgated thereunder, the “Securities Act”) or the Exchange Act since December 28, 2014 (the “SEC Documents”).

 

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As of their respective effective dates (in the case of SEC Documents that are registration statements filed pursuant to the requirements of the Securities Act) and as of their respective dates of filing (in the case of all other SEC Documents), the SEC Documents complied as to form in all material respects with the requirements of the Securities Act, the Exchange Act, and the Sarbanes-Oxley Act of 2002, as the case may be, and the rules and regulations of the SEC promulgated thereunder applicable thereto, and except to the extent amended or superseded by a subsequent filing with the SEC prior to the date of this Agreement, as of such respective dates, none of the SEC Documents contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. None of the Company’s Subsidiaries is separately subject to the periodic reporting requirements of the Exchange Act. As of the date hereof, there are no outstanding or unresolved comments in comment letters from the SEC staff with respect to any of the SEC Documents. To the Knowledge of the Company, as of the date hereof, none of the SEC Documents is the subject of ongoing SEC review or outstanding SEC investigation.

(b)        Each of the audited consolidated financial statements and the unaudited quarterly financial statements (including, in each case, the notes thereto) of the Company included in the SEC Documents when filed complied as to form in all material respects with the published rules and regulations of the SEC with respect thereto, have been prepared in all material respects in accordance with generally accepted accounting principles (“GAAP”) (except, in the case of unaudited quarterly statements, to the extent permitted by Form 10-Q of the SEC or other rules and regulations of the SEC) applied on a consistent basis during the periods involved (except as may be indicated in the notes thereto) and fairly present in all material respects the consolidated financial position of the Company and its consolidated Subsidiaries as of the dates thereof and the consolidated results of their operations and cash flows for the periods then ended (subject, in the case of unaudited quarterly statements, to normal year-end adjustments and the absence of footnotes).

(c)        Except for matters reflected or reserved against in the most recent consolidated balance sheet of the Company (or the notes thereto) included in the Filed SEC Documents, neither the Company nor any of its Subsidiaries has any liabilities or obligations (whether absolute, accrued, contingent, fixed or otherwise) of any nature that would be required under GAAP, as in effect on the date of this Agreement, to be reflected on a consolidated balance sheet of the Company (including the notes thereto), except liabilities and obligations that (A) were incurred since the date of such balance sheet in the Ordinary Course of Business, (B) are incurred in connection with the transactions contemplated by this Agreement, or (C) would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

(d)        Internal Controls.

(i)        The Company and its Subsidiaries have established and maintained a system of internal control over financial reporting (as defined in Rule 13a-15 under the Exchange Act). Such internal controls are designed to provide reasonable assurance regarding the reliability of the Company’s financial reporting and the preparation of Company financial statements for external purposes in accordance with GAAP. Since December 25, 2016, neither the Company nor, to the Company’s Knowledge, the Company’s independent registered public accounting firm, has identified or been made aware of (x) any significant deficiencies and material weaknesses in the design or operation of the Company’s internal

 

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controls over financial reporting that are reasonably likely to adversely affect in any material respects the Company’s ability to record, process, summarize and report financial information, or (y) any fraud, whether or not material, that involves (or involved) the management or other employees of the Company who have (or had) a significant role in the Company’s internal controls over financial reporting.

(ii)        The Company has established and maintains disclosure controls and procedures (as such term is defined in Rule 13a-15 under the Exchange Act), which are designed to ensure that material information relating to the Company required to be included in reports filed under the Exchange Act, including its consolidated Subsidiaries, is made known to the Company’s principal executive officer and its principal financial officer, and such disclosure controls and procedures are effective in timely alerting the Company’s principal executive officer and its principal financial officer to all material information required to be disclosed by the Company in the reports that it files or submits to the SEC under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC.

(iii)        The Company is in compliance in all material respects with the applicable listing and corporate governance rules and regulations of NASDAQ. Since December 28, 2014, neither the Company nor any of its Subsidiaries has made any prohibited loans to any executive officer of the Company (as defined in Rule 3b-7 under the Exchange Act) or director of the Company. There are no outstanding loans or other extensions of credit made by the Company or any of its Subsidiaries to any executive officer (as defined in Rule 3b-7 under the Exchange Act) or director of the Company.

(e)        Neither the Company nor any of its Subsidiaries (x) has or is subject to any “Off-Balance Sheet Arrangement” (as defined in Item 303(a)(4)(ii) of Regulation S-K promulgated under the Securities Act), or (y) is a party to, or has any commitment to become a party to, any Contract relating to any material transaction or material relationship with, or material ownership or other material economic interest in, any variable interest entity.

(f)        Since December 28, 2014 through the date of this Agreement, to the Knowledge of the Company, (i) neither the Company nor any director, officer, auditor or accountant of the Company has received any written material complaint, allegation, assertion or claim that the Company or its Subsidiaries have engaged in illegal or fraudulent accounting or auditing practices and (ii) no attorney representing the Company, whether or not employed by the Company, has reported to the Company Board or any committee thereof or to any director or officer of the Company any evidence of a material violation of United States federal securities Laws and the rules and regulations of the SEC promulgated thereunder, by the Company or any of its officers or directors. As of the date of this Agreement, to the Knowledge of the Company, there are no SEC inquiries or investigations or other governmental inquiries or investigations pending or threatened, in each case regarding any accounting practices of the Company or any of its Subsidiaries or any malfeasance by any executive officer of the Company.

Section 3.07    Absence of Certain Changes or Events.  Between December 25, 2016 and the date of this Agreement, the Company and its Subsidiaries have conducted their businesses only in the Ordinary Course of Business and there has not been:

(a)        any change, effect, event, occurrence or fact that has had or would reasonably be expected to have a Material Adverse Effect;

 

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(b)        any declaration, setting aside or payment of any dividend on, or making of any other distribution (whether in cash, stock or property) in respect of, any capital stock of the Company;

(c)        any split, combination or reclassification of any capital stock of the Company or any issuance or the authorization of any issuance of any other securities in lieu of or in substitution for shares of capital stock of the Company;

(d)        any repurchase, redemption or other acquisition by the Company or any of its Subsidiaries of any shares of capital stock of the Company or any of its Subsidiaries or any options, warrants, rights, convertible or exchangeable securities, stock-based performance units or other rights to acquire such shares or other rights that give the holder thereof any economic interest of a nature accruing to the holders of such shares, other than (x) the acquisition by the Company of shares of Company Common Stock in connection with the surrender of shares of Company Common Stock by holders of Company Stock Options in order to pay the exercise price thereof, (y) the withholding of shares of Company Common Stock to satisfy Tax obligations with respect to awards granted pursuant to the Company Stock Plans, and (z) the acquisition by the Company of Company Stock Options, Company RSUs, Company PSUs and Company Restricted Stock Awards in connection with the forfeiture of such awards;

(e)        any change in accounting methods, principles or practices by the Company or any of its Subsidiaries materially affecting the consolidated assets, liabilities or results of operations of the Company, except as required (x) by GAAP (or any interpretation thereof), including pursuant to standards, guidelines and interpretations of the Financial Accounting Standards Board or any similar organization, or (y) by Law, including Regulation S-X under the Securities Act;

(f)        with respect to the Company or any of its Subsidiaries, any material election relating to Taxes (including any “check-the-box” election pursuant to Treasury Regulations Section 301.7701-3), any material amendment with respect to any material Tax Return, any settlement or compromise of any material Tax liability for an amount that exceeds the amount disclosed, reflected or reserved against in the financial statements contained in the Filed SEC Documents, any request for any rulings from or the execution of any closing agreement with any Governmental Authority (except in connection with a settlement of a Tax liability for an amount that does not exceed the amount disclosed, reflected or reserved against in the financial statements contained in the Filed SEC Documents), any surrender of any right to claim a material Tax refund, any change to an annual accounting period for Tax purposes, or any change of any material accounting method for Tax purposes, except, in each case, for actions taken in the Ordinary Course of Business;

(g)        the commencement of any new line of business or the opening by the Company or any of its Subsidiaries of any restaurants or the Company or any of its Subsidiaries otherwise engaging in any other operations, in each case, in any country in which they did not, as of December 28, 2014, have an owned or franchised restaurant or conduct other operations;

(h)        any change (other than an immaterial change) to the terms of the Company’s or any of its Subsidiaries’ policies or procedures with respect to its relationships with any of its Franchisees, including any system-wide or regional mandates relating to advertising and marketing, equipment, hardware or software, except in the Ordinary Course of Business; or

 

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(i)        except as required by applicable Law or the terms of any Company Benefit Plan set forth in the Company Disclosure Letter, (A) any granting to any director or member of the Company Executive Team of any increase in compensation (except in the Ordinary Course of Business), (B) any granting to any director or member of the Company Executive Team of any increase in severance or termination pay (except to the extent of any increase in severance or termination pay as a result of any increase in compensation in the Ordinary Course of Business), (C) any entry by the Company or its Subsidiaries into any employment, consulting, severance, retention or termination agreement or arrangement with any director or member of the Company Executive Team, (D) any establishing, adopting, entry into or amending in any material respect any collective bargaining agreement, (E) any establishing, adopting, entry into or amending in any material respect any Company Benefit Plan (except in the Ordinary Course of Business), or (F) any acting to accelerate any rights or benefits under any Company Benefit Plan.

Section 3.08    Litigation.  There is no suit, claim (or counterclaim), litigation, action, charge, complaint, arbitration, mediation, grievance or other proceeding brought, conducted or heard by or before any court or other Governmental Authority, arbitrator or mediator or arbitration or mediation panel (each, a “Litigation”) pending or, to the Knowledge of the Company, threatened in writing against the Company or any of its Subsidiaries that, individually or in the aggregate, would reasonably be expected to have a Material Adverse Effect. There is no Judgment outstanding against the Company or any of its Subsidiaries that, individually or in the aggregate, would reasonably be expected to have a Material Adverse Effect.

Section 3.09    Contracts.

(a)        Except for this Agreement and for Contracts filed or incorporated by reference as exhibits to the Filed SEC Documents, Section 3.09 of the Company Disclosure Letter sets forth a true and complete list of, as of the date of this Agreement:

(i)        each Contract that would be required to be filed by the Company as a “material contract” pursuant to Item 601(b)(10) of Regulation S-K under the Securities Act;

(ii)        each loan and credit agreement, note, debenture, bond, indenture and other similar Contract pursuant to which any Indebtedness of the Company or any of its Subsidiaries, in each case in excess of $3,000,000, is outstanding or may be incurred, other than any such Contract between or among any of the Company and any of its Subsidiaries and any letters of credit;

(iii)        each Contract (other than Franchise Agreements) to which the Company or any of its Subsidiaries is a party that by its terms calls for aggregate payments by or to the Company or any of its Subsidiaries of more than $3,000,000 over the remaining term of such Contract that may not be canceled by the Company or any of its Subsidiaries upon notice of 90 days or less without material penalty or other material liability to the Company or any of its Subsidiaries;

(iv)        each Contract to which the Company or any of its Subsidiaries is a party relating to the acquisition or disposition by the Company or any of its Subsidiaries of properties or assets, in each case, (A) that was entered into since December 28, 2014 for aggregate consideration of more than $3,000,000, except for acquisitions and dispositions of

 

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properties and assets in the Ordinary Course of Business, or (B) pursuant to which the Company or any of its Subsidiaries has continuing “earn-out” or other contingent payment obligations;

(v)        each Contract of the Company or any of its Subsidiaries that (A) grants a right of exclusivity to a geographic region, area of protection, right of first offer, right of first refusal or similar right with respect to any business or geographic region (“Exclusive Rights”), other than such rights set forth in Franchise Agreements entered into in the Ordinary Course of Business; (B) authorizes any person to grant others the right to license any trademark, service mark or other Intellectual Property owned by the Company or any of its Subsidiaries in any geographic area (“Master Franchise Rights”); (C) restricts the ability of the Company or any of its Affiliates (including post-Closing) to compete with any business or in any geographical area or to solicit customers (“Company Noncompete Restrictions”), other than such restrictions set forth in Franchise Agreements entered into in the Ordinary Course of Business; (D) would require the disposition of any material assets or line of business of the Company or any of its Subsidiaries or, after the Effective Time, of Parent or any of its Subsidiaries; (E) grants “most favored nation” status to, or is a “requirements” Contract with, a Principal Supplier or Specified Franchisee, in each case that, following the Merger, would apply to Parent or any of its Subsidiaries (including the Company or any of its Subsidiaries); or (F) prohibits or limits the right of the Company or any of its Subsidiaries to use, transfer, license, distribute or enforce any of their respective Owned Intellectual Property, other than limitations on enforcement arising from non-exclusive licenses of Owned Intellectual Property entered into in the Ordinary Course of Business; in each case under clauses (A)-(F) (and the defined terms therein) that limits in any material respect the operation of the Company and its Subsidiaries (taken as a whole) as currently conducted and that may not be canceled by the Company or any of its Subsidiaries upon notice of 90 days or less without material penalty or other material liability to the Company or any of its Subsidiaries;

(vi)        each Contract that is a settlement, conciliation or similar agreement (A) that is with any Governmental Authority, (B) pursuant to which the Company or any of its Subsidiaries is obligated after the date of this Agreement to pay consideration in excess of $3,000,000 (net of insurance proceeds actually received), or (C) that would otherwise reasonably be expected to limit in any material respect the operation of the Company or any of its Subsidiaries (or, to the Knowledge of the Company, Parent or any of its other Affiliates from and after the Closing) as currently operated;

(vii)        each Contract to which the Company or any of its Subsidiaries is a party involving the inbound or outbound licensing or grant of any right to use or register (or any consent to or agreement not to assert any rights with respect to the use or registration of) any Intellectual Property (except for (1) off-the-shelf licenses of commercially available software for less than $500,000 on an annual basis, (2) agreements between the Company or any of its Subsidiaries, on the one hand, and their employees or consultants, on the other hand, entered into in the Ordinary Course of Business, (3) non-material non-exclusive licenses entered into in the Ordinary Course of Business, and (4) any Franchise Agreement entered into in the Ordinary Course of Business);

(viii)        each Contract other than Franchise Agreements entered into in the Ordinary Course of Business that grants to any person any option, right of first offer or right of first refusal or similar right to purchase, lease, sublease, license, use, possess or occupy any assets material to the C