<PAGE>
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a)
OF THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant /X/
Filed by a party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy statement
/ / Definitive Additional Materials
/ / Soliciting Material under Rule 14a-12
TCBY ENTERPRISES, INC.
----------------------
(Name of Registrant as Specified in Its Charter)
N/A
---
(Name of Person(s) Filing Proxy statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/ / No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
Common Stock, par value $0.10 per share
(2) Aggregate number of securities to which transaction applies:
25,990,111
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined): $6.00 per
share in cash-out merger, plus the difference between $6.00 and the
exercise price of each share underlying an option to purchase shares
of TCBY common stock.
(4) Proposed maximum aggregate value of transaction: $139,420,014
(5) Total fee paid: $27,884
/X/ Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement no.:
(3) Filing Party:
(4) Date Filed:
<PAGE>
TCBY ENTERPRISES, INC.
425 West Capitol Avenue
Little Rock, Arkansas 72201
March 16, 2000
TO THE STOCKHOLDERS OF TCBY ENTERPRISES, INC:
You are cordially invited to attend a special meeting of stockholders of
TCBY Enterprises, Inc. to be held at 10:00 a.m., local time, on April 18, 2000,
at the DoubleTree Hotel, 424 West Markham, Little Rock, Arkansas.
As described in the accompanying proxy statement, at the special meeting
you will be asked to approve and adopt an agreement and plan of merger, dated as
of February 9, 2000, among TCBY, CI Merger Co., a wholly-owned subsidiary of
Capricorn Investors III, L.P., and Capricorn Investors III, L.P. If the merger
agreement is approved and the merger becomes effective, TCBY will become a
majority-owned subsidiary of Capricorn and you will receive $6.00 in cash for
each outstanding share of TCBY common stock you own immediately prior to the
effective time of the merger.
TCBY's board of directors has received an opinion of its financial advisor,
Stephens Inc., to the effect that, on the date of such opinion, and based upon
and subject to the matters set forth in the opinion, the merger consideration of
$6.00 per share to be received by the holders of TCBY common stock in the merger
was fair, from a financial point of view, to those holders.
The board of directors has unanimously approved the merger agreement, has
determined that the merger is advisable and in the best interests of TCBY and
its holders of common stock and recommends that stockholders vote "FOR" approval
and adoption of the merger agreement and the merger.
YOUR VOTE IS IMPORTANT. To assure your representation at the special
meeting, please complete, sign and date the enclosed proxy card and return it in
the enclosed prepaid envelope. This will allow your shares to be voted whether
or not you attend the meeting.
Detailed information concerning the proposed merger is set forth in the
accompanying proxy statement. I urge you to read the enclosed material carefully
and request that you promptly complete and return the enclosed proxy in the
enclosed return envelope, which requires no postage if mailed in the United
States. If you attend the special meeting, you may vote in person even if you
have previously returned your proxy. Your vote is important regardless of the
number of shares you own.
Sincerely,
/s/ Frank D. Hickingbotham
Frank D. Hickingbotham
Chairman of the Board and Chief
Executive Officer
This proxy statement is dated March 16, 2000 and was first mailed to
stockholders on or about March 17, 2000.
<PAGE>
TCBY ENTERPRISES, INC.
425 West Capitol Avenue
Little Rock, Arkansas 72201
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON APRIL 18, 2000
NOTICE IS HEREBY GIVEN that a special meeting of holders of common stock of
TCBY Enterprises, Inc. will be held at 10:00 a.m., local time, on April 18,
2000, at the DoubleTree Hotel, 424 West Markham, Little Rock, Arkansas, for the
following purposes:
(1) To approve and adopt an Agreement and Plan of Merger, dated as of February
9, 2000, among TCBY, CI Merger Co., a wholly-owned subsidiary of Capricorn
Investors III, L.P., and Capricorn Investors III, L.P., pursuant to which
CI Merger Co. will merge into TCBY and TCBY will survive the merger. In the
merger, holders of the outstanding shares of TCBY common stock (other than
TCBY and its subsidiaries, CI Merger Co. and holders of dissenting shares)
will receive $6.00 in cash, without interest thereon, for each share of
TCBY common stock held by them. Adoption of the merger agreement will also
constitute approval of the merger and the other transactions contemplated
by the merger agreement.
(2) To transact such other business as may properly come before the meeting or
any adjournments or postponements thereof.
The accompanying proxy statement describes the proposed merger in detail.
Only holders of TCBY common stock of record at the close of business on
March 14, 2000 are entitled to notice of and to vote at the meeting or any
adjournments or postponements thereof.
Stockholders who do not vote in favor of adopting the merger agreement and
who otherwise comply with the requirements of Delaware law will be entitled to
appraisal rights. A summary of the applicable Delaware law provision, including
the requirements a stockholder must follow in order to exercise his or her
appraisal rights, is contained in the accompanying proxy statement.
By order of the Board of Directors
/s/ William P. Creasman
William P. Creasman
Secretary
March 16, 2000
Little Rock, Arkansas
The form of proxy is enclosed. To assure that your shares will be voted at the
special meeting, please complete and sign the enclosed proxy and return it
promptly in the enclosed envelope. No postage is required if mailed in the
United States. Sending a proxy will not affect your right to vote in person if
you attend the special meeting.
Please do not send your common stock certificates at this time. If the merger is
consummated, you will be sent instructions regarding the surrender of your
certificates.
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
QUESTIONS AND ANSWERS ABOUT THE MERGER.................................... iii
TERM SHEET FOR THE MERGER AND THE MERGER AGREEMENT........................ 1
The Special Meeting................................................. 1
The Parties......................................................... 2
The Merger.......................................................... 3
Other Terms of the Merger Agreement................................. 5
THE SPECIAL MEETING....................................................... 8
General; Date; Place and Time....................................... 8
Purpose of the Special Meeting...................................... 8
Record Date......................................................... 8
Vote Required to Adopt the Merger Agreement......................... 8
Stock Ownership of Management; Voting Agreement..................... 9
Proxies............................................................. 9
THE PARTIES............................................................... 10
TCBY................................................................ 10
CI Merger Co........................................................ 10
Capricorn Investors III, L.P........................................ 10
THE MERGER................................................................ 11
General............................................................. 11
Conversion of Securities............................................ 11
Exchange of Securities.............................................. 12
Background of the Merger............................................ 12
Reasons for the Merger; Recommendation of the TCBY Board............ 16
Opinion of TCBY's Financial Advisor................................. 18
Certain Federal Income Tax Consequences of the Merger............... 21
Accounting Treatment of the Merger.................................. 22
Regulatory Filings and Approvals.................................... 22
Management, Operations and Ownership Structure following the
Merger.............................................................. 22
Public Trading Markets.............................................. 22
</TABLE>
i
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<TABLE>
<S> <C>
Interests of Certain Persons in the Merger......................... 22
Merger Financing................................................... 24
OTHER TERMS OF THE MERGER AGREEMENT...................................... 24
Treatment of Stock Options......................................... 24
Representations and Warranties..................................... 25
Conduct of TCBY's Business Prior to the Merger..................... 26
Payment of Dividends............................................... 27
Agreement Not to Solicit Other Offers.............................. 28
Certain Other Covenants and Agreements............................. 28
Conditions of the Proposed Merger.................................. 30
Termination........................................................ 31
Termination Fees................................................... 33
Amendment.......................................................... 35
VOTING AGREEMENT......................................................... 35
DISSENTERS' RIGHTS OF APPRAISAL.......................................... 36
PRINCIPAL STOCKHOLDERS................................................... 39
SECURITY OWNERSHIP OF MANAGEMENT......................................... 40
CERTAIN PENDING LITIGATION............................................... 41
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS................ 42
STOCKHOLDER PROPOSALS FOR NEXT ANNUAL MEETING............................ 42
AVAILABLE INFORMATION.................................................... 43
</TABLE>
Appendix A -- Agreement and Plan of Merger
Appendix B -- Voting Agreement
Appendix C -- Opinion of Stephens Inc.
Appendix D -- Section 262 of the Delaware General Corporation Law
ii
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QUESTIONS AND ANSWERS ABOUT THE MERGER
Q: What is the proposal that I will be voting on?
A: You are being asked to approve a merger agreement and merger. The
merger agreement provides that TCBY will merge with a newly-formed company which
is a wholly-owned subsidiary of Capricorn Investors III, L.P. As a result of the
merger, TCBY will become a majority-owned subsidiary of Capricorn.
Q: What will I receive in the merger?
A: If the merger is completed, you will receive $6.00 in cash for each
share of TCBY common stock that you own. You will not receive interest on
amounts paid to you in the merger.
Q: What rights do I have if I oppose the merger?
A: You may dissent from the merger and seek appraisal of the fair value
of your shares by complying with all of the Delaware law procedures explained
under the caption "DISSENTERS' RIGHTS OF APPRAISAL." If you are entitled to an
appraisal, the Delaware Court of Chancery will appraise the fair value of your
shares by taking into account all relevant factors, exclusive of any value
arising from the accomplishment or expectation of the merger.
Q: Why is the board of directors recommending that I vote for the merger
agreement?
A: After considering the approval of the merger, as well as the opinion
of its financial advisor, Stephens Inc., the board of directors unanimously
believes that the terms of the merger agreement are advisable and in the best
interests of stockholders of TCBY.
Q: What do I need to do now?
A: Please mail your signed proxy card in the enclosed return envelope as
soon as possible, so that your shares will be represented at the special
meeting.
Q: Should I send in my stock certificates now?
A: No. If the merger is completed, we will send you written instructions
for exchanging your share certificates.
Q: If my broker holds my shares in "street name", will my broker vote my
shares for me?
A: Your broker will vote your shares only if you provide instructions on
how to vote. You should follow the directions provided by your broker regarding
how to instruct your broker to vote your shares.
Q: When do you expect the merger to be completed?
A: We will complete the merger when all of the conditions to its
completion are satisfied or waived. These conditions are described in more
detail beginning on page 30 under the caption "--Conditions of the Proposed
Merger." The merger will become effective when we file a certificate of merger
with the State of Delaware. We are working toward completing the merger as
quickly as possible and hope to complete the merger during the second quarter of
2000, provided that all of the conditions to the merger can be satisfied within
this time period.
Q: Who can answer my questions?
A: If you have more questions about the merger, you should contact:
Stacy Duckett
Investor Relations
TCBY Enterprises, Inc.
425 West Capitol Avenue
Little Rock, Arkansas 72201
Telephone: 501-688-8229
iii
<PAGE>
TERM SHEET FOR THE MERGER AND THE MERGER AGREEMENT
This term sheet highlights selected information from this document and may
not contain all of the information that is important to you. To understand the
merger fully and for a more complete description of the legal terms of the
merger, you should carefully read this entire document and the documents we have
referred you to. The merger agreement is attached as Appendix A to this
document. We encourage you to read the merger agreement. It is the legal
document that governs the merger.
The Special Meeting
Date, Place and Time: The special meeting will be held at 10:00
a.m., local time, on April 18, 2000, at the
DoubleTree Hotel, 424 West Markham, Little
Rock, Arkansas.
Purpose of the Special
Meeting: At the special meeting, you will be asked to
approve and adopt an agreement and plan of
merger, dated as of February 9, 2000, among
TCBY Enterprises, Inc., CI Merger Co., a
wholly-owned subsidiary of Capricorn
Investors III, L.P., and Capricorn Investors
III, L.P. If the merger is completed, TCBY
will become a majority-owned subsidiary of
Capricorn and you will be entitled to receive
$6.00 in cash, without interest, for each
share of TCBY common stock you own. See "THE
SPECIAL MEETING -- Purpose of the Special
Meeting" on page 8.
Record Date: TCBY's board of directors has fixed the close
of business on March 14, 2000 as the record
date for determination of TCBY stockholders
entitled to notice of and entitled to vote at
the special meeting. See "THE SPECIAL
MEETING -- Record Date" on page 8.
Vote Required to Adopt the
Merger Agreement: The holders of a majority of the outstanding
shares of TCBY common stock must approve the
merger. You are entitled to one vote for each
share of TCBY common stock you owned on the
record date. See "THE SPECIAL MEETING -- Vote
Required to Adopt the Merger Agreement" on
page 8.
Stock Ownership of
Management; Voting
Agreement: At the close of business on the record date,
directors and executive officers of TCBY and
their affiliates were the beneficial owners
of an aggregate of 11,071,152 shares of TCBY
common stock, or 48.35% of the voting power
of the TCBY common stock. See "THE SPECIAL
MEETING -- Stock Ownership of Management;
Voting Agreement" on page 9.
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Frank D. Hickingbotham, Herren C. Hickingbotham
and F. Todd Hickingbotham executed a voting
agreement which grants to CI Merger Co. a proxy to
vote all of the shares of TCBY common stock owned
by the Hickingbothams for the approval and
adoption of the merger agreement. At the close of
business on the record date, the Hickingbothams
beneficially owned an aggregate of 10,728,332
shares of TCBY common stock, or approximately 47%
of the voting power of the TCBY common stock. For
a description of the terms of the voting
agreement, see "VOTING AGREEMENT" on page 35.
Proxies: Because adoption of the merger agreement and
approval of the merger require the affirmative
vote of the holders of a majority of the
outstanding shares of TCBY common stock as of the
record date, abstentions, failures to vote and
broker non-votes will have the same effect as a
vote against adoption of the merger agreement and
approval of the merger.
You may revoke your proxy at any time before it is
voted by:
. delivering a written notice of revocation of
proxy prior to the special meeting to William
P. Creasman, Secretary, TCBY Enterprises,
Inc., 425 West Capitol Avenue, Little Rock,
Arkansas 72201,
. delivering to TCBY a duly executed proxy
bearing a later date prior to the special
meeting, or
. attending the special meeting and voting in
person.
If you own your shares of TCBY common stock in
"street name," you should follow your broker's
instructions concerning how to change your vote.
You should not send in any stock certificates with
your proxies. A transmittal form with instructions
for the surrender of stock certificates for TCBY
common stock will be mailed to you as soon as
practicable after completion of the merger. For
additional information on voting proxies, see "THE
SPECIAL MEETING -- Proxies" on page 9.
The Parties
TCBY: TCBY primarily manufactures and sells TCBY
softserve frozen yogurt, hardpack frozen yogurt
and ice cream, and novelty frozen food products
through company-owned and franchised retail
stores, non-traditional locations, and the retail
grocery trade. See "THE PARTIES -- TCBY" on
2
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page 10.
CI Merger Co.: CI Merger Co. is a Delaware corporation and a
wholly-owned subsidiary of Capricorn Investors
III, L.P. See "THE PARTIES -- CI Merger Co." on
page 10.
Capricorn Investors III, L.P.: Capricorn Investors III, L.P. is a privately-
held limited partnership. An affiliate of
Capricorn Investors III, L.P. is the principal
stockholder of Mrs. Fields' Holding Company,
Inc. Mrs. Fields is one of the largest
retailers in the premium snack-food industry,
with cookies and pretzels as its major product
lines. Based on numbers of units, Mrs. Fields
is the largest retailer of baked on-premises
cookies and the second largest retailer of
baked on-premises pretzels in the United
States. Mrs. Fields operates and franchises
stores located predominantly in shopping malls,
and also licenses kiosks and carts at airports,
universities, stadiums, hospitals and office
building lobbies. See "THE PARTIES -- Capricorn
Investors III, L.P." on page 10.
The Merger
General: Under the merger agreement, CI Merger Co. will
merge into TCBY and the separate corporate
existence of CI Merger Co. will cease. If the
merger is completed, TCBY will become a
majority-owned subsidiary of Capricorn
Investors III, L.P. and you will be entitled to
receive $6.00 in cash for each share of TCBY
common stock you own. For a detailed discussion
of provisions contained in the merger agreement
see "THE MERGER" on page 11 and "OTHER TERMS OF
THE MERGER AGREEMENT" on page 24.
Exchange of Securities: After the effective time of the merger, each
certificate formerly representing TCBY common
stock, until surrendered and exchanged in
accordance with the terms of the merger
agreement, will be deemed for all purposes to
evidence the right to receive only the merger
consideration for the shares of common stock
represented. For a description of the
procedures to follow to exchange stock
certificates, see "THE MERGER -- Exchange of
Securities" on page 12.
Dissenters' Rights of
Appraisal: Any stockholder who does not wish to accept the
$6.00 per share in the merger has the right
under Delaware law to have the "fair value" of
his or her shares determined by the Delaware
Chancery Court. This "right of appraisal" is
subject to a number of restrictions and
technical requirements. Generally, in order to
exercise appraisal rights:
3
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. you must not vote in favor of the merger,
and
. you must make a written demand for
appraisal in compliance with Delaware law
before the vote on the merger.
Merely voting against the merger will not
protect your right of appraisal. Appendix D
to this proxy statement contains the Delaware
statutory provisions relating to your right
of appraisal. Failure to follow all of the
steps required by these provisions will
result in the loss of your right of
appraisal. The Delaware law requirements for
exercising appraisal rights are explained in
"DISSENTERS' RIGHTS OF APPRAISAL" on page 36.
Board Recommendation: The TCBY board of directors unanimously
determined that the merger agreement and the
transactions contemplated thereby are
advisable and in the best interests of TCBY
and its shareholders and unanimously approved
the merger agreement and the transactions
contemplated by the merger agreement. The
TCBY board unanimously recommends that the
shareholders of TCBY vote for its approval.
See "THE MERGER -- Reasons for the Merger;
Recommendation of the TCBY Board" on page 16.
Opinion of Financial Advisor: On February 9, 2000, Stephens Inc. delivered
its oral opinion, subsequently confirmed in
writing, to the TCBY board of directors that
as of such date, and based upon the
assumptions and subject to the limitations
set forth therein, the merger consideration
of $6.00 per share in cash to be received by
holders of TCBY common stock in the merger
was fair from a financial point of view to
such holders. For a description of the
written opinion of Stephens Inc., see "THE
MERGER -- Opinion of TCBY's Financial
Advisor" on page 18.
Tax Consequences of the
Merger: The receipt of cash by a stockholder of TCBY
pursuant to the merger will be a taxable
transaction for federal income tax purposes
and may also be taxable under applicable
state, local and foreign income and other tax
laws. To review the tax consequences to
stockholders, see "THE MERGER -- Certain
Federal Income Tax Consequences of the
Merger" on page 21.
Interests of Certain Persons
in the Merger: In considering the recommendation of the TCBY
board of directors with regard to the merger,
you should be aware that a number of TCBY
officers and directors have severance
agreements, benefit plans or other agreements
that provide them with interests in the
merger that are different from, and in
addition to, the interests of stockholders
generally. For a
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description of these arrangements, see "THE
MERGER -- Interests on Certain Persons in the
Merger" on page 22.
Merger Financing: The aggregate amount of funds needed to pay
the aggregate merger consideration and
Capricorn's related transaction costs is
estimated to be approximately $149.7 million.
Although Capricorn has not entered into
definitive financing agreements with any
third party financing source, based on
discussions to date with financing sources,
Capricorn expects to finance this amount from
the following sources:
. Borrowings of approximately $95.2
million, consisting of approximately $50
million of bank debt and approximately
$45.2 million of mezzanine debt and
bridge debt.
. Equity of approximately $33 million, of
which approximately $25.5 million will be
provided by Capricorn.
. The balance from cash of TCBY available
at the closing, including approximately
$3.0 million in net proceeds from the
sale of certain real property and other
assets of TCBY discussed under the
section titled "OTHER TERMS OF THE MERGER
AGREEMENT" on page 24.
CI Merger Co.'s obligation to consummate the
merger is conditioned on the receipt of the
above financing. For a description of these
financing arrangements, see "THE MERGER -
Merger Financing" on page 24.
Other Terms of the Merger Agreement
Treatment of Stock Options: At the effective time, holders of outstanding
options to purchase shares of TCBY common
stock under TCBY's 1992 Employee Stock Option
Plan or 1992 Non-Employee Directors Stock
Option Plan, if then exercisable, will be
entitled to receive $6.00 for each share
subject to an option upon payment of the
exercise price. See "OTHER TERMS OF THE
MERGER AGREEMENT -- Treatment of Stock
Options" on page 24.
Conditions to the Merger: Consummation of the merger is subject to
various conditions, including, among others:
. the approval of the merger by
stockholders at the special meeting;
. that no law has been enacted or
injunction entered which effectively
prohibits the merger;
. that all necessary approvals of
governmental authorities and all material
required consents of third parties have
5
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been obtained;
. that CI Merger Co.'s and TCBY's respective
representations and warranties in the
merger agreement are true and correct in
all material respects and the parties have
performed in all material respects their
respective obligations under the merger
agreement;
. that CI Merger Co. has received the
proceeds of debt financing for the merger
consideration upon similar terms to those
set forth in commitment letters delivered
to TCBY; and
. the sale of assets, land and real property
of the AIMCO division of TCBY's Riverport
Equipment and Distribution subsidiary for
no less than $3 million.
For a summary of the conditions to the
merger, see "OTHER TERMS OF THE MERGER
AGREEMENT -- Conditions of the Proposed
Merger" on page 30.
Termination: The merger agreement provides that, in
certain circumstances, either TCBY or CI
Merger Co. may terminate the merger agreement
without completing the merger, including
certain situations where TCBY enters into a
business combination with a party other than
CI Merger Co.
TCBY's rights to terminate the merger
agreement also include, but are not limited
to, situations where:
. holders of a majority of TCBY common stock
outstanding on the record date fail to
approve the merger agreement, and
. an event occurs that materially affects CI
Merger Co.'s ability to obtain debt
financing for the merger.
The ability of TCBY to effectively terminate
the merger agreement and pursue another
business combination is limited by the terms
of the voting agreement. See "VOTING
AGREEMENT" beginning on page 35.
CI Merger Co.'s rights to terminate the
merger agreement include, but are not limited
to, situations where:
. the TCBY board withdraws or modifies its
recommendation of the merger to TCBY
stockholders or approves any takeover
proposal from a party other than CI Merger
Co., and
. a tender offer or exchange offer for 50%
or more of the outstanding shares of
capital stock of TCBY is commenced prior
to the special meeting and the TCBY board
fails to recommend against acceptance
6
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of such offer.
For a summary of these events, see "OTHER
TERMS OF THE MERGER AGREEMENT -- Termination"
on page 31.
Termination Fees: The merger agreement provides that, in
certain circumstances, TCBY must pay a
termination fee to CI Merger Co. of $6.5
million. These circumstances include
situations where:
. TCBY enters into a business combination
with a party other than CI Merger Co., and
. TCBY's board of directors withdraws or
modifies its recommendation of the merger
to TCBY stockholders or approves any
takeover proposal from a party other than
CI Merger Co.
In addition, the merger agreement provides
that, in certain circumstances, CI Merger Co.
must pay a termination fee to TCBY of $1.65
million. These circumstances include
situations where:
. CI Merger Co. fails to comply with its
obligations in the merger agreement
relating to financing of the merger
consideration, and
. a material adverse effect on CI Merger
Co.'s ability to obtain financing of the
merger consideration occurs.
For a summary of the termination fees payable
by TCBY and CI Merger Co., see "OTHER TERMS
OF THE MERGER AGREEMENT -- Termination Fees"
on page 33.
7
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THE SPECIAL MEETING
General; Date; Place and Time
This proxy statement is being provided by, and the enclosed proxy is
solicited by and on behalf of, the board of directors of TCBY for use at the
special meeting of the holders of TCBY's common stock.
The special meeting is scheduled to be held as follows:
Tuesday, April 18, 2000
10:00 a.m., local time
The DoubleTree Hotel
424 West Markham
Little Rock, Arkansas 72201
Purpose of the Special Meeting
The special meeting is being held so that stockholders of TCBY may consider
and vote upon a proposal to approve and adopt the merger agreement and to
transact any other business that is properly brought before the special meeting
or any postponement or adjournment. Adoption of the merger agreement will
constitute approval of the merger and the other transactions contemplated by the
merger agreement.
If the merger agreement is approved and the merger becomes effective, CI
Merger Co. will merge into TCBY and TCBY will become a majority-owned subsidiary
of Capricorn Investors III, L.P. You will receive $6.00 in cash for each share
of TCBY common stock that you own. The cash merger consideration will not be
paid in exchange for shares of TCBY common stock which are held in the treasury
of TCBY or any of its subsidiaries, owned by CI Merger Co. or held by dissenting
stockholders who seek appraisal of the fair value of their shares and comply
with all of the Delaware law procedures explained on pages 36 to 38.
Record Date
TCBY's board of directors has fixed the close of business on March 14, 2000
as the record date for determination of TCBY stockholders entitled to notice of
and entitled to vote at the special meeting. On the record date, there were
27,908,646 shares of TCBY common stock outstanding (inclusive of 5,012,509
treasury shares), held by approximately 4,228 holders of record.
Vote Required to Adopt the Merger Agreement
A majority of the voting power of the outstanding shares of TCBY common
stock entitled to vote at the special meeting must be represented, either in
person or by proxy, to constitute a quorum at the special meeting. Broker non-
votes and shares as to which a stockholder abstains will be included in
determining whether there is a quorum at the special meeting.
The holders of a majority of the outstanding shares of TCBY common stock
must approve the merger. You are entitled to one vote for each share of TCBY
common stock you owned on the record date on each proposal to be presented to
stockholders at the special meeting.
8
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Stock Ownership of Management; Voting Agreement
At the close of business on the record date, directors and executive
officers of TCBY and their affiliates were the beneficial owners of an aggregate
of 11,071,152 shares of TCBY common stock, or 48.35% of the voting power of the
TCBY common stock then outstanding.
At the close of business on the record date, Frank D. Hickingbotham, Herren
C. Hickingbotham and F. Todd Hickingbotham owned an aggregate of 10,728,332
shares of TCBY common stock, or approximately 47% of the voting power of the
TCBY common stock. Pursuant to a voting agreement with CI Merger Co., the
Hickingbothams have granted to CI Merger Co. a proxy to vote all of the shares
of TCBY common stock owned by them (1) for the approval and adoption of the
merger agreement, and (2) against any other takeover proposal (as defined in the
merger agreement). See "VOTING AGREEMENT" on page 35 for a description of the
terms of the voting agreement.
Proxies
All shares of TCBY common stock represented by properly executed proxies
received before or at the special meeting will, unless the proxies are revoked,
be voted in accordance with the instructions indicated thereon. If no
instructions are indicated on a properly executed proxy, the shares will be
voted "FOR" adoption of the merger agreement. You are urged to mark the box on
the proxy to indicate how to vote your shares.
If a properly executed proxy is returned and the stockholder has abstained
from voting on adoption of the merger agreement, the TCBY common stock
represented by the proxy will be considered present at the special meeting for
purposes of determining a quorum and for purposes of calculating the vote, but
will not be considered to have been voted in favor of adoption of the merger
agreement. Similarly, if an executed proxy is returned by a broker holding
shares of TCBY common stock in street name which indicates that the broker does
not have discretionary authority to vote on adoption of the merger agreement,
the shares will be considered present at the meeting for purposes of determining
the presence of a quorum and calculating the vote, but will not be considered to
have been voted in favor of adoption of the merger agreement. Your broker will
vote your shares only if you provide instructions on how to vote by following
the information provided to you by your broker.
Because adoption of the merger agreement and approval of the merger require
the affirmative vote of the holders of a majority of the outstanding shares of
TCBY common stock as of the record date, abstentions, failures to vote and
broker non-votes will have the same effect as a vote against adoption of the
merger agreement and approval of the merger.
TCBY does not expect that any matter other than adoption of the merger
agreement will be brought before the special meeting. If, however, other
matters are properly presented, the persons named as proxies will vote in
accordance with their judgment with respect to those matters, unless authority
to do so is withheld in the proxy.
You may revoke your proxy at any time before it is voted by:
. delivering a written notice of revocation of proxy prior to the special
meeting to William P. Creasman, Secretary, TCBY Enterprises, Inc., 425 West
Capitol Avenue, Little Rock, Arkansas 72201,
. delivering to TCBY a duly executed proxy bearing a later date prior to the
special meeting, or
. attending the special meeting and voting in person.
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The presence of a stockholder at the special meeting will not in and of itself
automatically revoke such stockholder's proxy. If you own your shares of TCBY
common stock in "street name," you should follow your broker's instructions
concerning how to change your vote.
TCBY will incur the expenses incurred in connection with the printing and
mailing of this proxy statement. TCBY will also request banks, brokers and
other intermediaries holding shares beneficially owned by others to send this
proxy to and obtain proxies from the beneficial owners and will reimburse the
holders for their reasonable expenses in so doing.
You should not send in any stock certificates with your proxies. A
transmittal form with instructions for the surrender of stock certificates for
TCBY common stock will be mailed to you as soon as practicable after completion
of the merger.
THE PARTIES
TCBY
TCBY manufactures and sells TCBY softserve frozen yogurt, hardpack frozen
yogurt and ice cream, and novelty frozen food products through company-owned and
franchised retail stores, non-traditional locations and the retail grocery
trade. Non-traditional locations include airports, schools, hospitals,
convenience stores, travel plazas, and locations in conjunction with petroleum
stores and other food concepts. In addition, TCBY sells a variety of frozen
packaged products and other specialty dairy food products to private label
customers. TCBY sells equipment related to the food service industry and
develops locations under the Juice Works brand in conjunction with the TCBY
brand.
The principal executive offices of TCBY are located at 425 West Capitol
Avenue, Little Rock, Arkansas 72201, and its telephone number is (501) 688-8229.
CI Merger Co.
CI Merger Co. is a wholly-owned subsidiary of Capricorn Investors III, L.P.
Capricorn Investors III, L.P. formed CI Merger Co. solely for the purpose of
effecting the merger.
Capricorn Investors III, L.P.
Capricorn Investors III, L.P. is a privately-held limited partnership. An
affiliate of Capricorn is the principal stockholder of Mrs. Fields. Mrs. Fields
is one of the largest retailers in the premium snack-food industry, with cookies
and pretzels as its major product lines. Based on numbers of units, Mrs. Fields
is the largest retailer of baked on-premises cookies and the second largest
retailer of baked on-premises pretzels in the United States. Mrs. Fields
operates and franchises stores located predominantly in shopping malls, and also
licenses kiosks and carts at airports, universities, stadiums, hospitals and
office building lobbies.
The principal executive offices of Capricorn are located at 30 East Elm
Street, Greenwich, Connecticut 06830, and its telephone number is (203) 861-
6600.
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THE MERGER
The following is a summary of certain material provisions of the merger
agreement, which is attached as Appendix A to this proxy statement. We urge
stockholders to read Appendix A in its entirety.
General.
The merger agreement provides that, at the effective time of the merger, CI
Merger Co. will be merged into TCBY, TCBY will continue as the surviving
corporation and the separate existence of CI Merger Co. will cease.
Pursuant to the provisions of the merger agreement, the merger will become
effective when a certificate of merger executed in accordance with the Delaware
General Corporation Law is filed with the Secretary of State of the State of
Delaware, or at another time as CI Merger Co. and TCBY agree and specify in the
certificate of merger.
Conversion of Securities.
As of the effective time of the merger, without any further action on the
part of CI Merger Co., TCBY or the holders of any securities of CI Merger Co. or
TCBY:
. Each issued and outstanding share of common stock of CI Merger Co. will be
converted into one share of common stock of the surviving corporation;
. All shares of TCBY common stock held in the treasury of TCBY or by any
wholly-owned subsidiary of TCBY and any shares owned by CI Merger Co. will
be canceled and no consideration will be delivered for the shares; and
. Each other share of TCBY common stock issued and outstanding prior to the
effective time of the merger (other than shares as to which dissenters'
rights of appraisal have been perfected) will be converted into the right
to receive from the surviving corporation $6.00 in cash, without interest.
These shares of TCBY common stock will no longer be outstanding and will
automatically be canceled and retired and each holder of a certificate
representing any of these shares shall cease to have any rights except the
right to receive the merger consideration, less any applicable withholding
taxes, upon surrender of the stock certificate that formerly evidenced the
shares of TCBY common stock.
As a result of the actions described above, at the effective time of the merger,
TCBY will become a majority-owned subsidiary of Capricorn.
TCBY stockholders who do not vote in favor of the merger or consent thereto
in writing and who have demanded properly in writing appraisal for their shares
of TCBY common stock in accordance with Delaware law and who otherwise comply
with all of the provisions of Delaware law regarding statutory appraisal rights,
have the right to seek a determination of the fair value of their shares of TCBY
common stock and cash payment for those shares in lieu of the merger
consideration to which they would otherwise be entitled.
Shares of TCBY common stock that are issued and outstanding immediately
prior to the effective time of the merger and that are held by stockholders who
have not voted the shares in favor of the merger and who have complied with the
requirements of Section 262 of the Delaware General Corporation Law
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will represent only the right to receive payment for the shares as provided
under Section 262, and shall not be converted into the merger consideration,
unless the holder fails to perfect or effectively withdraws or loses the
stockholder's right to receive payment for the shares under Section 262. If the
holder fails to perfect, effectively withdraws or loses this right, the
stockholder's shares of common stock thereupon will be deemed, as of the
effective time of the merger, to be converted into the merger consideration. See
the section entitled "DISSENTERS' RIGHTS OF APPRAISAL" in this proxy statement
for further information.
Exchange of Securities
As soon as reasonably practicable after the merger, a paying agent selected
by CI Merger Co. and reasonably acceptable to TCBY will mail a letter of
transmittal to each holder of record of TCBY common stock immediately prior to
the effective time of the merger for use in forwarding the holder's TCBY common
stock certificates for surrender and exchange for the merger consideration to
which the stockholder has become entitled. After receipt of the letter of
transmittal, each holder of certificates that represented TCBY common stock
prior to the merger should surrender the certificates together with the signed
letter of transmittal duly executed, and any other required documents as set
forth in the letter of transmittal to the paying agent, and each holder will
receive in exchange the merger consideration to which that holder is entitled.
The letter of transmittal will be accompanied by instructions specifying other
details of the exchange. Thereafter, the stockholder will be entitled to receive
an amount of cash equal to the product of the number of shares of TCBY common
stock formerly represented by that stockholder's certificate(s) and $6.00. No
interest will be paid on the cash payable upon surrender of any certificate(s).
The paying agent will be entitled to deduct and withhold from the merger
consideration those amounts as the paying agent is required to deduct and
withhold from the merger consideration as may be required by any applicable tax
laws.
After the effective time of the merger, each certificate formerly
representing TCBY common stock, until surrendered and exchanged, will be deemed
for all purposes to evidence the right to receive only the merger consideration
for the shares of common stock represented.
After the merger, there will be no transfers of shares of TCBY common stock
on the stock transfer books of TCBY. If, after the completion of the merger,
certificates that previously represented shares of TCBY common stock are
presented for transfer, they will be canceled and exchanged for the merger
consideration under the terms of the merger agreement.
Background of the Merger
Faced with increasing competition and a declining stock price during the
past several years, the management of TCBY has explored various strategic
alternatives or alliances in an effort to increase shareholder value.
Alternatives considered included, among other things, mergers with strategic
partners, complimentary acquisitions and strategic alliances.
During 1998, a competitor of TCBY informally offered to acquire the shares
of TCBY common stock owned by Frank Hickingbotham, the chairman of TCBY's board
of directors and its Chief Executive Officer, and his family, which shares
represent nearly a controlling interest in TCBY. Shares of TCBY common stock
not held by members of the Hickingbotham family would not have been acquired in
this proposed transaction. After significant discussions that occurred during
the summer of 1998, the Hickingbotham family declined to engage in this
transaction, principally due to adverse changes in the offeror's stock price
that made doubtful the financing of the acquisition of TCBY common stock.
Moreover, the Hickingbotham family was concerned, after repeated requests by the
Hickingbotham
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family to the offeror to extend its offer to all outstanding shares of TCBY
common stock, that the proposed transaction could adversely affect the interests
of the remaining TCBY stockholders.
After these discussions in 1998, management of TCBY determined to conduct
more comprehensive efforts to locate a buyer or strategic partner for TCBY.
Throughout 1998 and 1999, management considered and informally contacted a
number of potentially interested parties, primarily those operating in TCBY's
industry or those who might derive strategic benefit from ownership of a
substantial equity interest in TCBY. Moreover, TCBY had discussions with
various investment banking firms of national reputation, including Stephens Inc.
and other firms, about possible strategic transactions. Management of TCBY was
advised by one nationally prominent investment banking firm that the most
likely, if not the only, prospective buyer for TCBY would be a company already
operating in a similar or complementary business, and that there were few
companies fitting these characteristics that had the willingness or ability to
engage in a control transaction involving TCBY.
One alternative involved a company with which TCBY has a substantial co-
branding relationship. Management of TCBY pursued discussions with management
of this co-branding partner for several months in 1998 and 1999. Options
discussed included both a minority and controlling investment by this partner in
TCBY common stock. After several discussions and the exchange of financial and
operating information, the potential investor in the spring of 1999 declined to
further consider any investment in TCBY common stock.
The action of the TCBY board of directors to approve the merger agreement
and the transactions contemplated thereby was the culmination of a process that
began in the fall of 1999 when TCBY received an indication of interest from
Capricorn regarding a potential acquisition or other strategic transaction with
TCBY. While TCBY currently maintains a co-branding relationship with an
affiliate of Capricorn with respect to the sale of both companies' products at a
single TCBY franchise, there were no existing relationships, agreements or
understandings between TCBY, Capricorn or its affiliates prior to this contact.
On October 6, 1999, TCBY's board of directors met with certain members of
senior management, Stephens Inc., an investment banking firm that has
historically provided investment banking services to TCBY, and Kutak Rock LLP,
TCBY's legal counsel, to discuss Capricorn's inquiry. Representatives of
Stephens discussed with the TCBY board of directors Capricorn's business,
financial capabilities, and strategic reasons for its interest in TCBY.
Stephens noted that Capricorn had not submitted a definitive proposal regarding
an acquisition transaction and that it would be necessary to engage in further
discussions with Capricorn to obtain a better understanding of Capricorn's
intentions.
The board of directors approved the engagement of Stephens Inc. to act as
its financial advisor to evaluate Capricorn's indication of interest and to
advise it concerning other possible transactions available to TCBY. The board of
directors also engaged Kutak Rock, LLP, as its counsel. It also considered
whether to publicly announce its engagement of Stephens Inc. The board of
directors was advised that such a public disclosure is often made to ensure that
all prospective bidders were made aware of TCBY's efforts in this regard.
Management of TCBY advised that such public disclosure (i) may not be desirable
in that it could have a negative impact on TCBY's employee and franchisee
relations and thus on its operations, and (ii) may be unnecessary since there
was a very low likelihood that a bona fide prospective bidder existed who would
not be contacted directly by TCBY or its representatives about a potential
transaction involving the company. Moreover, the board of directors was advised
that such a public disclosure if not followed by a control transaction of some
kind often results in adverse changes in a company's stock price and in its
ability to conclude subsequent favorable negotiations regarding a control
transaction. Based upon this advice the TCBY board of directors concluded not to
publicly announce Stephens' engagement.
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Capricorn advised Stephens in early discussions that it would eventually be
unwilling to complete its investigations of TCBY's operations and finalize its
financing and the relevant transaction agreements without some agreement by TCBY
that it would refrain from efforts to find an alternative strategic partner.
Accordingly, the TCBY board of directors directed TCBY management and Stephens
to identify any entity who would likely be a potential buyer for all shares of
TCBY common stock and, with the assistance of Stephens, to contact these
prospective bidders to determine their interest in considering a control
transaction involving TCBY. During the next six weeks, representatives of
Stephens and TCBY management completed a list of 14 such companies, contacted
each of these companies and engaged them in confidential discussions as to a
potential acquisition transaction with TCBY. The list included national and
regional restaurant, dessert and dairy companies and selected financial buyers.
Also during this period Stephens continued its attempts to obtain from
Capricorn a more definitive proposal. As part of this process, and following
the execution of a confidentiality agreement between Capricorn and TCBY,
Capricorn was afforded the opportunity to review confidential business and
financial information regarding TCBY and was allowed to perform other extensive
off-site due diligence.
On November 17, 1999, TCBY's board of directors met and received a
presentation from Stephens and TCBY management regarding the results of the
discussions that had occurred with the various parties that had been contacted
regarding a potential transaction with TCBY. Stephens and members of TCBY
management informed the board of directors that all of the 14 parties contacted
by Stephens declined to pursue a potential acquisition transaction with TCBY.
Stephens then provided the TCBY board of directors with an overview of the
two specific proposals that had been received - one from Capricorn and another
from a bidder who had previously contacted TCBY. Capricorn proposed to acquire
all of the outstanding shares of TCBY common stock at $6.00 per share in cash,
subject to a number of conditions, including the receipt of adequate financing
for the transaction. Capricorn's proposal outlined a plan for financing the
purchase price, however, it did not identify specific lenders or investors who
would be willing to commit to such financing. Stephens described for the board
of directors the perceived benefits of the transaction to Capricorn and its
affiliated companies and the impact that those benefits were likely to have on
the ability of Capricorn to obtain the required financing for the transaction.
Stephens also advised the board of directors that in order to fully assess
the Capricorn proposal it would be necessary to (1) investigate the financing
proposed by Capricorn and (2) make a recommendation as to the ability of
Capricorn to procure such financing.
Unlike the Capricorn proposal, the other bidder, a foreign entity engaging
primarily in coffee production with no substantial operations in the United
States, proposed only to purchase the Hickingbotham family's shares for $6.00
per share, with the remaining shareholders of TCBY retaining their present
interest in TCBY, and subsequently merge its operations into TCBY. This
transaction was also contingent upon receipt of financing, however, the bidder
specified no plan for obtaining such financing. As with the Capricorn proposal,
Stephens indicated that it would be necessary to fully assess the viability of
the bidder's financing plans. Stephens also indicated that despite repeated
requests and demands, the bidder refused to consider the purchase of 100% of the
TCBY common stock.
The TCBY board of directors, after advice from financial and legal
representatives, expressed concern over a proposal that contemplated a purchase
of only the Hickingbotham family shares in light of Capricorn's proposal to
acquire all outstanding shares.
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The board of directors also discussed the Capricorn proposal. Various
board members expressed concern over the financing contingency and the ability
of Capricorn to consummate the transaction. The board of directors further
discussed the importance of having Stephens attempt to mitigate the financing
risks by engaging in extensive discussions with Jefferies & Co. ("Jefferies"),
Capricorn's financial advisor, and prospective lenders identified by Jefferies,
in order to fully assess the likelihood that Capricorn would be able to procure
the required financing for the transaction. Capricorn and TCBY also discussed,
in an effort to mitigate the financing risks, the possibility of reducing the
amount of cash to be received by TCBY stockholders and including in the merger
consideration a preferred equity interest in the surviving corporation.
The board of directors then authorized Stephens, senior management and
Kutak Rock LLP to (1) commence negotiations (on an exclusive basis, if
necessary) of a definitive agreement with Capricorn and (2) assess, mitigate or
narrow the financing risks or contingency related to the transaction. The board
of directors also authorized and instructed Stephens to continue discussions
with other parties, including the other bidder, as appropriate, in order to
fully preserve TCBY's options.
Thereafter, Stephens continued further discussions with Capricorn in order
to obtain more information regarding Capricorn's financing plans and prospective
lenders. On or about November 19, 1999, Capricorn informed Stephens that it was
prepared to begin negotiations with a prospective lender group. However, given
the significant time and expense that Capricorn had incurred to date, as well
as, the additional efforts and costs that would be required to complete the
process, Capricorn indicated that it would not proceed further without an
exclusive negotiating agreement from TCBY. TCBY granted Capricorn exclusive
negotiating rights through December 15, 1999.
On December 17, 1999, the TCBY board of directors met to consider progress
on the Capricorn transaction. Stephens provided the board of directors with a
detailed presentation regarding Capricorn's financing plan including the names
of institutions that had submitted financing proposals or engaged in discussions
with Capricorn. Stephens stated that while it believed Capricorn was the most
attractive strategic party available, more specific financing plans should be in
place before the board of directors authorizes the final negotiation of a
definitive merger agreement. Upon Stephens' recommendation, the board of
directors authorized senior management, Stephens and Kutak Rock LLP to continue
with discussions and negotiations with Capricorn and its representatives on an
exclusive basis through January 17, 2000, or for such additional limited time as
they deemed reasonable, necessary and appropriate to allow Capricorn to procure
final financing commitments.
Between December 20, 1999 and February 2, 2000, Capricorn continued its
discussion with prospective lenders. Additionally, during this period
discussions continued between Kutak Rock LLP and Skadden, Arps, Slate, Meagher &
Flom LLP, counsel for Capricorn, in respect of a draft merger agreement.
Capricorn's counsel proposed a form of voting agreement to be executed between
Capricorn and Frank D. Hickingbotham, Herren C. Hickingbotham and F. Todd
Hickingbotham pursuant to which the Hickingbothams would grant Capricorn a proxy
to vote their approximately 47% of the voting power of TCBY in favor of a merger
with Capricorn. Capricorn indicated that execution of such voting agreement
would be a condition to its execution of a merger agreement to acquire TCBY.
On February 2, 2000, Capricorn and Jefferies delivered form commitment
letters from certain of the lenders who were proposing to finance the
transaction. Additionally, Capricorn indicated that if the Hickingbotham family
would agree to purchase the assets of TCBY's restaurant equipment business
(known as AIMCO), it believed it could fill the remainder of the financing
shortfall by way of additional equity and debt investments from its partners and
co-investors. The parties discussed the termination provisions contained in the
draft merger agreement including the termination fees to be paid by the parties
in the event the transaction did not close. Capricorn reiterated its condition
that the Hickingbotham
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family execute a voting agreement and that such voting agreement grant Capricorn
authority to vote not only in favor of a merger with Capricorn, but also,
against any superior takeover proposal presented to shareholders in the event
the Capricorn merger agreement was terminated by the TCBY board of directors to
pursue such superior proposal.
Between February 3 and February 9, 2000, the parties continued to negotiate
the terms of the merger agreement. On the morning of February 9, 2000, Capricorn
and Jefferies delivered commitment letters, executed by the lenders, for the
financing of the transaction.
On the evening of February 9, 2000, the TCBY board of directors convened a
meeting. Representatives of Stephens provided the board of directors with a
summary of the transaction, including a description of the various components of
Capricorn's proposed financing and the terms of the commitment letters received
from lenders. Stephens also provided financial and valuation analysis to the
board of directors. Representatives of Kutak Rock LLP then specifically
described the terms of the merger agreement with particular emphasis on the
termination provisions and the practical limitations that the terms of the
voting agreement would place on the board of directors' ability to consider a
superior proposal to purchase TCBY. The board of directors determined that
based on prior efforts of Stephens and senior management there were no other
likely bidders who would pay a higher price for all shares of TCBY common stock
than the $6.00 per share offered by Capricorn. The board of directors also
reviewed and discussed the other matters described below under "-- Reasons for
the Merger; Recommendation of the TCBY Board."
Stephens then delivered its oral opinion to the TCBY board of directors
(subsequently confirmed by delivery of a written opinion dated February 9, 2000)
that the $6.00 per share price to be paid to the TCBY shareholders was fair from
a financial point of view. Mr. Frank Hickingbotham stated to the board of
directors that, although he did not personally have an interest in owning the
AIMCO business, at the request of Capricorn in order to facilitate Capricorn's
financing, he would be willing to purchase the business for $3 million in cash,
conditional upon the closing of the merger transaction with Capricorn. Both
Stephens and senior management stated to the board of directors that they
thought the $3 million purchase price to be paid by Mr. Hickingbotham for the
AIMCO business was a price no less favorable to TCBY than that which it would
have obtained from an unrelated third party under the same time constraints.
After further deliberation with respect to the terms, conditions and
provisions of the transaction, the TCBY board of directors approved and
authorized the execution of the merger agreement. The board of directors also
approved (without the participation of the Hickingbotham family) the sale of the
AIMCO business to Mr. Hickingbotham for $3.0 million, conditional upon the
closing of the merger. Later that evening TCBY, CI Merger Co. and Capricorn
executed the merger agreement and Frank D. Hickingbotham, Herren C.
Hickingbotham and F. Todd Hickingbotham executed the voting agreement.
Reasons for the Merger; Recommendation of the TCBY Board
The TCBY board of directors unanimously determined that the merger
agreement and the transactions contemplated thereby are advisable and in the
best interests of TCBY and its shareholders and unanimously approved the merger
agreement and the transactions contemplated by the merger agreement. The TCBY
board unanimously recommends that the shareholders of TCBY vote for its
approval.
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In reaching its conclusion, the TCBY board consulted with senior management
and its financial and legal advisors and carefully considered a variety of
factors. The principal factors considered by the TCBY board are listed below:
. TCBY's business, assets, management, strategic objectives and prospects
and the uncertainty created from trends in TCBY's business, including
(1) decline in sales in traditional and non-traditional locations, and
(2) the number of traditional store closings over the past three years.
. TCBY's historical financial information.
. Historical market prices and trading information, including current
market multiples, for TCBY's shares and a comparison of these prices,
trading information and multiples with those of certain companies in
the same or similar lines of business and industries as TCBY.
. A valuation of TCBY under various methodologies, including a comparable
public company analysis, a discounted cash flow analysis and a recent
trading analysis.
. The prices and forms of consideration paid in recent comparable
acquisition transactions and the fact that the price to be paid to
TCBY's shareholders pursuant to the merger agreement compares favorably
to the prices paid in such transactions.
. The fact that the $6.00 per share price to be paid to TCBY shareholders
represents (1) a premium of 68% over the closing price of the TCBY
shares on the New York Stock Exchange on February 9, 2000 and (2) a
premium of 64% over the 30-day average of the closing price of the TCBY
shares as of February 9, 2000, and the fact that these premiums compare
favorably to premiums paid in other recent comparable acquisition
transactions.
. The terms and conditions of the merger agreement, including the all
cash nature of the transaction and that (1) Capricorn had commitments
or "highly-confident" letters for financing of the $6.00 per share
purchase price, and (2) TCBY will receive a termination fee in the
amount of $1.65 million in the event Capricorn fails to consummate the
transaction as a result of its failure to obtain the financing
contemplated in the financing commitments.
. The strategic alternatives that may have been available to TCBY if it
did not pursue the transaction with Capricorn and the viability and
risks of pursuing those alternatives, including that no potential
bidder identified by Stephens and members of TCBY management as most
likely to offer to purchase TCBY had expressed an interest in pursuing
a transaction with TCBY and that the only other bidder wanted only to
purchase the Hickingbotham family shares in a highly-leveraged
transaction.
. The opinion of Stephens delivered to the TCBY board of directors on
February 9, 2000 that as of such date, and based upon and subject to
various considerations set forth therein, the $6.00 per share purchase
price to be received by TCBY's shareholders in the merger was fair,
from a financial point of view to such shareholders. See "Opinion of
Financial Advisor to TCBY."
. TCBY's ability to better support its franchisees after the merger,
including additional field support and increased purchasing power
resulting from TCBY's association with affiliates of Capricorn as well
as cross-branding opportunities for TCBY franchisees with Capricorn-
controlled brands.
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The foregoing discussion of the information and factors considered by
the TCBY board of directors is not intended to be exhaustive. In view of the
variety of factors considered in connection with its evaluation of the merger
agreement and the transactions contemplated thereby, the TCBY board of directors
did not find it practicable to, and did not, quantify or otherwise assign
relative weights to the factors considered in reaching its determination. In
addition, individual members of the TCBY board of directors may have given
different weight to the different factors.
Opinion of TCBY's Financial Advisor
Stephens was retained by TCBY to act as its financial advisor in connection
with a possible business combination by TCBY. In connection with the proposed
merger with Capricorn, TCBY requested that Stephens evaluate the fairness, to
the non-affiliated shareholders of TCBY from a financial point of view, of the
consideration to be received in the proposed transaction. At the meeting of
TCBY's board of directors held on February 9, 2000, Stephens delivered to the
TCBY board an oral opinion, which opinion was subsequently confirmed by delivery
of a written opinion dated February 9, 2000, stating that the merger
consideration was fair to the TCBY shareholders from a financial point of view.
In arriving at its opinion, Stephens (i) reviewed certain publicly available
business and financial information relating to TCBY; (ii) reviewed certain
information including internal financial statements, financial projections, and
other financial and operating data concerning TCBY furnished to Stephens by
TCBY; (iii) held discussions with certain senior officers, directors and other
representatives or advisors of TCBY concerning the business, operations and
prospects of and potential strategic alternatives available to TCBY; (iv)
reviewed the reported price and trading activity for TCBY's common stock; (v)
analyzed certain financial information and prices and trading activity of the
common stock for TCBY as compared with similar information for other publicly
traded companies; (vi) reviewed the financial terms, to the extent publicly
available, of certain comparable business combinations; (vii) reviewed the
merger agreement, the exhibits thereto, and other related documents; and (viii)
performed certain discounted cash flow analyses and other studies and analyses
as it considered appropriate. In addition, Stephens considered for the purposes
of its opinion, recent trends in the frozen treats and quick service restaurant
industries and the competitive position of TCBY.
In arriving at its opinion, Stephens performed a variety of financial
analyses, the material portions of which are summarized below. This summary
does not purport to be a complete description of the analyses performed by
Stephens. In addition, Stephens believes that its analyses must be considered
as a whole and that selecting portions of its analysis or the factors considered
by it, without considering all such factors and analyses, could create a
misleading view of the process underlying its analyses. Stephens did not draw
any specific conclusions from or with regard to any one method of analysis in
isolation from others. Arriving at a fairness opinion is a complex process not
necessarily susceptible to partial or summary description. The matters
considered by Stephens in arriving at its opinion are based on numerous
macroeconomic, operating and financial assumptions with respect to industry
performance, general business and economic conditions and other matters, many of
which are beyond TCBY's control. The analyses performed by Stephens are not
necessarily indicative of actual values, which may be significantly more or less
favorable than suggested by such analyses. Additionally, analyses relating to
the values of businesses do not purport to be appraisals or to reflect the
prices at which such business actually may be sold. Because such analyses are
inherently subject to uncertainty, none of TCBY nor Stephens or any other person
assumes responsibility if future events do not conform to the judgments
reflected in the opinion of Stephens.
In rendering its opinion, Stephens assumed and relied, without independent
verification, upon the accuracy and completeness of all financial and other
information publicly available or furnished to or otherwise reviewed by or
discussed with Stephens. With respect to financial forecasts and other
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information provided to or otherwise reviewed by or discussed with Stephens, the
management of TCBY advised Stephens that such forecasts and other information
were reasonably prepared on bases reflecting the best currently available
estimates and judgments of the management of TCBY as to the future financial
performance of TCBY. Stephens did not make or obtain an independent evaluation
or appraisal of the assets, liabilities (contingent or otherwise and including
the loss and loss adjustment expense reserves) or reserves of TCBY nor did
Stephens make any physical inspection of the properties or assets of TCBY.
The full text of the written opinion of Stephens dated February 9, 2000,
which sets forth the assumptions made, matters considered and limitations on the
review undertaken, is attached hereto as Appendix B and is incorporated herein
by reference. TCBY shareholders are urged to read the opinion carefully in its
entirety. Stephens' opinion is directed only to the fairness of the merger
consideration to the disinterested shareholders from a financial point of view.
The summary of the opinion of Stephens set forth in this proxy statement is
qualified in its entirety by reference to the full text of such opinion.
Overview. In its presentation to the TCBY board of directors, Stephens
presented an overview of the proposal, the merger and the events leading to the
definitive merger agreement. Stephens reviewed the recent historical
performance of TCBY as well as its projected future financial performance as
provided by the management of TCBY.
Stephens noted that with a merger consideration of $6.00 per share, the
value of common equity, including the value of stock options plus the amount of
assumed debt less the amount of assumed cash and cash equivalents ("Total
Transaction Value") of TCBY is approximately $122.0 million, representing 8.4x
and 8.2x TCBY's fiscal 1999 and estimated fiscal 2000 earnings, before interest,
taxes, depreciation and amortization ("EBITDA"), respectively; the total value
of common equity, including the value of stock options ("Transaction Value") of
TCBY was approximately $139.4 million representing 19.2x and 18.3x TCBY's fiscal
1999 and estimated fiscal 2000 net income, respectively; and the premium to the
closing market price of TCBY's shares one day prior to announcement of the
proposed transaction was 68%.
Valuation Analysis. Stephens arrived at ranges of value for shares of
TCBY's common stock by utilizing four principal valuation methodologies: a
comparable company analysis; a comparable transaction analysis; a discounted
cash flow analysis; and an analysis of premiums paid in similarly sized
transactions. Stephens also analyzed the historical trading (including price
and volume) of shares of TCBY's common stock and compared the offer price to
recent trading prices.
Comparable Company Analysis. Stephens analyzed certain publicly available
financial information, operating data and projected financial performance (per
research analyst estimates) of ten selected publicly traded companies that
Stephens believed to be appropriate for comparison to corresponding financial
and operating data of TCBY, specifically, Dreyer's Grand Ice Cream, Inc.; Ben &
Jerry's Homemade, Inc.; Yogen Fruz World-Wide Inc.; and Eskimo Pie Corp.;
(collectively the "Frozen Treat Companies") and Tricon Global Restaurant, Inc.;
Wendy's International, Inc.; Jack in the Box Inc.; CKE Restaurants, Inc.; Sonic
Corp; and Consolidated Products, Inc. (collectively the "Restaurant Companies"
and, with the Frozen Treat Companies, the "Comparable Companies"). Stephens'
analysis of the Comparable Companies yielded a ratio of market value of common
equity plus total debt less cash and cash equivalents ("Total Market
Capitalization") to latest twelve month EBITDA for the Frozen Treat Companies
ranging from 5.4x to 13.4x with a median of 6.4x and for the Restaurant
Companies ranging from 4.6x to 9.2x with a median of 5.9x; Total Market
Capitalization to latest twelve month earnings, before interest, taxes and
amortization ("EBITA") for the Frozen Treat Companies ranging from 7.4x to 39.9x
with a median of 12.3x and for the Restaurant Companies ranging from 7.6x to
12.0x with a median of 7.7x; market value of common equity to reported latest
twelve months net income for the
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Frozen Treat Companies ranging from 14.6x to 38.0x with a median of 20.8x and
for the Restaurant Companies ranging from 7.4x to 19.0x with a median of 12.9x;
the market value of common equity to estimated fiscal 2000 net income (per
research analyst estimates) for the Frozen Treat Companies ranging from 19.0x to
19.7x with a median of 19.3x and for the Restaurant Companies ranging from 10.1x
to 16.7x with a median of 12.0x; and the market value of common equity to
estimated fiscal 2001 net income (per research analyst estimates) for the Frozen
Treat Companies ranging from 18.0x to 18.0x with a median of 18.0x and for the
Restaurant Companies ranging from 9.2x to 14.7x with a median of 10.0x.
Stephens derived a range of implied trading value of TCBY common stock of
$3.92 to $4.85 per share based on a ratio of Total Market Capitalization to
fiscal 1999 EBITDA of 5.0x to 6.5x; a range of $3.82 to $4.68 per share based on
a ratio of Total Market Capitalization to fiscal 1999 EBITA of 7.0x to 9.0x; a
range of $3.48 to $4.42 per share based on a ratio of market value of common
equity to fiscal 1999 net income of 11.0x to 14.0x; a range of $3.29 to $4.28
per share based on a ratio of market value of common equity to fiscal 2000
estimated net income included in the projections of 10.0x to 13.0x; and a range
of $3.08 to $3.77 per share based on a ratio of market value of common equity to
fiscal 2001 estimated net income included in the projections of 9.0x to 11.0x.
Comparable Transaction Analysis. Stephens analyzed the financial terms, to
the extent publicly available, of eight transactions involving businesses
comparable to that of TCBY which were announced since April 27, 1997. The
selected transactions include Checkers Drive-In Restaurants, Inc.'s, acquisition
of Rally's Hamburgers, Inc.; the Sbarro Family's acquisition of Sbarro, Inc.;
AFC Enterprises, Inc.'s acquisition of Cinnabon International, Inc.; Carrols
Corp.'s acquisition of Pollo Tropical, Inc.; NE Restaurant Company, Inc.'s
acquisition of Bertucci's, Inc.; Berkshire Hathaway, Inc.'s acquisition of
International Dairy Queen, Inc.; Port Royal Holdings, Inc.'s acquisition of The
Krystal Company, and CKE Restaurants, Inc.'s acquisition of Hardee's Food
Systems, Inc. Stephens' analysis of the comparable transactions yielded a ratio
of the price paid for the common equity plus assumed debt less assumed cash
("Total Transaction Value") to latest twelve month EBITDA ranging from 5.4x to
17.9x with a median of 7.3x and the Total Transaction Value to latest twelve
month EBITA ranging from 7.5x to 19.3x with a median of 12.4x.
Stephens derived a range of implied transaction value of TCBY common stock
of $4.55 to $5.46 per share based on a ratio of Total Transaction Value to
fiscal 1999 EBITDA of 6.0x to 7.5x and a range of $4.26 to $5.11 per share based
on a ratio of Total Transaction Value to fiscal 1999 EBITA of 8.0x to 10.0x.
Discounted Cash Flow Analysis. Stephens performed a discounted cash flow
analysis of TCBY based upon the financial projections provided by management.
Utilizing these projections, Stephens calculated a range of value per share
based upon the discounted net present value of the sum of the projected stream
of unlevered free cash flows of TCBY for the years ending November 30, 2000
through 2004 and a projected terminal value at 2004 less debt plus cash as of
November 30, 1999 and divided by the number of TCBY's fully diluted shares
outstanding. Stephens applied several discount rates (ranging from 11.0% to
13.0%) and multiples of EBITDA (ranging from 6.0x to 7.5x) to generate the
terminal value. Utilizing this methodology, the implied range of value per
share of TCBY common stock was $4.76 to $5.75 per share.
Premiums Paid Analysis. Stephens determined the premium over market price
paid for publicly-traded companies in 75 selected transactions announced from
January 24, 1999 through January 24, 2000 with a Total Transaction Value ranging
from $50 million to $250 million. Stephens obtained information for this
analysis from Securities Data Corp. Stephens compared the per share prices paid
in such transactions with the closing price for the target's stock one week
prior to announcement of the subject transactions. The median premium for these
selected transactions over the subject target's closing per
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share price one week prior to announcement was 42.4%. Stephens also noted that
approximately 50% of the selected transactions had a premium over the subject
target's closing per share price one week prior to announcement of 20% to 50%.
This was compared to the premium of 68% for the TCBY shares one day prior to the
February 10, 2000 announcement of the proposal. Stephens estimated a per share
valuation for TCBY's common of $4.45 to $5.34 per share using a premium of 25%
to 50% over the closing price one day prior to announcement of the proposal.
Information Concerning Stephens. Stephens is a nationally recognized
investment banking firm and, as a customary part of its investment banking
activities, is regularly engaged in the valuation of businesses and their
securities in connection with mergers and acquisitions, negotiated
underwritings, private placements and for other purposes. The TCBY board of
directors selected Stephens as a financial advisor because of its expertise,
reputation and familiarity with TCBY. The TCBY board engaged Stephens to render
a fairness opinion in connection with the transaction. TCBY agreed to pay
Stephens $500,000 upon the rendering of a fairness opinion. In addition, TCBY
engaged Stephens to act as a financial advisor to TCBY in connection with the
proposed transaction and has agreed, if the merger is consummated, to pay
Stephens as consideration for such services, additional compensation in an
amount based on a percentage of the value of the consideration payable in the
merger. TCBY has agreed to reimburse Stephens for out-of-pocket expenses and to
indemnify Stephens against certain liabilities in connection with rendering the
fairness opinion and serving as the TCBY board's financial advisor.
Certain Federal Income Tax Consequences of the Merger
The following discussion describes certain United States federal income tax
consequences of the merger. The discussion is based upon the Internal Revenue
Code of 1986, as amended (the "Code"), existing and proposed treasury
regulations, rulings, administrative pronouncements and judicial decisions,
changes to which could materially affect the tax consequences described in this
proxy statement and could be made on a retroactive basis. This discussion does
not address all aspects of federal income taxation that may be important to you
based on your particular circumstances and does not address any aspect of state,
local or foreign tax laws. This summary generally considers only shares of TCBY
common stock that are held as capital assets (generally, assets held for
investment) and may not apply to holders who acquired TCBY common stock pursuant
to the exercise of employee stock options or other compensation arrangements
with TCBY, holders that are subject to special tax treatment, holders that hold
TCBY common stock as part of a "straddle", "hedge", or "conversion transaction",
or holders the functional currency of which is not the U.S. dollar. Holders
that may be subject to special tax treatment include broker-dealers, insurance
companies, tax-exempt organizations, financial institutions, and regulated
investment companies.
Consequences to Holders of TCBY common stock. A holder of TCBY common
stock will recognize gain or loss equal to the difference between the amount of
cash received in the merger and the holder's adjusted tax basis in the shares of
TCBY common stock exchanged. Such gain or loss will generally be capital gain
or loss and will be long-term capital gain or loss if at the effective time of
the merger the holder has a holding period for the TCBY common stock of more
than one year.
Backup Withholding and Information Reporting. Payments of cash to a holder
surrendering shares of TCBY common stock will be subject to information
reporting and "backup" withholding at a rate of 31% of the cash payable to the
holder, unless the holder furnishes its taxpayer identification number in the
manner prescribed in applicable treasury regulations, certifies that such number
is correct, certifies as to no loss of exemption from backup withholding and
meets certain other conditions. Any amounts withheld from payments to a holder
under the backup withholding rules generally will be allowed as a credit against
the holder's United States federal income tax liability, which may entitle such
holder to a refund provided the required information is furnished to the
Internal Revenue Service.
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The preceding discussion does not purport to be a complete analysis or
discussion of all potential tax effects relevant to the merger. Thus, TCBY
stockholders are urged to consult their own tax advisors as to the specific tax
consequences to them of the merger, including tax return reporting requirements,
the applicability and effect of federal, state, local, foreign and other
applicable tax laws and the effect of any proposed changes in the tax laws.
Accounting Treatment of the Merger
CI Merger Co. will account for the merger under the "purchase" method in
accordance with generally accepted accounting principles.
Regulatory Filings and Approvals
Capricorn has informed TCBY that the total assets and sales of Capricorn
are below the threshold level which, if exceeded, would require that Capricorn
and TCBY make certain filings under the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended, and the related rules promulgated by the Federal Trade
Commission. Accordingly, neither TCBY nor Capricorn intend to file preliminary
notification and report forms with the Federal Trade Commission and the
Antitrust Division of the Department of Justice. At any time before or after
consummation of the merger, the Department of Justice or the Federal Trade
Commission or any state could take such action under antitrust laws as it deems
necessary or desirable in the public interest, including seeking to enjoin the
consummation of the merger or seeking divestiture of substantial assets.
Private parties may also seek to take legal action under antitrust laws under
certain circumstances.
Management, Operations and Ownership Structure following the Merger
Following the merger, TCBY will continue its operations as a majority-owned
subsidiary of Capricorn Investors III, L.P. The officers and directors of CI
Merger Co. will become the officers and directors of TCBY. Except for
individuals identified by CI Merger Co. in writing at least 45 days prior to the
closing of the merger, TCBY agreed that it would, prior to the effective time of
the merger, terminate employment of all employees at TCBY's headquarters in
Little Rock, Arkansas and, simultaneously with such termination, make all
payments required to be made to such persons under TCBY's severance plan and
executive security agreements.
Public Trading Markets
TCBY common stock is currently traded on the New York Stock Exchange under
the symbol "TBY". Upon consummation of the merger, TCBY common stock will no
longer be traded on the New York Stock Exchange and will be deregistered under
the Securities Exchange Act of 1934.
Interests of Certain Persons in the Merger
Certain officers and directors of TCBY have certain agreements and
incentives which will be affected as a result of the merger. These agreements
and incentives are discussed below.
Executive Security Agreements. As previously disclosed in TCBY's 1998 Form
10-K and proxy statement for TCBY's 1999 annual meeting of stockholders, in the
year indicated TCBY entered into executive security agreements with the
following executive officers: William P. Creasman (1990), Jim H. Fink (1990),
Herren C. Hickingbotham (1990), F. Todd Hickingbotham (1990), John M. Rogers
(1994),
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James H. Sahene (1995), and Gene H. Whisenhunt (1995). Under such agreements,
TCBY agreed to make single lump sum cash severance payments equal to multiples
of up to 2.99 of each officer's immediately preceding five year's annualized
includible compensation if both of the following conditions are satisfied:
. a change of control of TCBY occurs, and
. either (i) the officer voluntarily terminates employment with TCBY
during the period beginning 90 days after the change of control occurs
and ending on the one year anniversary of the change of control, or
(ii) the officer is involuntarily terminated from employment by TCBY
during the one year period following a change of control of TCBY.
TCBY has also entered into executive security agreements with other employees
providing for lump sum payments of multiples of 1.0 to 2.99 of such employee's
immediately preceding five year's annualized includible compensation to be made
under similar circumstances. Simultaneously with the merger, CI Merger Co. will
assume and agree to perform TCBY's obligations under the executive security
agreements to the extent not previously performed by TCBY.
If each employee who has entered into an executive security agreement
terminated employment with TCBY under the circumstances described above, the
total aggregate payment required to be made by TCBY to such employees is
approximately $7.0 million. In addition to the foregoing amounts, if an amount
payable under an executive security agreement or otherwise would subject the
recipient to the excise tax under Section 280G of the Code, TCBY will make an
additional payment to such person such that after the payment of all income and
excise taxes, the recipient will be in the same after-tax position as if no
excise tax under Section 280G of the Code had been imposed. It is not currently
anticipated that such excise tax will be imposed.
Stock Options. The merger agreement provides that, at the effective time
of the merger, each holder of then outstanding options to purchase shares of
TCBY common stock under TCBY's 1992 Employee Stock Option Plan or 1992 Non-
Employee Directors Stock Option Plan, if then exercisable, will become entitled
to receive for each share subject to an option, upon payment of the exercise
price, the per share merger consideration of $6.00. The merger agreement
provides that, prior to the effective time of the merger, CI Merger Co. and TCBY
will use their respective reasonable best efforts to establish procedures for
the cashless exercise of such options.
Indemnification of Directors and Officers. The merger agreement provides
that, for a period of six years after the effective time of the merger, TCBY
will maintain a policy of officers' and directors' liability insurance for acts
and omissions occurring prior to the effective time with coverage in amount and
scope at least as favorable as TCBY's existing directors' and officers'
liability insurance coverage. In addition, CI Merger Co. has agreed to
indemnify each present and former director, officer, employee or agent of TCBY
against any losses incurred in connection with matters occurring at or prior to
the effective time of the merger to the fullest extent permitted under the
Delaware General Corporation Law or TCBY's certificate of incorporation or
bylaws.
Purchase of Assets. The merger agreement provides that the obligation of
CI Merger Co. to effect the merger is subject to TCBY receiving no less than
$3.0 million in cash proceeds from the sale of the assets, land and real
property of the AIMCO division of Riverport Equipment and Distribution Company,
a wholly-owned subsidiary of TCBY. TCBY presently expects to satisfy this
condition by selling the assets of the AIMCO division to an entity owned by
Frank D. Hickingbotham for $3.0 million in cash immediately prior to the
effective time of the merger.
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Merger Financing
The aggregate amount of funds needed to pay the aggregate merger
consideration and Capricorn's related transaction costs is estimated to be
approximately $149.7 million. Although Capricorn has not entered into
definitive financing agreements with any third party financing source, based on
discussions to date with financing sources, Capricorn expects to finance this
amount from the following sources:
. Borrowings of approximately $95.2 million, consisting of approximately
$50 million of bank debt and approximately $45.2 million of mezzanine
debt and bridge debt.
. Equity of approximately $33 million, of which approximately $25.5
million will be provided by Capricorn.
. The balance from cash of the Company available at the closing,
including approximately $3.0 million in net proceeds from the sale of
certain real property and other assets of the Company discussed under
the section titled "Other Terms of the Merger Agreement."
Based on discussions with interested lenders to date, Capricorn expects for
the bank debt to be provided under a $50 million floating rate senior secured
five year term credit facility to TCBY with a group of banks and other financial
institutions. Capricorn expects that borrowings under the credit facility will
be secured by TCBY's assets as well as the stock of TCBY owned by the parent
company of TCBY.
Based on discussions with interested lenders to date, Capricorn expects for
the mezzanine debt and the bridge debt to aggregate approximately $45.2 million,
with the split between them to be determined following further discussions. It
is expected that the mezzanine debt will be fixed rate senior secured debt of
TCBY that will be subordinated only to the bank debt and the bank debt's
security and will have a term of at least five and a half years. It is expected
that the bridge debt will be fixed rate senior secured debt of TCBY's Americana
subsidiary and will have a term of nine months to fifteen months, subject to
earlier repayment from the proceeds from any sale of this subsidiary or its
assets.
Pursuant to the terms of its limited partnership agreement, Capricorn has
the ability to make an equity call from its general and limited partners to
provide the funds needed to make its equity investment of approximately $25.5
million. Several other investors have agreed in principle with Capricorn to
provide the balance of the planned $33 million in equity.
OTHER TERMS OF THE MERGER AGREEMENT
The following describes certain aspects of the proposed merger, including
material provisions of the merger agreement. The following description of the
merger does not purport to be complete and is qualified in its entirety by
reference to the merger agreement, which is attached as Appendix A to this proxy
statement and is incorporated by reference. You are urged to read the merger
agreement carefully.
Treatment of Stock Options
At the effective time of the merger, each holder of then outstanding
options to purchase shares of TCBY common stock under TCBY's 1992 Employee Stock
Option Plan or 1992 Non-Employee Directors Stock Option Plan, if then
exercisable, will be entitled to receive for each share subject to an option,
upon payment of the exercise price, the per share merger consideration of $6.00.
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Representations and Warranties
Mutual Representations and Warranties. The merger agreement contains
various representations and warranties of TCBY, on the one hand, CI Merger Co.
and, as applicable Capricorn Investors III, L.P., on the other hand, relating to
and including, among other things:
. organization and qualification to do business and similar corporate matters;
. authorization, execution, delivery, performance and enforceability of the
merger agreement and related matters;
. investigations and reviews by governmental authorities and pending or
threatened litigation;
. the information supplied in this proxy statement; and
. finders and brokers fees.
Additional Representations and Warranties of TCBY. TCBY has made
additional representations relating to:
. capitalization;
. filings with the SEC;
. voting requirements of TCBY stockholders;
. undisclosed liabilities;
. compliance with laws and regulations, including environmental regulations;
. inapplicability of Delaware takeover statute;
. retirement and other employee plans and matters relating to the Employee
Retirement Income Security Act of 1974, as amended;
. certain changes or events outside the ordinary course of business;
. the filing of tax returns and other tax matters;
. the opinion of its financial advisor;
. material contracts and commitments;
. conflicts under governing documents, required consents or approvals, and
violations of any agreements or laws;
. ownership of intellectual property;
. contracts with labor unions or organizations;
. valid title to assets;
. ownership of necessary equipment;
. suppliers and franchisees;
. transactions with affiliates;
. insurance policies;
. legal proceedings;
. Year 2000 compliance; and
. the financial position of TCBY.
Additional Representations and Warranties of CI Merger Co. CI Merger Co.,
and as applicable, Capricorn, have made additional representations relating to:
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. lack of ownership of TCBY common stock;
. financing required by CI Merger Co.;
. solvency of the surviving corporation; and
. the financial position of Capricorn.
Conduct of TCBY's Business Prior to the Merger
TCBY has agreed as to itself and, where indicated, each of its
subsidiaries, that after the date of the merger agreement and prior to the
effective time of the merger (unless CI Merger Co. shall otherwise approve in
writing):
. it and its subsidiaries will conduct their operations according to the
ordinary and usual course of business and in a manner consistent with prior
practice;
. it and its subsidiaries will use reasonable best efforts to preserve intact
their business organizations and goodwill, keep available the services of
their current officers and other key employees and preserve their
relationships with those persons having business dealings with TCBY;
. it will report material operational matters and the general status of ongoing
operations to CI Merger Co.;
. it will notify CI Merger Co. of any emergency or change in the normal course
of its or its subsidiaries' businesses or in the operation of its or its
subsidiaries' respective properties and of any complaints, investigations or
hearings by any governmental authority;
. neither it nor any of its subsidiaries (other than those that are wholly
owned) will authorize or pay any dividends on or make any distribution with
respect to its outstanding shares of stock, except under limited
circumstances (see discussion under "-- Payment of Dividend" below);
. neither it nor any of its subsidiaries will split, combine or reclassify its
capital stock or issue or authorize or propose the issuance of any other
securities in substitution for shares of its capital stock;
. neither it nor its subsidiaries will make any change in employment terms for
any of its directors or officers, other than in the ordinary course of
business;
. neither it nor its subsidiaries will authorize, propose or announce an
intention to authorize or propose or enter into an agreement with respect to
any merger, consolidation or business combination, (other than the merger
with CI Merger Co. and any mergers, consolidations or business combinations
with its subsidiaries in the ordinary course of business), any acquisition of
assets or securities, any disposition of assets or securities or any release
or relinquishment of material contract rights, in each case not in the
ordinary course of business;
. it will not propose or adopt any amendments to its corporate charter or
bylaws;
. neither it nor its subsidiaries will issue or authorize or agree to issue or
sell any shares of its capital stock of any class (whether through the
issuance or granting of options, warrants, commitments, subscriptions, rights
to purchase or otherwise);
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. neither it nor its subsidiaries will grant, confer or award any options,
warrants, conversion rights or other rights to acquire any shares of its
capital stock;
. neither it nor its subsidiaries will purchase or redeem any shares of its
stock or any rights or options to acquire any such shares;
. neither it nor its subsidiaries will amend or adopt any new employee benefit
plans or severance agreements or grant to any officer or director an increase
in compensation or severance pay;
. neither it nor its subsidiaries will incur, assume or prepay any indebtedness
or any other material liabilities;
. neither it nor its subsidiaries will (1) make any loans, advances or capital
contributions to, or investments in, any other persons other than by TCBY or
its subsidiaries to or in TCBY or any wholly-owned subsidiary of TCBY, or (2)
pay, discharge or satisfy any claims, liabilities or obligations, other than
indebtedness, issuances of debt securities, guarantees, loans, advances,
capital contributions, investments, payments, discharges or satisfactions
incurred or committed to in the ordinary course of business;
. it will not sell, lease, license, mortgage or otherwise encumber or subject
to any lien or otherwise dispose of any of its properties or assets, other
than in the ordinary course of business;
. neither it nor its subsidiaries will make any tax election or settle or
compromise any tax liability or change its fiscal year;
. except as disclosed in reports filed by TCBY with the SEC prior to the date
of the merger agreement or in TCBY's 1999 financial statements, or as
required by a governmental authority, it will not change its methods of
accounting (including, without limitation, make any material write-off or
reduction in the carrying value of any assets) in effect at November 28,
1999, except as required by changes in GAAP as concurred in writing by its
independent auditors; and
. neither it nor its subsidiaries will agree, in writing or otherwise, to take
any of the foregoing actions or take any action which would (1) make any
representation or warranty in the merger agreement untrue or incorrect or (2)
result in any of the conditions to the merger set forth in the merger
agreement not being satisfied.
Payment of Dividends
TCBY has agreed that neither it nor any of its subsidiaries (other than
those that are wholly owned) will authorize or pay any dividends, except that
TCBY may pay cash dividends in one limited circumstance involving the collection
of an unsecured receivable from TCBY's prior distributor, AmeriServe Food
Distribution, Inc. Under this exception, TCBY may, but is not required to, pay
regular quarterly cash dividends, in amounts consistent with past practice, to
the extent of, but not exceeding, any amounts collected from AmeriServe with
respect to a $2.8 million receivable owed by AmeriServe to TCBY. On January 31,
2000 Ameriserve filed for Chapter 11 bankruptcy protection. There is no
assurance that TCBY will collect any amounts from AmeriServe or pay any future
dividends.
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Agreement Not to Solicit Other Offers
Under the merger agreement, TCBY has agreed not to, nor authorize or permit
any of its officers, directors, employees, agents or other representatives or
those of its subsidiaries to, directly or indirectly, solicit or knowingly
encourage any takeover proposal (as defined below) from any person. However,
TCBY may engage in discussions or negotiations with, and furnish information
concerning TCBY and its subsidiaries, businesses, properties or assets to, any
third party which has made an unsolicited takeover proposal if the TCBY board
concludes in good faith, after having received advice from TCBY's legal counsel,
that the failure to take such action would be inconsistent with its fiduciary
duties under applicable law. TCBY will promptly notify CI Merger Co. of the
receipt of any takeover proposal, including the material terms and conditions
thereof and the identity of the person making such takeover proposal, and will
promptly notify CI Merger Co. of any determination by the TCBY board that a
superior proposal (as defined below) has been made. Prior to providing any
information or data to any person in connection with a takeover proposal, the
TCBY board shall receive a confidentiality agreement from such person.
The merger agreement provides specific definitions for the following terms:
. "takeover proposal" means any bona fide proposal or offer made by any third
party prior to the stockholder vote at the special meeting for a merger,
consolidation or other business combination involving, or any purchase of,
all or substantially all of the assets or more than 50% of the voting
securities of TCBY.
. "superior proposal" means a bona fide takeover proposal made by a third
party on terms that a majority of the disinterested members of the TCBY
board reasonably determines in good faith, in consideration of advice of an
independent financial advisor, is more favorable to TCBY and to its
stockholders than the merger with CI Merger Co., including taking into
account, among other things, the financing of the merger consideration.
Certain Other Covenants and Agreements
Access to Information; Confidentiality. The merger agreement provides that
from the signing of the merger agreement to the closing or termination of the
merger, TCBY and CI Merger Co. will provide to one another, and to one another's
officers, employees, accountants, counsel and other authorized representatives,
full and complete access during normal business hours to its and its
subsidiaries' properties, contracts, commitments, books and records and any
report, schedule or other document filed or received by it pursuant to the
requirements of federal or state securities laws, and will furnish to one
another such additional financial and operating data and other information as
the other party may reasonably request. Both TCBY and CI Merger Co. will remain
subject to the terms of the confidentiality agreement between TCBY and CI Merger
Co. dated October 19, 1999. Neither party will be obligated to make any
disclosure to the other party in violation of any applicable law or that would
cause significant competitive harm if the transactions contemplated by the
merger agreement are not consummated.
Executive Security Agreements. Simultaneously with the merger, and to the
extent not performed by TCBY prior to the effective time of the merger, the
surviving corporation will assume and agree to perform TCBY's obligations under
its severance plan for employees and under executive security agreements between
TCBY and certain of its officers. The executive security agreements are further
described in "THE MERGER -- Interests of Certain Persons in the Merger" on page
22.
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Filings; Other Actions. The merger agreement provides that TCBY and CI
Merger Co. will make all necessary filings and take all other necessary actions
to fully carry out the transactions under the merger agreement. In addition,
both parties agree to use their respective reasonable best efforts to contest
and resist any actions challenging the transactions contemplated by the merger
agreement and to resolve any objections or challenges made by any governmental
authorities.
Further Assurances. After the effective time of the merger, if any action
is needed to carry out the purposes of the merger agreement, the proper officers
of TCBY and CI Merger Co. will take all such necessary action.
Takeover Statute. If any antitakeover statute or similar regulation is or
becomes applicable to the transactions contemplated by the merger agreement,
TCBY, CI Merger Co. and their respective boards of directors will take all
actions necessary to carry out the transactions contemplated by the merger
agreement as promptly as practicable on the terms contemplated by the merger
agreement, and otherwise act to eliminate or minimize the effects of such
statute or regulation on the transactions contemplated by the merger agreement.
Financing. CI Merger Co. has agreed to use its best efforts to satisfy all
conditions to obtaining financing for the transaction. If an event occurs that
could reasonably be expected to have a material adverse effect on CI Merger Co.
obtaining such financing, CI Merger Co. has agreed to, among other things,
promptly notify TCBY of that fact and use its best efforts to arrange for
alternative financing if necessary.
Solvency at Closing. The merger agreement provides that CI Merger Co. will
take all actions necessary to ensure that immediately following the effective
time of the merger, the surviving corporation will be solvent for all purposes
under federal bankruptcy and applicable state fraudulent transfer and fraudulent
conveyance laws.
Guaranty of Performance. Subject to certain limitations, Capricorn has
agreed to unconditionally guarantee the payment and performance of all covenants
and obligations of CI Merger Co. under the merger agreement, including, but not
limited to, the obligation to pay the merger consideration and any applicable
termination fee. The obligations of Capricorn under the guarantee are limited
to $1.65 million and will be deemed satisfied in full if CI Merger Co. pays the
termination fee described below under "--Termination Fees" or if the merger is
consummated and the merger consideration is paid. There is no duty or
obligation upon TCBY or its shareholders (1) to proceed against CI Merger Co.,
(2) to initiate any proceeding or exhaust any remedy against CI Merger Co., or
(3) to give any notice to CI Merger Co. or Capricorn, whatsoever, before
bringing suit, or instituting proceedings of any kind against CI Merger Co. or
Capricorn. From the date of the merger agreement until the effective time,
Capricorn will not take any action that would reasonably be expected to
materially adversely affect its ability to perform its obligations set forth
above. Capricorn also agrees that sufficiently in advance of closing of the
merger, Capricorn will make such calls for capital contributions from its
general and limited partners and take other actions to ensure that it has
sufficient cash to fund its obligations under the merger agreement.
Headquarters Employees; WARN Act Compliance. Except for individuals
identified by CI Merger Co. in writing at least 45 days prior to the closing of
the merger, TCBY agreed that it would, prior to the effective time of the
merger, terminate employment of all employees at TCBY's headquarters in Little
Rock, Arkansas and, simultaneously with such termination, make all payments
required to be made to such persons under TCBY's severance plan and executive
security agreements. In connection with such terminations, TCBY agreed to
comply fully with the notice and other requirements of the Worker Adjustment and
Retraining Notification Act of 1988 (the "WARN Act") so as to allow termination
of such employees without incurrence of any liabilities under the WARN Act and
to prevent CI Merger Co.
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from being characterized as an "employer" of such employees for purposes of the
WARN Act. On February 21, 2000, TCBY delivered notice under the WARN Act to
TCBY's headquarters employees.
Asset Sales. TCBY has agreed to use commercially reasonable efforts to
sell for the indicated cash proceeds the real estate assets of American Best
Care, Inc. located in Jacksonville, Arkansas ($800,000), the real property and
other assets of Carlin Manufacturing located in Fresno, California ($1.8
million), and certain notes receivable having a principal balance at January 30,
2000 of approximately $4.0 million (net of allowances) ($2.5 million).
Conditions of the Proposed Merger
Mutual Conditions. The obligation of each of TCBY and CI Merger Co. to
effect the merger is conditioned on the following:
(a) the approval of the merger by holders of a majority of the shares of TCBY
common stock outstanding on the record date;
(b) no statute, rule, regulation, executive order, decree, ruling or injunction
is existing at the time of the merger that prohibits the consummation of
the merger substantially on the terms contemplated by the merger agreement;
and
(c) any waiting period under the Hart-Scott-Rodino Act has expired or been
terminated and any other approvals required to consummate the merger have
been obtained, except where the failure to obtain such other approvals
would not have a material adverse effect (defined below) on TCBY or CI
Merger Co., as the case may be. TCBY and Capricorn are not required to
observe the waiting period under the Hart-Scott-Rodino Act because the
act's filing requirements are not satisfied. See "-- Regulatory Filings
and Approvals" on page 22.
Additional Conditions to the Obligations of TCBY. In addition, the
obligations of TCBY under the merger agreement are subject to (1) the
representations and warranties of CI Merger Co. contained in the merger
agreement being true and correct, except where the failure of such
representations and warranties in the aggregate to be true and correct would not
have a material adverse effect on CI Merger Co., (2) CI Merger Co.'s performance
in all material respects of all obligations and compliance with all covenants
required by the merger agreement, and (3) delivery of a certificate signed by
the CEO or President certifying (1) and (2).
Additional Conditions to the Obligations of CI Merger Co. In addition, the
obligations of CI Merger Co. under the merger agreement are subject to (1) the
representations and warranties of TCBY contained in the merger agreement being
true and correct, except where the failure of such representations and
warranties in the aggregate to be true and correct would not have a material
adverse effect on TCBY, (2) the accuracy of TCBY's representations that the
amount of aggregate payments under its severance plan and executive security
agreements will not exceed $8.3 million, and the accuracy of TCBY's
representations that its total amount of cash and short-term investments and net
worth will be at least $12.5 million and $76 million, respectively, as of April
30, 2000, (3) delivery of a certificate signed by the CEO or President
certifying (1) and (2), (4) TCBY's performance in all material respects of all
obligations and compliance with all covenants required by the merger agreement,
(5) TCBY obtaining all necessary third party consents, except where the failure
to obtain such consent individually or the aggregate would not have a material
adverse effect on TCBY, (6) CI Merger Co.'s receipt of the proceeds of $95.2
million in senior and subordinated debt financing on terms substantially no less
favorable than as described in commitment letters delivered to TCBY, and (7)
TCBY receiving no less than $3.0 million in
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cash proceeds from the sale of the assets, land and real property of the AIMCO
division of Riverport Equipment and Distribution Company, a wholly-owned
subsidiary of TCBY.
Defined Terms. The merger agreement provides a specific definition for the
following term:
. "material adverse effect" on or with respect to TCBY or CI Merger Co., as
the case may be, means such state of facts, event, change or effect that
has had, or could reasonably be expected to have, a material adverse effect
on the business, results of operations or financial condition of TCBY and
its subsidiaries, taken as a whole, or CI Merger Co., as the case may be.
Material Adverse Effect specifically excludes any material adverse effect
on the business, results of operations or financial condition of TCBY and
its subsidiaries, taken as a whole, or CI Merger Co., as the case may be,
if and to the extent that the foregoing results from the execution,
delivery and performance of the merger agreement or from changes in (1) the
national economy generally, (2) the securities markets generally, or (3) a
decline in TCBY's same or comparable store sales consistent with trends
existing on the date hereof.
Termination
The merger agreement may be terminated and abandoned at any time prior to
the effective time of the merger, whether before or after any approval of the
matters presented in connection with the merger by the respective stockholders
of TCBY and CI Merger Co.:
(a) by mutual written consent of TCBY and CI Merger Co.;
(b) by TCBY or CI Merger Co., if the merger is not consummated on or before May
31, 2000 and the terminating party did not breach in any material respect
its obligations under the merger agreement prior to termination, and, in
the case of TCBY seeking to terminate:
. TCBY held a special meeting of stockholders prior to termination and
the holders of a majority of the outstanding shares of TCBY common
stock approved the adoption of the merger agreement, and
. CI Merger Co. did not receive the proceeds of $95.2 million in senior
and subordinated debt financing on terms substantially no less
favorable than as described in commitment letters delivered to TCBY,
or CI Merger Co. did not waive its closing condition relating to such
financing, prior to termination.
(c) by TCBY or CI Merger Co., if:
. any statute, rule, regulation or executive order is enacted which
prohibits the consummation of the merger substantially on the terms
contemplated by the merger agreement; or
. an order, decree, ruling or injunction is entered which permanently
restrains, enjoins or otherwise prohibits the consummation of the
merger and such order, decree, ruling or other action is final and
nonappealable; provided however, that the party terminating the merger
agreement used reasonable best efforts to have such order, decree,
ruling or action vacated;
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(d) by TCBY or CI Merger Co. if holders of a majority of the shares of TCBY
common stock outstanding on the record date fail to approve and adopt the
merger agreement at the special meeting or any adjournment of the special
meeting;
(e) by either TCBY or CI Merger Co. if the TCBY board reasonably determines
that a takeover proposal constitutes a superior proposal, and in the case
of TCBY seeking to terminate:
. three business days have elapsed following delivery to CI Merger Co.
of a written notice of such determination by the TCBY board of
directors and during such three business day period TCBY informs CI
Merger Co. of the terms and conditions of the takeover proposal and
the identity of the person making the takeover proposal and otherwise
cooperates with CI Merger Co. with respect thereto;
. at the end of the three business day period referred to above the TCBY
board of directors continues reasonably to believe that the takeover
proposal constitutes a superior proposal;
. simultaneously with such termination TCBY enters into a definitive
acquisition, merger or similar agreement to effect the superior
proposal; and
. if required, TCBY pays to CI Merger Co. a termination fee.
(f) by CI Merger Co. if the TCBY board:
. withdraws or modifies in a manner adverse to CI Merger Co. its
approval or recommendation of the merger agreement and the
transactions contemplated by the merger agreement for any reason other
than the occurrence of a material adverse effect in financing (as
defined below), or
. approves or recommends, or proposes publicly to approve or recommend
any takeover proposal;
(g) by CI Merger Co. if a tender offer or exchange offer for 50% or more of the
outstanding shares of capital stock of TCBY is commenced prior to the TCBY
special meeting, and the TCBY board fails to timely recommend against
acceptance of such offer by its stockholders;
(h) by TCBY if a material adverse effect in financing (as defined below) occurs
and CI Merger Co. fails to timely waive the financing condition in the
merger agreement or fails to provide information to TCBY showing that
obtaining the financing is likely to occur; and
(i) by TCBY or CI Merger Co. if there is a material breach by the other of any
of its representations, warranties, covenants or agreements contained in
the merger agreement that has not been cured within 30 days after notice.
TCBY may terminate the merger agreement only if the parties to the voting
agreement, other than CI Merger Co., complied with the terms of the voting
agreement in all material respects. The voting agreement provides, among other
things, that CI Merger Co. is granted a proxy to vote 10,728,332 shares of TCBY
common stock against any takeover proposal, other than the merger with
Capricorn. CI Merger Co. retains this right even if TCBY terminates the merger
agreement under any provision specified in clauses (e), (f) or (g) above. For a
description of the voting agreement, see "VOTING AGREEMENT" beginning on page
35.
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Defined Terms. The merger agreement provides a specific definition for the
following term:
. "material adverse effect in financing" means any state of facts, event,
change or effect that (1) has had or could reasonably be expected to have a
material adverse effect on the availability of any portion of the CI Merger
Co. financing, and (2) does not have a material adverse effect (as defined
above) on TCBY.
Termination Fees
Termination Fee Payable by TCBY. TCBY agreed to pay to CI Merger Co. a
termination fee of $6.5 million, plus reasonable out-of-pocket expenses incurred
in connection with the merger agreement, if:
(a) TCBY or CI Merger Co. terminates the merger agreement under a provision
that allows termination where the TCBY board reasonably determines that a
takeover proposal constitutes a superior proposal and TCBY enters into a
definitive agreement to effect the superior proposal, and prior to such
termination:
. a material adverse effect in financing did not occur, and
. CI Merger Co. complied with certain of its obligations in the merger
agreement relating to the financing of the merger consideration.
(b) CI Merger Co. terminates the merger agreement under a provision that allows
termination where the TCBY board of directors either:
. withdraws or modifies in a manner adverse to CI Merger Co. its
approval or recommendation of the merger agreement for reasons other
than a material adverse effect in financing, or
. approves or recommends, or proposes publicly to approve or recommend,
any takeover proposal, and, in case of termination under this
provision, a material adverse effect in financing did not occur prior
to termination and CI Merger Co. complied with certain of its
obligations in the merger agreement relating to the financing of the
merger consideration.
(c) prior to the termination, a bona fide takeover proposal is commenced,
publicly proposed or publicly disclosed and not withdrawn, either TCBY or
CI Merger Co. terminates the merger agreement under one of the provisions
described below, and concurrently with or within 120 days after such
termination, a takeover proposal is consummated. The provisions under
which TCBY or CI Merger Co. must terminate the merger agreement for the fee
to be payable under this provision include:
. a provision that allows TCBY to terminate the merger agreement where
(1) the effective time of the merger did not occur on or before May
31, 2000, (2) TCBY held a special meeting of stockholders prior to
termination and the holders of a majority of the outstanding shares of
TCBY common stock approved the adoption of the merger agreement, and
(3) CI Merger Co. did not receive the proceeds of $95.2 million in
senior and subordinated debt financing on terms substantially no less
favorable than as
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described in commitment letters delivered to TCBY, or CI Merger Co.
did not waive its closing condition relating to such financing, prior
to termination,
. a provision that allows TCBY to terminate the merger agreement where
holders of a majority of the shares of TCBY common stock outstanding
on the record date fail to approve and adopt the merger agreement at
the special meeting or any adjournment of the special meeting, or
. a provision that allows CI Merger Co. to terminate the merger
agreement where a tender offer or exchange offer for 50% or more of
the outstanding shares of TCBY common stock is commenced prior to the
special meeting and the TCBY board of directors failed to recommend
against acceptance of such tender offer or exchange offer within
applicable time periods, and, in case of termination under this
provision, (1) a material adverse effect in financing did not occur
prior to termination, and (2) CI Merger Co. complied with certain of
its obligations in the merger agreement relating to the financing of
the merger consideration.
Termination Fee Payable by CI Merger Co. CI Merger Co. agreed to pay to
TCBY a termination fee of $1.65 million if:
(a) (1) CI Merger Co. terminates the merger agreement under a provision that
allows termination where the merger is not consummated on or before May 31,
2000, or (2) TCBY terminates the merger agreement under a provision that
allows termination where the merger is not consummated on or before May 31,
2000, TCBY held a special meeting of stockholders prior to termination and
the holders of a majority of the outstanding shares of TCBY common stock
approved the adoption of the merger agreement, and CI Merger Co. did not
receive the proceeds of $95.2 million in senior and subordinated debt
financing on terms substantially no less favorable than as described in
commitment letters delivered to TCBY, or CI Merger Co. did not waive its
closing condition relating to such financing, prior to termination, and, in
case of termination under (1) or (2) above, either:
. CI Merger Co. fails to comply with certain of its obligations in the
merger agreement relating to the financing of the merger
consideration,
. all conditions to CI Merger Co.'s obligations to consummate the
merger, other than the receipt of the proceeds of the CI Merger Co.
debt financing, occurred or were satisfied or waived prior to
termination, or
. CI Merger Co.'s commitments to receive $33.0 million in equity are
unavailable for any reason.
(b) if TCBY terminates the merger agreement under a provision that allows
termination where a material adverse effect in financing occurs and CI
Merger Co. fails to timely waive its financing condition or provide TCBY
information such that TCBY reasonably concludes that CI Merger Co.'s
receipt of the CI Merger Co. financing is likely.
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Amendment
Subject to applicable law, any provision of the merger agreement may be
amended or modified at any time prior to the effective time by a written
agreement executed and delivered by duly authorized officers of TCBY and CI
Merger Co.
VOTING AGREEMENT
In connection with the execution of the merger agreement, CI Merger Co.
entered into the voting agreement with Frank D. Hickingbotham, Herren C.
Hickingbotham and F. Todd Hickingbotham. Set forth below is a brief summary of
the material terms of the voting agreement, which is attached as Appendix B to
this proxy statement.
Pursuant to the voting agreement, the Hickingbothams irrevocably appointed
CI Merger Co. to act as their proxy to (1) vote in favor of the approval of the
merger agreement and the merger of CI Merger Co. and TCBY pursuant to the merger
agreement, and (2) vote against the approval of any takeover proposal (as
defined in the merger agreement). CI Merger Co. may vote pursuant to the proxy
only to the extent and as to the matters specifically referred to above. The
proxy does not grant CI Merger Co. rights to vote with respect to any change in
the terms of the merger agreement or the merger. As of the record date, Frank D.
Hickingbotham, Herren C. Hickingbotham and F. Todd Hickingbotham owned an
aggregate of 10,728,332 shares of TCBY common Stock, representing approximately
47% of the voting power of the TCBY common stock then outstanding.
The Hickingbothams also agree that they will not (1) revoke, amend or
otherwise revise such proxy, (2) take or knowingly fail to take any action that
would cause TCBY to breach any of its obligations under the merger agreement or
would otherwise prevent or delay the consummation of the transactions
contemplated by the merger agreement, or (3) sell, transfer pledge or otherwise
dispose of any of the shares of TCBY common stock beneficially owned by them
other than pursuant to the merger or to certain permitted transferees.
The voting agreement, including the proxy described above, terminates upon
the earlier of (1) the effective time of the merger agreement, (2) the
termination of the merger agreement by CI Merger Co., (3) the termination of the
merger agreement by TCBY under specified circumstances. The voting agreement,
and the proxy described above, does not terminate if TCBY terminates the merger
agreement under any provision described in "OTHER TERMS OF THE MERGER AGREEMENT
- -- Termination" above where:
. the TCBY board reasonably determines that a takeover proposal
constitutes a superior proposal and enters into a definitive
acquisition agreement to effect such superior proposal,
. the TCBY board withdraws or modifies in a manner adverse to CI Merger
Co. its approval of the merger agreement for any reason other than a
material adverse effect in financing,
. the TCBY board approves, or publicly proposes to approve, any takeover
proposal, and
. a tender offer or exchange offer for 50% or more of the outstanding
capital stock of TCBY is commenced prior to the TCBY special meeting
and the TCBY board fails to recommend against acceptance of such
offer.
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DISSENTERS' RIGHTS OF APPRAISAL
Under Section 262 of the Delaware General Corporation Law, any holder of
TCBY common stock who does not wish to accept the merger consideration may
dissent from the merger and elect to have the fair value of the stockholder's
shares of TCBY common stock (exclusive of any element of value arising from the
accomplishment or expectation of the merger) judicially determined and paid to
the stockholder in cash, together with a fair rate of interest, if any, provided
that the stockholder complies with the provisions of Section 262 of the Delaware
General Corporation Law. The following discussion is not a complete statement
of the law pertaining to appraisal rights under Delaware law, and is qualified
in its entirety by the full text of Section 262, which is provided in its
entirety as Appendix D to this proxy statement. All references in Section 262
and in this summary to a "stockholder" are to the record holder of the shares of
common stock as to which appraisal rights are asserted. A person having a
beneficial interest in shares of common stock held of record in the name of
another person, such as a broker or nominee, must act promptly to cause the
record holder to follow properly the steps summarized below and in timely manner
to perfect appraisal rights.
Under Section 262, where a proposed merger is to be submitted for approval
at a meeting of stockholders, as in the case of the special meeting, the
corporation, not less than 20 days prior to the meeting, must notify each of its
stockholders entitled to appraisal rights that the appraisal rights are
available and include in the notice a copy of Section 262. This proxy statement
shall constitute the notice to the holders of common stock and the applicable
Delaware law provisions are attached to this proxy statement as Appendix D. Any
stockholder who wishes to exercise appraisal rights or who wishes to preserve
the right to do so should review carefully the following discussion and Appendix
D to this proxy statement because failure to comply with the procedures
specified in Section 262 timely and properly will result in the loss of
appraisal rights.
Any holder of common stock wishing to exercise the right to dissent from
the merger and demand appraisal under Section 262 must satisfy each of the
following conditions:
(a) The stockholder must deliver to TCBY a written demand for appraisal of the
stockholder's shares before the vote on the merger agreement at the special
meeting, which demand will be sufficient if it reasonably informs TCBY of
the identity of the stockholder and that the stockholder intends thereby to
demand the appraisal of the holder's shares;
(b) The stockholder must not vote its shares of common stock in favor of the
merger agreement. Because a proxy which does not contain voting
instructions will, unless revoked, be voted in favor of the merger
agreement, a stockholder who votes by proxy and who wishes to exercise
appraisal rights must vote against the merger agreement or abstain from
voting on the merger agreement; and
(c) The stockholder must continuously hold the shares from the date of making
the demand through the effective time. Accordingly, a stockholder who is
the record holder of shares of common stock on the date the written demand
for appraisal is made but who thereafter transfers the shares prior to the
effective time will lose any right to appraisal in respect of that
stockholder's shares.
Neither voting (in person or by proxy) against, abstaining from voting on
or failing to vote on the proposal to approve and adopt the merger agreement
will constitute a written demand for appraisal within the meaning of Section
262. The written demand for appraisal must be in addition to and separate from
any such proxy or vote.
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Only a holder of record of shares of common stock issued and outstanding
immediately prior to the effective time is entitled to assert appraisal rights
for the shares of common stock registered in that holder's name. A demand for
appraisal should be executed by or on behalf of the stockholder of record, fully
and correctly, as that stockholder's name appears on the stock certificates,
should specify the stockholder's name and mailing address, the number of shares
of common stock owned and that the stockholder intends thereby to demand
appraisal of the stockholder's common stock. If the shares are owned of record
in a fiduciary capacity, such as by a trustee, guardian or custodian, execution
of the demand should be made in that capacity, and if the shares are owned of
record by more than one person as in a joint tenancy or tenancy in common, the
demand should be executed by or on behalf of all owners. An authorized agent,
including one or more joint owners, may execute a demand for appraisal on behalf
of a stockholder; however, the agent must identify the record owner or owners
and expressly disclose the fact that, in executing the demand, the agent is
acting as agent for the owner or owners. A record holder such as a broker who
holds shares as nominee for several beneficial owners may exercise appraisal
rights with respect to the shares held for one or more beneficial owners while
not exercising these rights with respect to the shares held for one or more
beneficial owners; in that case, the written demand should set forth the number
of shares as to which appraisal is sought, and where no number of shares is
expressly mentioned the demand will be presumed to cover all shares held in the
name of the record owner. Stockholders who hold their shares in brokerage
accounts or other nominee forms and who wish to exercise appraisal rights are
urged to consult with their brokers to determine the appropriate procedures for
the making of a demand for appraisal by a nominee.
A stockholder who elects to exercise appraisal rights under Section 262
should mail or deliver a written demand to: TCBY Enterprises, Inc., 425 West
Capitol Avenue, Little Rock, Arkansas 72201, Attn: William P. Creasman.
Within ten days after the effective time, the surviving corporation must
send a notice as to the effectiveness of the merger to each former stockholder
of TCBY who has made a written demand for appraisal in accordance with Section
262 and who has not voted in favor of the merger agreement. Within 120 days
after the effective time, but not thereafter, either the surviving corporation
or any dissenting stockholder who has complied with the requirements of Section
262 may file a petition in the Delaware Chancery Court demanding a determination
of the value of the shares of common shares held by all dissenting stockholders.
TCBY is under no obligation to and has no present intent to file a petition for
appraisal, and stockholders seeking to exercise appraisal rights should not
assume that the surviving corporation will file such a petition or that the
surviving corporation will initiate any negotiations with respect to the fair
value of such shares. Accordingly, stockholders who desire to have their shares
appraised should initiate any petitions necessary for the perfection of their
appraisal rights within the time periods and in the manner prescribed in Section
262. Inasmuch as TCBY has no obligation to file such a petition, the failure of
a stockholder to do so within the period specified could nullify that
stockholder's previous written demand for appraisal. In any event, at any time
within 60 days after the effective time (or at any time thereafter with the
written consent of TCBY), any stockholder who has demanded appraisal has the
right to withdraw the demand and to accept payment of the merger consideration.
Within 120 days after the effective time, any stockholder who has complied
with the provisions of Section 262 to that point in time will be entitled to
receive from the surviving corporation, upon written request, a statement
setting forth the aggregate number of shares not voted in favor of the merger
agreement and with respect to which demands for appraisal have been received and
the aggregate number of holders of these shares. The surviving corporation must
mail the statement to the stockholder within 10 days of receipt of the request
or within 10 days after expiration of the period for delivery of demands for
appraisals under Section 262, whichever is later.
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A stockholder timely filing a petition for appraisal with the Court of
Chancery must deliver a copy to the surviving corporation, which will then be
obligated within 20 days to provide the Delaware Court of Chancery with a duly
verified list containing the names and addresses of all stockholders who have
demanded appraisal of their shares. After notice to these stockholders, the
Delaware Court of Chancery is empowered to conduct a hearing on the petition to
determine which stockholders are entitled to appraisal rights. The Delaware
Court of Chancery may require stockholders who have demanded an appraisal for
their shares and who hold stock represented by certificates to submit their
certificates to the Register in Chancery for notation thereon of the pendency of
the appraisal proceedings, and if any stockholder fails to comply with the
requirement, the Delaware Court of Chancery may dismiss the proceedings as to
that stockholder.
After determining the stockholders entitled to an appraisal, the Delaware
Court of Chancery will appraise the "fair value" of their shares, exclusive of
any element of value arising from the accomplishment or expectation of the
merger, together with a fair rate of interest, if any, to be paid upon the
amount determined to be the fair value. The costs of the action may be
determined by the Delaware Chancery Court and taxed upon the parties as the
Delaware Chancery Court deems equitable. Upon application of a dissenting
stockholder, the Delaware Chancery Court may also order that all or a portion of
the expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorneys' fees and the
fees and expenses of experts, be charged pro rata against the value of all of
the shares entitled to appraisal. Stockholders considering seeking appraisal
should be aware that the fair value of their shares as determined under Section
262 could be more than, the same as or less than the merger consideration they
would receive under the merger agreement if they did not seek appraisal of their
shares. Section 262 provides that fair value is to be "exclusive of any element
of value arising from the accomplishment or expectation of the merger."
Stockholders should also be aware that investment banking opinions are not
opinions as to fair value under Section 262.
Any stockholder who has duly demanded an appraisal in compliance with
Section 262 will not, after the effective time, be entitled to vote the shares
subject to the demand for any purpose or be entitled to the payment of dividends
or other distributions on those shares (except dividends or other distributions
payable to holders of record of shares as of a record date prior to the
effective time).
Any stockholder may withdraw its demand for appraisal and accept the merger
consideration by delivering to the surviving corporation a written withdrawal of
the stockholder's demand for appraisal, except that (1) any such attempt to
withdraw made more than 60 days after the effective time will require written
approval of the surviving corporation, and (2) no appraisal proceeding in the
Delaware Chancery Court shall be dismissed as to any stockholder without the
approval of the Delaware Chancery Court, and such approval may be conditioned
upon such terms as the Delaware Chancery Court deems just. If the surviving
corporation does not approve a stockholder's request to withdraw a demand for
appraisal when such approval is required or if the Delaware Chancery Court does
not approve the dismissal of an appraisal proceeding, the stockholder would be
entitled to receive only the appraised value determined in any such appraisal
proceeding, which value could be lower than the value of the merger
consideration.
38
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth as of February 24, 2000, with respect to
each person who is known to TCBY to be the beneficial owner of more than 5% of
the outstanding shares of common stock of TCBY, the name and address of such
owner, the number of shares of common stock beneficially owned, the nature of
such ownership, and the percentage such shares comprised of the outstanding
shares of common stock of TCBY:
<TABLE>
<CAPTION>
Amount and Nature of Percent*
Name and Address of Beneficial Owner (a) Beneficial Ownership of Class
--------------------------------------------------- ---------------------------- ---------------
<S> <C> <C>
Frank D. Hickingbotham............................. 9,756,374 (b) 42.6%
c/o TCBY Enterprises, Inc.
425 West Capitol Avenue
Little Rock, Arkansas 72201
Dimensional Fund Advisors Inc...................... 1,387,166 (c) 6.06%
1299 Ocean Avenue, 11th Floor
Santa Monica, California 90401
</TABLE>
______________
* Percentages are based upon 22,896,137 shares outstanding and entitled to
vote (excluding 5,012, 509 shares TCBY holds as treasury stock which is not
entitled to vote) on February 24, 2000.
(a) TCBY is relying on reports filed under Section 13 of the Securities
Exchange Act of 1934, as amended, for purposes of determining ownership of
more than 5% of its common stock by any person or group
(b) See footnote "(a)" under "Security Ownership of Management" for explanation
of beneficial ownership. This figure does not include options to acquire
stock of TCBY.
(c) Dimensional Fund Advisors Inc. filed a report on Schedule 13G with the SEC
on February 3, 2000. The Schedule 13G states that Dimensional Fund
Advisors, in its role as investment adviser or manager of four registered
investment companies, possesses voting and/or investment power over
1,387,166 shares of TCBY common stock. All of such shares of TCBY common
stock are owned by the registered investment companies advised or managed
by Dimensional Fund Advisors, and Dimensional Fund Advisors disclaims
beneficial ownership of such securities. TCBY has included the foregoing
information in reliance upon, and without independent verification of, the
disclosures contained in the above-referenced report on Schedule 13G.
39
<PAGE>
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth certain information as of February 24, 2000
with respect to the positions held and beneficial ownership of TCBY's common
stock by its directors and certain named executive officers:
<TABLE>
<CAPTION>
Outstanding
Common Stock
of TCBY Percentage
Principal Occupation, Name of Beneficially of
Organization in Which Occupation is Owned at Outstanding
Name; Year Became Carried on, Offices and Positions, if February 24, Common
Director any, Held with TCBY, and Age 2000 (a) Stock (b)
- -------------------------- ----------------------------------------- ----------------- ---------------
<S> <C> <C> <C>
Frank D. Hickingbotham Chairman of the Board and Chief 10,004,860 43.7
1970 Executive Officer of TCBY; Age 63 (c)
Herren C. Hickingbotham President and Chief Operating Officer of 789,050 3.4
1982 TCBY; Age 41 (c)
William H. Bowen Retired Chairman and Chief Executive 34,000 *
1993 Officer, First Commercial Corporation;
Age 76 (c)
Daniel R. Grant President Emeritus, Ouachita Baptist 40,100 *
1989 University; Age 76
F. Todd Hickingbotham President of Riverport Equipment and 753,863 3.3
1990 Distribution Company, a subsidiary of
TCBY; Age 36
Don O. Kirkpatrick President and Chief Executive Officer, 24,583 *
1993 Quality Foods, Inc. (foodservice
distribution); Age 62
Marvin D. Loyd Dentist; Age 67 97,605 *
1984
Hugh H. Pollard Chief Executive Officer of 350,000 1.5
1984 Brooks-Pollard Co., Inc. (a marketing
consulting firm); Age 59 (c)
Named Executives
James M. Sahene President and Chief Operating Officer, 224,100 *
TCBY Systems, Inc., a subsidiary of
TCBY; Age 39
Gene H. Whisenhunt Executive Vice President and Chief 195,360 *
Financial Officer of TCBY; Age 39
Jim H. Fink Executive Vice President of TCBY and 238,325 1.0
President of Americana Foods Limited
Partnership, a subsidiary of TCBY; Age 42
</TABLE>
- --------------
* Denotes ownership of less than 1% of the outstanding common stock of TCBY.
(a) Includes shares, if any, held by spouse, held in joint tenancy with spouse,
held by or for the benefit of nominee or one or more members of nominee's
immediate family, held by a charitable foundation of which the nominee is
the trustee, credited to nominee's account in TCBY's employee or non-
employee director stock option plans, with respect to which the nominee has
or shares voting or investment powers, subject to employee stock options
which were exercisable on February 24, 2000 or which have or will become
exercisable within 60 days thereafter; or in which the nominee otherwise
has a beneficial interest. All directors and executive officers as a
40
<PAGE>
group beneficially own an aggregate of 12,889,703 shares (56.30% of all
outstanding shares, excluding shares TCBY holds as treasury stock).
(b) Stock options exercisable within 60 days of the date of the table were
added to the beneficial ownership total. To compute the percent of class
owned, the outstanding total was increased by the same amount.
(c) Also a member of the Executive Committee of the board of directors of TCBY.
Frank D. Hickingbotham is the father of Herren C. Hickingbotham and F. Todd
Hickingbotham. No other family relationships exist among any of the above named
individuals. From 1995 to 1998 Frank D. Hickingbotham was a director of First
Commercial Corporation, a bank holding company, until Regions Financial
Corporation acquired that company in 1998. From 1998 to 1999 Mr. Hickingbotham
was a director of Regions Financial Corporation.
Mr. Bowen served as Chairman and Chief Executive Officer of First
Commercial Corporation, a bank holding company, from 1984 to 1991, and remained
Retired Chairman and Chief Executive Officer until that company was acquired by
Regions Financial Corporation in 1998. Mr. Bowen served as President and Chief
Executive Officer of Healthsource Arkansas Ventures, Inc., from September, 1993
to July, 1995. Mr. Bowen was Dean of the School of Law for the University of
Arkansas at Little Rock from July, 1995, until July, 1997.
Except as set forth above, each of the foregoing persons has served the
person's respective company in the capacity set forth or in various
administrative or executive positions with such company, its parents or
subsidiaries for at least five years.
CERTAIN PENDING LITIGATION
On February 15, 2000, TCBY was served with papers purporting to initiate
two class actions in Pulaski County, Arkansas, seeking to enjoin the merger.
The litigation is styled David A. Marshall vs. TCBY Enterprises, Inc. and its
directors, 6/th/ Division, Chancery Court, IJ2000706, and Alan Braus vs. TCBY
Enterprises, Inc., and its directors, 5/th/ Division, Chancery Court, IJ2000705.
TCBY and its directors believe the litigation is without merit and will
vigorously defend their rights.
41
<PAGE>
Cautionary Statement Regarding Forward-looking Statements
The following are or may constitute forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995:
(a) certain statements concerning possible or assumed future results of
operations of TCBY contained in "THE MERGER -- Background of the Merger," "THE
MERGER -- Reasons for the Merger; Recommendation of the TCBY Board," and "THE
MERGER -- Opinion of TCBY's Financial Advisor," including any forecasts and
projections, and certain statements from documents TCBY files with the
Securities and Exchange Commission on or after the date of this proxy statement
regarding the development of possible or assumed future results of operations of
TCBY's businesses, the markets for TCBY's products, anticipated capital
expenditures, regulatory developments, competition or the effects of the merger;
(b) any statements preceded by, followed by or that include the words
"believes," "expects," "anticipates," "intends" or similar expressions contained
in the sections of this proxy statement cited above or incorporated herein; and
(c) other statements contained or incorporated by reference in this proxy
statement regarding matters that are not historical facts.
Because such statements are subject to risks and uncertainties, actual
results may differ materially from those expressed or implied by such forward-
looking statements. TCBY's stockholders are cautioned not to place undue
reliance on such statements, which speak only as of the date of this proxy
statement or, in the case of TCBY's documents filed with the Securities and
Exchange Commission on or after the date of this proxy statement, the date of
such documents. Types of risk include, but are not limited to, customer demand
for our products, competitor's actions, interruptions in our operations,
dependence on certain suppliers, and other risks that may be described in our
filings with the Securities and Exchange Commission.
All subsequent written and oral forward-looking statements attributable to
TCBY or persons acting on its behalf are expressly qualified in their entirety
by the cautionary statements contained or referred to in this section. TCBY does
not undertake any obligation to release publicly any revisions to such forward-
looking statements to reflect events or circumstances after the date of this
proxy statement or to reflect the occurrence of unanticipated events.
No person has been authorized by TCBY to give any information or to make
any representation not contained in this proxy statement and, if given or made,
such information or representation should not be relied upon as having been
authorized by TCBY. This proxy statement does not constitute an offer or
solicitation to sell or a solicitation of an offer to buy any securities. The
delivery of this proxy statement shall not, under any circumstances, imply or
create any implication that there have not been any changes in the affairs of
TCBY or in the information set forth or incorporated by reference herein
subsequent to the date hereof.
STOCKHOLDER PROPOSALS FOR NEXT ANNUAL MEETING
In accordance with TCBY's by-laws, proposals submitted by TCBY stockholders
for presentation at the TCBY 2000 annual meeting, to be held if the merger does
not occur, should have been received by TCBY no later than November 28, 1999 in
order to be eligible for inclusion in the proxy statement and proxy form
relating to such meeting. TCBY has received no such proposals.
42
<PAGE>
AVAILABLE INFORMATION
TCBY files annual, quarterly and special reports, proxy statements and
other information with the SEC. You may read and copy any reports, statements or
other information we file at the SEC's public reference rooms in Washington,
D.C., New York, New York and Chicago, Illinois. Please call the SEC at 1-800-
SEC-0330 for further information on the public reference rooms. Our filings are
also available to the public at the web site maintained by the SEC at
"http://www.sec.gov."
43
<PAGE>
APPENDIX A
================================================================================
AGREEMENT AND PLAN OF MERGER
among
CI MERGER CO.,
CAPRICORN INVESTORS III, L.P.,
and
TCBY ENTERPRISES, INC.
Dated as of February 9, 2000
================================================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
Article I
THE MERGER
Section 1.01. The Merger................................................................... 1
Section 1.02. Closing...................................................................... 2
Section 1.03. Effective Time............................................................... 2
Section 1.04. Effects of the Merger........................................................ 2
Section 1.05. Certificate of Incorporation and By-Laws of the Surviving Corporation........ 2
Section 1.06. Directors.................................................................... 2
Section 1.07. Officers..................................................................... 2
Article II
CONVERSION OF SHARES; EXCHANGE OF CERTIFICATES
Section 2.01. Effect on Stock.............................................................. 2
Section 2.02. Exchange of Certificates..................................................... 3
Section 2.03. Dissenting Shares............................................................ 5
Section 2.04. Options...................................................................... 6
Article III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Section 3.01. Organization, Qualification, Etc............................................. 6
Section 3.02. Capital Stock................................................................ 7
Section 3.03. Corporate Authority Relative to this Agreement; No Violation................. 7
Section 3.04. Reports and Financial Statements............................................. 8
Section 3.05. No Undisclosed Liabilities................................................... 9
Section 3.06. No Violation of Law.......................................................... 9
Section 3.07. Environmental Laws and Regulations........................................... 9
Section 3.08. ERISA; Benefit Plans......................................................... 10
Section 3.09. Absence of Certain Changes or Events......................................... 12
Section 3.10. Investigations; Litigation................................................... 12
Section 3.11. Proxy Statement; Other Information........................................... 12
Section 3.12. Tax Matters.................................................................. 13
Section 3.13. Opinion of Financial Advisor................................................. 14
Section 3.14. Required Vote of the Company Stockholders.................................... 14
Section 3.15. Material Contracts........................................................... 14
Section 3.16. Takeover Statute............................................................. 15
Section 3.17. Finders or Brokers........................................................... 15
</TABLE>
<PAGE>
<TABLE>
<S> <C>
Section 3.18. No Conflicts................................................................ 15
Section 3.19. Intellectual Property....................................................... 15
Section 3.20. Labor Matters............................................................... 16
Section 3.21. Title to Properties......................................................... 16
Section 3.22. Equipment................................................................... 17
Section 3.23. Suppliers and Franchisees................................................... 17
Section 3.24. Transactions with Affiliates................................................ 17
Section 3.25. Insurance................................................................... 17
Section 3.26. Legal Proceedings........................................................... 18
Section 3.27. Year 2000 Compliance........................................................ 18
Section 3.28. Company Financial Position.................................................. 18
Article IV
REPRESENTATIONS AND WARRANTIES OF NEWCO AND GUARANTOR
Section 4.01. Organization, Qualification, Etc............................................ 19
Section 4.02. Legal Authority Relative to this Agreement; No Violation.................... 19
Section 4.03. Investigations; Litigation.................................................. 20
Section 4.04. Proxy Statement; Other Information.......................................... 20
Section 4.05. Lack of Ownership of the Company Common Stock............................... 20
Section 4.06. Finders or Brokers.......................................................... 20
Section 4.07. Financing................................................................... 21
Section 4.08. Solvency.................................................................... 21
Section 4.09. Guarantor Financial Position................................................ 21
Article V
COVENANTS AND AGREEMENTS
Section 5.01. Conduct of Business by the Company.......................................... 22
Section 5.02. Investigation............................................................... 24
Section 5.03. Proxy Material.............................................................. 24
Section 5.04. Asset Sales................................................................. 25
Section 5.05. Executive Security Agreements/Severance Plan................................ 25
Section 5.06. Filings; Other Action....................................................... 26
Section 5.07. Further Assurances.......................................................... 27
Section 5.08. Takeover Statute............................................................ 27
Section 5.09. No Solicitation............................................................. 27
Section 5.10. Public Announcements........................................................ 28
Section 5.11. Indemnification and Insurance............................................... 28
Section 5.12. Reserved.................................................................... 29
Section 5.13. Additional Reports and Information.......................................... 29
Section 5.14. Financing................................................................... 30
Section 5.15. Solvency at Closing......................................................... 30
Section 5.16. Guaranty of Performance..................................................... 30
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C>
Section 5.17. Headquarters Employees/WARN Act Compliance.................................. 31
Article VI
CONDITIONS TO THE MERGER
Section 6.01. Conditions to Each Party's Obligation to Effect the Merger.................. 32
Section 6.02. Conditions to Obligation of the Company to Effect the Merger................ 32
Section 6.03. Conditions to Obligation of Newco to Effect the Merger...................... 32
Article VII
TERMINATION
Section 7.01. Termination or Abandonment.................................................. 33
Section 7.02. Termination Fee............................................................. 35
Section 7.03. Amendment or Supplement..................................................... 36
Section 7.04. Extension of Time, Waiver, Etc.............................................. 36
Article VIII
MISCELLANEOUS
Section 8.01. No Survival of Representations and Warranties............................... 36
Section 8.02. Expenses.................................................................... 36
Section 8.03. Counterparts; Effectiveness................................................. 37
Section 8.04. Governing Law............................................................... 37
Section 8.05. Jurisdiction................................................................ 37
Section 8.06. Notices..................................................................... 37
Section 8.07. Assignment; Binding Effect.................................................. 38
Section 8.08. Severability................................................................ 38
Section 8.09. Enforcement of Agreement.................................................... 38
Section 8.10. Entire Agreement; No Third-Party Beneficiaries.............................. 38
Section 8.11. Headings.................................................................... 39
Section 8.12. Certain Definitions......................................................... 39
</TABLE>
iii
<PAGE>
INDEX OF DEFINED TERMS
<TABLE>
<S> <C>
1999 Financial Statements.................................................. 8
Affiliates................................................................. 39
Aggregate Merger Consideration............................................. 21
Agreement.................................................................. 1
AmeriServe................................................................. 22
Benefit Plans.............................................................. 10
Cash Balance............................................................... 18
Certificate of Merger...................................................... 2
Certificates............................................................... 3
Change of Control Arrangement.............................................. 12
Closing Date............................................................... 2
Code....................................................................... 10
Company.................................................................... 1
Company Affiliated Group................................................... 13
Company Affiliates......................................................... 29
Company Common Stock....................................................... 2
Company Current SEC Reports................................................ 8
Company Disclosure Schedule................................................ 6
Company Material Contracts................................................. 14
Company Meeting............................................................ 25
Company Required Approvals................................................. 8
Company SEC Reports........................................................ 8
Company Stockholder Approval............................................... 14
Confidentiality Agreement.................................................. 24
Contingent Financing....................................................... 21
Control.................................................................... 39
Costs...................................................................... 28
Current Company Group...................................................... 13
D&O Insurance.............................................................. 29
DGCL....................................................................... 1
Disclosure Schedule........................................................ 19
Dissenting Shares.......................................................... 5
Effective Time............................................................. 2
Environmental Claims....................................................... 10
Environmental Laws......................................................... 9
Equity Financing........................................................... 21
ERISA...................................................................... 10
Exchange Act............................................................... 8
Exchange Agent............................................................. 3
Exchange Fund.............................................................. 3
</TABLE>
<PAGE>
<TABLE>
<S> <C>
Executive Security Agreements.............................................. 25
GAAP....................................................................... 9
Guarantor.................................................................. 1
Guarantor Financial Statements............................................. 21
Guarantor Interim Financial Statements..................................... 30
Guaranty................................................................... 30
Headquarters Employees..................................................... 31
HSR Act.................................................................... 8
Indemnified Parties........................................................ 28
Intellectual Property Rights............................................... 16
Lien....................................................................... 7
Material Adverse Effect.................................................... 39
Material Adverse Effect in Financing....................................... 30
Material State............................................................. 14
Merger..................................................................... 1
Net Worth.................................................................. 18
Newco...................................................................... 1
Newco Disclosure Schedule.................................................. 19
Newco Required Approvals................................................... 20
Non-Contingent Financing................................................... 21
Option Plans............................................................... 6
Options.................................................................... 6
Past Company Group......................................................... 13
Pension Plans.............................................................. 10
Per Share Merger Consideration............................................. 3
Proxy Statement............................................................ 13
Regulatory Law............................................................. 27
SEC........................................................................ 8
Securities Act............................................................. 8
Severance Plan............................................................. 26
Stock Voting Agreement..................................................... 1
Subsidiaries............................................................... 39
Superior Proposal.......................................................... 27
Surviving Corporation...................................................... 1
Tail D&O Coverage.......................................................... 29
Takeover Proposal.......................................................... 27
Tax Return................................................................. 14
Taxes...................................................................... 13
Termination Date........................................................... 22
Termination Fee............................................................ 35
WARN Act................................................................... 31
</TABLE>
<PAGE>
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER, dated as of February 9, 2000 (the
"Agreement"), among CI Merger Co., a Delaware corporation ("Newco"), Capricorn
Investors III, L.P., a Delaware limited partnership, as limited guarantor of
Newco's obligations ("Guarantor"), and TCBY Enterprises, Inc., a Delaware
corporation ("Company").
W I T N E S S E T H:
WHEREAS, the respective Boards of Directors of Newco and the Company have
approved the acquisition of the Company by Newco upon the terms and subject to
the conditions set forth in this Agreement;
WHEREAS, the respective Boards of Directors of Newco, and the Company have
approved this Agreement and the merger of Newco with and into the Company (the
"Merger") in accordance with the General Corporation Law of the State of
Delaware ("DGCL") and upon the terms and subject to the conditions set forth in
this Agreement;
WHEREAS, Guarantor owns all of the outstanding capital stock of Newco, and
due to the benefits to be received by Guarantor as a result of the transactions
contemplated by this Agreement, Guarantor has agreed, subject to the limitations
provided herein, to unconditionally guarantee the performance of Newco's
obligations under the Agreement;
WHEREAS, as a condition and an inducement to Newco and Guarantor entering
into this Agreement and incurring the obligations set forth herein, concurrently
with the execution and delivery of this Agreement, Newco is entering into a
Stock Voting Agreement with certain stockholders of the Company, in the form of
Exhibit A hereto (the "Stock Voting Agreement");
NOW THEREFORE, in consideration of the foregoing and the representations,
warranties, covenants and agreements contained herein, and intending to be
legally bound hereby, Newco, Guarantor and the Company 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 DGCL, Newco shall be merged
with and into the Company at the Effective Time (as defined in Section 1.03) of
the Merger. Following the Merger, the separate corporate existence of Newco
shall cease, and the Company shall continue as the surviving corporation and a
majority owned subsidiary of Guarantor (the "Surviving Corporation") and shall
succeed to and assume all the rights and obligations of Newco in accordance with
the DGCL.
<PAGE>
Section 1.02. Closing. The closing of the Merger shall take place at 10:00
a.m. on a date to be specified by the parties (the "Closing Date") which shall
be no later than the second business day after the satisfaction or waiver of the
conditions set forth in Article VI at the offices of Kutak Rock, Little Rock,
Arkansas, unless another date or place is agreed to in writing by the parties
hereto.
Section 1.03. Effective Time. On the Closing Date, the parties shall
execute and file in the office of the Secretary of State of the State of
Delaware a certificate of merger (the "Certificate of Merger") executed in
accordance with the DGCL and shall make all other filings or recordings, if any,
required under the DGCL. The Merger shall become effective at the time of filing
of the Certificate of Merger, or at such later time as is agreed upon by the
parties hereto and set forth therein (such time as the Merger becomes effective
is referred to herein as the "Effective Time").
Section 1.04. Effects of the Merger. The Merger shall have the effects set
forth in Section 259 of the DGCL.
Section 1.05. Certificate of Incorporation and By-Laws of the Surviving
Corporation.
(a) The Certificate of Incorporation of the Company in effect
immediately prior to the Effective Time shall become the Certificate of
Incorporation of the Surviving Corporation after the Effective Time, until
thereafter amended as provided by the DGCL and such Certificate of
Incorporation.
(b) The By-laws of the Company as in effect immediately prior to the
Effective Time shall become the By-laws of the Surviving Corporation after
the Effective Time, until thereafter amended as provided by the DGCL, the
Certificate of Incorporation of the Surviving Corporation and such By-laws.
Section 1.06. Directors. The directors of Newco immediately prior to the
Effective Time shall become the directors of the Surviving Corporation, until
the earlier of their death, resignation or removal or until their respective
successors are duly elected and qualified.
Section 1.07. Officers. The officers of Newco immediately prior to the
Effective Time shall become the officers of the Surviving Corporation, until the
earlier of their resignation or removal or until their respective successors are
duly elected and qualified.
ARTICLE II
CONVERSION OF SHARES; EXCHANGE OF CERTIFICATES
Section 2.01. Effect on Stock. At the Effective Time, by virtue of the
Merger and without any action on the part of the Company, Newco or the holders
of any securities of the Company or Newco:
(a) Each share of common stock, par value $.10 per share, of the
Company (the "Company Common Stock") issued and held, immediately prior to
the Effective
A-2
<PAGE>
Time, in the Company's treasury or by any of the Company's direct or
indirect wholly owned subsidiaries, and each share of Company Common Stock
that is owned by Newco shall automatically be cancelled and retired and
shall cease to exist, and no consideration shall be delivered in exchange
therefor.
(b) Each issued and outstanding share of Company Common Stock (other
than shares to be cancelled in accordance with Section 2.01(a) and shares
which are held by stockholders exercising appraisal rights under Section
262 of the DGCL) shall thereupon be converted into the right to receive
$6.00 in cash, without interest thereon (the "Per Share Merger
Consideration"). As of the Effective Time, all such shares of Company
Common Stock shall no longer be outstanding and shall automatically be
cancelled and retired and shall cease to exist, and each holder of a
certificate or certificates which immediately prior to the Effective Time
represented such outstanding shares of Company Common Stock (the
"Certificates") shall cease to have any rights with respect thereto, except
the right to receive the Per Share Merger Consideration set forth in this
Section 2.01(b) for each such share.
(c) Each issued and outstanding share of common stock, par value $.01
per share, of Newco shall be converted into one validly issued, fully paid
and nonassessable share of common stock of the Surviving Corporation.
Section 2.02. Exchange of Certificates.
(a) Exchange Agent. Prior to the Effective Time, Newco shall enter
into an agreement with Continental Stock Transfer and Trust Company, or
such other bank or trust company as may be designated by Newco and as shall
be reasonably satisfactory to the Company (the "Exchange Agent"), which
shall provide that Newco shall deposit with the Exchange Agent at the
Effective Time, for the benefit of the holders of shares of Company Common
Stock, for exchange in accordance with this Article II through the Exchange
Agent cash in an amount sufficient to make the cash payment due under
Section 2.01(b) (the "Exchange Fund"), which such funds shall be held by
Exchange Agent in a segregated trust account for the benefit of the
Company's stockholders.
(b) Exchange Procedures. As soon as reasonably practicable after the
Effective Time, Surviving Corporation shall cause the Exchange Agent to
mail to each holder of record of a Certificate whose shares were converted
into the right to receive Per Share Merger Consideration pursuant to
Section 2.01(b): (i) a letter of transmittal (which shall specify that
delivery shall be effected, and risk of loss and title to the Certificates
shall pass, only upon delivery of the Certificates to the Exchange Agent
and shall be in such customary form and have such other customary
provisions as the Company and Newco may reasonably specify), and (ii)
instructions for use in effecting the surrender of the Certificates in
exchange for the Per Share Merger Consideration. Upon surrender of a
Certificate for cancellation to the Exchange Agent, together with such
letter of transmittal, duly executed, and such other documents as may
reasonably be required by the Exchange Agent, the holder of such
Certificate shall be entitled to receive in exchange therefor (A) the
product of the Per Share Merger Consideration multiplied by the number of
shares of Company Common Stock represented by the Certificate, and
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(B) any amounts to which the holder is entitled to receive pursuant to
Section 2.02(c) hereof, and the Certificate so surrendered shall forthwith
be cancelled. In the event of a transfer of ownership of Company Common
Stock which is not registered in the transfer records of the Company, the
Per Share Merger Consideration and the amounts distributable under Section
2.01(c) hereof may be distributed 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 issuance shall pay any transfer or other non-
income taxes required by reason of such distribution to a person other than
the registered holder of such Certificate or establish to the satisfaction
of Surviving Corporation that any such tax has been paid or is not
applicable. To the extent that amounts are withheld by Surviving
Corporation pursuant to Section 2.02(i) below, such withheld amounts shall
be treated for all purposes of this Agreement as having been paid to the
holder of the Company Common Stock in respect of whom such deduction and
withholding were made by Surviving Corporation or the Exchange Agent. Until
surrendered as contemplated by this Section 2.02, each Certificate shall be
deemed at any time after the Effective Time to represent only the right to
receive upon such surrender Per Share Merger Consideration and other
amounts to which the holder is entitled pursuant to Section 2.02(c) hereof.
No interest will 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. The delivery
of the Per Share Merger Consideration distributed upon the surrender of
Certificates in accordance with the terms of this Article II shall be
deemed payment in full satisfaction of all rights pertaining to the shares
of Company Common Stock theretofore represented by such Certificates,
subject, however, to the Surviving Corporation's obligation to pay any
dividends or make any other distributions with a record date prior to the
Effective Time which may have been authorized or made by the Company on
such shares of Company Common Stock and which remain unpaid at the
Effective Time, 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 which were outstanding immediately prior to the
Effective Time. If, after the Effective Time, Certificates are presented to
the Surviving Corporation or the Exchange Agent for any reason, they shall
be cancelled and exchanged as provided in this Article II, except as
otherwise provided by law.
(d) Return of Exchange Fund. Any portion of the Exchange Fund,
together with any dividends or distributions payable in respect thereof
pursuant to Section 2.02(c) hereof, which remains undistributed to the
holders of the Certificates for six months after the Effective Time shall
be delivered to Newco upon demand, and any holders of the Certificates who
have not theretofore complied with this Article II shall thereafter look
only to Surviving Corporation for payment of their claim for Per Share
Merger Consideration.
(e) No Liability. None of the Company, Newco, the Surviving
Corporation or the Exchange Agent shall be liable to any person in respect
of any Per Share Merger Consideration delivered to a public official
pursuant to any applicable abandoned
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property, escheat or similar law. If any Certificate shall not have been
surrendered prior to one year after the Effective Time any such Per Share
Merger Consideration in respect of such Certificate shall, to the extent
permitted by applicable law, 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 Exchange Agent shall invest all
cash included in the Exchange Fund as directed by Surviving Corporation.
Any interest and other income resulting from such investments shall be paid
to Surviving Corporation.
(g) Lost Certificates. If any Certificate shall have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the
person claiming such Certificate to be lost, stolen or destroyed and, if
required by the Surviving Corporation, the posting by such person of a bond
in such reasonable amount as the Surviving Corporation may direct as
indemnity against any claim that may be made against it with respect to
such Certificate, the Exchange Agent will issue in exchange for such lost,
stolen or destroyed Certificate the Per Share Merger Consideration and, if
applicable, any unpaid dividends and distributions payable in respect
thereof pursuant to Section 2.02(c) hereof.
(h) Adjustments. If at any time during the period between the date of
this Agreement and the Effective Time, any change in the outstanding shares
of capital stock of the Company shall occur as a result of any
reclassification, recapitalization, stock split (including a reverse stock
split) or combination, exchange or readjustment of shares, or any stock
dividend or stock distribution with a record date during such period, the
Per Share Merger Consideration shall be equitably adjusted.
(i) Withholding Rights. The Surviving Corporation shall be entitled
to deduct and withhold from consideration otherwise payable to any holder
of Company Common Stock pursuant to this Agreement such amounts as may be
required to be deducted and withheld with respect to the making of such
payment under the Code (as defined in Section 3.08), or under any provision
of state, local or foreign tax law.
Section 2.03. Dissenting Shares. Each outstanding share of Company Common
Stock as to which a written demand for appraisal is filed in accordance with
Section 262 of the DGCL at or prior to the Company Meeting and not withdrawn at
or prior to the Company Meeting (as defined in Section 5.03(d)) and which is not
voted in favor of the Merger shall not be converted into or represent a right to
receive the Per Share Merger Consideration unless and until the holder thereof
shall have failed to perfect, or shall have effectively withdrawn or lost the
right to appraisal of and payment for each such share of Company Common Stock
under said Section 262, at which time each such share shall be converted into
the right to receive the Per Share Merger Consideration. All such shares of
Company Common Stock as to which such a written demand for appraisal is so filed
and not withdrawn at or prior to the Company Meeting and which are not voted in
favor of the Merger, except any such shares of Company Common Stock the holder
of which, prior to the Effective Time, shall have effectively withdrawn or lost
such right to appraisal and payment for such shares of Company Common Stock
under said Section 262, are herein referred to as "Dissenting Shares." The
Company shall give Newco notice upon
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receipt by the Company of any written demands for appraisal rights, withdrawal
of such demands, and any other written communications delivered to the Company
pursuant to said Section 262, and the Company shall give Newco the opportunity,
to the extent permitted by law, to participate in all negotiations and
proceedings with respect to such demands. Except with the prior written consent
of Newco, the Company shall not voluntarily make any payment with respect to any
demands for appraisal rights and shall not settle or offer to settle any such
demands. Each holder of Dissenting Shares who becomes entitled, pursuant to the
provisions of said Section 262, to payment for such shares of Dissenting Shares
under the provisions of said Section 262 shall receive payment therefor from the
Surviving Corporation and such shares of Company Common Stock shall be
cancelled.
Section 2.04. Options. At the Effective Time, each holder of a then
outstanding option to purchase shares of Company Common Stock (collectively
"Options") granted by the Company under the Company's 1992 Employee Stock Option
Plan and 1992 Non-Employee Directors Stock Option Plan (collectively, the
"Option Plans"), if then exercisable, shall in settlement thereof, become
entitled to receive for each such share subject to any such Option, upon payment
of the exercise price under such Option for such share, the Per Share Merger
Consideration multiplied by the number of shares of Company Common Stock for
which such Option is exercisable; provided that, prior to the Effective Time,
Newco and the Company shall use their respective reasonable best efforts to
establish procedures for the cashless exercise of such Options. Prior to the
Effective Time, the Company shall use its reasonable best efforts to obtain all
necessary consents or releases from holders of Options, to the extent required
by the terms of the Option Plans, or pursuant to the terms of any Option granted
thereunder, and take all such other lawful action as may be necessary to give
effect to the transactions contemplated by this Section 2.04 (except for such
action that may require the approval of the Company's shareholders).
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth on the Disclosure Schedule delivered by the Company to
Newco prior to the execution of this Agreement (the "Company Disclosure
Schedule"), the Company represents and warrants to Newco as follows:
Section 3.01. Organization, Qualification, Etc. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and has the corporate power and authority and possesses
all governmental franchises, licenses, permits, authorizations and approvals
necessary to enable it to own its properties and assets and to carry on its
business as it is now being conducted. The Company is duly qualified to do
business and is in good standing in each jurisdiction in which the ownership of
its properties or the conduct of its business requires such qualification,
except for jurisdictions in which the failure to be so qualified or in good
standing would not, individually or in the aggregate, have a Material Adverse
Effect (as defined in Section 8.12) on the Company. The copies of the Company's
certificate of incorporation and by-laws which have been delivered to Newco are
complete and correct and in full force and effect. Each of the Company's
Subsidiaries (as defined in Section 8.12) is a corporation or partnership duly
organized, validly existing and in good standing under
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the laws of its jurisdiction of incorporation or organization, has the corporate
power and authority and possesses all governmental franchises, licenses,
permits, authorizations and approvals necessary to enable it to own its
properties and to carry on its business as it is now being conducted. Each of
the Company's Subsidiaries is duly qualified to do business and is in good
standing in each jurisdiction in which the ownership of its property or the
conduct of its business requires such qualification, except for jurisdictions in
which the failure to be so qualified or in good standing would not, individually
or in the aggregate, have a Material Adverse Effect on the Company. All the
outstanding shares of capital stock of, or other ownership interests in, the
Company's Subsidiaries which are corporations are validly issued, fully paid and
non-assessable and all the outstanding shares of capital stock of, or other
ownership interests in, the Company's Subsidiaries are owned by the Company,
directly or indirectly, free and clear of all liens, claims, mortgages,
encumbrances, pledges, security interests, equities or charges of any kind
(each, a "Lien"). There are no existing options, rights of first refusal,
preemptive rights, calls, claims or commitments of any character relating to the
issued or unissued capital stock or other securities of, or other ownership
interests in, any Subsidiary of the Company.
Section 3.02. Capital Stock.
(a) The authorized stock of the Company consists of 50,000,000 shares
of Company Common Stock, and 2,000,000 shares of Preferred Stock, par value
of $.10 per share. As of the date hereof, 22,896,137 shares of Company
Common Stock were issued and outstanding and 5,012,509 shares of Company
Common Stock were held in the treasury of the Company. All the outstanding
shares of Company Common Stock have been validly issued and are fully paid
and non-assessable and not subject to preemptive rights. There are no
outstanding subscriptions, options, warrants, rights or other arrangements
or commitments obligating the Company to issue any shares of its capital
stock or voting securities other than options to acquire 3,093,974 shares
of Company Common Stock pursuant to the Option Plans. No options have been
granted since December 17, 1999. Such options granted on December 17, 1999
are not vested on the date hereof and will not vest prior to or upon
consummation of the Merger. Attached as Section 3.02 to the Company
Disclosure Schedule is detailed information regarding all outstanding
options granted prior to the date hereof.
(b) As of the date of this Agreement, no bonds, debentures, notes or
other indebtedness of the Company having the right to vote on any matters
on which stockholders may vote are issued or outstanding. There are no
outstanding contractual obligations of the Company or any of its
Subsidiaries to repurchase, redeem or otherwise acquire any shares of
capital stock of the Company or such Subsidiaries.
Section 3.03. Corporate Authority Relative to this Agreement; No
Violation.
(a) The Company has the corporate power and authority to enter into
this Agreement and to carry out its obligations hereunder. The execution
and delivery of this Agreement, the Stock Voting Agreement and the
consummation of the transactions contemplated hereby and thereby have been
duly and validly authorized by the Board of Directors of the Company and,
except for the approval and adoption of this Agreement
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by its stockholders, no other corporate proceedings on the part of the
Company are necessary to authorize the consummation of the transactions
contemplated hereby. The Board of Directors of the Company has taken all
necessary and appropriate action so that Section 203 of the DGCL will be
inapplicable to this Agreement, the Stock Voting Agreement and the
transactions contemplated hereby and thereby. The Board of Directors of the
Company has determined that the transactions contemplated by this Agreement
are in the best interest of the Company and its stockholders and, except as
otherwise may be required to comply or act in a manner consistent with its
fiduciary duties under the DGCL, to recommend to such stockholders that
they approve and adopt this Agreement. This Agreement has been duly and
validly executed and delivered by the Company and, assuming this Agreement
constitutes a valid and binding agreement of the other parties hereto, this
Agreement constitutes a valid and binding agreement of the Company,
enforceable against the Company in accordance with its terms (except to the
extent that enforceability may be limited by applicable bankruptcy,
insolvency, reorganization or other laws affecting the enforcement of
creditors' rights generally, or by principles governing the availability of
equitable remedies).
(b) Other than in connection with or in compliance with (i) the
provisions of the DGCL, (ii) the Securities Act of 1933, as amended (the
"Securities Act"), (iii) the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), (iv) the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended (the "HSR Act"), (v) any applicable non-United States
competition, antitrust and investment laws and (vi) the securities or blue
sky laws of the various states (collectively, the "Company Required
Approvals"), no authorization, consent or approval of, or filing with, any
governmental body or authority is necessary for the consummation by the
Company of the transactions contemplated by this Agreement, except for such
authorizations, consents, approvals or filings, the failure to obtain or
make which would not, individually or in the aggregate, have a Material
Adverse Effect on the Company or substantially impair or delay the
consummation of the transactions contemplated hereby.
Section 3.04. Reports and Financial Statements. The Company has previously
furnished to Newco, or its Affiliates or representatives, true and complete
copies of:
(a) the Company's Annual Reports on Form 10-K filed with the
Securities and Exchange Commission (the "SEC") for each of the years ended
November 30, 1997 and 1998; and the Company's audited consolidated
financial statements for the fiscal year ended November 28, 1999 (the "1999
Financial Statements");
(b) each definitive proxy statement filed by the Company with the SEC
on or after February 27, 1998;
(c) all Current Reports on Form 8-K and Quarterly Reports on Form 10-
Q filed by the Company with the SEC since December 1, 1998.
As of their respective dates, such reports and proxy statements
(collectively, the "Company SEC Reports" and with specific reference to all
current Company SEC Reports filed through the date hereof, the "Company Current
SEC Reports") (i) complied as to form in all
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material respects with the applicable requirements of the Securities Act, the
Exchange Act and the rules and regulations promulgated thereunder and (ii) did
not contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading. Except
to the extent that information contained in any Company SEC Report has been
revised or superseded by a later filed Company SEC Report, none of the Company
SEC Reports contains any untrue statement of a material fact or omits to state
any material fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under which they were
made, not misleading. The (i) audited consolidated financial statements and
unaudited consolidated interim financial statements included in the Company SEC
Reports and (ii) 1999 Financial Statements (including, in each case, any related
notes and schedules) fairly present the financial position of the Company and
its consolidated Subsidiaries as of the dates thereof and the results of
operations and cash flows for the periods or as of the dates then ended
(subject, in the case of the unaudited interim financial statements, to normal
recurring year-end adjustments), in each case in accordance with past practice
and generally accepted accounting principles in the United States ("GAAP")
consistently applied during the periods involved (except as otherwise disclosed
in the notes thereto). Since December 1, 1998, the Company has timely filed all
reports, registration statements and other filings required to be filed by it
with the SEC under the rules and regulations of the SEC. None of the Company's
Subsidiaries is required to file any forms, reports or other documents with the
SEC.
Section 3.05. No Undisclosed Liabilities. Neither the Company nor any of
its Subsidiaries has any liabilities or obligations of any nature, whether or
not accrued, contingent or otherwise, and there is no existing condition,
situation or set of circumstances which would reasonably be expected to result
in such a liability or obligation, except liabilities or obligations reflected
in the Company Current SEC Reports or the 1999 Financial Statements (and notes
and schedules thereto).
Section 3.06. No Violation of Law. The businesses of the Company and its
Subsidiaries are not being conducted in violation of any law, ordinance or
regulation of any governmental body or authority (provided that no
representation or warranty is made in this Section 3.06 with respect to
Environmental Laws (as hereinafter defined)) except as described in the Company
Current SEC Reports or the 1999 Financial Statements (and notes and schedules
thereto).
Section 3.07. Environmental Laws and Regulations. Except as described in
the Company Current SEC Reports, (a) the Company and each of its Subsidiaries is
in compliance with all applicable federal, state, local and foreign laws and
regulations relating to pollution or protection of human health or the
environment (including, without limitation, ambient air, surface water, ground
water, land surface or subsurface strata) (collectively, "Environmental Laws"),
which compliance includes, but is not limited to, the possession by the Company
and its Subsidiaries of all material permits and other governmental
authorizations required under applicable Environmental Laws, and compliance with
the terms and conditions thereof, except for non-compliance which would not,
individually or in the aggregate, have a Material Adverse Effect on the Company;
(b) neither the Company nor any of its Subsidiaries has received written notice
of, or, is the subject of, any actions, causes of action, claims,
investigations, demands or notices by any person asserting an obligation to
conduct investigations or clean-up activities
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under any Environmental Law or alleging liability under or non-compliance with
any Environmental Law (collectively, "Environmental Claims") which would,
individually or in the aggregate, have a Material Adverse Effect on the Company;
and (c) there are no facts, circumstances or conditions in connection with the
operation of its business or any currently owned or leased facilities that are
reasonably likely to lead to any Environmental Claims in the future which would
individually or in the aggregate, have a Material Adverse Effect on the Company.
Section 3.08. ERISA; Benefit Plans.
(a) The Company Disclosure Schedule contains a list of all "employee
pension benefit plans" (as defined in Section 3(2) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA")) (sometimes
referred to herein as "Pension Plans"), "employee welfare benefit plans"
(as defined in Section 3(l) of ERISA), bonus, stock option, stock purchase
and deferred compensation plans or arrangements, and other employee fringe
benefit plans (all the foregoing being herein referred to as "Benefit
Plans") maintained, or contributed to, by the Company, any of its
Subsidiaries or any entity that is treated as under common control with the
Company or any of its Subsidiaries under Section 414(b), (c), (m) or (o) of
the Internal Revenue Code of 1986, as amended (the "Code"), for the benefit
of, or relating to, any employees or former employees of the Company or any
of its Subsidiaries. The Company has delivered or made available to Newco,
or its Affiliates or representatives, true, complete and correct copies of
(i) each Benefit Plan (or, in the case of any unwritten Benefit Plan, a
description thereof), (ii) the most recent determination letter received
from the Internal Revenue Service, (iii) the latest actuarial evaluations,
if any, (iv) the most recent annual report on Form 5500 filed with the
Internal Revenue Service with respect to each Benefit Plan (if any such
report was required), including Schedule A and Schedule B thereto, (v) the
most recent summary plan description for each Benefit Plan for which such a
summary plan description is required, and (vi) each trust agreement and
group annuity contract relating to any Benefit Plan.
(b) Each Benefit Plan has been administered in all material respects
in accordance with its terms and the applicable provisions of ERISA and the
Code. There are no investigations by any governmental agency, termination
proceedings or other claims (except for benefits payable in the normal
operation of the Benefit Plans), suits or proceedings or against or
involving any Benefit Plan or asserting any rights or claims to benefits
under any Benefit Plan that could reasonably give rise to any material
liability and, to the Company's knowledge, there are no facts that could
reasonably give rise to any material liability in the event of any such
investigation, claim, suit or proceeding. All contributions to, and
payments from, the Benefit Plans that may have been required to be made in
accordance with the Benefit Plans have been timely made.
(c) No "prohibited transaction" (as defined in Section 4975 of the
Code or Section 406 of ERISA) has occurred that involves the assets of any
Benefit Plan and that could subject the Company or the Subsidiary or any of
their employees or, to the Company's knowledge, a trustee, administrator or
other fiduciary of any trusts created under any Benefit Plan, to any
material tax or penalty on prohibited transactions imposed
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by Section 4975 of ERISA or the sanctions imposed under Title I of ERISA.
None of the Company, any of its Subsidiaries or any trustee, administrator
or other fiduciary of any Benefit Plan nor any agent of any of the
foregoing has engaged in any transaction or acted or failed to act in a
manner that could subject the Company or any of its Subsidiaries to any
material liability for breach of fiduciary duty under ERISA or any other
applicable law. No liability under Title IV of ERISA has been incurred by
the Company, any of its Subsidiaries or their affiliates within six years
prior to the date hereof that has not been satisfied in full, and, to the
Company's knowledge, no condition exists that presents a material risk of
incurring such liability.
(d) At no time within the five years preceding the date of this
Agreement has the Company or any of its Subsidiaries been required to
contribute to any "multiemployer plan" (as defined in Section 4001(a)(3) of
ERISA) or incurred any withdrawal liability, within the meaning of Section
4201 of ERISA, which liability has not been fully paid as of the date
hereof, or announced an intention to withdraw, but not yet completed such
withdrawal, from any multiemployer plan.
(e) Neither the Company nor any of its Subsidiaries contributes to a
Pension Plan that is subject to Section 302 of ERISA or Section 412 of the
Code.
(f) With respect to any Benefit Plan that is an employee welfare
benefit plan, (1) no such Benefit Plan is funded through a welfare benefits
fund, as such term is defined in Section 419(e) of the Code, and (2) each
such Benefit Plan that is a group health plan, as such term is defined in
Section 5000(b)(1) of the Code, complies with the applicable requirements
of Section 4980B(f) of the Code.
(g) Neither the Company nor any of its Subsidiaries has incurred any
liability under Section 4062(b) of ERISA to the Pension Benefit Guaranty
Corporation in connection with any Benefit Plan which is subject to Title
IV of ERISA. The Internal Revenue Service has issued a letter for each
Benefit Plan identified on the Company Disclosure Schedule determining that
such plan is exempt from United States Federal Income Tax under Sections
401(a) and 501(a) of the Code, and there has been no occurrence since the
date of any such determination letter which purports to adversely affect
such qualification.
(h) Neither the Company, any of its Subsidiaries nor any of their
affiliates maintains or contributes to, or has any liability (fixed,
contingent or otherwise, under any current or former plan) for, medical,
health or life insurance benefits for terminated employees of the Company
or any of its Subsidiaries or for present employees of the Company or any
of its Subsidiaries after termination of their employment (other than any
such welfare benefits provided pursuant to Code Section 4980B or ERISA
Sections 601-608).
(i) The Company Disclosure Schedule contains a true and complete
list, as of the date of this Agreement, showing the names of all employees
who during the fiscal year ended November 30, 1999, received compensation
(including commissions and
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bonuses) in excess of $50,000. Neither the Company nor any of its
Subsidiaries has agreed to increase the salary payable to any employee so
listed by more than five percent.
(j) The Company has made available to Newco, or its Affiliates or
representatives, true and complete copies of all contracts, agreements,
plans or arrangements covering any employee or former employee of the
Company or any of its Subsidiaries with "change of control" or similar
provisions or providing for "stay on" bonuses or post-change of control
severance payments (each, a "Change of Control Arrangement"). No Change of
Control Arrangement individually or collectively is expected to give rise
to the payment of any amount that would not be deductible by Newco pursuant
to Section 280G of the Code.
Section 3.09. Absence of Certain Changes or Events. Other than the
transactions contemplated by this Agreement or as disclosed in the Company
Disclosure Schedules, the Company Current SEC Reports or the 1999 Financial
Statements (and notes and schedules thereto), since December 1, 1998, the
businesses of the Company and its Subsidiaries have been conducted in the
ordinary course consistent with past practice, and the Company has taken no
action that could reasonably be expected to have constituted a breach of Section
5.01 hereof had it been in effect during such period.
Section 3.10. Investigations; Litigation. Except as described in the
Company Current SEC Reports:
(a) there is no investigation or review pending by any governmental
body or authority with respect to the Company or any of its Subsidiaries
which could reasonably be expected, individually or in the aggregate, to
have a Material Adverse Effect on the Company, nor has any governmental
body or authority notified the Company of an intention to conduct the same;
and
(b) there are no actions, suits or proceedings pending (or, to the
Company's knowledge, threatened) against or affecting the Company or its
Subsidiaries, or any of their respective properties at law or in equity, or
before any federal, state, local or foreign governmental body or authority,
which, individually or in the aggregate, are reasonably likely to have a
Material Adverse Effect on the Company;
provided that no representation or warranty is made in this Section 3.10 with
respect to Environmental Laws.
Section 3.11. Proxy Statement; Other Information. None of the information
with respect to the Company or its Subsidiaries to be included in the Proxy
Statement (as defined below) will, at the time of the mailing of the Proxy
Statement or any amendments or supplements thereto, and at the time of the
Company Meeting, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading, except that no representation is made by the Company with
respect to information supplied in writing by Newco or any Affiliate of Newco
specifically for inclusion in the Proxy Statement. The Proxy Statement will
comply as to form in all material respects with the
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provisions of the Exchange Act and the rules and regulations promulgated
thereunder. The letter to stockholders, notice of meeting, proxy statement and
form of proxy to be distributed to stockholders in connection with the Merger
and any schedules required to be filed with the SEC in connection therewith are
collectively referred to herein as the "Proxy Statement."
Section 3.12. Tax Matters.
(a) All federal, state, local and foreign Tax Returns (as such term
is defined below) required to be filed by or on behalf of the Company, each
of its Subsidiaries, and each affiliated, combined, consolidated or unitary
group of which the Company or any of its Subsidiaries (i) is a member (a
"Current Company Group") or (ii) has been a member within six years prior
to the date hereof but is not currently a member, but only insofar as any
such Tax Return relates to a taxable period ending on a date within the
last six years (a "Past Company Group," together with Current Company
Groups, a "Company Affiliated Group") have been timely filed, and all such
Tax Returns are complete and accurate except to the extent any failure to
file or any inaccuracies in filed returns would not, individually or in the
aggregate, have a Material Adverse Effect on the Company (it being
understood that the representations made in this Section, to the extent
that they relate to Past Company Groups, are made to the knowledge of the
Company). All Taxes due and owing by the Company, any Subsidiary of the
Company or any Company Affiliated Group have been timely paid, or
adequately reserved for, except to the extent any failure to pay or reserve
would not, individually or in the aggregate, have a Material Adverse Effect
on the Company. There is no audit examination, deficiency, refund
litigation, proposed adjustment or matter in controversy with respect to
any Taxes due and owing by the Company, any Subsidiary of the Company or
any Affiliated Group All assessments for Taxes due and owing by the
Company, any Subsidiary of the Company or any Company Affiliated Group with
respect to completed and settled examinations or concluded litigation have
been paid. Prior to the date of this Agreement, the Company has provided
Newco, or its Affiliates or representatives, with written schedules of (i)
the taxable years of the Company for which the statutes of limitations with
respect to federal income Taxes have not expired, and (ii) with respect to
federal income Taxes, for all taxable years for which the statute of
limitations has not yet expired, those years for which examinations have
been completed, those years for which examinations are presently being
conducted, and those years for which examinations have not yet been
initiated. The Company and each of its Subsidiaries have complied in all
material respects with all rules and regulations relating to the payment
and withholding of Taxes, except to the extent any such failure to comply
would not, individually or in the aggregate, have a Material Adverse Effect
on the Company. Neither the Company nor any of its Subsidiaries is a party
to, bound by, or has any obligation under any Tax sharing, allocation,
indemnity, or similar contract or arrangement.
(b) For purposes of this Agreement: (i) "Taxes" means any and all
federal, state, local, foreign, provincial, territorial or other taxes,
imposts, rates, levies, assessments and other charges of any kind
whatsoever whether imposed directly or through withholding (together with
any and all interest, penalties, additions to tax and additional amounts
applicable with respect thereto), including, without limitation, income,
franchise, windfall or other profits, gross receipts, property, sales, use,
capital
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stock, payroll, employment, social security, workers' compensation,
unemployment compensation, net worth, excise, withholding, ad valorem and
value added taxes; (ii) "Tax Return" means any declaration, return, report,
schedule, certificate, statement or other similar document (including
relating or supporting information) required to be filed with a taxing
authority, or, where none is required to be filed with a taxing authority,
the statement or other document issued by a taxing authority in connection
with any Tax, including, without limitation, any information return, claim
for refund, amended return or declaration of estimated Tax; and (iii)
"Material State" means any state for which the average allocation
percentage of the Company and its Subsidiaries for the past three years
exceeds ten percent (10%).
Section 3.13. Opinion of Financial Advisor. The Board of Directors of the
Company has received the opinion of Stephens Inc., dated the date of this
Agreement, substantially to the effect that, as of such date, the Per Share
Merger Consideration is fair to the holders of the Company Common Stock from a
financial point of view. The Company has delivered a complete and accurate copy
of such opinion to Newco or its Affiliates or representatives.
Section 3.14. Required Vote of the Company Stockholders. The affirmative
vote of the holders of a majority of the outstanding shares of Company Common
Stock (the "Company Stockholder Approval") is required to approve and adopt this
Agreement. No other vote of the stockholders of the Company, or of the holders
of any other securities of the Company (equity or otherwise), is required by
law, the certificate of incorporation or by-laws of the Company or otherwise in
order for the Company to consummate the Merger and the transactions contemplated
hereby.
Section 3.15. Material Contracts. Except as set forth in the Company
Current SEC Reports, neither the Company nor any of its Subsidiaries is a party
to or bound by any "material contract" (as such term is defined in item
601(b)(10) of Regulation S-K of the SEC) (all contracts of the type described in
this Section 3.15 being referred to herein as "Company Material Contracts"). The
Company Disclosure Schedule sets forth, as of the date of this Agreement, a true
and complete list of all contracts (other than those disclosed in the Company
SEC Reports) to which the Company or any of its Subsidiaries is a party relating
to the business or assets of the Company or any of its Subsidiaries (except,
with respect to clauses (ii) and (iv) below, any of the foregoing calling for
aggregate payments of less than $50,000), including, without limitation, all
written or oral, express or implied (i) contracts not made in the ordinary
course of business consistent with past practice; (ii) purchase, supply and
customer contracts; (iii) contracts relating to the borrowing of money or for
lines of credit; (iv) contracts involving leases and subleases of real or
personal property; (v) contracts for the sale of any assets other than in the
ordinary course of business consistent with past practice or for the grant of
any options or preferential rights to purchase any assets, property or rights;
(vi) contracts granting any power of attorney with respect to the affairs of
either the Company or any of its Subsidiaries; (vii) suretyship contracts,
working capital maintenance or other forms of guaranty contracts; (viii)
contracts limiting or restraining the Company or any of its Subsidiaries from
engaging or competing in any lines of business or with any person, firm or
corporation, (ix) partnership and joint venture contracts; (x) employment
contracts; (xi) indentures, mortgages, notes, installment obligations, or other
instruments relating to the borrowing of money in excess of $50,000 by the
Company or any of its Subsidiaries; (xii) contracts which have remaining terms,
as of the date of
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this Agreement, of over one year in length of obligation on the part of the
Company or any of its Subsidiaries and provide for aggregate payments in excess
of $50,000; (xiii) franchise contracts; and (xiv) all amendments, modifications,
extensions or renewals of any of the foregoing. Each contract described above is
valid and binding on the Company and is in full force and effect, and the
Company and each of its Subsidiaries have in all material respects performed all
obligations required to be performed by them to date under each Company Material
Contract, except where such noncompliance, individually or in the aggregate,
would not have a Material Adverse Effect on the Company. Neither the Company nor
any of its Subsidiaries knows of, or has received notice of, any violation or
default under any such contract except for such violations or defaults as would
not in the aggregate have a Material Adverse Effect on the Company.
Section 3.16. Takeover Statute. The Board of Directors of the Company has
unanimously approved this Agreement and the Stock Voting Agreement and the
transactions contemplated hereby and thereby and, assuming the accuracy of the
representation and warranty contained in Section 4.05, such approval constitutes
approval of the Merger and the other transactions contemplated hereby by the
Board of Directors of the Company under the provisions of Section 203 of the
DGCL such that Section 203 of the DGCL does not apply to this Agreement and the
transactions contemplated hereby. To the knowledge of the Company, no other
state takeover statute is applicable to the Merger or the other transactions
contemplated hereby.
Section 3.17. Finders or Brokers. Except for Stephens Inc., a copy of
whose engagement agreement has been provided to Newco or its Affiliates or
representatives, neither the Company nor any of its Subsidiaries has employed
any investment banker, broker, finder or intermediary in connection with the
transactions contemplated hereby who might be entitled to any fee or any
commission in connection with or upon consummation of the Merger.
Section 3.18. No Conflicts. The execution and delivery by the Company of
the Agreement does not, and the consummation of the Merger and the other
transactions contemplated by the Agreement and compliance with the terms hereof
and thereof will not, conflict with, or result in any violation of or default
(with or without notice or lapse of time, or both) under, or give rise to a
right of termination, cancellation or acceleration of any obligation or to loss
of a material benefit under, or to increased, additional, accelerated or
guaranteed rights or entitlements of any person under, or result in the creation
of any Lien upon any of the properties or assets of the Company or any of its
Subsidiaries under, any provision of (i) the Certificate of Incorporation of the
Company, the By-laws of the Company or the comparable certificate of
incorporation or organizational documents of any of the Company's Subsidiaries,
(ii) any contract, lease, license, indenture, note, bond, agreement, permit,
concession, franchise or other instrument to which the Company or any of its
Subsidiaries is a party or by which any of their respective properties or assets
is bound, or (iii) any judgment, order or decree or statute, law (including
common law), ordinance, rule or regulation applicable to the Company or any of
its Subsidiaries or their respective properties or assets, other than, in the
case of clause (ii) above, any such items that, individually or in the
aggregate, have not had and could not reasonably be expected to have a Company
Material Adverse Effect on the Company.
Section 3.19. Intellectual Property. The Company Disclosure Schedule sets
forth a description of all patents, patent rights, trademarks, trademark rights,
trade names, trade name
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rights, service marks, service mark rights, copyrights and other proprietary
intellectual property rights and proprietary computer programs necessary to
produce the products of the Company and its Subsidiaries and to conduct the
business of the Company and its Subsidiaries as currently conducted
(collectively, "Intellectual Property Rights"). The Company and its Subsidiaries
own, or are validly licensed or otherwise have the right to use, all
Intellectual Property Rights with no infringement of, or conflict with, the
rights of any others. No claims are pending or, to the knowledge of the Company,
threatened that the Company or any of its Subsidiaries is infringing or
otherwise adversely affecting the rights of any person with regard to any
Intellectual Property Right. Other than pursuant to franchise agreements entered
into in the ordinary course of business, neither the Company nor any of its
Subsidiaries has granted to any third party a license or other right to any
Intellectual Property Right. To the knowledge of the Company, no person is
infringing the rights of the Company or any of its Subsidiaries with respect to
any Intellectual Property Right.
Section 3.20. Labor Matters. There are no collective bargaining or other
labor union agreements to which the Company or any of its Subsidiaries is a
party or by which any of them is bound. Since December 31, 1996, neither the
Company nor any of its Subsidiaries has encountered any labor union organizing
activity, or had any actual or threatened employee strikes, work stoppages,
slowdowns or lockouts.
Section 3.21. Title to Properties.
(a) Each of the Company and each of its Subsidiaries has good and
marketable title to, or valid leasehold interests in, all its respective
properties and assets (including the properties upon which the Americana
Foods' manufacturing facility is located), except for such properties and
assets as are no longer used or useful in the conduct of its respective
business or as have been disposed of in the ordinary course of business.
All such assets and properties, other than assets and properties in which
the Company or any of its Subsidiaries has leasehold interests, are free
and clear of all Liens, except: (i) any easement, quasi-easement, right of
way, land use ordinance, zoning plan or similar type of encumbrance that
may affect use of the property subject thereto (but not title to such
property) provided that such encumbrances do not materially restrict or
impair the use by the Company of the property subject thereto or affected
thereby; (ii) any Encumbrances for Taxes (and assessments) not delinquent
or which are being contested by Seller in good faith by appropriate
proceedings; (iii) any workmen, repairman, warehousemen and carriers liens
and encumbrances arising in the ordinary course of business which are not
due or which are being contested by Seller in good faith by appropriate
proceedings; and (iv) any encumbrances which are matters of record, such as
easements, quasi-easements, rights of way, land use ordinances and zoning
plans. The Company Disclosure Schedule sets forth a complete list of all
real property owned by the Company or any of its Subsidiaries.
(b) Each of the Company and each of its Subsidiaries has complied in
all material respects with the terms of all leases to which it is a party
and under which it is in occupancy, and all such leases are in full force
and effect. Each of the Company and each of its Subsidiaries enjoys
peaceful and undisturbed possession under all such leases. To the knowledge
of the Company, no other party to any of such leases is (with or
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without the lapse of time or the giving of notice, or both) in breach or
default in any material respect thereunder.
Section 3.22. Equipment. All the equipment necessary to produce the
products of the Company and its Subsidiaries or otherwise necessary to conduct
the business of the Company and its Subsidiaries as currently conducted is in
good operating condition and repair (ordinary wear and tear excepted) and is
available for immediate use in the business of the Company and its Subsidiaries.
Section 3.23. Suppliers and Franchisees. The Company and its Subsidiaries
have not purchased, from any single supplier, goods or services for which the
aggregate purchase price exceeded 5% of the total purchase price for goods and
services purchased by the Company and its Subsidiaries during their most recent
fiscal year. Since December 31, 1998, except as disclosed or referred to in the
Company Disclosure Schedule, the Company Current SEC Reports or the 1999
Financial Statements (and notes and schedules thereto), there has not been (i)
any material, adverse change in the business relationship of the Company or any
of its Subsidiaries with any of their top 20 suppliers or franchisees, (ii) any
material, adverse change in the terms of the supply agreements, franchise
agreements or related arrangements with any such supplier or franchisee. To the
knowledge of the Company, the transactions contemplated by the Agreement will
not materially adversely affect its or its Subsidiaries' business relationship
with any of their top 20 suppliers or franchisees and the execution and delivery
by the Company of this Agreement does not, and the consummation of the Merger
and the other transactions contemplated by this Agreement and compliance with
the terms hereof will not, conflict with, or result in any violation of or
default (with or without notice or lapse of time, or both) under, or give rise
to a right of termination, cancellation or acceleration of any obligation or to
loss of a material benefit under the Company's agreements with its franchisees.
Section 3.24. Transactions with Affiliates. As of the date hereof, except
as disclosed in the Company Current SEC Reports, the 1999 Financial Statements
(and notes and schedules thereto) or in the Company Disclosure Schedule, (i)
there are no outstanding amounts payable to or receivable from, or advances by
the Company or any of its Subsidiaries to, and neither the Company nor any
Subsidiary is otherwise a creditor of or debtor to, any holder of 5% or more of
the outstanding shares of Company Common Stock or any of its affiliates or any
officer, director or employee of the Company and (ii) neither the Company nor
any Subsidiary is a party to any transaction, agreement, arrangement or
understanding with any holder of 5% or more of the outstanding shares of Company
Common Stock or any of its affiliates or any officer, director or employee of
the Company.
Section 3.25. Insurance. All policies of fire, liability, workmen's
compensation and other forms of insurance owned or held by and insuring the
Company or its Subsidiaries are listed on the Company Disclosure Schedule. All
policies of fire, liability, workmen's compensation and other forms of insurance
owned or held by and insuring the Company and its Subsidiaries are in full force
and effect, all premiums with respect thereto covering all periods up to and
including the date as of which this representation is being made have been paid
(other than retroactive premiums which may be payable with respect to
comprehensive general liability and workmen's compensation insurance policies),
and no notice of cancellation or termination has been received with respect to
any such policy which was not replaced on substantially
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similar terms prior to the date of such cancellation. Such policies are valid,
outstanding and enforceable policies and will not be adversely affected by, or
terminate or lapse by reason of, the transactions contemplated by this
Agreement. Neither the Company nor any of its Subsidiaries has been refused any
insurance with respect to its assets or operations nor has their coverage been
limited in any material respect by any insurance carrier to which either of them
has applied for any such insurance or with which it has carried insurance during
the last three years. The Company has heretofore made available to Parent true
and complete copies of all such policies.
Section 3.26. Legal Proceedings. There are no claims, actions, or
proceedings pending, or investigations pending or, to the knowledge of the
Company, threatened, against or relating to the Company or any of its
Subsidiaries before any court, governmental or regulatory authority or body
acting in an adjudicative capacity, which (a) relate to or involve more than
$50,000, (b) seek any injunctive relief, or (c) relate to the transactions
contemplated by this Agreement.
Section 3.27. Year 2000 Compliance.
(a) Except as set forth in the Company Disclosure Schedule, the
computer systems of the Company and each of the Company's Subsidiaries are
Year 2000 Compliant (as defined below). Any failure on the part of the
customers of and suppliers to the Company and the Company Subsidiary to be
Year 2000 Compliant by December 31, 1999, is not reasonably expected to
have a Material Adverse Effect on the Company.
(b) The term "Year 2000 Compliant", with respect to a computer system
or software program, means that such computer system or software program,
means that such computer system or program: (i) is capable of recognizing,
processing, managing, representing, interpreting and manipulating correctly
date-related data for dates earlier and later than January 1, 2000; (ii)
has the ability to provide date recognition for any data element without
limitation; (iii) has the ability to function automatically into and beyond
the year 2000 without human intervention and without any change in
operations, where such intervention or change in operations is associated
with the advent of the year 2000; (iv) has the ability to interpret data,
dates and time correctly into and beyond the year 2000; (v) will not
produce noncompliance in existing data, nor otherwise corrupt such data,
into and beyond the year 2000; (vi) has the ability to process correctly
after January 1, 2000, data containing dates before that date; and (viii)
has the ability to recognize all "leap year" dates, including February 29,
2000.
Section 3.28. Company Financial Position. As of January 30, 2000, the
total amount of cash and short-term investments of the Company ("Cash Balance")
was at least $17.19 million and the total amount of all assets less all
liabilities of the Company ("Net Worth") was at least $77.24 million. As of
April 30, 2000, the Cash Balance of the Company will be at least $12.5 million
and the Net Worth of the Company will be at least $76 million (without taking
into account any payment to be made upon or in connection with the Closing,
including, without limitation, employee severance payments, payments under
agreements identified in Section 5.05 hereof, and payment of transaction fees
and expenses, and any payments made at the request of Newco). The Company's
third-party expenses incurred in connection with the negotiation of this
Agreement and/or the completion of the transactions contemplated hereby, will
not exceed $2.75 million.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF NEWCO AND GUARANTOR
Except as set forth on the Disclosure Schedule delivered by Newco to the
Company prior to the execution of this Agreement (the "Newco Disclosure
Schedule," and together with the Company Disclosure Schedule, the "Disclosure
Schedule"), Newco and, as applicable, Guarantor represent and warrant to the
Company as follows:
Section 4.01. Organization, Qualification, Etc. Newco is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware and has the corporate power and authority to own its
properties and assets and to carry on its business as it is now being conducted
and is duly qualified to do business and is in good standing in each
jurisdiction in which the ownership of its properties or the conduct of its
business requires such qualification, except for jurisdictions in which the
failure to be so qualified or in good standing would not, individually or in the
aggregate, have a Material Adverse Effect on Newco. Guarantor is a limited
partnership duly organized, validly existing and in good standing under the laws
of Delaware and has the power and authority to own its properties and assets and
to carry on its business as it is now being conducted and is duly qualified to
do business and is in good standing in each jurisdiction in which the ownership
of its properties or the conduct of its business requires such qualification,
except for jurisdictions in which the failure to be so qualified or in good
standing would not, individually or in the aggregate, have a Material Adverse
Effect on Guarantor. The copies of Newco's and Guarantor's certificate of
incorporation, by-laws or other applicable organizational documents which have
been delivered to the Company are complete and correct and in full force and
effect. Newco has no Subsidiaries.
Section 4.02. Legal Authority Relative to this Agreement; No Violation.
(a) Each of Newco and Guarantor has the legal authority to enter into
this Agreement and to carry out its obligations hereunder. The execution
and delivery of this Agreement and the consummation of the transactions
contemplated hereby have been duly and validly authorized by the Board of
Directors of Newco and Guarantor and no other corporate proceedings on the
part of Newco or Guarantor are necessary to authorize the consummation of
the transactions contemplated hereby. The Board of Directors of Newco has
determined that the transactions contemplated by this Agreement are in the
best interest of Newco and its stockholders. This Agreement has been duly
and validly executed and delivered by Newco and Guarantor and, assuming
this Agreement constitutes a valid and binding agreement of the other
parties hereto, this Agreement constitutes a valid and binding agreement of
Newco and Guarantor, enforceable against Newco and Guarantor in accordance
with its terms (except to the extent that enforceability may be limited by
applicable bankruptcy, insolvency, reorganization or other laws affecting
the enforcement of creditors' rights generally, or by principles governing
the availability of equitable remedies).
(b) Neither Newco nor Guarantor is subject to or obligated under any
charter, by-law or contract provision or any license, franchise or permit,
or subject to any order or
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decree, which, by its terms, would be breached or violated or would
accelerate any payment or obligation, trigger any right of first refusal or
other purchase right as a result of Newco or Guarantor executing or
carrying out the transactions contemplated by this Agreement, except for
any breaches or violations which would not, individually or in the
aggregate, have a Material Adverse Effect on Newco or Guarantor. Other than
in connection with or in compliance with (i) the provisions of the DGCL,
(ii) the Securities Act, (iii) the Exchange Act, (iv) the HSR Act, (v) any
applicable non-United States competition, antitrust and investments laws,
and (vi) the securities or blue sky laws of the various states
(collectively, the "Newco Required Approvals"), no authorization, consent
or approval of, or filing with, any governmental body or authority is
necessary for the consummation by Newco or Guarantor of the transactions
contemplated by this Agreement, except for such authorizations, consents,
approvals or filings, the failure to obtain or make which would not,
individually or in the aggregate, have a Material Adverse Effect on Newco
or substantially impair or delay the consummation of the transactions
contemplated hereby and thereby.
Section 4.03. Investigations; Litigation. Except as described in the Newco
Disclosure Schedule:
(a) there is no investigation or review pending by any governmental
body or authority with respect to Newco or any of its Affiliates which
would, individually or in the aggregate, have a Material Adverse Effect in
Financing, nor has any governmental body or authority notified Newco of an
intention to conduct the same; and
(b) there are no actions, suits or proceedings pending (or, to
Newco's knowledge, threatened) against or affecting Newco or its
Affiliates, or any of their respective properties at law or in equity, or
before any federal, state, local or foreign governmental body or authority
which, individually or in the aggregate, are reasonably likely to have a
Material Adverse Effect in Financing.
Section 4.04. Proxy Statement; Other Information. None of the information
with respect to Newco or its Affiliates to be included in the Proxy Statement
will, at the time of the mailing of the Proxy Statement or any amendments or
supplements thereto, and at the time of the Company Meeting, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading, except that no
representation is made by Newco with respect to information supplied in writing
by the Company or any affiliate of the Company specifically for inclusion in the
Proxy Statement.
Section 4.05. Lack of Ownership of the Company Common Stock. Neither Newco
nor any of its Affiliates owns any shares of the Company Common Stock or other
securities convertible into shares of the Company Common Stock (exclusive of any
shares owned by Newco's or its Affiliates' employee benefit plans).
Section 4.06. Finders or Brokers. Except for Jefferies & Co., a copy of
whose engagement agreements have been or will be provided to the Company,
neither Newco nor any of its Affiliates has employed any investment banker,
broker, finder or intermediary in
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connection with the transactions contemplated hereby who might be entitled to
any fee or any commission in connection with or upon consummation of the Merger.
Section 4.07. Financing. Exhibit B provides detailed terms and conditions
of all financing required by Newco to fund the aggregate Per Share Merger
Consideration for all shares of Company Common Stock (the "Aggregate Merger
Consideration"). Newco's obligations to consummate the Merger are conditioned
upon receipt of proceeds from $95.2 million in senior and subordinated debt
financing on terms described in the commitment letters attached hereto as
Exhibits B-1 through B-5 inclusive, or on such other terms that are
substantially no less favorable than those set forth on Exhibits B-1 through B-
5, inclusive. Such debt financing is referred to as the "Contingent Financing".
Newco represents that it has undertaken a commercially reasonable investigation
of the availability of the Contingent Financing and expects that such Contingent
Financing will be available on terms and conditions acceptable to it on a timely
basis. Newco also has undertaken a reasonable investigation of the terms and
conditions pursuant to which all funds other than the Contingent Financing
necessary to fund the Aggregate Merger Consideration will either be invested by
Newco or made available through the operations of the Company or the cash
proceeds from the sale of assets, land and real property referred to in Section
6.03(c) (such funding being referred to as the "Non-Contingent Financing").
Newco has received commitments sufficient to provide the $33.0 million equity
portion of the funds necessary to pay the Aggregate Merger Consideration (the
"Equity Financing"). Newco expects that, subject to the accuracy of the
representations from the Company in Section 3.28, the Non-Contingent Financing
will be available so that, together with the Contingent Financing, Newco will
have available the Aggregate Merger Consideration, together with merger-related
expenses, at Closing.
Section 4.08. Solvency. Newco reasonably believes that, immediately after
the Effective Time and after giving effect to the Merger and the transactions
contemplated thereby, including the payment of the Aggregate Merger
Consideration, the Surviving Corporation will not (i) be insolvent (either
because its financial condition is such that the sum of its debts is greater
than the value of its assets or because the fair saleable value of its assets is
less than the amount required to pay its probable liability on its existing
debts as they mature), (ii) have unreasonably small capital with which to engage
in its business, or (iii) have incurred debts beyond its ability to pay as they
become due.
Section 4.09. Guarantor Financial Position. Guarantor will furnish to the
Company, as soon as available, its financial statements as of December 31, 1999
("Guarantor Financial Statements"). The Guarantor Financial Statements fairly
present the financial condition of the Guarantor and will be prepared in
accordance with GAAP. Since September 30, 1999, there has not been any material,
adverse change in the financial condition or operations of Guarantor. Guarantor
has sufficient committed capital such that when called pursuant to its limited
partnership agreement, it will have funds sufficient to satisfy its obligations
set forth in Section 5.16 hereof.
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ARTICLE V
COVENANTS AND AGREEMENTS
Section 5.01. Conduct of Business by the Company. From and after the date
hereof and prior to the Effective Time or the date, if any, on which this
Agreement is earlier terminated pursuant to Section 7.01 (the "Termination
Date"), and except (i) as may be required by law (provided that any party
availing itself of such exception must first consult with the other party), (ii)
as may be agreed in writing by Newco and the Company, (iii) as may be expressly
permitted pursuant to this Agreement, or (iv) as set forth in Section 5.01 of
the Company Disclosure Schedule, the Company:
(a) shall, and shall cause each of its Subsidiaries to, conduct its
operations according to their ordinary and usual course of business in
substantially the same manner as heretofore conducted;
(b) shall use its reasonable best efforts, and shall cause each of
its Subsidiaries to use its reasonable best efforts, to preserve intact its
business organization and goodwill, keep available the services of its
current officers and other key employees and preserve its relationships
with those persons having business dealings with it;
(c) shall confer at such times as Newco may reasonably request to
report material operational matters and the general status of ongoing
operations (to the extent Newco reasonably requires such information);
(d) shall notify Newco of any emergency or other change in the normal
course of its or its Subsidiaries' respective businesses or in the
operation of its or its Subsidiaries' respective properties and of any
complaints, investigations or hearings (or communications indicating that
the same may be contemplated) of any governmental body or authority;
(e) shall not, and shall not permit any of its Subsidiaries that is
not wholly owned to, authorize or pay any dividends on or make any
distribution with respect to its outstanding shares of stock; provided
however, that the Company may pay regular quarterly cash dividends, in
amounts consistent with past practice, to the extent of, but not exceeding,
any amounts collected form AmeriServe Food Distribution, Inc.
("AmeriServe") with respect to the $2.8 million account receivable owed by
AmeriServe to the Company as of January 31, 2000;
(f) shall not, and shall not permit any of its Subsidiaries to,
split, combine or reclassify any of its capital stock or issue or authorize
or propose the issuance of any other securities in respect of, in lieu of
or in substitution for, shares of its capital stock;
(g) shall not, and shall not permit any of its Subsidiaries to,
except in the ordinary course of business consistent with past practice,
enter into or amend any employment, severance or similar agreements or
arrangements with any of their respective directors or executive officers;
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(h) shall not, and shall not permit any of its Subsidiaries to,
authorize, propose or announce an intention to authorize or propose, or
enter into an agreement with respect to, any merger, consolidation or
business combination (other than (A) the Merger and (B) any mergers,
consolidations or business combinations with its Subsidiaries entered into
in the ordinary course of business consistent with past practice), any
acquisition of assets or securities, any disposition of assets or
securities or any release or relinquishment of material contract rights, in
each case not in the ordinary course of business consistent with past
practice;
(i) shall not propose or adopt any amendments to its corporate
charter or by-laws;
(j) shall not, and shall not permit any of its Subsidiaries to, issue
or authorize the issuance of, or agree to issue or sell any shares of their
capital stock of any class (whether through the issuance or granting of
options, warrants, commitments, subscriptions, rights to purchase or
otherwise);
(k) shall not, and shall not permit any of its Subsidiaries to,
grant, confer or award any options, warrants, conversion rights or other
rights, not existing on the date hereof, to acquire any shares of its
capital stock;
(l) shall not, and shall not permit any of its Subsidiaries to,
purchase or redeem any shares of its stock or any rights, warrants or
options to acquire any such shares;
(m) shall not, and shall not permit any of its Subsidiaries to, (i)
amend in any respect the terms of their respective employee benefit plans,
programs or arrangements or any severance or similar agreements or
arrangements in existence on the date hereof, (ii) adopt any new employee
benefit plans, programs or arrangements or any severance or similar
agreements or arrangements, (iii) grant to any officer or director of the
Company or any of its Subsidiaries any increase in compensation, or (iv)
grant to any officer or director of the Company or any of its Subsidiaries
any increase in severance or termination pay;
(n) shall not, and shall not permit any of its Subsidiaries to,
incur, assume or prepay any indebtedness or any other material liabilities;
(o) shall not, and shall not permit any of its Subsidiaries to, (i)
make any loans, advances or capital contributions to, or investments in,
any other person, other than by it or a Subsidiary of the Company to or in
the Company or any wholly-owned Subsidiary thereof or (ii) pay, discharge
or satisfy any claims, liabilities or obligations (absolute, accrued,
asserted or unasserted, contingent or otherwise), other than indebtedness,
issuances of debt securities, guarantees, loans, advances, capital
contributions, investments, payments, discharges or satisfactions incurred
or committed to in the ordinary course of business consistent with past
practice;
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(p) shall not sell, lease, license, mortgage or otherwise encumber or
subject to any Lien or otherwise dispose of any of its properties or assets
(including securitizations), other than in the ordinary course of business
consistent with past practice;
(q) shall not, and shall not permit any of its Subsidiaries to, (i)
make any Tax election or settle or compromise any Tax liability or (ii)
change its fiscal year;
(r) except as disclosed in the Company Current SEC Reports filed
prior to the date of this Agreement or in the 1999 Financial Statements
(and notes and schedules thereto), or as required by a governmental body or
authority, shall not change its methods of accounting (including, without
limitation, make any material write-off or reduction in the carrying value
of any assets) in effect at November 28 1999, except as required by changes
in GAAP as concurred in writing by its independent auditors; and
(s) shall not, and shall not permit any of its Subsidiaries to,
agree, in writing or otherwise, to take any of the foregoing actions or
take any action which would (x) make any representation or warranty in
Article III hereof untrue or incorrect or (y) result in any of the
conditions to the Merger set forth in Article VI not being satisfied.
Section 5.02. Investigation. Each of the Company and Newco shall afford to
one another and to one another's officers, employees, accountants, counsel and
other authorized representatives full and complete access during normal business
hours, throughout the period prior to the earlier of the Effective Time or the
Termination Date, to its and its Subsidiaries' properties, contracts,
commitments, books and records and any report, schedule or other document filed
or received by it pursuant to the requirements of federal or state securities
laws and shall use their reasonable best efforts to cause their respective
representatives to furnish promptly to one another such additional financial and
operating data and other information as to its and its Subsidiaries' respective
businesses and properties as the other or its duly authorized representatives
may from time to time reasonably request, except that nothing herein shall
require either the Company or Newco or any of their respective Subsidiaries to
disclose any information to the other that would cause significant competitive
harm to such disclosing party or its affiliates if the transactions contemplated
by this Agreement are not consummated. The parties hereby agree that each of
them will treat any such information in accordance with the Confidentiality and
Standstill Agreement, dated as of October 19, 1999, between the Company and
Newco, as amended or superceded by subsequent agreement (the "Confidentiality
Agreement"). Notwithstanding any provision of this Agreement to the contrary, no
party shall be obligated to make any disclosure in violation of applicable laws
or regulations, including any such laws or regulations pertaining to the
treatment of classified information.
Section 5.03. Proxy Material.
(a) The Company and Newco shall together, or pursuant to an
allocation of responsibility to be agreed upon between them:
(i) prepare and file with the SEC as soon as is reasonably
practicable the Proxy Statement and shall use their reasonable best
efforts to have the Proxy Statement cleared by the SEC under the
Exchange Act; and
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(ii) cooperate with one another in order to lift any injunctions
or remove any other impediment to the consummation of the transactions
contemplated herein.
(b) Subject to the limitations contained in Section 5.02, the Company
and Newco shall each furnish to one another and to one another's counsel
all such information as may be required in order to effect the foregoing
actions and each represents and warrants to the other that no information
furnished by it in connection with such actions or otherwise in connection
with the consummation of the transactions contemplated by this Agreement
will contain any untrue statement of a material fact or omit to state a
material fact required to be stated in order to make any information so
furnished, in light of the circumstances under which it is so furnished,
not misleading.
(c) The Company shall cause the Proxy Statement to be mailed to the
Company's stockholders as promptly as practicable after the date hereof.
(d) The Company shall, as soon as practicable following the date of
this Agreement, duly call, give notice of, convene and hold a meeting of
its stockholders (the "Company Meeting") for the purpose of obtaining the
Company Stockholder Approval and, subject to its rights to terminate this
Agreement pursuant to Section 7.01, shall, through its Board of Directors,
recommend to its stockholders the adoption of this Agreement, the Merger
and the other transactions contemplated hereby.
Section 5.04. Asset Sales. The Company agrees to use commercially
reasonable efforts to cause to be sold (contingent upon consummation of the
transactions contemplated by this Agreement) for the cash proceeds set forth
below the following assets: (i) the real estate assets of America Best Care,
Inc. located in Jacksonville, Arkansas; proceeds of $800,000; (ii) the real
property and other assets of Carlin Manufacturing located in Fresno, California;
proceeds of $1.8 million, and (iii) certain notes receivable (other than the
receivable due from Suiza Foods) existing on the date hereof and having an
outstanding principal balance (net of allowances) at January 30, 1999 of $4.0
million; proceeds of $2.5 million. The Company undertakes to keep Newco
reasonably informed of its efforts pursuant to this Section 5.04 and agrees not
to sell these assets for less than the specified proceeds or later than the
Closing Date without Newco's prior written consent. The Company makes no
representation as to the value of any of the foregoing assets and provides to
Newco no assurances that it will be successful in its efforts hereunder.
Section 5.05. Executive Security Agreements/Severance Plan. Simultaneously
with the Merger and to the extent not performed by the Company on or prior to
the Closing Date, the Surviving Corporation shall assume and agree to perform
the Company's obligations under the executive security agreements (the
"Executive Security Agreements") listed in Section 5.05(a) of the Company
Disclosure Schedule complete and accurate copies of which have been provided to
Newco, or its Affiliates or representatives. To the extent not undertaken by the
Company on or prior to the Closing Date, at the Effective Time, the Surviving
Corporation shall provide each executive who is a party to an Executive Security
Agreement with a written undertaking evidencing Surviving Corporation's
assumption of the obligations under the Executive Security Agreement and
confirming the amount of payments to be made to each executive thereunder.
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The Company's Severance Plan for employees, dated August 8, 1993 (the "Severance
Plan"), is set forth in Schedule 5.05(b) to the Company Disclosure Schedule.
Simultaneously with the Merger and to the extent not performed by the Company on
or prior to the Closing Date, the Surviving Corporation shall assume and agree
to perform the Company's obligations under the Severance Plan.
Section 5.06. Filings; Other Action.
(a) Subject to the terms and conditions herein provided, the Company
and Newco shall (i) promptly make their respective filings and thereafter
make any other required submissions under the HSR Act, (ii) use their
reasonable best efforts to cooperate with one another in (x) determining
whether any filings are required to be made with, or consents, permits,
authorizations or approvals are required to be obtained from, any third
party or other governmental or regulatory bodies or authorities of federal,
state, local and foreign jurisdictions in connection with the execution and
delivery of this Agreement and the consummation of the transactions
contemplated hereby and (y) timely making all such filings and timely
seeking all such consents, permits, authorizations or approvals, and (iii)
use their reasonable best efforts to take, or cause to be taken, all other
actions and do, or cause to be done, all other things necessary, proper or
advisable to consummate and make effective the transactions contemplated
hereby, including, without limitation, taking all such further action as
reasonably may be necessary to resolve such objections, if any, as the
Federal Trade Commission, the Antitrust Division of the Department of
Justice, state antitrust enforcement authorities or competition authorities
of any other nation or other jurisdiction or any other person may assert
under relevant antitrust or competition laws with respect to the
transactions contemplated hereby.
(b) In furtherance and not in limitation of the covenants of the
parties contained in this Section 5.06, if any administrative or judicial
action or proceeding, including any proceeding by a private party, is
instituted (or threatened to be instituted) challenging any transaction
contemplated by this Agreement as violative of any Regulatory Law (as
defined below), each of the Company and Newco shall cooperate in all
respects with each other and use its respective reasonable best efforts to
contest and resist any such action or proceeding and to have vacated,
lifted, reversed or overturned any decree, judgment, injunction or other
order, whether temporary, preliminary or permanent, that is in effect and
that prohibits, prevents or restricts consummation of the transactions
contemplated by this Agreement. Notwithstanding the foregoing or any other
provision of this Agreement, nothing in this Section 5.06 shall limit a
party's right to terminate this Agreement pursuant to Section 7.01(b) or
7.01(c) so long as such party has until then complied in all respects with
its obligations under this Section 5.06.
(c) If any objections are asserted with respect to the transactions
contemplated hereby under any Regulatory Law or if any suit is instituted
by any governmental body or authority or any private party challenging any
of the transactions contemplated hereby as violative of any Regulatory Law,
each of the Company and Newco shall use its reasonable best efforts to
resolve any such objections or challenge as such governmental body or
authority or private party may have to such transactions under such
Regulatory Law so as to permit consummation of the transactions
contemplated hereby. For
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purposes of this Agreement, "Regulatory Law" means the Sherman Act, as
amended, the Clayton Act, as amended, the HSR Act, and all other federal,
state or foreign, if any, statutes, rules, regulations, orders, decrees,
administrative and judicial doctrines and other laws that are designed or
intended to prohibit, restrict or regulate actions having the purpose or
effect of monopolization or restraint of trade or lessening competition
through merger or acquisition.
Section 5.07. Further Assurances. In case at any time after the Effective
Time any further action is necessary or desirable to carry out the purposes of
this Agreement, the proper officers of the Company and Newco shall take all such
necessary action.
Section 5.08. Takeover Statute. If any "fair price," "moratorium,"
"control share acquisition" or other form of antitakeover statute or regulation
shall become applicable to the transactions contemplated hereby, each of the
Company and Newco and the members of their respective Boards of Directors shall
grant such approvals and take such actions as are reasonably necessary so that
the transactions contemplated hereby may be consummated as promptly as
practicable on the terms contemplated hereby and otherwise act to eliminate or
minimize the effects of such statute or regulation on the transactions
contemplated hereby.
Section 5.09. No Solicitation.
(a) From and after the date hereof, the Company will not, and shall
use its reasonable best efforts not to permit, any of its officers,
directors, employees, attorneys, financial advisors, agents or other
representatives or those of any of its Subsidiaries to, directly or
indirectly, solicit or knowingly encourage any Takeover Proposal from any
person. The Company may engage in discussions or negotiations with, and
furnish information concerning the Company and its Subsidiaries,
businesses, properties or assets to, any third party which has made an
unsolicited Takeover Proposal if the Board of Directors of the Company
concludes in good faith at a meeting of the Board, after having received
advice from the Company's legal counsel, that the failure to take such
action would be inconsistent with its fiduciary duties under applicable
law. The Company will promptly (but in no case later than 24 hours) notify
Newco, orally and in writing, of the receipt of any Takeover Proposal,
including the material terms and conditions thereof (and any change in the
material terms and conditions thereof) and the identity of the person
making such Takeover Proposal, and will promptly (but in no case later than
24 hours) notify Newco, orally and in writing, of any determination by the
Company's Board of Directors that a Superior Proposal (as hereinafter
defined) has been made. Prior to providing any information or data to any
person in connection with a Takeover Proposal pursuant to this Section
5.09, the Board of Directors of the Company shall receive from such person
a confidentiality agreement in a customary form. As used in this Agreement,
(i) "Takeover Proposal" shall mean any bona fide proposal or offer made by
any third party prior to the stockholder vote at the Company Meeting (other
than a proposal or offer by Newco or any of its Subsidiaries) for a merger,
consolidation or other business combination involving, or any purchase of,
all or substantially all of the assets or more than 50% of the voting
securities of, the Company, and (ii) "Superior Proposal" shall mean a bona
fide Takeover Proposal made by a third party on terms that a majority of
the disinterested members of the Board of Directors of the Company
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reasonably determines in good faith (in consideration of advice of an
independent financial advisor) is more favorable to the Company and to its
stockholders than the transactions contemplated hereby (including taking
into account, among other things, the financing thereof).
(b) The Company shall immediately cease and cause to be terminated
any discussions or negotiations with any parties (other than Newco and
Guarantor) conducted prior to the date of this Agreement with respect to
this Section 5.09.
Section 5.10. Public Announcements. The Company and Newco will consult
with and provide each other the opportunity to review and comment upon any press
release or other public statement or comment prior to the issuance of such press
release or other public statement or comment relating to this Agreement or the
transactions contemplated herein and shall not issue any such press release or
other public statement or comment prior to such consultation except as may be
required by law or by obligations pursuant to any listing agreement with any
national securities exchange.
Section 5.11. Indemnification and Insurance.
(a) From and after the Effective Time, Newco shall, and shall cause
the Surviving Corporation to, indemnify and hold harmless each present and
former director, officer, employee or agent of the Company (when acting in
such capacity) determined as of the Effective Time (the "Indemnified
Parties"), against any costs or expenses (including reasonable attorneys'
fees), judgments, fines, losses, claims, damages or liabilities
(collectively, "Costs") incurred in connection with any claim, action,
suit, proceeding or investigation, whether civil, criminal, administrative
or investigative, arising out of or pertaining to matters existing or
occurring at or prior to the Effective Time, whether asserted or claimed
prior to, at or after the Effective Time, to the fullest extent permitted
under the DGCL, the Company's certificate of incorporation or bylaws (and
the Surviving Corporation shall also advance expenses as incurred to the
fullest extent permitted under applicable law, provided the person to whom
expenses are advanced provides an undertaking to repay such advances if it
is ultimately determined that such person is not entitled to
indemnification).
(b) Any Indemnified Party wishing to claim indemnification under
paragraph (a) of this Section 5.11, upon learning of any such claim,
action, suit, proceeding or investigation, shall notify the Surviving
Corporation thereof, but the failure to so notify shall not relieve the
Surviving Corporation of any liability it may have to such Indemnified
Party if such failure does not materially prejudice the Surviving
Corporation. In the event of any such claim, action, suit, proceeding or
investigation (whether arising before or after the Effective Time), the
Surviving Corporation shall have the right to assume the defense thereof
and the Surviving Corporation shall not be liable to such Indemnified
Parties for any legal expenses of other counsel or any other expenses
subsequently incurred by such Indemnified Parties in connection with the
defense thereof, except that if the Surviving Corporation elects not to
assume such defense, or counsel for the Indemnified Parties advises that
there are issues which raise conflicts of interest between the Surviving
Corporation and the Indemnified Parties, the Indemnified
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Parties may retain counsel mutually satisfactory to the Surviving
Corporation and the Indemnified Parties, and the Surviving Corporation
shall pay all reasonable fees and expenses of such counsel for the
Indemnified Parties promptly as statements therefor are received.
(c) The Surviving Corporation shall maintain a policy of officers'
and directors' liability insurance for acts and omissions occurring prior
to the Effective Time ("D&O Insurance") with coverage in amount and scope
at least as favorable as the Company's existing directors' and officers'
liability insurance coverage (attached hereto as Section 5.11(c) of the
Company Disclosure Schedule) for a period of six years after the Effective
Time (the "Tail D&O Coverage"). The Company represents, based upon quotes
from its existing carrier, that the premium to obtain the Tail D&O Coverage
will be determined by multiplying the current annual premium ($110,000) by
a factor of from 1.85 to 2.85. The Company's annual premium is due and
payable on March 15, 2000. A portion of the premium paid on such date will
be credited to the Company towards the purchase of the Tail D&O Coverage.
The Company will give all required notices to its existing carrier in order
to continue the D&O Insurance after the date hereof.
(d) If Newco or any of its successors or assigns (i) shall
consolidate with or merge into any other corporation or entity and shall
not be the continuing or surviving corporation or entity of such
consolidation or merger or (ii) shall transfer all or substantially all of
its properties and assets to any individual, corporation or other entity,
then and in each such case, proper provisions shall be made so that the
successors and assigns of Newco shall assume all of the obligations set
forth in this Section.
(e) The provisions of this Section are intended to be for the benefit
of, and shall be enforceable by, each of the Indemnified Parties, their
heirs and their representatives.
(f) None of the officers, directors, shareholders, attorneys,
financial advisors, agents or other representatives or affiliates of the
Company (the "Company Affiliates") shall have any liability or obligation
of any kind to Newco or its affiliates under or resulting from this
Agreement or the transactions contemplated hereby, regardless whether any
Company Affiliate may otherwise be liable on the basis of contract, quasi-
contract, tort or strict liability (whether statutory or common law) and
regardless whether or to what extent any statute or common law permits the
waiver or exclusion thereof.
Section 5.12. Reserved.
Section 5.13. Additional Reports and Information. The Company shall
furnish to Newco copies of any reports of the type referred to in Sections 3.04
which it or its Subsidiaries file with the SEC on or after the date hereof, and
the Company represents and warrants that as of the respective dates thereof,
such reports will not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statement therein, in light of the circumstances under which they were made, not
misleading. Any unaudited consolidated interim financial statements included in
such reports (including any related notes and schedules) will fairly present the
financial position of the Company and its
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consolidated Subsidiaries as of the dates thereof and the results of operations
and changes in financial position or other information included therein for the
periods or as of the date then ended (subject, where appropriate, to normal
year-end adjustments), in each case in accordance with past practice and GAAP
consistently applied during the periods involved (except as otherwise disclosed
in the notes thereto). The Guarantor shall furnish to the Company an unaudited
consolidated balance sheet and statement of partners' equity as of the end of
each calendar month occurring after the date hereof until the Effective Date
(the "Guarantor Interim Financial Statements"). Any Guarantor Interim Financial
Statements (including any related notes and schedules) will fairly present the
financial position of the Guarantor as of the dates thereof and in each case
will be prepared in accordance with past practice and GAAP consistently applied
during the periods involved (except as otherwise disclosed in the notes
thereto).
Section 5.14. Financing. Newco will use its best efforts to satisfy all
conditions to the Contingent Financing and Non-Contingent Financing described in
Exhibit B. If any Material Adverse Effect in Financing (as defined below) shall
occur, (i) Newco shall promptly notify the Company in writing in reasonable
detail of such Material Adverse Effect in Financing, (ii) Newco shall use its
best efforts to arrange for alternative financing, if necessary, and (iii) after
a Material Adverse Effect in Financing occurs, and from time to time thereafter,
until Newco or Company terminates this Agreement pursuant to Section 7.01, (x)
Newco shall provide, and shall cause its lenders to provide, to the Company
copies of all term sheets and other similar materials reasonably pertaining to
Newco's efforts to obtain the Contingent Financing, and (y) the Company shall
have the right to discuss with the principal officers and affiliates of
Guarantor and Newco the status and prospects of Newco's obtaining the Contingent
Financing. A "Material Adverse Effect in Financing" means any state of facts,
event, change or effect (other than a Material Adverse Effect with respect to
the Company or a failure of the conditions to Newco's obligations to close under
Section 6.01 or 6.03, other than 6.03(c)) that has had or could reasonably be
expected to have a material adverse effect on the availability of any portion of
the Contingent Financing. Without limiting the foregoing, a Material Adverse
Effect in Financing shall be deemed to occur if Newco shall have received notice
that any portion of the Contingent Financing will not be available on terms that
are substantially no less favorable than those set forth in Exhibits B-1, B-2,
B-3, B-4 or B-5.
Section 5.15. Solvency at Closing. Newco agrees for the benefit of the
directors of the Company to take all actions necessary to ensure that
immediately following the Effective Time the Surviving Corporation will be
solvent for all purposes under federal bankruptcy and applicable state
fraudulent transfer and fraudulent conveyance laws; provided however, that
immediately before the Effective Time on the Closing Date, the Company shall
comply with Section 3.28.
Section 5.16. Guaranty of Performance. Subject to the limitations set
forth below, the Guarantor does hereby unconditionally guarantee the payment and
performance of all covenants and obligations of Newco under this Agreement
including, but not limited to, the obligation to fund the Per Share Merger
Consideration pursuant to Section 2.01 hereof and to pay the termination fee
contemplated by Section 7.02 hereof, up to a total of $34.65 million (the
"Guaranty"). The obligation of Guarantor under the Guaranty is primary, absolute
and unconditional, is a continuing guaranty, and shall remain in force at all
times hereafter, until all
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of Newco's obligations hereunder have been satisfied in full. Guarantor hereby
waives notice, presentment, demand, protest and notice of dishonor of any of the
liabilities or obligations guaranteed hereby, and hereby waives any failure to
promptly commence suit against any party or to give any notice to or make any
claim or demand upon Newco. Guarantor further agrees that this Guaranty shall
continue to be effective or be reinstated, as the case may be, if at any time
any payment, or any part thereof, by Newco is rescinded or must otherwise be
restored or returned upon the insolvency, bankruptcy or reorganization of Newco,
or otherwise, all as though such payment had not been made. Guarantor agrees
that sufficiently in advance of Closing it shall make such calls for capital
contributions from its general and limited partners, and take such other actions
necessary, to ensure that Guarantor has sufficient cash funds at Closing to
fully fund its obligations under this Section 5.16. This Guaranty shall inure to
the benefit of the Company and each shareholder entitled to receive the Per
Share Merger Consideration on a pro rata basis. There shall be no duty or
obligation upon the Company or its shareholders (i) to proceed against Newco,
(ii) to initiate any proceeding or exhaust any remedy against Newco, or (iii) to
give any notice to Newco or Guarantor, whatsoever, before bringing suit, or
instituting proceedings of any kind against Newco or Guarantor. Until all of the
obligations of Newco under this Agreement have been satisfied in full, Guarantor
shall have no right or subrogation and hereby waives any right to enforce any
remedy which Company or its shareholders now has or may hereafter have against
Newco and any benefit of, and any right to participate in, any security now or
hereafter held by Company or its shareholders. All rights and remedies under
this Guaranty are cumulative and those granted hereunder are in addition to any
rights and remedies available under law. From the date hereof until the
Effective Time, Guarantor shall not take any action that would reasonably be
expected to materially, adversely affect its ability to perform its obligations
under this Section 5.16. Notwithstanding the foregoing provisions of this
Section 5.16, Guarantor's obligation is limited to $1.65 million and will be
deemed satisfied in full if Newco pays the termination fee under Section 7.02 or
if the Merger is consummated and the Merger Consideration is paid pursuant
Section 2.02.
Section 5.17. Headquarters Employees/WARN Act Compliance.
(a) Except for individuals identified by Newco in writing to the
Company at least 45 days prior to the Closing Date, the Company shall
terminate the employment of all persons who are employees at the Company's
headquarters located in Little Rock, Arkansas (the "Headquarters
Employees") on or before the Closing Date (but in any event prior to the
Effective Time) and shall, simultaneously with such termination, make all
payments required to made to such persons under the Executive Security
Agreements and Severance Plan. In no case shall the aggregate payments made
or required to be made under the Executive Security Agreements and
Severance Plan (for all Company employees other than those of Americana
Foods, Inc., a Subsidiary of the Company, which employees are not expected
to be terminated) exceed $8.3 million.
(b) In executing the provision of Section 5.17(a), the Company shall
comply fully with the notice and other requirements of the Worker
Adjustment and Retraining Notification Act of 1988 (the "WARN Act") and any
similar state or local law. The Company shall (i) time the delivery of the
WARN Act and any similar state or local law notice to allow termination of
the Headquarters Employees in accordance with Section 5.17(a) without the
incurrence of any liabilities under the WARN Act or any similar state
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or local law and (ii) prevent Newco from being characterized as an
"employer" of the Headquarters Employees for purposes of the WARN Act and
any similar state or local law.
ARTICLE VI
CONDITIONS TO THE MERGER
Section 6.01. Conditions to Each Party's Obligation to Effect the Merger.
The respective obligations of each party to effect the Merger shall be subject
to the fulfillment at or prior to the Effective Time of the following
conditions:
(a) The Company Stockholder Approval shall have been obtained in
accordance with applicable law.
(b) No statute, rule, regulation, executive order, decree, ruling or
injunction shall have been enacted, entered, promulgated or enforced by any
court or other tribunal or governmental body or authority which prohibits
the consummation of the Merger substantially on the terms contemplated
hereby and shall continue to be in effect.
(c) Any applicable waiting period under the HSR Act shall have
expired or been terminated and any other Company Required Approvals and
Newco Required Approvals shall have been obtained, except where the failure
to obtain such other Company Required Approvals and Newco Required
Approvals would not have a Material Adverse Effect on the Company or Newco,
as the case may be.
Section 6.02. Conditions to Obligation of the Company to Effect the
Merger. The obligation of the Company to effect the Merger is further subject to
the fulfillment of the following conditions:
(a) (i) The representations and warranties of Newco contained herein
shall be true and correct in all material respects (but without regard to
materiality qualifications or references to Material Adverse Effect
contained in any specific representation or warranty) as of the Effective
Time with the same effect as though made as of the Effective Time except
(x) for changes specifically permitted by the terms of this Agreement, (y)
that the accuracy of representations and warranties that by their terms
speak as of the date of this Agreement or some other date will be
determined as of such date and (z) where any such failure of the
representations and warranties in the aggregate to be true and correct in
all respects would not have a Material Adverse Effect on Newco, (ii) Newco
shall have performed in all material respects all obligations and complied
with all covenants required by this Agreement to be performed or complied
with by it prior to the Effective Time and (iii) Newco shall have delivered
to the Company a certificate, dated the Effective Time and signed by its
Chief Executive Officer or President certifying to both such effects.
Section 6.03. Conditions to Obligation of Newco to Effect the Merger. The
obligation of Newco to effect the Merger is further subject to the fulfillment
of the following conditions:
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(a) (i) The representations and warranties of the Company contained
herein shall be true and correct in all material respects (but without
regard to any materiality qualification or reference to Material Adverse
Effect contained in any specific representation or warranty) as of the
Effective Time with the same effect as though made as of the Effective Time
except (x) for changes specifically permitted by the terms of this
Agreement, (y) that the accuracy of representations and warranties that by
their terms speak as of the date of this Agreement or some other date will
be determined as of such date and (z) where any such failure of the
representations and warranties in the aggregate to be true and correct in
all respects would not have a Material Adverse Effect on the Company, (ii)
the Company shall have performed in all material respects all obligations
and complied with all covenants required by this Agreement to be performed
or complied with by it prior to the Effective Time and (iii) the Company
shall have delivered to Newco a certificate, dated the Effective Time and
signed by its Chief Executive Officer or Executive Vice President
certifying to both such effects. Notwithstanding the foregoing, the $8.3
million limit in Section 5.17 and the minimum Company Cash Balance and Net
Worth specified in Section 3.28 must have been fully observed.
(b) The Company shall have obtained the consent or approval of each
Person whose consent or approval shall be required in order to consummate
the transactions contemplated by this Agreement under any agreement, lease,
contract, note, mortgage, indenture or other obligation to which the
Company or any of its Subsidiaries is a party, except those for which the
failure to obtain such consent or approval, individually or in the
aggregate, is not reasonably likely to have, a Material Adverse Effect on
the Company.
(c) Newco shall have received the proceeds of the Contingent
Financing upon terms and conditions which are not materially more onerous
than those set forth in Exhibits B-1, B-2, B-3, B-4 or B-5, respectively;
provided that Newco shall have complied with the provisions of Section 5.14
and the Company shall have received no less than $3 million in cash
proceeds from the sale of the assets, land and real property of the AIMCO
division of its Riverport Equipment and Distribution Company Subsidiary.
ARTICLE VII
TERMINATION
Section 7.01. Termination or Abandonment. Notwithstanding anything
contained in this Agreement to the contrary, this Agreement may be terminated
and abandoned at any time prior to the Effective Time (whether before or after
any approval of the matters presented in connection with the Merger by the
respective stockholders of the Company and Newco, provided however, in the case
of a termination by the Company pursuant to this Section 7.01 the Stock Voting
Agreement shall have been complied with in all material respects):
(a) by the mutual written consent of the Company and Newco;
(b) by either the Company or Newco if (i) the Effective Time shall
not have occurred on or before May 31, 2000; (ii) the party seeking to
terminate this Agreement
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<PAGE>
pursuant to this clause 7.01(b) shall not have breached in any material
respect its obligations under this Agreement in any manner that shall have
proximately contributed to the failure to consummate the Merger on or
before such date and (iii) in the case of the Company seeking to terminate
this Agreement, either (A) the Company Meeting shall have been held prior
to such termination and the Company Shareholder Approval shall have been
obtained and (B) the condition to Newco's obligations as set forth in
Section 6.03(c) shall not have been fully satisfied or irrevocably waived
by Newco prior to such termination.
(c) by either the Company or Newco if (i) a statute, rule, regulation
or executive order shall have been enacted, entered or promulgated
prohibiting the consummation of the Merger substantially on the terms
contemplated hereby or (ii) an order, decree, ruling or injunction shall
have been entered permanently restraining, enjoining or otherwise
prohibiting the consummation of the Merger substantially on the terms
contemplated hereby and such order, decree, ruling or injunction shall have
become final and non-appealable and the party seeking to terminate this
Agreement pursuant to this clause 7.01(c)(ii) shall have used its
reasonable best efforts to remove such injunction, order or decree;
(d) by the Company or Newco if the Company Stockholder Approval shall
not have been obtained by reason of the failure to obtain the required vote
at a duly held meeting of stockholders or of any adjournment thereof;
(e) by either the Company or Newco if the Board of Directors of the
Company reasonably determines that a Takeover Proposal constitutes a
Superior Proposal, except that the Company may not terminate this Agreement
pursuant to this clause 7.01(e) unless and until (i) three business days
have elapsed following delivery to Newco of a written notice of such
determination by the Board of Directors of the Company and during such
three business day period the Company (x) informs Newco of the terms and
conditions of the Takeover Proposal and the identity of the person making
the Takeover Proposal and (y) otherwise cooperates with Newco with respect
thereto (subject, in the case of this clause (y), to the condition that the
Board of Directors of the Company shall not be required to take any action
that it believes that such action would be inconsistent with its fiduciary
duties under applicable law) with the intent of enabling Newco to agree to
a modification of the terms and conditions of this Agreement so that the
transactions contemplated hereby may be effected, (ii) at the end of such
three business day period the Board of Directors of the Company continues
reasonably to believe that the Takeover Proposal constitutes a Superior
Proposal, (iii) simultaneously with such termination the Company enters
into a definitive acquisition, merger or similar agreement to effect the
Superior Proposal, and (iv), if required by Section 7.02, the Company pays
to Newco the amount specified and within the time period specified in
Section 7.02;
(f) by Newco if the Board of Directors of the Company shall have (i)
withdrawn or modified in a manner adverse to Newco its approval or
recommendation of this Agreement and the transactions contemplated hereby
for reasons other than a
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<PAGE>
Material Adverse Effect in Financing or (ii) approved or recommended, or
proposed publicly to approve or recommend, any Takeover Proposal;
(g) by Newco if a tender offer or exchange offer for 50% or more of
the outstanding shares of capital stock of the Company is commenced prior
to the Company Meeting, and the Board of Directors of the Company fails to
recommend against acceptance of such tender offer or exchange offer by its
stockholders (including by taking no position with respect to the
acceptance of such tender offer or exchange offer by its stockholders)
within the time period specified by Rule 14e-2;
(h) by the Company if (i) a Material Adverse Effect in Financing
shall occur, and (ii) within fifteen business days after written demand by
the Company, Newco fails to either (x) waive the condition set forth in
Section 6.03(c), or (y) provide information such that the Company
reasonably concludes that Newco's receipt of the Contingent Financing is
likely; or
(i) by either the Company or Newco if there shall have been a
material breach by the other of any of its representations, warranties,
covenants or agreements contained in this Agreement, which if not cured
would cause the conditions set forth in Sections 6.02(a) or 6.03(a), as the
case may be, not to be satisfied, and such breach shall not have been cured
within 30 days after notice thereof shall have been received by the party
alleged to be in breach.
In the event of termination of this Agreement pursuant to this Section
7.01, this Agreement shall terminate (except for the Confidentiality Agreement
referred to in Section 5.02 and the provisions of Sections 7.02, 8.02, 8.04 and
8.05), and there shall be no other liability on the part of the Company or Newco
to the other except as provided for in the Confidentiality Agreement.
Section 7.02. Termination Fee. Notwithstanding any provision in this
Agreement to the contrary, if (i) this Agreement is terminated by the Company or
Newco pursuant to Section 7.01(e), (ii) this Agreement is terminated by Newco
pursuant to Section 7.01(f), or (iii) (w) prior to the termination of this
Agreement, a bona fide Takeover Proposal is commenced, publicly proposed or
publicly disclosed and not withdrawn, and (x) this Agreement is terminated by
the Company pursuant to Section 7.01(b) or 7.01(d) (but only due to the failure
of the Company stockholders to approve the Merger) or by Newco pursuant to
Section 7.01(g), and (y) concurrently with or within 120 days after such
termination a Takeover Proposal shall have been consummated, then, in each case,
the Company shall pay to Newco a termination fee of $6.5 million in cash, plus
its reasonable out of pocket expenses incurred in connection with this Agreement
and the transactions contemplated hereby ("Termination Fee"), such payment to be
made simultaneously with such termination in the case of a termination by the
Company pursuant to Section 7.01(e) and promptly, but in no event later than the
second business day following a termination by Newco pursuant to Section 7.01(e)
or 7.01(f) and, in the case of clause (iii), upon the consummation of such
Takeover Proposal; provided, however, that the Company shall have no obligation
to pay Newco such Termination Fee if prior to any termination by the Company or
Newco pursuant to Section 7.01(e) or by Newco pursuant to Section 7.01(f)(ii) or
(g) a Material Adverse Effect in Financing shall have occurred or Newco
A-35
<PAGE>
shall have failed to comply with its obligations under Section 5.14 hereof.
Notwithstanding any provision in this Agreement to the contrary, if this
Agreement is terminated (1) by the Company or Newco under Section 7.01(b) and
either (a) Newco shall have failed to perform its obligations under Section 5.14
or (b) all conditions to each of Newco's obligations specified in Sections 6.01
and 6.03 hereof other than the condition specified in 6.03(c) shall have
occurred, been satisfied or waived, as appropriate, or (c) if the Equity
Financing shall be unavailable for any reason or (2) by the Company pursuant to
Section 7.01(h), then in each case Newco shall pay the Company a termination fee
of $1.65 million. The foregoing fees shall be considered liquidated damages for
any breach under this Agreement for the party paying the fee. The parties
further agree that Newco's payment of any fee pursuant to this Section 7.02
shall satisfy in full any obligation of Guarantor as the limited guarantor of
Newco's obligations under this Agreement.
Section 7.03. Amendment or Supplement. At any time before or after Company
Stockholder Approval and prior to the Effective Time, this Agreement may be
amended or supplemented in writing by the Company and Newco with respect to any
of the terms contained in this Agreement, except that following approval by the
stockholders of the Company there shall be no amendment or change to the
provisions hereof which by law or in accordance with the rules of any relevant
stock exchange requires further approval by such stockholders without such
further approval nor any amendment or change not permitted under applicable law.
Section 7.04. Extension of Time, Waiver, Etc. At any time prior to the
Effective Time, the Company and Newco may:
(a) extend the time for the performance of any of the obligations or
acts of the other party;
(b) waive any inaccuracies in the representations and warranties of
the other party contained herein or in any document delivered pursuant
hereto; or
(c) waive compliance with any of the agreements or conditions of the
other party contained herein.
Notwithstanding the foregoing, no failure or delay by the Company or Newco
in exercising any right hereunder shall operate as a waiver thereof nor shall
any single or partial exercise thereof preclude any other or further exercise of
any other right hereunder. Any agreement on the part of a party hereto to any
such extension or waiver shall be valid only if set forth in an instrument in
writing signed on behalf of such party.
ARTICLE VIII
MISCELLANEOUS
Section 8.01. No Survival of Representations and Warranties. None of the
representations and warranties in this Agreement or in any instrument delivered
pursuant to this Agreement shall survive the Merger.
Section 8.02. Expenses. Whether or not the Merger is consummated, all
costs and expenses incurred in connection with the Merger, this Agreement and
the transactions
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<PAGE>
contemplated hereby shall be paid by the party incurring or required to incur
such expenses, except (a) expenses incurred in connection with the printing and
mailing of the Proxy Statement shall be shared equally by the Company and Newco
and (b) as otherwise provided herein.
Section 8.03. Counterparts; Effectiveness. This Agreement may be executed
in two or more consecutive counterparts, each of which shall be an original,
with the same effect as if the signatures thereto and hereto were upon the same
instrument, and shall become effective when one or more counterparts have been
signed by each of the parties and delivered (by telecopy or otherwise) to the
other parties.
Section 8.04. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware, without regard
to the principles of conflicts of laws thereof.
Section 8.05. Jurisdiction. Each of the parties hereto (i) consents to
submit itself to the personal jurisdiction of any Federal court located in the
State of Arkansas or any Arkansas state court in the event any dispute arises
out of this Agreement or any of the transactions contemplated by this Agreement,
(ii) agrees that it will not attempt to deny or defeat such personal
jurisdiction by motion or other request for leave from any such court, and (iii)
agrees that it will not bring any action relating to this Agreement or any of
the transactions contemplated by this Agreement in any court other than a
Federal court sitting in the State of Arkansas or an Arkansas state court.
Section 8.06. Notices. All notices and other communications hereunder
shall be in writing (including telecopy or similar writing) and shall be
effective (a) if given by telecopy, when such telecopy is transmitted to the
telecopy number specified in this Section 8.06 and the appropriate telecopy
confirmation is received or (b) if given by any other means, when delivered at
the address specified in this Section 8.06:
To Newco or Guarantor:
c/o Capricorn Investors III, L.P.
30 East Elm Street
Greenwich, CT 06830
Attention: Herbert S. Winokur, Jr.
Telecopy: (203) 861-6671
copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
Four Times Square
New York, NY 10036-6522
Attention: Randall H. Doud
Telecopy: (917) 777-2524
A-37
<PAGE>
To the Company:
TCBY Enterprises, Inc.
425 West Capitol Avenue, Suite 1400
Little Rock, AR 72201
Attention: General Counsel
Telecopy: (501) 688-8538
copy to:
Kutak Rock LLP
425 W. Capitol Avenue
Suite 1100
Little Rock, AR 72201
Attention: Richard N. Massey
Telecopy: (501)-975-3001
Section 8.07. Assignment; Binding Effect. Neither this Agreement nor any
of the rights, interests or obligations hereunder shall be assigned by any of
the parties hereto (whether by operation of law or otherwise) without the prior
written consent of the other parties. Subject to the preceding sentence, this
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto and their respective successors and assigns.
Section 8.08. Severability. Any term or provision of this Agreement which
is invalid or unenforceable in any jurisdiction shall, as to that jurisdiction,
be ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement in any other jurisdiction. If any provision of this Agreement is so
broad as to be unenforceable, such provision shall be interpreted to be only so
broad as is enforceable.
Section 8.09. Enforcement of Agreement. The parties hereto agree that
money damages or other remedy at law would not be a sufficient or adequate
remedy for any breach or violation of, or a default under, this Agreement by
them and that in addition to all other remedies available to them, each of them
shall be entitled to the fullest extent permitted by law to an injunction
restraining such breach, violation or default or threatened breach, violation or
default and to any other equitable relief, including, without limitation,
specific performance, without bond or other security being required.
Section 8.10. Entire Agreement; No Third-Party Beneficiaries. This
Agreement and the Confidentiality Agreement constitute the entire agreement, and
supersede all other prior agreements and understandings, both written and oral,
between the parties, or any of them, with respect to the subject matter hereof
and thereof and except for the provisions of Section 5.11 hereof, is not
intended to and shall not confer upon any person other than the parties hereto
any rights or remedies hereunder.
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<PAGE>
Section 8.11. Headings. Headings of the Articles and Sections of this
Agreement are for convenience of the parties only, and shall be given no
substantive or interpretive effect whatsoever.
Section 8.12. Certain Definitions. References in this Agreement to
"Subsidiaries" of any party shall mean any corporation, partnership,
association, trust or other form of legal entity of which (i) more than 50% of
the outstanding voting securities are on the date hereof directly or indirectly
owned by such party, or (ii) such party or any Subsidiary of such party is a
general partner (excluding partnerships in which such party or any Subsidiary of
such party does not have a majority of the voting interests in such
partnership). References in this Agreement (except as specifically otherwise
defined) to "affiliates" shall mean, as to any person, any other person which,
directly or indirectly, controls, or is controlled by, or is under common
control with, such person. As used in this definition, "control" (including,
with its correlative meanings, "controlled by" and "under common control with")
shall mean the possession, directly or indirectly, of the power to direct or
cause the direction of management or policies of a person, whether through the
ownership of securities or partnership of other ownership interests, by contract
or otherwise. References in the Agreement to "person" shall mean an individual,
a corporation, a partnership, an association, a trust or any other entity, group
(as such term is used in Section 13 of the Exchange Act) or organization,
including, without limitation, a governmental body or authority. As used in this
Agreement, any reference to any state of facts, event, change or effect having a
"Material Adverse Effect" on or with respect to the Company or Newco, as the
case may be, means such state of facts, event, change or effect that has had, or
could reasonably be expected to have, a material adverse effect on the business,
results of operations or financial condition of the Company and its
Subsidiaries, taken as a whole, or Newco, as the case may be. "Material Adverse
Effect" shall specifically exclude any material adverse effect on the business,
results of operations or financial condition of the Company and its
Subsidiaries, taken as a whole, or Newco, as the case may be, if and to the
extent that the foregoing results from the execution, delivery and performance
of this Agreement or from changes in (a) the national economy generally, (b) the
securities markets generally or (c) a decline in the Company's same or
comparable store sales consistent with trends existing on the date hereof.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered as of the date first above written.
TCBY ENTERPRISES, INC.
By /s/ Frank D. Hickingbotham
Name Frank D. Hickingbotham
Title Chairman
CI MERGER CO.
By /s/ Herbert S. Winokur, Jr.
Name Herbert S. Winokur, Jr.
Title
CAPRICORN INVESTORS III, L.P.
By /s/ Herbert S. Winokur, Jr.
Name Herbert S. Winokur, Jr.
Title
A-40
<PAGE>
APPENDIX B
Frank D. Hickingbotham
Herren C. Hickingbotham
F. Todd Hickingbotham
425 West Capitol Avenue, Suite 1400
Little Rock, Arkansas 72201
February 9, 2000
CI Merger Co.
c/o Capricorn Investors III, L.P.
30 East Elm Street
Greenwich, CT 06830
Capricorn Investors III, L.P.
30 East Elm Street
Greenwich, CT 06830
Gentlemen:
Reference is made to the Agreement and Plan of Merger, dated as of February
9, 2000 (the "Merger Agreement"), among CI Merger Co., a Delaware corporation
("Newco"), Capricorn Investors III, as limited guarantor of Newco's obligations
("Guarantor"), and TCBY Enterprises, Inc., a Delaware corporation (the
"Company"), as to which the undersigned are stockholders (the "Stockholders").
The Stockholders represent and warrant that they are the record and
beneficial holders of 10,728,332 outstanding shares of the Company's common
stock (the "Company Common Stock"), representing approximately 47% of the shares
of the Company Common Stock outstanding, and do not have beneficial ownership in
any other shares of Company Common Stock other than up to 826,940 shares
issuable upon exercise of employee stock options. The Stockholders represent
and warrant that they have sole power to direct the voting and disposition of
all such outstanding shares of Company Common Stock that they beneficially own
and that they will have sole power to direct the voting and disposition of any
additional shares of Company Common Stock that they acquire by reason of
exercise of employee stock options.
In order to induce Newco and Guarantor to enter into the Merger Agreement
and in accordance with Section 212 of the Delaware General Corporation Law (the
"DGCL"), the Stockholders hereby irrevocably make, constitute and appoint Newco
to act as the Stockholders' true and lawful proxy to (1) vote in favor of the
approval of the Merger Agreement and the merger of Newco and the Company
pursuant to the Merger Agreement, and (2) vote against any approval of any
Takeover Proposal (as such term is defined in Section 5.09 of the Merger
Agreement). Newco may vote pursuant to this proxy only to the extent and as to
the matters specifically referred to above. Without limiting the generality of
the preceding sentence, this proxy shall not extend to, and Newco shall have no
right to vote with respect to, any (i) election
<PAGE>
of directors of the Company, (ii) amendment to the terms or conditions of the
Merger Agreement, and (iii) merger with Newco or its affiliates on terms or
conditions that are different from the terms and conditions set forth in the
Merger Agreement, including without limitation, terms and conditions relating to
merger consideration and financing arrangements.
The Stockholders hereby agree that the Stockholders will not (i) revoke,
amend or otherwise revise such proxy, (ii) take or knowingly fail to take any
action that would cause the Company to breach any of its obligations under the
Merger Agreement or would otherwise prevent or delay the consummation of the
transactions contemplated by the Merger Agreement, or (iii) sell, transfer
pledge or otherwise dispose of any of the shares of Company Common Stock
beneficially owned by them other than pursuant to the Merger or to a Permitted
Transferee (as defined below), or agree to do any of the foregoing, except for
bona fide pledges to a financial institution. By giving this proxy, the
Stockholders hereby revoke any other proxy granted by them to vote the Company
Common Stock which they beneficially own.
Notwithstanding the foregoing, the Stockholders may transfer any of their
shares of Common Stock to a Permitted Transferee; provided that, prior to such
transfer, such Permitted Transferee shall agree in writing to take such shares
of Common Stock subject to, and comply with, all of the provisions of this
Agreement. For purposes of this Agreement, a "Permitted Transferee" shall mean
(i) any immediate family member of a Stockholder, (ii) any corporation,
partnership, limited liability company or other entity controlled by such
Stockholder or (iii) any trust established for the benefit of a Stockholder or
such Stockholder's immediate family members of lineal descendants.
The Stockholders hereby expressly acknowledge that all power and authority
granted pursuant to this proxy is coupled with an interest and is irrevocable to
the fullest extent permitted under the DGCL. This proxy shall be binding upon
all beneficiaries, heirs at law, distributees, successors, assigns and legal
representatives of the Stockholders.
The Stockholders hereby represent and warrant that the representations and
warranties of the Company under Section 3.03 of the Merger Agreement, as such
sections relate to the Stockholders, are true, accurate and correct in all
respects.
It is expressly acknowledged and agreed that this Agreement, including
without limitation the proxy granted herein, will terminate upon the earlier of
(i) the Effective Time (as defined in Section 1.03 of the Merger Agreement),
(ii) the termination of the Merger Agreement by Newco pursuant to any provision
of Section 7.01, (iii) the termination of the Merger Agreement by Company
pursuant to Section 7.01(b), (c), (d), (h) or (i) thereof, or (iv) the failure
by Newco to vote this proxy for approval of the Merger Agreement prior to the
Company Meeting (as defined in the Merger Agreement).
The Stockholders agree that money damages or other remedy at law would not
be a sufficient or adequate remedy for any breach or violation of, or a default
under, this Agreement by them and that in addition to all other remedies
available to them, Newco and Guarantor shall be entitled to the fullest extent
permitted by law to an injunction restraining such breach, violation or default
or threatened breach, violation or default and to any other equitable relief,
including, without limitation, specific performance, without bond or other
security being required.
B-2
<PAGE>
This letter agreement shall be governed by and construed in accordance with
the laws of the State of Delaware without giving effect to principles of
conflicts of laws thereof and shall be binding upon all beneficiaries, heirs at
law, distributees, successors, assigns and legal representatives of the
Stockholders. This letter agreement may be executed in counterparts, each of
which shall be deemed an original, but which together constitute one and the
same instrument.
Very truly yours,
/s/ Frank D. Hickingbotham
Frank D. Hickingbotham
/s/ Herren C. Hickingbotham
Herren C. Hickingbotham
/s/ F. Todd Hickingbotham
F. Todd Hickingbotham
Accepted and agreed as of
the date first written above:
CI MERGER CO.
By /s/ Herbert S. Winokur, Jr.
Name Herbert S. Winokur, Jr.
Title
CAPRICORN INVESTORS III, L.P.
By /s/ Herbert S. Winokur, Jr.
Name Herbert S. Winokur, Jr.
Title
B-3
<PAGE>
[LETTERHEAD OF STEPHENS INC.]
APPENDIX C
February 9, 2000
TCBY Enterprises, Inc.
1100 TCBY Tower
425 W. Capitol Avenue
Little Rock, AR 72201
Gentlemen:
We have acted as your financial advisor in connection with the merger of
TCBY Enterprises, Inc. (the "Company") and an affiliate of Capricorn Investors
III, L.P. (the "Transaction") pursuant to which the shareholders of the Company
would receive cash consideration of $6.00 per share of Company common stock. The
terms and conditions of the Transaction are more fully set forth in the draft
merger agreement dated as of the date hereof, which we understand from Company
counsel represents a final expression of all material terms and conditions.
You have requested our opinion as to the fairness to the disinterested
shareholders of the Company from a financial point of view of the consideration
to be received by such shareholders in the Transaction. For purposes of this
opinion, the term "disinterested shareholders" means holders of the Company's
one class of publicly traded common stock (the "Common Stock") other than (1)
directors, officers and employees of the Company and their affiliates, (2) Frank
D. Hickingbotham, Herren C. Hickingbotham and F. Todd Hickingbotham and their
affiliates and (3) Capricorn Holdings and its affiliates.
In connection with rendering our opinion we have:
(i) analyzed certain publicly available financial statements and reports
regarding the Company;
(ii) analyzed certain internal financial statements and other financial
and operating data (including financial projections) concerning the
Company prepared by management of the Company;
(iii) reviewed the reported prices and trading activity for the Common
stock;
(iv) compared the financial performance of the Company and the prices and
trading activity of the Common Stock with that of certain other
comparable publicly-traded companies and their securities;
(v) reviewed the financial terms, to the extent publicly available, of
certain comparable transactions;
<PAGE>
(vi) reviewed the merger agreement and related documents;
(vii) discussed with management of the Company the operations of and
future business prospects for the Company;
(viii) assisted in your deliberations regarding the material terms of the
Transaction;
(ix) performed such other analyses and provided such other services as we
have deemed appropriate.
We have relied on the accuracy and completeness of the information and
financial data provided to us by the Company, and our opinion is based upon such
information. We have inquired into the reliability of such information and
financial data only to the limited extent necessary to provide a reasonable
basis for our opinion, recognizing that we are rendering only an informed
opinion and not an appraisal or certification of value. With respect to the
financial projections prepared by management of the Company, we have assumed
that they have been reasonably prepared on bases reflecting the best currently
available estimates and judgments of the future financial performance of the
Company.
As part of our investment banking business, we regularly issue fairness
opinions and are continually engaged in the valuation of companies and their
securities in connection with business reorganizations, private placements,
negotiated underwritings, mergers and acquisitions and valuations for estate,
corporate and other purposes. In the ordinary course of business, Stephens Inc.
and its affiliates at any time may hold long or short positions, and may trade
or otherwise effect transactions as principal or for the accounts of customers,
in debt or equity securities or options on securities of the Company. Stephens
Inc. is receiving a fee, and reimbursement of its expenses, in connection with
the issuance of this fairness opinion. In addition Stephens Inc. is receiving an
advisory fee upon the consummation of the Transaction.
Based on the foregoing and our general experience as investment bankers,
and subject to the qualifications stated herein, we are of the opinion on the
date hereof that the consideration to be received by the disinterested
shareholders of the Company in the Transaction is fair to them from a financial
point of view.
Neither this opinion nor its substance may be disclosed by you to anyone
other than your advisors without our written permission.
This opinion and a summary discussion of our underlying analyses and role
as your financial advisor may be included in communications to the Company's
shareholders provided that we approve of such disclosures prior to publication.
Very truly yours,
/s/ Stephens Inc.
STEPHENS INC.
C-2
<PAGE>
APPENDIX D
SECTION 262 OF THE DELAWARE GENERAL CORPORATION LAW
262 APPRAISAL RIGHTS.--(a) Any stockholder of a corporation of this State who
holds shares of stock on the date of the making of a demand pursuant to
subsection (d) of this section with respect to such shares, who continuously
holds such shares through the effective date of the merger or consolidation, who
has otherwise complied with subsection (d) of this section and who has neither
voted in favor of the merger or consolidation nor consented thereto in writing
pursuant to Section 228 of this title shall be entitled to an appraisal by the
Court of Chancery of the fair value of the stockholder's shares of stock under
the circumstances described in subsections (b) and (c) of this section. As used
in this section, the word "stockholder" means a holder of record of stock in a
stock corporation and also a member of record of a nonstock corporation; the
words "stock" and "share" mean and include what is ordinarily meant by those
words and also membership or membership interest of a member of a nonstock
corporation; and the words "depository receipt" mean a receipt or other
instrument issued by a depository representing an interest in one or more
shares, or fractions thereof, solely of stock of a corporation, which stock is
deposited with the depository.
(b) Appraisal rights shall be available for the shares of any class or series of
stock of a constituent corporation in a merger or consolidation to be effected
pursuant to Section 251 (other than a merger effected pursuant to Section 251
(g) of this title), Section 252, Section 254, Section 257, Section 258, Section
263 or Section 264 of this title:
(1) Provided, however, that no appraisal rights under this section shall be
available for the shares of any class or series of stock, which stock, or
depository receipts in respect thereof, at the record date fixed to determine
the stockholders entitled to receive notice of and to vote at the meeting of
stockholders to act upon the agreement of merger or consolidation, were either
(1) listed on a national securities exchange or designated as a national market
system security on an interdealer quotation system by the National Association
of Securities Dealers, Inc. or (2) held of record by more than 2,000 holders;
and further provided that no appraisal rights shall be available for any shares
of stock of the constituent corporation surviving a merger if the merger did not
require for its approval the vote of the stockholders of the surviving
corporation as provided in subsection (f) of Section 251 of this title.
(2) Notwithstanding paragraph (1) of this subsection, appraisal rights under
this section shall be available for the shares of any class or series of stock
of a constituent corporation if the holders thereof are required by the terms of
an agreement of merger or consolidation pursuant to Sections 251, 252, 254, 257,
258, 263 and 264 of this title to accept for such stock anything except:
a. Shares of stock of the corporation surviving or resulting from such merger or
consolidation, or depository receipts in respect thereof;
b. Shares of stock of any other corporation, or depository receipts in respect
thereof, which shares of stock (or depository receipts in respect thereof) or
depository receipts at the effective date of the merger or consolidation will be
either listed on a national securities exchange or designated as a national
market system security on an interdealer quotation system by the National
Association of Securities Dealers, Inc. or held of record by more than 2,000
holders.
c. Cash in lieu of fractional shares or fractional depository receipts described
in the foregoing subparagraphs a. and b. of this paragraph; or
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d. Any combination of the shares of stock, depository receipts and cash in lieu
of fractional shares or fractional depository receipts described in the
foregoing subparagraphs a., b. and c. of this paragraph.
(3) In the event all of the stock of a subsidiary Delaware corporation party to
a merger effected under Section 253 of this title is not owned by the parent
corporation immediately prior to the merger, appraisal rights shall be available
for the shares of the subsidiary Delaware corporation.
(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of any
class or series of its stock as a result of an amendment to its certificate of
incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the assets of
the corporation. If the certificate of incorporation contains such a provision,
the procedures of this section, including those set forth in subsections (d) and
(e) of this section, shall apply as nearly as is practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal rights are
provided under this section is to be submitted for approval at a meeting of
stockholders, the corporation, not less than 20 days prior to the meeting, shall
notify each of its stockholders who was such on the record date for such meeting
with respect to shares for which appraisal rights are available pursuant to
subsections (b) or (c) hereof that appraisal rights are available for any or all
of the shares of the constituent corporations, and shall include in such notice
a copy of this section. Each stockholder electing to demand the appraisal of
such stockholder's shares shall deliver to the corporation, before the taking of
the vote on the merger or consolidation, a written demand for appraisal of such
stockholder's shares. Such demand will be sufficient if it reasonably informs
the corporation of the identity of the stockholder and that the stockholder
intends thereby to demand the appraisal of such stockholder's shares. A proxy or
vote against the merger or consolidation shall not constitute such a demand. A
stockholder electing to take such action must do so by a separate written demand
as herein provided. Within 10 days after the effective date of such merger or
consolidation, the surviving or resulting corporation shall notify each
stockholder of each constituent corporation who has complied with this
subsection and has not voted in favor of or consented to the merger or
consolidation of the date that the merger or consolidation has become effective;
or
(2) If the merger or consolidation was approved pursuant to Section 228 or
Section 253 of this title, each constituent corporation, either before the
effective date of the merger or consolidation or within ten days thereafter,
shall notify each of the holders of any class or series of stock of such
constituent corporation who are entitled to appraisal rights of the approval of
the merger or consolidation and that appraisal rights are available for any or
all shares of such class or series of stock of such constituent corporation, and
shall include in such notice a copy of this section; provided that, if the
notice is given on or after the effective date of the merger or consolidation,
such notice shall be given by the surviving or resulting corporation to all such
holders of any class or series of stock of a constituent corporation that are
entitled to appraisal rights. Such notice may, and, if given on or after the
effective date of the merger or consolidation, shall, also notify such
stockholders of the effective date of the merger or consolidation. Any
stockholder entitled to appraisal rights may, within 20 days after the date of
mailing of such notice, demand in writing from the surviving or resulting
corporation the appraisal of such holder's shares. Such demand will be
sufficient if it reasonably informs the corporation of the identity of the
stockholder and that the stockholder intends thereby to demand the appraisal of
such holder's shares. If such notice did not notify stockholders of the
effective date of the merger or consolidation, either (1) each such constituent
corporation shall send a second notice before the effective date of the merger
or consolidation notifying each of the holders of any class or series of stock
of such constituent corporation that are entitled to appraisal rights of the
effective date of the merger or consolidation or (2) the surviving or resulting
corporation shall send such a second notice to all such holders on or within 10
days after such effective
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date; provided, however, that if such second notice is sent more than 20 days
following the sending of the first notice, such second notice need only be sent
to each stockholder who is entitled to appraisal rights and who has demanded
appraisal of such holder's shares in accordance with this subsection. An
affidavit of the secretary or assistant secretary or of the transfer agent of
the corporation that is required to give either notice that such notice has been
given shall, in the absence of fraud, be prima facie evidence of the facts
stated therein. For purposes of determining the stockholders entitled to receive
either notice, each constituent corporation may fix, in advance, a record date
that shall be not more than 10 days prior to the date the notice is given,
provided, that if the notice is given on or after the effective date of the
merger or consolidation, the record date shall be such effective date. If no
record date is fixed and the notice is given prior to the effective date, the
record date shall be the close of business on the day next preceding the day on
which the notice is given.
(e) Within 120 days after the effective date of the merger or consolidation, the
surviving or resulting corporation or any stockholder who has complied with
subsections (a) and (d) hereof and who is otherwise entitled to appraisal
rights, may file a petition in the Court of Chancery demanding a determination
of the value of the stock of all such stockholders. Notwithstanding the
foregoing, at any time within 60 days after the effective date of the merger or
consolidation, any stockholder shall have the right to withdraw such
stockholder's demand for appraisal and to accept the terms offered upon the
merger or consolidation. Within 120 days after the effective date of the merger
or consolidation, any stockholder who has complied with the requirements of
subsections (a) and (d) hereof, upon written request, shall be entitled to
receive from the corporation surviving the merger or resulting from the
consolidation a statement setting forth the aggregate number of shares not voted
in favor of the merger or consolidation and with respect to which demands for
appraisal have been received and the aggregate number of holders of such shares.
Such written statement shall be mailed to the stockholder within 10 days after
such stockholder's written request for such a statement is received by the
surviving or resulting corporation or within 10 days after expiration of the
period for delivery of demands for appraisal under subsection (d) hereof,
whichever is later.
(f) Upon the filing of any such petition by a stockholder, service of a copy
thereof shall be made upon the surviving or resulting corporation, which shall
within 20 days after such service file in the office of the Register in Chancery
in which the petition was filed a duly verified list containing the names and
addresses of all stockholders who have demanded payment for their shares and
with whom agreements as to the value of their shares have not been reached by
the surviving or resulting corporation. If the surviving or resulting
corporation shall file the petition, the petition shall be accompanied by such a
duly verified list. The Register in Chancery, if so ordered by the Court, shall
give notice of the time and place fixed for the hearing of such petition by
registered or certified mail to the surviving or resulting corporation and to
the stockholders shown on the list at the addresses therein stated. Such notice
shall also be given by 1 or more publications at least 1 week before the day of
the hearing, in a newspaper of general circulation published in the City of
Wilmington, Delaware or such publication as the Court deems advisable. The Court
shall approve the forms of the notices by mail and by publication, and the costs
thereof shall be borne by the surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine the stockholders
who have complied with this section and who have become entitled to appraisal
rights. The Court may require the stockholders who have demanded an appraisal
for their shares and who hold stock represented by certificates to submit their
certificates of stock to the Register in Chancery for notation thereon of the
pendency of the appraisal proceedings; and if any stockholder fails to comply
with such direction, the Court may dismiss the proceedings as to such
stockholder.
(h) After determining the stockholders entitled to an appraisal, the Court shall
appraise the shares, determining their fair value exclusive of any element of
value arising from the accomplishment or
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expectation of the merger or consolidation, together with a fair rate of
interest, if any, to be paid upon the amount determined to be the fair value. In
determining such fair value, the Court shall take into account all relevant
factors. In determining the fair rate of interest, the Court may consider all
relevant factors, including the rate of interest which the surviving or
resulting corporation would have had to pay to borrow money during the pendency
of the proceeding. Upon application by the surviving or resulting corporation or
by any stockholder entitled to participate in the appraisal proceeding, the
Court may, in its discretion, permit discovery or other pretrial proceedings and
may proceed to trial upon the appraisal prior to the final determination of the
stockholder entitled to an appraisal. Any stockholder whose name appears on the
list filed by the surviving or resulting corporation pursuant to subsection (f)
of this section and who has submitted such stockholder's certificates of stock
to the Register in Chancery, if such is required, may participate fully in all
proceedings until it is finally determined that such stockholder is not entitled
to appraisal rights under this section.
(i) The Court shall direct the payment of the fair value of the shares, together
with interest, if any, by the surviving or resulting corporation to the
stockholders entitled thereto. Interest may be simple or compound, as the Court
may direct. Payment shall be so made to each such stockholder, in the case of
holders of uncertificated stock forthwith, and the case of holders of shares
represented by certificates upon the surrender to the corporation of the
certificates representing such stock. The Court's decree may be enforced as
other decrees in the Court of Chancery may be enforced, whether such surviving
or resulting corporation be a corporation of this State or of any state.
(j) The costs of the proceeding may be determined by the Court and taxed upon
the parties as the Court deems equitable in the circumstances. Upon application
of a stockholder, the Court may order all or a portion of the expenses incurred
by any stockholder in connection with the appraisal proceeding, including,
without limitation, reasonable attorney's fees and the fees and expenses of
experts, to be charged pro rata against the value of all the shares entitled to
an appraisal.
(k) From and after the effective date of the merger or consolidation, no
stockholder who has demanded appraisal rights as provided in subsection (d) of
this section shall be entitled to vote such stock for any purpose or to receive
payment of dividends or other distributions on the stock (except dividends or
other distributions payable to stockholders of record at a date which is prior
to the effective date of the merger or consolidation); provided, however, that
if no petition for an appraisal shall be filed within the time provided in
subsection (e) of this section, or if such stockholder shall deliver to the
surviving or resulting corporation a written withdrawal of such stockholder's
demand for an appraisal and an acceptance of the merger or consolidation, either
within 60 days after the effective date of the merger or consolidation as
provided in subsection (e) of this section or thereafter with the written
approval of the corporation, then the right of such stockholder to an appraisal
shall cease. Notwithstanding the foregoing, no appraisal proceeding in the Court
of Chancery shall be dismissed as to any stockholder without the approval of the
Court, and such approval may be conditioned upon such terms as the Court deems
just.
(l) The shares of the surviving or resulting corporation to which the shares of
such objecting stockholders would have been converted had they assented to the
merger or consolidation shall have the status of authorized and unissued shares
of the surviving or resulting corporation.
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TCBY ENTERPRISES, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR USE AT THE
SPECIAL MEETING OF STOCKHOLDERS TO BE HELD AT 10:00 A.M., LOCAL TIME, ON APRIL
18, 2000.
The undersigned hereby appoints Frank D. Hickingbotham, Herren C. Hickingbotham
and William P. Creasman, and each or either of them, as proxies, each with full
power of substitution, to represent and to vote as designated herein all the
shares of TCBY common stock held of record by the undersigned on March 14,
2000, at the special meeting of stockholders to be held at 10:00 a.m., local
time, on April 18, 2000 at the DoubleTree Hotel, 424 West Markham, Little Rock,
Arkansas or any adjournments or postponements thereof.
1. To approve and adopt the Agreement and Plan of Merger dated as of February
9, 2000 among TCBY Enterprises, Inc., CI Merger Co. and Capricorn Investors
III, L.P. and the merger and other transactions contemplated thereby.
[_] FOR [_] AGAINST [_] ABSTAIN
2. In his discretion, the proxy is authorized to vote upon such other business
as may properly come before the special meeting.
(CONTINUED AND TO BE SIGNED ON REVERSE SIDE)
(CONTINUED FROM FRONT)
PROPERLY EXECUTED PROXIES WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY THE
UNDERSIGNED STOCKHOLDER AND AT THE DISCRETION OF THE PROXYHOLDER AS TO ANY
OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE SPECIAL MEETING. IF NO SUCH
DIRECTIONS ARE GIVEN, SUCH PROXIES WILL BE VOTED "FOR" PROPOSAL 1.
Please be sure to sign and date this proxy below.
Date: ________________, 2000
Signature __________________
Signature __________________
(When signing as attorney,
executor, administrator,
trustee or guardian, please
give full title as such. If
stockholder is a
corporation, corporate name
should be signed by an
authorized officer and the
corporate seal affixed. If
stockholder is a
partnership, please sign in
partnership name by
authorized persons. For
joint accounts, each joint
owner must sign.)
PLEASE MARK, SIGN, DATE AND MAIL YOUR PROXY CARD TODAY.
