PREM14A 1 g24723prem14a.htm PREM14A prem14a
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
 
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No.      )
 
Filed by the Registrant þ
 
Filed by a Party other than the Registrant o
 
Check the appropriate box:
 
þ  Preliminary Proxy Statement
o  Confidential, For Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
o  Definitive Proxy Statement
o  Definitive Additional Materials
o  Soliciting Material Pursuant to § 240.14a-12
 
BURGER KING HOLDINGS, INC.
(Name of Registrant as Specified in Its Charter)
 
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
 
Payment of Filing Fee (Check the appropriate box):
 
o   No fee required.
 
þ   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 $0.01 per share
 
 
  (2)   Aggregate number of securities to which transaction applies: 144,697,276 (includes 6,579,653 shares issuable upon exercise of options with an exercise price of less than $24.00 and 1,651,767 restricted stock units)
 
 
  (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):
 
Solely for purposes of calculating the registration fee, the maximum aggregate value of the transaction was calculated as the sum of (A) 136,465,856 shares of common stock multiplied by $24.00, plus (B) 6,579,653 options to acquire common stock with an exercise price below $24.00 multiplied by $24.00 minus such exercise price, plus (C) 1,651,767 restricted stock units multiplied by $24.00.
 
 
  (4)   Proposed maximum aggregate value of transaction: $3,366,943,534.15
 
 
  (5)   Total fee paid: $240,063
 
 
o   Fee paid previously with preliminary materials:
 
þ   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: $235,905.46
 
 
  (2)   Form, Schedule or Registration Statement No.: Schedule TO
 
 
  (3)   Filing Party: Blue Acquisition Holding Corporation, Blue Acquisition Sub, Inc., 3G Special Situations Fund II,L.P.
 
 
  (4)   Date Filed: September 16, 2010
 


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PRELIMINARY PROXY MATERIAL SUBJECT TO COMPLETION
 
(BURGER KING LOGO)
 
BURGER KING HOLDINGS, INC.
5505 BLUE LAGOON DRIVE
MIAMI, FLORIDA 33126
 
[ • ], 2010
 
Dear Shareholder:
 
On behalf of the board of directors of Burger King Holdings, Inc. (the “Company”), I cordially invite you to attend a special meeting of shareholders of the Company, to be held on [ • ], 2010 at [ • ] a.m. Eastern Standard Time, at [ • ].
 
On September 2, 2010, the Company entered into a definitive Merger Agreement to be acquired by an affiliate of 3G Capital. 3G Capital is a global investment firm focused on long-term value creation, with a particular emphasis on maximizing the potential of brands and businesses. At the special meeting, you will be asked to consider and vote upon a proposal to adopt the Merger Agreement.
 
If the merger contemplated by the Merger Agreement is completed, you will be entitled to receive $24.00 in cash, without interest, less any applicable withholding taxes, for each share of our common stock owned by you (unless you have properly exercised your appraisal rights with respect to such shares).
 
After careful consideration, the Company’s board of directors has unanimously determined that the merger is advisable, fair to and in the best interests of the shareholders of the Company, and approved the Merger Agreement, the merger and the other transactions contemplated by the Merger Agreement. Accordingly, the Company’s board of directors recommends that you vote “FOR” approval of the proposal to adopt the Merger Agreement and “FOR” approval of the proposal to adjourn the special meeting, if necessary or appropriate, to solicit additional proxies.
 
Approval of the proposal to adopt the Merger Agreement requires the affirmative vote of holders of a majority of the outstanding shares of our common stock entitled to vote thereon. Your vote is very important. Whether or not you plan to attend the special meeting, please complete, date, sign and return, as promptly as possible, the enclosed proxy card in the accompanying prepaid reply envelope, or submit your proxy by telephone or the Internet. If you attend the special meeting and vote in person, your vote by ballot will revoke any proxy previously submitted. The failure to vote your shares of our common stock will have the same effect as a vote “AGAINST” approval of the proposal to adopt the Merger Agreement.
 
If your shares of our common stock are held in “street name” by your bank, brokerage firm or other nominee, your bank, brokerage firm or other nominee will be unable to vote your shares of our common stock without instructions from you. You should instruct your bank, brokerage firm or other nominee to vote your shares of our common stock in accordance with the procedures provided by your bank, brokerage firm or other nominee. The failure to instruct your bank, brokerage firm or other nominee to vote your shares of our common stock “FOR” approval of the proposal to adopt the Merger Agreement will have the same effect as voting “AGAINST” the proposal to adopt the Merger Agreement.
 
The accompanying proxy statement provides you with detailed information about the special meeting, the Merger Agreement and the merger. A copy of the Merger Agreement is attached as Annex A to the proxy statement. We encourage you to read the entire proxy statement and its annexes, including the Merger Agreement, carefully. You may also obtain additional information about the Company from documents we have filed with the Securities and Exchange Commission.
 
On behalf of the board of directors and management of the Company, we thank you for your support.
 
Best regards,
 
John W. Chidsey
Chairman and Chief Executive Officer
 
The proxy statement is dated [ • ], 2010, and is first being mailed to our shareholders on or about [ • ], 2010.
 
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED THE MERGER, PASSED UPON THE MERITS OR FAIRNESS OF THE MERGER AGREEMENT OR THE TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE PROPOSED MERGER, OR PASSED UPON THE ADEQUACY OR ACCURACY OF THE INFORMATION CONTAINED IN THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.


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PRELIMINARY PROXY MATERIAL SUBJECT TO COMPLETION
 
BURGER KING HOLDINGS, INC.
5505 BLUE LAGOON DRIVE
MIAMI, FLORIDA 33126
 
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
To Be Held • , 2010
 
A special meeting of shareholders of Burger King Holdings, Inc., a Delaware corporation (the “Company”), will be held on [ • ], 2010 at [ • ] a.m. Eastern Standard Time, at [ • ].
 
The meeting will be held for the following purposes:
 
1. To consider and vote on a proposal to adopt the Agreement and Plan of Merger, dated as of September 2, 2010, as it may be amended from time to time, by and among the Company, Blue Acquisition Holding Corporation, a Delaware corporation (“Parent”), and Blue Acquisition Sub, Inc., a Delaware corporation and a wholly-owned subsidiary of Parent (the “Merger Agreement”). A copy of the Merger Agreement is attached as Annex A to the accompanying proxy statement.
 
2. To consider and vote on a proposal to adjourn the special meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes at the time of the special meeting to approve the proposal to adopt the Merger Agreement.
 
3. To transact any other business that may properly come before the special meeting, or any adjournment or postponement of the special meeting, by or at the direction of the board of directors of the Company.
 
The board of directors has fixed the close of business on • , 2010 as the record date for determining shareholders entitled to notice of and to vote at the meeting.
 
Your vote is very important, regardless of the number of shares of Company common stock you own. The merger cannot be completed unless the Merger Agreement is adopted by the affirmative vote of the holders of a majority of the outstanding shares of Company common stock entitled to vote thereon. Even if you plan to attend the special meeting in person, we request that you complete, sign, date and return, as promptly as possible, the enclosed proxy card in the accompanying prepaid reply envelope or submit your proxy by telephone or the Internet prior to the special meeting to ensure that your shares of Company common stock will be represented at the special meeting if you are unable to attend. If you fail to return your proxy card or fail to submit your proxy by phone or the Internet, your shares of Company common stock will not be counted for purposes of determining whether a quorum is present at the special meeting and will have the same effect as a vote “AGAINST” the proposal to adopt the Merger Agreement.
 
After careful consideration, the Company’s board of directors has unanimously determined that the merger is advisable, fair to and in the best interests of the shareholders of the Company, and approved the Merger Agreement, the merger and the other transactions contemplated by the Merger Agreement. Accordingly, the Company’s board of directors recommends that you vote “FOR” approval of the proposal to adopt the Merger Agreement and “FOR” approval of the proposal to adjourn the special meeting, if necessary or appropriate, to solicit additional proxies.
 
WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING, PLEASE COMPLETE, DATE, SIGN AND RETURN, AS PROMPTLY AS POSSIBLE, THE ENCLOSED PROXY CARD IN THE ACCOMPANYING PREPAID REPLY ENVELOPE, OR SUBMIT YOUR PROXY BY TELEPHONE OR THE INTERNET. IF YOU ATTEND THE SPECIAL MEETING AND VOTE IN PERSON, YOUR VOTE BY BALLOT WILL REVOKE ANY PROXY PREVIOUSLY SUBMITTED.
 
By Order of the Board of Directors,
 
Anne Chwat
General Counsel and Secretary
Miami, Florida
 • , 2010


 

 
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This proxy statement and a proxy card are first being mailed on or about [ • ], 2010 to shareholders who owned shares of Company common stock as of the close of business on [ • ], 2010.
 
SUMMARY
 
The following summary highlights selected information in this proxy statement and may not contain all the information that may be important to you. Accordingly, we encourage you to read carefully this entire proxy statement, its annexes and the documents referred to in this proxy statement. Each item in this summary includes a page reference directing you to a more complete description of that topic. You may obtain the information incorporated by reference in this proxy statement without charge by following the instructions under “Where You Can Find More Information” beginning on page [ • ].
 
• Parties to the Merger (Page [ • ])
 
Burger King Holdings, Inc., or the Company, we, our, or us, is a Delaware corporation formed on July 23, 2002, and is headquartered in Miami, Florida. Our restaurant system includes restaurants owned by the Company and by franchisees. We are the world’s second largest fast food hamburger restaurant chain as measured by the total number of restaurants and system-wide sales. As of June 30, 2010, we owned or franchised a total of 12,174 restaurants in 76 countries and U.S. territories, of which 1,387 restaurants were Company restaurants and 10,787 were owned by our franchisees. Of these restaurants, 7,258 or 60% were located in the United States and 4,916 or 40% were located in our international markets. Our restaurants feature flame-broiled hamburgers, chicken and other specialty sandwiches, french fries, soft drinks and other affordably-priced food items. During our more than 50 years of operating history, we have developed a scalable and cost-efficient quick service hamburger restaurant model that offers customers fast food at affordable prices.
 
Blue Acquisition Holding Corporation, or Parent, is a Delaware corporation that was formed solely for the purpose of acquiring the Company and has not engaged in any business except for activities related to its formation, completing the transactions contemplated by the merger agreement and arranging the related financing. Parent is controlled by 3G Special Situations Fund II, L.P., a Cayman exempted limited partnership, which we sometimes refer to as 3G. 3G is a private equity fund principally engaged in the business of making investments in securities. Upon completion of the merger, the Company will be a direct wholly-owned subsidiary of Parent.
 
Blue Acquisition Sub, Inc., or Merger Sub, is a Delaware corporation and a wholly-owned subsidiary of Parent that was formed by Parent solely for the purpose of facilitating the acquisition of the Company. To date, Merger Sub has not carried on any activities other than those related to its formation, completing the transactions contemplated by the merger agreement and arranging the related financing. Upon completion of the merger, Merger Sub will cease to exist.
 
In this proxy, we refer to the Agreement and Plan of Merger, dated September 2, 2010, as it may be amended from time to time, among the Company, Parent and Merger Sub, as the merger agreement, and the merger of Merger Sub with and into the Company, as the merger.
 
• Tender Offer
 
On September 16, 2010, Merger Sub commenced a tender offer, which we refer to as the offer, for all of the outstanding shares of Company common stock at a price of $24.00 per share, net to the seller in cash without interest. The offer contemplated that, after completion of the offer and the satisfaction or waiver of all conditions, we will merge with Merger Sub and all outstanding shares of Company common stock, other than shares held by Parent, Merger Sub or the Company or shares held by the Company’s shareholders who have and validly exercised appraisal rights under Delaware law, will be canceled and converted into the right to receive cash equal to the $24.00 offer price per share. The offer was commenced pursuant to the merger agreement.


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Under the terms of the merger agreement, the parties agreed to complete the merger whether or not the offer is completed. If the offer is not completed, the parties agreed that the merger could only be completed after the receipt of shareholder approval of the adoption of the merger agreement that will be considered at the special meeting. We are soliciting proxies for the special meeting to obtain shareholder approval of the adoption of the merger agreement to be able to consummate the merger regardless of the outcome of the offer.
 
We refer in this proxy statement to the offer and to terms of the merger agreement applicable to the offer, however, the offer is being made separately to the holders of shares of Company common stock and is not applicable to the special meeting.
 
• The Special Meeting (Page [ • ])
 
Time, Place and Purpose of the Special Meeting (Page [ • ])
 
The special meeting will be held on [ • ], 2010 at [ • ] a.m. EST, at [ • ].
 
At the special meeting, holders of common stock of the Company, par value $0.01 per share, which we refer to as Company common stock, will be asked to approve the proposal to adopt the merger agreement and to approve the proposal to adjourn the special meeting, if necessary or appropriate, for the purpose of soliciting additional proxies if there are insufficient votes at the time of the special meeting to approve the proposal to adopt the merger agreement.
 
Record Date and Quorum (Page [ • ])
 
You are entitled to receive notice of, and to vote at, the special meeting if you owned shares of Company common stock at the close of business on [ • ], 2010, which the Company has set as the record date for the special meeting and which we refer to as the record date. You will have one vote for each share of Company common stock that you owned on the record date. As of the record date, there were [ • ] shares of Company common stock outstanding and entitled to vote at the special meeting. A majority of the shares of Company common stock outstanding at the close of business on the record date and entitled to vote, present in person or represented by proxy, at the special meeting constitutes a quorum for the purposes of the special meeting.
 
Vote Required (Page [ • ])
 
Approval of the proposal to adopt the merger agreement requires the affirmative vote of the holders of a majority of the outstanding shares of Company common stock entitled to vote thereon.
 
Approval of the proposal to adjourn the special meeting, if necessary or appropriate, for the purpose of soliciting additional proxies requires the affirmative vote of holders of a majority of the shares of Company common stock present in person or represented by proxy and entitled to vote on the matter at the special meeting.
 
As of the record date, the directors and executive officers of the Company beneficially owned and were entitled to vote, in the aggregate, [ • ] shares of Company common stock (excluding (1) shares issuable upon the exercise of options to purchase Company common stock, which we refer to as stock options, (2) shares issuable upon vesting of Company restricted stock units, which we refer to as restricted stock units, (3) shares issuable upon vesting of Company performance-based stock units, which we refer to as performance-based restricted stock units, and (4) vested and unvested deferred stock awards granted to members of the board of directors of the Company, which we refer to as director stock units (collectively representing [ • ]% of the outstanding shares of Company common stock on the record date). The directors and executive officers have informed the Company that they currently intend to vote all of their shares of Company common stock (other than shares of Company common stock as to which such holder does not have discretionary authority) “FOR” the proposal to adopt the merger agreement and “FOR” the proposal to adjourn the special meeting, if necessary or appropriate, to solicit additional proxies.
 
In addition, concurrently with the execution of the merger agreement, certain private equity funds affiliated with TPG Capital, Bain Capital Partners and the Goldman Sachs Funds, who we refer to as the


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Sponsors, entered into stockholder tender agreements with the Company. It is anticipated that, pursuant to the terms of such stockholder tender agreements, such Sponsors will each enter into customary voting agreements with Parent to vote their shares of Company common stock in favor of the merger. The shares of Company common stock collectively held by such Sponsors comprise approximately 31% of the outstanding shares of Company common stock.
 
Proxies and Revocation (Page [ • ])
 
Any shareholder of record entitled to vote at the special meeting may submit a proxy by telephone, over the Internet, by returning the enclosed proxy card in the accompanying prepaid reply envelope, or may vote in person by appearing at the special meeting. If your shares of Company common stock are held in “street name” through a bank, brokerage firm or other nominee, you should instruct your bank, brokerage firm or other nominee on how to vote your shares of Company common stock using the instructions provided by your bank, brokerage firm or other nominee. If you fail to submit a proxy or to vote in person at the special meeting, or do not provide your bank, brokerage firm or other nominee with voting instructions, as applicable, your shares of Company common stock will not be voted on the proposal to adopt the merger agreement, which will have the same effect as a vote “AGAINST” the proposal to adopt the merger agreement, and your shares of Company common stock will not have an effect on approval of the proposal to adjourn the special meeting.
 
You may change your vote or revoke your proxy at any time before it is voted at the special meeting by:
 
  •  submitting a new proxy by telephone or via the Internet after the date of the earlier voted proxy;
 
  •  signing another proxy card with a later date and returning it to us prior to the special meeting; or
 
  •  attending the special meeting and voting in person.
 
If you hold your shares of Company common stock in street name, you may submit new voting instructions by contacting your bank, brokerage firm or other nominee. You may also vote in person at the special meeting if you obtain a legal proxy from your bank, brokerage firm or other nominee.
 
• The Merger (Page [ • ])
 
The merger agreement provides that Merger Sub will merge with and into the Company. The Company will be the surviving corporation in the merger and will continue to do business following the merger. As a result of the merger, the Company will cease to be a publicly traded company. If the merger is completed, you will not own any shares of the capital stock of the surviving corporation.
 
Merger Consideration (Page [ • ])
 
In the merger, each outstanding share of Company common stock (except for certain shares owned by Parent or Merger Sub, and shares held by shareholders who have perfected their statutory dissenters rights of appraisal under Delaware law, which we refer to collectively as the excluded shares) will be converted into the right to receive $24.00 in cash, without interest, which amount we refer to as the per share merger consideration, less any applicable withholding taxes.
 
• Reasons for the Merger; Recommendation of the Board of Directors (Page [ • ])
 
After careful consideration of various factors described in the section entitled “The Merger — Reasons for the Merger; Recommendation of the Board of Directors,” the board of directors of the Company, which we refer to as the board of directors, unanimously (i) authorized and approved the execution, delivery and performance of the merger agreement and the transactions contemplated by the merger agreement, (ii) approved and declared advisable the merger agreement, the merger and the other transactions contemplated by the merger agreement, (iii) declared that the terms of the merger agreement and the transactions contemplated by the merger agreement, including the merger and the other transactions contemplated by the merger agreement, on the terms and subject to the conditions set forth therein, are fair to and in the best interests of the


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shareholders of the Company, (iv) directed that the adoption of the merger agreement be submitted to a vote at a meeting of the shareholders of the Company, (v) recommended that the shareholders of the Company vote their shares of Company common stock in favor of adoption of the merger agreement and (vi) approved for all purposes Merger Sub, Parent and their affiliates, the merger agreement and the transactions contemplated by the merger agreement to exempt such persons, agreements and transactions from any anti-takeover laws.
 
In considering the recommendation of the board of directors with respect to the proposal to adopt the merger agreement, you should be aware that our directors and executive officers have interests in the merger that are different from, or in addition to, yours. The board of directors was aware of and considered these interests, among other matters, in evaluating and negotiating the merger agreement and the merger, and in recommending that the merger agreement be adopted by the shareholders of the Company. See the section entitled “The Merger — Interests of Certain Persons in the Merger” beginning on page [ • ].
 
The board of directors recommends that you vote “FOR” the proposal to adopt the merger agreement and “FOR” the proposal to adjourn the special meeting, if necessary or appropriate.
 
• Opinions of the Company’s Financial Advisors (Page [ • ])
 
Opinion of Morgan Stanley & Co. Incorporated (Page [ • ])
 
Morgan Stanley & Co. Incorporated, or Morgan Stanley, was engaged by the Company to provide it with financial advisory services in connection with the potential sale of the Company. At the meeting of the board of directors on September 1, 2010, Morgan Stanley rendered its oral opinion, subsequently confirmed in writing, that, as of that date, based upon and subject to the limitations, qualifications and assumptions set forth in the written opinion, the $24.00 per share to be received by holders of shares of Company common stock pursuant to the merger agreement, was fair from a financial point of view to such holders.
 
The full text of the written opinion of Morgan Stanley, dated September 1, 2010, which sets forth among other things, assumptions made, procedures followed, matters considered and limitations on the scope of the review undertaken by Morgan Stanley in rendering its opinion, is attached as Annex B hereto. Shareholders are urged to, and should, read the opinion carefully and in its entirety. Morgan Stanley’s opinion is directed to the Company board of directors and addresses only the fairness, from a financial point of view, of the consideration to be received by the holders of shares of Company common stock pursuant to the merger agreement, as of the date of the opinion. Morgan Stanley’s opinion does not address any other aspect of the transactions contemplated by the merger agreement and does not constitute a recommendation as to how any such holder should vote at the special meeting or whether any such holder should take any other action with respect to the merger. The summary of the opinion of Morgan Stanley set forth below under “The Merger — Opinions of the Company’s Financial Advisors — Opinion of Morgan Stanley & Co. Incorporated” is qualified in its entirety by reference to the full text of the opinion.
 
We encourage you to read the opinion of Morgan Stanley described above carefully in its entirety for a description of the assumptions made, procedures followed, matters considered and limitations on the scope of the review undertaken in connection with such opinion.
 
Opinion of Goldman, Sachs & Co. (Page [ • ])
 
Goldman, Sachs & Co., or Goldman Sachs, a financial advisor to the board of directors, rendered its opinion to the board of directors that, as of September 2, 2010, and based upon and subject to the factors and assumptions set forth therein, the $24.00 per share of Company common stock to be paid to the holders (other than Parent and its affiliates) of shares of Company common stock pursuant to the merger agreement was fair from a financial point of view to such holders.
 
The full text of the written opinion of Goldman Sachs, dated September 2, 2010, which sets forth among other things, assumptions made, procedures followed, matters considered and limitations on the review undertaken by Goldman Sachs in rendering its opinion, is attached as Annex C to this proxy statement and is incorporated by reference herein in its entirety. Goldman Sachs provided its opinion


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for the information and assistance of the board of directors in connection with its consideration of the transactions contemplated by the merger agreement. Goldman Sachs’ opinion does not address any other aspect of the merger and does not constitute a recommendation to any shareholder as to how any holder of shares of Company common stock should vote with respect to the merger or any other matter. The summary of the written opinion of Goldman Sachs set forth below under “The Merger — Opinions of the Company’s Financial Advisors — Opinion of Goldman, Sachs & Co.” is qualified in its entirety by reference to the full text of such opinion.
 
We encourage you to read the opinion of Goldman Sachs described above carefully in its entirety for a description of the assumptions made, procedures followed, factors considered and limitations on the review undertaken in connection with such opinion.
 
• Financing of the Merger (Page [ • ])
 
We anticipate that the total funds needed to complete the merger, including the funds needed to:
 
  •  pay our shareholders (and holders of our other equity-based interests) the amounts due to them under the merger agreement and the related expenses, which, based upon the shares (and our other equity-based interests) outstanding as of [ • ], 2010, would be approximately $3.3 billion; and
 
  •  repay or refinance indebtedness of the Company at the closing of the merger, which, as of [ • ], 2010, was approximately $729 million;
 
will be funded through a combination of:
 
  •  equity financing of $1.5 billion to be provided by 3G;
 
  •  a $1.9 billion senior secured credit facility, comprised of a $1.75 billion term loan facility and a $150 million revolving credit facility; and
 
  •  the issuance of senior unsecured notes yielding at least $900 million in gross cash proceeds (or, to the extent those notes are not issued at or prior to the closing of the merger, by a senior unsecured bridge loan facility).
 
Parent has obtained the equity commitment letter and the debt commitment letter described below, which we refer to collectively as the commitment letters. The funding under those commitment letters is subject to certain conditions, including conditions that do not relate directly to the merger agreement. We believe the amounts committed under the commitment letters and the proceeds from the senior notes will be sufficient to complete the merger, but we cannot assure you of that. Those amounts might be insufficient if, among other things, one or more of the parties to the commitment letters fails to fund the committed amounts in breach of such commitment letters or if the conditions to such commitments are not met. If the merger agreement is terminated in the circumstances in which Merger Sub does not receive the proceeds of the debt commitment letter, Parent may be obligated to pay the Company a fee of $175 million, or the Parent Termination Fee, as described under “The Merger Agreement — Terms of the Merger Agreement — Termination Fees” beginning on page [ • ]. The obligation of Parent to pay the Parent Termination Fee is guaranteed by 3G as discussed below.
 
Equity Financing (Page [ • ])
 
Parent has entered into a letter agreement, which we refer to as the equity commitment letter, with 3G dated September 2, 2010, pursuant to which 3G has committed to purchase, or cause the purchase of, equity interests in Parent simultaneously with the effective time of the merger, up to a maximum of $1.5 billion in the aggregate, to fund the merger consideration and related expenses.
 
3G’s obligation to fund the financing contemplated by the equity commitment letter is generally subject to the satisfaction of the conditions to Parent’s and Merger Sub’s obligations to consummate the transactions contemplated by the merger agreement, the funding of the debt financing pursuant to the terms and conditions of the debt commitment letter or any alternative financing that Parent and Merger Sub are required or


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permitted to accept from alternative sources pursuant to the merger agreement and the substantially contemporaneous closing of the merger.
 
Debt Financing (Page [ • ])
 
In connection with the entry into the merger agreement, Merger Sub received a debt commitment letter, dated September 2, 2010, which we refer to as the debt commitment letter, from JPMorgan Chase Bank, N.A., J.P. Morgan Securities LLC and Barclays Bank PLC, which along with JPMorgan Chase Bank, N.A., we refer to as the lenders. Pursuant to the debt commitment letter, the lenders have committed to provide the aggregate of $1.9 billion in debt financing to Merger Sub, consisting of (i) a senior secured term loan facility in an aggregate principal amount of $1.75 billion, (ii) a senior secured revolving credit facility with a maximum availability of $150 million and (iii) $900 million of senior unsecured bridge loans to the extent that some or all of the senior unsecured notes referred to in the next sentence are unable to be issued at or prior to the closing of the merger or such offering does not yield at least $900 million in gross cash proceeds. It is expected that at the closing of the merger, $900 million principal amount of senior unsecured notes will be issued pursuant to Rule 144A of the Securities Act of 1933, as amended, or the Securities Act, or another private placement exemption in lieu of the senior unsecured bridge loans.
 
The debt commitment letter is not subject to due diligence or a “market out” condition, which would allow lenders not to fund their commitments if the financial markets are materially adversely affected, but such financing may not be considered assured. There is a risk that the conditions to the debt financing will not be satisfied and the debt financing may not be funded when required. As of the date of this proxy statement, no alternative financing arrangements or alternative financing plans have been made in the event the debt financing described in this proxy statement is not available as anticipated.
 
• Limited Guaranty (Page [ • ])
 
Pursuant to a limited guaranty, which we refer to as the limited guaranty, delivered by 3G in favor of the Company, dated September 2, 2010, 3G has agreed to guarantee:
 
  •  the obligation of Parent and Merger Sub under the merger agreement to pay the Parent Termination Fee of $175 million to the Company, or
 
  •  the performance and discharge of Parent’s and Merger Sub’s obligations and liabilities under the merger agreement,
 
in each case, if, as and when due, provided, however, in no case shall the liability of 3G pursuant to the limited guaranty exceed $175 million. See “The Merger Agreement — Terms of the Merger Agreement — Termination Fees” beginning on page [ • ].
 
• Interests of Certain Persons in the Merger (Page [ • ])
 
When considering the recommendation of the board of directors that you vote to approve the proposal to adopt the merger agreement, you should be aware that our directors and executive officers have interests in the merger that are different from, or in addition to, your interests as a shareholder. The board of directors was aware of and considered these interests, among other matters, in evaluating and negotiating the merger agreement and the merger, and in recommending that the merger agreement be adopted by the shareholders of the Company. These interests include the following:
 
  •  accelerated vesting of equity awards held by our employees, including our executive officers, at the effective time of the merger, and the settlement of such awards in exchange for cash;
 
  •  payment of a pro rata annual bonus to all of our bonus-eligible employees, including our executive officers, for the period commencing on July 1, 2010 through the effective time of the merger;
 
  •  certain executive officers will receive a bonus upon the effective time of the merger and payment for performing transition services;


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  •  the executive officers will receive payments and benefits under the executive officers’ employment agreements upon certain types of termination of employment following the effective time of the merger which severance benefits have, in some circumstances, been enhanced; and
 
  •  accelerated vesting of any unvested director stock units and the payment to all non-management directors for all outstanding director stock units upon their resignation from the board in accordance with the terms of such awards.
 
In addition, if the proposal to adopt the merger agreement is approved by our shareholders, the vested shares of Company common stock held by our directors and executive officers will be treated in the same manner as outstanding shares of Company common stock held by other shareholders of the Company.
 
• Material U.S. Federal Income Tax Consequences of the Merger (Page [ • ])
 
The exchange of shares of Company common stock for cash in the merger will generally be a taxable transaction to United States holders for United States federal income tax purposes. In general, a United States holder whose shares of Company common stock are converted into the right to receive cash in the merger will recognize gain or loss for United States federal income tax purposes in an amount equal to the difference, if any, between the amount of cash received with respect to such shares (determined before the deduction of any applicable withholding taxes) and its adjusted tax basis in such shares. Backup withholding may also apply to the cash payments made pursuant to the merger unless the United States holder or other payee provides a taxpayer identification number, certifies that such number is correct and otherwise complies with the backup withholding rules. Payments made to a non-United States holder with respect to shares of Company common stock exchanged for cash pursuant to the merger will generally be exempt from United States federal income tax. A non-United States holder may, however, be subject to backup withholding with respect to the cash payments made pursuant to the merger, unless the holder certifies that it is not a United States person or otherwise establishes a valid exemption from backup withholding tax. You should read “The Merger — Material United States Federal Income Tax Consequences of the Merger” beginning on page [ • ] for definitions of “United States Holder” and “Non-United States Holder,” and for a more detailed discussion of the United States federal income tax consequences of the merger. You should also consult your tax advisor with respect to the specific tax consequences to you in connection with the merger in light of your own particular circumstances, including federal estate, gift and other non-income tax consequences, and tax consequences under state, local or foreign tax laws.
 
• Regulatory Approvals and Notices (Page [ • ])
 
Under the terms of the merger agreement, the merger cannot be completed until the waiting period applicable to the consummation of the merger under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, or the HSR Act, has expired or been terminated.
 
Under the HSR Act and the rules promulgated thereunder by the Federal Trade Commission, or the FTC, the merger cannot be completed until each of the Company and Parent files a notification and report form with the FTC and the Antitrust Division of the Department of Justice, or the DOJ, and the applicable waiting period has expired or been terminated. Parent filed such a notification and report form on September 16, 2010 and requested early termination of the waiting period. The Company filed such a notification and report form on September 17, 2010. The applicable waiting period will expire at 11:59 pm on October 1, 2010, unless earlier terminated.
 
The merger may also trigger antitrust notifications in Mexico and Turkey. Under Mexican law, certain acquisition transactions may not be consummated unless certain information has been furnished to the Federal Competition Commission, or the Mexican FCC, and certain waiting period requirements have been satisfied. The Company and Parent filed the notification and report form with the Mexican FCC on September 21, 2010. Consequently, the required waiting period under Mexican law is expected to expire on October 12, 2010. Under Turkish law, certain acquisition transactions may not be consummated unless certain information has been furnished to the Turkish Competition Authority, or the TCA, and certain waiting period requirements


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have been satisfied. The Company and Parent filed the notification and report with the TCA on September 17, 2010. Consequently, the required waiting period under Turkish law is expected to expire on October 17, 2010.
 
• Litigation Relating to the Merger (Page [ • ])
 
In connection with the offer and the merger, on September 3, 2010, four purported class action complaints were filed in the Circuit Court for the County of Miami-Dade, Florida against the Company, each member of its board of directors and 3G Capital Partners Ltd., or 3G Capital. In addition, on September 8, 2010, a purported class action complaint was filed in the Delaware Court of Chancery against the Company, its board members, 3G, 3G Capital, Parent, and Merger Sub. The complaints generally allege, among other things, that the board of directors breached their fiduciary duties in connection with the merger and that 3G, Parent, Merger Sub and 3G Capital and the Company aided and abetted the purported breaches of fiduciary duty.
 
We believe the complaints are completely without merit, and intend to vigorously defend them.
 
• The Merger Agreement (Page [ • ])
 
Treatment of Common Stock, Options and Restricted Stock Units (Page [ • ])
 
  •  Common Stock.  At the effective time of the merger, each share of Company common stock issued and outstanding (except for the excluded shares) will convert into the right to receive the per share merger consideration of $24.00 in cash, without interest, less any applicable withholding taxes.
 
  •  Options.  At the effective time of the merger, each outstanding and unexercised option to purchase shares of Company common stock, vested or unvested, issued under the Company’s equity plans or otherwise, will be cancelled and will entitle the holder to receive an amount in cash equal to the product of the total number of shares of Company common stock subject to such option multiplied by the amount, if any, by which $24.00 exceeds the exercise price per share of such option, less any applicable withholding taxes, other than the August equity grants, which will be treated as described under “The Merger — Interests of Certain Persons in the Merger — Equity Awards” beginning on page [ • ].
 
  •  Restricted Stock Units.  At the effective time of the merger, each outstanding restricted stock unit will be cancelled and will entitle the holder to receive an amount in cash, for each restricted stock unit, equal to $24.00, less any applicable withholding taxes, other than the August equity grants, which will be treated as described under “The Merger — Interests of Certain Persons in the Merger — Equity Awards” beginning on page [ • ].
 
  •  Performance-Based Stock Units.  At the effective time of the merger, each outstanding performance-based stock unit will be cancelled and will entitle the holder to receive an amount in cash equal to $24.00 multiplied by the number of shares subject to the performance-based stock units assuming that the target level of performance had been attained, less any applicable withholding taxes, other than the August equity grants, which will be treated as described under “The Merger — Interests of Certain Persons in the Merger — Equity Awards” beginning on page [ • ].
 
  •  Director Stock Units.  At the effective time of the Merger, each director stock unit that has not yet vested will vest, and in connection with such director’s resignation, will be converted into an amount in cash equal to $24.00, less any applicable withholding taxes.
 
Solicitation of Takeover Proposals (Page [ • ])
 
The merger agreement provides that until 11:59 p.m., Eastern time, on October 12, 2010, which we refer to as the “go shop” period, we are permitted to solicit any inquiry or the making of any takeover proposals from third parties and to participate in any negotiations or discussions with third parties with respect to any takeover proposals. From and after 12:00 a.m., Eastern time, on October 13, 2010 and until the effective time of the merger or, if earlier, the termination of the merger agreement, we are not permitted to solicit any inquiry or the making of any takeover proposals or engage in any negotiations or discussions with any person


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relating to an takeover proposal. Notwithstanding these restrictions, under certain circumstances, we may, from and after 11:59 a.m., Eastern time, on October 13, 2010, which we refer to as the no-shop period start date, and prior to the time that our shareholders adopt the merger agreement, respond to a written takeover proposal or engage in discussions or negotiations with the person making such an takeover proposal. In addition, the restrictions applicable to us following the no-shop period start date do not apply to our activities with any person who made a written takeover proposal prior to the no-shop period start date that our board of directors believed in good faith (after consultation with its financial advisor and outside legal counsel) could reasonably be expected to result in a superior proposal. At any time before the merger agreement is adopted by our shareholders, if our board of directors determines that an takeover proposal is a superior proposal, we may terminate the merger agreement and enter into any acquisition, merger or similar agreement, which we refer to as an acquisition agreement, with respect to such superior proposal, so long as we comply with certain terms of the merger agreement, including paying a termination fee to Parent. See “The Merger Agreement — Terms of the Merger Agreement — Termination Fees” beginning on page [ • ].
 
Conditions to the Merger (Page [ • ])
 
The respective obligations of the Company, Parent and Merger Sub to consummate the merger are subject to the satisfaction or waiver of certain customary conditions, including the adoption of the merger agreement by our shareholders, receipt of required antitrust approvals, the accuracy of the representations and warranties of the parties and compliance by the parties with their respective obligations under the merger agreement. The obligation of Parent and Merger Sub to consummate the merger is also subject to the absence of any change, event or occurrence, from the date of the merger agreement until the effective time of the merger, that has had or is reasonably likely to have a Company material adverse effect, as described under “The Merger Agreement — Terms of the Merger Agreement — Representations and Warranties” beginning on page [ • ].
 
Termination (Page [ • ])
 
We and Parent may, by mutual written consent, terminate the merger agreement and abandon the merger at any time prior to the effective time of the merger, whether before or after the adoption of the merger agreement by our shareholders.
 
The merger agreement may be terminated and the merger abandoned at any time prior to the effective time of the merger, whether before or after the adoption of the merger agreement by our shareholders:
 
  •  by either Parent or the Company:
 
  •  if the merger shall not have been consummated on or before March 2, 2011; provided that the right to terminate the merger agreement on such date shall not be available to Parent or the Company if (x) the offer has closed, or (y) the failure of Parent or the Company, as applicable, to perform any of its obligations under the merger agreement has been a principal cause of the failure of the merger to be consummated on or before such date;
 
  •  if any temporary restraining order, preliminary or permanent injunction, law or other judgment is in effect enjoining or otherwise prohibiting the consummation of the merger and such restraint becomes final and non-appealable; provided that the right to terminate in this circumstance shall not be available to Parent or the Company unless Parent or the Company, as applicable, shall have complied with its obligations under the merger agreement to prevent, oppose or remove such restraint; or
 
  •  the approval of the merger agreement by an affirmative vote of holders of a majority of the outstanding shares of Company common stock shall not have been obtained at the duly convened shareholders’ meeting or at any adjournment or postponement thereof.
 
  •  by Parent,
 
  •  if there is any breach or inaccuracy in any of the Company’s representations or warranties or the Company has failed to perform any of its covenants or agreements, which inaccuracy, breach or failure to perform (i) would give rise to the failure of a condition to the merger regarding the


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  accuracy of the Company’s representations and warranties or the Company’s compliance with its covenants or agreements, and (ii) (A) is not capable of being cured prior to March 2, 2011 or (B) is not cured within fifteen calendar days following Parent’s delivery of written notice to the Company of such breach; provided that Parent shall not have the right to terminate the merger agreement in this circumstance if (x) Parent or Merger Sub is then in material breach of any of its representations, warranties, covenants or agreements or (y) the offer has closed;
 
  •  the Company board of directors has made an adverse recommendation change or delivered a notice to Parent of its intent to effect an adverse recommendation change, provided that Parent shall have given the Company the right to enter into an acquisition agreement and such right has been available to the Company for no less than twenty-four hours,
 
  •  the Company failed to include in the proxy statement the board of directors’ recommendation to adopt the merger agreement and a statement of the findings and conclusions of the board of directors described in the board resolutions adopted in connection with the merger agreement,
 
  •  following the disclosure or announcement of a takeover proposal (other than a tender or exchange offer described below), the Company’s board of directors shall have failed to reaffirm publicly its recommendation to adopt the merger agreement within five business days after Parent requests in writing that such recommendation under such circumstances be reaffirmed publicly, or
 
  •  a tender or exchange offer relating to securities of the Company shall have been commenced and the Company shall not have announced, within ten business days after the commencement of such tender or exchange offer, a statement disclosing that the Company recommends rejection of such tender or exchange offer; provided that Parent shall not have the right to terminate the merger agreement in this circumstance if the approval of the merger by the shareholders of the Company shall have been obtained;
 
  •  by the Company, if
 
  •  there is any breach or inaccuracy in any of Parent’s or Merger Sub’s representations or warranties set forth in the merger agreement or Parent or Merger Sub has failed to perform any of its covenants or agreements set forth in the merger agreement, which inaccuracy, breach or failure to perform (i) would (x) give rise to the failure of certain conditions or, (y) reasonably be expected to, individually or in the aggregate, have a parent material adverse effect, and (ii) (A) is not capable of being cured prior to March 2, 2011 or (B) is not cured within fifteen calendar days following the Company’s delivery of written notice to Parent of such breach; provided that the Company shall not have the right to terminate the merger agreement in this circumstance if (x) the Company is then in material breach of any of its representations, warranties, covenants or agreements thereunder or (y) the offer has closed;
 
  •  in order to accept a superior proposal and enter into the acquisition agreement providing for such superior proposal immediately following or concurrently with such termination; provided, however, that payment of the termination fee by the Company to the parent, which we refer to as the Company Termination Fee (as described below), shall be a condition to the termination of the merger agreement by the Company in this circumstance; or
 
  •  (i)(A) all the conditions of the offer shall have been satisfied or waived as of the expiration of the offer, and (B) Parent shall have failed to consummate the offer promptly thereafter in accordance with the merger agreement, or (ii)(A) all the offer conditions (other than the financing proceeds condition) shall have been satisfied or waived as of the expiration of the offer, and (B) Parent shall have failed to consummate the offer in accordance with the merger agreement, in the case of both clause (i) and (ii), the Company shall have given Parent written notice at least one business day prior to such termination stating the Company’s intention to terminate the merger agreement in this circumstance and the basis for such termination; provided, however, that the termination right set forth in clause (ii) shall only be available from and after the close of business on November 18, 2010; or


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  •  after the close of business on November 18, 2010, if (i) all the conditions that are applicable to each party’s obligation to consummate the merger (other than the purchase of shares of Company common stock to the extent the offer has been terminated, which we refer to as the Offer Termination) and the conditions to the obligations of Parent and Merger Sub to consummate the merger have been satisfied (other than those conditions that by their terms are to be satisfied by actions taken at the closing of the merger, each of which is capable of being satisfied at the merger closing), (ii) Parent shall have failed to consummate the merger by the time required under the merger agreement, (iii) the Company has notified Parent in writing that it stands and will stand ready, willing and able to consummate the merger at such time, and (iv) the Company shall have given Parent written notice at least one business day prior to such termination stating the Company’s intention to terminate the merger agreement in this circumstance and the basis for such termination.
 
Termination Fees (Page [ • ])
 
If the merger agreement is terminated in certain circumstances described under “The Merger Agreement — Terms of the Merger Agreement — Termination Fees” beginning on page [ • ], the terminating party may be required to pay a termination fee.
 
  •  If the Company terminates the merger agreement in order to accept a superior proposal, the Company is required to pay a termination fee of $50 million during the go-shop period or $95 million after the go-shop period. We refer to these fees as the Company Termination Fee.
 
  •  If Parent fails to effect the closing of the merger under certain circumstances, Parent may be obligated to pay the Company the Parent Termination Fee of $175 million. 3G has agreed to guarantee the obligation of Parent to pay the Parent Termination Fee pursuant to the limited guaranty.
 
  •  If Parent terminates the merger agreement due to a breach by the Company of any of its representations or warranties or the failure by the Company to perform any of its covenants or agreements set forth in the merger agreement, which breach or failure to perform is the principal factor in the failure of the merger to be consummated, then the Company shall pay a termination fee to 3G in an amount equal to $175 million.
 
Limitations of Liability (Page [ • ])
 
The maximum aggregate liability of 3G, Parent and Merger Sub (including the debt and equity financing) for damages or otherwise is limited to the amount of the Parent Termination Fee of $175 million.
 
Our maximum aggregate liability for damages or otherwise in connection with the merger agreement or any of the transactions contemplated by the merger agreement is limited to $175 million.
 
The parties are entitled to equitable relief to prevent breaches of the merger agreement and to enforce specifically the terms of the merger agreement in addition to any other remedy to which they are entitled at law or in equity. Neither Parent and Merger Sub or the Company will be entitled to receive both the fee payable by the other party and a grant of specific performance. Our right to seek specific performance of Parent’s and Merger Sub’s obligations to cause the equity financing for the merger to be funded is subject to the satisfaction of the following conditions:
 
  •  the adoption of the merger agreement by our shareholders, receipt of required antitrust approvals, no injunctions or restraints, the accuracy of our representations and warranties in the merger agreement, subject to certain materiality qualifications, the performance of our obligations under the merger agreement in all material respects, no material adverse effect, and our solvency;
 
  •  the funding of the debt financing (or alternative debt financing); and
 
  •  our confirmation that if the debt and equity financings were funded, to take such actions that are within our control to cause the closing of the merger to occur.


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Our right to seek specific performance of Parent’s and Merger Sub’s obligations to cause a bridge take-down is subject to the adoption of the merger agreement by our shareholders, receipt of required antitrust approvals, no injunctions or restraints, the accuracy of our representations and warranties in the merger agreement, subject to certain materiality qualifications, the performance of our obligations under the merger agreement in all material respects, no material adverse effect, and our solvency.
 
• Market Price of Company Common Stock (Page [ • ])
 
The per share merger consideration of $24.00 per share of Company common stock:
 
  •  represented a premium of 43.1% over the closing price of the Company common stock on August 30, 2010;
 
  •  represented a premium of 41.6%, 36.7% and 27.0% over the one, three and six month, respectively, volume-weighted average closing prices of the Company common stock prior to August 30, 2010; and
 
  •  exceeded, by 8.8%, the 52-week high prior to August 30, 2010.
 
• Appraisal Rights (Page [ • ])
 
Shareholders are entitled to appraisal rights under the Delaware General Corporation Law, or the DGCL, in connection with the merger, provided that shareholders meet all of the conditions set forth in Section 262 of the DGCL. This means that you are entitled to have the fair value of your shares of Company common stock determined by the Delaware Court of Chancery and to receive payment based on that valuation. The ultimate amount you receive in an appraisal proceeding may be less than, equal to or more than the amount you would have received under the merger agreement.
 
To exercise your appraisal rights, you must submit a written demand for appraisal to the Company before the vote is taken on the merger agreement and you must not submit a proxy or otherwise vote in favor of the proposal to adopt the merger agreement. Your failure to follow exactly the procedures specified under the DGCL will result in the loss of your appraisal rights. See “Appraisal Rights” beginning on page [ • ] and the text of the Delaware appraisal rights statute reproduced in its entirety as Annex D to this proxy statement. If you hold your shares of Company common stock through a bank, brokerage firm or other nominee and you wish to exercise appraisal rights, you should consult with your bank, brokerage firm or other nominee to determine the appropriate procedures for the making of a demand for appraisal by such bank, brokerage firm or nominee. In view of the complexity of the DGCL, shareholders who may wish to pursue appraisal rights should consult their legal and financial advisors promptly.
 
• Delisting and Deregistration of Company Common Stock (Page [ • ])
 
If the merger is completed, Company common stock will be delisted from the New York Stock Exchange, or the NYSE, and deregistered under the Securities Exchange Act of 1934, as amended, or the Exchange Act. As such, we would no longer file periodic reports with the SEC on account of Company common stock.


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QUESTIONS AND ANSWERS ABOUT THE SPECIAL MEETING AND THE MERGER
 
The following questions and answers are intended to address briefly some commonly asked questions regarding the merger, the merger agreement and the special meeting. These questions and answers may not address all questions that may be important to you as a shareholder of the Company. Please refer to the “Summary” and the more detailed information contained elsewhere in this proxy statement, the annexes to this proxy statement and the documents referred to in this proxy statement, which you should read carefully and in their entirety. You may obtain the information incorporated by reference in this proxy statement without charge by following the instructions under “Where You Can Find More Information” beginning on page [ • ].
 
Q. What is the proposed transaction and what effects will it have on the Company?
 
A. The proposed transaction is the acquisition of the Company by Parent pursuant to the merger agreement. If the proposal to adopt the merger agreement is approved by our shareholders and the other closing conditions under the merger agreement have been satisfied or waived, Merger Sub will merge with and into the Company. Upon completion of the merger, Merger Sub will cease to exist and the Company will continue as the surviving corporation. As a result of the merger, the Company will become a subsidiary of Parent and will no longer be a publicly held corporation, and you will no longer have any interest in our future earnings or growth. In addition, the Company common stock will be delisted from the NYSE and deregistered under the Exchange Act, and we will no longer file periodic reports with the SEC on account of Company common stock.
 
Q: Did Merger Sub commence a tender offer for shares of Company common stock?
 
A: Yes. On September 16, 2010, Merger Sub commenced the offer for all of the outstanding shares of Company common stock at a price of $24.00 per share, net to the seller in cash without interest. The offer was commenced pursuant to the merger agreement.
 
Under the terms of the merger agreement, the parties agreed to complete the merger whether or not the offer is completed. If the offer is not completed, the parties agreed that the merger could only be completed after the receipt of shareholder approval of the adoption of the merger agreement that will be considered at the special meeting.
 
We are soliciting proxies for the special meeting to obtain shareholder approval of the adoption of the merger agreement to be able to consummate the merger regardless of the outcome of the offer. Regardless of whether you tendered your shares of Company common stock in the offer, you may nevertheless vote your shares at the special meeting because you were a shareholder as of the record date of the meeting.
 
Q. What will I receive if the merger is completed?
 
A. Upon completion of the merger, you will be entitled to receive the per share merger consideration of $24.00 in cash, without interest, less any applicable withholding taxes, for each share of Company common stock that you own, unless you have properly exercised and not withdrawn your appraisal rights under the DGCL with respect to such shares. For example, if you own 100 shares of Company common stock, you will receive $2,400 in cash in exchange for your shares of Company common stock, less any applicable withholding taxes. You will not own any shares of the capital stock in the surviving corporation.
 
Q. When do you expect the merger to be completed?
 
A. We are working towards completing the merger as soon as possible. If the merger is approved at the shareholders meeting then, assuming timely satisfaction of the other necessary closing conditions, we anticipate that the merger will be completed promptly thereafter.
 
Q. What happens if the merger is not completed?
 
A. If the merger agreement is not adopted by the shareholders of the Company or if the merger is not completed for any other reason, the shareholders of the Company will not receive any payment for their shares of Company common stock. Instead, the Company will remain an independent public company, and


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Company common stock will continue to be listed and traded on the NYSE. Under specified circumstances, the Company may be required to pay to Parent, or may be entitled to receive from Parent, a fee with respect to the termination of the merger agreement, as described under “The Merger Agreement — Terms of the Merger Agreement — Termination Fees” beginning on page [ • ].
 
Q. Is the merger expected to be taxable to me?
 
A. Yes. The exchange of shares of Company common stock for cash in the merger will generally be a taxable transaction to United States holders for United States federal income tax purposes. In general, a United States holder whose shares of Company common stock are converted into the right to receive cash in the merger will recognize gain or loss for United States federal income tax purposes in an amount equal to the difference, if any, between the amount of cash received with respect to such shares (determined before the deduction of any applicable withholding taxes) and its adjusted tax basis in such shares. Backup withholding may also apply to the cash payments made pursuant to the merger unless the United States holder or other payee provides a taxpayer identification number, certifies that such number is correct and otherwise complies with the backup withholding rules.
 
Payments made to a non-United States holder with respect to shares of Company common stock exchanged for cash pursuant to the merger will generally be exempt from United States federal income tax. A non-United States holder may, however, be subject to backup withholding with respect to the cash payments made pursuant to the merger, unless the holder certifies that it is not a United States person or otherwise establishes a valid exemption from backup withholding tax.
 
You should read “The Merger — Material United States Federal Income Tax Consequences of the Merger” beginning on page [ • ] for definitions of “United States Holder” and “Non-United States Holder,” and for a more detailed discussion of the United States federal income tax consequences of the merger. You should also consult your tax advisor with respect to the specific tax consequences to you in connection with the merger in light of your own particular circumstances, including federal estate, gift and other non-income tax consequences, and tax consequences under state, local or foreign tax laws.
 
Q: Do any of the Company’s directors or officers have interests in the merger that may differ from or be in addition to my interests as a shareholder?
 
A: Yes. In considering the recommendation of the board of directors with respect to the proposal to adopt the merger agreement, you should be aware that our directors and executive officers have interests in the merger that are different from, or in addition to, the interests of our shareholders generally. The board of directors was aware of and considered these interests, among other matters, in evaluating and negotiating the merger agreement and the merger, and in recommending that the merger agreement be adopted by the shareholders of the Company. See “The Merger — Interests of Certain Persons in the Merger” beginning on page [ • ].
 
Q. Why am I receiving this proxy statement and proxy card or voting instruction form?
 
A. You are receiving this proxy statement and proxy card or voting instruction form because you own shares of Company common stock. This proxy statement describes matters on which we urge you to vote and is intended to assist you in deciding how to vote your shares of Company common stock with respect to such matters.
 
Q. When and where is the special meeting?
 
A. The special meeting of shareholders of the Company will be held on [ • ], 2010 at [ • ] a.m. Eastern Standard Time, at [ • ]. This proxy statement for the special meeting will be mailed to shareholders on or about [ • ], 2010.
 
Q. Who may attend the special meeting?
 
A. All shareholders of record at the close of business on [ • ], 2010, or the record date, or their duly appointed proxies, and our invited guests may attend the special meeting. Seating is limited and admission


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is on a first-come, first-served basis. Please be prepared to present valid photo identification for admission to the special meeting.
 
If you hold shares of Company common stock in “street name” (that is, in a brokerage account or through a bank or other nominee) and you plan to vote in person at the special meeting, you will need to bring a valid photo identification and a copy of a statement reflecting your share ownership as of the record date, or a legal proxy from your broker or nominee.
 
Shareholders of record will be verified against an official list available in the registration area at the meeting. We reserve the right to deny admittance to anyone who cannot adequately show proof of share ownership as of the record date.
 
Q. When will the shareholders’ list be available for examination?
 
A. A complete list of the shareholders of record as of the record date will be available for examination by shareholders of record beginning on [ • ], 2010 at the Company’s headquarters and will continue to be available through and during the meeting at [ • ].
 
Q. Who may vote?
 
A. You may vote if you owned Company common stock as of the close of business on the record date. Each share of Company common stock is entitled to one vote. As of the record date, there were [          ] shares of Company common stock outstanding and entitled to vote at the special meeting.
 
Q. What will I be voting on?
 
A. You will be voting on the following:
 
• The adoption of the merger agreement, which provides for the acquisition of the Company by Parent; and
 
• The approval to adjourn the special meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes at the time of the special meeting to approve the proposal to adopt the merger agreement.
 
Q. What are the voting recommendations of the Board of Directors?
 
A. The board of directors recommends that you vote your shares of Company common stock “FOR” the proposal to adopt the merger agreement and “FOR” the proposal to adjourn the special meeting, if necessary or appropriate, to solicit additional proxies.
 
Q. How do I vote?
 
A. If you are a shareholder of record (that is, if your shares of Company common stock are registered in your name with The Bank of New York Mellon, our transfer agent, there are four ways to vote:
 
Telephone Voting:  You may vote by calling the toll-free telephone number indicated on your proxy card. Please follow the voice prompts that allow you to vote your shares of Company common stock and confirm that your instructions have been properly recorded.
 
Internet Voting:  You may vote by logging on to the website indicated on your proxy card. Please follow the website prompts that allow you to vote your shares of Company common stock and confirm that your instructions have been properly recorded.
 
Return Your Proxy Card By Mail:  You may vote by completing, signing and returning the proxy card in the postage-paid envelope provided with this proxy statement. The proxy holders will vote your shares of Company common stock according to your directions. If you sign and return your proxy card without specifying choices, your shares of Company common stock will be voted by the persons named in the proxy in accordance with the recommendations of the board of directors as set forth in this proxy statement.
 
Vote at the Meeting:  You may cast your vote in person at the special meeting. Written ballots will be passed out to shareholders or legal proxies who want to vote in person at the meeting.


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Telephone and Internet voting for shareholders of record will be available 24 hours a day and will close at 11:59 p.m. Eastern Standard Time on [ • ], 2010. Telephone and Internet voting is convenient, provides postage and mailing cost savings and is recorded immediately, minimizing the risk that postal delays may cause votes to arrive late and therefore not be counted.
 
Even if you plan to attend the special meeting, you are encouraged to vote your shares of Company common stock by proxy. You may still vote your shares of Company common stock in person at the meeting even if you have previously voted by proxy. If you are present at the meeting and desire to vote in person, your previous vote by proxy will not be counted.
 
Q. What if I hold my shares of Company common stock in “street name”?
 
A. You should follow the voting directions provided by your bank, brokerage firm or other nominee. You may complete and mail a voting instruction card to your bank, brokerage firm or other nominee or, in most cases, submit voting instructions by telephone or the Internet to your bank, brokerage firm or other nominee. If you provide specific voting instructions by mail, telephone or the Internet, your bank, brokerage firm or other nominee will vote your shares of Company common stock as you have directed. Please note that if you wish to vote in person at the special meeting, you must provide a legal proxy from your bank, brokerage firm or other nominee at the special meeting.
 
If you do not instruct your bank, brokerage firm or other nominee to vote your shares of Company common stock, your shares will not be voted and the effect will be the same as a vote “AGAINST” the proposal to adopt the merger agreement, and your shares of Company common stock will not have an effect on the proposal to adjourn the special meeting.
 
Q. Can I change my mind after I vote?
 
A. Yes. If you are a shareholder of record, you may change your vote or revoke your proxy at any time before it is voted at the special meeting by:
 
• submitting a new proxy by telephone or via the Internet after the date of the earlier voted proxy;
 
• signing another proxy card with a later date and returning it to us prior to the special meeting; or
 
• attending the special meeting and voting in person.
 
If you hold your shares of Company common stock in street name, you may submit new voting instructions by contacting your bank, brokerage firm or other nominee. You may also vote in person at the special meeting if you obtain a legal proxy from your bank, brokerage firm or other nominee.
 
Q. Who will count the votes?
 
A. A representative of Mediant Communications, Inc. will count the votes and will serve as the independent inspector of elections.
 
Q. What does it mean if I receive more than one proxy card?
 
A. It means that you have multiple accounts with brokers or our transfer agent. Please vote all of these shares. We encourage you to register all of your shares of Company common stock in the same name and address. You may do this by contacting your broker or our transfer agent. Our transfer agent may be reached at 1-800-524-4458 or at the following address:
 
The Bank of New York Mellon
Shareowner Services
Church Street Station
P.O. Box 11258
New York, NY 10286-1258
 
Q. Will my shares of Company common stock be voted if I do not provide my proxy?


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A. If you are the shareholder of record and you do not vote or provide a proxy, your shares of Company common stock will not be voted.
 
If your shares of Company common stock are held in street name, they may not be voted if you do not provide the bank, brokerage firm or other nominee with voting instructions. Currently, banks, brokerage firms or other nominees have the authority under the NYSE rules to vote shares of Company common stock for which their customers do not provide voting instructions on certain “routine” matters.
 
However, banks, brokerage firms or other nominees are precluded from exercising their voting discretion with respect to approving non-routine matters, such as the proposal to adopt the merger agreement and the proposal to approve the adjournment of the special meeting, if necessary or appropriate, and, as a result, absent specific instructions from the beneficial owner of such shares of Company common stock, banks, brokerage firms or other nominees are not empowered to vote those shares of Company common stock on non-routine matters, which we refer to generally as broker non-votes.
 
Q. May shareholders ask questions?
 
A. Yes. Our representatives will answer shareholders’ questions of general interest following the meeting consistent with the rules distributed at the meeting.
 
Q. How many votes must be present to hold the meeting?
 
A. A majority of the outstanding shares of Company common stock entitled to vote at the special meeting, represented in person or by proxy, will constitute a quorum. Shares of Company common stock represented in person or by proxy, including abstentions and broker non-votes, will be counted for purposes of determining whether a quorum is present.
 
Q. What vote is required to approve each proposal?
 
A. The adoption of the merger agreement requires the affirmative vote of the holders of a majority of the outstanding shares of Company common stock entitled to vote thereon. Because the affirmative vote required to approve the proposal to adopt the merger agreement is based upon the total number of outstanding shares of Company common stock, if you fail to submit a proxy or vote in person at the special meeting, or abstain, or you do not provide your bank, brokerage firm or other nominee with voting instructions, as applicable, this will have the same effect as a vote “AGAINST” the proposal to adopt the merger agreement.
 
Approval of the proposal to adjourn the special meeting, if necessary or appropriate, for the purpose of soliciting additional proxies requires the affirmative vote of the holders of a majority of the shares of Company common stock present in person or represented by proxy and entitled to vote on the matter at the special meeting. Abstaining will have the same effect as a vote “AGAINST” the proposal to adjourn the special meeting, if necessary or appropriate. If you fail to submit a proxy or to vote in person at the special meeting or if your shares of Company common stock are held through a bank, brokerage firm or other nominee and you do not instruct your bank, brokerage firm or other nominee on how to vote your shares of Company common stock, your shares of Company common stock will not be voted, but this will not have an effect on the proposal to adjourn the special meeting.
 
Q. How are votes counted?
 
A. For the proposal to adopt the merger agreement, you may vote “FOR,” “AGAINST” or “ABSTAIN”. Abstentions and broker non-votes will have the same effect as votes “AGAINST” the proposal to adopt the merger agreement.
 
For the proposal to adjourn the special meeting, if necessary or appropriate, to solicit additional proxies, you may vote “FOR,” “AGAINST” or “ABSTAIN”. Abstentions will have the same effect as if you voted “AGAINST” the proposal, but broker non-votes will not have an effect on the proposal.
 
Q. Who will pay for this proxy solicitation?


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A. We will bear the cost of preparing, assembling and mailing the proxy material and of reimbursing brokers, nominees, fiduciaries and other custodians for out-of-pocket and clerical expenses of transmitting copies of the proxy material to the beneficial owners of shares of Company common stock. A few of our officers and employees may participate in the solicitation of proxies without additional compensation.
 
Q. Will any other matters be voted on at the special meeting?
 
A. As of the date of this proxy statement, our management knows of no other matter that will be presented for consideration at the special meeting other than those matters discussed in this proxy statement.
 
Q. What is the Company’s website address?
 
A. Our website address is www.bk.com. We make this proxy statement, our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act available on our website in the Investor Relations-SEC Filings section, as soon as reasonably practicable after electronically filing such material with the SEC.
 
This information is also available free of charge at www.sec.gov, an Internet site maintained by the SEC that contains reports, proxy and information statements, and other information regarding issuers that is filed electronically with the SEC. Shareholders may also read and copy any reports, statements and other information filed by us with the SEC at the SEC public reference room at 100 F Street, N.E., Room 1580, Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 or visit the SEC’s website for further information on its public reference room. In addition, shareholders may obtain free copies of the documents filed with the SEC by contacting our Investor Relations department at 305-378-7696 or by sending a written request to Burger King Holdings, Inc., Investor Relations, 5505 Blue Lagoon Drive, Miami, Florida 33126.
 
The references to our website address and the SEC’s website address do not constitute incorporation by reference of the information contained in these websites and should not be considered part of this document.
 
Our SEC filings are available in print to any shareholder who requests a copy at the phone number or address listed above.
 
Q. What happens if I sell my shares of Company common stock before the special meeting?
 
A. The record date for shareholders entitled to vote at the special meeting is earlier than both the date of the special meeting and the consummation of the merger. If you transfer your shares of Company common stock after the record date but before the special meeting, unless special arrangements (such as provision of a proxy) are made between you and the person to whom you transfer your shares and each of you notifies the Company in writing of such special arrangements, you will retain your right to vote such shares at the special meeting but will transfer the right to receive the per share merger consideration to the person to whom you transfer your shares.
 
Q. What do I need to do now?
 
A. Even if you plan to attend the special meeting, after carefully reading and considering the information contained in this proxy statement, please vote promptly to ensure that your shares are represented at the special meeting. If you hold your shares of Company common stock in your own name as the shareholder of record, please vote your shares of Company common stock by (i) completing, signing, dating and returning the enclosed proxy card in the accompanying prepaid reply envelope, (ii) using the telephone number printed on your proxy card or (iii) using the Internet voting instructions printed on your proxy card. If you decide to attend the special meeting and vote in person, your vote by ballot will revoke any proxy previously submitted. If you are a beneficial owner, please refer to the instructions provided by your bank, brokerage firm or other nominee to see which of the above choices are available to you.
 
Q. Should I send in my stock certificates now?


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A. No. You will be sent a letter of transmittal promptly after the completion of the merger, describing how you may exchange your shares of Company common stock for the per share merger consideration. If your shares of Company common stock are held in “street name” by your bank, brokerage firm or other nominee, you will receive instructions from your bank, brokerage firm or other nominee as to how to effect the surrender of your “street name” shares of Company common stock in exchange for the per share merger consideration. Please do NOT return your stock certificate(s) with your proxy.
 
Q. Am I entitled to exercise appraisal rights under the DGCL instead of receiving the per share merger consideration for my shares of Company common stock?
 
A. Yes. As a holder of Company common stock, you are entitled to exercise appraisal rights under the DGCL in connection with the merger if you take certain actions and meet certain conditions. See “Appraisal Rights” beginning on page [ • ].
 
Q. Who can help answer my other questions?
 
A. If you have additional questions about the merger, need assistance in submitting your proxy or voting your shares of Company common stock, or need additional copies of the proxy statement or the enclosed proxy card, please call [ • ] toll-free at [ • ].


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CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING INFORMATION
 
This proxy statement, and the documents to which we refer you in this proxy statement, as well as information included in oral statements or other written statements made or to be made by us, contain statements that, in our opinion, may constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. The words such as “believe,” “expect,” “anticipate,” “intend,” “plan,” “foresee,” “likely,” “project,” “estimate,” “will,” “may,” “should,” “future,” “predicts,” “potential,” “continue” and similar expressions identify these forward-looking statements, which appear in a number of places in this proxy statement (and the documents to which we refer you in this proxy statement) and include, but are not limited to, all statements relating directly or indirectly to the timing or likelihood of completing the merger to which this proxy statement relates, plans for future growth and other business development activities as well as capital expenditures, financing sources and the effects of regulation and competition and all other statements regarding our intent, plans, beliefs or expectations or those of our directors or officers. You are cautioned that such forward-looking statements are not assurances for future performance or events and involve risks and uncertainties that could cause actual results and developments to differ materially from those covered in such forward-looking statements. These risks and uncertainties include, but are not limited to, the risks detailed in our filings with the SEC, including our most recent filings on Forms 10-K and 10-Q, factors and matters contained or incorporated by reference in this document, and the following factors:
 
  •  the occurrence of any event, change or other circumstances that could give rise to the termination of the merger agreement, including a termination under circumstances that could require us to pay a termination fee;
 
  •  Parent’s failure to obtain the necessary equity and debt financing set forth in commitment letters received in connection with the merger or the failure of that financing to be sufficient to complete the merger and the transactions contemplated thereby;
 
  •  the inability to complete the merger due to the failure to obtain shareholder approval or the failure to satisfy other conditions to completion of the merger, including required regulatory approvals;
 
  •  the failure of the merger to close for any other reason;
 
  •  risks that the proposed transaction disrupts current plans and operations and the potential difficulties in employee retention as a result of the merger;
 
  •  the outcome of any legal proceedings that have been or may be instituted against the Company and/or others relating to the merger agreement;
 
  •  diversion of management’s attention from ongoing business concerns;
 
  •  the effect of the announcement of the merger on our business relationships, operating results and business generally; and
 
  •  the amount of the costs, fees, expenses and charges related to the merger.
 
Consequently, all of the forward-looking statements we make in this document are qualified by the information contained or incorporated by reference herein, including, but not limited to (a) the information contained under this heading and (b) the information contained under the headings “Business” and “Risk Factors” and information in our consolidated financial statements and notes thereto included in our most recent filings on Forms 10-K and 10-Q (see “Where You Can Find More Information” beginning on page [ • ]). We are under no obligation to publicly release any revision to any forward-looking statement contained or incorporated herein to reflect any future events or occurrences.
 
You should carefully consider the cautionary statements contained or referred to in this section in connection with any subsequent written or oral forward-looking statements that may be issued by us or persons acting on our behalf.


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PARTIES TO THE MERGER
 
The Company
 
Burger King Holdings, Inc.
5505 Blue Lagoon Drive
Miami, Florida 33126
(305) 378-7696
 
The Company is a Delaware corporation formed on July 23, 2002, and its headquarters are located in Miami, Florida. Our restaurant system includes restaurants owned by the Company and by franchisees. We are the world’s second largest fast food hamburger restaurant chain as measured by the total number of restaurants and system-wide sales. For more information about the Company, please visit our website at http://www.bk.com. Our website address is provided as an inactive textual reference only. The information contained on our website is not incorporated into, and does not form a part of, this proxy statement or any other report or document on file with or furnished to the SEC. See also “Where You Can Find More Information” beginning on page [ • ]. Company common stock is publicly traded on the NYSE under the symbol “BKC”.
 
Parent
 
Blue Acquisition Holding Corporation
c/o 3G Capital Partners Ltd.
600 Third Avenue, 37th Floor
New York, New York 10016
(212) 893-6727
 
Blue Acquisition Holding Corporation, or Parent, is a Delaware corporation which was formed by an affiliate of, and is controlled by, 3G Special Situations Fund II, L.P, a Cayman exempted limited partnership, which we sometimes refer to as 3G, solely for the purpose of entering into the merger agreement and completing the transactions contemplated by the merger agreement and the related financing transactions. Parent has not engaged in any business except for activities incidental to its formation and as contemplated by the merger agreement. Upon completion of the merger, the Company will be a direct wholly-owned subsidiary of Parent.
 
3G is a private equity fund principally engaged in the business of making investments in securities.
 
Merger Sub
 
Blue Acquisition Sub, Inc.
c/o 3G Capital Partners Ltd.
600 Third Avenue, 37th Floor
New York, New York 10016
(212) 893-6727
 
Blue Acquisition Sub, Inc., or Merger Sub, is a Delaware corporation that was formed by Parent solely for the purpose of facilitating the acquisition of the Company. Merger Sub is a wholly-owned subsidiary of Parent and has not engaged in any business except for activities incidental to its formation and as contemplated by the merger agreement and the related financing transactions. Upon the completion of the merger, Merger Sub will cease to exist and the Company will continue as the surviving corporation.


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THE SPECIAL MEETING
 
Time, Place and Purpose of the Special Meeting
 
This proxy statement is being furnished to our shareholders as part of the solicitation of proxies by the board of directors for use at the special meeting to be held on [ • ], 2010, starting at [ • ] a.m., Eastern Standard Time, at [ • ], or at any postponement or adjournment thereof. At the special meeting, holders of Company common stock will be asked to approve the proposal to adopt the merger agreement and to approve the proposal to adjourn the special meeting, if necessary or appropriate, for the purpose of soliciting additional proxies if there are insufficient votes at the time of the special meeting to approve the proposal to adopt the merger agreement.
 
Our shareholders must approve the proposal to adopt the merger agreement in order for the merger to occur. If our shareholders fail to approve the proposal to adopt the merger agreement, the merger will not occur. A copy of the merger agreement is attached as Annex A to this proxy statement, which we encourage you to read carefully in its entirety.
 
Record Date and Quorum
 
We have fixed the close of business on [ • ], 2010 as the record date for the special meeting, and only holders of record of Company common stock on the record date are entitled to vote at the special meeting. You are entitled to receive notice of, and to vote at, the special meeting if you owned shares of Company common stock at the close of business on the record date. On the record date, there were [ • ] shares of Company common stock outstanding and entitled to vote. Each share of Company common stock entitles its holder to one vote on all matters properly coming before the special meeting.
 
A majority of the shares of Company common stock outstanding at the close of business on the record date and entitled to vote, present in person or represented by proxy, at the special meeting constitutes a quorum for the purposes of the special meeting. Shares of Company common stock represented at the special meeting but not voted, including shares of Company common stock for which a shareholder directs an “abstention” from voting, as well as broker non-votes, will be counted for purposes of establishing a quorum. A quorum is necessary to transact business at the special meeting. Once a share of Company common stock is represented at the special meeting, it will be counted for the purpose of determining a quorum at the special meeting and any adjournment of the special meeting. However, if a new record date is set for the adjourned special meeting, then a new quorum will have to be established. In the event that a quorum is not present at the special meeting, it is expected that the special meeting will be adjourned or postponed.
 
Attendance
 
Only shareholders of record or their duly authorized proxies have the right to attend the special meeting. To gain admittance, you must present a valid photo identification, such as a driver’s license or passport. If your shares of Company common stock are held through a bank, brokerage firm or other nominee, please bring to the special meeting a copy of your brokerage statement evidencing your beneficial ownership of Company common stock and a valid photo identification. If you are the representative of a corporate or institutional shareholder, you must present valid photo identification along with proof that you are the representative of such shareholder. Please note that cameras, recording devices and other electronic devices will not be permitted at the special meeting.
 
Vote Required
 
Approval of the proposal to adopt the merger agreement requires the affirmative vote of the holders of a majority of the outstanding shares of Company common stock entitled to vote thereon. For the proposal to adopt the merger agreement, you may vote FOR, AGAINST or ABSTAIN. Abstentions will not be counted as votes cast in favor of the proposal to adopt the merger agreement but will count for the purpose of determining whether a quorum is present. If you fail to submit a proxy or to vote in person at the special meeting, or abstain, it will have the same effect as a vote “AGAINST” the proposal to adopt the merger agreement.


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If your shares of Company common stock are registered directly in your name with our transfer agent, The Bank of New York Mellon, you are considered, with respect to those shares of Company common stock, the “shareholder of record.” This proxy statement and proxy card have been sent directly to you by the Company.
 
If your shares of Company common stock are held through a bank, brokerage firm or other nominee, you are considered the “beneficial owner” of shares of Company common stock held in street name. In that case, this proxy statement has been forwarded to you by your bank, brokerage firm or other nominee who is considered, with respect to those shares of Company common stock, the shareholder of record. As the beneficial owner, you have the right to direct your bank, brokerage firm or other nominee how to vote your shares by following their instructions for voting.
 
Under the rules of the NYSE, banks, brokerage firms or other nominees who hold shares in street name for customers have the authority to vote on “routine” proposals when they have not received instructions from beneficial owners. However, banks, brokerage firms or other nominees are precluded from exercising their voting discretion with respect to approving non-routine matters, such as the proposal to adopt the merger agreement, and, as a result, absent specific instructions from the beneficial owner of such shares of Company common stock, banks, brokerage firms or other nominees are not empowered to vote those shares of Company common stock on non-routine matters, which we refer to generally as broker non-votes. These broker non-votes will be counted for purposes of determining a quorum, but will have the same effect as a vote “AGAINST” the proposal to adopt the merger agreement.
 
The proposal to adjourn the special meeting, if necessary or appropriate, to solicit additional proxies requires the affirmative vote of the holders of a majority of the shares of Company common stock present in person or represented by proxy and entitled to vote on the matter at the special meeting. For the proposal to adjourn the special meeting, if necessary or appropriate, you may vote FOR, AGAINST or ABSTAIN. For purposes of this proposal, if your shares of Company common stock are present at the special meeting but are not voted on this proposal, or if you have given a proxy and abstained on this proposal, this will have the same effect as if you voted “AGAINST” the proposal. If you fail to submit a proxy or vote in person at the special meeting, or there are broker non-votes on the issue, as applicable, the shares of Company common stock not voted, will not be counted in respect of, and will not have an effect on, the proposal to adjourn the special meeting.
 
If you are a shareholder of record, you may have your shares of Company common stock voted on matters presented at the special meeting in any of the following ways:
 
Telephone Voting:  You may vote by calling the toll-free telephone number indicated on your proxy card. Please follow the voice prompts that allow you to vote your shares and confirm that your instructions have been properly recorded.
 
Internet Voting:  You may vote by logging on to the website indicated on your proxy card. Please follow the website prompts that allow you to vote your shares of Company common stock and confirm that your instructions have been properly recorded.
 
Return Your Proxy Card By Mail:  You may vote by completing, signing and returning the proxy card in the postage-paid envelope provided with this proxy statement. The proxy holders will vote your shares of Company common stock according to your directions. If you sign and return your proxy card without specifying choices, your shares of Company common stock will be voted by the persons named in the proxy in accordance with the recommendations of the board of directors as set forth in this proxy statement.
 
Vote at the Meeting:  You may cast your vote in person at the special meeting. Written ballots will be passed out to shareholders or legal proxies who want to vote in person at the meeting.
 
If you are a beneficial owner, you will receive instructions from your bank, brokerage firm or other nominee that you must follow in order to have your shares of Company common stock voted. Those instructions will identify which of the above choices are available to you in order to have your shares voted.


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Please note that if you are a beneficial owner and wish to vote in person at the special meeting, you must provide a legal proxy from your bank, brokerage firm or other nominee.
 
Please refer to the instructions on your proxy or voting instruction card to determine the deadlines for voting over the Internet or by telephone. If you choose to vote by mailing a proxy card, your proxy card must be filed with our General Counsel and Secretary by the time the special meeting begins. Please do not send in your stock certificates with your proxy card. When the merger is completed, a separate letter of transmittal will be mailed to you that will enable you to receive the per share merger consideration in exchange for your stock certificates.
 
If you vote by proxy, regardless of the method you choose to vote, the individuals named on the enclosed proxy card, and each of them, with full power of substitution, or your proxies, will vote your shares of Company common stock in the way that you indicate. When completing the Internet or telephone processes or the proxy card, you may specify whether your shares of Company common stock should be voted for or against or to abstain from voting on all, some or none of the specific items of business to come before the special meeting.
 
If you properly sign your proxy card but do not mark the boxes showing how your shares of Company common stock should be voted on a matter, the shares of Company common stock represented by your properly signed proxy will be voted “FOR” the proposal to adopt the merger agreement and “FOR” the proposal to adjourn the special meeting, if necessary or appropriate, to solicit additional proxies.
 
If you have any questions or need assistance voting your shares, please call [ • ] toll-free at [ • ].
 
IT IS IMPORTANT THAT YOU VOTE YOUR SHARES OF COMPANY COMMON STOCK PROMPTLY. WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING, PLEASE COMPLETE, DATE, SIGN AND RETURN, AS PROMPTLY AS POSSIBLE, THE ENCLOSED PROXY CARD IN THE ACCOMPANYING PREPAID REPLY ENVELOPE, OR SUBMIT YOUR PROXY BY TELEPHONE OR THE INTERNET. SHAREHOLDERS WHO ATTEND THE SPECIAL MEETING MAY REVOKE THEIR PROXIES BY VOTING IN PERSON.
 
As of [ • ], 2010, the record date, the directors and executive officers of the Company beneficially owned and were entitled to vote, in the aggregate, [ • ] shares of Company common stock (excluding any shares of Company common stock deliverable upon exercise or conversion of any options or restricted stock units), representing [ • ]% of the outstanding shares of Company common stock on the record date. The directors and executive officers have informed the Company that they currently intend to vote all of their shares of Company common stock “FOR” the proposal to adopt the merger agreement and “FOR” the proposal to adjourn the special meeting, if necessary or appropriate, to solicit additional proxies.
 
Proxies and Revocation
 
Any shareholder of record entitled to vote at the special meeting may submit a proxy by telephone, over the Internet, by returning the enclosed proxy card in the accompanying prepaid reply envelope, or may vote in person at the special meeting. If your shares of Company common stock are held in “street name” by your bank, brokerage firm or other nominee, you should instruct your bank, brokerage firm or other nominee on how to vote your shares of Company common stock using the instructions provided by your bank, brokerage firm or other nominee. If you fail to submit a proxy or vote in person at the special meeting, or abstain, or do not provide your bank, brokerage firm or other nominee with voting instructions, as applicable, your shares of Company common stock will not be voted on the proposal to adopt the merger agreement, which will have the same effect as a vote “AGAINST” the proposal to adopt the merger agreement.
 
If you are a shareholder of record, you have the right to revoke a proxy, whether delivered over the Internet, by telephone or by mail, at any time before it is voted at the special meeting by:
 
  •  submitting a new proxy by telephone or via the Internet after the date of the earlier voted proxy;
 
  •  signing another proxy card with a later date and returning it to us prior to the special meeting; or
 
  •  attending the special meeting and voting in person.


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If you hold your shares in street name, you may submit new voting instructions by contacting your bank, brokerage firm or other nominee. You may also vote in person at the special meeting if you obtain a legal proxy from your bank, brokerage firm or other nominee.
 
Adjournments and Postponements
 
Although it is not currently expected, the special meeting may be adjourned or postponed, including for the purpose of soliciting additional proxies, if there are insufficient votes at the time of the special meeting to approve the proposal to adopt the merger agreement or if a quorum is not present at the special meeting. Other than an announcement to be made at the special meeting of the time, date and place of an adjourned meeting, an adjournment generally may be made without notice. Any adjournment or postponement of the special meeting for the purpose of soliciting additional proxies will allow the Company’s shareholders who have already sent in their proxies to revoke them at any time prior to their use at the special meeting as adjourned or postponed.
 
Anticipated Date of Completion of the Merger
 
We are working towards completing the merger as soon as possible. If the merger is approved at the shareholders meeting, then, assuming timely satisfaction of the other necessary closing conditions, we anticipate that the merger will be completed promptly thereafter.
 
Rights of Shareholders Who Seek Appraisal
 
Shareholders that do not vote for the adoption of the merger agreement are entitled to appraisal rights under the DGCL in connection with the merger. This means that you are entitled to have the fair value of your shares of Company common stock determined by the Delaware Court of Chancery and to receive payment based on that valuation in lieu of the right to receive $24.00 per share of Company common stock in cash, without interest. The ultimate amount you receive in an appraisal proceeding may be less than, equal to or more than the amount you would have received under the merger agreement.
 
To exercise your appraisal rights, you must submit a written demand for appraisal to the Company before the vote is taken on the merger agreement and you must not vote in favor of the proposal to adopt the merger agreement. Your failure to follow exactly the procedures specified under the DGCL may result in the loss of your appraisal rights. See “Appraisal Rights” beginning on page [ • ] and the text of the Delaware appraisal rights statute reproduced in its entirety as Annex D to this proxy statement. If you hold your shares of Company common stock through a bank, brokerage firm or other nominee and you wish to exercise appraisal rights, you should consult with your bank, brokerage firm or other nominee to determine the appropriate procedures for the making of a demand for appraisal by your bank, brokerage firm or nominee. In view of the complexity of the DGCL, shareholders who may wish to pursue appraisal rights should consult their legal and financial advisors.
 
Payment of Solicitation Expenses
 
The Company may reimburse brokers, banks and other custodians, nominees and fiduciaries representing beneficial owners of shares of Company common stock for their expenses in forwarding soliciting materials to beneficial owners of Company common stock and in obtaining voting instructions from those owners. Our directors, officers and employees may also solicit proxies by telephone, by facsimile, by mail, on the Internet or in person. They will not be paid any additional amounts for soliciting proxies.
 
Questions and Additional Information
 
If you have more questions about the merger or how to submit your proxy, or if you need additional copies of this proxy statement or the enclosed proxy card or voting instructions, please call [ • ] toll-free at [ • ].


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THE MERGER
 
This discussion of the merger is qualified in its entirety by reference to the merger agreement, which is attached to this proxy statement as Annex A. You should read the entire merger agreement carefully as it is the legal document that governs the merger.
 
The merger agreement provides that Merger Sub will merge with and into the Company. The Company will be the surviving corporation in the merger and will continue to do business following the merger. As a result of the merger, the Company will cease to be a publicly traded company. You will not own any shares of the capital stock of the surviving corporation.
 
Merger Consideration
 
In the merger, each outstanding share of Company common stock (except for the excluded shares) will be converted into the right to receive the per share merger consideration of $24.00 in cash, less any applicable withholding taxes.
 
Background of the Merger
 
Since our initial public offering in 2006, as part of our ongoing strategic planning process, the board of directors and members of our senior management have regularly reviewed and evaluated our business and operations, competitive position, strategic plans and alternatives with a goal of enhancing shareholder value. Although we have achieved many financial and operating performance goals since our initial public offering, certain initiatives that management considered important to our long-term success, including (1) the recent roll-out of the new flexible broiler and point-of-sale system, (2) the on-going reimaging and remodeling of our restaurants, (3) our portfolio management strategies, including the refranchising of half of our restaurant portfolio over the next three to five years, and (4) other operating initiatives designed to enhance overall efficiencies and profitability, could take several years to yield any direct monetary benefits to us and our shareholders and may depress the market price of our common stock in the interim. Furthermore there are significant internal and external risks that could result in us not recognizing all of the anticipated benefits of these initiatives. In addition, our refranchising strategy, although designed to position us for stronger net restaurant growth and reduce our future required capital expenditure obligations, could exacerbate the operational risks associated with our highly franchised business model.
 
In late 2009 and early 2010, Alexandre Behring, Managing Partner at 3G Capital, the investment advisor of 3G, taking action on behalf of 3G, Parent and Merger Sub, other representatives of 3G Capital and certain representatives of Lazard Freres & Co. LLC, or Lazard, financial advisor to 3G Capital, contacted representatives of certain private equity funds affiliated with TPG Capital, Bain Capital Partners and Goldman, Sachs & Co. (the “Goldman Sachs Funds”), who we refer to as the Sponsors, on an unsolicited basis to express 3G Capital’s preliminary interest in exploring a potential transaction involving the Company. The representatives of the Sponsors informed the representatives of 3G Capital and Lazard that any inquiries regarding the Company should be raised directly with Mr. John Chidsey, our Chief Executive Officer and Executive Chairman.
 
In early March 2010, Mr. Behring contacted Mr. Chidsey to express 3G Capital’s preliminary interest in exploring a potential acquisition of the Company. During this discussion, Mr. Behring suggested that the consideration payable in such transaction would be entirely paid in cash, but Mr. Behring did not propose a purchase price for the acquisition of the Company. Mr. Chidsey informed Mr. Behring that the Company was not for sale, but that the Company and the board of directors would consider any proposal that would enhance shareholder value. Mr. Chidsey informed Mr. Behring that, if 3G Capital was serious about exploring a potential acquisition of the Company, then 3G Capital should deliver a written acquisition proposal to the Company based on publicly available information, which Mr. Chidsey would then discuss with the board of directors.
 
On March 29, 2010, we received a letter from 3G Capital and a third party private equity firm with whom 3G Capital was discussing the transaction containing a non-binding indication of interest to acquire all of the


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outstanding shares of Company common stock for $24.00 in cash per share, which we refer to as the March 29th Proposal.
 
Following receipt of the March 29th Proposal, Mr. Chidsey contacted Mr. Behring to confirm that he had received the proposal and would discuss it with the board of directors at a special meeting to be held on April 6, 2010.
 
On April 6, 2010, the board of directors held a special meeting, at which certain members of our senior management were present. At the meeting, the terms and conditions of the March 29th Proposal were discussed and it was noted, among other matters, that the March 29th Proposal:
 
  •  set forth a price of $24.00 in cash per share as compared to the market price of approximately $21 to $22 per share over the prior two weeks;
 
  •  was non-binding in nature and could be withdrawn or modified by 3G Capital at any time;
 
  •  was based solely on publicly available information and was subject to due diligence that 3G Capital described as confirmatory in nature;
 
  •  had been reviewed and approved by the investment committee of 3G Capital;
 
  •  was subject to financing but included non-binding “highly confident” letters from Barclays Capital PLC and another international lending institution to provide the necessary debt financing for the potential transaction; and
 
  •  indicated that 3G Capital had reviewed all of the publicly available information and was prepared to enter into a confidentiality agreement in order to gain access to non-public information and personnel to further refine its proposal.
 
The board of directors and management also discussed our prospects as a stand-alone company, including our strategic plan, the historical operating and financial results and the short-term and long-term outlook for us, as well as macroeconomic factors. With a view towards maximizing shareholder value, the board of directors and management then discussed whether, if the board of directors were to decide to explore a possible sale of the Company, any third parties other than 3G Capital, including any potential strategic buyers, should be contacted regarding their potential interest in the Company. The board of directors noted that the most likely strategic acquirer had not shown an interest in pursuing a business combination with the Company.
 
In addition, the board of directors discussed the advisability of hiring an investment bank as its financial advisor to conduct an independent assessment and valuation of the Company. The board of directors authorized our senior management team to retain a financial advisor to perform such valuation and otherwise assist us in its evaluation of strategic alternatives. At this meeting, the board of directors unanimously approved the appointment of Ronald Dykes as the independent lead director of the board. After further discussion of the March 29th Proposal, the board of directors decided to not pursue a potential sale to 3G Capital at that time. The board of directors requested that Mr. Chidsey communicate the board of director’s position to 3G Capital. Following the meeting, Mr. Chidsey contacted a representative of Lazard to convey the board of director’s position that the offer price contained in the March 29th Proposal was not sufficient to warrant further discussions at this time unless 3G Capital was willing to increase its offer price.
 
On or about April 12, 2010, representatives of Lazard contacted Mr. Chidsey and indicated that 3G Capital might be willing to increase the price of its offer above $24.00 per share but would need to meet with our management to further understand our business and its short-term and long-term prospects. No alternative prices were discussed in these conversations. Based on these discussions, Mr. Chidsey said he was willing to meet with representatives of 3G Capital to discuss additional information about us that might be helpful to 3G Capital’s analysis if 3G Capital entered into an acceptable confidentiality agreement.
 
On April 14, 2010, we distributed to 3G Capital a draft of a non-disclosure and standstill agreement, or a Non-Disclosure Agreement. We, 3G Capital, Holland & Knight, LLP, or Holland & Knight, our outside corporate counsel, and Kirkland & Ellis LLP, or Kirkland, outside counsel to 3G Capital, negotiated the terms of the Non-Disclosure Agreement over the next several weeks. On April 26, 2010, we and 3G Capital executed


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the Non-Disclosure Agreement. The Non-Disclosure Agreement contained customary provisions, including standstill and non-solicitation of employees provisions. The other private equity firm that had initially participated in the March 29th Proposal did not execute a Non-Disclosure Agreement and we had no further contact with such firm.
 
In addition, beginning on April 14, 2010, we began discussions with representatives of Morgan Stanley and Goldman Sachs regarding their potential role as financial advisors to the Company. During the next few weeks, our representatives held discussions with each of Morgan Stanley and Goldman Sachs regarding preparing a financial analysis of the Company. On April 21, 2010, we entered into a Non-Disclosure Agreement with Morgan Stanley in connection with Morgan Stanley’s engagement to conduct a valuation of the Company.
 
On April 27, 2010, Mr. Chidsey and Ben Wells, our Chief Financial Officer, met with representatives of 3G Capital at the Miami offices of Holland & Knight. At such meeting, Mr. Chidsey and Mr. Wells provided information regarding our business and prospects that had recently been presented to investors and analysts and that were publicly available. At the conclusion of the meeting, representatives of 3G Capital requested certain additional due diligence information from us. In addition, representatives of 3G Capital indicated that they would deliver an updated proposal to us within a few weeks after receiving the requested additional information. Following the April 27, 2010 discussion, Mr. Wells provided representatives of 3G Capital with the information requested by 3G Capital.
 
On May 11, 2010, we received a revised proposal from 3G Capital to acquire all of the outstanding shares of Company common stock for $25.00 per share in cash, which we refer to as the May 11th Proposal, subject to results of its due diligence investigation. The May 11th Proposal indicated that the $25.00 per share offer price represented a value of the Company equal to 9.4x our trailing twelve month EBITDA as of March 31, 2010. In the May 11th Proposal, 3G Capital stated its commitment to contribute all of the equity capital required to finance the transaction and indicated that JP Morgan and Barclays Capital had committed to provide all of the debt financing required to consummate the transaction. 3G Capital also indicated that it was working on firm commitment papers with those lenders. In the May 11th Proposal, 3G Capital requested further meetings with us to complete its due diligence review as soon as possible and indicated that it would be able to finalize its confirmatory due diligence and financing commitments within two to three weeks. Finally, 3G Capital indicated in the May 11th Proposal that it expected to enter into exclusive negotiations with us for a period of 30 days following the start of its due diligence. We did not agree to any exclusivity arrangement with 3G Capital and the discussions and negotiations continued on a non-exclusive basis throughout the period until the signing of the merger agreement. On May 12, 2010, representatives of Morgan Stanley contacted representatives of Lazard by telephone to convey that the board of directors would review the May 11th Proposal in detail at its regularly scheduled board of directors meeting on June 3, 2010.
 
From mid-April 2010 until early June 2010, Mr. Chidsey and Mr. Wells had several in-person and telephonic meetings with representatives of Morgan Stanley in connection with Morgan Stanley’s preparation of preliminary financial analyses relating to us. We also interviewed several national law firms specializing in public company mergers and acquisitions to provide additional assistance to the board of directors and us in connection with its evaluation of 3G Capital’s interest in a potential transaction with us.
 
On May 20, 2010, the board of directors held a special meeting, at which certain members of our senior management were present. During the meeting, Mr. Chidsey updated the board of directors on the status of our activities in response to the acquisition proposal received from 3G Capital and reviewed the terms and conditions of the May 11th Proposal. Mr. Chidsey informed the board of directors that (i) representatives of Morgan Stanley would attend the regularly scheduled board of directors meeting on June 3, 2010 to review their preliminary financial analyses relating to us detail and (ii) representatives of an outside special legal counsel, or Outside Special Counsel, would attend the June 3rd board of directors meeting to discuss the fiduciary duties of the directors in general and specifically in connection with their consideration of 3G Capital’s interest in a potential transaction. The board of directors determined to defer further consideration of the May 11th Proposal until it had received the preliminary financial analyses from Morgan Stanley and further discussed with management and our advisors potential responses to the May 11th Proposal. The board


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of directors instructed representatives of Morgan Stanley to advise 3G Capital that we would respond to the May 11th Proposal following the board of directors meeting on June 3, 2010.
 
On June 3, 2010, the board of directors held a regularly scheduled meeting, at which certain members of our senior management were present and, for portions of the meeting, representatives of Morgan Stanley and Outside Special Counsel were present. During this meeting, our management provided the board of directors with a forecast of the fourth quarter 2010 financial results and the proposed annual operating plan for fiscal year 2011. During the review of the fourth quarter forecasted financial results and the forecasted fiscal 2010 results generally, our management indicated that our results were adversely impacted by a generally weak consumer environment, including continued high unemployment, and commodity price increases, which have contributed to an erosion of margins as well as uncertainties created by fluctuations in currency exchange rates. Mr. Chidsey then reviewed the proposed annual operating plan for fiscal year 2011. Mr. Chidsey also reviewed the macroeconomic and business challenges facing us, including global economic uncertainty, high unemployment, potential as well as current commodity price increases, unpredictable currency exchange rates, competitive pressures and the negative impact of refranchisings on sales and EBITDA. Mr. Chidsey then reviewed the proposed capital expenditure plan for fiscal year 2011, including our re-imaging program and new restaurant development. Mr. Wells then discussed the need to refinance our existing credit facility before the end of September 2010 since the term loan under that facility would become a current liability in the fourth quarter of calendar 2010 and the revolver was scheduled to mature in June 2011.
 
Mr. Chidsey and Mr. Wells then reviewed with the board of directors our five year plan, including key strategic imperatives, the key assumptions underlying the plan and various growth scenarios. Representatives of Outside Special Counsel reviewed the legal duties of the directors generally and specifically in connection with a proposed acquisition transaction. Representatives of Morgan Stanley presented and reviewed with the board of directors their preliminary financial analyses of the Company. Representatives of Morgan Stanley discussed with the board of directors the terms of the May 11th Proposal and other potential strategic alternatives. Representatives of Morgan Stanley also reviewed certain background information relating to 3G Capital, including its involvement in other transactions. The board of directors, along with representatives of Morgan Stanley, Outside Special Counsel and members of senior management, discussed the terms of the May 11th Proposal in light of the preliminary valuation analyses of the Company performed by Morgan Stanley and the state of the financing markets. At the conclusion of these discussions, the board of directors instructed representatives of Morgan Stanley to inform Lazard that if 3G Capital would confirm the $25.00 per share price in its May 11th Proposal, then the board of directors would permit our management to meet with 3G Capital and its representatives and provide additional due diligence materials to allow 3G Capital to further improve its proposal, including to potentially decrease uncertainty in its offer and potentially improve its offer price.
 
Following the board of directors meeting on June 3, 2010, a representative of Morgan Stanley contacted a representative of Lazard to inform Lazard that the board of directors authorized us to have a due diligence meeting with 3G Capital and its debt financing sources if 3G Capital confirmed that there had been no change to the $25.00 per share price contained in the May 11th Proposal and a representative of Lazard stated that 3G Capital had not changed its price from the May 11th Proposal.
 
On June 14, 2010, Mr. Chidsey, Mr. Wells and Anne Chwat, our General Counsel, met with representatives of 3G Capital, its debt financing sources and another private equity firm considering participating in the transaction. Our and 3G Capital’s financial and legal advisors also attended the meeting. During this meeting, Mr. Chidsey and Mr. Wells gave a detailed presentation regarding our business and prospects for the remaining portion of fiscal year 2010 as well as the budget for fiscal year 2011 and the issues and opportunities for fiscal year 2012 and beyond.
 
On June 16, 2010, representatives of Lazard contacted representatives of Morgan Stanley to express 3G Capital’s continued interest in pursuing a transaction and indicated that 3G Capital would respond to us no later than July 1, 2010 with a proposal that included fully committed financing.


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During the last two weeks of June 2010, representatives of Outside Special Counsel and Holland & Knight had a few discussions with representatives of Kirkland to confirm that the new proposal to be delivered by 3G Capital would also address other significant deal provisions and conditions.
 
On June 25, 2010, representatives of Lazard contacted representatives of Morgan Stanley to provide an update on 3G Capital’s discussions with the lenders that would be providing the debt financing for the proposed transaction. The representatives of Lazard indicated that the lenders remained willing to fully commit the debt financing, but that the credit markets had tightened and worsened significantly since the May 11th Proposal and such adjustment in market conditions had resulted in reduced availability of leverage and significantly higher financing costs. The representatives of Lazard indicated that due to the less favorable market conditions and certain financial information provided by us during the June 14, 2010 meeting, 3G Capital expected to propose an offer price to acquire the Company that was lower than the price in the May 11th Proposal.
 
On June 29, 2010, we received a proposal from 3G Capital to acquire all of the outstanding shares of Company common stock for $23.00 in cash per share, which we refer to as the June 29th Proposal. The key elements of the June 29th Proposal included, among other things:
 
  •  draft commitment letters from debt financing sources (JP Morgan and Barclays Capital) for the entire debt financing that would be necessary to consummate the transaction;
 
  •  a draft equity commitment letter from 3G Capital to fund the entire equity capital of Merger Sub (approximately $1.5 billion) needed to consummate the transaction;
 
  •  an indication that 3G Capital had completed substantially all of its work and that it needed two additional weeks to complete confirmatory due diligence and negotiate a definitive merger agreement;
 
  •  a summary of certain key provisions of the merger agreement pursuant to which 3G Capital would be willing to enter into the transaction, including a one-step merger structure, a 30-day “go-shop” period during which we would be permitted to solicit alternative transaction proposals and if a superior offer were made and accepted during this period, we would only be obligated to pay a reduced termination fee to 3G Capital of $75 million (compared to $100 million after the “go-shop” period), and a reverse termination fee of $150 million;
 
  •  an expectation that, at the time the board of directors considered to be most appropriate, certain members of senior management (including Mr. Chidsey and Mr. Wells) would agree to continue their association with the Company during a post-closing transition period, although management retention would not be a condition to closing the transaction and none of the members of senior management would be rolling-over any of their equity interests in the transaction; and
 
  •  a statement that the proposal was a non-binding indication of interest and the offer remained subject to negotiation and execution of definitive agreements and the satisfactory completion of confirmatory due diligence.
 
In addition, the June 29th Proposal included a request that we grant 3G Capital a 30-day period of exclusivity. We did not grant 3G Capital’s request for exclusivity and the parties continued discussions on a non-exclusive basis.
 
On June 30, 2010, representatives of Outside Special Counsel and representatives of Kirkland held a teleconference to discuss the proposed terms of the merger agreement included with the June 29th Proposal.
 
On July 1, 2010, the board of directors held a special meeting, at which certain members of our senior management were present and, for portions of the meeting, representatives of Morgan Stanley, Holland & Knight and Outside Special Counsel were present. Representatives of Morgan Stanley and Outside Special Counsel presented the board of directors with a detailed summary of the June 29th Proposal. Representatives of Morgan Stanley then reviewed with the board of directors our recent share price performance relative to other participants and competitors in its industry over a range of historical short-term and long-term periods, as well as a description of the current debt financing market conditions and changes in the market since the


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May 11th Proposal and the board of directors meeting on June 3, 2010. The board of directors, in consultation with representatives of Morgan Stanley, noted that although the leveraged loan markets had weakened considerably during these periods, the market had recently showed some improvement. Finally, representatives of Morgan Stanley presented their preliminary valuation analyses of the Company. At the conclusion of the meeting and following an extensive discussion of the June 29th Proposal, the board of directors determined that pursuing a potential acquisition by 3G Capital on the terms of the June 29th Proposal was not in the best interest of the Company and its shareholders at that time. The board of directors instructed representatives of Morgan Stanley to inform Lazard that the board of directors was not willing to pursue a transaction on the basis of the June 29th Proposal at that time. Following the meeting, representatives of Morgan Stanley contacted a representative of Lazard to convey the board of director’s position.
 
On July 26, 2010, the board of directors held a special meeting, at which certain members of our senior management, and representatives of Morgan Stanley, Holland & Knight and Outside Special Counsel were present. Mr. Chidsey provided the board of directors with an update of our financial results and forecast since the July 1, 2010 board of directors meeting. Representatives of Morgan Stanley informed the board of directors of the discussions between Morgan Stanley and Lazard on July 1, 2010 following the board of directors meeting. Representatives of Morgan Stanley further indicated that neither Lazard nor 3G Capital had contacted us or Morgan Stanley since the July 1, 2010 call between representatives of Morgan Stanley and Lazard. The board of directors and its advisors discussed the June 29th Proposal, our stand-alone prospects and whether any further action should be taken with respect to the June 29th Proposal. After discussion, the board of directors determined not to initiate any further discussions with 3G Capital at that time.
 
On July 27, 2010, Mr. Behring contacted a member of the board of directors to discuss 3G Capital’s interest in the transaction and the amount of work that had been done to support the June 29th Proposal. The director suggested that it might be productive for 3G Capital to discuss these topics directly with Mr. Chidsey. Thereafter, a representative of Lazard contacted a representative of Morgan Stanley to schedule a meeting among them, Mr. Behring and Mr. Chidsey to take place within a few days.
 
On July 29, 2010, Mr. Chidsey and a representative of Morgan Stanley met with Mr. Behring and a representative of Lazard. At the meeting, Mr. Behring indicated that 3G Capital wished to continue discussions with us in a collaborative process regarding the appropriate price at which a transaction may be completed. Mr. Chidsey and the representative of Morgan Stanley indicated at the meeting that they could not commit to any additional discussions without further guidance from the board of directors.
 
On July 30, 2010, a representative of Morgan Stanley informed a representative of Lazard that the board of directors planned to meet the following week to discuss the July 29, 2010 meeting.
 
On August 3, 2010, the board of directors held a special meeting, at which certain members of our senior management and representatives of Morgan Stanley, Holland & Knight and Outside Special Counsel were present. Mr. Chidsey and representatives of Morgan Stanley updated the board of directors on the discussions that had occurred with 3G Capital and Lazard since July 26, 2010, including the discussion during the in-person meeting on July 29, 2010. Representatives of Morgan Stanley and Outside Special Counsel reminded the board of directors that the non-price terms of the June 29th Proposal had not yet been discussed between the parties. Following discussion, the board of directors determined that its legal advisors should engage in discussions and negotiations with Kirkland regarding the non-price terms of the potential transaction, particularly to decrease the conditionality of the proposed terms. At the conclusion of the meeting, the board of directors instructed representatives of Morgan Stanley to inform representatives of Lazard that we would provide 3G Capital with updated due diligence materials and organize a meeting between Outside Special Counsel and Kirkland to negotiate certain material non-price terms and conditions of the June 29th Proposal. Following the meeting, representatives of Morgan Stanley contacted a representative of Lazard to convey the board of director’s position.
 
Later in the day on August 3, 2010, Outside Special Counsel distributed to Kirkland a revised version of the summary terms of the merger agreement that was included in the June 29th Proposal. The revised terms deleted all conditions to the consummation of the transaction related to 3G Capital’s debt financing and required that 3G Capital enter into definitive financing for the transaction prior to signing the merger


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agreement. In addition, the revised terms proposed that 3G Capital would complete the transaction through a tender offer directly to the Company’s shareholders and a back-end merger, which representatives of Outside Special Counsel explained would be favorable to us because it could be completed more quickly and therefore with greater certainty of closing. In addition, the revised terms proposed expansions to our “go shop” rights to solicit superior proposals, including a lower termination fee and more limited matching and information rights.
 
Between August 3, 2010 and August 16, 2010, representatives of Outside Special Counsel, Holland & Knight and Kirkland held meetings and discussions regarding the summary terms of a merger agreement. During this period, the parties also discussed the terms under which 3G Capital would intend for certain members of our management to continue to be employed following the closing of the transaction and other management transition and retention matters.
 
In addition, during early August, 3G Capital and its representatives were provided with information in response to due diligence requests. Commencing on August 10, 2010, 3G Capital and its representatives were advised that an online data room that contained various legal and financial due diligence materials was available for representatives of 3G Capital and its advisors to access. Throughout the process leading to the execution of the merger agreement the data room was updated with new information, including specific information requested by 3G Capital and its advisors.
 
Between August 3, 2010 and August 13, 2010, representatives of Morgan Stanley and Lazard had a number of conversations to discuss the process that would be followed in the next few weeks to allow 3G Capital to make a definitive offer. Representatives of Lazard and Morgan Stanley discussed the mutual desire to finalize the due diligence and work through any other key issues in the proposed transaction through a negotiation of the merger agreement terms.
 
On August 12, 2010, representatives of Morgan Stanley, Outside Special Counsel and Holland & Knight, on our behalf, and representatives of Lazard and Kirkland, on behalf of 3G Capital, held a call to review the status of the discussions and open issues in advance of a meeting of the board of directors. Later that day, a subset of this group met to recap their mutual understanding on the remaining open items regarding the proposed terms of the merger agreement based on the discussions that had taken place over the course of the prior days of negotiations. In particular, the parties agreed that the merger agreement would initially contemplate a tender offer followed by a back-end merger with a minimum tender condition of approximately 78-80%, but that the merger agreement would provide that we would simultaneously proceed with filing a proxy statement for a single-step merger to prevent delay to the transaction if a majority but less than a supermajority of our shareholders tendered their shares in the tender offer.
 
On August 13, 2010, the board of directors held a special meeting, at which certain members of our senior management and representatives of Morgan Stanley, Holland & Knight and Outside Special Counsel were present. Mr. Chidsey updated the board of directors on our fourth quarter and full year 2010 results as well as results for July 2010 and indicated that he would be presenting an updated forecast for the full year and the five-year plan at the upcoming board of directors meeting on August 19, 2010. Representatives of Morgan Stanley updated the board of directors on their discussions with representatives of Lazard since August 3, 2010 regarding the proposed process and timeline to get to a definitive agreement for a proposed transaction. In that regard, it was noted that progress on the deal had been made (other than on the price of the transaction, on which the parties had agreed to delay further negotiation). Following discussion, the board of directors determined that our management and advisors should continue to furnish due diligence materials to 3G Capital and its advisors and deliver a draft merger agreement to 3G Capital and Kirkland. Representatives of Morgan Stanley informed the board of directors that Mr. Behring had requested a meeting with Mr. Chidsey to review the transition and retention issues with respect to members our management team. Following a discussion, the board of directors determined that Mr. Chidsey should meet with Mr. Behring to discuss the management retention and transition issues, but that Mr. Chidsey should not discuss any of the terms of his own retention arrangements until later in the process.
 
On August 16, 2010, Mr. Chidsey met with Mr. Behring at 3G Capital’s offices to discuss our senior management organizational structure and management retention and transition issues generally, although no specific individual arrangements were discussed at this meeting.


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Also on August 16, 2010, Outside Special Counsel distributed to Kirkland an initial draft of the merger agreement that reflected the most recent discussions between the parties, as well as our proposal to resolve certain of the remaining open issues.
 
On August 18, 2010, the Compensation Committee of the board of directors met to discuss proposed changes to the severance arrangements for Mr. Chidsey, members of the Global Executive Team, other Senior Vice Presidents and Vice Presidents. The Compensation Committee received advice from Mercer Inc., or Mercer, its compensation consultant, and CAP Partners, our compensation consultant, that the level of severance in connection with a change in control of the Company provided at the time of our initial public offering was currently below market as compared to industry peers. The Compensation Committee then discussed the potential changes that should be made to such provisions in order to bring them more in line with industry peers, including for Mr. Chidsey by adding a pro-rata bonus in addition to his current severance benefit and increasing the benefits for other members of the Global Executive Team, other Senior Vice Presidents and Vice Presidents, who we collectively refer to as the Company Officers. In addition, the Compensation Committee discussed our regular, annual grant of long-term incentive compensation to our employees and officers under our Equity Incentive Plan, including the fact that such grant was a standard component of compensation for certain of our employees and officers as well as the pros and cons of making such grant in light of a possible transaction with 3G Capital. Following such discussion, the Compensation Committee approved such grant of long-term incentive compensation under our Equity Incentive Plan, such grant to be made and priced as of August 25, 2010, generally, in the form of 50% stock options and 50% restricted stock awards.
 
On August 19, 2010, the board of directors held a regular meeting, at which certain members of our senior management were present and, for portions of the meeting, representatives of Morgan Stanley, Holland & Knight and Outside Special Counsel were present. Mr. Chidsey updated the board of directors on our results for the 2010 fiscal year. Mr. Chidsey then provided an update on the proposed transaction with 3G Capital and indicated that we were still awaiting an updated proposal, with a revised offer price, from 3G Capital. Our senior management team then reviewed with the board of directors the refinancing options that existed with respect to our term loan facility, including the amendment and extension of our existing credit facility, and reported to the board of directors that we would need to capitalize on any favorable conditions in the debt markets to effect the refinancing if a transaction could not be finalized with 3G Capital. Representatives of Outside Special Counsel then gave a presentation regarding the board of directors’ fiduciary duties, the current transaction terms proposed by 3G Capital and compensation and equity-related matters. The board of directors also discussed the terms of the draft merger agreement, including the “go-shop” provision which allows for a formal marketing process after the signing of a definitive merger agreement to explore whether any third parties would be interested in acquiring the Company on more favorable terms. The board of directors also reviewed the current transaction terms and conditions proposed by 3G Capital, including a two-step tender offer structure with a fall back one-step merger, the status of the debt financing, the proposed termination fees (including the amounts and circumstances in which such fees would be payable), the reverse termination fees payable by 3G Capital and other matters. The board of directors then discussed the principal outstanding open issues between the parties, our position with respect to these matters and the potential risks to us. Representatives of the Sponsors indicated that they would be prepared to enter into tender agreements, with customary fiduciary out provisions, to support a transaction with 3G Capital that was approved by the board of directors. The board of directors then reviewed the change in control severance enhancements for our officers that were discussed with the Compensation Committee on August 18, 2010 at a meeting of the Compensation Committee, as described in the paragraph immediately above. After carefully considering the implications of the equity grant in light of the potential, but not definite, transaction with 3G Capital and the impact of deviating from our standard practice with respect to such grants, the board of directors ratified the fiscal year 2011 annual equity grant previously approved by the Compensation Committee. In addition, the board of directors approved management moving forward with the refinancing in the event the transaction with 3G Capital did not occur, in order to take advantage of a window of opportunity in the credit markets.
 
Also at the August 19, 2010 meeting, representatives of Morgan Stanley summarized for the board of directors the recent developments with respect to the 3G Capital proposal, including the expectation that 3G


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Capital seek to put in place fully negotiated financing agreements before signing. Representatives of Morgan Stanley discussed the recent share price performance of the Company and our peers and again reviewed Morgan Stanley’s preliminary financial analyses.
 
In order to efficiently manage the process of reviewing the new proposal that was expected from 3G Capital and any alternatives thereto, the board of directors authorized the Executive Committee of the board of directors to provide advice and guidance to our management and advisors in reviewing the basic financial terms of any proposal received by 3G Capital but that no definitive steps relating to such proposal would be determined without the final approval of the entire board of directors. The Executive Committee of the board of directors is comprised of Richard Boyce, John W. Chidsey, Ronald M. Dykes, Sanjeev K. Mehra and Stephen G. Pagliuca.
 
Following the presentation from Morgan Stanley, the representatives of Morgan Stanley, Outside Special Counsel and Holland & Knight were excused from the meeting, and the board of directors discussed the fee proposals submitted by Morgan Stanley relating to its role as financial advisor in connection with a potential acquisition transaction and the potential role of Goldman Sachs as our co-financial advisor with Morgan Stanley. Mr. Mehra was then excused from the meeting. Representatives of Outside Special Counsel were invited back into the meeting, and together with the board of directors, reviewed the history of the Goldman Sachs Funds’ ownership interest in the Company, its board rights under the existing shareholders’ agreement between us and the Sponsors, any potential (or perceived) conflict of interest in Goldman Sachs acting as our co-financial advisor on the transaction, the depth of knowledge that Goldman Sachs had of the Company and the industry including through its role as an underwriter in various equity offerings and noted the benefit of receiving a second financial analysis of the transaction and opinion as to the fairness of the price that would be offered in the transaction. The board of directors noted that the financial advisor fees would be split between Morgan Stanley and Goldman Sachs. The board of directors also noted that the advice, analysis and fairness opinion provided by Goldman Sachs would be independent of any analysis prepared by Morgan Stanley and that Goldman Sachs’ financial advisory team would be separate from the persons affiliated with the Goldman Sachs Funds. Following such discussion, the Outside Special Counsel representatives were excused from the meeting and the board of directors (excluding Mr. Mehra) approved the engagement of Goldman Sachs as co-financial advisor in connection with the proposed transaction and the advisory fee to be paid to both Morgan Stanley and Goldman Sachs. The board of directors also discussed formally retaining legal counsel to provide advice and assistance in connection with the proposed transaction and instructed Ms. Chwat to retain such legal counsel to represent the Company.
 
Finally, Mr. Wells provided the board of directors with a summary of the financial results for fiscal year 2010 and the fiscal year 2011 plan, including the strategic initiatives regarding refranchising of our restaurants. Mr. Wells reviewed the assumptions in the forecasted plan, including comparable sales and traffic, commodity prices and currency impact. Mr. Wells advised the board of directors that, because our 2011 plan and five-year plans contained many risks and uncertainties, including macroeconomic factors outside of our control such as those regarding currency, commodities, unemployment rates, and general economic conditions, it was very difficult to forecast our potential results.
 
Later in the day on August 19, 2010, representatives of Morgan Stanley and Lazard had a detailed conversation regarding the status of the potential transaction, the issues discussed at the board of directors meeting earlier that day, and the process to move forward. Representatives of Morgan Stanley indicated during this discussion that the board of directors was reviewing the refinancing alternatives relating to our existing credit facility and that we needed to know whether or not there would be a mutually agreeable transaction by August 30, 2010. Representatives of Lazard indicated that 3G Capital hoped to conclude the discussions by August 30, 2010 and that it was in discussions with its banks to provide detailed debt commitment letters. They further discussed the status and remaining items needed to complete the legal and financial due diligence.
 
On August 20, 2010, Ms. Chwat contacted Skadden, Arps, Slate, Meagher & Flom LLP, or Skadden Arps, to engage the firm as legal counsel to provide advice and assistance in connection with the proposed transaction with 3G Capital. Thereafter, Skadden Arps served as our special transaction counsel. From


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August 22, 2010 through August 25, 2010, representatives of Skadden Arps discussed certain outstanding open issues in the merger agreement with representatives of Kirkland, including transaction structure, certainty of financing, conditions to the closing, cooperation by us with 3G Capital’s debt financing efforts, obligations of 3G Capital to use bridge financing, specific performance rights, the “go-shop” period, termination fees and management retention and transition matters.
 
On August 22, 2010, representatives of Kirkland and representatives of Skadden Arps held a teleconference to discuss the status of the merger agreement and management retention arrangements and the open items on each. Following the call, Kirkland delivered to Skadden Arps a proposal setting forth 3G Capital’s expectations regarding the treatment of employee equity in the merger, the treatment of existing severance arrangements for our officers and transition arrangements with Mr. Chidsey, Mr. Wells and Ms. Chwat, who we collectively refer to as the Transition Executives, and Mr. Smith. The proposed terms included a cash out of all vested equity and a cash out and placement in trust of the proceeds with respect to all unvested equity for all employees, including management, which would then be released over the two year period following the completion of the merger. The proposal did not contemplate the issuance of any new equity for management or other employees post-closing, including pursuant to the rollover of existing Company equity awards. The proposal generally indicated 3G Capital’s acceptance of the severance terms discussed by the Compensation Committee at the August 18, 2010 meeting for members of the Global Executive Team and other Senior Vice Presidents. The proposal further contemplated transition agreements with Messrs. Chidsey, Wells and Smith and Ms. Chwat, pursuant to which the executives would perform transition services for a period of up to one year or, in the case of Mr. Chidsey, at least two years. Pursuant to the proposal, Mr. Chidsey would serve as Co-Chairman during the transition period, would no longer serve as our Chief Executive Officer upon the completion of the merger, would receive current salary and bonus levels during the transition period, would agree to the placement in trust of his unvested equity proceeds and severance entitlements at closing and would receive a payment of 1.5 times Mr. Chidsey’s equity proceeds placed in trust. With respect to Messrs. Wells and Smith and Ms. Chwat, the proposal provided that the executives would receive current salary and bonus levels during the transition period and would agree to the placement in trust of the executive’s equity amounts and severance entitlements at closing. Discussions between us and 3G Capital and their respective legal advisors regarding treatment of employee equity and severance arrangements and the retention and transition arrangements for the Transition Executives and Mr. Smith continued until the signing of the merger agreement.
 
On August 25, 2010, Kirkland distributed a revised draft of the merger agreement for the proposed transaction. From August 25, 2010 through August 29, 2010, our senior management and representatives of Skadden Arps, Holland & Knight and Morgan Stanley held numerous meetings and conference calls with representatives of 3G Capital, Lazard and Kirkland to discuss the open issues in the merger agreement and our position with respect to such issues, including the obligations of Merger Sub to use the bridge financing in lieu of placing the high-yield notes, the timing of the tender offer (and extensions thereto) and the filing and mailing of the proxy statement, the conditions to the tender offer and the merger, including with respect to solvency matters and financial performance criteria of the Company, the termination fees (including the amounts and the circumstances in which such fees would become payable) and the management retention and transition matters.
 
On August 26, 2010, Mr. Chidsey met with Mr. Behring to discuss (i) the treatment of employee equity in the transaction, including the Company’s standard equity grant on August 25, 2010 of approximately 2.2 million shares, (ii) the senior management team and retention issues, and (iii) the transition arrangements for the Transition Executives and Mr. Smith.
 
On August 27, 2010, representatives of 3G Capital, Lazard, Kirkland, the Company, Morgan Stanley, Skadden Arps and Holland & Knight met by teleconference to negotiate certain key terms of the merger agreement, including the terms of our “go shop” period and the closing conditions to the offer and the merger. In particular, we objected to the presence of a closing condition providing for the Company to have a minimum EBITDA of $100 million during the first fiscal quarter of fiscal 2011.


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On August 28, 2010, Skadden Arps delivered a revised proposal to Kirkland reflecting management’s position regarding management retention and transition issues. The revised proposal, among other things, provided (i) that all Company equity awards, whether or not vested, would be cashed out in the merger, except that an amount equal to sixty percent (60%) of the proceeds (representing an after-tax amount) from the equity awards that were granted on August 25, 2010 to the Company’s officers who hold the position of vice president and above, including the executive officers (the “August Equity Grants”) (excluding Peter Smith), would be deposited in a trust, escrow or similar account for the benefit of such employees for subsequent release; (ii) for the payment at closing of pro rata bonuses in respect of the 2011 fiscal year to all of our bonus-eligible employees; (iii) for amendments to the severance provisions of our officers consistent with changes discussed at the August 18, 2010 compensation committee meeting; (iv) transition bonuses for the Transition Executives; and (v) for transition services to be performed by Messrs. Chidsey and Wells and Ms. Chwat for six months following completion of the merger, including a part-time consulting arrangement for Mr. Chidsey for an additional six-month period.
 
On August 29, 2010, Skadden Arps distributed a revised draft of the merger agreement relating to the proposed transaction and drafts of the stockholder tender agreements, whereby the Sponsors would, subject to customary exceptions, agree to tender their shares of Company common stock into the proposed tender offer. From this time until early in the morning on September 2, 2010, representatives of us and 3G Capital and their respective legal and financial advisors engaged in extensive discussions and negotiations regarding the terms of the merger agreement, the debt and equity commitment letters and the management retention and transition matters. In particular, the parties discussed the timing of the tender offer and mailing of the proxy statement, the terms of the “go-shop” period during which we could solicit interest in alternative transactions, our obligation to cooperate in the financing efforts of Parent and the closing conditions. During these negotiations, 3G Capital agreed to permit a 40-day “go-shop” period, lower the termination fee payable in connection with the termination of the merger agreement to accept a superior proposal to $50 million, and agreed to increase the termination fee payable by 3G Capital in connection with certain events of termination of the merger agreement where 3G Capital has failed to close the offer or the merger to $175 million. 3G Capital also agreed to eliminate its minimum EBITDA condition if we would agree that 3G would not have to draw on its bridge commitment under its debt financing commitment letters to complete the offer prior to November 18, 2010 unless it was commercially reasonable to do so.
 
On August 31, 2010, a representative of Lazard contacted a representative of Morgan Stanley and stated that 3G Capital proposed to acquire all of the outstanding shares of Company common stock at a price of $24.00 in cash per share. The representative of Lazard indicated that this was 3G Capital’s “best and final” offer.
 
On August 31, 2010, the Compensation Committee held a special meeting, with representatives of Skadden Arps, Mercer and CAP Partners, management’s compensation consultant, in attendance, to consider certain matters in connection with the proposed transaction. At this meeting, the Compensation Committee determined that the treatment of the Company’s equity awards provided in the merger agreement was consistent with the terms of the Company’s equity incentive plans and further approved, and recommended that the board of directors approve the cancellation of outstanding equity awards at the effective time of the merger in exchange for the consideration to be paid to holders of such equity awards in accordance with the terms of the merger agreement, as well as the placement in trust of the after tax amount of the proceeds with respect to the August Equity Grants made to our Vice Presidents and above. The Compensation Committee considered and approved, and recommended that the board of directors approve, the employment agreement amendments for Messrs. Chidsey, Wells and Smith and Ms. Chwat. The Compensation Committee also authorized amendments to the employment agreements for members of the Global Executive Team, other Senior Vice Presidents and Vice Presidents which modified the severance payments for such executives to be effective upon consummation of the merger. The Compensation Committee also authorized and approved the payment, upon effectiveness of the merger, of pro rata bonuses for the portion of our 2011 fiscal year occurring prior to such date at target level, as contemplated by the merger agreement. These transition and retention arrangements are described in “Interests of Certain Persons in the Merger” beginning on page [ • ].


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On August 31, 2010, Kirkland distributed a revised draft of the equity commitment letter and an initial draft of the limited guaranty pursuant to which 3G would agree to guarantee the performance and discharge of the payment of the reverse termination fee when required to be paid under the merger agreement. Representatives of Skadden Arps and Kirkland subsequently discussed the issues regarding the limited guaranty and equity commitment letter, including the circumstances in which we would be permitted to specifically enforce, as a third party beneficiary, the obligations of 3G under the equity commitment letter.
 
On the evening of August 31, 2010, news articles ran reporting rumors that we were considering a sale of the Company.
 
On September 1, 2010, the board of directors held a special meeting, at which members of our senior management and representatives of Skadden Arps, Holland & Knight, Morgan Stanley and Goldman Sachs were present. Prior to this meeting, the members of the board of directors were provided with materials related to the proposed transaction. At the meeting:
 
  •  representatives of Skadden Arps reviewed with the board of directors its fiduciary duties in considering the proposed transaction;
 
  •  the board of directors reviewed the developments in the negotiations with 3G Capital, including the terms of the merger agreement and stockholder tender agreements and the changes that had been effected to the merger agreement since the last board of directors meeting, the terms of the debt and equity financing commitment letters and the information that had been received regarding the sources of funding of 3G with respect to its obligations under the equity commitment letter and the limited guaranty;
 
  •  the board of directors considered the positive and negative factors and risks in connection with the proposed transaction, as discussed in the section entitled “— Reasons for Recommendation” below;
 
  •  Ms. Chwat reviewed with the board of directors the actions taken by the Compensation Committee on August 31, 2010 with respect to retention and transition matters;
 
  •  representatives of Morgan Stanley made a financial presentation and rendered to the board of directors its oral opinion, subsequently confirmed in writing, that as of September 1, 2010, and based upon and subject to the limitations, qualifications and assumptions set forth in the written opinion, the $24.00 per share to be received by holders of shares of Company common stock pursuant to the merger agreement was fair, from a financial point of view, to such holders as discussed in “— Opinion of the Company’s Financial Advisors — Opinion of Morgan Stanley & Co. Incorporated.” Such opinion is attached hereto as Annex B. Representatives of Morgan Stanley discussed with the board of directors the possibility of another private equity buyer or strategic buyer making an offer for the Company; and
 
  •  representatives of Goldman Sachs made a financial presentation and rendered to the board of directors its oral opinion, which was subsequently confirmed by delivery of a written opinion, dated September 2, 2010, to the effect that, as of that date, and based upon and subject to the factors, assumptions and limitations described in the opinion, the $24.00 per share of Company common stock in cash to be paid to the holders (other than Parent and its affiliates) of shares of Company common stock pursuant to the merger agreement was fair, from a financial point of view, to such holders as discussed in the section entitled “— Opinion of the Company’s Financial Advisors — Opinion of Goldman Sachs & Co.” Such opinion is attached hereto as Annex C.
 
Following an extensive discussion, the board of directors instructed us and our advisors to continue to pursue their due diligence with respect to the source of the funds for 3G to ensure that 3G could perform its obligations under the equity commitment letter and the limited guaranty, including satisfying its obligations to pay the reverse termination fee. The board of directors determined to adjourn the meeting until later in the evening on September 1, 2010 to allow for the due diligence and discussions on this issue to progress. Following the adjournment of the meeting, we and our advisors contacted 3G Capital and its advisors to discuss the source of the funds for 3G and to explore potential methods to provide reasonable assurances that 3G would have the funds to satisfy its obligations under the equity commitment letter and the limited guaranty.


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Skadden Arps and Kirkland then discussed certain modifications to the equity commitment letter and limited guaranty to include provisions that would provide assurances on these matters.
 
Later in the evening of September 1, 2010, the board of directors reconvened the special meeting, at which members of our senior management and representatives of Skadden Arps, Morgan Stanley, Goldman Sachs and Holland & Knight were present. The board of directors reviewed discussions with 3G Capital and its advisors regarding the source of funds of 3G. The board of directors also discussed the assurances that 3G had agreed to provide to us. Following a detailed discussion of these matters and following careful consideration of the proposed merger agreement and the offer and the merger, the board of directors unanimously (1) approved and declared advisable the merger agreement, the offer, the merger and the other transactions contemplated by the merger agreement, and (2) declared that the terms of the merger agreement and the transactions contemplated by the merger agreement, including the merger, the offer and the other transactions contemplated by the merger agreement, on the terms and subject to the conditions set forth therein, are fair to and in the best interests of the shareholders of the Company. The board of directors unanimously resolved to recommend that the Company’s shareholders accept the offer and tender their shares into the offer and, if necessary, vote their shares in favor of adoption of the merger agreement to approve the merger. The board of directors authorized the appropriate officers of the Company to finalize and execute the merger agreement and related documentation. The board of directors also ratified the actions taken by the Compensation Committee on August 31, 2010.
 
During the course of the late evening of September 1, 2010 and early morning of September 2, 2010, representatives of Kirkland, Skadden Arps, Holland & Knight and us finalized the merger agreement and the other definitive transaction agreements.
 
On September 2, 2010, the parties executed the merger agreement and the appropriate parties executed and delivered the equity commitment letter, the debt commitment letter and the stockholder tender agreements and ancillary documents on September 2, 2010. On September 2, 2010, before the opening of trading on the NYSE, we and 3G Capital issued a joint press release announcing the execution of the merger agreement.
 
Beginning on September 3, 2010, the day following the execution of the merger agreement, at the direction of the board of directors and under the supervision of our executive officers, representatives of Morgan Stanley began the process of contacting parties to determine whether they might be interested in pursuing a transaction that would be superior to the proposed transaction with 3G Capital. Representatives of Morgan Stanley and, in one case, together with representatives of Goldman Sachs, contacted 21 parties, consisting of one potential strategic buyer and 20 potential financial sponsor buyers.
 
On September 16, 2010, Parent and Merger Sub commenced the offer, which has an initial expiration date of October 14, 2010.
 
As of September 23, 2010, none of the parties contacted during the go-shop process, on behalf of us and at the direction of the board of directors, had submitted an acquisition proposal for the Company. The process for the solicitation of other third party interest is ongoing, although there can be no assurance that such efforts will result in an alternative transaction being proposed or in a definitive agreement for such a transaction being entered into. We do not intend to announce further developments with respect to the solicitation process until the board of directors has made a decision regarding an alternative proposal, if any.
 
Reasons for the Merger; Recommendation of the Board of Directors
 
In evaluating the merger agreement, the merger and the other transactions contemplated by the merger agreement, the board of directors consulted with our senior management, outside legal counsel and independent financial advisors. In recommending that the Company’s shareholders vote their shares of Company


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common stock in favor of adoption of the merger agreement, the board of directors also considered a number of factors, including the following:
 
Financial Terms; Fairness Opinions; Certainty of Value
 
  •  Historical market prices, volatility and trading information with respect to the Company common stock, including that the per share merger consideration of $24.00 per share in cash:
 
  •  Represented a premium of 43.1% over the closing price of the Company common stock on August 30, 2010.
 
  •  Represented a premium of 41.6%, 36.7% and 27.0% over the one, three and six month, respectively, volume-weighted average closing prices of the Company common stock prior to August 30, 2010.
 
  •  Exceeded, by 8.8%, the 52-week high prior to August 30, 2010.
 
  •  Opinions of the Company’s financial advisors and support of the transactions:
 
  •  Morgan Stanley and Goldman Sachs presented certain financial analyses and delivered their opinions that as of the date of their respective opinions and subject to various limitations, qualifications and assumptions set forth therein, the $24.00 per share to be received by holders of shares of Company common stock pursuant to the merger agreement was fair, from a financial point of view, to such holders, other than with respect to Goldman Sachs’ opinion, Parent and its affiliates, as described under “— Opinions of the Company’s Financial Advisors” below.
 
  •  The Sponsors, highly sophisticated investors and whose affiliated funds own approximately 31% of the outstanding shares of Company common stock, have three representatives on the board of directors, all of whom support the transaction.
 
  •  The form of consideration to be paid in the transaction is cash, which provides certainty of value and immediate liquidity to the Company’s shareholders.
 
Financial Condition; Prospects of the Company
 
  •  Our current and historical financial condition, results of operations, competitive position, strategic options and prospects, as well as the financial plan and prospects if we were to remain an independent public company, and the potential impact of those factors on the trading price of the Company common stock (which is not feasible to quantify numerically).
 
  •  The prospective risks to us as a stand-alone public entity, including the risks and uncertainties with respect to (i) achieving its growth in light of the current and foreseeable market conditions, including the risks and uncertainties in the U.S. and global economy generally and the quick service restaurant industry specifically, (ii) future commodity prices, (iii) fluctuations in foreign exchange rates, (iv) potential increased costs relating to changes in law effecting the health care industry and (v) the “risk factors” set forth in our Form 10-K for the fiscal year ended June 30, 2010.
 
  •  In particular, the board of directors considered the increasing challenges to achieving our business plan caused by having approximately 90% of its restaurants owned by franchisees (which percentage would have been expected to increase in the next five years if we accelerated the pace of refranchisings as part of the portfolio management strategy):
 
  •  Given the significant percentage of franchised restaurants, our operating results (i.e., royalties) are closely tied to the success of its franchisees, but the franchisees are independent operators and we have limited influence over their restaurant operations and must rely on franchisees to implement major initiatives (including the reimaging initiative and point-of-sale upgrade initiative) and marketing and advertising programs to drive future growth.
 
  •  Our principal competitors may have greater influence over their restaurant systems because of their significantly higher percentage of owned restaurants (as compared to us) which allows such


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  competitors more control in the implementation of operational initiatives and business strategies, including marketing and advertising programs.
 
  •  The board of directors considered how closely tied our comparable sales and average restaurant sales are to the unemployment and consumer confidence levels and its opinion that, while some operating improvements were achievable in the current economic environment, until and unless the economy experiences significant improvements in unemployment and consumer confidence, we would not be able to significantly capitalize on the investments and operating improvements that had been made in the business.
 
  •  The board of directors’ knowledge of the significant capital expenditures that are required in order to remodel or rebuild our restaurants and the risks that are associated with our plan to refranchise approximately half of our restaurant portfolio in the next three to five years to minimize these capital expenditures and encourage additional restaurant growth.
 
  •  The board of directors’ knowledge of our recent share price performance, specifically that our recent earnings multiples compared to those of certain comparable companies did not provide shareholders the full benefit of our recent operational performance.
 
Strategic Alternatives
 
  •  In consultation with its financial advisors, the board of directors considered the likelihood of another financial or strategic buyer being willing to pursue a transaction with us. Although we did not actively seek offers from other potential purchasers, the board of directors believes that the per share merger consideration is the highest price reasonably attainable by the Company’s shareholders in an acquisition transaction, considering the likelihood of potential interested third parties and strategic opportunities.
 
  •  As discussed below, the terms of the merger agreement permit the board of directors to solicit and consider alternative proposals and to terminate the merger agreement and enter into an agreement with a third party to accept a “superior proposal”.
 
  •  The board of directors also considered the possibility of continuing as a standalone company or pursuing a leveraged stock repurchase and perceived risks of those alternatives, the range of potential benefits to the Company’s shareholders of these alternatives and the timing and execution risk of accomplishing the goals of such alternatives, as well as the board of director’s assessment that no alternatives were reasonably likely to create greater value for the Company’s shareholders, taking into account risks of execution as well as business, competitive, industry and market risk.
 
Merger Agreement Terms (Go-Shop Period; Solicitation of Alternative Proposals)
 
  •  We have the right to conduct a “go shop” process for 40 days after signing the merger agreement to solicit alternative acquisition proposals, if available, or confirm the advisability of the merger.
 
  •  The merger agreement has customary no solicitation and termination provisions which should not preclude third parties from making “superior proposals”:
 
  •  After the go-shop period, the board of directors can furnish information or enter into discussions with respect to a takeover proposal if it determines in good faith, after consultation with its outside legal counsel and financial advisor, that such takeover proposal constitutes or would reasonably be expected to result in a superior proposal.
 
  •  If the board of directors determines in good faith after consultation with its financial advisor and outside legal counsel, that a takeover proposal constitutes a superior proposal, it can (after giving Merger Sub a “match right”) terminate the merger agreement and enter into an agreement with respect to the superior proposal.


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  •  The board of directors may withdraw or modify its recommendation if it determines in good faith after consultation with its financial advisor and outside legal counsel, that the failure to do so would be inconsistent with its fiduciary duties (whether or not in response to a takeover proposal).
 
  •  If we terminate the merger agreement in order to accept a superior proposal, we are required to pay a termination fee of $50 million during the go-shop period or $95 million after the go-shop period (equal to approximately 1.5% and 2.8% of the aggregate equity value of the transaction, respectively); the board of directors believes that such termination fees are customary and would not deter any interested third party from making, or inhibit the board of directors from approving a superior proposal if such were available.
 
  •  The merger agreement has customary terms and was the product of extensive arms-length negotiations.
 
  •  The structure of the transaction as a two-step transaction enables the shareholders to receive the cash price pursuant to the offer in a relatively short time frame (and reduce the uncertainty during the pendency of the transaction), followed by the merger in which shareholders that do not tender in the offer will receive the same cash price as is paid in the offer. In addition, the structure of the transaction permits the use of a one-step transaction, under certain circumstances, in the event the two-step transaction is unable to be effected.
 
  •  Merger Sub is obligated to exercise the “top-up” to purchase up to an additional number of shares of Company common stock sufficient to cause Merger Sub to own 90% of the shares of Company common stock outstanding after the offer, which would permit Merger Sub to close the merger (as a short-form merger under Delaware law) more quickly than alternative structures.
 
  •  The availability of statutory appraisal rights under Delaware law in the merger.
 
Likelihood of Consummation
 
  •  Stockholder Tender Agreements:
 
  •  The Sponsors, who currently own approximately 31% of the outstanding shares of Company common stock, entered into the stockholder tender agreements and agreed to tender their shares in the offer. It is anticipated that, pursuant to the terms of such stockholder tender agreements, such Sponsors will each enter into customary voting agreements with Parent to vote their shares of Company common stock in favor of the merger.
 
  •  The stockholder tender agreements were a condition to Parent’s willingness to enter into the merger agreement.
 
  •  The stockholder tender agreements would automatically terminate upon a termination of the merger agreement for any reason (including as a result of the board of directors accepting a superior proposal) and do not prevent the board of directors from accepting a superior proposal.
 
  •  The likelihood that the offer and the merger would be consummated, including:
 
  •  Merger Sub is required, subject to certain exceptions, to extend the offer in certain circumstances.
 
  •  The consummation of the offer is conditioned on 79.1% of the outstanding shares of Company common stock being tendered in the offer, with a back-up one-step merger (that only requires the approval of the holders of a majority of the outstanding shares of Company common stock) in certain circumstances, including in the event the minimum condition in the offer is not satisfied.
 
  •  The conditions to the offer are specific and limited, and are not within the control or discretion of Merger Sub, Parent or 3G and, in the board of directors’ judgment, are likely to be satisfied.
 
  •  The transaction is likely to be completed if a sufficient number of shares are tendered in the offer.
 
  •  There are no significant antitrust or other regulatory impediments.
 
  •  There are no third party consents that are conditions to the transaction.


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  •  Merger Sub has obtained commitment letters as described below.
 
Financing-Related Terms
 
  •  Debt/Equity Commitment Letters:
 
  •  Merger Sub received executed debt financing commitment letters from major commercial banks with significant experience in similar lending transactions and a strong reputation for honoring the terms of the commitment letters, which, in the reasonable judgment of the board of directors, increases the likelihood of such financing being completed.
 
  •  Each of Parent and Merger Sub is required to use reasonable best efforts to seek to enforce its rights under the debt financing documents in the event of a material breach thereof by the financing sources thereunder.
 
  •  3G has provided the equity commitment letter to fund the equity portion of the financing (which represents approximately 37.5% of the total financing required for the transaction) and has provided assurances of the sources of its funds.
 
  •  The limited number and nature of the conditions to funding set forth in the debt and equity financing commitment letters and the expectation that such conditions will be timely met and the financing will be provided in a timely manner, and the obligation of Parent and Merger Sub to use reasonable best efforts to obtain the debt financing, and if they fail to effect the closing under certain circumstances, for Parent to pay us the Parent Termination Fee.
 
  •  3G has provided the Guaranty in favor of the Company that guarantees the payment of the Parent Termination Fee.
 
  •  The board of directors considered the level of effort Merger Sub and Parent must use under the merger agreement to obtain the proceeds of the financing, including the obligation to “take-down” the bridge financing by November 18, 2010 if all conditions to the merger or offer (other than the financing proceeds condition), as applicable, have been satisfied or waived.
 
  •  Specific Performance:
 
  •  We are entitled to cause the equity to be funded if (i) all of the conditions to Parent’s and Merger Sub’s obligations to the offer closing and/or the effective time of the merger have been satisfied, (ii) the debt financing would be funded at the effective time of the merger if the equity is funded and (iii) we have confirmed that if the equity financing and debt financing were funded, it would take actions within its control to cause the closing of the merger to occur.
 
The board of directors also considered a number of uncertainties and risks in its deliberations concerning the merger and the other transactions contemplated by the merger agreement, including the following:
 
  •  Our current shareholders would not have the opportunity to participate in any possible growth and profits of the Company following the completion of the transaction.
 
  •  The risk that the minimum tender condition of 79.1% in the offer may not be satisfied and that such minimum tender condition is a higher threshold than the approval percentage that would be required if the transaction was structured as a one-step merger (i.e., a majority of the outstanding shares).
 
  •  However, this consideration was viewed in light of the provisions in the merger agreement that provide for the one-step merger (with a majority voting requirement) if the minimum tender condition is not satisfied.
 
  •  The merger agreement contemplates the early filing of a proxy statement so that the one-step merger structure could be implemented without significant delay if the minimum tender condition is not satisfied.


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  •  The risk that the proposed transaction might not be completed and the effect of the resulting public announcement of termination of the merger agreement on:
 
  •  The market price of the Company common stock, which could be affected by many factors, including (i) the reason for which the merger agreement was terminated and whether such termination results from factors adversely affecting us, (ii) the possibility that the marketplace would consider us to be an unattractive acquisition candidate and (iii) the possible sale of shares of Company common stock by short-term investors following the announcement of termination of the merger agreement.
 
  •  Our operating results, particularly in light of the costs incurred in connection with the transaction, including the potential requirement to make a termination payment.
 
  •  The ability to attract and retain key personnel.
 
  •  Relationships with franchisees and others that do business with us.
 
  •  The possible disruption to our business that may result from the announcement of the transaction and the resulting distraction of the attention of our management and employees and the impact of the transaction on our franchisees and others that do business with us.
 
  •  The terms of the merger agreement, including (i) the operational restrictions imposed on us between signing and closing (which may delay or prevent us from undertaking business opportunities that may arise pending the completion of the transaction), and (ii) the termination fee, that could become payable by us under certain circumstances, including if we terminate the merger agreement to accept a superior proposal, in an amount equal to:
 
  •  $50 million (or approximately 1.5% of the equity value of the transaction) if such termination occurs prior to the expiration of the go-shop period, or
 
  •  $95 million (or approximately 2.8% of the equity value of the transaction) if such termination occurs after the expiration of the go-shop period.
 
  •  The fact that we entered into the transaction with Parent and Merger Sub before seeking offers from other potential purchasers.
 
  •  The board of directors believed that initiating a prolonged auction process could have (i) resulted in the loss of Merger Sub’s offer, (ii) negative impacts on the morale of employees, and (iii) distracted employees and senior management from implementing our operating plan.
 
  •  The permissive “go shop” provisions and level of termination fees of the merger agreement would nonetheless provide an opportunity to seek offers from other potential purchasers.
 
  •  The restriction on soliciting competing proposals following the “go-shop” period.
 
  •  The possibility that Merger Sub will be unable to obtain the debt financing from the lenders under the commitment letters, including as a result of the conditions in the debt commitment letter.
 
  •  The fact that we are entering into a merger agreement with a newly formed entity and, accordingly, that its remedy in connection with a breach of the merger agreement by Merger Sub, even a breach that is deliberate or willful, is limited to $175 million.
 
  •  The interests of our CEO and certain other members of senior management in the offer and the merger, including certain severance and retention arrangements as described under the section entitled “The Merger — Interests of Certain Persons in the Merger” beginning on page [ • ].
 
  •  The fact that the cash consideration paid in the transaction would be taxable to the Company’s shareholders and would provide liquidity to the Sponsors.
 
The board of directors believed that, overall, the potential benefits of the offer and the merger to the Company’s shareholders outweighed the risks and uncertainties of the offer and the merger.


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The foregoing discussion of information and factors considered by the board of directors is not intended to be exhaustive. In light of the variety of factors considered in connection with its evaluation of the offer and the merger, the board of directors did not find it practicable to, and did not, quantify or otherwise assign relative weights to the specific factors considered in reaching its determinations and recommendations. Moreover, each member of the board of directors applied his own personal business judgment to the process and may have given different weight to different factors. In arriving at their recommendation, the members of the board of directors were aware of the interests of our executive officers, directors and affiliates as described under the section entitled “The Merger — Interests of Certain Persons in the Merger” beginning on page [ • ]. The board of directors believed it was appropriate to engage Goldman Sachs to provide financial advice and to undertake a study to render a fairness opinion in connection with the offer and merger, notwithstanding that certain of its affiliates have interests as described under the section entitled “The Merger — Interests of Certain Persons in the Merger” beginning on page [ • ], as, among other things, (i) Goldman Sachs’ financial advisory team was separate from the persons affiliated with the Goldman Sachs Funds, which is a Sponsor, and Mr. Mehra, a member of the board of directors and a Managing Director of Goldman Sachs, (ii) the board of directors had also engaged Morgan Stanley to act as a financial advisor and (iii) Goldman Sachs would split the financial advisor fee with Morgan Stanley, therefore there would be no incremental advisor fees as a result of our engaging two financial advisors.
 
The board of directors recommends that you vote “FOR” the proposal to adopt the merger agreement and “FOR” the proposal to adjourn the special meeting, if necessary or appropriate, to solicit additional proxies.
 
In considering the recommendation of the board of directors with respect to the proposal to adopt the merger agreement, you should be aware that our directors and executive officers have interests in the merger that are different from, or in addition to, yours. The board of directors was aware of and considered these interests, among other matters, in evaluating and negotiating the merger agreement and the merger, and in recommending that the merger agreement be adopted by the shareholders of the Company. See the section entitled “The Merger — Interests of Certain Persons in the Merger” beginning on page [ • ].
 
Opinions of the Company’s Financial Advisors
 
Opinion of Morgan Stanley & Co. Incorporated
 
Morgan Stanley was engaged by the Company to provide it with financial advisory services in connection with the potential sale of the Company. At the meeting of the board of directors on September 1, 2010, Morgan Stanley rendered its oral opinion, subsequently confirmed in writing, that, as of that date, based upon and subject to the limitations, qualifications and assumptions set forth in the written opinion, the $24.00 per share to be received by holders of shares of Company common stock pursuant to the merger agreement, was fair from a financial point of view to such holders.
 
The full text of the written opinion of Morgan Stanley, dated September 1, 2010, which sets forth among other things, assumptions made, procedures followed, matters considered and limitations on the scope of the review undertaken by Morgan Stanley in rendering its opinion, is attached as Annex B hereto. Shareholders are urged to, and should, read the opinion carefully and in its entirety. Morgan Stanley’s opinion is directed to the board of directors and addresses only the fairness, from a financial point of view, of the consideration to be received by the holders of shares of Company common stock pursuant to the merger agreement, as of the date of the opinion. Morgan Stanley’s opinion does not address any other aspect of the transactions contemplated by the merger agreement and does not constitute a recommendation as to how any such holder should vote at the special meeting or whether any such holder should take any other action with respect to the merger. The summary of the opinion of Morgan Stanley set forth in this proxy statement is qualified in its entirety by reference to the full text of the opinion. The summary of the opinion of Morgan Stanley set forth below is qualified in its entirety by reference to the full text of the opinion.


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Summary of Morgan Stanley’s Opinion
 
In connection with rendering its opinion, Morgan Stanley, among other things:
 
  •  Reviewed certain publicly available financial statements and other business and financial information of the Company;
 
  •  Reviewed certain internal financial and operating data concerning the Company;
 
  •  Reviewed certain financial projections prepared by the management of the Company;
 
  •  Discussed the past and current operations and financial condition and the prospects of the Company with senior executives of the Company;
 
  •  Reviewed the reported prices and trading activity for the shares of the Company common stock;
 
  •  Compared the financial performance of the Company and the price and trading activity of the shares with that of certain other comparable publicly-traded companies and their securities;
 
  •  Reviewed the financial terms, to the extent publicly available, of certain comparable acquisition transactions;
 
  •  Participated in certain discussions and negotiations among representatives of the Company, Parent, Merger Sub, certain parties and their respective financial and legal advisors;
 
  •  Reviewed the merger agreement, drafts of equity and debt commitment letters from certain lenders and other parties, or the Commitment Letters, and certain related documents; and
 
  •  Performed such other analyses and considered such other factors as Morgan Stanley deemed appropriate.
 
In rendering its opinion, Morgan Stanley assumed and relied upon, without independent verification, the accuracy and completeness of the information that was publicly available or supplied or otherwise made available to Morgan Stanley by the Company, which formed a substantial basis for its opinion. With respect to the financial projections, Morgan Stanley assumed that they were reasonably prepared on bases reflecting the best currently available estimates and judgments of the management of the Company of the future financial performance of the Company.
 
In addition, Morgan Stanley assumed that the offer and the merger will be consummated in accordance with the terms set forth in the merger agreement without any waiver, amendment or delay of any terms or conditions and that the Parent and Merger Sub will obtain financing in accordance with the terms set forth in the Commitment Letters. Morgan Stanley assumed that in connection with the receipt of all the necessary governmental, regulatory or other approvals and consents required for the merger, no delays, limitations, conditions or restrictions would be imposed that would have a material adverse effect on the contemplated benefits expected to be derived in the merger. Morgan Stanley is not a legal, tax or regulatory advisor. Morgan Stanley is a financial advisor only and relied upon, without independent verification, the assessment of Parent, Merger Sub and the Company and their legal, tax or regulatory advisors with respect to legal, tax or regulatory matters. Morgan Stanley did not express an opinion with respect to the fairness of the amount or nature of the compensation to any of the Company’s officers, directors or employees, or any class of such persons, relative to the consideration to be received by the holders of shares in the transaction. Morgan Stanley did not make any independent valuation or appraisal of the assets or liabilities of the Company, nor was it furnished with any such appraisals.
 
Morgan Stanley’s opinion was necessarily based on financial, economic, market and other conditions as in effect on, and the information made available to it, as of September 1, 2010. Events occurring after September 1, 2010 may affect Morgan Stanley’s opinion and the assumptions used in preparing it. Morgan Stanley did not assume any obligation to update, revise or reaffirm its opinion.
 
In arriving at its opinion, Morgan Stanley was not authorized to solicit and did not solicit interest from any party with respect to the acquisition, business combination or other extraordinary transaction, involving the Company, nor did Morgan Stanley negotiate with any of the parties, other than Parent and Merger Sub,


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which expressed interest to Morgan Stanley in the possible acquisition of the Company or certain of its constituent businesses.
 
Morgan Stanley’s opinion was approved by a committee of Morgan Stanley investment banking and other professionals in accordance with its customary practice.
 
The following is a brief summary of the material analyses performed by Morgan Stanley in connection with its oral opinion and the preparation of its written opinion letter dated September 1, 2010. Some of these summaries of financial analyses include information presented in tabular format. In order to fully understand the financial analyses used by Morgan Stanley, the tables must be read together with the text of each summary. The tables alone do not constitute a complete description of the financial analyses.
 
Historical Share Price Performance.  Morgan Stanley reviewed the share price performance and compared various metrics to the per share merger consideration.
 
Morgan Stanley observed that the shares of Company common stock closed at $17.12 on June 29, 2010 (the day on which the Company received a written proposal from Parent and Merger Sub proposing an acquisition of the Company at $23.00 per share) and compared that to per share merger consideration to be received by holders of shares of Company common stock pursuant to the merger agreement of $24.00 per share. Morgan Stanley noted that the implied premium of the per share merger consideration to be received by holders of shares of Company common stock pursuant to the merger agreement of $24.00 per share when compared with the closing share price on June 29th was 40.2%.
 
Morgan Stanley also observed that the shares of Company common stock closed at $16.77 on August 30, 2010 (two trading days prior to the announcement of the execution of the merger agreement) and compared that to the per share merger consideration to be received by holders of shares of Company common stock pursuant to the merger agreement of $24.00 per share. Morgan Stanley noted that the implied premium of the per share merger consideration to be received by holders of shares of Company common stock pursuant to the merger agreement of $24.00 per share when compared with the closing share price on August 30 was 43.1%.
 
Morgan Stanley also observed that the range of closing share prices for the twelve months ending August 30, 2010 was from $16.41 to $22.06.
 
The following table presents various closing prices for the shares of Company common stock and the premium implied by the per share merger consideration when compared with such closing prices:
 
                                                 
    June
  August
  52-Week
  1-Month
  3-Month
  6-Month
    29th   30th   High(1)   Average(1)   Average(1)   Average(1)
 
Closing Share Price
  $ 17.12     $ 16.77     $ 22.06     $ 16.94     $ 17.55     $ 18.90  
Premium Implied by the Offer Price
    40.2 %     43.1 %     8.8 %     41.6 %     36.7 %     27.0 %
 
 
(1) As of August 30, 2010, two trading days prior to announcement of the execution of the merger agreement.
 
Securities Research Analysts’ Future Price Targets.  Morgan Stanley reviewed the public market trading price targets for the shares of Company common stock prepared and published by securities research analysts prior to August 30, 2010. These targets reflected each analyst’s estimate of the future public market trading price of the shares. The range of equity analyst price targets for the Company was $18.00 per share to $24.00 per share. Morgan Stanley discounted the analysts’ price targets to derive a range of present values of these price targets which resulted in a range of securities research analysts’ future price targets for the Company of approximately $16.50 per share to $22.00 per share.
 
The public market trading price targets published by securities research analysts do not necessarily reflect current market trading prices for the shares and these estimates are subject to uncertainties, including the future financial performance of the Company and future financial market conditions.


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Peer Group Comparison.  Morgan Stanley compared certain financial information of the Company with publicly-available information for certain companies that operate in and are exposed to similar lines of business as the Company, namely companies in the quick service restaurant sector. The peer group included:
 
  •  Yum! Brands, Inc.
 
  •  McDonald’s Corporation
 
  •  Sonic Corporation
 
  •  Jack in the Box Inc.
 
  •  Domino’s Pizza, Inc.
 
  •  Wendy’s Arby’s Group Inc.
 
  •  Tim Hortons Inc.
 
  •  Papa John’s International, Inc.
 
For this analysis, Morgan Stanley analyzed the following statistics for each of these companies, as of August 30, 2010 and based on estimates for the peer group companies provided by I/B/E/S and public filings:
 
  •  The ratio of aggregate value, defined as market capitalization plus total debt plus minority interests plus preferred capital less cash and cash equivalents, which we refer to as Aggregate Value or AV, to estimated calendar year 2010 earnings before interest, taxes, depreciation and amortization, or EBITDA;
 
  •  The ratio of price to estimated earnings per share for calendar year 2010; and
 
  •  The ratio of price to estimated earnings growth per share for calendar year 2010.
 
Based on the analysis of the relevant metrics for each of the peer group companies, Morgan Stanley selected a range of multiples for the peer group companies and applied this range of multiples to the relevant Company financial statistics. For purposes of the Company’s estimated calendar year 2010 EBITDA, earnings and earnings growth, Morgan Stanley utilized estimates provided by I/B/E/S. Based on this analysis, the implied value per share of Company common stock is as of August 30, 2010 as follows:
 
                         
    Company
    Peer Group
       
    Financial
    Company
    Implied Value per
 
Ratio
  Statistic     Multiple Range     Share  
 
Aggregate Value to Estimated Calendar 2010 EBITDA
  $ 444.2MM       6.5x - 8.5x     $ 16.25 - $22.50  
Price to Estimated Calendar 2010 Earnings
  $ 1.36 per share       12.0x - 14.5x     $ 16.25 - $19.75  
Price to Estimated Calendar 2010 Earnings Growth
    12.8 %     0.8x - 1.2x     $ 14.00 - $21.00  
 
Morgan Stanley also noted that applying McDonald’s Corporation and Yum! Brands, Inc., valuation metrics to the Company resulted in a per share price of $27.00 based on the AV to Estimated Calendar 2010 EBITDA ratio, a per share price of $22.50 based on the Price to Estimated Calendar 2010 Earnings ratio, and a per share price of $26.25 based on the Price to Estimated Calendar 2010 Earnings Growth ratio.
 
No company in the peer group comparison analysis is identical to the Company. In evaluating the peer group, Morgan Stanley made judgments and assumptions with regard to industry performance, general business, economic, market and financial conditions and other matters, many of which are beyond the control of the Company, such as the impact of competition on the business of the Company or the industry generally, industry growth and the absence of any material adverse change in the financial condition and prospects of the Company or the industry or in the financial markets in general. Mathematical analysis, such as determining the average or median, is not in itself a meaningful method of using peer group data.
 
Discounted Equity Value Analysis.  Morgan Stanley performed an illustrative analysis of the present value of the Company’s theoretical implied future price per share of Company common stock. In performing the discounted equity value analysis, Morgan Stanley multiplied the earnings per share estimate for calendar years 2011-2013, based on Company management forecasts, to price-to-earnings, or P/E multiples of 12.0x


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and 15.0x in order to estimate the future price per share. The estimated future price per share was then discounted to present value implying a price per share ranging from approximately $15.50 per share to $19.75 per share for a P/E multiple of 12.0x and a price per share ranging from approximately $19.25 per share to $24.75 per share for a P/E multiple of 15.0x.
 
Analysis of Selected Precedent Transactions.  Using publicly available information, Morgan Stanley reviewed the terms of selected transactions in which the targets were companies or divisions that operate in and/or were exposed to similar lines of business as the Company.
 
Morgan Stanley reviewed the price paid and calculated the ratio of Aggregate Value implied by the price paid to last twelve months, or LTM, EBITDA (based on publicly available information) in each of the selected transactions in the quick service restaurant and casual dining restaurant sectors since May 31, 2002 (listed below). Based on this analysis, Morgan Stanley selected a range of multiples implied by these transactions and applied this range of multiples to the Company’s LTM EBITDA to imply a value per share of Company common stock based on such multiples.
 
For this analysis Morgan Stanley reviewed the following transactions:
 
Domestic Transactions
 
         
Acquiror
 
Target
  Announcement Date
 
Oak Hill Capital Partners
  Dave & Busters   5/3/10
Apollo Management
  CKE Restaurants   4/24/10
Golden Gate Capital
  On-The-Border Cafes, Inc.   3/23/10
Friedman Fleischer & Lowe
  Church’s Chicken   6/9/09
Golden Gate Capital
  Romano’s Macaroni Grill   8/18/08
Triarc Companies, Inc. 
  Wendy’s International, Inc.   4/24/08
LNK Partners
  ABP Corporation   1/16/08
Sun Capital Partners (Barbeque Integrated, Inc.)
  Smokey Bones Barbeque and Grill (Darden)   12/4/07
Ruth’s Chris Steak House Inc. 
  Mitchell’s Fish Market   11/6/07
Darden Restaurants Inc. 
  RARE Hospitality International Inc.   8/16/07
Sun Capital Partners Inc. 
  Boston Market Corporation   8/6/07
IHOP Corp. 
  Applebee’s International, Inc.   7/16/07
Seminole Hard Rock Hotel & Casino
  Hard Rock Café International, Inc.   12/7/06
Bain Capital Partners LLC & Catterton Partners
  OSI Restaurant Partners, Inc.   11/6/06
Black Canyon and BRS
  Logan’s Roadhouse   10/30/06
Catterton Partners & Oak Investment Partners
  Cheddar’s Inc.   8/28/06
Buffet’s, Inc. 
  Ryan’s Restaurant Group, Inc.   7/24/06
CCMP Capital Advisors LLC
  The Quizno’s Corporation   3/20/06
Services Acquisition Corp. International
  Jamba Juice Company   3/13/06
Carlyle Group, Bain Capital, THL Partners
  Dunkin Brands Inc.   12/12/05
Trimaran Capital Partners, Inc. 
  El Pollo Loco, Inc.   9/28/05
Management
  Au bon Pain, Inc.   5/18/05
Arcapita Inc. 
  Church’s Chicken   11/1/04
Catterton Partners
  First Watch Restaurants, Inc.   9/1/04
Wendy’s International Inc. 
  Fresh Enterprises Inc. (Baja Fresh)   5/31/02


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International Transactions
 
         
Acquiror
 
Target
  Announcement Date
 
Bridgepoint Capital Ltd. 
  Pret A Manger   2/22/08
Rome Bidco (Paladin Partners and Saratoga)
  Caffe Nero Group PLC   12/7/06
CDC Capital Investissement
  Quick Restaurant NV   10/25/06
Foodco Pastries
  Tele Pizza SA   2/20/06
Investor Group
  PizzaExpress PLC   5/13/03
TPG, Bain Capital, GS Capital Partners
  Burger King Corp.   7/25/02
 
The following table summarizes Morgan Stanley’s analysis:
 
                         
    Company
    Comparable
    Implied
 
    Financial
    Company
    Value per
 
Ratio
  Statistic     Multiple Range     Share  
 
Aggregate Value to LTM EBITDA
  $ 444.6MM       8.0x - 10.0 x   $ 21.00 - $27.00  
 
Morgan Stanley also reviewed the premiums paid or proposed to be paid in acquisitions of U.S. public companies with capitalization greater than $1 billion during the 21-year period ended March 31, 2010. Morgan Stanley observed that the premiums paid or proposed to be paid in these transactions was between 30% to 40% of the target’s pre-announcement trading price, which implied a range of $21.75 to $23.50 per share based on the closing share price on August 30, 2010.
 
No company utilized in the selected precedent transactions analysis is identical to the Company, nor is any transaction listed identical to the transactions contemplated by the merger agreement. In evaluating the transactions listed above, Morgan Stanley made judgments and assumptions with regard to industry performance, general business, economic, market and financial conditions and other matters, many of which are beyond the control of the Company, such as the impact of competition on the business of the Company or the industry generally, industry growth and the absence of any adverse material change in the financial condition and prospects of the Company or the industry or in the financial markets in general. Mathematical analysis, such as determining the average or median, is not in itself a meaningful method of using comparable transaction data.
 
Discounted Cash Flow Analysis.  Morgan Stanley performed a discounted cash flow analysis as of August 30, 2010, which is an analysis of the present value of projected unlevered free cash flows using terminal year Aggregate Value to EBITDA multiples based on projected EBITDA for the Company. Morgan Stanley analyzed the Company’s business using information provided by Company management, including certain financial forecasts prepared by Company management for the fiscal years 2011 through 2015, under five scenarios. The first scenario assumes that the Company operates in a continued recessionary economic environment, or the Recessionary Case. The second scenario assumes that the Company operates in a moderately improved economic environment, or the Moderate Growth Case. The third scenario assumes that the Company operates in a significantly improved economic environment, or the Economic Expansion Case. The fourth scenario assumes that the Company implemented a re-franchising of its company-owned stores, or the Refranchise Case. The fifth scenario assumes that the Company operates in an economic environment without any macroeconomic risks to pricing and costs (e.g., commodities, labor, inflation, etc.), or the Risk Neutral Case. The terminal value was calculated by applying terminal multiples ranging from 6.5x to 8.5x fiscal year 2015 EBITDA, as estimated by Company management. For purposes of this analysis, Morgan Stanley calculated the Company’s discounted unlevered free cash flow value using discount rates ranging from 8.0% to 9.0%. The range of discount rates was selected based upon an analysis of the Company’s weighted average cost of capital and on the experience and judgment of Morgan Stanley. The discounted cash flow analysis implied a range of $20.50 per share to $27.25 per share using the Recessionary Case, $21.75 per share to $29.00 per share using the Moderate Growth Case and Refranchise Case and $24.00 per share to $32.50 per share using the Economic Expansion Case and Risk Neutral Case.
 
Leveraged Buyout Analysis.  Morgan Stanley performed an illustrative leveraged buyout analysis to estimate the theoretical purchase price that a financial buyer could pay in an acquisition of the Company. For purposes of this analysis, Morgan Stanley assumed that the capital structure of the Company that would result


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from the theoretical transaction would be identical to the capital structure proposed by Parent and Merger Sub and that such a financial buyer would attempt to realize a return on its investment in fiscal year 2015. Estimated financial data for the Company was based on certain financial forecasts prepared by Company management for fiscal years 2011 through 2015, under the five scenarios described above. Estimated exit values for the Company were calculated by applying an exit value multiple of 8.5x to fiscal year 2015 EBITDA, as estimated by Company management. Morgan Stanley then derived a range of theoretical purchase prices based on an assumed required internal rate of return for a financial buyer of between 17.5% and 22.5%. This analysis implied a value range of $21.00 per share to $22.75 per share using the Recessionary Case, $22.00 per share to $24.00 per share using the Moderate Growth Case and Refranchise Case and $23.50 per share to $26.50 per share using the Economic Expansion Case and Risk Neutral Case.
 
In connection with the review of the transaction contemplated by the merger agreement by the board of directors, Morgan Stanley performed a variety of financial and comparative analyses for purposes of its opinion given in connection therewith. The preparation of a financial opinion is a complex process and is not necessarily susceptible to partial analysis or summary description. In arriving at its opinion, Morgan Stanley considered the results of all of its analyses as a whole and did not attribute any particular weight to any analysis or factor considered by it. Furthermore, Morgan Stanley believes that selecting any portion of its analyses, without considering all analyses as a whole, would create an incomplete view of the process underlying its analyses and opinion. In addition, Morgan Stanley may have given various analyses and factors more or less weight than other analyses and factors and may have deemed various assumptions more or less probable than other assumptions, so that the ranges of valuations resulting from any particular analysis described above should not be taken to be Morgan Stanley’s view of the actual value of the Company.
 
In performing its analyses, Morgan Stanley made numerous assumptions with respect to industry performance, general business and economic conditions and other matters, many of which are beyond the control of the Company. Any estimates contained in Morgan Stanley’s analyses are not necessarily indicative of future results or actual values, which may be significantly more or less favorable than those suggested by such estimates. The analyses performed were prepared solely as part of Morgan Stanley’s analysis of the fairness from a financial point of view of the $24.00 per share to be received by the holders of shares of Company common stock pursuant to the merger agreement, and were conducted in connection with the delivery of Morgan Stanley’s opinion to the board of directors. These analyses do not purport to be appraisals or to reflect the prices at which the shares might actually trade. The per share merger consideration to be received by the holders of the shares of Company common stock and other terms of the merger agreement were determined through arm’s-length negotiations between the Company and Parent and Merger Sub and were approved by the board of directors. Morgan Stanley provided advice to the Company during such negotiations; however, Morgan Stanley did not recommend any specific consideration to the Company or that any specific consideration constituted the only appropriate consideration for the proposed transaction. In addition, as described above under the heading “— Reasons for the Merger; Recommendation of the Board of Directors,Morgan Stanley’s opinion and presentation to the board of directors was one of many factors taken into consideration by the board of directors in making their decision to approve the merger agreement. Consequently, the Morgan Stanley analyses as described above should not be viewed as determinative of the opinion of the board of directors with respect to the consideration or the value of the Company, or of whether the board of directors would have been willing to agree to a different consideration.
 
The board of directors retained Morgan Stanley based upon Morgan Stanley’s qualifications, experience and expertise and its knowledge of the business affairs of the Company. Morgan Stanley is a global financial services firm engaged in the securities, investment management and individual wealth management businesses. Its securities business is engaged in securities underwriting, trading and brokerage activities, foreign exchange, commodities and derivatives trading, prime brokerage, as well as providing investment banking, financing and financial advisory services. Morgan Stanley, its affiliates, directors and officers may at any time invest on a principal basis or manage funds that invest, hold long or short positions, finance positions, and may trade or otherwise structure and effect transactions, for their own account or the accounts of its customers, in debt or equity securities or loans of the Parent and Merger Sub or their affiliates, the Company, or any other company, or any currency or commodity, that may be involved in this transaction, or any related derivative instrument.


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In the two years prior to the date of its opinion, Morgan Stanley has provided financial advisory and financing services to the Company and has received fees in connection with such services. Morgan Stanley may also seek to provide such services to the Parent and Merger Sub and the Company in the future and expects to receive fees for the rendering of these services.
 
Pursuant to the terms of its engagement letter, Morgan Stanley provided financial advisory services and a financial fairness opinion to the board of directors in connection with the transaction, and the Company agreed to pay Morgan Stanley a customary fee, a substantial portion of which is contingent upon the consummation of the merger, in connection with the transaction. For a description of the engagement letter and the fees payable thereunder by the Company to Morgan Stanley, see “— Persons Retained, Employed, Compensated or Used”. The Company has also agreed to reimburse Morgan Stanley for its expenses incurred in performing its services. In addition, the Company has agreed to indemnify Morgan Stanley and its affiliates, their respective directors, officers, agents and employees and each person, if any, controlling Morgan Stanley or any of its affiliates against certain liabilities and expenses, including certain liabilities under the federal securities laws, related to or arising out of Morgan Stanley’s engagement.
 
Opinion of Goldman, Sachs & Co.
 
Goldman Sachs rendered its opinion to the board of directors that, as of September 2, 2010, and based upon and subject to the factors and assumptions set forth therein, the $24.00 per share of Company common stock in cash to be paid to the holders (other than Parent and its affiliates) of shares of Company common stock pursuant to the merger agreement was fair, from a financial point of view, to such holders.
 
The full text of the written opinion of Goldman Sachs, dated September 2, 2010, which sets forth the assumptions made, procedures followed, matters considered and limitations on the review undertaken in connection with the opinion, is attached as Annex C. Goldman Sachs provided its opinion for the information and assistance of the board of directors in connection with its consideration of the transactions contemplated by the merger agreement. Goldman Sachs’ opinion does not address any other aspect of the merger and does not constitute a recommendation as to how any shareholder of the Company should vote with respect to the merger or any other matter. The summary of the written opinion of Goldman Sachs set forth below is qualified in its entirety by reference to the full text of such opinion.
 
In connection with rendering the opinion described above and performing its related financial analyses, Goldman Sachs reviewed, among other things:
 
  •  the merger agreement;
 
  •  annual reports to shareholders and Annual Reports on Form 10-K of the Company for the five fiscal years ended June 30, 2010;
 
  •  certain interim reports to shareholders and Quarterly Reports on Form 10-Q of the Company;
 
  •  certain other communications from the Company to its shareholders;
 
  •  certain publicly available research analyst reports for the Company; and
 
  •  certain internal financial analyses and forecasts for the Company prepared by its management, including the Company’s “Refranchise Case”, which was approved for Goldman Sachs’ use by the Company.
 
Goldman Sachs also held discussions with members of the senior management of the Company regarding their assessment of the past and current business operations, financial condition and future prospects of the Company. In addition, Goldman Sachs reviewed the reported price and trading activity for the shares of Company Common Stock, compared certain financial and stock market information for the Company with similar information for certain other companies the securities of which are publicly traded, reviewed the financial terms of certain recent business combinations in the restaurant industry specifically and in other


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industries generally, and performed such other studies and analyses, and considered such other factors, as Goldman Sachs considered appropriate.
 
For purposes of rendering the opinion described above, Goldman Sachs relied upon and assumed, without assuming any responsibility for independent verification, the accuracy and completeness of all of the financial, legal, regulatory, tax, accounting and other information provided to, discussed with or reviewed by it, and Goldman Sachs does not assume any liability for any such information. In that regard, Goldman Sachs assumed with the consent of the Company that the Refranchise Case was reasonably prepared on a basis reflecting the best currently available estimates and judgments of the management of the Company. In addition, Goldman Sachs did not make an independent evaluation or appraisal of the assets and liabilities (including any contingent, derivative or other off-balance sheet assets and liabilities) of the Company or any of its subsidiaries, nor was any such evaluation or appraisal of the assets or liabilities of the Company or any of its subsidiaries furnished to Goldman Sachs. Goldman Sachs assumed that all governmental, regulatory or other consents and approvals necessary for the consummation of the transactions contemplated by the merger agreement will be obtained without any adverse effect on the expected benefits of such transactions in any way meaningful to its analysis. Goldman Sachs also assumed that the transactions contemplated by the merger agreement will be consummated on the terms set forth therein, without the waiver or modification of any term or condition the effect of which would be in any way meaningful to its analysis. Goldman Sachs’ opinion does not address any legal, regulatory, tax or accounting matters.
 
Goldman Sachs’ opinion does not address the underlying business decision of the Company to engage in the transactions contemplated by the merger agreement or the relative merits of such transactions as compared to any strategic alternatives that may be available to the Company. Goldman Sachs was not requested to solicit, and did not solicit, interest from other parties with respect to an acquisition of or other business combination with the Company. Goldman Sachs’ opinion addresses only the fairness from a financial point of view, as of the date of its opinion, of the $24.00 per share of Company common stock in cash to be paid to the holders (other than Parent and its affiliates) of such shares pursuant to the merger agreement. Goldman Sachs’ opinion does not express any view on, and does not address, any other term or aspect of the merger agreement or the transactions contemplated thereby or any term or aspect of any other agreement or instrument contemplated by the merger agreement or entered into or amended in connection with the transactions contemplated thereby, including, without limitation, the fairness of such transactions to, or any consideration received in connection therewith by, the holders of any other class of securities, creditors, or other constituencies of the Company; nor as to the fairness of the amount or nature of any compensation to be paid or payable to any of the officers, directors or employees of the Company, or class of such persons in connection with the transactions contemplated by the merger agreement, whether relative to the per share merger consideration to be paid to the holders (other than Parent and its affiliates) of such shares pursuant to the merger agreement or otherwise. In addition, Goldman Sachs did not express any opinion as to the impact of the transactions contemplated by the merger agreement on the solvency or viability of the Company or Parent or the ability of the Company or Parent to pay their respective obligations when they become due. Goldman Sachs’ opinion was necessarily based on economic, monetary, market and other conditions as in effect on, and the information made available to it as of, the date of its opinion and Goldman Sachs assumed no responsibility for updating, revising or reaffirming its opinion based on circumstances, developments or events occurring after the date of the opinion. The advisory services provided by Goldman Sachs and the opinion expressed in Goldman Sachs’ opinion were provided for the information and assistance of the board of directors in connection with its consideration of the transactions contemplated by the merger agreement and Goldman Sachs’ opinion does not constitute a recommendation as to whether or not any holder of shares of Company common stock should vote with respect to the merger or any other matter. Goldman Sachs’ opinion was approved by a fairness committee of Goldman Sachs.
 
The following is a summary of the material financial analyses delivered by Goldman Sachs to the board of directors in connection with rendering the opinion described above. The following summary, however, does not purport to be a complete description of the financial analyses performed by Goldman Sachs, nor does the order of analyses described represent relative importance or weight given to those analyses by Goldman Sachs. Some of the summaries of the financial analyses include information presented in tabular format. The tables


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must be read together with the full text of each summary and are alone not a complete description of Goldman Sachs’ financial analyses. Except as otherwise noted, the following quantitative information, to the extent that it is based on market data, is based on market data as it existed on or before August 30, 2010 (the date on which Goldman Sachs completed its analyses) and is not necessarily indicative of current market conditions.
 
Historical Trading Analysis.  Goldman Sachs reviewed the historical trading prices for the shares of Company common stock and analyzed the consideration to be paid to holders of such shares pursuant to the merger agreement in relation to (1) the closing price of the shares of Company common stock on August 30, 2010; (2) the average closing prices of shares of Company common stock for the 30-calendar day and 60-calendar day periods ending August 30, 2010; (3) the high closing price of shares of Company common stock for the 52-week period ending August 30, 2010; and (4) the high closing price of shares of Company common stock for the period beginning with the date of the initial public offering of the shares of Company common stock and ending August 30, 2010.
 
This analysis indicated that the price per share to be paid to the Company’s shareholders in connection with the transactions contemplated by the merger agreement represented:
 
  •  a premium of 43.1% based on the closing market price of the shares of Company common stock on August 30, 2010;
 
  •  a premium of 41.8% based on the average closing price of the shares of Company common stock for the 30-calendar day period ended on August 30, 2010;
 
  •  a premium of 40.4% based on the average closing price of the shares of Company common stock for the 60-calendar day period ended on August 30, 2010;
 
  •  a premium of 8.8% based on the last twelve months high closing price of the shares of Company common stock for the period ending on August 30, 2010; and
 
  •  a discount of 21.1% based on the high closing price of the shares of Company common stock for the period beginning on the Company’s initial public offering (May 18, 2006) and ending on August 30, 2010.
 
Selected Public Companies Analysis.  Goldman Sachs reviewed and compared certain financial information, ratios and public market multiples for the Company to corresponding financial information, ratios and public market multiples for the following publicly traded corporations in the quick service restaurant, or QSR, industry:
 
     
QSR Index
 
Large Cap QSR
 
Wendy’s/Arby’s Group, Inc. 
  McDonald’s Corporation
Domino’s Pizza, Inc. 
  YUM! Brands, Inc.
Jack in the Box Inc.
   
Sonic Corp.
   
Papa John’s International, Inc.
   
 
Although none of the selected companies is directly comparable to the Company, the companies included were chosen because they are publicly traded companies with operations that for purposes of analysis may be considered similar to certain operations of the Company.
 
Goldman Sachs calculated and compared various financial multiples and ratios based on the most recent publicly available financial data and I/B/E/S estimates and/or other Wall Street research. The multiples and ratios of the Company and the selected companies were calculated using the closing price of each company’s shares on August 30, 2010. With respect to the Company and the selected companies, Goldman Sachs calculated (1) enterprise value, which is the market value of common equity plus the book value of debt less cash, as a multiple of earnings before interest, taxes, depreciation and amortization, or EBITDA, for the latest twelve months ended August 30, 2010; and (2) enterprise value as a multiple of EBITDA for estimated calendar years 2010 and 2011, respectively, based on IBES estimates and/or other Wall Street research.


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The following table presents the results of this analysis:
 
                         
    Selected Public Companies   Company
    QSR Index   Large Cap Index   As of 8/30
  Offer Price
    Range   Median   Range   Median   2010   $24.00
 
Enterprise Value as a multiple of EBITDA:
                       
LTM
  5.5x - 9.2x   6.5x   9.6x - 10.0x   10.0x   6.6x   9.0x
CY2010E
  5.5x - 9.1x   6.8x   9.6x - 10.2x   9.9x   6.6x   9.0x
CY2011E
  5.3x - 8.8x   6.3x   8.8x - 9.8x   9.3x   6.3x   8.7x
 
Goldman Sachs also calculated (1) the price-to-earnings ratios for estimated calendar years 2010 and 2011, respectively; (2) the price-to-earnings ratios for the latest twelve months ended August 30, 2010; (3) the price to earnings ratios estimated for the next twelve months ending August 30, 2011; and (4) the latest twelve months EBITDA margins, which is the last twelve months EBITDA as a percentage of the last twelve months revenue.
 
The following table presents the results of this analysis:
 
                         
    Selected Public Companies   Company
    QSR Index   Large Cap QSR   As of 8/30
  Offer Price
    Range   Median   Range   Median   2010   $24.00
 
Price/Earnings Ratio:
                       
CY2010E
  9.9x - 31.9x   13.2x   16.1x - 16.7x   16.4x   12.4x   17.7x
CY2011E
  9.1x - 122.2x   11.5x   14.8x - 14.9x   14.9x   11.7x   16.7x
LTM
  8.5x - 14.4x   11.3x   16.8x - 18.8x   17.7x   12.3x   17.6x
NTM-E
  9.4x - 24.9x   12.1x   15.5x - 15.7x   15.6x   12.3x   17.6x
EBITDA Margin:
                       
LTM
  10.1% - 24.6%   12.0%   21.6% - 35.8%   28.7%   17.8%   17.8%
 
Selected Transactions Analysis.  Goldman Sachs analyzed certain information relating to the following selected transactions in the restaurant industry since 1998 with transaction equity values ranging from $570 million to $3 billion. These transactions (listed by acquirer/target and date of announcement) were:
 
  •  Oak Hill Capital Partners, L.P./Dave & Buster’s, Inc. (May 2010)
 
  •  Apollo Management, L.P./CKE Restaurants, Inc. (April 2010)
 
  •  Tilman J. Fertitta/Landry’s Restaurants, Inc. (June 2008)
 
  •  Triarc Companies, Inc./Wendy’s International, Inc. (April 2008)
 
  •  Darden Restaurants, Inc./RARE Hospitality International, Inc. (August 2007)
 
  •  IHOP Corp./Applebee’s International, Inc. (June 2007)
 
  •  Bain Capital Partners LLC and Catterton Partners and Company/OSI Restaurant Partners, LLC (November 2006)
 
  •  Merrill Lynch Global Private Equity, Inc./NPC International, Inc. (March 2006)
 
  •  JP Morgan Partners LLC/Quiznos Master LLC (March 2006)
 
  •  Bain Capital Partners LLC, the Carlyle Group and Thomas H. Lee Partners LP/Dunkin’ Brands, Inc. (December 2005)
 
  •  Weston Presidio Capital/Apple American Group LLC (January 2005)
 
  •  Caxton-Iseman Capital, Inc./Buffets Holdings, Inc. (June 2000)
 
  •  Sbarro Family/Sbarro, Inc. (January 1999)


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  •  Bain Capital, Inc./Domino’s Pizza, Inc. (September 1998)
 
For each of the selected transactions, Goldman Sachs calculated and compared the enterprise value as a multiple of latest twelve months EBITDA, using publicly available data, and then calculated the median of these multiple values for all transactions; however, for purposes of its analysis Goldman Sachs excluded transactions occurring during calendar years 2005 through 2007 because in its professional judgment, these transactions were not representative of the current market environment. While none of the companies that participated in the selected transactions are directly comparable to the Company, these companies were chosen because they are publicly traded companies with operations that, for the purposes of analysis, may be considered similar to certain of the Company’s results, market size and product profile.
 
The following table presents the results of this analysis:
 
                         
    Selected Transactions   Proposed Transaction
    Range   Median   Offer Price $24.00
 
LTM EV/EBITDA (all transactions)
    5.0x - 13.3x       8.2x       9.0x  
LTM EV/EBITDA (excluding transactions occurring in 2005-2007)
    5.0x - 8.9x       7.4x          
 
Premia Paid Analysis.  Goldman Sachs also calculated the median price premia paid per share relative to the market closing price of target companies on the day prior to announcement of transactions for announced and completed cash transactions involving target companies in the United States in all industries since 2001 with transaction values over $1 billion, using publicly available historical data, but excluding transactions with undisclosed value, spinoffs, recapitalizations, self-tenders, stock repurchases, deals in which minority stakes in a target were acquired, deals involving acquisitions of the remaining minority stake in a target by a controlling shareholder and nationalization transactions. Based on this information, Goldman Sachs then calculated the median of these implied premia values for the multi-year period from 2001 to 2010.
 
The following table presents the results of this analysis:
 
                         
    Selected Transactions   Proposed Transaction
            Offer Price Premium
Period
  Range   Median   to Price as of 8/30/2010
 
2001-2010
    22.7% - 43.8%       27.7 %     43.1 %
 
Illustrative Present Value of Future Share Price Analysis.  Goldman Sachs performed an illustrative analysis of the implied present value of the future price per share of Company common stock, which is designed to provide an indication of the present value of a theoretical future value of a company’s equity as a function of such company’s estimated future earnings and its assumed price to future earnings per share multiple. For this analysis, Goldman Sachs used the Refranchise Case provided by the Company’s management for the fiscal years 2011 to 2015. Goldman Sachs calculated the implied present values per share by applying price to forward earnings per share multiples ranging from 12.3x to 14.8x earnings per share of Company common stock for each of the fiscal years 2011 to 2015 based on the Refranchise Case, discounted to present value using a discount rate of 10%, reflecting an estimate of the Company’s cost of equity, and assuming a yearly dividend of $0.25 with a constant yield throughout such time period. This analysis resulted in a range of implied present values per share of Company common stock of $19.51 to $27.38.
 
Illustrative Discounted Cash Flow Analysis.  Goldman Sachs performed an illustrative discounted cash flow analysis on the Company using the Refranchise Case. Goldman Sachs calculated indications of the net present value of free cash flows for the Company for the years 2011 through 2015. Goldman Sachs calculated illustrative value indications per share of Company common stock using the Refranchise Case and illustrative terminal value indications in the year 2015 based on terminal multiples ranging from 6.0x 2015 EBITDA to 7.5x 2015 EBITDA and discounting these terminal values to illustrative present values using discount rates ranging from 8.0% to 10.0%, reflecting estimates of the Company’s weighted average cost of capital. This analysis resulted in a range of illustrative per share of Company common stock values of $20.73 to $27.74.
 
Goldman Sachs also performed a sensitivity analysis to illustrate the effect of different assumptions for changes in annual revenue growth rates and operating margins for the Company. The sensitivity adjustments to


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the projected annual EBITDA growth rates ranged from 4.4%, which implies an estimated 2015 EBITDA of $550.0 million, to 12.8%, which implies an estimated 2015 EBITDA of $750.0 million. This analysis, assuming a 9% discount rate and 6.6x 2015 EBITDA multiple, resulted in an implied present value per share of Company common stock range of $17.76 to $26.59.
 
General.  The preparation of a fairness opinion is a complex process and is not necessarily susceptible to partial analysis or summary description. Selecting portions of the analyses or of the summary set forth above, without considering the analyses as a whole, could create an incomplete view of the processes underlying Goldman Sachs’ opinion. In arriving at its fairness determination, Goldman Sachs considered the results of all of its analyses and did not attribute any particular weight to any factor or analysis considered by it. Rather, Goldman Sachs made its determination as to fairness on the basis of its experience and professional judgment after considering the results of all of its analyses. No company or transaction used in the above analyses as a comparison is directly comparable to the Company or the contemplated transactions.
 
Goldman Sachs prepared these analyses for purposes of Goldman Sachs’ providing its opinion to the board of directors as to the fairness from a financial point of view of the $24.00 per share merger consideration to be paid to the holders (other than Parent and its affiliates) of shares pursuant to the merger agreement. These analyses do not purport to be appraisals nor do they necessarily reflect the prices at which businesses or securities actually may be sold. Analyses based upon forecasts of future results are not necessarily indicative of actual future results, which may be significantly more or less favorable than suggested by these analyses. Because these analyses are inherently subject to uncertainty, being based upon numerous factors or events beyond the control of the parties or their respective advisors, none of the Company, Parent, Goldman Sachs or any other person assumes responsibility if future results are materially different from those forecast.
 
The consideration for the transactions was determined through arms’-length negotiations between the Company and Parent and was approved by the board of directors. Goldman Sachs provided advice to the Company during these negotiations. Goldman Sachs did not, however, recommend any specific amount of consideration to the Company or the board of directors or that any specific amount of consideration constituted the only appropriate consideration for the transactions.
 
As described above, Goldman Sachs’ opinion to the board of directors was one of many factors taken into consideration by the board of directors in making its determination to approve the merger agreement. The foregoing summary does not purport to be a complete description of the analyses performed by Goldman Sachs in connection with the fairness opinion and is qualified in its entirety by reference to the written opinion of Goldman Sachs attached as Annex C.
 
Goldman Sachs and its affiliates are engaged in investment banking and financial advisory services, commercial banking, securities trading, investment management, principal investment, financial planning, benefits counseling, risk management, hedging, financing, brokerage activities and other financial and non-financial activities and services for various persons and entities. In the ordinary course of these activities and services, Goldman Sachs and its affiliates may at any time make or hold long or short positions and investments, as well as actively trade or effect transactions, in the equity, debt and other securities (or related derivative securities) and financial instruments (including bank loans and other obligations) of the Company, Parent, any of their respective affiliates and third parties, including affiliates and portfolio companies of 3G Capital, TPG Capital and Bain Capital, LLC or any currency or commodity that may be involved in the transactions contemplated by the merger agreement for their own account and for the accounts of their customers. Goldman Sachs acted as financial advisor to the Company in connection with, and participated in certain of the negotiations leading to, the transactions contemplated by the merger. For a description of the engagement letter and the fees payable thereunder by the Company to Goldman Sachs, see “— Persons Retained, Compensated or Used.”
 
Goldman Sachs also has provided certain investment banking services to the Company and its affiliates from time to time. Goldman Sachs also has provided from time to time and is currently providing certain investment banking to Bain Capital and its affiliates and portfolio companies for which its Investment Banking Division has received, and may receive, compensation, including having acted as joint lead arranger for a new


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term loan (aggregate principal amount of $250,000,000) for SunGard Data Systems Inc., a portfolio company of Bain Capital, in September 2008; as joint bookrunner on a high yield offering (aggregate principal amount of $1,100,000,000) for Warner Music Group, a portfolio company of Bain Capital, in May 2009; as joint bookrunner on high yield offerings (aggregate principal amount of $2,900,000,000) for HCA Inc., a portfolio company of Bain Capital, in April 2009 and March 2010; as joint bookrunner with respect to a high yield offering (aggregate principal amount of $2,500,000,000) for Clear Channel Communications Inc., a portfolio company of Bain Capital, in December 2009; and as joint lead arranger with respect to a term loan (aggregate principal amount of $1,500,000,000) for Warner Chilcott Plc, a portfolio company of Bain Capital, in August 2010. In addition, Goldman Sachs has provided from time to time and is currently providing certain investment banking services to TPG and its affiliates and portfolio companies for which its Investment Banking Division has received, and may receive, compensation, including having acted as joint bookrunner on a notes offering (aggregate principal amount of $1,500,000,000) by TXU Electric Delivery Company, a portfolio company of TPG, in September 2008; as a joint lead arranger for a term loan (aggregate principal amount of $250,000,000) for SunGard Data Systems Inc., a portfolio company of TPG, in September 2008; as financial advisor to ALLTEL Corporation, a former portfolio company of TPG, in connection with its sale in January 2009; and as co-manager of a high yield offering (aggregate principal amount of $1,000,000,000) by Harrah’s Entertainment Inc., a portfolio company of TPG, in May 2009. Goldman Sachs may also in the future provide investment banking services to the Company, its affiliates and Parent, TPG, Bain Capital and their respective affiliates and portfolio companies for which its Investment Banking Division may receive compensation. The Goldman Sachs Funds currently own, in the aggregate, approximately 10.3% of the outstanding shares of Company Common Stock. In connection with the transactions contemplated by the merger agreement, the Goldman Sachs Funds have entered into a stockholder tender agreement. Goldman Sachs may be deemed to directly or indirectly own the shares which are owned directly or indirectly by the Goldman Sachs Funds. Sanjeev K. Mehra, a Managing Director of Goldman Sachs, is a director of the Company. Affiliates of Goldman Sachs also may have co-invested with Parent, TPG, Bain Capital and their respective affiliates from time to time and may have invested in limited partnership units of affiliates of Parent, TPG and Bain Capital from time to time and may do so in the future.
 
Certain Company Projections
 
We do not, as a matter of course, make public projections as to future performance, earnings or other results beyond the current fiscal year due to the unpredictability of the underlying assumptions and estimates. However, we provided to Parent, Merger Sub and Lazard in August 2010, in connection with their due diligence review, management’s internal non-public stand-alone fiscal 2011 financial forecasts, or the Fiscal 2011 P&L Projections, which are summarized below. We also provided to Morgan Stanley and Goldman Sachs for their use in connection with the rendering of their fairness opinions to the board of directors and performing their related financial analysis, as described under the section entitled “The Merger — Opinion of the Company’s Financial Advisors” beginning on page [ • ], non-public five-year standalone financial forecasts that had been prepared by management for internal planning purposes and that are subjective in many respects. We have included below a summary of a subset of these five-year forecast which assumes that we implement our previously announced plan to refranchise approximately half of our restaurant portfolio in the next three to five years, which we refer to as the Five-Year Projections. We believe that the Five-Year Projections, which incorporate the impact of the refranchising strategy, are the projections that reflect our current operating plan a go-forward standalone basis. The board of directors also considered other projections prepared by management, including those that excluded the impact of the refranchising strategy and those that applied alternative macroeconomic assumptions, but came to the conclusion that the Five-Year Projections were the most realistic. In addition, we provided to Morgan Stanley and Goldman Sachs certain stand-alone fiscal 2011 free cash flow forecasts which are summarized below, which we refer to as the Free Cash Flow Projections, and collectively, with the Fiscal 2011 P & L Projections and the Five-Year Projections, the Projections. The Fiscal 2011 P&L Projections were based on the 2011 fiscal plan adopted by the board of directors, and adjusted for one-month of actual results, while the Five-Year Projections and the Free Cash Flow Projections were not so adjusted.


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The Projections have been prepared by, and are the responsibility of, our management. The Projections were not prepared with a view toward public disclosure; and, accordingly, do not necessarily comply with published guidelines of the SEC, the guidelines established by the American Institute of Certified Public Accountants for preparation and presentation of financial forecasts, or generally accepted accounting principles, or GAAP. KPMG LLP, our independent registered public accounting firm, has not audited, compiled or performed any procedures with respect to the Projections and does not express an opinion or any form of assurance related thereto. A summary of the Projections is not being included in this document to influence your decision whether to vote for or against the proposal to adopt the merger agreement, but is being included because (i) the Projections were made available to the board of directors and its advisors and (ii) the Fiscal 2011 P&L Projections were made available to Parent and Merger Sub and their advisors. The inclusion of this information should not be regarded as an indication that our board of directors or its advisors or any other person considered, or now considers, such financial forecasts to be material or to be a reliable prediction of actual future results, and these forecasts should not be relied upon as such. Our management’s internal financial forecasts, upon which the Projections were based, are subjective in many respects. There can be no assurance that the Projections will be realized or that actual results will not be significantly higher or lower than forecasted. The Projections cover multiple years and such information by its nature becomes subject to greater uncertainty with each successive year. As a result, the inclusion of the Projections in this proxy statement should not be relied on as necessarily predictive of actual future events.
 
The Projections, while presented with numerical specificity, necessarily were based on numerous variables and assumptions that are inherently uncertain and many of which are beyond the control of our management. Because the Five-Year Projections cover multiple years, by their nature, they become subject to greater uncertainty with each successive year. The assumptions upon which the Projections were based necessarily involve judgments with respect to, among other things, future economic, competitive and financial market conditions, all of which are difficult or impossible to predict accurately and many of which are beyond our control. The Projections also reflect assumptions as to certain business decisions that are subject to change. In addition, the Projections may be affected by our ability to achieve strategic goals, objectives and targets over the applicable periods.
 
Accordingly, there can be no assurance that the Projections will be realized, and actual results may vary materially from those shown. The inclusion of the Projections in this document should not be regarded as an indication that we or any of our affiliates, advisors, officers, directors or representatives considered or consider the Projections to be predictive of actual future events, and the Projections should not be relied upon as such. Neither we nor any of our affiliates, advisors, officers, directors or representatives can give any assurance that actual results will not differ from the Projections, and none of them undertakes any obligation to update or otherwise revise or reconcile the Projections to reflect circumstances existing after the date the Projections were generated or to reflect the occurrence of future events even in the event that any or all of the assumptions underlying the Projections are shown to be in error. We do not intend to make publicly available any update or other revision to the Projections, except as otherwise required by law. Neither we nor any of our affiliates, advisors, officers, directors or representatives has made or makes any representation to any shareholder of the Company or other person regarding our ultimate performance compared to the information contained in the Projections or that the Projections will be achieved. We have made no representation to Parent, Merger Sub or their affiliates, in the merger agreement or otherwise, concerning the Projections.
 
In light of the foregoing factors and the uncertainties inherent in the Projections, shareholders are cautioned not to place undue, if any, reliance on the Projections.
 
The financial forecasts are forward-looking statements. For information on factors that may cause the Company’s future financial results to materially vary, see “Cautionary Statement Concerning Forward-Looking Information” on page [ • ].


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Fiscal 2011 Projections
 
The following is a summary of the Fiscal 2011 Projections (dollars in millions, except per share information):
 
         
    FY 2011 Estimate  
 
Revenues
       
Company
  $ 1,846.1  
Franchise
    566.2  
Property
    114.5  
         
Total Revenues
    2,556.8  
Company Restaurant expenses
    (1,628.8 )
Selling, general and administrative expenses
    (513.5 )
Other Income and Expenses
    (5.7 )
Operating Income
    348.4  
Net Interest Expense
    (49.9 )
Income Tax Expense
    (107.5 )
         
Net Income
  $ 191.1  
Earnings per share
       
Net Income — basic
  $ 1.41  
Net Income — diluted
  $ 1.39  
EBITDA(1)
  $ 465.8  
 
The key assumptions underlying the summary Fiscal 2011 Projections include:
 
  •  Comparable Sales of 1.6%
 
  •  Comparable Traffic of 1.3%
 
  •  Commodities inflation continues
 
  •  Competition for value will continue
 
  •  Global economic and financial market recovery uncertain
 
  •  Re-franchising will reduce Sales, EBITDA, and EPS in the short term
 
  •  Re-financing of outstanding debt will negatively impact Interest Expense/Net Income/EPS
 
Cash Flow Projections
 
The following is a summary of the Cash Flow Projections (dollars in millions):
 
         
    FY 2011
 
    Estimate  
 
EBITDA(1)
  $ 463  
Cash Interest Expense, net
    (50 )
Cash Tax Expense
    (103 )
FX Hedging
     
Other non-cash losses/gains
    29  
Changes in working capital
    3  
Other long-term assets/liabilities
    2  
         
Operating Cash Flow
  $ 344  
         
Maintenance Capital Expenditures
    (24 )
         
Free Cash Flow
    321  


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Five-Year Projections
 
The following is a summary of the Five-Year Projections (dollars in millions, except per share information):
 
                                         
    FY 2011     FY 2012     FY 2013     FY 2014     FY 2015  
 
Revenue
  $ 2,574     $ 2,102     $ 1,884     $ 1,910     $ 2,024  
EBIT
    351       426       465       528       589  
Profit Before Tax
    299       363       409       478       549  
EPS
    1.40       1.69       1.91       2.23       2.56  
EBITDA(1)
    464       518       563       620       685  
 
 
(1) EBITDA is a non-GAAP financial measure. EBITDA is defined as earnings (net income) before interest, taxes, depreciation and amortization, and is used by management to measure operating performance of the business. The Company also uses EBITDA as a measure to calculate certain incentive based compensation and certain financial covenants related to the Company’s credit facility and as a factor in the Company’s tangible and intangible asset impairment test. Management believes EBITDA is a useful measure as it reflects certain operating drivers of the Company’s business, such as sales growth, operating costs, selling, general and administrative expenses and other operating income and expense.
 
The key assumptions underlying the summary Five-Year Projections include:
 
  •  Refranchising a total of 689 restaurants over the 5 year period, comprising of 105 in fiscal year 2011, 342 in fiscal year 2012, 240 in fiscal year 2013 and 45 in fiscal year 2014
 
  •  Comparable Sales of 1.6% in fiscal year 2011, 2.7% in fiscal year 2012, 2.8% in fiscal year 2013, 2.9% in fiscal year 2014 and 2.8% in fiscal year 2015
 
  •  Comparable Traffic of 1.3% for all years presented
 
  •  Royalty Rate of 4.5% on all refranchised restaurants
 
  •  Excludes 36% Estimated Tax Rate for all years presented
 
  •  137.3 million weighted average shares outstanding for all years presented and no dilutive effect of compensation grants
 
  •  Cash benefits of $258 million over the five-year period, including approximately $110 million in cash proceeds from the refranchising of the Company restaurants and $148 million in reduced capital expenditures. However the run-rate EBIT set forth above excludes any impact from the re-investment of any cash proceeds.
 
The Projections should be evaluated, if at all, in conjunction with the historical financial statements and other information regarding the Company contained elsewhere in this proxy statement and the Company’s public filings with the SEC.
 
Financing of the Merger
 
We anticipate that the total funds needed to complete the merger, including the funds needed to:
 
  •  pay our shareholders (and holders of our other equity-based interests) the amounts due to them under the merger agreement and the related expenses, which, based upon the shares (and our other equity-based interests) outstanding as of [ • ], 2010, would be approximately $3.3 billion; and
 
  •  repay indebtedness of the Company at the closing of the merger, which, as of [ • ], 2010, was approximately $729 million;
 
will be funded through a combination of:
 
  •  equity financing of $1.5 billion to be provided by 3G;


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  •  a $1.9 billion senior secured credit facility, comprised of a $1.75 billion term loan facility and a $150 million revolving credit facility; and
 
  •  the issuance of senior unsecured notes yielding at least $900 million in gross cash proceeds (or, to the extent those notes are not issued at or prior to the closing of the merger, by a senior unsecured bridge loan facility).
 
The equity and debt financing commitments are subject to certain conditions. If the merger agreement is terminated in the circumstance in which Merger Sub does not receive the proceeds of the debt financing commitments, Merger Sub may be obligated to pay us a termination fee of $175 million.
 
Equity Financing
 
Parent has received the equity commitment letter from 3G, pursuant to which 3G has committed to invest up to $1.5 billion solely for the purpose of funding, and to the extent necessary to fund, a portion of the aggregate offer price and/or merger consideration pursuant to and in accordance with the merger agreement, together with related expenses. We refer to the financing contemplated by the equity commitment letter, as may be amended and restated, and any permitted replacement equity financing, as the equity financing. The Company is a third party beneficiary to the equity commitment letter for the limited purpose provided in the equity commitment letter to permit the Company to seek specific performance to cause Parent and Merger Sub to cause, or to directly cause, 3G to fund its equity commitment in certain limited circumstances in accordance with the terms of the equity commitment letter and the merger agreement.
 
Concurrently with the execution and delivery of the equity commitment letter, 3G executed and delivered to the Company the limited guaranty where 3G has agreed to guaranty:
 
  •  the obligation of Parent and Merger Sub under the merger agreement to pay the Parent Termination Fee of $175 million to the Company, and
 
  •  the performance and discharge of Parent’s and Merger Sub’s obligations and liabilities under the merger agreement, up to a maximum of $175 million.
 
In no event will 3G incur obligations totalling more than $175 million under the limited guaranty.
 
The funding of the equity financing is subject to (i) the satisfaction or waiver by Parent and Merger Sub of all conditions of the merger, (ii) pursuant to the terms and conditions of the debt commitment letter, the debt financing described below or any alternative financing that Parent and Merger Sub are required or permitted to accept from alternative sources pursuant to the merger agreement having been obtained, and (iii) the substantially contemporaneous consummation of the merger.
 
Debt Financing
 
Merger Sub has received the debt commitment letter from JPMorgan Chase Bank, N.A., which we refer to as JPMCB, J.P. Morgan Securities LLC, which we refer to as JPMSLLC, and Barclays Bank PLC, which we refer to as Barclays Bank and, together with JPMCB, the lenders, to provide the following, subject to the conditions set forth in the debt commitment letter:
 
  •  to Merger Sub, up to $1.90 billion of senior secured facilities (not all of which is expected to be drawn at the closing of such facilities) for the purpose of financing the merger, refinancing certain existing indebtedness of the Company, paying fees and expenses incurred in connection with the merger and the transactions contemplated thereby and for providing ongoing working capital and for other general corporate purposes of the Company and its subsidiaries; and
 
  •  to Merger Sub, up to $900 million of bridge facilities for the purpose of financing the merger.
 
Upon consummation of the merger, Burger King Corporation, or BKC, will assume all of the obligations under the senior secured facilities.


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The commitment of the lenders with respect to the senior secured facilities and the bridge facility expires upon the earliest to occur of (i) the irrevocable termination of the merger agreement prior to the closing of the merger or (ii) March 2, 2011. The documentation governing the debt financings has not been finalized and, accordingly, the actual terms of the debt financing may differ from those described in this document. Each of Parent and Merger Sub has agreed to use its reasonable best efforts to arrange the debt financing on the terms and conditions described in the debt commitment letter. If any portion of the debt financing becomes unavailable on the terms and conditions contemplated in the debt commitment letter, Parent must use its reasonable best efforts to arrange promptly to obtain alternative financing from alternative sources in an amount at least equal to the debt financing or such unavailable portion thereof on terms that are not materially less favorable in the aggregate to Parent and Merger Sub than as contemplated by the debt commitment letter.
 
Although the debt financing described in this document is not subject to a due diligence or “market out,” such financing may not be considered assured. As of the date hereof, no alternative financing arrangements or alternative financing plans have been made in the event the debt financing described herein is not available.
 
Credit Facilities
 
The availability of the senior secured facilities and the bridge facility is subject, among other things, to consummation of the merger in accordance with the merger agreement (without giving effect to any amendments or waivers to the provisions thereof, or any consents or requests by Parent or Merger Sub resulting in an action taken by the Company or its subsidiaries, in each case that are materially adverse to the lead arrangers or lenders under such facilities without the consent of the commitment parties thereunder), the achievement of a specified pro forma ratio of total debt of the Company and its consolidated subsidiaries to EBITDA for the four most recent fiscal quarters ended at least 45 days prior to closing, payment of required fees and expenses, the funding of the equity financing, the refinancing of certain of the Company’s existing debt and the absence of certain types of other debt, delivery of certain historical and pro forma financial information, the execution of certain guarantees and the creation of security interests and the negotiation, execution and delivery of definitive documentation.
 
Senior Secured Term and Revolving Credit Facilities
 
The senior secured facilities will consist of a (i) $1.75 billion term loan facility with a term of six years and (ii) a $150 million revolving credit facility with a term of five years.
 
Roles.  JPMSLLC and Barclays Capital have been appointed as joint lead arrangers and joint bookrunners for the senior secured facilities. JPMCB has been appointed as administrative agent for the senior secured facilities.
 
Interest Rate.  Loans under the senior secured facilities are expected to bear interest, at BKC’s option, at a rate equal to the adjusted Eurodollar rate or an alternate base rate, in each case, plus a spread. After the Company’s delivery of financial statements with respect to at least one full fiscal quarter ending after the effective date of the merger, interest rates under the revolving credit facility shall be subject to decreases based on a total leverage ratio as agreed upon between BKC and the lenders.
 
Prepayments and Amortization.  BKC will be permitted to make voluntary prepayments with respect to the senior secured facilities at any time, without premium or penalty (other than LIBOR breakage costs, if applicable). The term loans under the senior secured facilities will amortize 1% per annum in equal quarterly installments until the final maturity date.
 
Guarantors.  All obligations under the senior secured facilities will be guaranteed by the Company and each of the existing and future direct and indirect, material wholly-owned domestic subsidiaries of BKC.
 
Security.  The obligations of BKC and the guarantors under the senior secured facilities and under any swap agreements and cash management arrangements entered into with a lender or any of its affiliates, will be secured, subject to permitted liens and other agreed upon exceptions on a first priority basis by a perfected security interest in all of BKC’s and each guarantor’s tangible and intangible assets, including United States registered intellectual property, real property and all of the capital stock of BKC and each of its direct and


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indirect subsidiaries (limited, in the case of foreign subsidiaries, to 65% of the capital stock of first tier foreign subsidiaries). If certain security is not provided at closing despite the use of commercially reasonable efforts to do so, the delivery of such security will not be a condition precedent to the availability of the senior secured facilities on the closing date, but instead will be required to be delivered following the closing date pursuant to arrangements to be mutually agreed.
 
Other Terms.  The senior secured facilities will contain customary representations and warranties and customary affirmative and negative covenants, including, among other things, restrictions on indebtedness, investments, sales of assets, mergers and consolidations, prepayments of subordinated indebtedness, liens and dividends and other distributions. The senior secured facilities will also include customary events of defaults including a change of control to be defined.
 
Bridge Facility
 
Merger Sub is expected to issue up to $900 million aggregate principal amount of senior notes, as described below. If the offering of senior notes by Merger Sub is not completed on or prior to the closing of the senior secured facilities, the lenders have committed to provide a bridge facility of up to $900 million. Merger Sub would be the initial borrower under the bridge facility, and upon consummation of the merger, BKC would assume all of the obligations under the bridge facility. The bridge facility will be guaranteed by the persons that guarantee the senior secured facilities. JPMSLLC and Barclays Capital have been appointed as joint lead arrangers and joint bookrunners for the bridge facility. JPMCB has been appointed as administrative agent for the bridge facility. Subject to the satisfaction of certain conditions related to the merger, Merger Sub is obligated to take down and use the proceeds of the bridge facility if it has not completed the senior notes offering by November 18, 2010.
 
Senior Notes due 2018
 
Merger Sub plans to issue up to $900 million in aggregate principal amount of senior notes due in 2018. Merger Sub plans to issue the notes in transactions exempt from or not subject to registration under the Securities Act pursuant to Rule 144A and Regulation S under the Securities Act. If senior notes are issued, upon consummation of the merger, the Company will assume all of the obligations under the senior notes and the guarantees described below will become effective. The provisions below set forth the expected material terms for the senior notes.
 
Guarantees.  The Company’s obligations under the senior notes will be jointly and severally guaranteed on a senior unsecured basis by the Company and all of its existing and future direct and indirect domestic subsidiaries that guarantee its indebtedness or indebtedness of subsidiary guarantors.
 
Optional Redemption.  The Company may redeem any of the senior notes at any time on or after the fourth anniversary of the issuance date of the senior notes, in whole or in part, in cash at the redemption prices described in the indenture governing the senior notes, plus accrued and unpaid interest, if any, to the date of redemption. In addition, on or before the third anniversary of the issuance date, the Company may redeem up to 35% of the aggregate principal amount of senior notes with the net proceeds of certain equity offerings at a price of 100% of the principal amount of the senior notes, plus accrued and unpaid interest, if any, to the date of redemption. The Company may make that redemption only if, after the redemption, a specified minimum percentage of the aggregate principal amount of senior notes remains outstanding. The Company may redeem any of the senior notes at any time before the fourth anniversary of the issuance date of the senior notes, in cash at 100% of the principal amount plus accrued and unpaid interest, if any, to the date of redemption and a make-whole premium.
 
Change of Control.  Upon a change of control, the Company may be required to make an offer to purchase each holder’s senior notes at a price equal to 101% of the principal amount thereof, plus accrued and unpaid interest to the date of purchase.


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Certain Covenants.  The indenture governing the senior notes is expected to contain covenants that, among other things, limit our ability and the ability of our restricted subsidiaries to:
 
  •  incur additional indebtedness and guarantee indebtedness;
 
  •  pay dividends or make other distributions in respect of, or repurchase or redeem, capital stock;
 
  •  prepay, redeem or repurchase certain debt;
 
  •  make loans and investments;
 
  •  sell or otherwise dispose of assets;
 
  •  incur liens;
 
  •  enter into transactions with affiliates;
 
  •  alter the businesses we conduct;
 
  •  enter into agreements restricting our subsidiaries’ ability to pay dividends; and
 
  •  consolidate, merge or sell all or substantially all of our assets.
 
These limitations are expected to be subject to a number of qualifications and exceptions that will be set forth in the indenture governing the senior notes.
 
Closing and Effective Time of Merger
 
If the merger is approved at the shareholders meeting then, assuming timely satisfaction of the other necessary closing conditions, we anticipate that the merger will be completed promptly thereafter. The effective time of the merger will occur as soon as practicable following the closing of the merger upon the filing of a certificate of merger with the Secretary of State of the State of Delaware (or at such later date as we and Parent may agree and specify in the certificate of merger).
 
Payment of Merger Consideration and Surrender of Stock Certificates
 
Each record holder of shares of Company common stock (other than holders of solely the excluded shares) will be sent a letter of transmittal describing how such holder may exchange its shares of Company common stock for the per share merger consideration promptly, and in any event within two business days, after the completion of the merger.
 
You should not return your stock certificates with the enclosed proxy card, and you should not forward your stock certificates to the paying agent without a letter of transmittal.
 
You will not be entitled to receive the per share merger consideration until you deliver a duly completed and executed letter of transmittal to the paying agent. If your shares are certificated, you must also surrender your stock certificate or certificates to the paying agent. If ownership of your shares is not registered in the transfer records of the Company, a check for any cash to be delivered will only be issued if the applicable letter of transmittal is accompanied by all documents reasonably required by the Company to evidence and effect such transfer and to evidence that any applicable stock transfer taxes have been paid or are not applicable.
 
Interests of Certain Persons in the Merger
 
Overview
 
The vested shares of Company common stock held by our directors and executive officers will be treated in the same manner as outstanding shares of Company common stock held by our other shareholders. As of September 13, 2010, our directors and executive officers and their affiliates owned in the aggregate 28,659,925 shares of Company common stock, excluding (1) shares issuable upon the exercise of stock options, (2) shares issuable upon vesting of Company restricted stock units, (3) shares issuable upon vesting of


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the Company’s performance-based stock units and (4) vested and unvested director stock units. If the merger is completed, our directors and executive officers and their affiliates, including the Sponsors, would receive an aggregate amount of $687,838,200 net in cash, without interest thereon and less any required withholding taxes.
 
Aside from their interests as shareholders of the Company, our directors and employees, including our executive officers, have interests in the merger that may be different from, or in addition to, those of other shareholders of the Company generally. In considering the recommendation of the board of directors that you approve the proposal to adopt the merger agreement, you should be aware of these interests. The members of the board of directors were aware of and considered these interests, among other matters, in making their decision to recommend that you approve the proposal to adopt the merger agreement. The interests of the Company’s directors and employees, including its executive officers, in the merger that are different from, or in addition to, those of other shareholders of the Company are as follows:
 
  •  accelerated vesting of all stock options held by our employees, including our executive officers, at the earlier to occur of the offer closing and the effective time of the merger, which we refer to as the acceleration time, and the settlement of such options in exchange for cash (as described below).
 
  •  accelerated vesting of all restricted stock units held by our employees, including our executive officers, at the acceleration time and the cancelation of such awards in exchange for cash (as described below).
 
  •  accelerated vesting of all performance-based stock units held by our employees, including our executive officers, at the acceleration time (calculated at target level of performance) and the cancelation of such awards in exchange for cash (as described below).
 
  •  payment of a pro rata annual bonus (calculated at target level of performance) to all of our bonus-eligible employees, including our executive officers, for the period commencing on July 1, 2010 through the effective time of the merger.
 
  •  certain of our executive officers will receive payment for performing transition services.
 
  •  our executive officers will receive payments and benefits under the executive officers’ employment agreements upon certain types of termination of employment following the effective time of the merger.
 
  •  accelerated vesting of any unvested director stock units and the payment to all non-management directors for all outstanding director stock units upon their resignation from the board of directors in accordance with the terms of such awards.
 
The dates used below to quantify these interests have been selected for illustrative purposes only. They do not necessarily reflect the dates on which certain events will occur.
 
Equity Awards
 
Our officers, and certain of our employees, hold stock options, restricted stock units and/or performance-based stock units. All of our non-management directors hold director stock units. Under the merger agreement, each stock option, whether vested or unvested, that is outstanding immediately prior to the effective time of the merger will vest and be canceled in exchange for an amount in cash equal to (A) the excess, if any, of (x) $24.00 over (y) the exercise price per share of Company common stock subject to such option, multiplied by (B) the number of shares of Company common stock for which such option shall not have been exercised. Each restricted stock unit that is outstanding immediately prior to such time will vest and be converted into an amount in cash equal to $24.00. Each performance-based stock unit that is outstanding immediately prior to such time will vest and be converted into an amount in cash equal to (A) $24.00 multiplied by (B) the number of shares subject to the performance-based stock units assuming that the target level of performance had been attained. Each director stock unit, that has not yet vested, will vest and all director stock units outstanding immediately prior to such time, in connection with such director’s resignation, will be converted into an amount in cash equal to $24.00.


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For our officers who hold the position of vice president and above, including the executive officers, the equity awards that were granted on August 25, 2010, which we refer to as the August equity grants, will be converted into the right to receive $24.00, however 60% of the cash amount attributable to the August equity grants for such officers, other than Mr. Smith (who will receive such amounts at the effective time of the merger), will be deposited into a trust account established with a third party for the officer’s benefit. The remaining 40% will be withheld for taxes. For those officers other than Messrs. Chidsey and Wells, and Ms. Chwat, if the officer is employed on each of August 25, 2011 and August 25, 2012, the officer will receive from the trust an amount equal to 25% of the portion of the trust account related to such officer’s stock options, which mirrors the vesting schedule of the original underlying option grant. If the officer is actively employed until the end of the two year anniversary following the effective time of the merger, the balance of the trust will be paid to the officer. If the officer is terminated without cause prior to any of these payment dates (or terminates for good reason prior to the payment date, for those officers who are a party to an employment agreement containing a definition of good reason) the balance will be paid to such officer upon such termination. However, if the officer voluntarily terminates his or her employment (other than for good reason, for those officers who are a party to an employment agreement containing a definition of good reason) or is terminated for cause prior to any of these payment dates, the officer will forfeit his or her remaining balance in the trust.
 
For Mr. Chidsey, Mr. Wells and Ms. Chwat, whom we refer to as the transition executives, the subsequent conditions to receive the payment of the trust amounts are as follows: (i) in the case of Mr. Chidsey (i) 50% of the amounts in the trust will be released and remitted on the six-month anniversary of the effective time of the merger and (ii) 50% of the amounts in the trust will be released and remitted on the twelve-month anniversary of the effective time of the merger, subject to Mr. Chidsey’s continued service until each such date except as provided below and (ii) in the case of each of Mr. Wells and Ms. Chwat, the amounts in the trust will be released in six substantially equal installments on the first business day of each of the first six months following the effective time of the merger, subject to such transition executive’s continued service through such date except as provided below. If the transition executive’s employment is terminated due to death or disability or without cause or if the transition executive terminates his or her employment for good reason prior to any of these payment dates, the balance of the transition executive’s trust will be paid to such transition executive upon termination. However, if the transition executive voluntarily terminates his or her employment (other than for good reason) or is terminated for cause prior to any of these payment dates, the transition executive will forfeit his or her remaining balance in the trust. For Mr. Chidsey, the merger agreement specifies that the expiration of the transition period and the commencement of the six-month consulting arrangement described below under “— Amendments to Employment Agreements” will not be deemed to be the termination of his employment without cause or voluntary resignation for good reason. Further, if Mr. Chidsey’s consulting arrangement is terminated without cause or by reason of his death or disability, the amount in trust will be immediately released to him upon such termination.
 
The following table shows the amount in cash that each executive officer is expected to receive pursuant to the merger agreement, based on equity awards held as of September 13, 2010, assuming the effective time of the merger occurs on October 15, 2010 as a result of the cancelation of all stock options, restricted stock units and performance-based stock units held by our executive officers.
 
                                 
    Vested
  Unvested
  Performance-Based
   
    Stock
  Stock
  and Restricted
   
Executive Officer
  Options ($)   Options ($)   Stock Units ($)   Total ($)
 
John W. Chidsey
    17,154,523       3,583,134       6,763,392       27,501,049  
Ben K. Wells
    1,274,398       834,230       1,547,688       3,656,316  
Anne Chwat
    1,175,140       581,122       968,856       2,725,118  
Peter C. Smith
    807,153       563,161       903,960       2,274,274  
Charles M. Fallon, Jr. 
    1,387,295       937,936       988,056       3,313,287  
Julio A. Ramirez
    205,229       510,234       1,104,384       1,819,847  
Natalia Franco
          181,468       344,448       525,916  
Kevin Higgins
    47,620       392,307       571,104       1,011,031  


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The following table shows the amount in cash that each director is expected to receive pursuant to the merger agreement, based on equity awards held as of September 13, 2010, assuming the effective time of the merger occurs on October 15, 2010 as a result of the cancelation of all director stock units held by our directors.
 
                         
    Vested
  Unvested
   
    Director Stock
  Director Stock
   
Director
  Units ($)   Units ($)   Total ($)
 
Richard W. Boyce
    600,000             600,000  
David A. Brandon
    840,000             840,000  
Ronald M. Dykes
    574,200             574,200  
Peter R. Formanek
    3,780,168             3,780,168  
Manuel A. Garcia
    1,551,384             1,551,384  
Sanjeev K. Mehra(1)
    587,472             587,472  
Stephen Pagliuca
    495,552       28,776       524,328  
Brian T. Swette
    3,141,648             3,141,648  
Kneeland C. Youngblood
    420,168             420,168  
 
 
(1) Mr. Mehra has an understanding with The Goldman Sachs Group, Inc. pursuant to which he holds such director stock units for the benefit of The Goldman Sachs Group, Inc.
 
Employment Agreements
 
We are a party to employment agreements with our executive officers that provide for certain payments and benefits upon a termination of employment by the Company (other than for cause) or a resignation for good reason (as such terms are defined in the respective employment agreements).
 
Amendments to Employment Agreements
 
On September 1, 2010, we entered into amendments to the employment agreements of Messrs. Chidsey, Wells and Smith and Ms. Chwat, effective upon the effective time of the merger, which add or modify certain terms of their existing agreements, including terms pursuant to which services will be performed following the effective time of the merger. The amendments provide that at the effective time of the merger, the transition executives will remain employed with the Company for a period of six months. With respect to the transition executives, the six-month transition period can be extended if the Company and the executive mutually agree. Mr. Smith’s employment will terminate at the effective time of the merger and he will receive the severance payments and benefits set forth in his employment agreement, as amended.
 
In exchange for performing services during the transition period, the transition executives will generally be compensated during the transition period as they were compensated prior to the transition period. If their employment is terminated during the transition period other than (i) for cause or (ii) the executive’s voluntary termination without good reason, in addition to the severance payments and benefits under the executive’s existing employment agreement, the executive will receive the remaining cash compensation that would have been paid to the executive had he or she performed services through the end of the transition period.
 
Following the six-month transition period, the employment of each of Messrs. Chidsey and Wells and Ms. Chwat will terminate and he or she will be entitled to the severance payments and benefits set forth in his or her employment agreement. In addition, Mr. Chidsey has agreed to perform part-time consulting services for the six-month period following the transition period. In exchange for performing consulting services, Mr. Chidsey will receive a monthly consulting fee of $100,000.
 
Each of Messrs. Chidsey, Wells and Smith and Ms. Chwat will receive a transition bonus ($3,021,000, $1,308,500, $1,097,518, and $1,130,619 for Messrs. Chidsey, Wells and Smith and Ms. Chwat, respectively) in respect of his or her contributions toward the successful completion of the Merger and, in the case of Messrs. Wells and Chidsey and Ms. Chwat, as an inducement for his or her agreement to perform services


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following the effective time of the merger. The transition bonuses will be paid at the time the Merger closes except for Mr. Chidsey, who will receive $521,000 of his transition bonus at the effective time of the merger, $1,250,000 on the six-month anniversary of the effective time of the merger and $1,250,000 on the twelve-month anniversary of the effective time of the merger, subject to his continued service or earlier termination of employment without cause, for good reason, or by reason of his death or disability.
 
In connection with the employment agreement amendments, Messrs. Chidsey, Wells and Smith and Ms. Chwat have agreed to extend the non-competition and non-solicitation covenants from one year following their termination to two years following their termination and Messrs. Chidsey and Wells and Ms. Chwat have agreed to modify their right to terminate for good reason, including waiving that right due to any change in their duties resulting from consummation of the Merger. In the case of Messrs. Wells and Smith and Ms. Chwat, the welfare benefits continuation period in the event of a qualifying termination has been extended from one year to two years pursuant to their amended employment agreements.
 
Pursuant to the merger agreement, the Company is authorized to enter into amendments to the employment agreements of Messrs. Fallon, Ramirez and Higgins and Ms. Franco, effective upon the effective time of the merger, which will increase their severance payments to two times the sum of base salary, benefits or perquisite allowance (as applicable) and target bonus for the year of termination. In addition, the right of Messrs. Fallon and Ramirez and Ms. Franco to receive welfare benefits continuation will be extended from one year to two years. In addition, the proposed amendments provide for the non-competition provisions and the non-solicitation provisions to be extended from one year to two years.
 
Prior to amendment, the employment agreements of each of Messrs. Fallon, Ramirez and Higgins and Ms. Franco provide that in the event of a termination by the Company without cause, or by the executive for good reason in the case of Messrs. Fallon and Ramirez and Ms. Franco, subject to execution by the executive of a release, the executive is entitled to an amount equal to (i) his or her annual base salary and annual perquisite allowance plus (ii) a pro-rata bonus though the date of termination, payable when and to the extent that the Company pays a bonus for such year, and continued coverage for one year under BKC’s medical, dental and life insurance plans. In addition, Ms. Franco’s agreement provides that if a Change in Control (as defined in the agreement) occurs on or before May 17, 2011, and, within twelve months following such Change in Control Ms. Franco is terminated without cause or resigns for good reason, Ms. Franco is entitled to an amount equal to twice her annual base salary, annual perquisite allowance and prorated bonus.
 
Potential Payments Upon a Change in Control
 
Based on compensation and benefit levels as of September 16, 2010, and assuming that the effective time of the merger occurs on October 15, 2010 and that the executive officers experience a qualifying termination of employment at that time (except that for Messrs. Chidsey and Wells and Ms. Chwat, it assumes that a qualifying termination occurs at the end of the transition period), the executive officers would be entitled to receive the following cash payments and benefits under their amended employment agreements upon a


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qualifying termination (assuming that all of the payments described above under “— Equity Awards” have been previously made, including payments resulting from accelerated vesting of outstanding equity awards):
 
                     
        Termination w/o
       
        Cause or
    Pro-Rata
 
        for Good
    Bonus
 
        Reason
    Payable Upon
 
        After Change
    the Merger’s
 
Name
 
Benefit
  in Control ($)     Closing ($)(2)  
 
John W. Chidsey(1)
  Salary   $ 6,257,250          
    Pro Rata Bonus Payable at Closing           $ 302,862  
    Pro Rata Bonus at Termination Date(3)   $ 521,438          
    Transition Bonus(4)   $ 3,021,000          
    Benefits Continuation(5)   $ 90,000          
    Perquisite Allowance   $ 190,500          
                     
    Total   $ 10,080,188     $ 302,862  
Ben K. Wells(1)
  Salary   $ 525,000          
    Bonus              
    Pro Rata Bonus Payable at Closing           $ 106,726  
    Pro Rata Bonus at Termination Date(3)   $ 183,750          
    Transition Bonus(4)   $ 1,308,500          
    Benefits Continuation(5)   $ 60,000          
    Perquisite Allowance   $ 48,500          
    Outplacement Services   $ 28,500          
                     
    Total   $ 2,154,250     $ 106,726  
Anne Chwat(1)
  Salary   $ 450,883          
    Bonus              
    Pro Rata Bonus Payable at Closing           $ 91,659  
    Pro Rata Bonus at Termination Date(3)   $ 157,809          
    Transition Bonus(4)   $ 1,130,619          
    Benefits Continuation(5)   $ 60,000          
    Perquisite Allowance   $ 48,500          
    Outplacement Services   $ 28,500          
                     
    Total   $ 1,876,311     $ 91,659  
Peter C. Smith
  Salary   $ 437,091          
    Bonus              
    Pro Rata Bonus Payable at Closing(3)           $ 88,855  
    Transition Bonus(4)   $ 1,097,518          
    Benefits Continuation(5)   $ 60,000          
    Perquisite Allowance   $ 48,500          
    Outplacement Services   $ 28,500          
    Total   $ 1,671,609     $ 88,855  
                     
 


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        Termination w/o
       
        Cause or
    Pro-Rata
 
        for Good
    Bonus
 
        Reason
    Payable Upon
 
        After Change
    the Merger’s
 
Name
 
Benefit
  in Control ($)     Closing ($)(2)  
 
Charles M. Fallon, Jr
  Salary   $ 1,000,000          
    Bonus   $ 700,000          
    Pro Rata Bonus Payable at Closing           $ 101,644  
    Benefits Continuation(5)   $ 60,000          
    Perquisite Allowance   $ 97,000          
    Outplacement Services   $ 28,500          
                     
    Total   $ 1,885,500     $ 101,644  
Julio A. Ramirez
  Salary   $ 824,000          
    Bonus   $ 576,800          
    Pro Rata Bonus Payable at Closing           $ 83,755  
    Benefits Continuation(5)   $ 60,000          
    Perquisite Allowance   $ 97,000          
    Outplacement Services   $ 28,500          
                     
    Total   $ 1,586,300     $ 83,755  
Natalia Franco
  Salary   $ 700,000          
    Bonus   $ 490,000          
    Pro Rata Bonus Payable at Closing           $ 71,151  
    Benefits Continuation(5)   $ 60,000          
    Perquisite Allowance   $ 97,000          
    Outplacement Services   $ 28,500          
                     
    Total   $ 1,375,500     $ 71,151  
Kevin Higgins(6)
  Salary   $ 992,600          
    Bonus   $ 446,670          
    Pro Rata Bonus Payable at Closing           $ 64,859  
    Benefits Continuation     N/A          
    Perquisite Allowance   $ 121,098          
    Outplacement Services   $ 28,500          
                     
    Total   $ 1,527,801     $ 64,380  
 
 
(1) If Messrs. Chidsey or Wells or Ms. Chwat are terminated other than for cause or good reason, he or she will receive the remaining cash compensation that he or she would have received had he or she performed services through the end of their six-month transition period.
 
(2) All bonus eligible employees, including each executive officer, will receive a pro rata annual bonus for the period commencing July 1, 2010 through October 15, 2010, calculated at target level of performance, upon the effective time of the merger without regard to whether the executive is terminated or continues to be employed by the Company.
 
(3) For each of the transition executives, the pro rata bonus payable at Termination Date represents a pro rata bonus, calculated at target level of performance, for services rendered during the six-month transition period.
 
(4) The transition bonus will be paid at the effective time of the merger, except for Mr. Chidsey, who will receive $521,000 at the effective time of the merger, $1,250,000 six months after the effective time of the merger and $1,250,000 12 months after the effective time of the merger.

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(5) Assumes cost of the benefits continuation of $30,000 per year. However, each executive will receive benefits at the level in effect on the date of termination.
 
(6) Mr. Higgins salary and other payments are due in Swiss Francs. Amounts above represent conversion to U.S. dollars based on the Bloomberg exchange rate in effect on September 13, 2010, which was 1 Swiss Franc to 0.9926 United States Dollars.
 
Director Compensation
 
Each non-management director receives an annual deferred stock award, director stock units, with a grant date fair value of $85,000. The director stock units vest in quarterly installments over a 12 month period. In addition, the non-management directors receive an annual retainer of $65,000. The chair of the Audit Committee receives an additional $20,000 fee and the chairs of the Compensation Committee and the Nominating and Corporate Governance Committee each receive an additional $10,000 fee. In addition, commencing on July 1, 2010, the board appointed a lead independent director who will be eligible to receive an additional $25,000 annual fee. Directors have the option to receive their annual retainer and their chair fees either 100% in cash or 100% in director stock units. Messrs. Formanek and Youngblood, who elected to receive their annual retainer for the 2010 calendar year in cash, previously received their annual retainer. The remaining non-management directors, who elected to receive their annual retainer for the 2010 calendar year in director stock units, will receive a cash settlement in the amount of $65,000 at the effective time of the merger in lieu of receiving director stock units at the annual meeting of shareholders.
 
All director stock units, whether the annual grant or a grant in lieu of a cash retainer or chair fees, will be settled upon termination of service on the board of directors. Any director stock units granted as part of a director’s annual compensation that remain unvested immediately before the consummation of the merger will vest and be canceled in exchange for an amount in cash calculated as described above under “— Equity Awards”. The director stock units for each director are set forth in the Deferred Stock columns in the director table above under “— Equity Awards”.
 
Indemnification and Exculpation of Directors and Officers
 
Section 145 of the DGCL provides that a Delaware corporation may indemnify any persons who are, or are threatened to be made, parties to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of such corporation), by reason of the fact that such person was an officer, director, employee or agent of such corporation, or is or was serving at the request of such person as an officer, director, employee or agent of another corporation or enterprise. The indemnity may include expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with such action, suit or proceeding, provided that such person acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the corporation’s best interests and, with respect to any criminal action or proceeding, had no reasonable cause to believe that his or her conduct was illegal. A Delaware corporation may indemnify any persons who are, or are threatened to be made, a party to any threatened, pending or completed action or suit by or in the right of the corporation by reason of the fact that such person was a director, officer, employee or agent of such corporation, or is or was serving at the request of such corporation as a director, officer, employee or agent of another corporation or enterprise. The indemnity may include expenses (including attorneys’ fees) actually and reasonably incurred by such person in connection with the defense or settlement of such action or suit provided such person acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the corporation’s best interests, except that no indemnification is permitted without judicial approval if the officer or director is adjudged to be liable to the corporation. Expenses incurred by any officer or director in defending any such action, suit or proceeding in advance of its final disposition shall be paid by the corporation upon delivery to the corporation of an undertaking, by or on behalf of such director or officer, to repay all amounts so advanced if it shall ultimately be determined that such director or officer is not entitled to be indemnified by the corporation. Where an officer or director is successful on the merits or otherwise in the defense of any action referred to above, the corporation must indemnify him or her against the expenses which such officer or director has actually and reasonably incurred. Our certificate of


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incorporation and bylaws provide for the indemnification of our directors and officers to the fullest extent permitted under the DGCL.
 
Section 102(b)(7) of the DGCL permits a corporation to provide in its certificate of incorporation that a director of the corporation shall not be personally liable to the corporation or its shareholders for monetary damages for breach of fiduciary duties as a director, except for liability for any:
 
  •  transaction from which the director derives an improper personal benefit;
 
  •  act or omission not in good faith or that involves intentional misconduct or a knowing violation of law;
 
  •  unlawful payment of dividends or redemption of shares; or
 
  •  breach of a director’s duty of loyalty to the corporation or its shareholders.
 
Our certificate of incorporation provides for such limitation of liability to the fullest extent permitted by the DGCL. In addition, the employment agreements of each of Messrs. Chidsey, Wells, Fallon, Franco, Ramirez and Smith, and Ms. Chwat contain provisions providing for the indemnification of the executive officer in certain circumstances.
 
The merger agreement requires the surviving corporation to honor all existing rights to indemnification in favor of all current and former directors and officers of the Company and its subsidiaries.
 
In addition, the merger agreement requires Parent to maintain the Company’s current directors’ and officers’ insurance policies (or substitute insurance of at least the same coverage and amounts containing terms that are no less favorable to the indemnified parties) for six years following the effective time of the merger. However, Parent will not be required to pay premiums which on an annual basis exceed 300% of the premium paid by the Company for its last fiscal year. The merger agreement also requires Parent and the surviving corporation to indemnify, defend and hold harmless, and provide advancement of expenses to, the current and former directors and officers of the Company and the Company’s subsidiaries against certain losses and indemnified liabilities, including in connection with the merger agreement, the merger and the other transactions contemplated by the merger agreement.
 
Persons Retained, Employed, Compensated or Used
 
We have retained Morgan Stanley and Goldman Sachs as our financial advisors in connection with the Merger and in connection with such engagement, Morgan Stanley and Goldman Sachs provided the fairness opinions described in “— Opinion of the Company’s Financial Advisors,” which are filed as Annex B and C hereto, respectively, and are incorporated herein by reference. The board of directors selected Morgan Stanley and Goldman Sachs as its financial advisors because each is an internationally recognized investment banking firm that has substantial experience in transactions similar to the transactions contemplated by the merger agreement and each has a strong experience working with the Company and in the industry which the board of directors believed would assist it in successfully evaluating and negotiating the transaction.
 
Pursuant to the Engagement Letter between Morgan Stanley and the Company, the Company has agreed to pay to Morgan Stanley (i) an announcement fee of $4.5 million, which was due and payable upon execution of the merger agreement, credited against fees payable pursuant to (ii) and (iii); (ii) a transaction fee of 0.4% of the Adjusted Aggregate Value (as defined in the Engagement Letter) paid in the transaction if the transaction is consummated; and (iii) if the transaction is not consummated, but the Company receives compensation pursuant to the termination provisions contained in the merger agreement, a termination fee of 13.34% of the total of such fees, provided that the termination fee will not exceed the transaction fee payable in (ii). Assuming the transaction is consummated, the Company will pay approximately $20 million in the aggregate to Morgan Stanley.
 
The Company has also agreed in the Engagement Letter to reimburse Morgan Stanley for all reasonable out-of-pocket expenses and to indemnify Morgan Stanley and certain related persons from and against any liabilities, expenses and actions arising out of or in connection with its engagement.


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In the past two years, Morgan Stanley and its affiliates have provided financial advisory services for the Company and received customary fees for such services. In the ordinary course of Morgan Stanley’s trading and brokerage activities, Morgan Stanley or its affiliates may at any time hold long or short positions, and may trade or otherwise effect transactions, for its own account or for the account of customers in the equity and other securities of the Company or any other parties, commodities or currencies involved in the merger.
 
Pursuant to the Engagement Letter between Goldman Sachs and the Company, the Company has agreed to pay to Goldman Sachs (i) 0.2% of the Aggregate Value (as defined in the Engagement Letter) paid in the transaction if the transaction is consummated; and (ii) if the transaction is not consummated, but the Company receives compensation pursuant to the termination provisions contained in the merger agreement, a termination fee of 6.66% of the total of such fees, provided that the termination fee will not exceed the transaction fee payable in (i). Assuming the transaction is consummated, the Company will pay approximately $10 million in the aggregate to Goldman Sachs. The Company has also agreed in the Engagement Letter to reimburse Goldman Sachs for all reasonable expenses and to indemnify Goldman Sachs and certain related persons from and against any liabilities, expenses and actions arising out of or in connection with its engagement.
 
The Goldman Sachs Funds, affiliates of Goldman Sachs, are one of the Company’s Sponsors and own 10.3% of the issued and outstanding shares of Company Common Stock. The Goldman Sachs Funds have entered into a stockholder tender agreement and are a party to the shareholders’ agreement. In addition, Mr. Mehra, a member of the board of directors, is a Managing Director of Goldman Sachs. In connection with the merger, Mr. Mehra will be entitled to receive $587,472 in cash pursuant to the accelerated vesting of his director stock units. See “Interests of Certain Persons in the Merger” above. Mr. Mehra has an understanding with The Goldman Sachs Group, Inc. pursuant to which he holds such Director Stock Units for the benefit of The Goldman Sachs Group, Inc. Over the past two years, Goldman Sachs and its affiliates have provided financial advisory services for the Company and received customary fees for such services. In the ordinary course of Goldman Sachs’ trading and brokerage activities, Goldman Sachs or its affiliates may at any time hold long or short positions, and may trade or otherwise effect transactions, for its own account or for the account of customers in the equity and other securities of the Company or any other parties, commodities or currencies involved in the merger.
 
The Company has also retained Joele Frank, Wilkinson Brimmer Katcher, which we refer to as Joele Frank, as its public relations advisor in connection with the merger. The Company has agreed to pay customary compensation to Joele Frank for such services. In addition, the Company has agreed to reimburse Joele Frank for its reasonable out-of-pocket expenses and to indemnify it and certain related persons against certain liabilities arising out of the engagement.
 
Except as set forth above, neither the Company nor any person acting on its behalf has or currently intends to employ, retain or compensate any person to make solicitations or recommendations to the shareholders of the Company on its behalf with respect to the merger.
 
Accounting Treatment
 
The merger will be accounted for as a “purchase transaction” for financial accounting purposes.
 
Material U.S. Federal Income Tax Consequences of the Merger
 
The following is a summary of the material United States federal income tax consequences to beneficial owners of shares of Company common stock whose shares are converted into the right to receive cash in the merger. This summary is general in nature and does not discuss all aspects of United States federal income taxation that may be relevant to a holder of shares of Company common stock in light of its particular circumstances. In addition, this summary does not describe any tax consequences arising under the laws of any local, state or foreign jurisdiction and does not consider any aspects of United States federal tax law other than income taxation. This summary deals only with shares of Company common stock held as capital assets within the meaning of Section 1221 of the United States Internal Revenue Code of 1986, as amended (which we refer to as the “Code”) (generally, property held for investment), and does not address tax considerations


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applicable to any holder of shares of Company common stock that may be subject to special treatment under the United States federal income tax laws, including:
 
  •  a bank or other financial institution;
 
  •  a tax-exempt organization;
 
  •  a retirement plan or other tax-deferred account;
 
  •  a partnership, an S corporation or other pass-through entity (or an investor in a partnership, S corporation or other pass-through entity);
 
  •  an insurance company;
 
  •  a mutual fund;
 
  •  a real estate investment trust;
 
  •  a dealer or broker in stocks and securities, or currencies;
 
  •  a trader in securities that elects mark-to-market treatment;
 
  •  a holder of shares of Company common stock subject to the alternative minimum tax provisions of the Code;
 
  •  a holder of shares of Company common stock that received such shares through the exercise of an employee stock option, through a tax qualified retirement plan or otherwise as compensation;
 
  •  a person that has a functional currency other than the United States dollar;
 
  •  a person that holds the shares of Company common stock as part of a hedge, straddle, constructive sale, conversion or other integrated transaction;
 
  •  a United States expatriate;
 
  •  any holder of shares of Company common stock that holds an equity interest, actually or constructively, in Parent or the surviving corporation after the merger;
 
  •  any holder of shares of Company common stock that entered into a stockholder tender agreement as part of the transactions described in this proxy statement; or
 
  •  any holder of shares of Company common stock that beneficially owns, actually or constructively, or at some time during the 5-year period ending on the date of the exchange has beneficially owned, actually or constructively, more than 5% of the total fair market value of the shares of Company common stock.
 
If a partnership (including any entity or arrangement treated as a partnership for United States federal income tax purposes) holds shares of Company common stock, the tax treatment of a partner in the partnership generally will depend upon the status of the partner and the activities of the partnership. Partnerships holding shares of Company common stock and the partners therein should consult their own tax advisors regarding the tax consequences of exchanging the shares pursuant to the merger.
 
This summary is based on the Code, the Treasury regulations promulgated under the Code, and rulings and judicial decisions, all as in effect as of the date of this proxy statement, and all of which are subject to change or differing interpretations at any time, with possible retroactive effect. We have not sought, and do not intend to seek, any ruling from the Internal Revenue Service (which we refer to as the “IRS”) with respect to the statements made and the conclusions reached in the following summary, and no assurance can be given that the IRS will agree with the views expressed herein, or that a court will not sustain any challenge by the IRS in the event of litigation.
 
The discussion set out herein is intended only as a summary of the material United States federal income tax consequences to a holder of shares of Company common stock. We urge you to consult your own tax advisor with respect to the specific tax consequences to you in connection with the merger in


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light of your own particular circumstances, including federal estate, gift and other non-income tax consequences, and tax consequences under state, local or foreign tax laws.
 
United States Holders
 
For purposes of this discussion, the term “United States Holder” means a beneficial owner of shares of Company common stock that is, for United States federal income tax purposes:
 
  •  a citizen or resident of the United States;
 
  •  a corporation (or any other entity or arrangement treated as a corporation for United States federal income tax purposes) organized in or under the laws of the United States or any state thereof or the District of Columbia;
 
  •  an estate, the income of which is subject to United States federal income taxation regardless of its source; or
 
  •  a trust if (i) a court within the United States is able to exercise primary supervision over the administration of the trust and one or more United States persons have the authority to control all substantial decisions of the trust or (ii) the trust has validly elected to be treated as a “United States person” under applicable Treasury regulations.
 
Payments with Respect to Shares
 
The exchange of shares of Company common stock for cash pursuant to the merger will generally be a taxable transaction for United States federal income tax purposes, and a United States Holder who receives cash for shares of Company common stock pursuant to the merger will recognize gain or loss, if any, equal to the difference between the amount of cash received and the holder’s adjusted tax basis in the shares exchanged therefor. Gain or loss will be determined separately for each block of shares of Company common stock (i.e., shares acquired at the same cost in a single transaction). Such gain or loss will be capital gain or loss, and will be long-term capital gain or loss if such United States Holder’s holding period for the shares of Company common stock is more than one year at the time of the exchange. Long-term capital gain recognized by an individual holder generally is subject to tax at a lower rate than short-term capital gain or ordinary income. There are limitations on the deductibility of capital losses.
 
Backup Withholding Tax
 
Proceeds from the exchange of shares of Company common stock pursuant to the merger generally will be subject to backup withholding tax at the applicable rate (currently, 28%) unless the applicable United States Holder or other payee provides a valid taxpayer identification number and complies with certain certification procedures (generally, by providing a properly completed IRS Form W-9) or otherwise establishes an exemption from backup withholding tax. Any amounts withheld under the backup withholding tax rules from a payment to a United States Holder will be allowed as a credit against that holder’s United States federal income tax liability and may entitle the holder to a refund, provided that the required information is timely furnished to the IRS. Each United States Holder should complete and sign the IRS Form W-9, which is included with the letter of transmittal to be returned to the paying agent, to provide the information and certification necessary to avoid backup withholding, unless an exemption applies and is established in a manner satisfactory to the paying agent.
 
Non-United States Holders
 
The following is a summary of the material United States federal income tax consequences that will apply to you if you are a Non-United States Holder of shares of Company common stock. The term “Non-United States Holder” means a beneficial owner of shares of Company common stock that is neither a United States Holder nor a partnership for United States federal income tax purposes.


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The following discussion applies only to Non-United States Holders, and assumes that no item of income, gain, deduction or loss derived by the Non-United States Holder in respect of shares of Company common stock at any time is effectively connected with the conduct of a United States trade or business. Special rules, not discussed herein, may apply to certain Non-United States Holders, such as:
 
  •  certain former citizens or residents of the United States;
 
  •  controlled foreign corporations;
 
  •  passive foreign investment companies;
 
  •  corporations that accumulate earnings to avoid United States federal income tax;
 
  •  investors in pass-through entities that are subject to special treatment under the Code; and
 
  •  Non-United States Holders that are engaged in the conduct of a United States trade or business.
 
Payments with Respect to Shares
 
Payments made to a Non-United States Holder with respect to shares of Company common stock exchanged for cash pursuant to the merger generally will be exempt from United States federal income tax. However, if the Non-United States Holder is an individual who was present in the United States for 183 days or more in the taxable year of the exchange and certain other conditions are met, such holder will be subject to tax at a flat rate of 30% (or such lower rate as may be specified under an applicable income tax treaty) on any gain from the exchange of the shares of Company common stock, net of applicable United States-source losses from sales or exchanges of other capital assets recognized by the holder during the year.
 
Backup Withholding Tax
 
A Non-United States Holder may be subject to backup withholding tax with respect to the proceeds from the disposition of shares of Company common stock pursuant to the merger, unless, generally, the Non-United States Holder certifies under penalties of perjury on an appropriate IRS Form W-8 that such Non-United States Holder is not a United States person, or the Non-United States Holder otherwise establishes an exemption in a manner satisfactory to the paying agent.
 
Any amounts withheld under the backup withholding tax rules will be allowed as a refund or a credit against the Non-United States Holder’s United States federal income tax liability, provided the required information is timely furnished to the IRS.
 
The foregoing summary does not discuss all aspects of United States federal income taxation that may be relevant to particular holders of shares of Company common stock. Holders of shares of Company common stock should consult their own tax advisors as to the particular tax consequences to them of exchanging their shares for cash in the merger under any federal, state, foreign, local or other tax laws.
 
The United States federal income tax consequences described above are not intended to constitute a complete description of all tax consequences relating to the merger. Because individual circumstances may differ, each shareholder should consult the shareholder’s tax advisor regarding the applicability of the rules discussed above to the shareholder and the particular tax effects to the shareholder of the merger in light of such shareholder’s particular circumstances and the application of state, local and foreign tax laws.
 
Regulatory Approvals and Notices
 
U.S. Antitrust Approval
 
Under the terms of the merger agreement, the merger cannot be completed until the waiting period applicable to the consummation of the merger under the HSR Act has expired or been terminated.


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Under the HSR Act and the rules promulgated thereunder by the FTC, the merger cannot be completed until each of the Company and Parent files a notification and report form with the FTC and the Antitrust Division of the DOJ under the HSR Act and the applicable waiting period has expired or been terminated. Parent filed a notification and report form with the FTC and the Antitrust Division of the DOJ relating to its proposed acquisition of the Company on September 16, 2010. We submitted our Premerger Notification and Report Form with the FTC and the Antitrust Division of the DOJ on September 17, 2010. Consequently, the required waiting period will expire on October 1, 2010, unless earlier terminated.
 
At any time before or after consummation of the merger, notwithstanding the termination of the waiting period under the HSR Act, the Antitrust Division of the DOJ or the FTC could take such action under the antitrust laws as it deems necessary or desirable in the public interest, including seeking to enjoin the completion of the merger or seeking divestiture of substantial assets of the Company or Parent. At any time before or after the completion of the merger, and notwithstanding the termination of the waiting period under the HSR Act, any state could take such action under the antitrust laws as it deems necessary or desirable in the public interest. Such action could include seeking to enjoin the completion of the merger or seeking divestiture of substantial assets of the Company or Parent. Private parties may also seek to take legal action under the antitrust laws under certain circumstances.
 
There can be no assurance that all of the regulatory approvals described above will be sought or obtained and, if obtained, there can be no assurance as to the timing of any approvals, the ability of Parent or the Company to obtain the approvals on satisfactory terms or the absence of any litigation challenging such approvals. There can also be no assurance that the DOJ, the FTC or any other governmental entity or any private party will not attempt to challenge the merger on antitrust grounds and, if such a challenge is made, there can be no assurance as to its result.
 
Foreign Antitrust Approval
 
The merger may also trigger antitrust notifications in the following jurisdictions:
 
Mexico.  Under Articles 16-22 of Mexico’s Federal Law of Economic Competition, or the Competition Law, along with Articles 15-27 of Mexico’s new Regulations to the Competition Law, certain acquisition transactions may not be consummated unless certain information has been furnished to the Federal Competition Commission, or the Mexican FCC, and certain waiting period requirements have been satisfied. The initial statutory review period can range between 15 and 35 working days from receipt of a complete notification, depending on whether the notification is made under the so-called fast-track procedure or the general procedure. Transactions notified under the general procedure or under the fast-track procedure may not be completed for 10 working days following the date of notification. If the Mexican FCC does not issue a suspension order during the 10-day period, the parties may close the transaction without incurring the risk of any fine on day 11 and any time thereafter. If the Mexican FCC issues a bar on closing order during the initial waiting period, the parties must refrain from closing the transaction until the Mexican FCC issues a decision. The Company and Parent filed with the Mexican FCC on September 21, 2010. Consequently, the required waiting period with respect to the offer and/or merger is expected to expire on October 12, 2010.
 
Turkey.  Under Articles 7, 10, 11, and 12 of the Law on the Protection of Competition, No. 4054, dated 7 December 1994, and the Competition Authority Communique No. 1997/1 on the Mergers and Acquisitions Calling for the Authorization of the Competition Board, as amended by Communiques No. 1998/2, No. 1998/6, No. 2000/2 and 2006/2, certain acquisition transactions may not be consummated unless certain information has been furnished to the Turkish Competition Authority, or the TCA, and certain waiting period requirements have been satisfied. The TCA must notify the parties of its decision to approve a transaction or to open a prolonged in-depth investigation within 30 calendar days following the receipt of a complete notification, unless the TCA requests additional information. If the TCA requests additional information, the 30-day review period will start again as of the date of submission of the requested information. A notifiable transaction is invalid and unenforceable under Turkish law until


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the date of approval of the TCA. The Company and Parent filed with the TCA on September 17, 2010. Consequently, the required waiting period is expected to expire on October 17, 2010.
 
Litigation Relating to the Merger
 
On September 3, 2010, four purported class action complaints were filed in the Circuit Court for the County of Miami-Dade, Florida, captioned Darcy Newman v. Burger King Holdings, Inc. et. al., Case No. 10-48422CA30, Belle Cohen v. David A. Brandon, et. al., Case No. 10-48395CA32, Melissa Nemeth v. Burger King Holdings, Inc. et. al., Case No. 10-48424CA05 and Vijayalakshmi Venkataraman v. John W. Chidsey, et. al., Case No. 10-48402CA13, by purported shareholders of the Company, in connection with the offer and the merger. Each of the four complaints (collectively, the “Florida Action”) names as defendants the Company, each member of the Company’s board of directors (the “Individual Defendants”) and 3G Capital. The suits generally allege that the Individual Defendants breached their fiduciary duties to the Company’s shareholders in connection with the proposed sale of the Company and that 3G Capital and the Company aided and abetted the purported breaches of fiduciary duties. The complaint filed on behalf of Belle Cohen includes, among others, allegations that the Individual Defendants have failed to explore alternatives to the offer; that the consideration to be received by the holders of shares of Company common stock is unfair and inadequate; and that the proposed transaction employs a process that does not maximize shareholder value. The complaints filed on behalf of Melissa Nemeth and Darcy Newman generally allege that the Individual Defendants breached their fiduciary duties by engaging in self-dealing and obtaining for themselves personal benefits not shared equally by the other holders of shares. Those complaints include allegations that the consideration to be received by the holders of shares is unfair and inadequate, and that the proposed transaction employs a process which renders it unlikely that a higher bid will emerge for the Company. The complaint filed on behalf of Vijayalakshmi Venkataraman generally alleges that the Individual Defendants breached their fiduciary duties by pursuing a transaction that fails to maximize shareholder value. The complaint includes, among others, allegations that the 40-day “go-shop” period is inadequate and the proposed transaction is intended to enable the Company’s private equity investors to “dump” their shares. Each of the complaints seeks injunctive relief and one complaint also seeks compensatory damages. The plaintiffs in the Florida Action have filed a joint agreed motion to consolidate these actions and to appoint plaintiff’s co-lead counsel. In addition, the Court has granted a motion to transfer the actions to the Complex Business Litigation Section.
 
On September 20, 2010, an Amended Complaint was filed on behalf of two of the plaintiffs in the Florida Action. The Amended Complaint generally alleges, among other things, that the board of directors breached their fiduciary duties in connection with the merger and that 3G Capital, Parent and the Company aided and abetted the purported breaches of fiduciary duty. The Amended Complaint also adds allegations related to purported deficiencies in the Company’s public disclosures about the offer and the process leading up to it. On September 22, 2010, a Motion to Stay Proceedings Pending Disposition of Related Delaware Action was filed in the Florida Actions.
 
On September 8, 2010, another putative shareholder class action suit captioned Roberto S. Queiroz v. Burger King Holdings, Inc., et al., Case No. 5808-VCP was filed in the Delaware Court of Chancery against the Individual Defendants, the Company, 3G, 3G Capital, Parent, and Merger Sub. The complaint generally alleges that the Individual Defendants breached their fiduciary duty to maximize shareholder value by entering into the proposed transaction via an unfair process and at an unfair price, and that the merger agreement contains provisions that unreasonably dissuade potential suitors from making competing offers. The complaint further alleges that the Individual Defendants engaged in self-dealing and obtained for themselves personal benefits not shared equally by the shareholders. Specifically, the complaint includes allegations that the “Top-Up” will likely lead to a short form merger without obtaining shareholder approval, that the termination fees are unreasonable, that the “no shop” restriction impermissibly constrains the Company’s ability to communicate with potential acquirers, and that the consideration to be received by the Company’s shareholders is unfair and inadequate. The complaint also alleges that the Company and 3G aided and abetted these alleged breaches of fiduciary duty. The complaint seeks class certification, injunctive relief, including enjoining the merger and rescinding the merger agreement, unspecified damages, and costs of the action as well as


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\attorneys’ and experts’ fees. The Company and the Individual Defendants filed an answer to the complaint on September 9, 2010, substantially denying the allegations of wrongdoing contained therein. 3G filed its answer in this action on September 15, 2010.
 
On September 22, 2010, the plaintiff in the Delaware action filed a Motion For Leave To File An Amended Class Action Complaint. Like the Amended Complaint in the Florida Action, the proposed Amended Complaint in Delaware alleges that the Company’s public disclosures about the offer and the process leading up to it are incomplete and misleading.
 
The Company believes the aforementioned complaints are completely without merit, and intends to vigorously defend them.
 
THE MERGER AGREEMENT
 
This section describes the material terms of the merger agreement. The description in this section and elsewhere in this proxy statement is qualified in its entirety by reference to the complete text of the merger agreement, a copy of which is attached as Annex A and is incorporated by reference into this proxy statement. This summary does not purport to be complete and may not contain all of the information about the merger agreement that is important to you. We encourage you to read the merger agreement carefully and in its entirety. This section is not intended to provide you with any factual information about us. Such information can be found elsewhere in this proxy statement and in the public filings we make with the SEC, as described in the section entitled, “Where You Can Find More Information”, beginning on page [ • ].
 
Explanatory Note Regarding the Merger Agreement
 
The merger agreement is included to provide you with information regarding its terms. Factual disclosures about the Company contained in this proxy statement or in the Company’s public reports filed with the SEC may supplement, update or modify the factual disclosures about the Company contained in the merger agreement. The representations, warranties and covenants made in the merger agreement by the Company, Parent and Merger Sub were qualified and subject to important limitations agreed to by the Company, Parent and Merger Sub in connection with negotiating the terms of the merger agreement. In particular, in your review of the representations and warranties contained in the merger agreement and described in this summary, it is important to bear in mind that the representations and warranties were negotiated with the principal purposes of establishing the circumstances in which a party to the merger agreement may have the right not to consummate the merger if the representations and warranties of the other party prove to be untrue due to a change in circumstance or otherwise, and allocating risk between the parties to the merger agreement, rather than establishing matters as facts. The representations and warranties may also be subject to a contractual standard of materiality different from those generally applicable to shareholders and reports and documents filed with the SEC and in some cases were qualified by the matters contained in the disclosure schedule that the Company delivered in connection with the merger agreement, which disclosures were not reflected in the merger agreement. Moreover, information concerning the subject matter of the representations and warranties, which do not purport to be accurate as of the date of this proxy statement, may have changed since the date of the merger agreement and subsequent developments or new information qualifying a representation or warranty may have been included in this proxy statement.
 
Effects of the Merger; Directors and Officers; Certificate of Incorporation; Bylaws
 
The merger agreement provides for the merger of Merger Sub with and into the Company upon the terms, and subject to the conditions, set forth in the merger agreement. As the surviving corporation, the Company will continue to exist following the merger.
 
The board of directors of the surviving corporation will, from and after the effective time of the merger, consist of the directors of Merger Sub until their successors have been duly elected or appointed and qualified or until their earlier death, resignation or removal in accordance with the certificate of incorporation and bylaws of the surviving corporation. The officers of the Company immediately prior to the effective time of


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the merger will, from and after the effective time of the merger, be the officers of the surviving corporation until their successors have been duly elected or appointed and qualified or until their earlier death, resignation or removal in accordance with the certificate of incorporation and bylaws of the surviving corporation.
 
The certificate of incorporation of the surviving corporation will be in the form of the certificate of incorporation attached as an exhibit to the merger agreement, until amended in accordance with its terms or by applicable law, except that the name of the surviving corporation will be “Burger King Holdings, Inc.”. The by-laws of Merger Sub as in effect immediately prior to the effective time of the merger will be the by-laws of the surviving corporation, until amended in accordance with its terms or by applicable law.
 
Following the completion of the merger, the Company common stock will be delisted from the NYSE and deregistered under the Exchange Act and to cease to be publicly traded.
 
Terms of the Merger Agreement
 
The following is a summary of certain provisions of the merger agreement. This summary does not purport to be complete and is qualified in its entirety by reference to the full text of the merger agreement, a copy of which is attached hereto as Annex A, which is incorporated herein by reference. Copies of the merger agreement, and any other filings that we make with the SEC with respect to the offer or the merger, may be obtained in the manner set forth in “Where You Can Find More Information” beginning on page [ • ]. Shareholders and other interested parties should read the merger agreement for a more complete description of the provisions summarized below.
 
The Offer
 
On September 16, 2010, Merger Sub commenced the offer for all of the outstanding shares of Company common stock at a price of $24.00 per share, net to the seller in cash without interest. The offer contemplated that, after completion of the offer and the satisfaction or waiver of all conditions, we will merge with Merger Sub and all outstanding shares of Company common stock, other than shares held by Parent, Merger Sub or the Company or shares held by the Company’s shareholders who have and validly exercised appraisal rights under Delaware law, will be canceled and converted into the right to receive cash equal to $24.00 per share. The offer was commenced pursuant to the merger agreement.
 
Under the terms of the merger agreement, the parties agreed to complete the merger whether or not the offer is completed. If the offer is not completed, the parties agreed that the merger could only be completed after the receipt of shareholder approval of the adoption of the merger agreement that will be considered at the special meeting. We are soliciting proxies for the special meeting to obtain shareholder approval of the adoption of the merger agreement to be able to consummate the merger regardless of the outcome of the offer.
 
We refer in this proxy statement to the offer and to terms of the merger agreement applicable to the offer, however, the offer is being made separately to the holders of shares of Company common stock and is not applicable to the special meeting.
 
The merger agreement also provides that the obligation of Merger Sub to purchase shares tendered in the offer is subject to the satisfaction or waiver of a number of conditions set forth in the merger agreement, including the expiration or termination of applicable waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, the consummation of the offer not being unlawful under the antitrust or similar law of certain foreign jurisdictions, the receipt of proceeds by Parent under certain financing agreements, and other customary closing conditions. In addition, it is a condition to Merger Sub’s obligation to purchase the shares tendered in the offer that the number of the outstanding shares of Company common stock that have been validly tendered and not validly withdrawn, together with any shares of Company common stock then owned by Parent and its subsidiaries, equals at least 79.1% of the Company common stock outstanding as of the expiration of the offer.


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Top-Up
 
Pursuant to the merger agreement, the Company granted to Merger Sub an irrevocable right, which we refer to as the top-up, to purchase additional shares of Company common stock, which Merger Sub must exercise immediately following consummation of the offer, if necessary, at a price per share equal to the merger consideration that, when added to the number of shares owned by Parent, Merger Sub and any of their wholly-owned subsidiaries immediately prior to the time of such exercise, will constitute at least one share more than 90% of the shares of Company common stock then outstanding (after giving effect to the top-up). The top-up is intended to expedite the timing of the completion of the merger by permitting the merger to occur pursuant to Delaware’s short-form merger statute. Merger Sub is required to exercise the top-up if Merger Sub does not own at least 90% of the outstanding shares immediately after it accepts for purchase all of the shares validly tendered and not withdrawn. Simultaneously with the consummation of the offer, Merger Sub shall pay to the Company the purchase price owed by Merger Sub to the Company to purchase that number of newly issued, fully paid and nonassessable shares of Company common stock required to effect the top-up, at Merger Sub’s option, (i) in cash, by wire transfer of same-day funds, or (ii) by (x) paying in cash, by wire transfer of same-day funds, an amount equal to not less than the aggregate par value of the such newly issued shares of Company common stock and (y) executing and delivering to the Company a promissory note, with such terms as specified in the merger agreement, having a principal amount equal to the aggregate purchase price pursuant to the top-up less the amount paid in cash.
 
If, following the offer, Parent, Merger Sub and any other subsidiary of Parent collectively at least own 90% of the outstanding shares of Company common stock, Parent, Merger Sub and the Company shall take all necessary and appropriate action to consummate the merger as a short-form merger as soon as practicable without a meeting of Company shareholders. In such a case, shareholder approval at the special meeting will not be required.
 
Recommendation
 
The Company has represented in the merger agreement that the board of directors has, at a meeting duly called and held, unanimously (i) authorized and approved the execution, delivery and performance of the merger agreement and the transactions contemplated by the merger agreement, (ii) approved and declared advisable the merger agreement, the merger and the other transactions contemplated by the merger agreement, (iii) declared that the terms of the merger agreement and the transactions contemplated by the merger agreement, including the merger and the other transactions contemplated by the merger agreement, on the terms and subject to the conditions set forth therein, are fair to and in the best interests of the shareholders of the Company, (iv) directed that the adoption of the merger agreement be submitted to a vote at a meeting of the shareholders of the Company, (v) recommended that the shareholders of the Company vote their shares of Company common stock in favor of adoption of the merger agreement and (vi) approved for all purposes Merger Sub, Parent and their affiliates, the merger agreement and the transactions contemplated by the merger agreement to exempt such persons, agreements and transactions from any anti-takeover laws. We refer to the recommendation in clause (v) above as the “Recommendation.”
 
The Merger
 
The merger agreement provides that, subject to the terms and conditions of the merger agreement, and in accordance with the DGCL, at the effective time of the merger:
 
  •  Merger Sub will be merged with and into the Company and, as a result of the merger, the separate corporate existence of Merger Sub will cease;
 
  •  the Company will be the surviving corporation in the merger and will become a wholly-owned subsidiary of Parent; and
 
  •  All of the properties, rights, privileges, powers and franchises of the Company and Merger Sub will vest in the surviving corporation, and all of the claims, obligations, liabilities, debts and duties of the


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  Company and Merger Sub shall become the claims, obligations, liabilities, debts and duties of the surviving corporation.
 
Merger Closing Conditions.  The obligations of Parent and Merger Sub, on the one hand, and the Company, on the other hand, to complete the merger are each subject to the satisfaction or (to the extent permitted by applicable law) the waiver of the following conditions:
 
  •  the affirmative vote of holders of a majority of shares of Company common stock entitled to vote at a shareholders’ meeting to adopt the merger agreement, which we refer to as the Shareholder Approval, shall have been obtained, if required by applicable law;
 
  •  the waiting period applicable to the merger under the HSR Act shall have expired unless early termination shall have been granted, and the consummation of the merger is not unlawful under the competition, merger control, antitrust or similar law of certain applicable jurisdictions; and
 
  •  the consummation of the merger will not then be restrained, enjoined or prohibited by any order of any court of competent jurisdiction which remains in effect that enjoins or otherwise prohibits consummation of the merger.
 
  •  Merger Sub shall have accepted for payment the shares of Company common stock validly tendered and not validly withdrawn pursuant to the offer, unless the Offer Termination has occurred.
 
Solely if the Offer Termination shall have occurred, the obligations of Parent and Merger Sub to complete the merger shall be subject to the satisfaction or (to the extent permitted by applicable law) the waiver of the following conditions:
 
  •  the representations and warranties of the Company, (i) set forth in Section 4.03 (Capital Structure), Section 4.04 (Authority, Recommendation), Section 4.26 (Voting Requirements) and Section 4.27 (State Takeover Statute) shall be true and correct in all material respects as of the date of the merger agreement and as of the closing date of the merger; as though made on such date, (ii) set forth in Section 4.07 (Absence of Certain Changes or Events) shall be true and correct as of the date of the merger agreement and as of the closing date of the merger; as though made on such date without disregarding the “Material Adverse Effect” qualification set forth therein and (iii) set forth in the merger agreement, other than those described in clauses (i) and (ii) above, shall be true and correct (disregarding all qualifications or limitations as to “materiality”, “Material Adverse Effect” and words of similar import set forth therein) as of the date of the merger agreement and as of the closing date of the merger; as though made on such date, except, in the case of this clause (iii), where the failure of such representations and warranties to be so true and correct would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect; provided in each case that representations and warranties made as of a specific date shall be required to be so true and correct (subject to such qualifications) as of such date only.
 
  •  the Company shall have performed or complied in all material respects with its obligations required to be performed or complied with by it under the merger agreement at or prior to the closing of the merger;
 
  •  since the date of the merger agreement, there shall not have occurred any change, event or occurrence that has had or would reasonably be expected to have a Material Adverse Effect; and
 
  •  as of immediately prior to the closing date of the merger (and, for the avoidance of doubt, before giving effect to the incurrence of the Debt Financing and the consummation of the transactions contemplated by the merger agreement and such Debt Financing), the Company is Solvent.
 
The obligations of the Company to complete the merger shall be subject to the satisfaction or (to the extent permitted by applicable law) the waiver of the following conditions:
 
  •  the representations and warranties of Parent and Merger Sub set forth in the merger agreement shall be true and correct (disregarding all qualifications or limitations as to “materiality”, “parent material adverse effect” and words of similar import set forth therein) as of the date of the merger agreement


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  and as of the closing date of the merger; as though made on such date (except to the extent such representations and warranties expressly relate to an earlier date, in which case as of such earlier date), except where the failure of such representations and warranties to be so true and correct would not, individually or in the aggregate, reasonably be expected to have a parent material adverse effect; and
 
  •  Parent and Merger Sub shall each have performed or complied in all material respects with its obligations required to be performed or complied with by it under the merger agreement at or prior to the closing of the merger.
 
Merger Consideration.  At the effective time of the merger, each share of Company common stock issued and outstanding immediately prior to the effective time of the merger, other than shares of Company common stock owned by Parent or Merger Sub immediately prior to the effective time of the merger, or any shareholder of the Company who is entitled to and properly exercises appraisal rights under Delaware law, will automatically be converted into the right to receive the per share merger consideration in cash, without interest and less any applicable withholding taxes. All shares converted into the right to receive the per share merger consideration shall be canceled and cease to exist.
 
Payment for the Company Common Stock.  Before the merger, Parent will designate a bank or trust company reasonably acceptable to the Company to make payment of the per share merger consideration, which we refer to as the Paying Agent. At or prior to the effective time of the merger, Parent shall cause to be deposited, in trust with the Paying Agent, the funds necessary to pay the aggregate per share merger consideration to the shareholders.
 
As promptly as reasonably practicable after the effective time of the merger, the Paying Agent will send to each holder of shares of Company common stock a letter of transmittal and instructions advising the shareholders how to surrender stock certificates in exchange for the per share merger consideration. The Paying Agent will pay the per share merger consideration to the shareholders upon receipt of (1) surrendered certificates representing the shares of Company common stock and (2) a signed letter of transmittal and any other items specified by the Paying Agent. Interest will not be paid or accrue in respect of the per share merger consideration. The surviving corporation will reduce the amount of any per share merger consideration paid to the shareholders by any applicable withholding taxes.
 
If any cash deposited with the Paying Agent is not claimed within six months following the effective time of the merger, such cash will be returned to Parent, upon demand, and any holders of the certificates evidencing shares of Company common stock, which we refer to as share certificates, who have not theretofore complied with share certificate exchange procedures in the merger agreement shall thereafter look only to Parent for, and Parent shall remain liable for, payment of their claims for the per share merger consideration and any dividends declared in accordance with the restrictions in the merger agreement with a record date prior to the effective time of the merger that remain unpaid at the effective time of the merger and that are due to any such holder.
 
The transmittal instructions will include instructions if the shareholder has lost the share certificate or if it has been stolen or destroyed. The shareholder will have to provide an affidavit to that fact and, if required by the Paying Agent or Parent, post a bond in an amount that Parent or the Paying Agent reasonably directs as indemnity against any claim that may be made against it in respect of the share certificate.
 
Treatment of the Company Equity Awards.  At the acceleration time each of (i) the stock options outstanding as of such date, (ii) the restricted stock units outstanding as of such date, (iii) the performance-based restricted stock units outstanding as of such date and (iv) the deferred stock units outstanding as of such date (items (i) through (iv) are collectively referred to herein as the Company Equity Awards), will vest in full (but in the case of the performance-based stock units, assuming the target level of performance is satisfied) and be converted into the right to receive an amount in cash equal to the per share merger consideration, less, in the case of options, the exercise price per share subject to such option, other than the August equity grants, which will be treated as described under “The Merger — Interests of Certain Persons in the Merger — Equity Awards” on page [ • ].


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Representations and Warranties
 
The merger agreement contains representations and warranties of the Company, Parent and Merger Sub.
 
Some of the representations and warranties in the merger agreement made by the Company are qualified as to “materiality” or “Material Adverse Effect.” For purposes of the merger agreement, “Material Adverse Effect” means any change, effect, event or occurrence that individually or in the aggregate with all other changes, effects, events or occurrences, has had or would reasonably be expected to have a material adverse effect on (a) the business, condition (financial or otherwise), assets, liabilities or results of operations of the Company and its subsidiaries, taken as a whole or (b) the ability of the Company to perform its obligations under the merger agreement or to consummate the merger. For the purposes of clause (a) above, no change, effect, event or occurrence directly arising out of or directly relating to any of the following shall either alone or in combination constitute, or be taken into account in determining whether there has been, a “Material Adverse Effect”:
 
  •  general economic, credit, capital or financial markets or political conditions in the United States or elsewhere in the world, including with respect to interest rates or currency exchange rates;
 
  •  any outbreak or escalation of hostilities, acts of war (whether or not declared), sabotage or terrorism;
 
  •  any hurricane, tornado, flood, volcano, earthquake or other natural or man-made disaster occurring after the date of the merger agreement;
 
  •  any change in applicable law or GAAP (or authoritative interpretation or enforcement thereof) which is proposed, approved or enacted on or after the date of the merger agreement;
 
  •  general conditions in the industries in which the Company and its subsidiaries primarily operate;
 
  •  the failure, in and of itself, of the Company to meet any internal or published projections, forecasts, estimates or predictions in respect of revenues, earnings or other financial or operating metrics before, on or after the date of the merger agreement, or changes after the date of the merger agreement in the market price or trading volume of the shares of Company common stock or the credit rating of the Company (it being understood that the underlying facts giving rise or contributing to such failure or change may be taken into account in determining whether there has been a Material Adverse Effect);
 
  •  the announcement and pendency of the merger agreement and the transactions contemplated thereby;
 
  •  any action taken by the Company or its subsidiaries at Parent’s written request or otherwise required by the merger agreement; or
 
  •  the identity of, or any facts or circumstances relating to Parent, Merger Sub or their respective affiliates.
 
Except in the cases of the first four bullets above, to the extent that the Company and its subsidiaries, taken as a whole, are materially disproportionately affected by such item as compared with other participants in the industries in which the Company and its subsidiaries primarily operate (in which case the incremental materially disproportionate impact or impacts may be taken into account in determining whether there has been, or is reasonably expected to be, a Material Adverse Effect).
 
In the merger agreement, the Company has made customary representations and warranties to Parent and Merger Sub with respect to, among other things:
 
  •  corporate matters related to the Company and its subsidiaries, such as organization, standing and corporate power;
 
  •  its capitalization;
 
  •  its subsidiaries;
 
  •  public SEC filings and financial statements;
 
  •  the absence of undisclosed liabilities;
 
  •  compliance with laws;


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  •  employee benefit matters;
 
  •  affiliate transactions;
 
  •  the absence of certain changes or events;
 
  •  absence of litigation;
 
  •  tax matters;
 
  •  labor and employment matters;
 
  •  intellectual property;
 
  •  real property;
 
  •  environmental matters;
 
  •  insurance;
 
  •  franchise matters;
 
  •  quality and safety of food and beverage products;
 
  •  certain business practices;
 
  •  the Company swaps;
 
  •  the vote required for the adoption of the merger agreement and the approval of the merger and the transactions contemplated by the merger agreement;
 
  •  material contracts;
 
  •  finders’ and brokers’ fees and expenses;
 
  •  opinions of financial advisors with respect to the fairness of the per share merger consideration;
 
  •  the inapplicability of state takeover statutes or regulations to the offer or the merger; and
 
  •  solvency.
 
In the merger agreement, Parent and Merger Sub have made customary representations and warranties to the Company with respect to, among other things:
 
  •  corporate matters related to Parent and Merger Sub, such as organization, standing and corporate power;
 
  •  capitalization;
 
  •  authority;
 
  •  non-contravention;
 
  •  financing;
 
  •  limited guaranty;
 
  •  absence of litigation;
 
  •  information supplied;
 
  •  operation and ownership of Merger Sub;
 
  •  absence of competing businesses;
 
  •  finders’ and brokers’ fees and expenses;
 
  •  no ownership of shares of Company common stock; and
 
  •  solvency.
 
None of the representations and warranties contained in the merger agreement survives the consummation of the merger.


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Conduct of Business of the Company
 
The merger agreement provides that, except (i) as may be otherwise required by applicable law, (ii) with the prior written consent of Parent (not to be unreasonably withheld or delayed), (iii) as contemplated, required or permitted by the merger agreement or (iv) as previously disclosed to Parent in connection with the merger agreement, after the date of the merger agreement, and prior to the effective time of the merger:
 
  •  the Company shall, and shall cause each of its subsidiaries to, carry on its business in the ordinary course of business consistent with past practice;
 
  •  use reasonable best efforts to preserve substantially intact its current business organization and to preserve its relationships with significant franchisees, customers, suppliers, licensors, licensees, distributors, wholesalers, lessors and others having significant business dealings with the Company or any of its subsidiaries consistent with past practice; and
 
  •  comply with law consistent with past practice.
 
In addition, during the same period except as previously disclosed to Parent in connection with the merger agreement, as expressly contemplated or required by the merger agreement, required by law or consented to in writing by Parent (such consent not to be unreasonably withheld or delayed), the Company shall not, and shall not permit any of its subsidiaries to, take certain actions with respect to the following, subject to the thresholds and exceptions specified in the merger agreement:
 
  •  making dividends, distributions or redemptions of shares of Company common stock;
 
  •  effecting issuances, splits, combinations or reclassifications of shares of Company common stock or any rights, warrants or options to acquire, any such shares of Company common stock;
 
  •  effecting mergers or consolidations with any person;
 
  •  purchasing or selling assets;
 
  •  making capital expenditures;
 
  •  incurring indebtedness for borrowed money;
 
  •  effecting increases in salaries, bonuses, severance or termination pay; announcing new incentive awards, adopting compensation or benefit plans or accelerating the vesting of any right to compensation or benefits;
 
  •  establishing, adopting, entering into or amending in any material respect any material collective bargaining agreement;
 
  •  effecting compromises, settlements or agreements to settle any pending or threatened suit or claim;
 
  •  amending the organizational documents of the Company or of a subsidiary of the Company;
 
  •  changing financial accounting principles;
 
  •  adopting a plan of complete or partial liquidation, dissolution, restructuring, recapitalization or other reorganization of the Company or any of its subsidiaries;
 
  •  effecting tax election changes, changes to annual tax accounting periods, changes to tax accounting methods, settlements of, or extensions or waivers of the applicable statute of limitations for any tax claim;
 
  •  entering into any contract that restricts the ability of the Company or any or its subsidiaries to compete with any business or in any geographic area, or to solicit customers;
 
  •  terminating or materially amending or modifying certain agreements or (b) entrance into any contract that would have been required to be disclosed in connection with the execution of the merger agreement;


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  •  authorizing of any of, or committing or agreeing to take any of, the foregoing actions.
 
Go-Shop; Solicitation
 
During the period beginning on September 2, 2010 and continuing until 11:59 p.m., New York City time, on October 12, 2010, which we refer to as the No-Shop Period Start Date, the Company may, directly or through its representatives: (i) solicit, initiate or encourage, whether publicly or otherwise, any Takeover Proposals (as defined below), including by way of providing access to non-public information; however, the Company shall only permit such non-public information related to the Company to be provided pursuant to a confidentiality and standstill agreement with terms no less favorable to the Company in any substantive respect than those contained in the confidentiality agreement with an affiliate of Parent and Merger Sub, which we refer to as the Confidentiality Agreement; provided that such confidentiality and standstill agreement shall expressly not prohibit, or adversely affect the rights of the Company thereunder upon compliance by the Company with any provision of the merger agreement, and in addition, (A) the Company shall promptly provide to Parent any non-public information concerning the Company or its subsidiaries to which any person is provided such access and which was not previously provided to Parent, and (B) the Company shall withhold such portions of documents or information, or provide pursuant to customary “clean-room” or other appropriate procedures, to the extent relating to any pricing or other matters that are highly sensitive or competitive in nature if the exchange of such information (or portions thereof) could reasonably be likely to be harmful to the operation of the Company in any material respect; and (ii) engage in and maintain discussions or negotiations with respect to any inquiry, proposal or offer that constitutes or may reasonably be expected to lead to any Takeover Proposal or otherwise cooperate with or assist or participate in, or facilitate any such inquiries, proposals, offers, discussions or negotiations or the making of any Takeover Proposal.
 
No Solicitation.  After 11:59 p.m., New York City time, on October 12, 2010 until the effective time of the merger, or, if earlier, the termination of the merger agreement in accordance with its terms, the Company shall not, nor shall it permit any representative of the Company to, directly or indirectly, (i) solicit, initiate or knowingly encourage (including by way of providing information) the submission or announcement of any inquiries, proposals or offers that constitute or would reasonably be expected to lead to any Takeover Proposal, (ii) provide any non-public information concerning the Company or any of its subsidiaries related to, or to any person or group who would reasonably be expected to make, any Takeover Proposal, (iii) engage in any discussions or negotiations with respect thereto, (iv) approve, support, adopt, endorse or recommend any Takeover Proposal, or (v) otherwise cooperate with or assist or participate in, or knowingly facilitate any such inquiries, proposals, offers, discussions or negotiations. Subject to the section of the merger agreement governing the Company’s response to Takeover Proposals, at the No-Shop Period Start Date, the Company shall immediately cease and cause to be terminated any solicitation, encouragement, discussion or negotiation with any person or groups (other than a Qualified Go-Shop Bidder (as defined below)) conducted theretofore by the Company, its subsidiaries or any of their respective representatives with respect to any Takeover Proposal and shall use reasonable best efforts to require any other parties (other than a Qualified Go-Shop Bidder) who have made or have indicated an intention to make a Takeover Proposal to promptly return or destroy any confidential information previously furnished by the Company, any of its subsidiaries or any of their respective representatives.
 
For purposes of the merger agreement:
 
  •  “Takeover Proposal” means any inquiry, proposal or offer from any person or group providing for (a) any direct or indirect acquisition or purchase, in a single transaction or a series of related transactions, of (1) 20% or more (based on the fair market value, as determined in good faith by the board of directors) of assets (including capital stock of the subsidiaries of the Company) of the Company and its subsidiaries, taken as a whole, or (2)(A) shares of Company common stock, which together with any other shares of Company common stock beneficially owned by such person or group, would equal to 20% or more of the outstanding shares of Company common stock, or (B) any other equity securities of the Company or any of its subsidiaries, (b) any tender offer or exchange offer that, if consummated, would result in any person or group owning, directly or indirectly, 20% or more of the outstanding shares of Company common stock or any other equity securities of the Company or any of


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  its subsidiaries, (c) any merger, consolidation, business combination, binding share exchange or similar transaction involving the Company or any of its subsidiaries pursuant to which any person or group (or the shareholders of any person) would own, directly or indirectly, 20% or more of the aggregate voting power of the Company or of the surviving entity in a merger or the resulting direct or indirect parent of the Company or such surviving entity, or (d) any recapitalization, liquidation, dissolution or any other similar transaction involving the Company or any of its material operating subsidiaries, other than, in each case, the transactions contemplated by the merger agreement.
 
  •  “Qualified Go-Shop Bidder” means any person or group from whom the Company or any of its representatives has received a Takeover Proposal after the execution of the merger agreement and prior to the No-Shop Period Start Date that the Company’s board of directors determines, prior to or as of the No-Shop Period Start Date, in good faith, after consultation with its financial advisor and outside legal counsel, constitutes or could reasonably be expected to result in a Superior Proposal (as defined below).
 
  •  “Superior Proposal” means any bona fide, written Takeover Proposal that if consummated would result in a person or group (or the shareholders of any person) owning, directly or indirectly, (a) 75% or more of the outstanding shares of Company common stock or (b) 75% or more of the assets of the Company and its subsidiaries, taken as a whole, in either case which the board of directors determines in good faith (after consultation with its financial advisor and outside legal counsel) (x) is reasonably likely to be consummated in accordance with its terms, and (y) if consummated, would be more favorable to the shareholders of the Company from a financial point of view than the offer and the merger, in each case taking into account all financial, legal, financing, regulatory and other aspects of such Takeover Proposal (including the person or group making the Takeover Proposal) and of the merger agreement (including any changes to the terms of the merger agreement proposed by Parent in connection with a response to a change in recommendation by the board of directors).
 
The Board of Director’s Recommendation; Adverse Recommendation Changes.  As described above, and subject to the provisions described below, the board of directors has made the Recommendation that the holders of the shares of Company Common Stock adopt the merger agreement. The merger agreement provides that the board of directors will not effect an “Adverse Recommendation Change” (as defined below) except as described below.
 
Neither the board of directors any committee thereof shall (i) withdraw or rescind (or modify in a manner adverse to Parent), or publicly propose to withdraw (or modify in a manner adverse to Parent), the Recommendation or the findings or conclusions of the board of directors described in the board resolutions adopted in connection with the execution of the merger agreement, (ii) approve or recommend the adoption of, or publicly propose to approve, declare the advisability of or recommend the adoption of, any Takeover Proposal, (iii) cause or permit the Company or any of its subsidiaries to execute or enter into, any letter of intent, memorandum of understanding, agreement in principle, merger agreement, acquisition agreement or other similar agreement related to any Takeover Proposal, other than a confidentiality and standstill agreement with terms no less favorable to the Company in any substantive respect than those contained in the confidentiality agreement between the Company and an affiliate of Parent and Merger Sub, or (iv) publicly proposed or announced an intention to take any of the foregoing actions (any action described in clauses (i), (ii), (iii) or (iv), we refer to as an Adverse Recommendation Change).
 
The board of directors is entitled to make an Adverse Recommendation Change only if the board of directors determines in good faith (after consultation with its outside counsel) that the failure to take such action would be inconsistent with its fiduciary duties under applicable law. However, the board of directors is not entitled to exercise its right to make an Adverse Recommendation Change or, solely with regards to a Superior Proposal, terminate the merger agreement in order to accept a Superior Proposal and enter into an agreement for such Superior Proposal immediately following or concurrently with the termination of the merger agreement (x) unless the Company shall have provided prior written notice to Parent and Merger Sub,


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at least three business days in advance, that it will effect an Adverse Recommendation Change or terminate the merger agreement in such circumstances and specifying the reasons for such actions and (y):
 
i. if the Adverse Recommendation Change is not being made as a result of a Superior Proposal, during such three business day period, if requested by Parent, the Company shall have engaged in good faith negotiations with Parent to amend the merger agreement in such a manner that would otherwise obviate the need for such Adverse Recommendation Change; or
 
ii. if such Adverse Recommendation Change or termination is being made as a result of a Superior Proposal:
 
(1) then the notice to Parent shall specify the identity of the party making such Superior Proposal and the material terms thereof and copies of all relevant documents relating to such Superior Proposal (any material amendment to the terms of any Superior Proposal (and in any event including any amendment to any price term thereof) shall require a new notice and the three business day period shall be reduced to one business day for any such new notice);
 
(2) after providing any notice to Parent, the Company shall, and shall cause its representatives to, negotiate with Parent and Merger Sub in good faith (to the extent Parent and Merger Sub desire to negotiate) during such three business day period (or one business day period if a notice is delivered due to a material amendment to the terms of any Superior Proposal) to make such adjustments in the terms and conditions of the merger agreement; and
 
iii. in the case of either clause (i) or clause (ii) above, the board of directors shall have considered in good faith any adjustments to the merger agreement (including a change to the price terms thereof) that may be offered in writing by Parent no later than 5:00 p.m., New York City time, on the third business day of such three business day period (or the first business day in certain circumstances) and shall have determined that (x) in the case of a Superior Proposal, the Superior Proposal would continue to constitute a Superior Proposal if such adjustments were to be given effect, or (y) in the case of an Adverse Recommendation Change not being made as a result of a Superior Proposal, no adjustment has been made that would obviate the need for such Adverse Recommendation Change, and (y) the findings contemplated by clause (i) above continue to be applicable such that an Adverse Recommendation Change should be made the Superior Proposal would continue to constitute a Superior Proposal if such adjustments were to be given effect.
 
The merger agreement does not prohibit the Company from (i) taking and disclosing to its shareholders a position contemplated by Rule 14d-9 or Rule 14e-2(a) promulgated under the Exchange Act or (ii) making any disclosure to its shareholders as, in the good faith determination of the board of directors, after consultation with its outside legal counsel, is required by applicable laws or (iii) making any “stop-look-and-listen” communication to the Company’s shareholders pursuant to Section 14d-9(f) promulgated under the Exchange Act (or any similar communications to the shareholders of the Company) in which the Company indicates that it has not changed the Recommendation.
 
Financing Efforts
 
Each of Parent and Merger Sub shall use, and cause its affiliates to use, its reasonable best efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things necessary, proper or advisable to consummate and obtain the financing on the terms and conditions set forth in the commitment letters and related documents, including using reasonable best efforts to seek to enforce (including through litigation) its rights under the debt commitment letter in the event of a material breach thereof by the lenders thereunder, and shall not permit any amendment or modification to be made to, or consent to any waiver of any provision or remedy under, the commitment letters, if such amendment, modification or waiver (i) reduces the aggregate amount of the financing (including by changing the amount of fees to be paid or original issue discount) from that contemplated in the commitment letters, (ii) imposes new or additional conditions or otherwise expands, amends or modifies any of the conditions to the receipt of the financing in a manner adverse to Parent or the Company, (iii) decreases the aggregate equity financing as set forth in the equity commitment letter delivered


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on the date of the merger agreement, (iv) amends or modifies any other terms in a manner that would reasonably be expected to (x) delay or prevent the closing of the offer or the completion of the merger or (y) make the timely funding of the financing or satisfaction of the conditions to obtaining the financing less likely to occur, or (v) adversely impact the ability of Parent or Merger Sub to enforce its rights against the other parties to the commitment letters.
 
The Company has agreed to use its reasonable best efforts to provide such reasonable cooperation as Parent may reasonably request in connection with the debt financing and certain other financing related matters.
 
Obligations to Use Bridge Financing.  Each of Parent and Merger Sub shall use, and cause its affiliates to use, commercially reasonable efforts to take all actions and to do all things necessary, proper or advisable to consummate, or cause to be consummated, and shall use, or cause to be used, the proceeds of the bridge financing (or any alternative debt financing) within ten calendar days after the conditions of the offer (other than the financing proceeds conditions) have been satisfied or waived, or if the Offer Termination has occurred, applicable conditions to the merger have been satisfied or waived. Notwithstanding the foregoing, if it shall not be commercially reasonable to complete the utilization of such bridge financing by the tenth calendar day, Parent and Merger Sub shall continue to use, and cause its affiliates to continue to use, commercially reasonable efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things necessary, proper or advisable to consummate, or cause to be consummated, and shall use, or cause to be used, the proceeds of such bridge financing (or such alternative debt financing) as soon as reasonably practicable thereafter. Notwithstanding anything to the contrary contained in the merger agreement, and without regard to the then market conditions or other general economic conditions, including the interest rate and cost of the debt financing, and, for the avoidance of doubt, regardless of whether or not commercially reasonable, if all of the offer conditions (other than the financing proceeds condition) have been satisfied or waived or, if the Offer Termination has occurred, certain conditions have been satisfied or waived, then Parent shall consummate, or cause to be consummated, and shall use, or cause to be used, the proceeds of the bridge financing (or such alternative debt financing) in no event later than November 18, 2010.
 
Obligations with Respect to the Proxy Statement
 
The merger agreement provides that, on or before September 24, 2010, the Company will prepare and file with the SEC in preliminary form a proxy statement relating to a shareholders’ meeting, which shall include the Recommendation with respect to the merger, the opinions of the Company’s financial advisors and a copy of Section 262 of the DGCL. This proxy statement fulfills such obligation.
 
If the adoption of the merger agreement by the Company’s shareholders is required by applicable law, then the Company shall have the right at any time after the Proxy Statement Clearance Date (and Parent and Merger Sub shall have the right, at any time after the later of such date and November 1, 2010, to request in writing that the Company, and upon receipt of such written request, the Company shall, as promptly as practicable and in any event within ten business days), (x) establish a record date for and give notice of a meeting of its shareholders, for the purpose of voting upon the adoption of the merger agreement, and (y) mail to the holders of shares of Company common stock as of the record date established for the shareholders’ meeting a proxy statement.
 
Efforts to Close the Transaction
 
In the merger agreement, each of the Company, Parent and Merger Sub agreed to use its reasonable best efforts to take all actions necessary, proper or advisable under applicable law to consummate, as promptly as reasonably practicable, the offer, the merger and the other transactions contemplated by the merger agreement, including making all necessary filings, notices, and other documents necessary to consummate the offer, the merger and other transactions contemplated by the merger agreement.


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Takeover Statute
 
If any “moratorium,” “control share acquisition,” “business combination,” “fair price” or other form of anti-takeover laws becomes applicable to the Company, Parent or Merger Sub, the offer, the merger, the Top-Up, including the acquisition of shares of Company common stock pursuant thereto, or the other transactions contemplated by the merger agreement, the Company and the members of the board of directors shall take such actions as are necessary to eliminate if possible, and otherwise to minimize, the effects of such statute or regulation on the merger agreement, the offer, the merger and the other transactions contemplated thereby.
 
Indemnification and Insurance
 
Parent and Merger Sub agreed that all rights to exculpation, indemnification and advancement of expenses for acts or omissions occurring at or prior to the effective time of the merger, whether asserted or claimed prior to, at or after the effective time of the merger, now existing in favor of the current or former directors, officers or employees of the Company as provided in their respective employers’ certificates of incorporation or bylaws or other organizational documents or in any indemnification or other agreement will survive the offer or the merger and will continue in full force and effect and will not be, for a period of six years from the effective time of the merger, modified in any manner that would adversely affect the rights thereunder of any individuals who at the effective time of the merger were current or former directors, officers or employees of the Company.
 
In addition, the surviving corporation agreed to indemnify and hold harmless each current and former director or officer of the Company or any of its subsidiaries against any losses, claims, damages, liabilities, costs, expenses, judgments, fines and amounts paid in settlement of or in connection with or arising out of any action or omission in connection with such director’s or officer’s service to the Company or any of its subsidiaries and the merger agreement and any transaction contemplated thereby.
 
For a period of six years after the effective time of the merger, Parent shall maintain in effect the current or substitute policies of officers’ and directors’ liability insurance maintained by the Company and its subsidiaries on terms and coverage amounts no less favorable than the terms of such policies in effect on the date of the merger agreement; provided that neither Parent nor the surviving corporation shall be required to expend annually in excess of 300% of the annual premium paid by the Company in its last full fiscal year for such insurance coverage, but in such case shall purchase the greatest amount of coverage available for such amount. Alternatively, the Company shall be entitled to purchase, at or prior to the effective time of the merger, a “tail policy” on terms and conditions providing no less favorable benefits as the current policies of directors’ and officers’ liability insurance maintained by the Company with respect to matters arising on or before the effective time of the merger, subject to the maximum premium listed in the immediate preceding sentence.
 
Shareholder Litigation
 
Each of the Company, Parent and Merger Sub shall keep the other parties reasonably informed regarding litigation relating to the merger agreement, the offer, the merger or the transactions contemplated thereby. the Company agreed to promptly advise Parent orally and in writing and cooperate fully with Parent in connection with, and to consult with and permit Parent to participate in, the defense, negotiations or settlement of litigation relating to the merger agreement, the offer, the merger or the transactions contemplated thereby and the Company will give consideration to Parent’s advice with respect to such litigation. the Company will not compromise, settle, or come to a settlement arrangement regarding any such litigation without Parent’s consent.
 
Other Covenants
 
The merger agreement contains other customary covenants, including, but not limited to, covenants relating to public announcements and access and confidentiality.


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Continuing Pursuit of the Merger
 
If at any then-scheduled expiration date of the offer occurring after November 24, 2010 (i) any offer condition has not been satisfied or waived, and (ii) the Expiration Date has occurred (which we refer to as the Offer Determination Date), then Merger Sub may irrevocably and unconditionally terminate the offer if the Proxy Statement Clearance Date has occurred on or prior to such Offer Determination Date. In addition, the Company has the right, exercisable by delivering written notice to Parent and Merger Sub at any time after the Offer Determination Date to cause Merger Sub to, and upon receipt of such written notice, Merger Sub must terminate the offer at the then-scheduled Expiration Date. The termination of the offer pursuant to the foregoing process is referred to as the “Offer Termination.”
 
Termination of the Merger Agreement
 
The merger agreement may be terminated at any time prior to the effective time of the merger, whether before or after any approval of the merger by the shareholders of the Company:
 
  •  by mutual written consent of Parent and the Company;
 
  •  by either Parent or the Company:
 
  •  if the merger shall not have been consummated on or before March 2, 2011; provided that the right to terminate the merger agreement on such date shall not be available to Parent or the Company if (x) the offer has closed or (y) the failure of Parent or the Company, as applicable, to perform any of its obligations under the merger agreement has been a principal cause of the failure of the merger to be consummated on or before such date;
 
  •  if any temporary restraining order, preliminary or permanent injunction, law or other judgment issued by any court of competent jurisdiction is in effect enjoining or otherwise prohibiting the consummation of the merger and such temporary restraining order, preliminary or permanent injunction, law or other judgment becomes final and non-appealable; provided that the right to terminate in this circumstance shall not be available to Parent or the Company unless Parent or the Company, as applicable, shall have complied with its obligations under the merger agreement to prevent, oppose or remove such temporary restraining order, preliminary or permanent injunction, law or other judgment; or
 
  •  the Shareholder Approval shall not have been obtained at the duly convened shareholders’ meeting or at any adjournment or postponement thereof.
 
  •  by Parent, if there is any breach or inaccuracy in any of the Company’s representations or warranties set forth in the merger agreement or the Company has failed to perform any of its covenants or agreements set forth in the merger agreement, which inaccuracy, breach or failure to perform (i) would give rise to the failure of a condition to the merger regarding the accuracy of the Company’s representations and warranties or the Company’s compliance with its covenants or agreements, and (ii) (A) is not capable of being cured prior to March 2, 2011 or (B) is not cured within fifteen calendar days following Parent’s delivery of written notice to the Company of such breach; provided that Parent shall not have the right to terminate the merger agreement in this circumstance if (x) Parent or Merger Sub is then in material breach of any of its representations, warranties, covenants or agreements or (y) the offer has closed;
 
  •  by the Company, if there is any breach or inaccuracy in any of Parent’s or Merger Sub’s representations or warranties set forth in the merger agreement or Parent or Merger Sub has failed to perform any of its covenants or agreements set forth in the merger agreement, which inaccuracy, breach or failure to perform (i) would (x) give rise to the failure of certain conditions or, (y) reasonably be expected to, individually or in the aggregate, have a parent material adverse effect, and (ii) (A) is not capable of being cured prior to March 2, 2011 or (B) is not cured within fifteen calendar days following the Company’s delivery of written notice to Parent of such breach; provided that the Company shall not have the right to terminate the merger agreement in this circumstance if (x) the Company is then in


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  material breach of any of its representations, warranties, covenants or agreements thereunder or (y) the offer has closed;
 
  •  by Parent, in the event that any of the following shall have occurred: (i) an Adverse Recommendation Change; (ii) the Company shall have delivered a notice to parent of its intent to effect an Adverse Recommendation Change, if Parent shall have given the Company the right to enter into an acquisition agreement and such right has been available to the Company for no less than twenty-four hours, (iii) the Company failed to include in the proxy statement or the Schedule 14D-9 filed by the Company, in each case, when mailed, the Recommendation and a statement of the findings and conclusions of the board of directors described in the board resolutions adopted in connection with the merger agreement, (iv) if, following the disclosure or announcement of a Takeover Proposal (other than a tender or exchange offer described in clause (v) below), the Company’s board of directors shall have failed to reaffirm publicly the Recommendation within five business days after Parent requests in writing that such recommendation under such circumstances be reaffirmed publicly, or (v) a tender or exchange offer relating to securities of the Company shall have been commenced and the Company shall not have announced, within ten business days after the commencement of such tender or exchange offer, a statement disclosing that the Company recommends rejection of such tender or exchange offer (we refer to any of the forgoing actions as a Triggering Event); provided that Parent shall not have the right to terminate the merger agreement in this circumstance if (x) the offer has closed or (y) the approval of the merger by the shareholders of the Company shall have been obtained;
 
  •  by the Company, in order to accept a Superior Proposal and enter into the acquisition agreement providing for such Superior Proposal immediately following or concurrently with such termination; provided, however, that payment of the termination fee by the Company to the parent, which we refer to as the Company Termination Fee (as described below), shall be a condition to the termination of the merger agreement by the Company in this circumstance; or
 
  •  by the Company, if (i)(A) all the conditions of the offer shall have been satisfied or waived as of the expiration of the offer, and (B) Parent shall have failed to consummate the offer promptly thereafter in accordance with the merger agreement, or (ii)(A) all the offer conditions (other than the financing proceeds condition) shall have been satisfied or waived as of the expiration of the offer, and (B) Parent shall have failed to consummate the offer in accordance with the merger agreement, in the case of both clause (i) and (ii), the Company shall have given Parent written notice at least one business day prior to such termination stating the Company’s intention to terminate the merger agreement in this circumstance and the basis for such termination; provided, however, that the termination right set forth in clause (ii) shall only be available from and after the close of business on November 18, 2010; or
 
  •  by the Company, after the close of business on November 18, 2010, if (i) all the conditions that are applicable to each party’s obligation to consummate the merger (other than the purchase of shares of Company common stock to the extent the Offer Termination has occurred) and the conditions to the obligations of Parent and Merger Sub to consummate the merger have been satisfied (other than those conditions that by their terms are to be satisfied by actions taken at the closing of the merger, each of which is capable of being satisfied at the merger closing), (ii) Parent shall have failed to consummate the merger by the time required under the merger agreement, (iii) the Company has notified Parent in writing that it stands and will stand ready, willing and able to consummate the merger at such time, and (iv) the Company shall have given Parent written notice at least one business day prior to such termination stating the Company’s intention to terminate the merger agreement in this circumstance and the basis for such termination.
 
Effect of Termination.  If the merger agreement is terminated in accordance with its terms, the merger agreement will become null and void and, subject to certain designated provisions of the merger agreement which survive, including the termination, confidentiality, cooperation, specific performance, remedies, and limitation on liability provisions , among others, there will be no liability on the part of Parent, Merger Sub or the Company. No party is relieved of any liability for any breach of any of its representations, warranties,


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covenants or agreements set forth in the merger agreement prior to such termination. No party is liable for punitive damages.
 
Termination Fees
 
  •  The Company has agreed to pay 3G a termination fee of $50 million if the merger agreement is terminated by the Company prior to October 12, 2010 in order for the Company to accept a Superior Proposal, with such fee being payable concurrently with, and as a condition to the effectiveness of, such termination.
 
  •  the Company has agreed to pay 3G a termination fee of $95 million as follows:
 
  •  if the merger agreement is terminated by the Company after October 12, 2010 in order for the Company to accept a Superior Proposal, with such fee being payable concurrently with, and as a condition to the effectiveness of, such termination;
 
  •  if the merger agreement is terminated by Parent upon an Adverse Recommendation Change or other Triggering Event (as described above), with such fee being payable within two business days following such termination; or
 
  •  if (A) the merger agreement is terminated by the Company or Parent due to (x) the failure of the merger to be completed by March 2, 2011 or (y) the failure of the Company’s shareholders to adopt the merger agreement at the shareholders meeting, to the extent such shareholder approval is required by applicable law, or (ii) the merger agreement is terminated by Parent due to a material breach of the Company’s representations, warranties, covenants or agreements set forth in the merger agreement as described above under “— Termination of the Merger Agreement”, other than any termination relating to such material breach to the extent such breach was the principal factor in the failure of the offer or the merger to be completed as described below, (B) prior to such termination a Takeover Proposal become publicly known and was not withdrawn, and (C) within 12 months after any termination of the merger agreement in the circumstances described in clause (A) above, the Company enters into a definitive agreement providing for any transaction contemplated by any Takeover Proposal (which transaction is thereafter consummated) or consummates any Takeover Proposal, then such fee shall be paid on the date such transaction is consummated. For purposes of determining whether the termination fee is payable under the circumstances described in the previous sentence, the term Takeover Proposal has the meaning described below, except that the references to “20%” in the definition of Takeover Proposal shall be deemed to be references to “50%.”
 
  •  the Company has agreed to pay 3G a termination fee of $175 million, if the merger agreement is terminated by Parent due to a breach by the Company of any of its representations or warranties or the failure by the Company to perform any of its covenants or agreements set forth in the merger agreement, which breach or failure to perform is the principal factor in the failure of the offer or the merger to be consummated; provided that Parent and Merger Sub is not then in material breach of any of their representations, warranties, covenants or agreements set forth in the merger agreement, with such termination fee being payable within two (2) business days following such termination of the merger agreement.
 
  •  Parent has agreed to pay the Company $175 million, as follows:
 
  •  if the merger agreement is terminated by the Company due to a breach by Parent of any of its representations or warranties or the failure by Parent to perform any of its covenants or agreements set forth in the merger agreement, which breach or failure to perform is the principal factor in the failure of the offer or the merger to be consummated; provided that the Company is not then in material breach of any of its representations, warranties, covenants or agreements set forth in the merger agreement; or
 
  •  if the merger agreement is terminated by the Company at such time as (i)(A) all the offer conditions shall have been satisfied or waived as of the expiration of the offer, and (B) Parent shall have failed


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  to consummate the offer promptly thereafter in accordance with the merger agreement, or (ii)(A) all the offer conditions (other than the financing proceeds condition) shall have been satisfied or waived as of the expiration of the offer, and (B) Parent shall have failed to consummate the offer in accordance with the merger agreement, in the case of both clause (i) and (ii), the Company shall have given Parent written notice at least one business day prior to such termination stating the Company’s intention to terminate the merger agreement in this circumstance and the basis for such termination; provided, however, that the termination right set forth in clause (ii) shall only be available from and after the close of business on November 18, 2010; or
 
  •  if the merger agreement is terminated by the Company, after the close of business on November 18, 2010, if (i) all the conditions that are applicable to each party’s obligation to consummate the merger and the conditions to the obligations of Parent and Merger Sub to consummate the merger (other than the purchase of shares of Company common stock to the extent the Offer Termination has occurred) have been satisfied (other than those conditions that by their terms are to be satisfied by actions taken at the merger Closing, each of which is capable of being satisfied at the merger Closing), (ii) Parent shall have failed to consummate the merger by the time required under the merger agreement, (iii) the Company has notified Parent in writing that it stands and will stand ready, willing and able to consummate the merger at such time, and (iv) the Company shall have given Parent written notice at least one business day prior to such termination stating the Company’s intention to terminate the merger agreement in this circumstance and the basis for such termination.
 
Such $175 million termination fee shall be payable by Parent within two business days following the date of termination of the merger agreement in such circumstances.
 
Expense Reimbursement
 
If the merger agreement is terminated by Parent or the Company due to the failure of the Company’s shareholders to adopt the merger agreement at the shareholders meeting, to the extent such shareholder approval is required by applicable law, then the Company shall reimburse Parent for up to $15 million of the documented out-of-pocket fees and expenses of Parent, 3G or their affiliates in connection with the merger agreement.
 
Specific Performance
 
Parent, Merger Sub and the Company shall be entitled to an injunction or injunctions, or any other appropriate form of specific performance or equitable relief, to prevent breaches of the merger agreement and to enforce specifically the terms and provisions thereof in any arbitration or any court of competent jurisdiction, this being in addition to any other remedy to which they are entitled under the terms of the merger agreement at law or in equity. Notwithstanding the foregoing, the Company’s right to obtain an injunction, or other appropriate form of specific performance or equitable relief, solely with respect to causing Parent and Merger Sub to, or to directly, cause either the equity financing to be funded at any time but only simultaneously with the receipt of the debt financing or a draw on the bridge commitment under the debt commitment letters is subject to the requirements that:
 
(a) with respect to any funding of the equity financing to occur at the consummation of the offer closing, all of the conditions of the offer (other than the financing proceeds condition) are satisfied or waived as the expiration of the offer, and, with respect to any funding of the equity financing to occur at the consummation of the merger, all conditions with respect to obtaining Shareholder Approval and regulatory approval, as well as there being no temporary restraining order, preliminary or permanent injunction, law or other judgment issued by any court of competent jurisdiction in effect enjoining or otherwise preventing or prohibiting the consummation of the merger;
 
(b) the debt financing (or, in the case any alternative financing that Parent and Merger Sub are required or permitted to accept has been obtained, for all the debt financing), has been funded or would be funded in accordance with its terms at the consummation of the offer or the merger, as applicable, if the equity financing is funded at the consummation of the offer or the merger, as applicable, and


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(c) the Company has irrevocably confirmed to Parent in writing that if the equity financing and the debt financing were funded, it would take such actions that are within its control to cause the consummation of the merger.
 
Limitations of Liability
 
The maximum aggregate liability of 3G, Parent and Merger Sub (including the Parent Termination Fee) for damages or otherwise is limited to $175 million. the Company can cause 3G to provide funds, subject to the maximum set forth in the equity commitment letter between the Company, Parent and 3G, up to such aggregate limit to Parent to the extent provided in the equity commitment letter, subject to the terms of the equity commitment letter and the limited guaranty. In addition, the rights of the Company pursuant to the equity commitment letter and the limited guaranty are the sole and exclusive remedy of the Company and its affiliates against Parent and Parent’s affiliates in respect of monetary liabilities or obligations arising under the merger agreement.
 
The maximum aggregate liability of the Company for damages or otherwise in connection with the merger agreement or any of the transactions contemplated thereby is limited to $175 million, provided that in no event shall Parent, on behalf of itself and its affiliates, be entitled to both (x) the receipt of the Company Termination Fee or the $175 million or recovery of monetary damages against the Company or any of its subsidiaries and (y) specific enforcement of the merger agreement.
 
Fees and Expenses
 
Except for the provisions described under “Expense Reimbursement,” all fees and expenses incurred in connection with the merger agreement, the offer, the merger and the other transactions contemplated by the merger agreement will be paid by the party incurring such fees or expenses, whether or not the offer, the merger or any of the other transactions contemplated by the merger agreement are consummated.
 
Amendment
 
The merger agreement may be amended by Parent, Merger Sub or the Company at any time before or after the closing of the offer or receipt of the Shareholder Approval; provided, however, that (x) after the closing of the offer, there will be no amendment that decreases the per share merger consideration, and (y) after the Shareholder Approval has been obtained, no amendment will be made that by law requires further approval by the shareholders of the Company without such approval having been obtained.
 
Governing Law
 
The merger agreement shall be governed by Delaware law.
 
Stockholder Voting Agreements
 
Concurrently with the execution of the merger agreement, certain private equity funds affiliated with each of the Sponsors entered into stockholder tender agreements with the Company pursuant to which such shareholders have agreed to tender their shares of Company common stock in the offer upon the terms and subject to the conditions of such agreements. It is anticipated that, pursuant to the terms of such stockholder tender agreements, such Sponsors will each enter into customary voting agreements with Parent to vote their shares of Company common stock in favor of the merger. The shares of Company common stock held by such Sponsors comprise approximately 31% of the outstanding shares of Company common stock. The stockholder voting agreements will terminate upon certain circumstances, including upon termination of the merger agreement.


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MARKET PRICE OF COMPANY COMMON STOCK
 
The Company common stock is listed for trading on the NYSE under the symbol “BKC”. The table below shows, for the periods indicated, the high and low sales prices for the Company common stock, as reported on the NYSE.
 
                 
    Common Stock Price  
    High     Low  
 
Fiscal Year Ended June 30, 2009
               
First Quarter ended September 30
  $ 30.95     $ 22.77  
Second Quarter ended December 31
  $ 25.07     $ 16.56  
Third Quarter ended March 31
  $ 24.48     $ 19.21  
Fourth Quarter ended June 30
  $ 24.10     $ 15.85  
Fiscal Year Ending June 30, 2010
               
First Quarter ended September 30
  $ 19.50     $ 15.61  
Second Quarter ended December 31
  $ 19.13     $ 16.63  
Third Quarter ended March 31
  $ 21.50     $ 17.10  
Fourth Quarter ended June 30
  $ 22.19     $ 16.80  
Fiscal Year Ending June 30, 2011
               
First Quarter July 1 to [ • ]
  $       $  
 
The closing price of Company common stock on the NYSE on September 1, 2010, the last trading day prior to the public announcement of the merger agreement, was $18.86 per share of Company common stock. In addition, on August 31, 2010, the date on which news articles ran in the evening reporting rumors that the Company was considering a sale, the closing price was $16.45 per share of Company common stock. On [ • ], 2010, the most recent practicable date before this proxy statement was mailed to our shareholders, the closing price for Company common stock on the NYSE was $[ • ] per share of Company common stock. You are encouraged to obtain current market quotations for Company common stock in connection with voting your shares of Company common stock.
 
During each quarter of fiscal 2009 and 2010, the Company paid a quarterly cash dividend of $0.0625 per share. Under the terms of the merger agreement, the Company is not permitted to declare or pay dividends in respect of shares unless approved in advance by Parent in writing, other than the payment of the fiscal 2011 first quarter dividend of $0.0625 per share, which was declared on August 19, 2010 and is payable on September 30, 2010 to shareholders of record on September 14, 2010.


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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
 
The following table sets forth certain information as of September 13, 2010, regarding the beneficial ownership of our common stock by:
 
  •  Each of our directors and NEOs;
 
  •  All directors and executive officers as a group; and
 
  •  Each person or entity who is known to us to be the beneficial owner of more than 5% of our common stock.
 
As of September 13, 2010, our outstanding equity securities consisted of 136,465,856 shares of common stock. The number of shares beneficially owned by each shareholder is determined under rules promulgated by the SEC and generally includes voting or investment power over the shares. The information does not necessarily indicate beneficial ownership for any other purpose. Under the SEC rules, the number of shares of common stock deemed outstanding includes shares issuable upon the conversion of other securities, as well as the exercise of options or the settlement of restricted stock units held by the respective person or group that may be exercised or settled on or within 60 days of September 13, 2010. For purposes of calculating each person’s or group’s percentage ownership, shares of common stock issuable pursuant to stock options and restricted stock units that may be exercised or settled on or within 60 days of September 13, 2010 are included as outstanding and beneficially owned by that person or group but are not treated as outstanding for the purpose of computing the percentage ownership of any other person or group.
 
Unless otherwise indicated, the address for each listed shareholder is: c/o Burger King Holdings, Inc., 5505 Blue Lagoon Drive, Miami, Florida 33126. To our knowledge, except as indicated in the footnotes to this table and pursuant to applicable community property laws, the persons named in the table have sole voting and investment power with respect to all shares of common stock beneficially owned by them.


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    Common Stock, par Value
    $.01 Per Share
        Percentage
Name and Address of Beneficial Owner
  Number   of Class
 
John W. Chidsey(1)
    1,831,834       1.3 %
Ben K. Wells(1)
    300,660       *  
Russell B. Klein(1)
    124,778       *  
Charles M. Fallon, Jr.(1)
    305,154       *  
Anne Chwat(1)
    363,292       *  
Peter Smith(1)
    195,357       *  
Richard W. Boyce(1)
    25,000       *  
David M. Brandon(1)
    35,000       *  
Ronald M. Dykes(1)
    23,925       *  
Peter R. Formanek(1)
    233,094       *  
Manuel A. Garcia(1)
    64,641       *  
Sanjeev K. Mehra(1)(2)(6)
    13,946,647       10.2 %
Stephen G. Pagliuca(1)
    13,601,924       10.0 %
Brian T. Swette(1)
    130,902       *  
Kneeland C. Youngblood(1)
    17,507       *  
All Executive Officers and Directors as a group (18 persons)(1)
    31,297,015       22.9 %
5% Stockholders
               
FMR LLC(3)
    7,824,558       5.7 %
Investment funds affiliated with Artisan Partners Holdings LLC(4)
    7,971,200       5.8 %
Investment funds affiliated with Bain Capital Investors, LLC(5)
    10,403,858       7.6 %
Investment funds affiliated with The Goldman Sachs Group, Inc.(6)
    14,046,089       10.3 %
TPG BK Holdco LLC(7)
    15,131,497       11.1 %
 
 
Less than one percent (1%)
 
(1) Includes beneficial ownership of shares of common stock for which the following persons hold options currently exercisable or exercisable on or within 60 days of September 13, 2010: Mr. Chidsey, 1,340,714 shares; Mr. Wells, 266,509 shares; Mr. Fallon, 252,653 shares; Ms. Chwat, 284,462 shares; and Mr. Smith, 98,819 shares; and all directors and executive officers as a group, 2,311,985 shares. Also includes beneficial ownership of shares of common stock underlying deferred stock units held by the following persons that are currently vested or will vest on or within 60 days of September 13, 2010 and will be settled upon termination of Board service: each of Messrs. Boyce and Brandon, 25,000 shares; Mr. Dykes, 23,925 shares; each of Mr. Formanek and Mr. Youngblood, 17,507 shares; Mr. Garcia, 23,078 shares; Mr. Mehra, 24,478 shares; Mr. Pagliuca, 3,597 shares; Mr. Swette, 30,277 shares; and all non-employee directors as a group, 189,153 shares. See Footnotes 2 and 6 below for more information regarding the deferred stock held by Mr. Mehra. Mr. Klein’s employment terminated on December 15, 2009 and his shares included in the table are based on the Form 4 filed with the SEC on December 16, 2009. None of the executive officers have restricted stock units or performance-based restricted stock units that will vest on or within 60 days of September 13, 2010, except 11,565 restricted stock units held by a non-NEO executive officer.
 
(2) Mr. Mehra is a managing director of Goldman, Sachs & Co. Mr. Mehra and The Goldman Sachs Group, Inc. each disclaims beneficial ownership of the shares of common stock owned directly or indirectly by the Goldman Sachs Funds and Goldman, Sachs & Co., except to the extent of his or its pecuniary interest therein, if any. Goldman, Sachs & Co. disclaims beneficial ownership of the shares of common stock owned directly or indirectly by the Goldman Sachs Funds, except to the extent of its pecuniary interest therein, if any. Mr. Mehra has an understanding with The Goldman Sachs Group, Inc. pursuant to which he holds the


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deferred stock units he receives in his capacity as a director of the Company for the benefit of The Goldman Sachs Group, Inc. See Footnote 6 below for information regarding The Goldman Sachs Group, Inc.
 
(3) The shares included in the table are based solely on Amendment No. 3 to the Schedule 13G filed with the SEC on January 11, 2010 by FMR LLC. FMR LLC filed the amended Schedule 13G on a voluntary basis as if all of the shares are beneficially owned by FMR LLC and Fidelity International Limited (“FIL”) on a joint basis, but each is of the view that the shares held by the other need not be aggregated for purposes of Section 13(d). FMR LLC has the sole power to vote or to direct the vote regarding 4,857,828 of these shares and the sole power to dispose or to direct the disposition of 7,824,558 of these shares. The business address of FMR LLC is 82 Devonshire Street, Boston, MA 02109.
 
(4) The shares included in the table are based solely on the Schedule 13G filed with the SEC on February 11, 2010 by Artisan Partners Holdings LP (“Artisan Holdings”), Artisan Investment Corporation (“Artisan Corp.”), Artisan Partners Limited Partnership (“Artisan Partners”), Artisan Investments GP LLC (“Artisan Investments”), ZFIC, Inc. (“ZFIC”), Andrew A. Ziegler and Carlene M. Ziegler. Artisan Holdings, a registered investment adviser, is the sole limited partner of Artisan Partners, a registered investment adviser. Artisan Investments is the general partner of Artisan Partners. Artisan Corp. is the general partner of Artisan Holdings. ZFIC is the sole stockholder of Artisan Corp. and Mr. Ziegler and Ms. Ziegler are the principal stockholders of ZFIC. Of the shares reported, each of Artisan Holdings, Artisan Corp., ZFIC, Mr. Ziegler and Ms. Ziegler reported that they had shared voting power with respect to 7,811,200 shares and shared dispositive power with respect to 7,971,200 shares. Artisan Partners and Artisan Investments each reported that it had shared voting power over 7,754,000 shares and shared dispositive power over 7,914,000 shares. The shares reported were acquired on behalf of discretionary clients of Artisan Partners and Artisan Holdings. The business address of Artisan Holdings is 875 East Wisconsin Avenue, Suite 800, Milwaukee, WI 53202.
 
(5) The shares included in the table consist of: (i) 10,403,858 shares of common stock owned by Bain Capital Integral Investors, LLC, whose administrative member is Bain Capital Investors, LLC (“BCI”); (ii) 3,117,905 shares of common stock owned by Bain Capital VII Coinvestment Fund, LLC, whose managing and sole member is Bain Capital VII Coinvestment Fund, L.P., whose general partner is Bain Capital Partners VII, L.P., whose general partner is BCI and (iii) 59,513 shares of common stock owned by BCIP TCV, LLC, whose administrative member is BCI. The shares included in the table are based solely on the Amendment No. 3 to Schedule 13G filed with the SEC on February 16, 2010 by BCI on behalf of itself and its reporting group. The business address of BCI is 111 Huntington Avenue, Boston, MA 02199.
 
(6) The Goldman Sachs Group, Inc., and certain affiliates, including, Goldman, Sachs & Co., may be deemed to directly or indirectly own the shares of common stock which are owned directly or indirectly by investment partnerships, which The Goldman Sachs Group, Inc. refers to as the Goldman Sachs Funds, of which affiliates of The Goldman Sachs Group, Inc. and Goldman Sachs & Co. are the general partner, managing limited partner or the managing partner. Goldman, Sachs & Co. is the investment manager for certain of the Goldman Sachs Funds. Goldman, Sachs & Co. is a direct and indirect, wholly owned subsidiary of The Goldman Sachs Group, Inc. The Goldman Sachs Group, Inc., Goldman, Sachs & Co. and the Goldman Sachs Funds share voting and investment power with certain of their respective affiliates. Shares beneficially owned by the Goldman Sachs Funds consist of: (i) 7,262,660 shares of common stock owned by GS Capital Partners 2000, L.P.; (ii) 2,638,973 shares of common stock owned by GS Capital Partners 2000 Offshore, L.P.; (iii) 303,562 shares of common stock owned by GS Capital Partners 2000 GmbH & Co. Beteiligungs KG; (iv) 2,306,145 shares of common stock owned by GS Capital Partners 2000 Employee Fund, L.P.; (v) 106,837 shares of common stock owned by Bridge Street Special Opportunities Fund 2000, L.P.; (vi) 213,675 shares of common stock owned by Stone Street Fund 2000, L.P.; (vii) 356,124 shares of common stock owned by Goldman Sachs Direct Investment Fund 2000, L.P.; (viii) 412,941 shares of common stock owned by GS Private Equity Partners 2000, L.P.; (ix) 141,944 shares of common stock owned by GS Private Equity Partners 2000 Offshore Holdings, L.P.; and (x) 157,364 shares of common stock owned by GS Private Equity Partners 2000-Direct Investment Fund, L.P.
 
Goldman Sachs Execution & Clearing, L.P. beneficially owns directly and The Goldman Sachs Group, Inc. may be deemed to beneficially own indirectly 3,520 shares of common stock. Goldman, Sachs & Co. beneficially owns directly and The Goldman Sachs Group, Inc. may be deemed to beneficially own indirectly 10,100 shares of common stock. Goldman, Sachs & Co. and The Goldman Sachs Group, Inc. may


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each be deemed to beneficially own indirectly, in the aggregate, 13,900,225 shares of common stock through certain limited partnerships described in this footnote, of which affiliates of Goldman, Sachs & Co. and The Goldman Sachs Group, Inc. are the general partner, managing general partner, managing partner, managing member or member. Goldman, Sachs & Co. is a wholly-owned subsidiary of The Goldman Sachs Group, Inc. Goldman, Sachs & Co. is the investment manager of certain of the limited partnerships.
 
The Goldman Sachs Group, Inc. may be deemed to beneficially own 24,478 shares of common stock pursuant to the 2006 Omnibus Incentive Plan, which are deferred shares granted to Sanjeev K. Mehra, a managing director of Goldman, Sachs & Co. in his capacity as a director of the Company. Mr. Mehra has an understanding with The Goldman Sachs Group, Inc. pursuant to which he holds such deferred shares for the benefit of The Goldman Sachs Group, Inc. The grant of 24,478 deferred shares is currently vested or will vest within 60 days of September 13, 2010. The deferred shares granted to Mr. Mehra will be settled upon termination of Board service. Each of Goldman, Sachs & Co. and The Goldman Sachs Group, Inc. disclaims beneficial ownership of the deferred shares of common stock except to the extent of its pecuniary interest therein.
 
The shares included in the table are based solely on the Schedule 13G filed with the SEC on February 16, 2010 by The Goldman Sachs Group, Inc. on behalf of itself and its reporting group. The business address for The Goldman Sachs Group, Inc. is 85 Broad Street, New York, NY 10004.
 
(7) The shares included in the table are directly held by TPG BK Holdco LLC. TPG Advisors III, Inc., a Delaware corporation (“Advisors III”), is the sole general partner of TPG GenPar III, L.P., a Delaware limited partnership, which in turn is the sole general partner of TPG Partners III, L.P., a Delaware limited partnership, which in turn is the managing member of TPG BK Holdco LLC. David Bonderman and James Coulter are directors, officers and sole shareholders of Advisors III, and therefore, David Bonderman, James Coulter and Advisors III may each be deemed to beneficially own the shares directly held by TPG BK Holdco LLC. The shares included in this table are based solely on the Amendment No. 2 to Schedule 13G filed with the SEC on February 13, 2009 on behalf of Advisors III, Mr. Bonderman and Mr. Coulter. The business address for TPG BK Holdco LLC is c/o TPG Capital, L.P., 301 Commerce Street, Suite 3300, Fort Worth, TX 76102.
 
APPRAISAL RIGHTS
 
Under the DGCL, if you do not wish to accept the per share merger consideration provided for in the merger agreement and you do not vote for the adoption of the merger agreement, you have certain rights under the DGCL to demand appraisal of your shares of Company common stock and to receive payment in cash for the fair value of your shares of Company common stock in lieu of the $24.00 per share to be paid in the merger, exclusive of any element of value arising from the accomplishment or expectation of the merger, as determined by the Delaware Court of Chancery, together with interest, if any, to be paid upon the amount determined to be fair value. The “fair value” of your shares of Company common stock as determined by the Delaware Court of Chancery may be more or less than, or the same as, the $24.00 per share that you are otherwise entitled to receive under the terms of the merger agreement. These rights are known as appraisal rights. The Company’s shareholders who elect to exercise appraisal rights must not vote in favor of the proposal to adopt the merger agreement and must comply with the provisions of Section 262 of the DGCL, in order to perfect their rights. Strict compliance with the statutory procedures in Section 262 is required. Failure to follow precisely any of the statutory requirements will result in the loss of your appraisal rights.
 
This section is intended as a brief summary of the material provisions of the Delaware statutory procedures that a shareholder must follow in order to seek and perfect appraisal rights. This summary, however, is not a complete statement of all applicable requirements, and is qualified in its entirety by reference to Section 262 of the DGCL, the full text of which appears in Annex D to this proxy statement. The following summary does not constitute any legal or other advice, nor does it constitute a recommendation that shareholders exercise their appraisal rights under Section 262.


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Section 262 requires that where a merger agreement is to be submitted for adoption at a meeting of shareholders, the shareholders be notified that appraisal rights will be available not less than 20 days before the meeting to vote on the merger. A copy of Section 262 must be included with such notice. This proxy statement constitutes the Company’s notice to our shareholders that appraisal rights are available in connection with the merger, in compliance with the requirements of Section 262. If you wish to consider exercising your appraisal rights, you should carefully review the text of Section 262 contained in Annex D. Failure to comply timely and properly with the requirements of Section 262 will result in the loss of your appraisal rights under the DGCL.
 
If you elect to demand appraisal of your shares of Company common stock, you must satisfy each of the following conditions: You must deliver to the Company a written demand for appraisal of your shares of Company common stock before the vote is taken to approve the proposal to adopt the merger agreement, which must reasonably inform us of the identity of the holder of record of shares of Company common stock who intends to demand appraisal of his, her or its shares of Company common stock; and you must not vote or submit a proxy in favor of the proposal to adopt the merger agreement.
 
If you fail to comply with either of these conditions and the merger is completed, you will be entitled to receive payment for your shares of Company common stock as provided for in the merger agreement, but you will have no appraisal rights with respect to your shares of Company common stock. A holder of shares of Company common stock wishing to exercise appraisal rights must hold of record the shares of Company common stock on the date the written demand for appraisal is made and must continue to hold the shares of Company common stock of record through the effective time of the merger, because appraisal rights will be lost if the shares of Company common stock are transferred prior to the effective time of the merger. Voting against or failing to vote for the proposal to adopt the merger agreement by itself does not constitute a demand for appraisal within the meaning of Section 262. A proxy that is submitted and does not contain voting instructions will, unless revoked, be voted in favor of the proposal to adopt the merger agreement, and it will constitute a waiver of the shareholder’s right of appraisal and will nullify any previously delivered written demand for appraisal. Therefore, a shareholder who submits a proxy and who wishes to exercise appraisal rights must either submit a proxy containing instructions to vote against the proposal to adopt the merger agreement or abstain from voting on the proposal to adopt the merger agreement. The written demand for appraisal must be in addition to and separate from any proxy or vote on the proposal to adopt the merger agreement.
 
All demands for appraisal should be addressed to Burger King Holdings, Inc., Attention: General Counsel and Secretary, 5505 Blue Lagoon Drive, Miami, Florida 33126, and must be delivered before the vote is taken to approve the proposal to adopt the merger agreement at the special meeting, and should be executed by, or on behalf of, the record holder of the shares of Company common stock. The demand must reasonably inform the Company of the identity of the shareholder and the intention of the shareholder to demand appraisal of his, her or its shares of Company common stock.
 
To be effective, a demand for appraisal by a shareholder of Company common stock must be made by, or in the name of, the record shareholder, fully and correctly, as the shareholder’s name appears on the shareholder’s stock certificate(s) or in the transfer agent’s records, in the case of uncertificated shares. The demand cannot be made by the beneficial owner if he or she does not also hold the shares of Company common stock of record. The beneficial holder must, in such cases, have the registered owner, such as a bank, brokerage firm or other nominee, submit the required demand in respect of those shares of Company common stock. If you hold your shares of Company common stock through a bank, brokerage firm or other nominee and you wish to exercise appraisal rights, you should consult with your bank, brokerage firm or the other nominee to determine the appropriate procedures for the making of a demand for appraisal by the nominee.
 
If shares of Company common stock are owned of record in a fiduciary capacity, such as by a trustee, guardian or custodian, execution of a demand for appraisal should be made in that capacity. If the shares of Company common stock are owned of record by more than one person, as in a joint tenancy or tenancy in common, the demand should be executed by or for all joint owners. An authorized agent, including an


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authorized agent for two or more joint owners, may execute the demand for appraisal for a shareholder of record; however, the agent must identify the record owner or owners and expressly disclose the fact that, in executing the demand, he or she is acting as agent for the record owner. A record owner, such as a bank, brokerage firm or other nominee, who holds shares of Company common stock as a nominee for others, may exercise his or her right of appraisal with respect to the shares of Company common stock held for one or more beneficial owners, while not exercising this right for other beneficial owners. In that case, the written demand should state the number of shares of Company common stock as to which appraisal is sought. Where no number of shares of Company common stock is expressly mentioned, the demand will be presumed to cover all shares of Company common stock held in the name of the record owner.
 
Within ten days after the effective time of the merger, the surviving corporation in the merger must give written notice that the merger has become effective to each of the Company’s shareholders who has properly filed a written demand for appraisal and who did not vote in favor of the proposal to adopt the merger agreement. At any time within 60 days after the effective time of the merger, any shareholder who has not commenced an appraisal proceeding or joined a proceeding as a named party may withdraw the demand and accept the cash payment specified by the merger agreement for that shareholder’s shares of Company common stock by delivering to the surviving corporation a written withdrawal of the demand for appraisal. However, any such attempt to withdraw the demand made more than 60 days after the effective time of the merger will require written approval of the surviving corporation. Unless the demand is properly withdrawn by the shareholder within 60 days after the effective date of the merger, no appraisal proceeding in the Delaware Court of Chancery will be dismissed as to any shareholder without the approval of the Delaware Court of Chancery, with such approval conditioned upon such terms as the Court deems just. If the surviving corporation does not approve a request to withdraw a demand for appraisal when that approval is required, or if the Delaware Court of Chancery does not approve the dismissal of an appraisal proceeding, the shareholder will be entitled to receive only the appraised value determined in any such appraisal proceeding, which value could be less than, equal to or more than the consideration offered pursuant to the merger agreement.
 
Within 120 days after the effective time of the merger, but not thereafter, either the surviving corporation or any shareholder who has complied with the requirements of Section 262 and is entitled to appraisal rights under Section 262 may commence an appraisal proceeding by filing a petition in the Delaware Court of Chancery demanding a determination of the fair value of the shares of Company common stock held by all shareholders entitled to appraisal. Upon the filing of the petition by a shareholder, service of a copy of such petition shall be made upon the surviving corporation. The surviving corporation has no obligation to file such a petition, and holders should not assume that the surviving corporation will file a petition. Accordingly, the failure of a shareholder to file such a petition within the period specified could nullify the shareholder’s previous written demand for appraisal. In addition, within 120 days after the effective time of the merger, any shareholder who has properly filed a written demand for appraisal and who did not vote in favor of the merger agreement, upon written request, will be entitled to receive from the surviving corporation, a statement setting forth the aggregate number of shares of Company common stock not voted in favor of the merger agreement and with respect to which demands for appraisal have been received and the aggregate number of holders of such shares. The statement must be mailed within 10 days after such written request has been received by the surviving corporation. A person who is the beneficial owner of shares of Company common stock held either in a voting trust or by a nominee on behalf of such person may, in such person’s own name, file a petition for appraisal or request from the surviving corporation such statement.
 
If a petition for appraisal is duly filed by a shareholder and a copy of the petition is delivered to the surviving corporation, then the surviving corporation will be obligated, within 20 days after receiving service of a copy of the petition, to file with the Delaware Register in Chancery a duly verified list containing the names and addresses of all shareholders who have demanded an appraisal of their shares of Company common stock and with whom agreements as to the value of their shares of Company common stock have not been reached. After notice to shareholders who have demanded appraisal, if such notice is ordered by the Delaware Court of Chancery, the Delaware Court of Chancery is empowered to conduct a hearing upon the petition and to determine those shareholders who have complied with Section 262 and who have become entitled to the appraisal rights provided by Section 262. The Delaware Court of Chancery may require shareholders who have


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demanded payment for their shares of Company common stock to submit their stock certificates to the Register in Chancery for notation of the pendency of the appraisal proceedings; and if any shareholder fails to comply with that direction, the Delaware Court of Chancery may dismiss the proceedings as to that shareholder.
 
After determination of the shareholders entitled to appraisal of their shares of Company common stock, the Delaware Court of Chancery will appraise the shares of Company common stock, determining their fair value as of the effective time of the merger after taking into account all relevant factors exclusive of any element of value arising from the accomplishment or expectation of the merger, together with interest, if any, to be paid upon the amount determined to be the fair value. When the value is determined, the Delaware Court of Chancery will direct the payment of such value upon surrender by those shareholders of the certificates representing their shares of Company common stock. Unless the Court in its discretion determines otherwise for good cause shown, interest from the effective date of the merger through the date of payment of the judgment shall be compounded quarterly and shall accrue at 5% over the Federal Reserve discount rate (including any surcharge) as established from time to time during the period between the effective time of the merger and the date of payment of the judgment.
 
You should be aware that an investment banking opinion as to fairness from a financial point of view is not necessarily an opinion as to fair value under Section 262. Although we believe that the per share merger consideration is fair, no representation is made as to the outcome of the appraisal of fair value as determined by the Delaware Court of Chancery and shareholders should recognize that such an appraisal could result in a determination of a value higher or lower than, or the same as, the per share merger consideration. Moreover, we do not anticipate offering more than the per share merger consideration to any shareholder exercising appraisal rights and reserve the right to assert, in any appraisal proceeding, that, for purposes of Section 262, the “fair value” of a share of Company common stock is less than the per share merger consideration. In determining “fair value”, the Delaware Court is required to take into account all relevant factors. In Weinberger v. UOP, Inc., the Delaware Supreme Court discussed the factors that could be considered in determining fair value in an appraisal proceeding, stating that “proof of value by any techniques or methods which are generally considered acceptable in the financial community and otherwise admissible in court” should be considered and that “[f]air price obviously requires consideration of all relevant factors involving the value of a company.” The Delaware Supreme Court has stated that in making this determination of fair value the court must consider market value, asset value, dividends, earnings prospects, the nature of the enterprise and any other facts which could be ascertained as of the date of the merger which throw any light on future prospects of the merged corporation. Section 262 provides that fair value is to be “exclusive of any element of value arising from the accomplishment or expectation of the merger.” In Cede & Co. v. Technicolor, Inc., the Delaware Supreme Court stated that such exclusion is a “narrow exclusion [that] does not encompass known elements of value,” but which rather applies only to the speculative elements of value arising from such accomplishment or expectation. In Weinberger, the Delaware Supreme Court construed Section 262 to mean that “elements of future value, including the nature of the enterprise, which are known or susceptible of proof as of the date of the merger and not the product of speculation, may be considered.”
 
Costs of the appraisal proceeding (which do not include attorneys’ fees or the fees and expenses of experts) may be determined by the Delaware Court of Chancery and imposed upon the surviving corporation and the shareholders participating in the appraisal proceeding by the Delaware Court of Chancery, as it deems equitable in the circumstances. Upon the application of a shareholder, the Delaware Court of Chancery may order all or a portion of the expenses incurred by any shareholder in connection with the appraisal proceeding, including, without limitation, reasonable attorneys’ fees and the fees and expenses of experts used in the appraisal proceeding, to be charged pro rata against the value of all shares of Company common stock entitled to appraisal. Any shareholder who demanded appraisal rights will not, after the effective time of the merger, be entitled to vote shares of Company common stock subject to that demand for any purpose or to receive payments of dividends or any other distribution with respect to those shares of Company common stock, other than with respect to payment as of a record date prior to the effective time of the merger. However, if no petition for appraisal is filed within 120 days after the effective time of the merger, or if the shareholder otherwise fails to perfect, successfully withdraws or loses such holder’s right to appraisal, then the right of that shareholder to


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appraisal will cease and that shareholder will be entitled to receive the $24.00 per share cash payment (without interest) for his, her or its shares of Company common stock pursuant to the merger agreement.
 
In view of the complexity of Section 262 of the DGCL, the Company’s shareholders who may wish to pursue appraisal rights should consult their legal and financial advisors.
 
DELISTING AND DEREGISTRATION OF COMPANY COMMON STOCK
 
If the merger is completed, Company common stock will be delisted from the NYSE and deregistered under the Exchange Act and we will no longer file periodic reports with the SEC on account of Company common stock.
 
OTHER MATTERS
 
Other Matters for Action at the Special Meeting
 
As of the date of this proxy statement, our board of directors knows of no matters that will be presented for consideration at the special meeting other than as described in this proxy statement.
 
Shareholder Proposals and Nominations for 2010 Annual Meeting
 
Once the merger is completed, there will be no public participation in any future meetings of the Company’s shareholders. If the merger is not completed, our public shareholders will continue to be entitled to attend and participate in our shareholder meetings, and we would expect to hold our 2010 annual meeting of shareholders prior to the end of 2010.
 
Inclusion of Proposals in the Company’s Proxy Statement and Proxy Card under the SEC Rules
 
In order to be considered for inclusion in the proxy statement distributed to shareholders prior to the annual meeting of shareholders in 2010, a shareholder proposal pursuant to Rule 14a-8 under the Exchange Act must have been received by us no later than June 10, 2010 and must comply with the requirements of SEC Rule 14a-8; provided, however, if the annual meeting date is changed by more than 30 days from the anniversary of last year’s annual meeting, which took place on November 19, 2009, then the deadline for such proposals is a reasonable time before the Company begins to print and send its proxy materials, which would be disclosed in the Company’s reports filed with the SEC. Written requests for inclusion should be addressed to: Burger King Holdings, Inc., 5505 Blue Lagoon Drive, Miami, Florida 33126, Attention: General Counsel and Secretary. We suggest that you mail your proposal by certified mail, return receipt requested.
 
Advance Notice Requirements for Shareholder Submission of Nominations and Proposals
 
A shareholder recommendation for nomination of a person for election to the board of directors or a proposal for consideration at the 2010 annual meeting of shareholders must be submitted in accordance with the advance notice procedures and other requirements in the Company’s bylaws. These requirements are separate from, and in addition to, the requirements discussed above to have the shareholder proposal included in our proxy statement and form of proxy/voting instruction card pursuant to the SEC’s rules.
 
Our bylaws require a shareholder who wants to nominate a director or submit a shareholder proposal be a shareholder of record at the time of giving the notice and the time of the meeting, be entitled to vote at the meeting and comply with the advance notice provisions of our bylaws.
 
Our bylaws require that shareholder recommendations for nominees to the board of directors must include the name of the nominee or nominees, all information relating to such person that is required to be disclosed in a proxy statement, a consent signed by the nominee evidencing a willingness to serve as a director, if elected, and disclosure of any material relationship between the shareholder or the beneficial owner and the proposed nominee or nominees, including any material interest in such business of the shareholder or the beneficial owner.


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Our bylaws require that shareholder proposals include a brief description of the business to be brought before the meeting, the text of the proposal or business, the reasons for conducting such business at the meeting, and any material interest of such shareholder or the beneficial owner, if any, on whose behalf the proposal is made in such business. In order to be considered timely pursuant to Rule 14a-4 and 14a-5(e) of the Exchange Act, under the advance notice requirements of our bylaws the proposal or recommendation for nomination must be received by the Company’s General Counsel and Secretary at least 90 days but no more than 120 days prior to the first anniversary of the previous year’s annual meeting. For the 2010 annual meeting of shareholders, a proposal or recommendation for nomination must have been received by the Company’s General Counsel and Secretary not earlier than July 22, 2010 and not later than August 21, 2010. If no annual meeting was held in the previous year or if the date of the annual meeting is more than 30 days from the date of the previous year’s annual meeting, then the proposal or recommendation must be received not later than the close of business on the 90th day prior to the annual meeting or the 10th day following the day on which notice of the date of the 2010 annual meeting is mailed or publicly disclosed or such proposal will be considered untimely pursuant to Rule 14a-4 and 14a-5(e) of the Exchange Act. Except for proposals properly made in accordance with Rule 14a-8 under the Exchange Act and included in the notice of meeting given by or at the direction of the board of directors, the advance notice provisions of the bylaws shall be the exclusive means for a shareholder to propose business to be brought before an annual meeting of shareholders.
 
In addition, our bylaws require that the shareholder giving notice and the beneficial owner, if any, on whose behalf the proposal is made, must also include (i) the name and address of the shareholder, (ii) the class and number of shares beneficially owned and held of record by the shareholder and the beneficial owner, (iii) any derivative, swap or any other transaction or series of transactions engaged in, directly or indirectly by the shareholder or the beneficial owner the purpose or effect of which is to give the shareholder or beneficial owner economic risk similar to ownership of shares in the Company, (iv) a representation that the shareholder is the holder of record of the shares entitled to vote at the meeting and intends to appear in person or by proxy at the meeting to present the proposal or nomination, and (v) a representation that the shareholder or the beneficial owner intends to be or is a part of a group which intends to deliver a proxy statement or a form of proxy to the holders of at least the percentage of the Company’s outstanding shares required to approve or adopt the proposal or elect the nominee, or otherwise plans to solicit proxies from shareholders in support of the nomination or proposal.
 
WHERE YOU CAN FIND MORE INFORMATION
 
We file annual, quarterly and current reports, proxy statements and other information with the SEC. You may read and copy any document we file at the SEC public reference room located at 100 F Street, N.E., Room 1580, Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the public reference room. Our SEC filings are also available to the public at the SEC website at www.sec.gov. You also may obtain free copies of the documents we file with the SEC, including this proxy statement, by going to the Investor Relations page of our corporate website at www.bk.com. Our website address is provided as an inactive textual reference only. The information provided on our website, other than copies of the documents listed below that have been filed with the SEC, is not part of this proxy statement, and therefore is not incorporated herein by reference.
 
Statements contained in this proxy statement, or in any document incorporated by reference in this proxy statement regarding the contents of any contract or other document, are not necessarily complete and each such statement is qualified in its entirety by reference to that contract or other document filed as an exhibit with the SEC. The SEC allows us to “incorporate by reference” into this proxy statement documents we file with the SEC. This means that we can disclose important information to you by referring you to those documents. The information incorporated by reference is considered to be a part of this proxy statement, and later information that we file with the SEC will update and supersede that information. We incorporate by reference the documents listed below and any documents filed by us pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this proxy statement and before the date of the special meeting.


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  •  Annual Report on Form 10-K for the fiscal year ended June 30, 2010 (filed with the SEC on August 26, 2010);
 
  •  Form 10-K/A (filed with the SEC on September 20, 2010); and
 
  •  Current Reports on Form 8-K (filed with the SEC on August 25, 2010, September 2, 2010, September 3, 2010; and September 16, 2010).
 
Notwithstanding the foregoing, information furnished under Items 2.02 and 7.01 of any Current Report on Form 8-K, including the related exhibits, is not incorporated by reference into this proxy statement.
 
Any person, including any beneficial owner, to whom this proxy statement is delivered may request copies of proxy statements and any of the documents incorporated by reference in this document or other information concerning us, without charge, by written or telephonic request directed to Investor Relations Department, Burger King Holdings, Inc., 5505 Blue Lagoon Drive, Miami, Florida 33126, telephone number (305) 378-3000 or from the SEC through the SEC website at the address provided above. Documents incorporated by reference are available without charge, excluding any exhibits to those documents unless the exhibit is specifically incorporated by reference into those documents.
 
THIS PROXY STATEMENT DOES NOT CONSTITUTE THE SOLICITATION OF A PROXY IN ANY JURISDICTION TO OR FROM ANY PERSON TO WHOM OR FROM WHOM IT IS UNLAWFUL TO MAKE SUCH PROXY SOLICITATION IN THAT JURISDICTION. YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED OR INCORPORATED BY REFERENCE IN THIS PROXY STATEMENT TO VOTE YOUR SHARES OF COMPANY COMMON STOCK AT THE SPECIAL MEETING. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION THAT IS DIFFERENT FROM WHAT IS CONTAINED IN THIS PROXY STATEMENT. THIS PROXY STATEMENT IS DATED [ • ], 2010. YOU SHOULD NOT ASSUME THAT THE INFORMATION CONTAINED IN THIS PROXY STATEMENT IS ACCURATE AS OF ANY DATE OTHER THAN THAT DATE, AND THE MAILING OF THIS PROXY STATEMENT TO SHAREHOLDERS DOES NOT CREATE ANY IMPLICATION TO THE CONTRARY.


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Annex A
 
 
AGREEMENT AND PLAN OF MERGER
by and among
BLUE ACQUISITION HOLDING CORPORATION,
BLUE ACQUISITION SUB, INC.
and
BURGER KING HOLDINGS, INC.
dated as of
September 2, 2010
 
 
The Merger Agreement has been provided solely to inform investors of its terms. The representations, warranties and covenants contained in the Merger Agreement were made only for the purposes of such agreement and as of specific dates, were made solely for the benefit of the parties to the Merger Agreement and may be intended not as statements of fact, but rather as a way of allocating risk to one of the parties if those statements prove to be inaccurate. In addition, such representations, warranties and covenants may have been qualified by certain disclosures not reflected in the text of the Merger Agreement and may apply standards of materiality in a way that is different from what may be viewed as material by stockholders of, or other investors in, the Company. The Company’s stockholders and other investors are not third-party beneficiaries under the Merger Agreement and should not rely on the representations, warranties and covenants or any descriptions thereof as characterizations of the actual state of facts or conditions of the Company, Parent, Sub or any of their respective subsidiaries or affiliates.
 


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TABLE OF CONTENTS
 
             
        Page
 
ARTICLE I The Offer
    1  
Section 1.01
  The Offer     1  
Section 1.02
  Company Actions     4  
Section 1.03
  Top-Up     5  
Section 1.04
  Directors     6  
       
ARTICLE II The Merger     7  
Section 2.01
  The Merger     7  
Section 2.02
  Closing     7  
Section 2.03
  Effective Time     7  
Section 2.04
  Effects of the Merger     7  
Section 2.05
  Certificate of Incorporation and By-Laws     7  
Section 2.06
  Directors     7  
Section 2.07
  Officers     8  
Section 2.08
  Taking of Necessary Action     8