UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

(Amendment No. 1)

 

 

Filed by the Registrant ☑

Filed by a Party other than the Registrant ☐

Check the appropriate box:

 

☑	Preliminary Proxy Statement

 

☐	Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

 

☐	Definitive Proxy Statement

 

☐	Definitive Additional Materials

 

☐	Soliciting Material under §240.14a-12

Chuy’s 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 all boxes that apply):

 

☐	No fee required.

 

☐	Fee paid previously with preliminary materials.

 

☑	Fee computed on table in exhibit required by Item 25(b) per Exchange Act Rules 14a-6(i)(1) and 0-11.

 

 

 

EXPLANATORY NOTE

This Amendment to the Preliminary Proxy Statement on Schedule 14A, filed by Chuy’s Holdings, Inc. on September 5, 2024, is being filed solely for the purpose of filing an updated filing fee table as Exhibit 107. No additional changes have been made.

PRELIMINARY PROXY STATEMENT – SUBJECT TO COMPLETION

 

September [ ], 2024

Dear Chuy’s Stockholder:

Chuy’s Holdings, Inc. (“Chuy’s,” “we,” “us” or “our”) has entered into an agreement to be acquired by way of a merger. If the proposed merger is completed, Chuy’s will become an indirect, wholly-owned subsidiary of Darden Restaurants, Inc., and each share of Chuy’s common stock will be converted (unless you have properly exercised your appraisal rights) into the right to receive $37.50 in cash, without interest and less any applicable withholding taxes.

Our board of directors unanimously approved the merger agreement and has called a special meeting of our stockholders at which stockholders will have the opportunity to consider and vote upon a proposal to adopt the merger agreement. Stockholder approval is one of several conditions to the proposed merger. Our board of directors unanimously recommends that you vote “FOR” each of the proposals to be considered at the special meeting, including adoption of the merger agreement. The attached notice of special meeting includes further details about the special meeting, which will be held at the Chuy’s headquarters located at 1623 Toomey Road, Austin, Texas, 78704 at 9:00 a.m. Central Time on October 10, 2024.

You’re invited to attend the special meeting in person but, whether or not you plan to attend, please vote your shares as promptly as possible. Depending on how you hold your shares, you’ll find voting instructions beginning on page 17 of the enclosed proxy statement and on the enclosed proxy or voting instruction card. Your vote is very important, because the merger cannot be completed unless holders of a majority of the outstanding shares of our common stock vote in favor of the proposal to adopt the merger agreement. A failure to vote your shares of our common stock on the proposal to adopt the merger agreement will have the same effect as a vote against the proposal.

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

If you have any questions or need assistance in voting your shares, please contact our proxy solicitor, Georgeson LLC, by telephone at 866-461-7291 or by email at chuys@georgeson.com.

Thank you for your continued support.

Sincerely,

Steve Hislop

Chairman, President, and Chief Executive Officer

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

This proxy statement is dated September [ ], 2024, and is first being mailed to stockholders on or about September [ ], 2024.

PRELIMINARY PROXY STATEMENT – SUBJECT TO COMPLETION

 

CHUY’S HOLDINGS, INC.

 

 

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS TO BE HELD ON OCTOBER 10, 2024

 

 

TO THE STOCKHOLDERS OF CHUY’S HOLDINGS, INC.:

You are cordially invited to attend a special meeting of stockholders, to be held at the Chuy’s headquarters located at 1623 Toomey Road, Austin, Texas, 78704 at 9:00 a.m. Central Time on October 10, 2024. The purpose of the special meeting is to consider and vote upon the following proposals:

 

1.

Merger Proposal. To adopt the Agreement and Plan of Merger, dated as of July 17, 2024 (which, as it may be amended from time to time, we refer to as the “merger agreement”), by and among Chuy’s Holdings, Inc., Darden Restaurants, Inc., and Cheetah Merger Sub Inc., pursuant to which Chuy’s Holdings, Inc. would be acquired by way of a merger and become an indirect, wholly-owned subsidiary of Darden Restaurants, Inc., which we refer to as the “merger.”

 

2.

Advisory Compensation Proposal. To approve, on a non-binding, advisory basis, certain compensation that may be paid or become payable to our named executive officers in connection with the merger.

 

3.

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

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

Enclosed with this notice of special meeting of stockholders is a proxy statement, which describes these proposals in more detail, and a form of proxy, which allows you to vote on these proposals. The proxy statement includes a summary of the merger agreement, and a copy of the merger agreement is attached thereto as Appendix A. Please carefully review these materials, including the appendices to and the information incorporated by reference into the proxy statement.

We welcome you to attend the meeting, but whether or not you plan to attend, please submit your completed proxy via phone, mail, or internet as soon as possible. Proxies are revocable and will not affect your right to vote in person in the event you revoke the proxy and attend the meeting. Instructions on how to vote are found in the section titled “The Special Meeting—How to Cast your Vote” beginning on page 17.

Your vote is very important, regardless of the number of shares of Chuy’s common stock that you own. The failure of any stockholder of record to vote in person at the special meeting or to submit a completed proxy via phone, mail, or internet before the special meeting or of any beneficial owner to direct your broker, bank, or other nominee on how to vote your shares on your behalf, will have the same effect as a vote “AGAINST” the merger proposal.

Stockholders and beneficial owners who do not vote in favor of the merger proposal and who otherwise meet the requirements of Section 262 of the General Corporation Law of the State of Delaware (the “DGCL”) have the right to seek appraisal of the fair value of their shares of Chuy’s common stock, subject to and as determined in accordance with Section 262 of the DGCL. In addition to not voting in favor of the merger proposal, any stockholder or beneficial owner (as defined in Section 262 of the DGCL) wishing to exercise its appraisal rights must deliver a written demand for appraisal to Chuy’s before the vote on the merger proposal at the special meeting and must comply in all respects with the requirements of Section 262 of the DGCL, the text of which is attached as Appendix C to the enclosed proxy statement.

Only stockholders of record at the close of business on August 30, 2024, will be entitled to vote at the special meeting. Each stockholder is entitled to one vote per share of our common stock on all matters to be voted on at the meeting. Other than the proposals set forth above, no other business will be conducted at the special meeting.

 

		BY ORDER OF THE BOARD OF DIRECTORS,
Dated: September [ ], 2024 Austin, Texas		Tim Larson Vice President, General Counsel and Secretary

 

 

PRELIMINARY PROXY STATEMENT – SUBJECT TO COMPLETION

 

TABLE OF CONTENTS

 

PREFACE			iii
ABOUT THIS PROXY STATEMENT			iii
ADDITIONAL INFORMATION			iii
DATE OF MAILING			iii
PROXY STATEMENT SUMMARY			1
THE SPECIAL MEETING			1
PROPOSALS UNDER CONSIDERATION			1
THE PARTIES			2
THE MERGER PROPOSAL			2
THE MERGER			3
TIMING OF THE MERGER AND RELATED CONTINGENCIES			4
OUR BOARD’S RECOMMENDATION AND RELATED CONSIDERATIONS			4
CERTAIN OTHER TERMS OF THE MERGER AGREEMENT			6
ADVISORY COMPENSATION PAYMENTS			8
APPRAISAL RIGHTS			9
QUESTIONS AND ANSWERS			10
THE SPECIAL MEETING			16
THE SPECIAL MEETING			16
RECORD DATE – WHO CAN VOTE – SHARES OUTSTANDING			16
HOW TO CAST YOUR VOTE			17
REVOKING YOUR PROXY			17
VOTING INTENTIONS OF OUR DIRECTORS AND OFFICERS AND CERTAIN STOCKHOLDERS			17
VOTING PROCEDURES AND TECHNICALITIES			17
SOLICITATION OF PROXIES			18
PARTIES			19
CHUY’S			19
DARDEN			19
MERGER SUB			20
THE MERGER			21
THE MERGER AND ITS EFFECTS			21
CHUY’S WITHOUT THE MERGER			21
BACKGROUND OF THE MERGER			21
REASONS FOR OUR BOARD’S RECOMMENDATION IN FAVOR OF THE MERGER			29
CERTAIN PROSPECTIVE FINANCIAL INFORMATION			33
OPINION OF OUR FINANCIAL ADVISOR			37
INTERESTS OF OUR DIRECTORS AND EXECUTIVE OFFICERS IN THE MERGER			44
REGULATORY APPROVALS			49
MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES			50
APPRAISAL RIGHTS			51
THE MERGER AGREEMENT			58
STRUCTURE AND CORPORATE EFFECTS OF THE MERGER			58
TIMING OF THE MERGER			58
EFFECT OF THE MERGER ON OUR COMMON STOCK			59
TREATMENT OF CHUY’S EQUITY AWARDS			59
TREATMENT OF CHUY’S 2023 EMPLOYEE STOCK PURCHASE PLAN			59

 

i

PAYMENT FOR COMMON STOCK IN THE MERGER			60
REPRESENTATIONS AND WARRANTIES; MATERIAL ADVERSE EFFECT			60
CONDUCT OF THE BUSINESS PENDING THE MERGER			63
SOLICITATION OF OTHER OFFERS			66
CHANGE IN BOARD RECOMMENDATION			68
COMPANY STOCKHOLDERS’ MEETING			70
EMPLOYEE MATTERS			70
INDEMNIFICATION AND INSURANCE			71
EFFORTS TO COMPLETE THE MERGER			72
COORDINATION ON LITIGATION			72
OTHER COVENANTS AND AGREEMENTS			72
CONDITIONS TO COMPLETION OF THE MERGER			72
EXPENSES			73
TERMINATION			73
TERMINATION FEES			74
SPECIFIC ENFORCEMENT			74
ASSIGNMENT			75
AMENDMENT AND MODIFICATION			75
GOVERNING LAW			75
THE MERGER PROPOSAL (PROPOSAL #1)			76
VOTE ON ADOPTION OF THE MERGER AGREEMENT			76
VOTE REQUIRED FOR APPROVAL			76
BOARD RECOMMENDATION			76
THE ADVISORY COMPENSATION PROPOSAL (PROPOSAL #2)			77
NON-BINDING, ADVISORY VOTE ON MERGER-RELATED COMPENSATION OF NAMED EXECUTIVE OFFICERS			77
VOTE REQUIRED FOR APPROVAL			77
BOARD RECOMMENDATION			77
THE ADJOURNMENT PROPOSAL (PROPOSAL #3)			78
VOTE ON ADJOURNMENT OF THE SPECIAL MEETING TO A LATER DATE OR DATES			78
VOTE REQUIRED FOR APPROVAL			78
BOARD RECOMMENDATION			78
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT			79
MARKET PRICES AND DIVIDEND DATA			81
THE MARKET FOR OUR COMMON STOCK			81
HISTORICAL MARKET PRICES			81
DIVIDEND POLICY			82
MISCELLANEOUS			83
RECEIVING THE MERGER CONSIDERATION			83
NOTICE OF INTERNET AVAILABILITY OF PROXY MATERIALS FOR THE SPECIAL MEETING			83
HOUSEHOLDING			83
STOCKHOLDER PROPOSALS FOR OUR 2025 ANNUAL MEETING			83
LEGAL AND CAUTIONARY DISCLOSURES			84
FORWARD-LOOKING STATEMENTS			85
WHERE YOU CAN FIND MORE INFORMATION			87
INCORPORATION BY REFERENCE			87
OBTAINING COPIES			87
APPENDICES
MERGER AGREEMENT			A-1
OPINION OF PIPER SANDLER & CO.			B-1
SECTION 262 OF THE DGCL			C-1

 

ii

PREFACE

ABOUT THIS PROXY STATEMENT

This document is being sent by Chuy’s Holdings, Inc., a Delaware corporation, which we refer to as “we,” “us,” “our,” “Chuy’s,” or the “company,” and our board of directors to solicit proxies from our stockholders to vote their shares of common stock, par value $0.01 per share of the company (the “common stock”), at the special meeting of our stockholders to be held on October 10, 2024. At the special meeting, our stockholders will be asked, among other things, to adopt the Agreement and Plan of Merger, which, as it may be amended from time to time, we refer to as the “merger agreement,” entered into on July 17, 2024, by and among Chuy’s, Darden Restaurants, Inc., which we refer to as “Darden” or “Parent,” and Cheetah Merger Sub Inc., which we refer to as “Merger Sub.” Pursuant to the terms of the merger agreement, Merger Sub will merge with and into Chuy’s, with Chuy’s continuing as the surviving corporation and becoming an indirect, wholly-owned subsidiary of Darden, which we refer to as the “merger.”

For a description of the company and the other parties involved in the transactions described in this proxy statement, see “Parties” beginning on page 19.

ADDITIONAL INFORMATION

We have elected to “incorporate by reference” certain information into this proxy statement, which means that we are disclosing important information to you by referring you to certain other documents that we have filed separately with the U.S. Securities and Exchange Commission, which we refer to as the “SEC,” and certain other documents that we may file with the SEC after the date of this proxy statement but prior to the special meeting. Because these documents contain important information and may subsequently amend this proxy statement, you should monitor and review our SEC filings until the special meeting is completed. References to this proxy statement are meant to include not only the main body of this proxy statement, but also the accompanying notice of special meeting and proxy card, each of the appendices, and all of the information incorporated by reference. See “Where You Can Find More Information” beginning on page 87.

We have not authorized anyone to provide any information other than what is contained in or incorporated by reference in this proxy statement and take no responsibility for any information others may give you. See “Miscellaneous—Legal and Cautionary Disclosures—Other Information Not Authorized by Chuy’s” beginning on page 84.

This proxy statement contains a variety of forward-looking statements, which are subject to a number of risks and uncertainties. We caution you not to place undue reliance on forward-looking statements. See “Forward-Looking Statements” beginning on page 85.

DATE OF MAILING

We expect that this proxy statement, the related form of proxy, and notice of special meeting will first be mailed to stockholders on or about September [ ], 2024.

 

iii

 

1

 

2

 

3

 

4

 

5

 

6

 

7

 

8

 

9

QUESTIONS AND ANSWERS

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

 

Q:	Why am I receiving this document?

 

A:

On July 17, 2024, Chuy’s entered into a merger agreement providing for Chuy’s to be acquired by way of a merger. If the proposed merger is completed, Chuy’s will become an indirect, wholly-owned subsidiary of Darden. You are receiving this document in connection with the solicitation of proxies by our board of directors in favor of the proposal to adopt the merger agreement, which we refer to as the merger proposal, and related proposals to be voted on at the special meeting. In addition, this document is our formal notice to you of your appraisal rights under Delaware law.

 

Q:	What is a proxy?

 

A:

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

 

Q:	When and where is the special meeting?

 

A:	The special meeting will be held at the Chuy’s headquarters located at 1623 Toomey Road, Austin, Texas, 78704 on October 10, 2024, at 9:00 a.m. Central Time.

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

 

Q:	Who can vote at the special meeting?

 

A:

Only holders of record of our common stock as of the close of business on August 30, 2024, the record date for the special meeting, are entitled to receive these proxy materials and to vote their shares at the special meeting. As of the close of business on the record date, there were    shares of our common stock outstanding and entitled to vote at the special meeting. Each share of our common stock issued and outstanding as of the record date will be entitled to one vote on each matter submitted to a vote at the special meeting.

 

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

 

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

If your shares are held through a broker, bank, or other nominee, you are considered the “beneficial owner” of the shares of our common stock held in “street name.” In that case, this proxy statement has been forwarded to you by your broker, bank, or other nominee. As the beneficial owner, you have the right to direct your broker, bank, or other nominee on how to vote your shares on your behalf at the special meeting, or you may contact your broker, bank, or other nominee to obtain a “legal proxy” to authorize you to vote your shares in person at the special meeting.

 

10

Attendance at the special meeting will be limited to stockholders of record and beneficial owners who provide proof of beneficial ownership as of the record date (such as an account statement, a copy of the voting instruction card provided by a broker, bank, or other nominee, or other similar evidence of ownership).

 

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

 

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

 

1.

to adopt the merger agreement (which we describe in greater detail beginning on page 76);

 

2.

to approve, on a non-binding, advisory basis, certain compensation that may be paid or become payable to our named executive officers in connection with the merger (which we describe in greater detail beginning on page 77); and

 

3.

to approve one or more adjournments of the special meeting to a later date or dates if necessary or appropriate to solicit additional proxies if there are insufficient votes to approve the merger agreement at the time of the special meeting (which we describe in greater detail beginning on page 78).

 

Q:	What is the proposed merger and what effects will it have on Chuy’s?

 

A:

The proposed merger is the acquisition of Chuy’s by Darden pursuant to the merger agreement. If the merger proposal is approved by the holders of our common stock and the other closing conditions under the merger agreement are satisfied or (to the extent permitted by applicable law) waived, Merger Sub will merge with and into Chuy’s, with Chuy’s continuing as the surviving corporation. As a result of the merger, Chuy’s will become an indirect, wholly-owned subsidiary of Darden. We would delist our common stock from Nasdaq and deregister our common stock under the Exchange Act as soon as reasonably practicable following the effective time, and at such time, we will no longer be a publicly traded company and will no longer file periodic reports with the SEC. If the merger is completed, you will not own any shares of the capital stock of the surviving corporation.

 

Q:	What happens if the merger is not completed?

 

A:

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

Under specified circumstances, we may be required to pay to Darden a termination fee upon the termination of the merger agreement, as described under “The Merger Agreement—Termination Fees” beginning on page 74.

 

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

 

A:

Upon completion of the merger, you will be entitled to receive the merger consideration of $37.50 in cash without interest for each share of our common stock that you own. For example, if you own 100 shares of our common stock, you will receive $3,750 in cash in exchange for your shares of our common stock, less any applicable withholding taxes. Following the merger, you will not own shares in the surviving corporation.

 

Q:	How does the merger consideration compare to the market price of Chuy’s common stock prior to the public announcement of the merger agreement?

 

A:	The merger consideration represents a premium of approximately 47.9% to our closing stock price on July 16, 2024, the trading day before the public announcement of the merger agreement.

 

11

Q:	What will the holders of Chuy’s equity awards, such as options and restricted stock units, receive in the merger?

 

A:

Until the effective time, equity awards will continue to be subject to vesting, exercise, or forfeiture in accordance with their terms. At the effective time, all of our then-outstanding equity awards will be treated as summarized below and as described in more detail under “The Merger Agreement—Treatment of Chuy’s Equity Awards” beginning on page 59. These payments will be made shortly following the effective time, without interest and subject to any applicable withholding tax.

Stock Options. Immediately prior to the effective time, except as may otherwise be agreed in writing by Parent, the company and the holder thereof, by virtue of the merger and without any action on the part of the option holders, each option (whether vested and exercisable or unvested) to purchase shares of our common stock outstanding and unexercised will be automatically converted into the right to receive from Parent or the surviving corporation an amount in cash equal to the product obtained by multiplying (1) the excess, if any, of $37.50 over the per share exercise price of such option by (2) the aggregate number of shares of our common stock that were issuable upon exercise of such option immediately prior to the effective time.

Restricted Stock Units. Immediately prior to the effective time, except as may otherwise be agreed in writing by Parent, the company and the holder thereof, by virtue of the merger and without any action on the part of the holders thereof, each restricted stock unit (each, an “RSU”) then outstanding will be deemed to have been earned, and become fully vested and be canceled in exchange for the right to receive from Darden or the surviving corporation an amount in cash equal to the product obtained by multiplying (1) the number of shares of our common stock subject to such RSU by (2) $37.50.

 

Q:	What will happen to the Chuy’s 2023 Employee Stock Purchase Plan?

 

A:	If the merger is completed, our 2023 Employee Stock Purchase Plan, which we refer to as the “2023 ESPP,” will be terminated. The Company never commenced an offering period under the 2023 ESPP. While the merger remains pending, we will not commence an offering period under the 2023 ESPP.

 

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

 

A:

We are working toward completing the merger as soon as possible after the date of the special meeting, and currently expect to complete the merger during the fourth quarter of 2024. However, the exact timing of completion of the merger cannot be predicted because the merger is subject to certain conditions, including approval of the merger proposal by our stockholders and the receipt of regulatory approvals. See “The Merger Agreement—Timing of the Merger” beginning on page 58, and “The Merger Agreement—Conditions to Completion of the Merger” beginning on page 72.

 

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

 

A:	Yes. As a holder of our 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 “The Merger—Appraisal Rights” beginning on page 51.

 

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

 

A:

Generally, yes, if you are a U.S. holder. The exchange of our common stock for cash pursuant to the merger generally will require a U.S. holder to recognize a gain or loss for U.S. federal income tax purposes in an amount equal to the difference, if any, between (1) the amount of cash received by such U.S. holder pursuant to the merger plus the amount used to satisfy any applicable withholding taxes and (2) such U.S. holder’s adjusted tax basis in the shares of our common stock surrendered pursuant to the merger. Backup withholding may apply to the cash payment made pursuant to the merger unless the U.S. holder or other payee provides a valid taxpayer identification number and complies with certain certification procedures

 

12

(generally, by providing a properly completed and executed IRS Form W-9) or otherwise establishes an exemption from backup withholding. A more complete description of the U.S. federal income tax consequences of the merger is provided under “The Merger—Material U.S. Federal Income Tax Consequences” beginning on page 50.

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

 

Q:	What vote of Chuy’s stockholders is required to approve the merger proposal?

 

A:

Approval of the merger proposal requires the affirmative vote of a majority of the outstanding common stock. A failure to vote your shares of our common stock or an abstention from voting will have the same effect as a vote “AGAINST” the merger proposal. If your shares are held in “street name” by your broker, bank, or other nominee and you do not instruct such broker, bank, or other nominee how to vote your shares, such failure to instruct your broker, bank, or other nominee will have the same effect as a vote “AGAINST” the merger proposal.

 

Q:	How does the Chuy’s board of directors recommend that I vote?

 

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

For a discussion of the factors that our board of directors considered in determining to recommend the adoption of the merger agreement, see “The Merger—Reasons for Our Board’s Recommendation in Favor of the Merger” beginning on page 29. In addition, in considering the recommendations of our board of directors, you should be aware that certain of our directors and executive officers may have interests in the merger that are different from, or in addition to, the interests of our stockholders generally. For a discussion of these interests, see the section entitled “The Merger—Interests of Our Directors and Executive Officers in the Merger” beginning on page 44.

 

Q:	How do the Chuy’s directors and officers intend to vote?

 

A:	We currently expect that each of our directors and officers will vote their respective shares of common stock in favor of the merger proposal, the advisory compensation proposal, and the adjournment proposal, although they have no obligation to do so.

 

Q:	Why am I being asked to cast a non-binding, advisory vote to approve certain merger-related compensation that may be paid or become payable to the company’s named executive officers in connection with the merger?

 

A:

The inclusion of this proposal is required by the SEC rules and is referred to as “golden parachute” compensation under such rules. However, the approval of this proposal is not a condition to the completion of the merger, and the vote on this proposal is an advisory vote by stockholders and is not binding on Chuy’s or Darden. If the merger agreement is adopted by our stockholders and the merger is completed as anticipated, any merger-related compensation will be paid to the company’s named executive officers in accordance with the terms of their compensation agreements and arrangements, even if our stockholders do not approve this proposal. See the section entitled “The Advisory Compensation Proposal (Proposal #2)” beginning on page 77.

 

13

Q:	What do I need to do now? How do I vote my shares of Chuy’s common stock?

 

A:

We urge you to read this entire document carefully, including its appendices and the documents incorporated by reference, and to consider how the merger affects you. Your vote is important, regardless of the number of shares of our common stock you own. You’ll find voting instructions beginning on page 17 of this proxy statement or on the enclosed proxy card. You can vote your shares in person or by proxy over the internet, by telephone, or by mail.

 

Q:	Can I revoke my proxy?

 

A:

Yes. You may revoke your proxy and change your vote at any time before your proxy is voted at the special meeting. To revoke your proxy, you must (1) submit a new proxy by internet or telephone no later than 11:59 p.m. Eastern Time on October 9, 2024; (2) complete, sign, date and return a new proxy card to us, which must be received by us before the time of the meeting; or (3) if you are a stockholder of record (or a beneficial owner with a legal proxy from the stockholder or record), attend the meeting in person and deliver a proper written notice of revocation of your proxy. Attendance at the meeting will not by itself revoke a previously granted proxy. Unless you decide to vote your shares in person, please revoke your prior proxy in the same way you initially submitted it—that is, by internet, telephone, or mail.

 

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

 

A:

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

 

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

 

A:

If your shares of our common stock are registered differently or are held in more than one account, you will receive more than one proxy or voting instruction card. Please complete and return all of the proxy cards and voting instruction cards you receive (or submit each of your proxies by telephone or the internet, if available to you) to ensure that all of your shares of our common stock are voted.

 

Q:	What happens if I sell my shares of Chuy’s common stock before completion of the merger?

 

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

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

 

14

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

 

A:

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

 

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

 

A:

We intend to announce preliminary voting results at the special meeting and publish final results in a Current Report on Form 8-K that will be filed with the SEC following the special meeting. All reports that we file with the SEC are publicly available when filed. See “Where You Can Find More Information” beginning on page 87.

 

Q:	Where can I find more information about Chuy’s?

 

A:	You can find more information about us from various sources described in the section entitled “Where You Can Find More Information” beginning on page 87.

 

Q:	Who can help answer my other questions?

 

A:	If you have more questions about the merger or require assistance in submitting your proxy or voting your shares or need additional copies of this proxy statement or the enclosed proxy card, please contact our proxy solicitor, Georgeson LLC, which we refer to as “Georgeson”:

Georgeson LLC

1290 Avenue of the Americas, 9^th Floor

New York, NY 10104

Stockholders, Banks and Brokers

Call Toll Free:

866-461-7291

chuys@georgeson.com

 

15

THE SPECIAL MEETING

THE SPECIAL MEETING

Date, Time, Place

We will hold a special meeting of stockholders at the Chuy’s headquarters located at 1623 Toomey Road, Austin, Texas, 78704 at 9:00 a.m. Central Time on October 10, 2024.

Purpose

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

 

1.

Merger Proposal. To adopt the Agreement and Plan of Merger, dated as of July 17, 2024 (as it may be amended from time to time), by and among Chuy’s, Darden, and Merger Sub, pursuant to which Chuy’s would be acquired by way of a merger and become an indirect, wholly-owned subsidiary of Darden. For more information on this proposal, see “The Merger Proposal (Proposal #1)” beginning on page 77.

 

2.

Advisory Compensation Proposal. To approve, on a non-binding, advisory basis, certain compensation that may be paid or become payable to our named executive officers in connection with the merger. For more information on this proposal, see “The Advisory Compensation Proposal (Proposal #2)” beginning on page 78.

 

3.

Adjournment Proposal. To approve one or more adjournments of the special meeting to a later date or dates if necessary or appropriate to solicit additional proxies if there are insufficient votes to adopt the merger agreement at the time of the special meeting. For more information on this proposal, see “The Adjournment Proposal (Proposal #3)” beginning on page 79.

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

Other Business

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

Adjournment

Although it is not currently expected, we may adjourn the special meeting one or more times, including if necessary or appropriate, to solicit additional proxies if there are insufficient votes to adopt the merger agreement at the time of the special meeting.

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

RECORD DATE – WHO CAN VOTE – SHARES OUTSTANDING

Our board of directors has fixed August 30, 2024, as the record date for the special meeting. Stockholders of record, as shown on our books at the close of business on the record date, will be entitled to vote at the special meeting. Persons who were not stockholders on the record date will not be eligible to vote.

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

 

16

HOW TO CAST YOUR VOTE

Your vote is important! Please cast your vote as soon as possible, using the instructions on the enclosed proxy card. The Chuy’s board of directors unanimously recommends that you vote “FOR” each of the proposals. Instructions for voting your shares depend on how you hold them and whether you wish to vote in-person or by proxy:

 

•

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

 

•

Beneficial owners, who own shares through a bank, broker, or other nominee, can vote by following the instructions for voting as provided by their bank, broker, or other nominee.

If you own shares in different accounts or in more than one name, you may receive different voting instructions for each type of ownership. Please vote all of your shares.

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

If you have any questions or need assistance voting, please contact Georgeson, our proxy solicitor assisting us in connection with the special meeting, toll-free at 866-461-7291 or by email at chuys@georgeson.com.

Proxies will be voted as directed therein. If you sign and return the enclosed proxy card or submit a proxy by telephone or over the internet and do not specify how your shares are to be voted, your shares will be voted:

 

•

“FOR” the merger proposal,

 

•

“FOR” the advisory compensation proposal, and

 

•

“FOR” the adjournment proposal.

REVOKING YOUR PROXY

Any stockholder giving a proxy may revoke its proxy and change its vote before its proxy is voted. To revoke a proxy, a stockholder must (1) submit a new proxy by internet or telephone no later than 11:59 p.m. Eastern Time on October 9, 2024; (2) complete, sign, date and return a new proxy card to us, which must be received by us before the time of the meeting; or (3) if you are a stockholder of record (or a beneficial owner with a legal proxy from the stockholder of record), attend the meeting in person and deliver a proper written notice of revocation of your proxy.

Attendance at the meeting will not by itself revoke a previously granted proxy. Unless you decide to vote your shares in person, please revoke your prior proxy in the same way you initially submitted it—that is, by internet, telephone, or mail.

VOTING INTENTIONS OF OUR DIRECTORS AND OFFICERS AND CERTAIN STOCKHOLDERS

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

VOTING PROCEDURES AND TECHNICALITIES

One Vote per Share

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

 

17

Quorum

A “quorum” is the minimum number of stockholders who must be present at the special meeting for business to be conducted. The holders of a majority of the shares of our common stock issued and outstanding and entitled to vote at the special meeting will be a quorum for the special meeting.

Abstentions

If a stockholder indicates on their proxy that they wish to abstain from voting, including banks, brokers or other nominees holding their customers’ shares who cause abstentions to be recorded, these shares are considered present and entitled to vote at the special meeting and those shares will count toward determining whether or not a quorum is present at the meeting. An abstention will have the same effect as a vote against the merger proposal, the advisory compensation proposal, and the adjournment proposal.

Broker Non-Votes

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

Because the vote required to adopt the merger agreement is based on the total number of the outstanding shares of our common stock as of the record date, and not just the shares that are entitled to vote or are actually voted at the special meeting, if you hold your shares through a broker, bank, or other nominee and do not instruct them how to vote, it will have the same effect as voting against the merger proposal.

For the advisory compensation proposal and the adjournment proposal, if you hold your shares through a broker, bank, or other nominee and you do not instruct them how to vote, it will not have an effect on the advisory compensation proposal or the adjournment proposal.

SOLICITATION OF PROXIES

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

We have retained Georgeson, a proxy solicitation firm, to assist our board of directors in the solicitation of proxies for the special meeting, and we expect to pay Georgeson $15,000, plus reimbursement of out-of-pocket expenses. Proxies may be solicited by mail, personal interview, email, telephone, or over the internet by Georgeson or, without additional compensation, by certain of our directors, officers, and employees.

 

18

PARTIES

CHUY’S

Chuy’s Holdings, Inc. (referred to in this proxy statement as “we,” “us,” “our,” “Chuy’s,” or the “company”) is a Delaware corporation. This entity was incorporated in 2006, but our Chuy’s brand was originally founded in Austin, Texas in 1982.

We are a growing full-service restaurant concept offering a distinct menu of authentic, freshly-prepared Mexican and Tex-Mex inspired food. We were founded in Austin, Texas in 1982 and, as of June 30, 2024, we operated 101 restaurants across 15 states.

We are committed to providing value to our customers through offering generous portions of made-from-scratch, flavorful Mexican and Tex-Mex inspired dishes. We also offer a full-service bar in all of our restaurants, providing our customers a wide variety of beverage offerings. We believe the Chuy’s culture is one of our most valuable assets, and we are committed to preserving and continually investing in our culture and our customers’ restaurant experience.

Our restaurants have a common décor, but we believe each location is unique in format, offering an “unchained” look and feel, as expressed by our motto “If you’ve seen one Chuy’s, you’ve seen one Chuy’s!” We believe our restaurants have an upbeat, funky, eclectic, somewhat irreverent atmosphere while still maintaining a family-friendly environment.

The members of our board of directors are:

 

•

Steve Hislop, Chair

 

•

Jon Howie

 

•

Saed Mohseni

 

•

Ira Zecher

 

•

Randall DeWitt

 

•

Jody Bilney

 

•

Nancy Freda-Smith

Our current executive officers are:

 

•

Steve Hislop, President and Chief Executive Officer

 

•

Jon Howie, Vice President and Chief Financial Officer

 

•

John Korman, Chief Operating Officer

 

•

John Mountford, Chief Culinary and Procurement Officer

 

•

Michael Hatcher, Vice President of Development

Our principal executive offices are located at 1623 Toomey Road, Austin, Texas 78704, and our telephone number is (512) 473-2783. Our website is www.chuys.com. The information contained on, or accessible through, our website is not incorporated into this proxy statement. More information about the company, our board of directors, and our executive officers is available as described under “Where You Can Find More Information” beginning on page 87.

DARDEN

Darden Restaurants, Inc. (referred to in this proxy statement as “Darden” or “Parent”) is a full-service restaurant company, and as of May 26, 2024, Darden owned and operated 2,031 restaurants through subsidiaries

 

19

in the United States and Canada under the Olive Garden^®, LongHorn Steakhouse^®, Cheddar’s Scratch Kitchen^®, Yard House^®, Ruth’s Chris Steak House^®, The Capital Grille^®, Seasons 52^®, Bahama Breeze^®, Eddie V’s Prime Seafood^®, and The Capital Burger^® trademarks. As of May 26, 2024, Darden also had 146 restaurants operated by independent third parties pursuant to area development and franchise agreements and 4 restaurants operating under contractual agreements.

Darden’s principal executive offices are located at 1000 Darden Center Drive, Orlando, Florida 32837, and its telephone number is (407) 245-4000.

MERGER SUB

Cheetah Merger Sub Inc. (referred to in this proxy statement as “Merger Sub”) is a Delaware corporation and an indirect, wholly-owned subsidiary of Darden. Merger Sub was formed on July 15, 2024, solely for the purpose of entering into the merger agreement and completing the transactions contemplated by the merger agreement, and it currently has no other business or operations. Upon completion of the merger, Merger Sub will be merged with and into Chuy’s and cease to exist, and Chuy’s will continue as the surviving corporation.

Merger Sub’s principal executive offices are located at 1000 Darden Center Drive, Orlando, Florida 32837, and its telephone number is (407) 245-4000.

 

20

THE MERGER

THE MERGER AND ITS EFFECTS

If the merger agreement is adopted by our stockholders and the other conditions to the closing of the merger are either satisfied or (to the extent permitted by applicable law) waived, Merger Sub will be merged with and into Chuy’s, and the separate corporate existence of Merger Sub will cease to exist. Chuy’s will be the surviving corporation in the merger and will continue its corporate existence as a Delaware corporation and an indirect, wholly-owned subsidiary of Darden.

Upon the terms and subject to the conditions of the merger agreement, at the effective time, each share of our common stock issued and outstanding immediately before the effective time will be automatically canceled and (other than shares of common stock that are (1) owned or held in treasury by the Company, (2) owned by Parent or Merger Sub (or any of their respective affiliates) or (3) owned by stockholders who have properly exercised appraisal rights for such shares in accordance with Section 262 of the DGCL) converted into the right to receive $37.50 in cash without interest. At the effective time, our current stockholders will cease to have ownership interests in the company or rights as its stockholders. Therefore, our current stockholders will not participate in any of our future earnings or growth and will not benefit from any appreciation in our value.

Our shares of common stock are currently registered under the Exchange Act and traded on Nasdaq under the symbol “CHUY.” As a result of the merger, Chuy’s will cease to be a publicly traded company and will be an indirect, wholly-owned subsidiary of Darden. Following the completion of the merger, our common stock will be delisted from Nasdaq and deregistered under the Exchange Act, and Chuy’s will no longer be required to file periodic reports with the SEC, in each case in accordance with applicable law, rules, and regulations.

The merger is expected to be accounted for as a “purchase transaction” for financial accounting purposes.

CHUY’S WITHOUT THE MERGER

If the merger agreement is not adopted by our stockholders or if the merger is not completed for any other reason, our stockholders will not receive any payment for their shares of our common stock. Instead, we will remain a public company, our common stock will continue to be listed and traded on Nasdaq and registered under the Exchange Act, and we will continue to file periodic reports with the SEC. In addition, if the merger is not completed, we expect that management will operate the business in a manner similar to that in which it is being operated today and that our stockholders will continue to be subject to the same risks and opportunities as they currently are, including, among other things, general industry, economic and market conditions. If the merger is not completed, there can be no assurance as to the effect of these risks and opportunities on the future value of your shares of our common stock. From time to time, if the merger is not completed, our board of directors will evaluate and review our business operations, properties, dividend policy and capitalization and, among other things, make such changes as are deemed appropriate and continue to seek to identify strategic alternatives to maximize stockholder value. If the merger agreement is not approved by our stockholders or if the merger is not completed for any other reason, there can be no assurance that any other transaction acceptable to us will be offered or that our business, prospects, or results of operations will not be adversely impacted. If the merger agreement is terminated, under specified circumstances, we may be required to pay Darden a termination fee, as described under “The Merger Agreement—Termination Fees” beginning on page 74.

BACKGROUND OF THE MERGER

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

During the past several years, as part of Chuy’s ongoing strategic planning process, our board of directors and management regularly reviewed and assessed, among other things, the company’s long-term strategic goals and

 

21

opportunities, competitive environment, and short- and long-term performance in light of the company’s strategic plan, with the goal of enhancing stockholder value.

In late October 2022, a financial advisor presented to the board of directors on potential strategic alternatives available to Chuy’s. The board of directors determined not to pursue or formally explore a strategic process at that time, but discussed the prospect of inviting another financial advisor with industry experience to present to the board of directors on strategic alternatives at some point in the future in order to get an additional point of view regarding the company’s potential options.

In November 2022, representatives of Piper Sandler & Co. (“Piper”) contacted Steve Hislop, the company’s President, Chief Executive Officer and chairman of the board of directors, and Jon Howie, the company’s Vice President, Chief Financial Officer and member of the board of directors, about an opportunity to meet with the management team of Darden, who, through Darden’s financial advisor, BofA Securities, Inc. (“BofA Securities”) had expressed general interest in exploring strategic opportunities with restaurant companies with profiles similar to Chuy’s. After advising the company’s lead independent director of the outreach, Messrs. Hislop and Howie had an introductory meeting with Rick Cardenas, Darden’s President and Chief Executive Officer, and Raj Vennam, Darden’s Chief Financial Officer, at an industry conference on January 8, 2023, where they discussed the parties’ respective businesses, the industry, and the general economic environment. On February 9, 2023, Mr. Hislop briefed the board of directors about those discussions, which did not progress further at that time.

On February 22, 2023, during a meeting with Messrs. Hislop and Howie, representatives of Piper discussed potential strategic alternatives available to Chuy’s as well as its qualifications to act as a financial advisor based on Piper’s restaurant industry expertise and experience advising public restaurant companies.

From time to time over the ensuing year, Messrs. Hislop and Cardenas had telephone conversations to discuss, on an informal basis, the industry and the general economic environment. Messrs. Hislop and Howie engaged in a similar discussion with Messrs. Cardenas and Vennam at an informal meeting in January 2024 in Orlando, Florida during an industry conference. These periodic discussions did not include discussion of a potential transaction between the companies.

On March 25, 2024, at Darden’s direction, a representative of BofA Securities contacted a representative of Piper to indicate that Darden was interested in exploring a potential transaction with the company.

Following the call between BofA Securities and Piper, representatives of Piper contacted Messrs. Hislop and Howie to inform them that Darden was interested in exploring a potential transaction with the company.

On March 29, 2024, Messrs. Hislop and Cardenas had a telephone conversation. After informal discussion regarding the industry and the general economic environment, Mr. Cardenas confirmed that Darden was interested in exploring a potential transaction with the company and requested that the parties enter into a non-disclosure agreement to facilitate the exchange of due diligence information.

On April 1, 2024, Messrs. Hislop and Howie reported to the board of directors on (i) Darden’s interest in a potential transaction and (ii) the prospect of engaging Piper as the board of directors’ financial advisor. After discussion, the directors approved the execution of a non-disclosure agreement with Darden and an engagement letter with Piper.

On April 3, 2024, representatives of BofA Securities sent representatives of Piper an initial diligence request list, to which the company responded on April 15, 2024.

On April 4, 2024, Chuy’s and Darden entered into a non-disclosure agreement which contained an eighteen-month “standstill” provision that included a “don’t ask, don’t waive” provision, but did not prohibit Darden from submitting confidential proposals to the company for consideration by the board of directors.

 

22

On April 11, 2024, the company entered into an engagement letter with Piper based on Piper’s qualifications to act as a financial advisor, including its restaurant industry expertise and experience advising public restaurant companies evaluating strategic alternatives.

On April 29, 2024, Darden sent a non-binding indication of interest regarding a potential acquisition of Chuy’s for $37.50 per share, which would not be subject to a financing contingency (the “Darden IOI”). Darden’s proposal represented a premium of approximately 24% to the company’s closing stock price of $30.33 on April 26, 2024. In addition, the Darden IOI indicated an estimated six-week timeline to complete its due diligence and negotiate the merger agreement.

On May 2, 2024, the board of directors held a meeting attended by representatives of Piper and Winston & Strawn LLP (“Winston”), Chuy’s outside legal counsel, to consider and discuss the Darden IOI and potential strategic alternatives. Winston’s representatives presented on the board of directors’ fiduciary duties in considering strategic alternatives. Representatives of Piper then presented on: the financial aspects of the Darden IOI; potential strategic alternatives available to the company, including maintaining the company’s current strategy, increasing the company’s size and/or scale, returning capital to stockholders, and being acquired; and the current environment for public restaurant companies. The directors asked questions and engaged in discussion with their advisors regarding, among other things, Piper’s analysis, the company’s finances, prospects, and historical stock price, the challenging economic environment, and the status and future outlook of the restaurant industry (including the limited number of likely potential acquirers of companies operating in the company’s sector). The board of directors also discussed “go-shop” provisions with its advisors, which would allow the company to solicit alternative acquisition proposals for a period following the execution of the merger agreement, and considered the advantages and disadvantages of a go-shop provision compared to a sale process. Representatives of Winston also described the typical structure of termination fees in connection with go-shop provisions, including that a termination fee is usually lower if the merger agreement is terminated in connection with a proposal received during the go-shop period. Based on those and other considerations, the board of directors (i) determined to formally evaluate strategic alternatives available to Chuy’s, (ii) determined that a sale process would be unduly disruptive to the company’s business because of, among other things, the risk of leaks and other potential distractions, including the distraction of management’s attention from the operations of the company’s business, and (iii) authorized Piper to respond on its behalf to BofA Securities in an effort to negotiate a price increase and to indicate the company’s desire that the merger agreement include a go-shop provision to allow the company to solicit alternative acquisition proposals.

Later that same day, Piper informed BofA Securities that the company was seeking a price increase from the $37.50 per share price contemplated in the Darden IOI to above $40 per share and conveyed the company’s desire to include a go-shop provision in the merger agreement.

On May 4, 2024, BofA Securities indicated that Darden was unlikely to raise its offer to that price range and would like additional diligence information and an in-person diligence meeting before it would consider raising its offer price. With respect to a potential transaction, BofA Securities also indicated that, if the parties could reach an agreement on economic terms, Darden would be agreeable to including a go-shop provision in the merger agreement.

On May 8, 2024, the board of directors held a meeting at which representatives of Winston were present. Winston reviewed the board of directors’ fiduciary duties in connection with its consideration of strategic alternatives. Messrs. Hislop and Howie updated the board of directors on Piper’s discussions with BofA Securities. Following discussion among the directors and with their advisors regarding the feedback from BofA Securities, the board of directors determined to continue negotiating with Darden and authorized management to continue providing Darden with due diligence information and to proceed with the in-person diligence meeting.

On May 9, 2024, after market close, the company released first quarter 2024 earnings. The following day, the company’s stock price declined 5.5% from the previous day’s close of $29.72.

 

23

On May 13, 2024, Messrs. Howie, Hislop, Cardenas and Vennam and Todd Burrowes, President, Business Development of Darden, and representatives of Piper and BofA Securities met in Austin, Texas. During the meeting, Messrs. Hislop and Howie provided Darden’s representatives with information requested in diligence regarding the company’s organizational structure, financial performance and outlook, restaurant performance, and real estate and development strategy.

On May 15, 2024, the board of directors held a meeting with representatives of Piper and Winston in attendance. At the meeting, representatives of Piper updated the board of directors on the in-person meeting with Darden, including that Darden had indicated it would be agreeable to a go-shop provision that would allow Chuy’s to solicit alternative proposals. The board of directors discussed with its advisors valuation and process considerations, including recent operational results and downward pressure affecting the company’s stock price.

On May 20, 2024, representatives of Piper had a conversation with representatives of BofA Securities. BofA Securities’ representatives relayed Darden’s view that Chuy’s would be a good cultural and strategic fit for Darden, but indicated that Darden was not prepared to increase its $37.50 per share offer price given (i) the challenging macroeconomic environment for the restaurant industry, (ii) the company’s weaker first quarter results, and (iii) the approximate 10% reduction in the company’s stock price since the Darden IOI.

On May 22, 2024, the board of directors held a meeting with representatives of Piper and Winston in attendance. At the meeting, representatives of Piper updated the board of directors on the conversation with BofA Securities on May 20, 2024, including that Darden was unwilling to raise its offer price. The board of directors discussed with its advisors potential negotiation strategies in light of various considerations including, without limitation: (i) whether there might be other interested bidders capable of entering into a strategic transaction with the company on better terms, and Darden’s amenability to a go-shop provision that would allow Chuy’s to solicit alternative proposals; (ii) the implied premium of Darden’s proposed offer price compared to the company’s current stock price, which was approximately 43% based on the company’s closing stock price of $26.29 on May 22, 2024; (iii) possible alternatives to Darden’s offer, including continuing to operate on a standalone basis (either based on the company’s current strategy or implementing strategies to increase the company’s size and/or scale) and returning capital to stockholders, and whether these alternatives would achieve the same stockholder value as Darden’s proposed offer price and the timing of achieving such stockholder value; and (iv) the timing and potential advantages and disadvantages of an expedited transaction process. After further discussion, the board of directors instructed Piper to ask Darden, through BofA Securities, to increase its offer price to $38.00 per share.

Later that same day, representatives of Piper relayed to representatives of BofA Securities the board of directors’ request that Darden increase its offer price to $38.00 per share.

On May 23, 2024, BofA Securities indicated that $37.50 per share was Darden’s best and final offer.

On May 24, 2024, the board of directors held a meeting with representatives of Piper and Winston in attendance. Mr. Hislop updated the board of directors on Piper’s conversation with BofA Securities, including that $37.50 per share was Darden’s best and final offer. Representatives of Piper presented to the board of directors on macroeconomic conditions generally and within the restaurant industry (including that (i) gross domestic product and disposable income growth were expected to decelerate in 2024, (ii) consumer confidence continued to fall, and (iii) restaurant industry sales had stagnated), as well as the company’s recent financial and stock price performance. Against that backdrop, the Piper representatives discussed strategic alternatives available to the company and presented an analysis of Darden’s per share offer price, noting that it represented a 45.1% premium to the company’s closing price on May 23, 2024, a 32.6% premium to the 30-day volume weighted average price, which we refer to as “30-day VWAP,” and a 20.2% premium to the 90-day volume weighted average price.

The board of directors asked questions and discussed with its advisors numerous aspects of Darden’s offer, including (i) Darden’s offer price compared to the company’s historical stock price, which had been lower than

 

24

$37.50 approximately 93% of the time over the last 10 years, (ii) the go-shop process and potential benefits and risks attendant to the go-shop process, and (iii) that Darden’s offer did not have any financial or other material contingencies. Additionally, at the request of the board of directors, representatives of Piper confirmed that Piper had no conflicts of interest with respect to the board of directors’ consideration of strategic alternatives or a potential transaction with Darden and that Piper had not been engaged by or received fees from Darden within the last three years. After further deliberation, the board of directors determined that pursuing Darden’s offer at $37.50 per share was advisable and in the best interests of the company and its stockholders and unanimously approved proceeding with the potential transaction, subject to the satisfactory negotiation of a merger agreement. Mr. Mohseni, the board of directors’ lead independent director, instructed Piper to relay the message to BofA Securities.

Later that day, Piper informed BofA Securities of the board of directors’ determination to proceed with the potential transaction, subject to the satisfactory negotiation of a merger agreement. Also on that day, Mr. Hislop had a telephone conversation with Mr. Cardenas during which he confirmed the board of directors’ determination to proceed with the potential transaction.

On May 29, 2024, representatives of Winston discussed diligence and other transaction related items with Darden’s legal advisor, Hunton Andrews Kurth LLP (“Hunton”).

Also on May 29, 2024, the board of directors held a meeting with the company’s General Counsel and representatives of Piper and Winston in attendance. Mr. Hislop updated the board of directors on his May 24, 2024 conversation with Mr. Cardenas and noted that Chuy’s had received a new diligence request list from Darden on May 28, 2024. Representatives of Winston provided an update on diligence and other transaction related items. Winston’s representatives also discussed with the board of directors the possibility of post-transaction employment arrangements for company senior management. Following discussion, (i) senior management confirmed that no such arrangements had been discussed with Darden to date and (ii) the board of directors unanimously determined that any such discussions regarding post -transaction employment arrangements with respect to Messrs. Hislop or Howie should avoid any specific discussion of compensation or other remuneration until after such potential transaction closes.

On May 30, 2024, representatives of BofA Securities called representatives of Piper to provide an update on expected timing to complete due diligence and negotiate the merger agreement, including a target signing date of July 16, 2024.

On June 5, 2024, representatives of Darden and Hunton were granted access to an electronic data room containing certain confidential due diligence materials. The diligence process, which included numerous calls with company management and representatives of Piper and the review of business diligence information and documents, continued until the execution of the merger agreement on July 17, 2024.

On June 11, 2024, representatives of Hunton sent representatives of Winston a draft merger agreement.

On June 12, 2024, the board of directors held a meeting with representatives of Piper and Winston in attendance. Mr. Hislop and representatives of Piper provided an update on the company’s progress on diligence and negotiating deal documentation and representatives of Winston provided an overview of the draft merger agreement. The board of directors then discussed various aspects of the draft merger agreement with its advisors, including, among other things, (i) the structure of the transaction, (ii) closing conditions, (iii) the material adverse effect definition, (iv) termination provisions, (v) the mutual obligation of the parties to use their reasonable best efforts to consummate the transaction, (vi) Darden’s proposal of a 25-day go-shop provision, (vii) the ability of the board of directors to change its recommendation and to terminate the merger agreement to accept a superior proposal, (viii) the amount of the termination fee and the circumstances in which it would become payable, and (ix) the absence of a financing contingency.

On June 13, 2024, Messrs. Hislop and Cardenas had a call to discuss generally the transition process for Chuy’s employees and timing related issues. The conversation did not include any specific discussion of compensation or other remuneration with respect to Messrs. Hislop or Howie.

 

25

On June 19, 2024, the board of directors held a meeting with representatives of Piper and Winston in attendance. At the meeting, Mr. Hislop summarized the company’s progress on diligence and merger agreement negotiations since the last meeting of the board of directors. Representatives of Piper noted that Darden had requested that company management participate in diligence calls over the next few weeks. Representatives of Winston then summarized the company’s proposed revisions to Darden’s draft merger agreement, including changes (i) narrowing the circumstances in which the company would pay a termination fee, (ii) decreasing the amount of the termination fee to 1.375% of equity value if the merger agreement was terminated in favor of a superior proposal pursuant to the go-shop process, or 2.75% of equity value if the merger agreement was terminated under other scenarios giving rise to the termination fee, and (iii) extending the go-shop period to 35 days following execution of the merger agreement. After further discussion among the directors and advisors, the board of directors unanimously authorized Winston to send the revised merger agreement back to Hunton on the terms discussed.

Following the meeting and through July 16, 2024, company management participated in various calls with representatives of Darden regarding, among other things, tax matters, real estate matters, human resources/employee matters, and legal matters.

On June 20, 2024, representatives of Winston sent representatives of Hunton a revised draft of the merger agreement.

On June 26, 2024, the board of directors held a meeting with representatives of Piper and Winston in attendance. At the meeting, Mr. Hislop and advisor representatives summarized the company’s progress on diligence and transaction documentation since the last meeting of the board of directors, including the status of the draft merger agreement. The board of directors also discussed with its advisors the prospective announcement of the transaction, including the timing and types of internal and external communications.

Later on June 26, 2024, representatives of Hunton sent a revised draft of the merger agreement to representatives of Winston. Among other changes, the revised merger agreement provided for (i) a termination right for Darden should Chuy’s materially breach the non-solicitation covenant, (ii) a termination fee of 1.8% of equity value if the merger agreement was terminated in favor of a superior proposal pursuant to the go-shop process, or 3.5% of equity value, if the merger agreement was terminated in other scenarios giving rise to the termination fee, and (iii) a 30-day go-shop period.

On July 3, 2024, representatives of Winston had a call with representatives of Hunton to discuss the draft merger agreement.

Later on July 3, 2024, the board of directors held a meeting with the company’s General Counsel and representatives of Piper and Winston in attendance. At the meeting, Mr. Hislop summarized the company’s progress in diligence since the last meeting of the board of directors, after which representatives of Winston summarized Darden’s latest proposed revisions to the draft merger agreement. Among other things, the board of directors discussed with Piper and Winston the proposed terms of the go-shop provision, including Darden’s proposal of a 30-day go-shop period and the circumstances in which the lower termination fee would be payable if Chuy’s terminated the merger agreement to accept a superior proposal. Following discussion with its advisors, the board of directors concluded that a 30-day go-shop period would be an acceptable time period to solicit alternative proposals. In reaching that determination, the board of directors, in consultation with Piper and Winston, considered, among other things, (i) the fact that the company would be entitled to pay the lower termination fee as long as it terminated the merger agreement in favor of a superior proposal pursuant to the go-shop process prior to the 10th day after the expiration of the 30-day go-shop period and (ii) the board of directors’ view that the termination fee amounts within the range being negotiated by the parties would not unduly impede a superior proposal. The board of directors then discussed potential responses to other terms of the draft merger agreement with its advisors, including (i) providing for a notice and cure period in connection with Darden’s right to terminate for breach of the non-solicitation covenant and (ii) reducing the termination fee to 1.5% of equity value if the merger agreement was terminated in favor of a superior proposal pursuant to the go-shop process, or 3.0% of equity value if the merger agreement was terminated in other scenarios giving rise to

 

26

the termination fee. After further deliberation, the board of directors unanimously authorized Winston to send the further revisions back to Hunton.

Mr. Hislop then noted that Mr. Cardenas had requested a call with Mr. Hislop to be held on July 5, 2024 to discuss the prospect of retaining the company’s employees during a post-closing transition period and prospective compensation during such a transition period. The directors then discussed with their advisors and reiterated the board of directors’ prior determination that any discussion regarding specific post-closing compensation for Messrs. Hislop or Howie should await closing of the potential transaction, which Messrs. Hislop and Howie acknowledged.

Later on July 3, 2024, representatives of Winston sent a revised draft of the merger agreement to representatives of Hunton.

On July 5, 2024, Mr. Hislop had a call with Mr. Cardenas to discuss (i) retention bonuses that would be paid to employees that stayed through a transition period and (ii) severance arrangements for employees who would not continue to be employed by Darden following the transaction. During that call, Mr. Cardenas raised the topic of Mr. Hislop’s potential compensation post-closing. Mr. Hislop deferred the conversation and, following the call, informed the board of directors’ lead independent director and representatives of Winston of the substance of the discussion. The conversation did not include any specific discussion of compensation or other remuneration with respect to Messrs. Hislop or Howie.

On July 8, 2024, Messrs. Hislop and Cardenas had a further call during which Mr. Cardenas described, in general terms, the compensation a brand president would typically receive at Darden. Messrs. Hislop and Cardenas did not engage in any specific discussion, or any subsequent specific discussions, regarding potential post-closing compensation or other remuneration with respect to Messrs. Hislop or Howie.

On July 9, 2024, representatives of Hunton sent representatives of Winston a further revised draft of the merger agreement.

On July 10, 2024, representatives of Hunton and Winston had a call to discuss the draft merger agreement.

Later on July 10, 2024, the board of directors held a meeting with the company’s General Counsel and representatives of Piper and Winston in attendance. At the meeting, representatives of Piper summarized the company’s progress in responding to Darden’s diligence requests and representatives of Winston summarized Darden’s further revisions to the draft merger agreement. The directors and advisors then discussed proposed revisions to certain provisions of the merger agreement, including to Darden’s right to terminate the merger agreement for breach of the non-solicitation covenant, the amount of the termination fee and the circumstances in which it would be payable, and the employee benefit matters covenant, after which the board of directors unanimously authorized Winston to send the further revisions back to Hunton. Mr. Hislop then summarized for the board of directors his conversations with Mr. Cardenas on July 5, 2024 and July 8, 2024, and indicated that the typical compensation of a Darden brand president described by Mr. Cardenas was less than what Mr. Hislop receives in his role at the company.

On July 11, 2024, representatives of Hunton provided a summary of Darden’s severance benefits applicable to employees whose employment might be terminated in connection with a transaction. They also explained that the severance arrangements were inapplicable to those company employees with employment agreements (including Messrs. Hislop and Howie), because those employees’ benefits, if any, would be paid out under the terms of the employment agreements.

On July 12, 2024, representatives of Winston sent representatives of Hunton a revised draft of the merger agreement.

From July 12, 2024, through July 17, 2024, representatives of Winston and Hunton continued to negotiate the terms of the draft merger agreement and disclosure schedules and exchanged revised drafts of such documents.

 

27

On July 17, 2024, the board of directors held a meeting with the company’s General Counsel and representatives of Piper and Winston in attendance. Representatives of Winston then discussed: (i) the directors’ fiduciary duties in considering the proposed transaction with Darden, (ii) the changes to the merger agreement since the July 10, 2024 meeting of the board of directors, including changes to (a) the definition of material adverse effect, (b) the termination provisions, including a termination fee of 1.7% of equity value if the merger agreement was terminated in favor of a superior proposal pursuant to the go-shop process, and 3.4% of equity value if the merger agreement was terminated in other scenarios giving rise to a termination fee, and (c) the employee benefit plan matters covenant, (iii) the company disclosure letter and the surviving corporation’s certificate of incorporation, and (iv) the company’s post-signing communications plan. Representatives of Piper then provided an overview of the transaction, including that (A) the $37.50 offer price implied an enterprise value for the company of approximately $605 million, (B) based on adjusted EBITDA (as defined in “ —Certain Prospective Financial Information” beginning on page 33), the trailing twelve-month (“LTM”) Q2 2024 multiple (based on preliminary actual second fiscal quarter 2024 results and adjusted to exclude the 53^rd fiscal week of fiscal year 2023) at the $37.50 offer price was 10.8x and (C) the offer price represented a 47.9% premium to the closing price of the company’s common stock on July 16, 2024 (the trading day before the public announcement of the merger agreement) and a 49.6% premium to the 30-day VWAP. They also noted that approximately 88% of the trading volume in the company’s common stock during the last twelve months had been below $37.50 and that the company’s common stock had traded below $37.50 approximately 93% of the time during the last 10 years. The Piper representatives then reviewed the valuation methodologies Piper used in its valuation of the company – a selected public companies analysis, a selected precedent transactions analysis, and a discounted cash flow analysis – and delivered Piper’s oral opinion to the board of directors, later confirmed in a written opinion of the same date, that, as of July 17, 2024 and based upon and subject to the assumptions, procedures, considerations, and limitations set forth in the written opinion and based upon such other factors as Piper considered relevant, the $37.50 per share transaction price is fair, from a financial point of view, to the holders of shares of our common stock. The directors discussed the merger agreement and transactions contemplated therein, including the factors described under the section of this proxy statement entitled “ —Reasons for Our Board’s Recommendation in Favor of the Merger,” amongst each other and with their advisors and, following discussion, unanimously (i) determined and declared that the merger agreement and the transactions contemplated thereby are fair, advisable and in the best interests of the company and its stockholders, (ii) approved the merger agreement and the transactions contemplated thereby, (iii) authorized and approved the execution, delivery and performance by the company of the merger agreement and consummation of the transactions contemplated therein, (iv) determined to recommend that the stockholders of the company approve the merger and adopt the merger agreement, and (v) directed that the merger agreement be submitted to a vote of the company’s stockholders for purposes of obtaining approval from the holders of a majority of the company’s common stock.

After market close on July 17, 2024, Chuy’s and Darden executed the merger agreement and issued a joint press release announcing the execution of the merger agreement. Also on that date, Chuy’s filed a Form 8-K with the SEC which attached, among other things, a copy of the merger agreement and the joint press release as exhibits. Both the joint press release and the company’s Form 8-K included a description of the go-shop provision.

During the go-shop period, representatives of Piper contacted 20 potential counterparties to a strategic transaction involving Chuy’s, consisting of eight strategic parties and 12 financial parties. Piper selected these potential counterparties based on their restaurant industry transaction experience, including Piper’s knowledge of parties interested in transactions in the restaurant industry and the ability of such parties to complete a transaction. Of these parties, three financial parties contacted by Piper and one strategic party contacted by Piper executed nondisclosure agreements with Chuy’s and received access to certain non-public information regarding Chuy’s. Each executed nondisclosure agreement was an acceptable confidentiality agreement (as defined in “The Merger Agreement—Solicitation of Other Offers” beginning on page 66) and did not include any standstill or similar provision. None of these parties submitted an acquisition proposal to the company.

The go-shop period expired at 11:59 p.m., New York City time, on August 16, 2024. In accordance with the terms of the merger agreement, following the expiration of the go-shop period, Chuy’s terminated the access of

 

28

each party that executed a nondisclosure agreement to the non-public information of Chuy’s and requested that each party that executed a nondisclosure agreement return or destroy the non-public information of Chuy’s that they had received during the course of their evaluation of a potential transaction in accordance with the terms of their non-disclosure agreements with Chuy’s.

REASONS FOR OUR BOARD’S RECOMMENDATION IN FAVOR OF THE MERGER

On July 17, 2024, the board of directors, after considering various factors, including the non-exhaustive list of factors described herein, and after consultation with its independent legal and financial advisors and company management, unanimously (i) determined and declared that the merger agreement and the transactions contemplated thereby are fair, advisable and in the best interests of the company and its stockholders, (ii) approved the merger agreement and the transactions contemplated thereby, (iii) authorized and approved the execution, delivery and performance by the company of the merger agreement and consummation of the transactions contemplated therein, (iv) determined to recommend that the stockholders of the company approve the transactions contemplated by the merger agreement, and (v) directed that the merger agreement be submitted to a vote of the company’s stockholders for purposes of obtaining approval of a majority of the company’s stockholders.

The board of directors recommends that you vote (i) “FOR” the merger proposal, (ii) “FOR” the advisory compensation proposal, and (iii) “FOR” the adjournment proposal.

In evaluating the terms of the merger agreement and the transactions contemplated thereby, the board of directors consulted with independent legal and financial advisors and the company’s management. In reaching its determinations and recommendations, the board of directors considered a number of factors, including the following factors (not necessarily in order of relative importance), which the board of directors viewed as being generally positive or favorable in coming to its determination and recommendation:

 

•

Premium to Market Price. The relationship of the per share merger consideration to the historic trading ranges of our common stock and the potential trading range of the common stock absent the announcement of the merger agreement, as well as the possibility that absent such announcement our common stock would not trade at a price in excess of the merger consideration on a present-value basis for a considerable period of time (if ever), including that the per share merger consideration constitutes:

 

•

a premium of approximately 47.9% relative to the closing price of our common stock on July 16, 2024 (the trading day before the public announcement of the merger agreement); and

 

•

a 49.6% premium to the 30-day VWAP per share of our common stock.

The board of directors also considered that, notwithstanding the approximately 17% decrease in the trading price of the common stock between the delivery of the Darden IOI and July 16, 2024 (the trading day before the public announcement of the merger agreement), Darden’s offer price had remained unchanged and the premium of the offer price over the trading price of the common stock had increased significantly.

Certain historical market prices of our common stock are set forth in the table in the section entitled “Market Prices and Dividend Data” beginning on page 81.

 

•

Opinion of Piper. The financial analysis reviewed and discussed with the board of directors by representatives of Piper, and Piper’s opinion that, as of July 17, 2024 and based upon and subject to assumptions, procedures, considerations, and limitations set forth in Piper’s written opinion, the merger consideration of $37.50 per share is fair, from a financial point of view, to the holders of shares of our common stock, as more fully described below in the section entitled “Opinion of Our Financial Advisor” beginning on page 37.

 

•

History of Negotiations. The fact that the merger consideration and other terms of the merger agreement were the result of arm’s-length negotiations with Darden and the board of directors’

 

29

considered belief that the $37.50 per share merger consideration represented the highest price that Darden was willing to pay and the highest price reasonably available in a strategic transaction. The board of directors also considered the potential consequences of soliciting proposals from other potential acquirors during discussions with Darden (as opposed to doing so in a post-signing go-shop process), including the consequences of potential leaks and the disruption to the company’s business from such a process.

 

•

Value Relative to Standalone Prospects. The belief of our board of directors, after a review of our current and historical financial condition, results of operations, prospects, business strategy, competitive position, and the broader industry, including the potential impact of those factors on the trading price of our common stock (which cannot be quantified numerically), that the value to our stockholders under the merger agreement is greater than the value stockholders potentially could have received from continued execution of our current strategy as an independent public company.

 

•

Value Relative to Other Strategic Alternatives. The board of directors’ assessment that the merger consideration of $37.50 per share of our common stock is of greater value to the company’s stockholders than the value that would reasonably be expected to result from other potential strategic and financial alternatives. In this assessment, the board of directors considered the potential risks and uncertainties associated with possible strategic alternatives, including the anticipated timing and likelihood of achieving such alternatives, and whether any such alternative, on a risk adjusted basis, is reasonably likely to create value for the company’s stockholders greater than or equal to the merger consideration. The board of directors also considered the current volume of mergers and acquisitions activity in the company’s industry, as well as its belief, informed by consultation with its financial advisor, that the universe of strategic or financial counterparties who would potentially be interested in an alternative transaction involving an acquisition of Chuy’s at a price and terms comparable to those provided by Darden was likely limited.

 

•

Current Challenges, Risks and Uncertainties. The challenges and risks that we have faced, and would likely continue to face, if we remained an independent company (particularly in light of our relative size and the difficulties involved in enhancing scale and financial flexibility as a standalone independent company), including the costs and burdens of being a public company, risks related to inflationary pressures with respect to food, labor and construction costs, our ability to execute on our strategic plan and achieve management’s related financial projections and other factors described in the section entitled “Risk Factors” set forth in our Form 10-K for the fiscal year ended December 31, 2023.

 

•

Form of Consideration. The fact that the merger consideration is all cash, and therefore would provide the company’s stockholders significant, immediate and certain value and liquidity for their shares of our common stock, taking into account the effect on the company’s stockholders of long-term business and execution risk, as well as risks related to the financial markets generally.

 

•

Loss of Opportunity. The possibility that if the board of directors declined to approve the merger agreement there may not be another opportunity for the company’s stockholders to receive a comparably priced offer with a comparable level of closing certainty.

 

•

Current Macroeconomic Conditions. The current state of the U.S. and global economies, including increased volatility in the credit, financial and stock markets, global inflation trends, geopolitical risks, current interest rates, and the current and potential impact of these conditions in both the near term and long term on the company’s industry and the trading price of our common stock.

 

•

Likelihood of Closing. The likelihood that the transactions contemplated by the merger agreement, including the merger, would be completed, based on, among other things (not in any relative order of importance):

 

•

the financial resources of Darden, including Darden’s cash on hand and available credit, which are sufficient for Darden to complete the merger without obtaining additional financing;

 

•

the absence of a financing condition of any kind in the merger agreement;

 

30

•

the likelihood and anticipated timing of obtaining all required regulatory clearances in connection with the merger;

 

•

the company’s ability, under certain circumstances pursuant to the merger agreement, to seek specific performance of the terms of the merger agreement; and

 

•

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

 

•

Go-Shop Period. The fact that the merger agreement permitted Chuy’s to solicit alternative acquisition proposals from, and participate in discussions and negotiations with, third parties during the go-shop period and, with respect to any party that submitted a written bona fide acquisition proposal before the go-shop period ended that the board of directors has determined in good faith (after consultation with its independent financial advisors and outside legal counsel) constitutes, or is reasonably expected to result in, a superior proposal (which we refer to as an “excluded party”), after the go-shop period.

 

•

Other Merger Agreement Terms, Including Terms Regarding Alternative Proposals. The terms of the merger agreement, which were reviewed by the board of directors with the company’s outside legal counsel and independent financial advisor, and the fact that such terms were the product of arm’s-length negotiations between the parties, including:

 

•

the company’s ability, under certain circumstances prior to obtaining stockholder approval of the merger, to (1) provide information to and participate in discussions or negotiations with third parties with respect to an unsolicited written bona fide acquisition proposal that did not result from a breach (other than a de minimis breach) of the no-shop restrictions, that the board of directors has determined in good faith (after consultation with its independent financial advisors and outside legal counsel) constitutes or is reasonably expected to result in a superior proposal and that failing to do so would be inconsistent with the board of directors’ fiduciary duties under applicable law and (2) continue to engage in activities permitted during the go-shop period with any excluded party after the go-shop period;

 

•

the board of directors’ ability, under certain circumstances prior to obtaining stockholder approval of the merger, to effect an adverse recommendation change;

 

•

the board of directors’ ability, under certain circumstances prior to obtaining stockholder approval of the merger, to terminate the merger agreement in order to enter into an agreement providing for a superior proposal, subject to Darden’s matching right and payment of a termination fee to Darden; and

 

•

the board of directors’ belief that the termination fee of $11,210,529, or 1.7% of equity value, if the merger agreement is terminated by the company prior to the 10th day after the expiration of the go-shop period to enter into an agreement with respect to a superior proposal with an excluded party, or $22,421,057, or 3.4% of equity value, if the merger agreement is terminated in other scenarios giving rise to payment of the termination fee, is reasonable in light of, among other things, the benefits of the merger to our stockholders, the typical size of such fees in similar transactions, and the likelihood that a fee of such size would not be preclusive or unreasonably restrictive of other offers.

 

•

No Vote of Darden’s Stockholders. The fact that the merger is not subject to the conditionality and execution risk of any required approval by Darden’s stockholders.

 

•

Advisors. The fact that the company’s outside legal counsel and independent financial advisor were involved throughout the process and negotiations and updated the board of directors directly and regularly, which provided the board of directors with additional perspectives on the negotiations in addition to those of the company’s management.

 

31

•

Unanimous Board Determination. The fact that the board of directors was unanimous in its determination that the merger is advisable and in the best interests of the company’s stockholders and its recommendation to approve the merger.

 

•

Appraisal Rights. The fact that company’s stockholders who do not vote their shares in favor of the adoption of the merger agreement and otherwise comply with the requirements of Section 262 of the DGCL will have the right to seek appraisal for the fair value of such shares in accordance with the DGCL, as more fully described in the section entitled “The Merger—Appraisal Rights” beginning on page 51.

In the course of its deliberations, the board of directors also considered a number of uncertainties, risks and other countervailing factors relating to entering into the merger agreement, including the following factors (not necessarily in order of relative importance):

 

•

Closing Certainty. The fact that completion of the transactions contemplated by the merger agreement, including the merger, depends on certain factors outside of the company’s or Darden’s control, including regulatory clearances and stockholder approval, and the risk that the merger might not be completed in a timely manner or at all.

 

•

No Stockholder Participation in Future Growth. The fact that, following the merger, the company’s stockholders would no longer participate in the company’s future earnings or growth, or benefit from any future appreciation in value of our common stock.

 

•

No Increase in Initial Offer Price. The fact that Darden did not increase its initial offer price of $37.50 per share. However, the board of directors also considered that, notwithstanding the deterioration of the broader macroeconomic environment and the approximately 17% decrease in the trading price of the common stock between the delivery of the Darden IOI and July 16, 2024 (the trading day before the public announcement of the merger agreement), Darden’s offer price had remained unchanged and the premium of the offer price over the trading price of the common stock had increased significantly.

 

•

Impact of Merger Announcement on Chuy’s. The risk that disruptions from the merger may harm (i) the company’s business, including current plans and operations and relationships with the company’s investors, suppliers, business partners and other third parties, including during the pendency of the merger, and (ii) the ability of Chuy’s to retain and hire key personnel. The board of directors also considered the potential adverse reactions or changes to business relationships resulting from the announcement or completion of the merger and that potential business uncertainty, including changes to existing business relationships, during the pendency of the transactions contemplated by the merger agreement could affect the company’s financial performance.

 

•

Loss of Opportunity with Other Potential Counterparties. The fact that, prior to the execution of the merger agreement, Chuy’s did not solicit alternative proposals from other potential counterparties. However, the board of directors also considered that it had preserved the ability of Chuy’s to solicit other potential counterparties during the go-shop period, had negotiated for a lower termination fee payable by Chuy’s if it determined to enter into an alternative agreement with respect to a superior proposal during the go-shop period or prior to the 10th day thereafter, and had preserved the ability of potential counterparties to continue to submit and for the board of directors to respond to, unsolicited bona fide alternative acquisition proposals after the go-shop period.

 

•

Tax Treatment. The fact that the receipt of the merger consideration, which is all cash, in exchange for shares of our common stock pursuant to the merger agreement would generally be taxable to the company’s stockholders that are U.S. holders for U.S. federal income tax purposes.

 

•

Restrictions on Solicitation. The restrictions imposed by the merger agreement on the company’s solicitation of alternative acquisition proposals from third parties after the go-shop period, and that prospective bidders may perceive Darden’s matching right under the merger agreement to be a deterrent to making alternative acquisition proposals.

 

32

•

Termination Fee. The possibility that a termination fee, which would be payable by Chuy’s under certain circumstances, including if Chuy’s consummates an acquisition proposal within 12 months after termination of the merger agreement or enters into a definitive agreement for an acquisition proposal within 12 months of termination of the merger agreement which transaction is ultimately consummated, could discourage other potential acquirors from making a competing proposal to acquire Chuy’s.

 

•

Pre-Closing Covenants. The restrictions placed on the conduct of the company’s business prior to the completion of the merger pursuant to the terms of the merger agreement, which could delay or prevent Chuy’s from undertaking business opportunities that may arise or any other action it would otherwise take with respect to the operations of Chuy’s absent the pending completion of the merger.

 

•

Potential Litigation. The potential for litigation by stockholders in connection with the transactions contemplated by the merger agreement, including the merger, which, even where lacking in merit, could nonetheless result in distraction and expense.

The board of directors unanimously concluded that the potential benefits of the transactions contemplated by the merger agreement, including the merger, outweigh the uncertainties, risks and potentially negative factors.

In addition, the board of directors was aware of and considered the fact that some of the company’s directors and executive officers have interests in the merger that are different from, or in addition to, the company stockholders generally, including those interests that are a result of employment and compensation arrangements with Chuy’s. For more information, see the section entitled “ —Interests of Our Directors and Executive Officers in the Merger” beginning on page 44.

The foregoing discussion of factors considered by the board of directors in reaching its conclusions and recommendation includes the principal factors considered by the board of directors, but is not intended to be exhaustive and may not include all of the factors considered by the board of directors. In light of the variety of factors considered in connection with its evaluation of the transactions contemplated by the merger agreement, including the merger, the board of directors did not find it practicable to, and did not, quantify or otherwise assign relative or specific weights to the various factors considered in reaching its determinations and recommendations. Rather, the board of directors based its decisions on the totality of the factors and information it considered, including discussions with, and questioning of, the company’s management and its independent financial advisor and outside legal counsel. Moreover, each member of the board of directors applied his or her own personal business judgment to the process and may have given different weight to different factors.

This explanation of the board of directors’ reasons for its recommendations and other information presented in this section includes statements that are forward-looking in nature and, therefore, should be read in light of the factors described in the section entitled “Forward-Looking Statements” beginning on page 85.

CERTAIN PROSPECTIVE FINANCIAL INFORMATION

The company does not, as a matter of general practice, publicly disclose financial projections due to the difficulty of predicting the company’s results. The company is especially wary of making such projections for extended periods into the future due to, among other reasons, the unpredictability of the underlying assumptions and estimates, though the company has in the past provided investors with limited full-year financial guidance covering limited areas of its expected financial performance. However, in connection with the board of directors’ strategic planning process in February 2024, company management provided the board of directors with certain non-public, unaudited prospective financial information prepared by company management for the fiscal years ending 2024 through 2028. This information was also provided to Darden in April 2024 in connection with its due diligence review of a potential transaction, as well as to Piper in April 2024 in connection with the preparation of its valuation analysis and fairness opinion.

 

33

Upon the completion of the company’s second quarter of fiscal year 2024, the company provided the board of directors, Piper, and Darden with preliminary actual results for the second fiscal quarter 2024. The prospective financial information for the fiscal year ending 2024 was subsequently updated in July 2024 to incorporate preliminary actual results for the first half of fiscal year 2024 (consisting of the first and second fiscal quarters) and company management’s original expectations for the second half of fiscal year 2024 (consisting of the third and fourth fiscal quarters). The updated prospective financial information for the fiscal year ending 2024, provided in July 2024, and the prospective information for the fiscal years ending 2025 through 2028, provided in April 2024, was relied upon and used as the basis for the financial analyses conducted by Piper and summarized below in “Opinion of Our Financial Advisor.”

A summary of this financial information (collectively, the “Company Projections”) is provided below only to provide stockholders of the company with access to certain prospective financial information concerning the company that was made available to the board of directors, Piper, and Darden, as described herein. The Company Projections were not prepared with a view to public disclosure. The Company Projections are not included in this proxy statement in order to influence any stockholder of the company to make any decision regarding the proposal to adopt the merger agreement or for any other purpose, and readers of this proxy statement are cautioned not to place any reliance on the Company Projections included herein.

The Company Projections included in this proxy statement are the responsibility of the company’s management. The Company Projections represent company management’s good faith estimates and judgments as to the future growth and financial performance of the company, including forecasts of revenues and adjusted EBITDA, that, in each case, company management believed were reasonable at the time the Company Projections were prepared, taking into account relevant information available at the time. However, this information is not fact and should not be relied upon as being necessarily indicative of actual future results. Although a summary of the Company Projections is presented with numerical specificity, it reflects numerous assumptions and estimates made by the company’s management, including assumptions and estimates with respect to future industry performance, general business, economic, regulatory, litigation, market and financial conditions, and matters specific to the company’s business, all of which are difficult to predict and many of which are beyond the company’s control. The Company Projections reflect the subjective judgment of the company’s management in many respects and, thus, are susceptible to multiple interpretations and periodic revisions based on actual experience and business developments. As such, the Company Projections constitute forward-looking statements and are subject to risks and uncertainties that could cause actual results to differ materially from the results forecasted in such prospective information, including the factors described under “Forward-Looking Statements,” the company’s performance, industry performance, general business and economic conditions, customer requirements, competition, adverse changes in applicable laws, regulations, or rules, the outcome of future litigation and the various risks set forth in the reports filed by the company with the SEC.

The Company Projections include adjusted EBITDA which is determined by methods other than in accordance with U.S. generally accepted accounting principles (“GAAP”) because company management believed such measure would be useful to the board of directors in evaluating the prospects of the company. Company management believes adjusted EBITDA is a useful measure to assess the company’s operating performance and the company’s operating performance against its peers. Non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information presented in accordance with GAAP, including net income and income from operations. The company’s calculations of these non-GAAP measures may differ from calculations of such measures by others in the company’s industry and are not necessarily comparable with information presented under similar sounding captions used by other companies.

The Company Projections were not prepared with a view toward complying with GAAP, the published guidelines of the SEC regarding projections and the use of non-GAAP financial measures, or the guidelines established by the American Institute of Certified Public Accountants for preparation and presentation of the company’s prospective financial information. In addition, the Company Projections are unaudited and neither the company’s independent registered public accounting firm, nor any other independent accountants, have

 

34

compiled, examined, or performed any procedures with respect to the Company Projections, nor have they expressed any opinion or any other form of assurance on such information or its achievability, and they assume no responsibility for, and disclaim any association with, the Company Projections.

The inclusion of the Company Projections should not be regarded as an admission, representation, or indication that any of the board of directors, the company, the company’s management, Piper, any of their respective advisors or any other person considered, or now considers, the forecasts to be material or a reliable prediction of future results, and the Company Projections should not be relied upon as such. In fact, the board of directors and the company’s management view the Company Projections as non-material because of the inherent risks and uncertainties associated with such long-range forecasts.

No representation or warranty was made in the merger agreement concerning prospective financial information, including the Company Projections. The Company Projections should only be evaluated in conjunction with the historical financial statements and other information regarding the company contained in the company’s public filings with the SEC.

The Company Projections in this proxy statement do not take into account any conditions, circumstances, or events occurring after the date they were prepared, including the transactions contemplated by the merger agreement. Except as required by applicable law, the company does not intend to update or otherwise revise the Company Projections to reflect any condition, circumstance, or event existing after the date they were prepared or to reflect the occurrence of any future event (including any failure of the transactions contemplated by the merger agreement to occur), even in the event that any or all of the assumptions underlying the Company Projections are in error or are no longer appropriate. In light of the foregoing factors and uncertainties inherent in the Company Projections, readers of this proxy statement are cautioned not to place any reliance on the portions of the Company Projections set forth below.

FY 2024E to FY 2028E Company Projections

Subject to the foregoing qualifications, the portions of the Company Projections that were provided to the board of directors, Piper and Darden are summarized below.

 

($ in millions)		Twenty Six Weeks Ended				Fiscal Year Ending December
		June 30, 2024 (Actual) (1)				2024E Original (2)				2024E Updated (3)				2025E				2026E				2027E				2028E
Revenue		$	230.3			$	475.4			$	469.2			$	530.1			$	585.6			$	651.4			$	738.0
Restaurant-level operating expenses (4)			184.8				384.7				381.1				427.9				471.6				524.5				592.2
General and administrative			14.4				30.6				29.6				33.3				36.1				39.1				43.0
Restaurant pre-opening costs			1.2				2.8				2.9				4.8				5.6				6.3				7.2
Adjusted EBITDA (5)		$	29.9			$	57.3			$	55.5			$	64.0			$	72.4			$	81.5			$	95.6

Note: Table may not foot due to rounding.

 

(1)	Represents preliminary actual results for the first half of fiscal year 2024 (consisting of the first and second fiscal quarters) provided in July 2024.

(2)	Represents original estimated fiscal year 2024 results provided to the board of directors in February 2024 and to Darden and Piper in April 2024, which includes company management expectations for the first through fourth fiscal quarters.

(3)

Represents updated estimated fiscal year 2024 results provided in July 2024, which reflects preliminary actual results for the first half of fiscal year 2024 (consisting of the first and second fiscal quarters), which were lower than company managements’ original expectations for the first half of fiscal 2024, and company management’s original expectations for the second half of fiscal 2024 (consisting of the third and fourth fiscal quarters).

 

35

(4)	Consists of cost of sales, labor, operating, occupancy, and marketing expenses, and excludes depreciation and amortization.

(5)	Adjusted EBITDA represents a non-GAAP financial measure. See “Reconciliation of Non-GAAP Financial Measures” below.

Reconciliation of Non-GAAP Financial Measures

Certain of the measures included in the Company Projections may be considered non-GAAP financial measures. Non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information presented in compliance with GAAP, and non-GAAP financial measures, as used by the company, may not be comparable to similarly titled amounts used by other companies. These non-GAAP measures are included in this proxy statement because such information was made available to the board of directors, Piper, and Darden and used in the process leading to the execution of the merger agreement, as described elsewhere in this proxy statement. Reconciliations of certain of these measures are provided below. The figures included in the reconciliation are part of the Company Projections and are subject to and should be read together with the disclosures above.

Adjusted EBITDA. Adjusted EBITDA is defined as net income before interest, taxes, depreciation, and amortization as adjusted for closed restaurant costs, loss (gain) on lease termination and loss on asset impairment and before public company expenses and stock-based compensation. A reconciliation of adjusted EBITDA to net income is provided below:

FY 2024E to FY 2028E Company Projections

 

($ in millions)		Twenty Six Weeks Ended				Fiscal Year Ending December
		June 30, 2024 (Actual) (1)				2024E Original (2)				2024E Updated (3)				2025E				2026E				2027E				2028E
Net Income		$	14.9			$	29.7			$	26.6			$	33.3			$	37.7			$	42.3			$	50.8
Plus: Income Tax Provision (Benefit)			2.1				4.3				3.7				5.8				6.6				7.4				8.9
Plus: Interest Expense (Income)			(1.2	)			(2.3	)			(2.3	)			(1.0	)			(1.0	)			(1.1	)			(1.1	)
Plus: Depreciation & Amortization			10.9				22.8				22.6				25.5				28.6				32.4				36.5
EBITDA		$	26.7			$	54.6			$	50.5			$	63.6			$	71.9			$	81.0			$	95.2
Plus: Impairment, Closed Restaurant and Other Costs			3.1				2.7				5.0				0.4				0.4				0.4				0.4
Adjusted EBITDA		$	29.9			$	57.3			$	55.5			$	64.0			$	72.4			$	81.5			$	95.6

Note: Table may not foot due to rounding.

 

(1)	Represents preliminary actual results for the first half of fiscal year 2024 (consisting of the first and second fiscal quarters) provided in July 2024.

(2)	Represents original estimated fiscal year 2024 results provided to the board of directors in February 2024 and to Darden and Piper in April 2024, which includes company management expectations for the first through fourth fiscal quarters.

(3)

Represents updated estimated fiscal year 2024 results provided in July 2024, which reflects preliminary actual results for the first half of fiscal year 2024 (consisting of the first and second fiscal quarters), which were lower than company managements’ original expectations for the first half of fiscal 2024, and company management’s original expectations for the second half of fiscal 2024 (consisting of the third and fourth fiscal quarters).

 

36

OPINION OF OUR FINANCIAL ADVISOR

Pursuant to an engagement letter that was executed on April 11, 2024, the board of directors retained Piper to evaluate strategic alternatives and, if requested, deliver its opinion as to the fairness, from a financial point of view, to the holders of shares of common stock of the consideration to be received pursuant to the merger agreement. At a meeting of the board of directors on July 17, 2024, Piper issued its oral opinion to the board of directors, later confirmed in a written opinion of the same date, that, based upon and subject to the assumptions, procedures, considerations, and limitations set forth in the written opinion and based upon such other factors as Piper considered relevant, the merger consideration is fair, from a financial point of view, to the holders of shares of common stock as of the date of the opinion.

The full text of the written opinion of Piper, dated July 17, 2024, which sets forth, among other things, the assumptions made, procedures followed, matters considered, and limitations on the scope of the review undertaken by Piper in rendering its opinion, is attached as Appendix B. The Piper opinion addresses only the fairness, from a financial point of view and as of the date of the opinion, of the merger consideration to the holders of shares of common stock. Piper’s opinion was directed solely to the board of directors in connection with its consideration of the merger agreement and was not intended to be, and does not constitute, a recommendation to any holder of shares of common stock as to how such holder should act with respect to the merger or any other matter. Piper’s opinion was approved for issuance by the Piper opinion committee and Piper has consented to the disclosure of its opinion in this proxy statement.

In connection with rendering the opinion described above and performing its financial analyses, Piper, among other things:

 

•

reviewed and analyzed the financial terms of the merger agreement;

 

•

reviewed and analyzed certain financial and other data with respect to the company that was publicly available;

 

•

reviewed and analyzed certain information furnished to Piper by company management, including the Company Projections, relating to the business, earnings, cash flow, assets, liabilities, and prospects publicly available and provided by company management;

 

•

conducted discussions with members of senior management and representatives of the company concerning the two immediately preceding matters described above, as well as its business and prospects before and after giving effect to the merger;

 

•

reviewed the current and historical reported prices and trading activity of the shares of common stock and similar information for certain other companies that Piper deemed comparable;

 

•

compared the financial performance of the company with that of certain other publicly traded companies that Piper deemed relevant;

 

•

reviewed the financial terms, to the extent publicly available, of certain precedent transactions that Piper deemed relevant in evaluating the merger; and

 

•

conducted such other analyses, examinations and inquiries and considered such other financial, economic and market criteria as Piper deemed necessary in arriving at its opinion.

The following is a summary of the material financial analyses performed by Piper in connection with the preparation of its fairness opinion, which was reviewed with, and formally delivered to, the board of directors at a meeting held on July 17, 2024. The preparation of analyses and a fairness opinion is a complex analytic process involving various determinations as to the most appropriate and relevant methods of financial analysis and the application of those methods to the particular circumstances. Therefore, this summary does not purport to be a complete description of the analyses performed by Piper or of its presentation to the board of directors on July 17, 2024. You are urged to, and should, read the Piper opinion in its entirety and this summary is qualified in its entirety by the written opinion of Piper attached as Appendix B hereto, which is incorporated herein.

 

37

This summary includes information presented in tabular format, which tables must be read together with the text of each analysis summary and considered as a whole in order to fully understand the financial analyses presented by Piper. The tables alone do not constitute a complete summary of the financial analyses. The order in which these analyses are presented below, and the results of those analyses, should not be taken as any indication of the relative importance or weight given to these analyses by Piper or the board of directors. Except as otherwise noted, the following quantitative information, to the extent that it is based on market data, is based on market data as it existed on or before July 16, 2024, and is not necessarily indicative of current market conditions.

For purposes of its analyses, Piper calculated (i) the company’s equity value implied by the merger consideration to be approximately $659.4 million, based on approximately 17.6 million shares of common stock and common stock equivalents estimated to be outstanding as of June 30, 2024 (the end of the company’s second fiscal quarter of fiscal year 2024), as provided by company management, consisting of in-the-money options (calculated using the treasury stock method), and restricted stock units, and (ii) the company’s enterprise value (for the purposes of this analysis, implied enterprise value equates to implied equity value, plus total debt, finance lease obligations, preferred equity, and noncontrolling interests of $0.0 million as of June 30, 2024, less cash and cash equivalents of $54.5 million as of June 30, 2024 (the end of the company’s second fiscal quarter of fiscal year 2024), referred to as “EV,”) to be approximately $605.0 million. The EV implies a 10.8x multiple relative to the last twelve months (“LTM”) Q2 2024 adjusted EBITDA (based on preliminary actual second fiscal quarter 2024 results and adjusted to exclude the 53^rd fiscal week of fiscal year 2023’s contribution of approximately $2.3 million), a 10.9x multiple relative to the company’s projected 2024E Updated adjusted EBITDA, and a 9.4x multiple relative to the company’s projected 2025E adjusted EBITDA.

Financial Analyses

Selected Public Companies Analysis. Piper reviewed certain publicly available financial, operating, and stock market information of the company and the following selected U.S. publicly traded companies in the restaurant industry that Piper deemed relevant. Piper selected companies based on information obtained by searching SEC filings, publicly available disclosures, and company presentations, press releases, and other sources and by applying the following criteria:

 

•

companies that operate in the full service restaurant industry, defined as establishments offerings table service with a waitstaff;

 

•

companies that have a market capitalization greater than or equal to $100.0 million, and separated between small cap (defined as sub-$1 billion market capitalization) and mid/large cap (defined as $1 billion+ market capitalization); and

 

•

companies that operate a significant number of company-owned restaurants, defined as greater than or equal to 70.0% of the units being company-owned.

Based on these criteria, Piper identified and analyzed the following eleven selected companies:

Sub $1 billion Market Cap Public Companies:

 

•

BJ’s Restaurants, Inc.

 

•

Cracker Barrel Old Country Store, Inc.

 

•

The ONE Group Hospitality, Inc.

 

•

Red Robin Gourmet Burgers, Inc.

$1 billion+ Market Cap Public Companies:

 

•

Bloomin’ Brands, Inc.

 

38

•

Brinker International, Inc.

 

•

The Cheesecake Factory Incorporated

 

•

Darden Restaurants, Inc.

 

•

Dave & Buster’s Entertainment, Inc.

 

•

First Watch Restaurant Group, Inc.

 

•

Texas Roadhouse, Inc.

For the selected public companies analysis, Piper calculated the following valuation multiples for the company, including as implied by the merger consideration, and the selected companies:

 

•

Enterprise value (which is defined as fully diluted equity value, based on closing prices per share on July 16, 2024, plus total debt, finance lease obligations, preferred equity, and noncontrolling interests (as applicable) less total cash and cash equivalents) as a multiple of EBITDA for estimated calendar year 2024; and

 

•

Enterprise value as a multiple of EBITDA for estimated calendar year 2025.

Financial data of the selected companies were based on publicly available research analysts’ estimates, public filings, and other publicly available information. Financial data of the company was based on publicly available information and the Company Projections furnished to Piper by company management.

The results of this analysis are summarized as follows:

 

Merger Consideration Implied Multiple:				Implied Multiple Reference Ranges:
EV / CY 2024E Updated EBITDA		EV / CY 2025E EBITDA		$1B+ Market Cap:				Sub $1B Market Cap:
				EV / CY 2024E Updated EBITDA		EV / CY 2025E EBITDA		EV / CY 2024E Updated EBITDA		EV / CY 2025E EBITDA
10.9x		9.4x		4.8x – 17.8x		4.6x – 16.2x		4.2x – 7.9x		3.5x – 7.4x

 

Merger Consideration:		Implied Equity Value per Share Reference Ranges:
$37.50		$1B+ Market Cap:				Sub $1B Market Cap:
		EV / CY 2024E EBITDA		EV / CY 2025E EBITDA		EV / CY 2024E EBITDA		EV / CY 2025E EBITDA
		$18.31– $59.16		$19.78 – $62.04		$16.41 – $27.91		$15.67 – $29.96

No company utilized in the selected public companies analysis is identical to the company. In evaluating the selected companies, Piper made judgments and assumptions with regard to industry performance, general business, macroeconomic, market and financial conditions, and other matters.

Selected Precedent Transactions Analysis. Piper reviewed precedent transactions involving target companies in the U.S. restaurant industry that Piper deemed relevant. Piper selected these transactions based on information obtained by searching SEC filings, publicly available disclosures, and company presentations, press releases, and other sources and by applying the following criteria:

 

•

transactions in which the acquiring company purchased a controlling interest of the target;

 

•

transactions that were announced or completed between January 1, 2014, and the date of Piper’s opinion and subsequently closed or remained pending;

 

•

targets that operate in the full service restaurant industry, defined as establishments offerings table service with a waitstaff; and

 

•

targets with transaction enterprise values greater than or equal to $100.0 million.

 

39

Based on these criteria, Piper identified and analyzed the following 20 selected transactions ordered by recency:

 

Target		Acquiror
TGI Fridays Safflower Holdings Ruth’s Hospitality Group BBQ Holdings Main Event Twin Peaks J. Alexander’s Holdings Del Frisco’s Double Eagle & Del Frisco’s Grille Del Frisco’s Restaurant Group Barteca Restaurant Group Bravo Brio Restaurant Group Fogo de Chão Buffalo Wild Wings Ruby Tuesday Cheddar’s Casual Café Bob Evans Restaurants Frisch’s Restaurants TGI Fridays Red Lobster Seafood Co. CEC Entertainment		Hostmore The ONE Group Hospitality Darden Restaurants MTY Food Group Dave & Buster’s Entertainment FAT Brands SPB Hospitality Landry’s L Catterton Del Frisco’s Restaurant Group Spice Private Equity Rhône Capital Arby’s Restaurant Group NRD Capital Management Darden Restaurants Golden Gate Capital NRD Capital Management Sentinel Capital Partners, TriArtisan Capital Partners Golden Gate Capital Apollo Global Management

Piper reviewed transaction enterprise values of the selected transactions, calculated, to the extent publicly available, as the purchase price paid for the target involved in such transactions plus total debt, finance lease obligations, preferred equity, and noncontrolling interests (as applicable) less total cash and cash equivalents, as a multiple of EBITDA for the LTM as of the applicable announcement dates of such transactions.

Financial data of the selected transactions were based on publicly available research analysts’ estimates, public filings, and other publicly available information and, to the extent publicly available and applicable, is pro forma for certain transactions with significant owned real estate by adjusting transaction enterprise values for sale-leaseback proceeds and adjusting target companies’ EBITDA for incremental rent expense. Financial data of the company was based on publicly available information and the Company Projections furnished to Piper by company management.

The results of this analysis are summarized as follows:

 

Merger Consideration Implied Multiple: EV / LTM EBITDA		Implied Multiple Reference Range: EV/ LTM EBITDA
10.8x		5.0x – 18.8x
Merger Consideration		Implied Equity Value per Share Reference Range: EV/ LTM EBITDA
$37.50		$18.94 – $63.04

No transaction utilized in the selected precedent transactions analysis is identical to the company. In evaluating the selected transactions, Piper made judgments and assumptions with regard to industry performance, general business, macroeconomic, market and financial conditions, and other matters.

Discounted Cash Flow Analysis. Using a discounted cash flows analysis, Piper calculated an estimated range of theoretical values for the company based on the net present value of (i) projected unlevered free cash flows from

 

40

second half of fiscal 2024 (consisting of the third and fourth fiscal quarters) to fiscal year 2028, discounted back to June 30, 2024 (the end of the company’s second fiscal quarter 2024), based on the Company Projections furnished to Piper by company management, and (ii) a terminal value at fiscal year 2028 based upon EBITDA exit multiples, discounted back to June 30, 2024. The unlevered free cash flows for each year were calculated from the Company Projections as adjusted EBITDA less depreciation and amortization, less closed restaurant costs, less income taxes (utilizing a 14.9% tax rate), plus depreciation and amortization, plus non-cash rent expense, less net capital expenditures, and less the change in net working capital. In addition, stock-based compensation was treated as a cash expense for purpose of determining unlevered free cash flow. The terminal values of the company were calculated by applying the company’s fiscal year 2028 adjusted EBITDA to a selected range of EBITDA exit multiples of 8.0x to 10.0x, with a mid-point of 9.0x, based on the median of the selected precedent transactions analysis.

Piper performed discounted cash flow analyses by calculating the range of net present values for each period from second half of fiscal 2024, consisting of the third and fourth fiscal quarters 2024, to fiscal year 2028, based on a discount rate ranging from 11.5% to 16.5%, with a mid-point of 14.0%, reflecting estimates of the company’s weighted average cost of capital. Piper derived these discount rates by application of the capital asset pricing model, which requires certain company-specific inputs, including a market capitalization size risk premium, as well as certain financial metrics for the U.S. financial markets generally.

This analysis indicated the following approximate implied equity value per share reference ranges for the company, as compared to the merger consideration:

 

Merger Consideration		Implied Equity Value per Share Reference Range:
$37.50		$26.55 – $38.20

Other Information

Piper observed certain additional information that was not considered part of its financial analysis for its fairness opinion but was noted solely for reference only, including the following:

Premiums Paid Analysis. Piper reviewed publicly available information for selected completed or pending precedent transactions to determine the premiums paid in the transactions over recent trading prices of the target companies prior to announcement of the transaction (which represent undisturbed trading prices to the extent publicly available and applicable). Piper selected these transactions from the SEC database and applied, among others, the following criteria:

 

•

companies operating in the broader U.S. consumer industry, including apparel, consumer products, consumer services, food & beverage, restaurants, and retail; and

 

•

transactions that were announced between January 1, 2017, and the date of Piper’s fairness opinion and subsequently closed or remained pending.

Piper performed premiums paid analyses on 61 transactions that satisfied these criteria. Piper calculated, for this period, the premia represented by the prices per share paid in these transactions relative to the target companies’ (x) one-day spot and (y) 30-day Volume Weighted Average Price (“30-day VWAP”) prior to announcement (which represented undisturbed trading prices to the extent publicly available and applicable). The overall low to high acquisition premia observed for these transactions were -10.3% to 136.8% (with a median of 32.8%) for the one-day spot and -15.4% to 128.3% (with a median of 29.3%) for the 30-day VWAP. This analysis indicated the following approximate implied equity value per share reference ranges for the company, as compared to the merger consideration:

 

Merger Consideration		Implied Equity Value per Share Reference Ranges:
		One-Day Spot				30-Day VWAP
$37.50		$	22.74 – $60.03			$	21.19 – $57.20

 

41

52-Week Trading Analysis. Piper analyzed the merger consideration to be paid to the holders of shares of common stock pursuant to the merger agreement in relation to the company’s 52-week low and high trading as of July 16, 2024, the trading day before the public announcement of the merger agreement.

 

Merger Consideration		Company 52-Week Trading Low and High Range:
$37.50		$23.52 – $41.95

Miscellaneous. The summary set forth above does not contain a complete description of the analyses performed by Piper but does summarize the material analyses performed by Piper in rendering its opinion. The preparation of a fairness opinion is a complex process and is not necessarily susceptible to partial analysis or summary description. Piper believes that its analyses and the summary set forth above must be considered as a whole and that selecting portions of its analyses or of the summary, without considering the analyses as a whole or all of the factors included in its analyses, would create an incomplete view of the processes underlying the analyses set forth in the Piper opinion. In arriving at its opinion, Piper considered the results of all of its analyses and did not attribute any particular weight to any factor or analysis. Instead, Piper made its determination as to fairness on the basis of its experience and financial judgment after considering the results of all of its analyses. The fact that any specific analysis has been referred to in the summary above is not meant to indicate that this analysis was given greater weight than any other analysis. In addition, the ranges of valuations resulting from any particular analysis described above should not be taken to be Piper’s view of the actual value of the shares of common stock.

None of the selected companies or transactions used in the analyses above is directly comparable to the company or the transactions contemplated by the merger agreement, including the merger. Accordingly, an analysis of the results of the comparisons is not purely mathematical; rather, it involves complex considerations and judgments concerning differences in historical and projected financial and operating characteristics of the selected companies and target companies in the selected transactions and other factors that could affect the public trading value or transaction value of the companies involved.

Piper performed its analyses solely for purposes of providing its opinion to the board of directors. In performing its analyses, Piper made numerous assumptions with respect to the capital markets, industry performance, general business and macroeconomic conditions, and other matters. Certain of the analyses performed by Piper are based upon forecasts of future results furnished to Piper by the company’s management, which are not necessarily indicative of actual future results and may be significantly more or less favorable than actual future results. These forecasts are inherently subject to uncertainty because, among other things, they are based upon numerous factors or events beyond the control of the parties or their respective advisors. Piper does not assume responsibility if future results are materially different from forecasted results.

Piper’s opinion was one of many factors taken into consideration by the board of directors in making the determination to approve the merger agreement and recommend that the stockholders vote in favor of the merger. The above summary does not purport to be a complete description of the analyses performed by Piper in connection with the opinion or of its presentation to the board of directors on July 17, 2024, and is qualified in its entirety by reference to the written opinion of Piper attached as Appendix B hereto.

Piper relied upon and assumed, without assuming liability or responsibility for independent verification, the accuracy and completeness of all information that was publicly available or was furnished, or otherwise made available, to Piper or discussed with or reviewed by Piper. Piper further relied upon the assurances of the management of the company that the financial information provided to Piper was prepared on a reasonable basis in accordance with industry practice, and that company management was not aware of any information or facts that would make any information provided to Piper incomplete or misleading. Without limiting the generality of the foregoing, for the purpose of Piper’s opinion, Piper assumed that with respect to the Company Projections, estimates and other forward-looking information reviewed by Piper, that such information was reasonably prepared based on assumptions reflecting the best currently available estimates and judgments of the

 

42

management of the company as to the expected future results of operations and financial condition of the company. Piper expressed no opinion as to any such Company Projections or forward-looking information or the assumptions on which they were based. Piper relied, with the company’s consent, on advice of the outside counsel and the independent accountants to the company, and on the assumptions of the management of the company, as to all accounting, legal, tax, and financial reporting matters with respect to the company and the transactions contemplated by the merger agreement.

Piper relied upon and assumed, without independent verification, that (i) the representations and warranties of all parties to the merger agreement and all other documents and instruments that are referred to therein are true and correct, (ii) each party to such agreements will fully and timely perform all of the covenants and agreements required to be performed by such party, (iii) the merger would be completed pursuant to the terms of the merger agreement without amendments thereto and (iv) all conditions to the completion of the merger would be satisfied without waiver by any party of any conditions or obligations thereunder. Additionally, Piper assumed that all the necessary regulatory approvals and consents required for the merger would be obtained in a manner that would not adversely affect the company or the contemplated benefits of the merger.

In arriving at its opinion, Piper did not perform any appraisals or valuations of any specific assets or liabilities of the company (fixed, contingent, or other) and was not furnished or provided with any such appraisals or valuations, nor did Piper evaluate the solvency of the company under any state or federal law relating to bankruptcy, insolvency, or similar matters. The analyses performed by Piper in connection with its opinion were going concern analyses, and Piper expressed no opinion regarding the liquidation value of the company or any other entity. Piper undertook no independent analysis of any pending or threatened litigation, regulatory action, possible unasserted claims or other contingent liabilities, to which the company or any of its affiliates was a party or may be subject, and, at the direction of the company and with its consent, made no assumption concerning, and therefore did not consider, the possible assertion of claims, outcomes, or damages arising out of any such matters. Piper also assumed that neither the company nor Darden is party to any material pending transaction, including without limitation any financing, recapitalization, acquisition or merger, divestiture, or spin-off, other than the merger.

Piper’s opinion was necessarily based upon the information available to it and facts and circumstances as they existed and were subject to evaluation on the date of its opinion. Events occurring after the date of its opinion could materially affect the assumptions used in preparing its opinion. Piper expressed no opinion as to the price at which the shares of common stock may trade following announcement of the merger or at any future time. Piper did not undertake to reaffirm or revise its opinion or otherwise comment upon any events occurring after the date of its opinion and does not have any obligation to update, revise, or reaffirm its opinion.

Piper’s opinion addressed solely the fairness, from a financial point of view, to holders of the shares of common stock of the merger consideration, as set forth in the merger agreement, and did not address any other terms or agreement relating to the merger or any other terms of the merger agreement. Piper was not requested to opine as to, and its opinion does not address, the basic business decision to proceed with the merger, the merits of the merger relative to any alternative transaction or business strategy that may be available to the company, Darden’s ability to fund the merger consideration, any other terms contemplated by the merger agreement or the fairness of the merger to any other class of securities, creditor, or other constituency of the company. Furthermore, Piper expressed no opinion with respect to the amount or nature of the compensation to any officer, director, or employee of any party to the merger, or any class of such persons, relative to the compensation to be received by the holders of shares common stock or with respect to the fairness of any such compensation.

Information About Piper

As a part of its investment banking business, Piper is regularly engaged in the valuation of businesses and their securities in connection with mergers and acquisitions, underwritings, secondary distributions of listed and unlisted securities, private placements, and valuations for corporate and other purposes. The board of directors

 

43

selected Piper to be its financial advisor and render its fairness opinion in connection with the transactions contemplated by the merger agreement on the basis of Piper’s extensive qualifications and experience (including transactional advisory experience) in the restaurant industry and its independence.

Piper acted as the board of directors’ financial advisor in connection with the merger and will receive a fee, currently estimated to be approximately $8.2 million, from the company. A significant portion of Piper’s fee is contingent upon completion of the merger, and $1.0 million of such fee has been earned by Piper for rendering its fairness opinion and is creditable against the total fee. The opinion fee was not contingent upon the completion of the merger or the conclusions reached in Piper’s opinion. The company has also agreed to indemnify Piper against certain liabilities and reimburse Piper for certain expenses in connection with its services. In addition, in the ordinary course of its business, Piper and its affiliates may actively trade securities of the company or Darden for Piper’s own account or the account of its customers and, accordingly, may at any time hold a long or short position in such securities. In the ordinary course of its business, Piper also publishes research on the shares of company and Darden common stock. Piper may also, in the future, provide investment banking and financial advisory services to the company or the Darden or entities that are affiliated with the company or the Darden, for which Piper would expect to receive compensation.

Consistent with applicable legal and regulatory requirements, Piper has adopted policies and procedures to establish and maintain the independence of Piper’s research department and personnel. As a result, Piper’s research analysts may hold opinions, make statements or recommendations, and/or publish research reports with respect to the company and the merger and other participants in the merger that differ from the opinions of Piper’s investment banking personnel.

INTERESTS OF OUR DIRECTORS AND EXECUTIVE OFFICERS IN THE MERGER

When considering the recommendation of our board of directors that you vote for the proposal to adopt the merger agreement, you should be aware that certain of our directors and executive officers may have interests in the merger that are different from, or in addition to, your interests as a stockholder. Our board of directors was aware of these interests and considered them, among other matters, in approving the merger agreement and the merger and in recommending that the merger agreement be adopted by the stockholders of the company. As described in more detail below, these interests include:

 

•

The accelerated vesting and payment in respect of outstanding restricted stock units for each of our directors and named executive officers;

 

•

Potential receipt of certain severance payments in the event of a qualified termination (as defined below) of employment under existing agreements between our named executive officers and the company;

 

•

Payout of vested account balances under the company’s nonqualified deferred compensation plans (as applicable); and

 

•

The entitlement to indemnification benefits in favor of our directors and named executive officers.

These interests are described in more detail below, and certain of them are quantified in the narrative and the table below.

 

44

Our current executive officers and, for purposes of determining merger-related compensation, our “named executive officers” are:

 

•

Steve Hislop, President and Chief Executive Officer

 

•

Jon Howie, Vice President and Chief Financial Officer

 

•

John Korman, Chief Operating Officer

 

•

John Mountford, Chief Culinary and Procurement Officer

 

•

Michael Hatcher, Vice President of Development

The compensation that may be paid or become payable to our named executive officers in connection with the merger is subject to a non-binding, advisory vote of the company’s stockholders, as described in “The Advisory Compensation Proposal (Proposal #2)” beginning on page 77.

Employment or Other Agreements with Darden

As of the date of this proxy statement, no executive officer of the company has entered into an agreement with Darden or Merger Sub or any of their respective affiliates regarding employment with, or the right to purchase or participate in the equity of, the surviving corporation or any of its affiliates. Under the merger agreement, Darden has agreed to honor, or cause one of its affiliates to honor, the terms of the employment agreements with certain executives, including each named executive officer, following the closing date. Prior to or following the closing of the merger, however, these executive officers may discuss or enter into new employment or equity agreements with Darden, Merger Sub, and/or any of their respective affiliates.

Treatment of Outstanding Company Equity Awards

Under the merger agreement, equity-based awards outstanding under our equity incentive plans immediately prior to the effective time will be treated as summarized below and further described in “The Merger Agreement—Treatment of Chuy’s Equity Awards” beginning on page 59:

Stock Options. Each option (whether vested and exercisable or unvested) to purchase shares of our common stock outstanding and unexercised will be automatically converted into the right to receive from Parent or the surviving corporation an amount in cash equal to the product obtained by multiplying (1) the excess, if any, of $37.50 over the per share exercise price of such option by (2) the aggregate number of shares of our common stock that were issuable upon exercise of such option immediately prior to the effective time.

Restricted Stock Units. Each then-outstanding RSU will be deemed to have been earned, become fully vested, and be canceled in exchange for the right to receive from Parent or the surviving corporation an amount in cash equal to the product obtained by multiplying (1) the number of shares of our common stock subject to such RSU by (2) $37.50.

For an estimate of the amounts that would be payable to each of our named executive officers in settlement of their outstanding equity awards, see the “Equity” column in the “Quantification of Payments and Benefits to Named Executive Officers” table beginning on page 47. The company does not have executive officers beyond the named executive officers.

 

45

Assuming the merger closed on August 19, 2024, and continued service by each non-employee director through such date, the following RSUs held by our non-employee directors will be deemed to have been earned and become fully vested and will be exchanged for the right to receive from Parent or the surviving corporation an amount in cash as follows:

 

Name		Aggregate Restricted Stock Unit Awards				Total Cash Amount to be Paid Based on Merger Consideration
Saed Mohsemi			3,220	(1)		$	120,750.00
Ira Zecher			3,220	(1)		$	120,750.00
Randall DeWitt			3,220	(1)		$	120,750.00
Jody Bilney			3,207	(2)		$	120,262.50
Nancy Freda-Smith			1,084	(3)		$	40,650.00

 

(1)

Subject to the non-employee director’s continued service, (i) 996 of such RSUs would otherwise vest on March 1, 2025, (ii) 254 of such RSUs would otherwise vest on March 15, 2025, (iii) 999 of such RSUs would otherwise vest on March 1, 2026, (iv) 639 of such RSUs would otherwise vest on March 1, 2027, and (v) 332 of such RSUs would otherwise vest on March 1, 2028.

(2)

Subject to the non-employee director’s continued service, (i) 996 of such RSUs would otherwise vest on March 1, 2025, (ii) 241 of such RSUs would otherwise vest on August 15, 2025, (iii) 999 of such RSUs would otherwise vest on March 1, 2026, (iv) 639 of such RSUs would otherwise vest on March 1, 2027, and (v) 332 of such RSUs would otherwise vest on March 1, 2028.

(3)	Subject to the non-employee director’s continued service, 271 of such RSUs would otherwise vest on each of May 15, 2025, May 15, 2026, May 15, 2027, and May 15, 2028.

Change in Control and Severance Benefits

Employment Agreements

Chuy’s is party to an employment agreement with each of our named executive officers that provides for severance and change in control benefits, in each case subject to the executive’s timely execution and non-revocation of a general release of claims in favor of the company. The employment agreements do not have a fixed term. Under the merger agreement, Darden will, or will cause one of its affiliates (including the surviving corporation), to honor the terms of the employment agreements with each named executive officer following the closing date.

Each employment agreement provides for certain “single-trigger” severance benefits if the executive’s employment is terminated without cause (as defined in the employment agreements) or by the executive for good reason (as defined in the employment agreements) which, together, we refer to as “qualified terminations.” In the event Mr. Hislop’s employment is terminated without cause or by him for good reason, he is entitled to continue to receive his base salary for two years following the termination of his employment and an amount equal to his target short-term incentive program payout for the year his employment was terminated. In the event the employment of Messrs. Howie, Korman, Mountford, and Hatcher is terminated without cause or by the executive for good reason, each is entitled to continue to receive one year’s base salary following his termination and an amount equal to his target short-term incentive program payout for the year his employment was terminated. Additionally, in the event the employment of Messrs. Hislop, Howie, Korman, Mountford, and Hatcher is terminated without cause or by the executive for good reason, each is entitled to continue to receive the amount that we were subsidizing for the executive and his or her dependents’ medical and dental insurance coverage during the same period the executive is entitled to continue to receive his base salary after his termination.

The employment agreements also provide for certain “double-trigger” severance benefits, specifically that if (1) the employment of Messrs. Hislop, Howie, Korman, Mountford, or Hatcher is terminated on account of the

 

46

executive’s death or disability (as defined in the employment agreements) or (2) the executive’s employment is terminated without cause or by the executive for good reason, in each case, on or during the 24-month period after a change in control (as defined in the company’s 2020 Omnibus Incentive Plan), then any unvested or unexercisable portion of any award granted to the executive under the Company’s equity incentive plans shall become fully vested or exercisable.

Under the employment agreements, any payment and benefits received by or payable to a named executive officer will be reduced to the extent necessary to avoid the imposition of any excise taxes under Section 4999 of the Code on any payments that may constitute “parachute payments” within the meaning of Section 280G of the Code, solely to the extent that such reduction would put the named executive officer in a better position on an after-tax basis than if he received the payments and benefits subject to the excise tax (“Best Pay Cutback Provision”). None of the named executive officers are eligible for an excise tax gross-up.

The provision of any severance payments and benefits, including the “double-trigger” benefits described above, is contingent upon the executive’s compliance with certain restrictive covenants in their employment agreement, which provide for (i) confidentiality and non-disparagement in perpetuity, (ii) an assignment of intellectual property, and (iii) non-competition and non-solicitation covenants that apply during employment and for 24 months post-employment for Mr. Hislop and 12 months post-employment for the other named executive officers. For an estimate of the value of the severance payments and benefits described above that would become payable to each of our executive officers upon a qualified termination, see the section of this proxy statement captioned “Quantification of Payments and Benefits to Named Executive Officers” below.

Nonqualified Deferred Compensation Plan

Pursuant to the company’s nonqualified deferred compensation plan, certain eligible employees, including our named executive officers, have voluntarily elected to defer a portion of their salary, short-term incentive program payouts, and/or discretionary bonuses to the plan. The plan also provides for company discretionary matching contributions that vest ratably over three years starting on the first day of the participant’s service with the company, such that an eligible employee with three years of service is 100% vested in our matching contributions. At the participant’s election, payments can be deferred until a specific date at least 12 months after the year of deferral or until termination of employment and can be paid in a lump sum or in up to five annual installments bonus payments to the plan.

Quantification of Payments and Benefits to Named Executive Officers

As required by Item 402(t) of Regulation S-K, the table below and its footnotes show the estimated payments and benefits that each named executive officer would receive if the individual experiences a qualified termination in connection with a hypothetical closing of the merger on August 19, 2024, which is the assumed effective time solely for purposes of the disclosure in this section, based on each individual’s compensation levels and outstanding equity awards as of August 19, 2024.

The amounts reflected in the table and the footnotes with respect to the value of the vesting acceleration of each named executive officer’s outstanding equity awards are determined using a per share price for the company’s common stock of $37.50, which is the merger consideration as specified in the merger agreement. The compensation summarized in the table and footnotes below in respect of the named executive officers is subject to a non-binding, advisory vote of the company’s stockholders, as described in “The Advisory Compensation Proposal (Proposal #2)” beginning on page 77.

The calculations in the tables below do not include amounts the officers were already entitled to receive or that were vested as of August 19, 2024, or amounts under contracts, agreements, plans, or arrangements to the extent they do not discriminate in scope, terms, or operation in favor of an officer and that are available generally to all of the salaried employees of the company. No potential reductions have been applied pursuant to the Best Pay

 

47

Cutback Provision in the employment agreements with respect to the calculations below. The estimated amounts below are based on multiple assumptions that may not actually occur, including assumptions described in this proxy statement. In addition, certain amounts will vary depending on the actual date of closing of the merger, which is presently expected to occur in the fourth quarter of 2024. As a result, the actual amounts, if any, to be received by an applicable individual may materially differ from the amounts set forth in the following table and accompanying footnotes.

 

		CASH SEVERANCE PAYMENTS ($)(1)				2024 TARGET BONUS AMOUNT ($)(2)				PERQUISITES/ BENEFITS ($)(3)				ACCELERATION OF EQUITY AWARDS ($)(4)				TOTAL ($)
Steve Hislop			1,535,726				383,932				13,514				1,497,000				3,430,172
Jon Howie			481,982				240,991				9,329				626,438				1,358,740
John Korman			270,426				135,213				8,252				313,500				727,391
John Mountford			271,643				81,493				6,757				376,275				736,168
Michael Hatcher			265,090				79,527				6,757				344,475				695,849

 

(1)

The amounts in this column represent salary continuation payments that each named executive officers would be entitled to under their employment agreement upon a qualified termination of employment that occurred on August 19, 2024. Under the employment agreements, cash severance is payable in equal installments in accordance with the company’s normal payroll practices over a 24-month period for Mr. Hislop and over a 12-month period for each other named executive officer. The amounts shown in this column are based on the base salaries in effect on August 19, 2024, and the resulting salary continuation payments for each named executive officer, as set forth below.

 

Named Executive Officer		Base Salary ($)				Salary Continuation ($)
Steve Hislop			767,863				1,535,726
Jon Howie			481,982				481,982
John Korman			270,426				270,426
John Mountford			271,643				271,643
Michael Hatcher			265,090				265,090

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

 

(2)

Upon a qualified termination of employment, each named executive officer is eligible to an amount equal to the executive’s target annual bonus for the year in which such termination occurs. The amounts in this column represent the target annual bonus payouts that the named executive officers would be entitled to upon a qualified termination of employment that occurs on August 19, 2024, under the employment agreements.

(3)

Upon a qualified termination of employment, each named executive officer’s employment agreement entitles such individual to certain healthcare benefits equal to an amount by which the Company was subsidizing for medical and dental insurance for the named executive officer and his eligible dependents prior to termination for a period of up to 24 months for Mr. Hislop and up to 12 months for each other named executive officer. In accordance with applicable SEC rules, the estimated value of these benefits was calculated based on the same assumptions used for financial reporting purposes under GAAP.

(4)

For all executive officers, the treatment of equity awards at the effective time of the merger is a “single-trigger” benefit contingent upon the occurrence of the merger. The amounts in this column represent the value of unvested restricted stock units that would vest as a result of the merger using a per share price for the company’s common stock of $37.50, the merger consideration as specified in the merger agreement. Because stockholder approval is a closing condition for the merger, it is not possible for a closing to occur before the date of the meeting to which this proxy statement relates.

 

48

Depending on when the closing date of the merger actually occurs, additional restricted stock units that are currently outstanding may vest in accordance with their terms prior to the closing of the merger.

 

Named Executive Officer		Shares Subject to Unvested RSUs (#)				Total Value of Shares Subject to Unvested RSUs ($)				Total ($)
Steve Hislop			39,920				1,497,000				1,497,000
Jon Howie			16,705				626,438				626,438
John Korman			8,360				313,500				313,500
John Mountford			10,034				376,275				376,275
Michael Hatcher			9,186				344,475				344,475

Indemnification and Insurance of Directors and Executive Officers

See “The Merger Agreement—Indemnification and Insurance” beginning on page 71, for a summary of the obligations of Darden and the surviving corporation with respect to indemnification and directors’ and officers’ liability insurance of directors and executive officers after the effective time.

Benefit Arrangements

See “The Merger Agreement—Employee Matters,” beginning on page 70, for a summary of certain post-closing covenants related to employee benefit arrangements.

REGULATORY APPROVALS

HSR Waiting Period

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

Under the HSR Act, the merger may not be completed until the expiration of a 30-calendar day waiting period, which began when Chuy’s and Darden filed their respective Premerger Notification and Report Forms under the HSR Act with the FTC and the DOJ on July 31, 2024. The waiting period is expected to expire at 11:59 p.m., Eastern Time, on August 30, 2024, unless earlier terminated by the FTC and the DOJ, restarted by the parties pulling and refiling the Premerger Notification and Report Forms, or extended by a Request for Additional Information and Documentary Material, which we refer to as a “second request.” If prior to the expiration or termination of the waiting period either the FTC or the DOJ issues a second request from the filing parties, the waiting period with respect to the merger will be extended until the 30th calendar day following the date of the filing parties’ substantial compliance with that second request. After that time, absent agreement from the filing parties, the acquisition can be blocked only by court order. The FTC and the DOJ may terminate the applicable waiting period at any time before its expiration.

At any time (regardless of whether before or after the expiration or termination of the statutory waiting periods under the HSR Act, or before or after the effective time), the FTC or the DOJ may take action under the antitrust laws, including seeking to enjoin the completion of the merger, to rescind the merger, or to conditionally permit completion of the merger subject to regulatory conditions or other remedies. In addition, U.S. state attorneys general could take action under the antitrust laws as they deem necessary or desirable in the public interest, including, without limitation, seeking to enjoin the completion of the merger or permitting completion subject to

 

49

regulatory conditions. Private parties may also seek to take legal action under the antitrust laws under some circumstances. Although we do not believe that the merger will violate the antitrust laws, there can be no assurance that a challenge to the merger on antitrust grounds will not be made or, if such a challenge is made, that it would not be successful.

Other Approvals

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

MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES

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

 

•

a citizen or individual resident of the United States;

 

•

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

 

•

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

 

•

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

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

 

50

investment companies, U.S. holders who hold shares of our common stock as part of a hedge, straddle, constructive sale, conversion or other risk reduction strategy or integrated transaction, U.S. holders who will hold (actually or constructively) an equity interest in Darden immediately after the merger, U.S. holders who acquired their shares of our common stock through the exercise of employee stock options, through a tax qualified retirement plan or other compensation arrangements, and dissenters (as defined under “Appraisal Rights” below)).

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

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

Tax Consequences of the Merger

The receipt of cash by U.S. holders in exchange for shares of our common stock pursuant to the merger will be a taxable transaction for U.S. federal income tax purposes. In general, for U.S. federal income tax purposes, a U.S. holder who receives cash in exchange for shares of our common stock pursuant to the merger will recognize capital gain or loss in an amount equal to the difference, if any, between (1) the amount of cash received plus the amount used to satisfy any applicable withholding taxes and (2) the U.S. holder’s adjusted tax basis in such shares. Any such gain or loss will be long-term capital gain or loss if a U.S. holder’s holding period in the shares of our common stock surrendered in the merger is greater than one year as of the date of the merger. Long-term capital gains of certain non-corporate holders, including individuals, are generally subject to U.S. federal income tax at preferential rates. The deductibility of capital losses is subject to limitations. If a U.S. holder acquired different blocks of our common stock at different times and different prices, such U.S. holder must determine its adjusted tax basis, gain or loss and holding period separately with respect to each block of our common stock.

Information Reporting and Backup Withholding

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

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

APPRAISAL RIGHTS

The following is a summary of certain provisions of the statutory procedures that a stockholder must follow under the DGCL in order to seek and perfect appraisal rights. This summary, however, is not a complete statement of all applicable requirements and the law pertaining to appraisal rights under the DGCL, and is

 

51

qualified in its entirety by reference to Section 262 of the DGCL, the full text of which appears in Appendix C to this proxy statement, which we refer to as “Section 262.” The following summary does not constitute any legal or other advice, nor does it constitute a recommendation that stockholders exercise their appraisal rights under Section 262. STOCKHOLDERS AND BENEFICIAL OWNERS SHOULD CAREFULLY REVIEW THE FULL TEXT OF SECTION 262 AS WELL AS THE INFORMATION DISCUSSED BELOW.

If the merger is completed, the company’s stockholders (including “beneficial owners” of shares of common stock) who (1) do not vote in favor of the adoption of the merger agreement; (2) properly demand an appraisal of their shares; (3) continuously hold of record or beneficially own their shares through the effective time; (4) otherwise comply with the procedures of Section 262; and (5) do not withdraw their demands or otherwise lose their rights to appraisal may, subject to the conditions and procedures set forth in Section 262, seek appraisal of their shares in connection with the merger under Section 262. Unless the context requires otherwise, all references in Section 262 and in this summary to a “stockholder” are to the record holder of shares as to which appraisal rights are asserted, all references in Section 262 and in this summary to a “beneficial owner” means a person who is the beneficial owner of shares of stock held either in voting trust or by a nominee on behalf of such person, and all references in Section 262 and in this summary to the word “person” mean any individual, corporation, partnership, unincorporated association or other entity.

Under Section 262, if the merger is completed, holders of record of shares of common stock or beneficial owners who (1) submit a written demand for appraisal of such stockholder’s shares of common stock to the company prior to the vote on the adoption of the merger agreement; (2) do not vote in favor of the adoption of the merger agreement; (3) continuously hold of record (or beneficially own, as the case may be) such shares on the date of making the demand for appraisal through the effective time; and (4) otherwise comply with the procedures and satisfy certain ownership thresholds set forth in Section 262 may be entitled to have their shares of common stock appraised by the Delaware Court of Chancery and to receive payment in cash, in lieu of the merger consideration, for the “fair value” of their shares of common stock, exclusive of any element of value arising from the accomplishment or expectation of the merger, together with (unless the Delaware Court of Chancery in its discretion determines otherwise for good cause shown) interest on the amount determined by the Delaware Court of Chancery to be the fair value from the effective time through the date of payment of the judgment (or in certain circumstances described herein, on the difference between the amount determined to be the fair value and the amount paid by the surviving corporation in the merger to each person entitled to appraisal prior to the entry of judgment in the appraisal proceeding) as described further below. However, after an appraisal petition has been filed, the Delaware Court of Chancery, at a hearing to determine persons entitled to appraisal rights, will dismiss appraisal proceedings as to all holders of shares of a class or series of stock that, immediately prior to the closing of the merger, were listed on a national securities exchange who are otherwise entitled to appraisal rights unless (A) the total number of shares of the class or series of stock for which appraisal rights have been pursued or perfected exceeds one percent of the outstanding shares of such class or series as measured in accordance with subsection (g) of Section 262; or (B) the value of the merger consideration in respect of such shares exceeds $1 million. We refer to these conditions as the “ownership thresholds.” Given that the shares of common stock are listed on the Nasdaq (and assuming such shares remain so listed up until the closing of the merger), then the Delaware Court of Chancery will dismiss any appraisal proceedings as to all holders of common stock who are otherwise entitled to appraisal rights unless one of the ownership thresholds is satisfied.

Unless the Delaware Court of Chancery, in its discretion, determines otherwise for good cause shown, interest on the amount determined to be the fair value of the shares subject to appraisal will accrue and compound quarterly from the effective time through the date the judgment is paid at five percent over the Federal Reserve discount rate (including any surcharge) as established from time to time during such period (except that, if at any time before the entry of judgment in the proceeding, the surviving corporation makes a voluntary cash payment to each person entitled to appraisal, interest will accrue thereafter only upon the sum of (x) the difference, if any, between the amount so paid and the fair value of the shares as determined by the Delaware Court of Chancery; and (y) interest theretofore accrued, unless paid at that time). The surviving corporation is under no obligation to make such voluntary cash payment prior to such entry of judgment.

 

52

Under Section 262, where a merger agreement is to be submitted for adoption at a meeting of stockholders, the corporation, not less than 20 days prior to the meeting, must notify each of its stockholders of record as of the record date for notice of such meeting that appraisal rights are available and include in the notice a copy of Section 262 or information directing the stockholders to a publicly available electronic resource at which Section 262 may be accessed without subscription or cost. This proxy statement constitutes the company’s notice to the company’s stockholders that appraisal rights are available in connection with the merger, and the full text of Section 262 appears in Appendix C. In connection with the merger, any holder of record of shares of common stock or beneficial owner who wishes to exercise appraisal rights, or who wishes to preserve such holder’s or beneficial owner’s right to do so, should review Section 262 carefully. Failure to strictly comply with the requirements of Section 262 in a timely and proper manner may result in the loss of appraisal rights under the DGCL. A person who loses his, her, or its appraisal rights will be entitled to receive the merger consideration less any applicable withholding taxes. Because of the complexity of the procedures for exercising the right to seek appraisal of shares of common stock, the company believes that if a person is considering exercising such rights, such person should seek the advice of legal counsel.

Stockholders or beneficial owners wishing to exercise the right to seek an appraisal of their shares of common stock must do ALL of the following:

 

•

such person must not vote such shares in favor of the proposal to adopt the merger agreement;

 

•

such person must deliver to the company a written demand for appraisal before the vote on the merger agreement at the special meeting;

 

•

such person must continuously hold of record or beneficially own the shares of the common stock from the date of making the demand through the effective time (a person demanding appraisal will lose appraisal rights if after demanding appraisal and before the effective time, in the case of a record holder transfers, or in the case of a beneficial owner ceases to beneficially own, such shares);

 

•

such person (or any other person duly demanding appraisal) or the surviving corporation must file a petition in the Delaware Court of Chancery demanding a determination of the fair value of the company stock of all such stockholders within 120 days after the effective time (the surviving corporation is under no obligation to file any petition and has no present intention to do so); and

 

•

such person must otherwise comply with the applicable procedures and requirements set forth in Section 262.

If such person fails to comply with any of these conditions and the merger is completed, such person will be entitled to receive the merger consideration, but will have no appraisal rights with respect to such person’s shares of common stock.

In addition, after an appraisal petition has been filed, the Delaware Court of Chancery, at a hearing to determine persons entitled to appraisal rights, will dismiss appraisal proceedings as to all persons who asserted appraisal rights with respect to the shares of common stock unless one of the ownership thresholds is met.

Because a proxy that is submitted and does not contain voting instructions will, unless properly revoked, be voted in favor of the adoption of the merger agreement, each person who votes by proxy and who wishes to exercise appraisal rights must vote against the adoption of the merger agreement or abstain.

Filing Written Demand

A person wishing to exercise appraisal rights must deliver to the company, before the vote on the adoption of the merger agreement at the special meeting, a written demand for the appraisal of such person’s common stock. In addition, that person must not vote or submit a proxy in favor of the adoption of the merger agreement. A vote in favor of the adoption of the merger agreement will constitute a waiver of your appraisal rights in respect of the

 

53

shares of common stock so voted and will nullify any previously filed written demands for appraisal. A person exercising appraisal rights must hold or own, as applicable, of record or beneficially, the shares of common stock on the date the written demand for appraisal is made and must continue to hold or own, as applicable, the common stock through the effective time. A proxy that is submitted and does not contain voting instructions will, unless revoked, be voted in favor of the adoption of the merger agreement, and it will constitute a waiver of the stockholder’s and beneficial owner’s right of appraisal and will nullify any previously delivered written demand for appraisal with respect to such shares. Therefore, a stockholder who submits a proxy and who wishes to exercise appraisal rights must submit a proxy containing instructions to vote against the adoption of the merger agreement or abstain from voting on the adoption of the merger agreement. Neither voting against the adoption of the merger agreement nor abstaining from voting or failing to vote on the proposal to adopt the merger agreement will, in and of itself, constitute a written demand for appraisal satisfying the requirements of Section 262. The written demand for appraisal must be in addition to and separate from any proxy or vote on the adoption of the merger agreement. A proxy or vote against the adoption of the merger agreement will not constitute a demand. A person’s failure to make the written demand prior to the taking of the vote on the adoption of the merger agreement at the special meeting will constitute a waiver of appraisal rights.

In the case of a written demand for appraisal made by a stockholder of record, the demand must reasonably inform the company of the identity of the stockholder and that the stockholder intends thereby to demand an appraisal of such stockholder’s common stock. In the case of a written demand for appraisal made by a beneficial owner, the demand must reasonably identify the record holder of the shares for which the demand is made, be accompanied by documentary evidence of such beneficial owner’s beneficial ownership of such common stock and a statement that such documentary evidence is a true and correct copy of what it purports to be, and provide an address at which such beneficial owner consents to receive notices given by the surviving corporation and to be set forth on the verified list (as defined below).

All written demands for appraisal pursuant to Section 262 should be mailed or delivered to:

Chuy’s Holdings, Inc.

1623 Toomey Road,

Austin, Texas, 78704

Attention: General Counsel & Secretary

At any time within 60 days after the effective time, any person entitled to appraisal rights who has not commenced an appraisal proceeding or joined that proceeding as a named party may withdraw such person’s demand for appraisal and accept the merger consideration, less any applicable withholding taxes, by delivering to company, as the surviving corporation, a written withdrawal of the demand for appraisal. Notwithstanding the foregoing, no appraisal proceeding in the Delaware Court of Chancery will be dismissed as to any person without the approval of the Delaware Court of Chancery, and such approval may be conditioned upon such terms as the Delaware Court of Chancery deems just, including, without limitation, a reservation of jurisdiction (which we refer to as a “reservation”) for any application (as defined below); provided, however, that this shall not affect the right of any person who has not commenced an appraisal proceeding or joined that proceeding as a named party to withdraw such person’s demand for appraisal and to accept the merger consideration within 60 days after the effective time. If the Delaware Court of Chancery does not approve the dismissal of an appraisal proceeding with respect to a person, such person will be entitled to receive only the fair value determined in any such appraisal proceeding, which value could be less than, equal to or more than the merger consideration.

Notice by the Surviving Corporation

If the merger is completed, within 10 days after the effective time, the surviving corporation will notify each stockholder (including any beneficial owner, as the case may be) who has properly made a written demand for appraisal pursuant to Section 262, and who has not voted in favor of the adoption of the merger agreement, that the merger has become effective and the effective time thereof.

 

54

Filing a Petition for Appraisal

Within 120 days after the effective time, but not thereafter, either the surviving corporation or any person who has complied with Section 262 and is otherwise entitled to appraisal rights under Section 262 may commence an appraisal proceeding by filing a petition in the Delaware Court of Chancery, with a copy served on the surviving corporation in the case of a petition filed by any person other than the surviving corporation, demanding a determination of the fair value of the common stock held by all dissenting stockholders entitled to appraisal. The surviving corporation is under no obligation, and has no present intention, to file a petition, and stockholders should not assume that the surviving corporation will file a petition or initiate any negotiations with respect to the fair value of the shares of common stock. Accordingly, any persons who desire to have their common stock appraised should initiate all necessary action to perfect their appraisal rights in respect of their shares of common stock within the time and in the manner prescribed in Section 262. The failure to file such a petition within the period specified in Section 262 could nullify a previous written demand for appraisal.

Within 120 days after the effective time, any person who has complied with the requirements for an appraisal of such person’s common stock pursuant to Section 262 will be entitled, upon written request, to receive from the surviving corporation a statement setting forth the aggregate number of common stock not voted in favor of the adoption of the merger agreement and with respect to which the company has received demands for appraisal, and the aggregate number of stockholders or beneficial owners holding or owning such common stock (provided that where a beneficial owner makes a demand for appraisal directly, the record holder of such common stock shall not be considered a separate stockholder holding such common stock for purposes of this aggregate number). Such statement must be given within 10 days after receipt by the surviving corporation of the written request for such a statement or within 10 days after the expiration of the period for delivery of demands for appraisal, whichever is later.

If a petition for an appraisal is duly filed by any person other than the surviving corporation, service of a copy thereof must be made upon the surviving corporation, which will then be obligated within 20 days after such service to file with the Delaware Register in Chancery a duly verified list (which we refer to as the “verified list”) containing the names and addresses of all persons who have demanded appraisal for their shares and with whom agreements as to the value of their shares have not been reached. If the petition is filed by the surviving corporation, the petition must be accompanied by the verified list. The Delaware Court of Chancery may order that notice of the time and place fixed for the hearing of such petition be given to the surviving corporation and all of the persons shown on the verified list at the addresses stated therein. The costs of any such notice are borne by the surviving corporation.

After notice is provided to the applicable persons as required by the Delaware Court of Chancery, at the hearing on such petition, the Delaware Court of Chancery will determine the persons who have complied with Section 262 and who have become entitled to appraisal rights thereunder. The Delaware Court of Chancery may require the persons who demanded appraisal for their shares and who hold stock represented by stock certificates to submit their stock certificates to the Delaware Register in Chancery for notation thereon of the pendency of the appraisal proceedings. If any person fails to comply with this requirement, the Delaware Court of Chancery may dismiss the proceedings as to such person. Upon application by the surviving corporation or by any person entitled to participate in the appraisal proceeding, the Delaware Court of Chancery may, in its discretion, proceed to trial upon the appraisal prior to the final determination of the persons entitled to an appraisal. Any person whose name appears on the verified list may participate fully in all proceedings until it is finally determined that such person is not entitled to appraisal rights under Section 262.

Given that the shares common stock are listed on the Nasdaq (and assuming such shares remain so listed up until closing of the merger), the Delaware Court of Chancery will dismiss any appraisal proceedings as to all holders of shares of common stock who are otherwise entitled to appraisal rights unless one of the ownership thresholds is met.

 

55

Determination of Fair Value

After the Delaware Court of Chancery determines the persons entitled to appraisal and that at least one of the ownership thresholds above has been satisfied in respect of persons seeking appraisal rights, then the appraisal proceeding will be conducted in accordance with the rules of the Delaware Court of Chancery, including any rules specifically governing appraisal proceedings. Through such proceeding, the Delaware Court of Chancery will determine the “fair value” of the shares of common stock, 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. Unless the Delaware Court of Chancery, in its discretion, determines otherwise for good cause shown, interest from the effective time through the date of payment of the judgment will be compounded quarterly and will accrue at five percent over the Federal Reserve discount rate (including any surcharge) as established from time to time during the period between the effective time and the date of payment of the judgment. However, the surviving corporation has the right, at any time prior to the Delaware Court of Chancery’s entry of judgment in the proceedings, to make a voluntary cash payment to each person seeking appraisal. If the surviving corporation makes a voluntary cash payment pursuant to subsection (h) of Section 262, interest will accrue thereafter only on the sum of (x) the difference, if any, between the amount paid by the surviving corporation in such voluntary cash payment and the fair value of the shares as determined by the Delaware Court of Chancery; and (y) interest accrued before such voluntary cash payment, unless paid at that time.

In determining “fair value,” the Delaware Court of Chancery will take into account all relevant factors. In Weinberger v. UOP, Inc., the Supreme Court of Delaware 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 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 that could be ascertained as of the date of the merger that 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 Supreme Court of Delaware also stated 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.” In Dell, Inc. v. Magnetar Global Event Driven Master Fund Ltd., and DFC Global Corp. v. Muirfield Value Partners, L.P., the Delaware Supreme Court indicated, without establishing a presumption, that in a merger resulting from arm’s-length negotiations and a sale process reasonably designed to maximize stockholder value, the agreed-upon deal price less synergies expected from the merger may be the best indicator of fair value.

Persons considering seeking appraisal should be aware that the fair value of their shares as so determined by the Delaware Court of Chancery could be more than, the same as or less than the merger consideration if they did not seek appraisal of their shares and that an opinion of an investment banking firm as to the fairness from a financial point of view of the consideration payable in a merger is not an opinion as to, and may not in any manner address, fair value under Section 262. ALTHOUGH THE COMPANY BELIEVES THAT THE 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 STOCKHOLDERS SHOULD RECOGNIZE THAT SUCH AN APPRAISAL COULD RESULT IN A DETERMINATION OF A VALUE HIGHER OR LOWER THAN, OR THE SAME AS, THE MERGER CONSIDERATION. Neither the company nor Darden anticipates offering more than the merger consideration to any persons exercising appraisal rights, and each of the company and Darden reserves the rights to make a voluntary cash payment pursuant to subsection (h) of Section 262 and to assert, in any appraisal

 

56

proceeding, that for purposes of Section 262, the “fair value” of a share of common stock is less than the merger consideration. If a petition for appraisal is not timely filed or, with respect to common stock, if neither of the ownership thresholds above has been satisfied in respect of persons seeking appraisal rights, then the right to an appraisal will cease.

The Delaware Court of Chancery will direct the payment of the fair value of the shares, together with interest, if any, by the surviving corporation to the persons entitled thereto. Payment will be so made to each such person upon such terms and conditions as the Delaware Court of Chancery may order. The Delaware Court of Chancery’s decree may be enforced as other decrees in such Delaware Court of Chancery may be enforced.

The costs of the appraisal proceedings (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 parties as the Delaware Court of Chancery deems equitable under the circumstances. Upon application of a person whose name appears on the verified list who participated in the proceeding and incurred expenses in connection therewith (which we refer to as an “application”), the Delaware Court of Chancery may also order that all or a portion of such expenses, including, without limitation, reasonable attorney’s fees and the fees and expenses of experts, be charged pro rata against the value of all the shares entitled to an appraisal that were not dismissed pursuant to the terms of Section 262 or subject to an award pursuant to a reservation. In the absence of such determination or assessment, each party bears its own expenses.

THE PROCESS OF DEMANDING AND EXERCISING APPRAISAL RIGHTS REQUIRES STRICT COMPLIANCE WITH THE TECHNICAL PREREQUISITES OF SECTION 262. IF YOU WISH TO EXERCISE YOUR APPRAISAL RIGHTS, YOU SHOULD CONSULT WITH YOUR OWN LEGAL COUNSEL. TO THE EXTENT THERE ARE ANY INCONSISTENCIES BETWEEN THE FOREGOING SUMMARY AND SECTION 262, SECTION 262 WILL GOVERN.

 

57

THE MERGER AGREEMENT

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

Please note that the representations, warranties, covenants, and agreements in the merger agreement were made only for purposes of the merger agreement and may not represent the actual state of facts. See “Miscellaneous—Legal and Cautionary Disclosures—Context for Assertions Embodied in Agreements” beginning on page 85.

STRUCTURE AND CORPORATE EFFECTS OF THE MERGER

At the effective time, Merger Sub will merge with and into Chuy’s, and the separate corporate existence of Merger Sub will cease to exist. Chuy’s will be the surviving corporation of the merger and will continue its corporate existence as a Delaware corporation and an indirect, wholly-owned subsidiary of Darden.

As of the effective time, the certificate of incorporation of the surviving corporation will be amended and restated so as to read in its entirety as set forth in the applicable exhibit to the merger agreement, and the bylaws of the surviving corporation will be amended and restated to be the same as the bylaws of Merger Sub in effect immediately before the effective time (except that any references to Merger Sub’s name will be replaced by references to the surviving corporation), and for at least six years following the effective time, such certificate of incorporation and bylaws will contain provisions no less favorable with respect to indemnification, advancement of expenses and exculpation of covered persons for periods at or prior to the effective time than are currently set forth in the company’s governing documents.

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

TIMING OF THE MERGER

The closing of the merger is to take place at 9:00 a.m. Eastern Time, on a date that is no later than three business days after the satisfaction or (to the extent permitted by applicable law) waiver of the conditions set forth in the merger agreement (other than those conditions that by their nature are to be satisfied at the closing of the merger, but subject to the satisfaction or waiver of such conditions). We and Darden may mutually agree upon another date or time for the closing to take place. The date on which the closing occurs is sometimes referred to as the “closing date.”

At the closing, we will file a certificate merger with the Secretary of State of the State of Delaware. The merger will become effective at the time when the certificate of merger is filed or at such later date or time as may be agreed by us and Darden and specified in the certificate of merger.

As of the date of the filing of this proxy statement, we expect to complete the merger in the fourth quarter of 2024. However, completion of the merger is subject to the satisfaction or (to the extent permitted by applicable law) waiver of the conditions to the completion of the merger, and factors outside of our control or the control of Darden may delay the completion of the merger or prevent it from being completed at all. There can be no assurances as to whether or when the merger will be completed.

 

58

EFFECT OF THE MERGER ON OUR COMMON STOCK

Each share of our common stock that is issued and outstanding immediately prior to the effective time will be automatically canceled and converted into the right to receive $37.50 in cash without interest, except for (1) any shares that are owned or held in treasury by the company, (2) any shares that are owned by Darden or Merger Sub (or any of their respective affiliates), and (3) any dissenting shares.

At the effective time, each share owned or held in treasury by the company, or owned by Darden or Merger Sub (or their respective affiliates), will automatically be canceled and cease to exist, and no consideration will be delivered in exchange for such cancellation.

In this proxy statement, we use the term “dissenting shares” to describe shares of our common stock issued and outstanding immediately prior to the effective time that are held by a holder who (1) has not voted in favor of approval of the merger agreement, (2) is entitled to appraisal under the DGCL, and (3) has properly exercised appraisal rights for such shares in accordance with Section 262 of the DGCL. At the effective time, any dissenting shares will not be converted into or represent the right to receive the merger consideration, but instead will be entitled to payment for such dissenting shares determined in accordance with Section 262 of the DGCL following which such shares will automatically be canceled and will cease to exist. However, if, after the effective time, any such holder fails to perfect, withdraws, or loses such holder’s right to appraisal pursuant to Section 262 of the DGCL, or if a court of competent jurisdiction determines that such holder is not entitled to the relief provided by Section 262 of the DGCL, then such dissenting shares will be treated as if they had converted as of the effective time into the right to receive the merger consideration without interest thereon. For more information regarding appraisal rights, see “Appraisal Rights” beginning on page 51.

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

TREATMENT OF CHUY’S EQUITY AWARDS

Stock Options. Immediately prior to the effective time, except as may otherwise be agreed in writing by Parent, the company, and the holder thereof, by virtue of the merger and without any action on the part of the option holders, each option, whether or not vested and exercisable, that is then outstanding and unexercised, will be automatically converted into the right to receive from Darden or the surviving corporation an amount in cash equal to the product obtained by multiplying (1) the excess, if any, of $37.50 over the per share exercise price of such option by (2) the aggregate number of shares of our common stock that were issuable upon exercise of such option immediately prior to the effective time (subject to any applicable withholding tax).

Restricted Stock Units. Immediately prior to the effective time, except as may otherwise be agreed in writing by Parent, the company and the holder thereof, by virtue of the merger and without any action on the part of the holders thereof, each RSU that is then outstanding will be deemed to have been earned, and become fully vested, and will be canceled and extinguished as of the effective time and, in exchange therefor, each former holder of any RSU will have the right to receive from Darden or the surviving corporation an amount in cash equal to the product obtained by multiplying (1) the number of shares of common stock subject to such RSU by (2) $37.50 subject to any applicable withholding tax.

TREATMENT OF CHUY’S 2023 EMPLOYEE STOCK PURCHASE PLAN

With respect to the 2023 ESPP, the merger agreement provides that:

 

•

No new offering periods under the 2023 ESPP will commence after the date of the merger agreement.

 

•

The 2023 ESPP will be terminated upon the completion of the merger, effective as of immediately prior to the effective time.

 

59

PAYMENT FOR COMMON STOCK IN THE MERGER

At or prior to the effective time, Darden will deposit the aggregate merger consideration with Equiniti Trust Company, LLC (or another nationally recognized paying agent designated by Parent and approved in writing by us), which we refer to as the “paying agent.”

Promptly after the effective time, and in any event no later than three business days after the effective time, Darden will send or cause the paying agent to send to each record holder of shares of our common stock immediately prior to the effective time whose shares were converted into the right to receive the merger consideration a letter of transmittal and instructions for effecting the surrender of certificates or book-entry shares formerly representing shares of our common stock in exchange for the merger consideration. Upon (1) surrender of certificates to the paying agent together with duly completed and validly executed letters of transmittal or (2) in the case of a book-entry transfer of shares of our common stock, receipt of a customary “agent’s message” by the paying agent, and in each case, such other documents as may reasonably be requested by the paying agent, the holders of such certificates or book-entry shares will be entitled to receive the merger consideration for all such shares.

REPRESENTATIONS AND WARRANTIES; MATERIAL ADVERSE EFFECT

The merger agreement contains representations and warranties of ours, subject to certain exceptions in the merger agreement, in the disclosure letter delivered by the company to Darden and Merger Sub in connection with the merger agreement and in certain of our public filings, as to, among other things:

 

•

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

 

•

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

 

•

resolutions adopted by our board of directors declaring the merger agreement, the merger, and the transactions contemplated by the merger agreement to be fair to, advisable, and in the best interests of the company and its stockholders, approving the merger agreement, the merger, and the transactions contemplated by the merger agreement and declaring them advisable, and recommending that our stockholders approve the merger and adopt the merger agreement;

 

•

the receipt by our board of directors of an opinion from Piper;

 

•

the inapplicability of anti-takeover statutes;

 

•

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

 

•

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

 

•

capitalization and ownership of our subsidiaries;

 

•

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

 

•

absence of preemptive or similar rights;

 

•

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

 

•

disclosure controls and procedures and internal control over financial reporting;

 

•

the absence of certain events, including changes having, or which would reasonably be expected to have, a material adverse effect, since December 31, 2023;

 

•

material contracts;

 

•

real property matters;

 

60

•

environmental matters;

 

•

intellectual property matters;

 

•

data privacy and security matters;

 

•

tax matters;

 

•

employee benefit matters;

 

•

the company and its subsidiaries not being parties to franchise agreements;

 

•

labor matters;

 

•

compliance with applicable laws, including anti-corruption laws;

 

•

litigation matters and investigations;

 

•

insurance policies and coverage;

 

•

economic sanctions and export controls laws;

 

•

top suppliers;

 

•

quality and safety of food and beverage products;

 

•

related party transactions; and

 

•

broker’s fees.

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

 

•

organization and good standing with respect to Darden;

 

•

corporate authority to enter into the merger agreement and the enforceability of the merger agreement against Darden and Merger Sub;

 

•

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

 

•

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

 

•

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

 

•

affirmation that no vote or consent of any stockholders of Darden is necessary to adopt and approve the merger agreement and affirmation that the consent of a wholly-owned subsidiary of Darden, as the sole stockholder of Merger Sub, is the only vote or consent required of Merger Sub to adopt and approve the merger agreement;

 

•

litigation matters and investigations;

 

•

the availability of funds, taking into account funds available to Darden, to complete the merger and pay related fees and expenses;

 

•

that Darden, Merger Sub and their affiliates are not “interested stockholders” of the company as described in the DGCL;

 

•

broker’s fees; and

 

•

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

 

61

Some of the representations and warranties in the merger agreement are qualified by materiality or knowledge qualifications or a “material adverse effect” qualification.

For purposes of the merger agreement, a “material adverse effect” with respect to us means any change, event, effect, development, condition, occurrence, or circumstance that, individually or in the aggregate, has or would reasonably be expected to have a material adverse effect on the business, assets, properties financial condition or results of operations of us and our subsidiaries, taken as a whole. However, none of the following will be deemed to be or constitute a material adverse effect or be taken into account when determining whether a material adverse effect has occurred or would reasonably be expected to occur (except, in certain circumstances, if any such change, event, effect, development, condition, occurrence or circumstance has had, or would reasonably be expected to have, a disproportionate adverse effect on the company relative to other companies operating in the same segment of the restaurant industry in the United States, in which case only the incremental disproportionate adverse impact may be taken into account in determining whether a material adverse effect has occurred):

 

•

changes in general economic conditions, or changes in conditions in the global, international or United States economy generally;

 

•

changes in conditions in the financial markets, credit markets, or capital markets, including changes in interest rates or credit ratings, changes in exchange rates for the currencies of any country, or any suspension of trading of securities generally on any securities exchange or over-the-counter market;

 

•

changes in conditions in the industries in which we and our subsidiaries conduct business (including supply chain delays and increases in raw material prices);

 

•

changes in regulatory, legislative, or political conditions (including civil unrest, protests and public demonstrations, any government responses thereto (e.g., curfews or government shutdowns or slowdowns), and any escalation or worsening thereof);

 

•

changes in geopolitical or social conditions, outbreak of hostilities, acts of war (whether or not declared), sabotage, widespread cyber-attack, terrorism, or military actions (including any escalation or general worsening of any such hostilities, acts of war, sabotage, cyberterrorism, terrorism, or military actions);

 

•

earthquakes, volcanic activity, hurricanes, tsunamis, tornadoes, floods, mudslides, wildfires, or other natural disasters, weather conditions, and other force majeure events;

 

•

any epidemic, pandemic or disease outbreak, human health crises or other force majeure events, in each case including any worsening thereof, or law, mandate, directive, pronouncement, guideline or recommendation issued by a governmental authority, the Center for Disease Control and Prevention, the World Health Organization or industry group providing for business closures, “sheltering-in-place,” curfews or other restrictions that relate to, or arise out of, an epidemic, pandemic, or disease outbreak, or any change in such law or directive, pronouncement or guideline or interpretation thereof, or any material worsening of such condition;

 

•

changes in GAAP or applicable laws (or the enforcement, implementation, or interpretation of any of the foregoing);

 

•

the negotiation, execution, delivery, or performance of the merger agreement;

 

•

the announcement of the merger agreement and the pendency or performance of the transactions contemplated thereby, including the impact thereof on the relationships, contractual or otherwise, of us and our subsidiaries with customers, suppliers, lenders, lessors, business partners, employees, governmental authorities, vendors, or any other person;

 

•

compliance by us, Darden, or Merger Sub with the terms of the merger agreement, including any action required to be taken or refrained from being taken pursuant to the merger agreement;

 

•

any action taken or refrained from being taken, in each case to which Darden has expressly approved, consented to, or requested in writing;

 

62

•

changes in the price or trading volume of the company’s common stock, in and of itself; provided that the underlying facts relating to these changes may be taken into account in determining whether there has been a material adverse effect in some circumstances;

 

•

any failure, in and of itself, by us and our subsidiaries to meet any public estimates or expectations of our revenue, earnings, or other financial performance or results of operations for any period, any budgets, plans, projections or forecasts of our revenues, earnings, or other financial performance or results of operations; provided that the underlying facts relating to these changes may be taken into account in determining whether there has been a material adverse effect in some circumstances;

 

•

availability or cost of equity, debt, or other financing to Darden or Merger Sub;

 

•

identity of, or any facts or circumstances relating to, Darden, Merger Sub, or their respective affiliates or the announcement or disclosure of their respective plans or intentions with respect to us, our subsidiaries, or our business;

 

•

any proceeding commenced or threatened against us, Darden, or Merger Sub, any of our or their respective affiliates or our or their respective directors or officers or otherwise relating to, involving or affecting such party or its affiliates or such directors or officers, in each case in connection with, arising from or otherwise relating to the merger agreement or the transactions contemplated thereby, other than a proceeding solely among us, Darden and Merger Sub related to the merger agreement, which we refer to as “transaction litigation”; or

 

•

any breach by Darden or Merger Sub of the merger agreement.

CONDUCT OF THE BUSINESS PENDING THE MERGER

The merger agreement provides that, during the period from the date of the merger agreement to the closing date, except as approved by Darden in writing (such approval not to be unreasonably withheld, conditioned, or delayed), as expressly contemplated by the merger agreement, as set forth in the disclosure letter, or required by applicable law, we will use, and cause our subsidiaries to use, reasonable best efforts to:

 

•

conduct our businesses in all material respects in the ordinary course of business consistent with past practices; and

 

•

preserve intact in all material respects our current business organization, ongoing businesses and significant relationships with our officers, employees, suppliers, customers, distributors, licensors, and other persons with whom we or our subsidiaries have material business dealings.

The merger agreement also provides that, during the period from the date of the merger agreement to the closing date, except as approved by Darden in writing (such approval not to be unreasonably withheld, conditioned, or delayed), as expressly contemplated by the merger agreement, as set forth in the disclosure letter or as required by applicable law, we will not, and will not permit any of our subsidiaries to, among other things (subject to certain specified exceptions):

 

•

amend our organizational documents or the organizational documents of our subsidiaries;

 

•

propose or adopt a plan of complete or partial liquidation, dissolution, merger, consolidation, restructuring, recapitalization, or other reorganization with respect to us or our subsidiaries;

 

•

issue, sell, deliver, grant, pledge, dispose of or encumber, or agree or commit to issue, sell, deliver, grant, pledge, dispose of or encumber any shares of the company’s or its subsidiaries’ capital stock, other voting securities or equity interests, or any securities convertible or exchangeable into shares of capital stock, voting securities or equity interests of the company or its subsidiaries;

 

•

adopt a rights plan;

 

•

commence any offering period under the 2023 ESPP;

 

63

•

reclassify, split, combine, subdivide, or redeem, repurchase, purchase, or otherwise acquire or amend the terms of, directly or indirectly, any shares of our capital stock or other equity or voting interest, other than (1) the withholding of shares of our common stock to satisfy tax obligations incurred in connection with the settlement of awards granted pursuant to our stock plans, or (2) our acquiring RSUs in connection with the forfeiture of such awards;

 

•

establish a record date for, declare, set aside, or pay any dividends on, or make any other distributions in respect of our capital stock, except for cash dividends made by any direct or indirect wholly-owned subsidiary to us or one of our other wholly-owned subsidiaries;

 

•

incur, assume, or suffer to exist any indebtedness, except (1) for trade payable incurred in the ordinary course of business consistent with past practice, and (2) for loans or advances to direct or indirect wholly-owned subsidiaries in the ordinary course of business consistent with past practice;

 

•

make any loans, advances, or capital contributions to, or investments in, any person;

 

•

mortgage or pledge any assets, tangible or intangible, or create or suffer to exist any lien thereupon, except for certain permitted liens;

 

•

enter into, adopt, materially amend, materially modify, or terminate any employee benefit plan, other than annual renewals in the ordinary course of business consistent with past practice and either (i) on substantially similar terms or (ii) after good faith consultation with Darden;

 

•

increase the compensation, bonus, severance, retention, or termination pay payable or that could become payable to any current or former directors, officers or employees or consultants, other than increases of compensation or bonus in the ordinary course of business consistent with past practices for any employee below the level of vice president;

 

•

pay any benefit not required to be paid by any employee benefit plan;

 

•

grant, amend or modify any equity awards;

 

•

hire or engage any officer, employee or individual consultant with an annual base compensation or annual fees of more than $100,000, in each case, other than to fill a vacant position at compensation that does not exceed that of the previous holder of such vacant position;

 

•

settle any pending or threatened proceeding, except for the settlement of any proceeding that (A) is for solely monetary payments by us or our subsidiaries of no more than $250,000 individually or $1 million in the aggregate and does not impose any material non-monetary obligations on us or our subsidiaries, (B) is transaction litigation and settled in compliance with the merger agreement, or (C) involves any dispute between one or more of Darden or Merger Sub, on the one hand, and us, on the other hand;

 

•

materially change our methods, principles or practices of financial accounting or annual accounting period except as required by GAAP, or applicable law or any governmental authority;

 

•

make any tax election that is inconsistent with past practice, revoke or change any tax election, change any method of tax accounting, file any amended tax return or take action to surrender any claim for a refund of taxes that, in each case, individually or in the aggregate, (A) would materially and adversely affect the tax liability of us or of our subsidiaries; (B) change the entity classification of any subsidiary; or (C) consent to any extension or waiver of the limitation period applicable to any material tax claim or assessment (other than any automatic extension of time in which to file a tax return);

 

•

incur or commit to incur any capital expenditures in excess of $500,000 individually and $1.5 million in the aggregate other than consistent with the capital expenditure budget for the fiscal year 2024, pursuant to obligations imposed by any contract in effect as of the date of the merger agreement or emergency capital expenditures necessary to maintain the operations of our business and properties as currently conducted;

 

64

•

enter into, modify in any material respect, amend in any material respect, terminate (other than any material contact or real property lease or other restaurant lease that has expired in accordance with its terms) or waive any material rights or material claims under any material contract, real property lease or other restaurant lease except, in each case, for renewals of any material contract, real property lease or other restaurant lease on substantially similar terms;

 

•

enter into any franchise agreement or grant to any person the right to engage in or carry on a business, or to sell or offer to sell any product or service, under or in association with any trademark, advertising or commercial symbol which constitutes a franchise, regardless of the jurisdiction in which the franchised business is located or operated, or any other law regulating the offer or sale of franchises, business opportunities or seller-assisted marketing plans;

 

•

engage in any transaction with, or enter into any agreement, arrangement or understanding with, any of our affiliates or other related person that would require disclosure pursuant to applicable SEC rules;

 

•

acquire (by merger, consolidation or acquisition of stock or assets) any other person or any material equity interest in any other person or a material amount of assets in any one transaction or series of related transactions, other than acquisitions (A) of raw materials, supplies, equipment, furniture, fixtures or inventory from vendors or suppliers for consumption or use in the ordinary course of business consistent with past practice or (B) that do not exceed $100,000 in the aggregate;

 

•

lease, acquire or sell, or enter into any contract to lease, acquire or sell, any real property or any interest therein for an aggregate payment that exceeds $100,000 in any one transaction or series of related transactions, in each case, without prior good faith consultation with Darden;

 

•

sell, assign, license, lease, transfer, abandon or otherwise dispose of, or create any lien on (other than a permitted lien), or otherwise dispose of, any of our or our subsidiaries’ material tangible assets, other than such sales, assignments, licenses, leases, transfers, liens or other dispositions (A) in the ordinary course of business consistent with past practice, (B) that are sales or other dispositions of equipment that is no longer used by us or our subsidiaries in the operation of our and their respective businesses, or (C) that have neither a fair market value of the assets nor an aggregate purchase price that exceeds $100,000 in any one transaction or series of related transactions;

 

•

sell, assign, lease, license, sublicense, terminate, abandon, waive, allow to lapse, or otherwise transfer or dispose of, or create or incur any lien, other than certain permitted liens, on or grant any interest in or rights with respect to, any material intellectual property;

 

•

close any restaurants, other than temporary closures in the ordinary course of business consistent with past practice or as required by applicable law or order;

 

•

fail to use commercially reasonable efforts to maintain in full force and effect material insurance policies covering us and our subsidiaries and our and their respective directors, officers, properties, assets, and businesses in a form and amount consistent with past practice in all material respects;

 

•

establish, adopt, enter into, or amend any collective bargaining agreement (or recognize or certify any labor union, labor organization, works council or group of employees as the bargaining representative for any employees of us or our subsidiaries);

 

•

implement any employee layoffs that trigger the Worker Adjustment and Retraining Notification Act of 1988; or

 

•

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

 

65

SOLICITATION OF OTHER OFFERS

For purposes of the merger agreement:

 

•

“acceptable confidentiality agreement” means a confidentiality agreement between us and any third party containing terms no less favorable, in the aggregate, to us than the terms of the confidentiality agreement between us and Darden; provided, however, that such confidentiality agreement (i) may contain provisions that permit us to comply with the merger agreement, (ii) will not in any way restrict us or our representatives from complying with our and their respective obligations under the merger agreement, (iii) need not contain any “standstill” or similar provisions or otherwise prohibit the making of any acquisition proposal and (iv) will not require us or any of our subsidiaries to reimburse the costs or expenses of any person.

 

•

“acquisition proposal” means any bona fide written offer or proposal from any third party relating to any transaction or series of related transactions involving:

 

•

direct or indirect purchase or other acquisition (whether in a single transaction or a series of related transactions) by any third party, whether from us or any other person(s), of shares of our common stock representing more than 20% of our common stock outstanding after giving effect to the consummation of such purchase or other acquisition, including pursuant to a tender offer or exchange offer by any third party that, if consummated in accordance with its terms, would result in a third party beneficially owning more than 20% of our common stock outstanding after giving effect to the consummation of such tender or exchange offer,

 

•

direct or indirect purchase or other acquisition (whether in a single transaction or a series of related transactions) by any third party, or stockholders or other equity holders of any such third party, of more than 20% of our and our subsidiaries’ consolidated assets, taken as a whole (measured by the fair market value thereof as of the date of such purchase or acquisition), or

 

•

merger, amalgamation, consolidation, share exchange, business combination, recapitalization, reorganization, liquidation, dissolution or other transaction involving us or any of our subsidiaries pursuant to which any third party, or stockholders or equity holders of any third party, would hold shares of our common stock representing more than 20% of our common stock outstanding or obtain more than 20% of our and our subsidiaries’ consolidated assets taken as a whole (measured by the fair market value thereof as of the date of such purchase or acquisition), in each case, after giving effect to the consummation of such transaction.

 

•

“alternative acquisition agreement” means any letter of intent, memorandum of understanding, agreement in principle, acquisition agreement, merger agreement, share purchase agreement, asset purchase agreement, share exchange agreement, option agreement or other similar definitive agreement (but excluding an acceptable confidentiality agreement) relating to an acquisition proposal.

 

•

“superior proposal” means any written acquisition proposal (with all references to 20% in the definition of acquisition proposal being deemed to be references to 50%) on terms that our board of directors determines in good faith, after consultation with its financial advisors and outside legal counsel, and taking into account the changes, if any, to the merger agreement proposed by Darden pursuant to its matching right, (1) if consummated, would be more favorable, from a financial point of view, to our stockholders than the merger (taking into account all relevant legal, regulatory, financial, timing, financing, conditionality and other aspects of such acquisition proposal) and (2) is reasonably likely to be consummated in accordance with its terms.

 

66

Go-Shop Period

Under the merger agreement, during the period from the date of the merger agreement until the No-Shop Period Start Date, which we refer to as the “go-shop period,” we, our subsidiaries and our representatives had the right to, subject to the terms of the merger agreement:

 

•

solicit, initiate, encourage or facilitate any inquiry, discussion, offer, request, negotiation or proposal that constitutes, or could reasonably be expected to result in, an acquisition proposal, including by providing information and data (including non-public information and data) relating to us or our subsidiaries and affording access to the business, properties, assets, books, records and personnel of the company and its subsidiaries to any third party (and such third party’s representatives, including potential financing sources) pursuant to an acceptable confidentiality agreement; and

 

•

engage in, enter into, continue, or otherwise participate in discussions or negotiations with any third party (and such third party’s representatives, including potential financing sources) with respect to any acquisition proposal.

The go-shop period ended, and the No-Shop Period Start Date occurred, at 11:59 p.m., New York City time, on August 16, 2024.

No-Shop Period

From the No-Shop Period Start Date until the earlier of the termination of the merger agreement and the effective time, we agreed that we will not and will cause each of our subsidiaries and our and their officers and directors not to, and will not authorize and will direct and use commercially reasonable efforts to cause our or their representatives not to, directly or indirectly:

 

•

solicit, initiate, encourage or facilitate any acquisition proposal or any inquiry, discussion, offer, request, negotiation or proposal that constitutes, or could reasonably be expected to result in, an acquisition proposal, including by providing information (including non-public information and data) relating to us or any of our subsidiaries or affording access to the business, properties, assets, books, records or personnel of the company or its subsidiaries to any third party (or such third party’s representatives);

 

•

engage in, enter into, or otherwise participate in any discussions or negotiations with any third party (or such third party’s representatives) with respect to an acquisition proposal or any inquiry, discussion, offer, request, negotiation, or proposal that constitutes, or could reasonably be expected to result in, an acquisition proposal;

 

•

approve or recommend an acquisition proposal;

 

•

enter into any alternative acquisition agreement or any letter of intent, memorandum of understanding, agreement in principle, acquisition agreement, merger agreement, share purchase agreement, asset purchase agreement, share exchange agreement, option agreement or other similar definitive agreement requiring us to abandon, terminate or fail to complete the transactions contemplated by the merger agreement; or

 

•

propose or agree to do any of the foregoing.

Furthermore, from the No-Shop Period Start Date until the earlier of the termination of the merger agreement and the effective time, we agreed to, and to cause each of our subsidiaries and our and their officers and directors to, and to direct and use our reasonable best efforts to cause our and their other representatives to, immediately:

 

•

cease any solicitations, discussions, negotiations, or communications with any third party with respect to any acquisition proposal or any inquiry, discussion, offer, request, negotiation, or proposal that constitutes, or could reasonably be expected to result in, an acquisition proposal;

 

67

•

request the prompt return or destruction of all non-public information and data concerning the company or its subsidiaries previously furnished to any such third party (or such third party’s representatives, including potential financing sources) with whom a confidentiality agreement was entered into at any time within the one-year period immediately preceding the No-Shop Period Start Date;

 

•

cease providing any further information or access with respect to us and our subsidiaries or otherwise in connection with any acquisition proposal or any inquiry, discussion, offer, request, negotiation, or proposal that constitutes, or could reasonably be expected to result in, an acquisition proposal to any such third party (or such third party’s representatives, including potential financing sources); and

 

•

terminate all access granted to any such third party (or such third party’s representatives, including potential financing sources) to any physical or electronic data room.

Notwithstanding these restrictions, which we refer to as the “no-shop restrictions,” after the No-Shop Period Start Date and prior to the time the requisite stockholder vote is obtained, we, our subsidiaries and our representatives may engage or otherwise participate in discussions or negotiations with such third party (and such third party’s representatives, including potential financing sources) in response to an unsolicited written bona fide acquisition proposal from a third party that did not result from a breach (other than a de minimis breach) of the no-shop restrictions, and may furnish information to such third party if (1) our board of directors has determined in good faith, after consultation with the company’s independent financial advisors and outside legal counsel, that such acquisition proposal constitutes or is reasonably expected to result in a superior proposal and failure to take such action would be inconsistent with the board of directors’ fiduciary duties under applicable law, (2) we enter into an acceptable confidentiality agreement with such third party, and (3) any non-public information that is provided to such third party not previously provided to Darden is promptly provided to Darden.

From and after the No-Shop Period Start Date, we are also required to notify Darden promptly (but in no event later than 36 hours after the occurrence thereof) of the receipt of any acquisition proposal or any request for non-public information or data regarding us or any of our subsidiaries by any third party that informs us that it is making, has made or is considering making an acquisition proposal or any other inquiry, discussion, offer, request, negotiation or proposal that constitutes, or could reasonably be expected to result in, an acquisition proposal, or any request from any third party seeking non-public information or to have discussions or negotiations with us or our representatives regarding a possible acquisition proposal or that we determine would be reasonably expected to lead to an acquisition proposal. We will also promptly (and in any event within 36 hours) notify Darden in writing if we enter into discussions or negotiations concerning any acquisition proposal or provide no-public information or data to any third party, of any change to the financial and other material terms and conditions of any such acquisition proposal and otherwise keep Darden reasonably informed of the status and terms of any such acquisition proposal or any inquiry, discussion, offer, request, negotiation or proposal that constitutes, or could reasonably be expected to result in, an acquisition proposal on a reasonably current basis, including by providing a copy of all written proposals, counter-proposals, written offers, drafts of proposed agreements and material correspondence relating thereto.

CHANGE IN BOARD RECOMMENDATION

As described under “The Merger—Reasons for Our Board’s Recommendation in Favor of the Merger” beginning on page 29, and subject to the provisions described below, our board of directors has unanimously recommended that our stockholders vote “FOR” the proposal to adopt the merger agreement.

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

 

•

change, withhold, withdraw, or modify or qualify in any manner adverse to Darden or Merger Sub, or resolve to or publicly propose or announce its intention to change, withhold, withdraw, or modify or qualify in a manner adverse to Darden or Merger Sub, the board recommendation;

 

68

•

approve, adopt, or recommend or resolve to or publicly propose or announce its intention to approve, adopt or recommend, any acquisition proposal;

 

•

fail to include the board recommendation in this proxy statement;

 

•

within 10 business days of Darden’s written request, fail to make or reaffirm the board recommendation following the date any acquisition proposal or any material modification thereto is first disclosed or given to the company’s stockholders (and no more than once in connection with any such modification);

 

•

fail to recommend, in a Solicitation/Recommendation Statement on Schedule 14D-9, against any acquisition proposal that is a tender offer or exchange offer subject to Regulation 14D promulgated under the Exchange Act within 10 business days after the commencement of such tender offer or exchange offer; or

 

•

publicly propose or agree to any of the foregoing.

Notwithstanding the no-shop restrictions, at any time prior to the time the company stockholder approval is obtained, our board of directors may, (x) effect an adverse recommendation change in response to an intervening event or if the company has received a written bona fide acquisition proposal that did not result from a breach (other than a de minimis breach) of the no-shop restrictions and that the board of directors has determined, after consultation with the company’s outside legal counsel and independent financial advisors, constitutes a superior proposal and/or (y) terminate the merger agreement in order to enter into an alternative acquisition agreement providing for such superior proposal. Our board of directors is permitted to take these actions if and only if:

 

•

we have complied in all material respects with the no-shop restrictions;

 

•

the board of directors has determined, after consultation with the company’s outside legal counsel, that the failure to take such action would reasonably be expected to be inconsistent with the directors’ duties under applicable law;

 

•

we have provided prior written notice to Darden stating that the board of directors intends to take such action and the basis therefor, which notice shall describe the intervening event in reasonable detail or identify the third party making the superior proposal, describe the material terms and conditions of such superior proposal and include, to the extent applicable, copies of all relevant material documents relating to such superior proposal (including any proposed merger or other agreement, financing documents and commitment letters), as applicable;

 

•

during the four business days following Darden’s receipt of such notice, we will negotiate, and cause our representatives to negotiate, with Darden (to the extent Darden desires to negotiate) to make such adjustments in the terms and conditions of the merger agreement so that, (x) in the case of an intervening event, the failure to effect such adverse recommendation change would no longer reasonably be expected to be inconsistent with the directors’ duties under applicable law and (y) in the case of a superior proposal, such acquisition proposal ceases to constitute a superior proposal; and

 

•

following such four business day period, our board of directors has determined, after consultation with the company’s outside legal counsel and independent financial advisors, and taking into account any changes to the merger agreement or the transactions contemplated thereby proposed by Darden in response to the notice or otherwise, that the failure of the board of directors to effect an adverse recommendation change and/or terminate the merger agreement would reasonably be expected to be inconsistent with the directors’ duties under applicable law and, with respect to a superior proposal, that such acquisition proposal continues to constitute a superior proposal.

As used in the merger agreement, “intervening event” means a material change, event, effect, development, condition, occurrence or circumstance that was not known (or if known, the magnitude or material consequences of which were unknown and not reasonably foreseeable) by our board of directors as of the date of the merger

 

69

agreement, and which change, event, effect, development, condition, occurrence or circumstance (or consequences thereof) becomes known to our board of directors after the date of the merger agreement and prior to obtaining the company stockholder approval.

COMPANY STOCKHOLDERS’ MEETING

Subject to the relevant provisions of the merger agreement, including our board of directors’ right to change its recommendation in favor of the merger and our right to terminate the merger agreement to enter into a definitive agreement with respect to a superior proposal, as described in the section entitled “Change in Board Recommendation” beginning on page 68, we have agreed to (1) duly call, convene and hold the special meeting as promptly as reasonably practicable after the expiration of the SEC’s 10-day waiting period or the date the company learns the SEC has no further comments, and in no event will the meeting be held later than 45 days following the date the proxy statement is mailed to stockholders, (2) recommend that our stockholders vote to adopt the merger agreement, and (3) use our commercially reasonable efforts to solicit from our stockholders proxies in favor of the adoption of the merger agreement and, in any event, shall ensure that all proxies solicited by or on behalf of the company in connection with the special meeting are solicited in compliance, in all material respects, with all applicable laws.

EMPLOYEE MATTERS

From the effective time until 90 days thereafter, Darden or one of its affiliates will provide each of our employees immediately prior to the merger that continues to be an employee of Darden or one of its subsidiaries (including the surviving corporation) following the effective time (each a “continuing employee”) and who is not an hourly restaurant employee, (1) an annual base salary or base wage rate, as applicable, and (2) target annual cash incentive opportunities (if any) under the company’s bonus plan as is in effect at the effective time that are no less favorable in the aggregate than these provided to such continuing employees immediately prior to the effective time. During the period beginning immediately after 90 days after the closing and ending one year after the closing, Darden or one of its affiliates will provide each continuing employee total direct compensation, consisting of (1) an annual base salary or base wage rate, as applicable, (2) target annual cash incentive opportunities (if any) under Darden’s bonus plan as then in effect and (3) an equity grant (if any) at target, that is substantially comparable in the aggregate to the total direct compensation provided to similarly-situated employees of Darden and its affiliates; provided, however, that the cash incentive or bonus opportunities for continuing employees who participated in a bonus plan (as defined below) as of immediately prior to the effective time will be governed by the following paragraph.

Darden or one of its affiliates will continue to maintain our Senior Management Incentive Plan, Supervisor Bonus Plan, Vice President Bonus Plan and Corporate Bonus Plan, which we refer to as our “bonus plans,” until December 29, 2024, and will honor and payout any bonuses thereunder either (1) at target, with respect to any bonus plan (or portion thereof) based on overall company performance, or (2) as determined based on actual performance, with respect to any bonus plan (or portion thereof) based on any metric other than overall company performance, in each case, in accordance with the terms of such bonus plan. From and after December 30, 2024, until the first anniversary of the closing, any continuing employee who participated in a bonus plan shall be eligible to participate in or to receive partial-year bonus opportunities substantially comparable to participants in a comparable management incentive plan of similarly-situated employees of Darden and its affiliates.

From and after the effective time through June 30, 2025, Darden or one of its affiliates will provide to each continuing employee who is an hourly restaurant employee total cash compensation no less favorable in the aggregate than the total cash compensation provided to such continuing employee immediately prior to the effective time.

Darden or one of its affiliates will honor any written employment agreements existing as of the date of the merger agreement, honor and recognize all earned but unused vacation, sick leave, and similar paid time off

 

70

earned by each continuing employee as of the effective time, and provide to each continuing employee any severance benefits provided to similarly-situated employees of Darden and its affiliates in connection with previous acquisitions.

From and after the effective time through June 30, 2025, Darden or one of its affiliates will provide each continuing employee with employee benefits, excluding severance, that are substantially similar to the employee benefits to which such continuing employee was entitled as of immediately prior to the effective time. From June 30, 2025 through the first anniversary of the closing date, Darden or one of its affiliates will provide each continuing employee with employee benefits that are substantially comparable in the aggregate to those provided to other similarly-situated employees of Darden and its affiliates.

The merger agreement provides that, to the extent that any employee benefit plans sponsored by Darden or one of its affiliates are made available to any continuing employee, Darden and its subsidiaries (including the surviving corporation) will use commercially reasonable efforts to credit such continuing employee for all service with us and our subsidiaries prior to the effective time for purposes of eligibility to participate, vesting and entitlement to benefits where length of service is relevant, except as would result in duplication of coverage or benefits for the same period of service.

In addition, Darden will use commercially reasonable efforts to (i) ensure each continuing employee is immediately eligible to participate, without any waiting period or other eligibility requirement, in any and all new employee benefit plans sponsored by Darden or its affiliates to the extent that coverage under such new plans replaces coverage under a corresponding employee benefit plan of the Company in which the continuing employee participates prior to the effective time, (ii) waive any waiting periods, preexisting conditions, exclusions, evidence of insurability requirements and activity-at-work or similar requirements applicable to such continuing employee and their eligible dependents under any employee benefits plans providing life insurance, medical, dental, pharmaceutical, vision or disability benefits, (iii) cause full credit to be given for any eligible expenses incurred by each continuing employee or their covered dependents during the calendar year in which the closing of the merger occurs, to the same extent recognized under any comparable plan of the Company prior to the closing date, as if such amounts had been paid under and in accordance with any similar plans maintained by Darden or its affiliates, and (iv) credit the accounts of such continuing employee pursuant to any flexible spending plan maintained by Darden or its affiliates with any unused balance in the account of such continuing employee pursuant to any corresponding plan of the Company.

INDEMNIFICATION AND INSURANCE

Effective as of the effective time, Darden will purchase, at a price not to exceed 300% of the amount per annum the company paid for such insurance in its last full fiscal year prior to the date of the merger agreement, a directors’ and officers’ liability insurance “tail” or “runoff” insurance program for a period of six years after the effective time with respect to wrongful acts and/or omissions committed or allegedly committed by covered persons at or prior to the effective time. Such coverage shall have an aggregate coverage limit over the term of such policy in an amount not to exceed the annual aggregate coverage limit under the company’s and its subsidiaries’ existing directors’ and officers’ liability policy, and in all other material respects shall be comparable to such existing coverage.

From and after the effective time, Darden will cause the surviving corporation and its subsidiaries to honor and perform all of the obligations of the company and our subsidiaries, to the fullest extent permissible under applicable law, under the company’s organizational documents and the organizational documents of the company’s subsidiaries in effect on the date of the merger agreement, and under any indemnification or other similar agreements in effect on the date of the merger agreement, to indemnify and advance expenses to their respective directors, officers and other persons covered by such organizational documents or agreements arising out of or relating to actions or omissions in such capacity at or prior to the effective time, including in connection with the approval of the merger agreement and the transactions contemplated thereby.

 

71

From the effective time through the sixth anniversary thereof, the charter documents of the surviving corporation will contain provisions no less favorable with respect to indemnification, advancement of expenses and exculpation of covered persons for periods at or prior to the effective time than are currently set forth in the company’s organizational documents.

EFFORTS TO COMPLETE THE MERGER

We and Darden have each agreed to use our respective reasonable best efforts to take, or cause to be taken, all actions, do (or cause to be done) all things and assist and cooperate with the other parties in doing (or causing to be done) all things, in each case, as are necessary, proper or advisable pursuant to applicable law or otherwise to complete and make effective the merger, as promptly as practicable, and in any event prior to the end date, including by (A) obtaining all consents, licenses, permits, waivers, clearances, approvals, orders and authorizations required to be obtained from any governmental authority, and (B) making all required registrations, declarations and filings with any governmental authority, in each case that are necessary or advisable to complete the transactions contemplated by the merger agreement (in each case, other than with respect to any matters relating to the HSR Act).

COORDINATION ON LITIGATION

We have agreed to provide Darden with prompt notice of any transaction litigation and keep Darden reasonably informed with respect to the status thereof. We will (1) give Darden the opportunity to participate, at its own expense, in the defense, settlement or prosecution of any transaction litigation, and (2) consult with Darden with respect to the defense, settlement and prosecution of any transaction litigation. We will not compromise, settle, or come to an arrangement regarding, or agree to compromise, settle, or come to an arrangement regarding, any transaction litigation unless Darden has consented thereto in writing (which consent will not be unreasonably withheld, conditioned, or delayed).

OTHER COVENANTS AND AGREEMENTS

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

CONDITIONS TO COMPLETION OF THE MERGER

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

 

•

obtaining the company stockholder approval of the merger agreement;

 

•

the absence of any order that is in effect (whether temporary, preliminary, or permanent) issued by any governmental authority having jurisdiction over us, Darden, or Merger Sub or any applicable law adopted and continuing in effect that would restrain, enjoin, or otherwise prevent or prohibit the completion of the merger; and

 

•

the expiration or early termination of the waiting period applicable to the completion of the merger under the HSR Act.

The obligations of Darden and Merger Sub to complete the merger are subject to the satisfaction or waiver (to the extent permitted by applicable law) at or prior to the closing of the following additional conditions:

 

•

the accuracy of the representations and warranties of the company, subject to certain materiality qualifiers;

 

72

•

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

 

•

the absence, since the date of the merger agreement, of the occurrence and continuance of a material adverse effect; and

 

•

our having delivered to Darden a certificate signed on behalf of the company by an authorized officer of the company, certifying to the satisfaction of the foregoing conditions.

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

 

•

the accuracy of the representations and warranties of Darden and Merger Sub, except where the failure of such representations and warranties to be so true and correct would not reasonably be expected to prevent or materially delay the ability of Darden and Merger Sub to perform their respective obligations under the merger agreement or to complete the merger;

 

•

Darden and Merger Sub having performed and complied in all material respects with all covenants required to be performed or complied with under the merger agreement on or prior to the closing date; and

 

•

Darden has delivered to us a certificate, signed on behalf of Darden by an authorized officer of Darden, certifying to the satisfaction of the foregoing conditions.

EXPENSES

In general, all fees and expenses incurred in connection with the merger agreement shall be paid by the party incurring such cost or expenses, whether or not the merger is completed. However, Darden has agreed to pay all filing fees for the filings under the HSR Act.

TERMINATION

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

 

•

by either us or Darden, if:

 

•

the merger is not completed on or before February 17, 2025, which we refer to as the “end date”;

 

•

any governmental authority of competent jurisdiction has issued a final and non-appealable order or taken any other final action permanently enjoining, restraining, or otherwise prohibiting the completion of the merger; or

 

•

our stockholders do not approve the merger agreement at the special meeting.

 

•

by us, if:

 

•

there is a breach by Darden or Merger Sub of any representation, warranty, covenant, or other agreement contained in the merger agreement that (i) would result in any condition to closing not being satisfied and (ii) has not been cured prior to the earlier of the end date or the 30th calendar day following our written notice describing such breach to Darden; or

 

•

prior to obtaining the company stockholder approval, the board of directors has effected an adverse recommendation change in order to enter into an alternative acquisition agreement providing for a superior proposal and we pay Darden a termination fee.

 

73

•

by Darden, if:

 

•

there is a breach by us of any representation, warranty, covenant, or other agreement contained in the merger agreement that (i) would result in any condition to closing not being satisfied and (ii) has not been cured prior to the earlier of the end date or the 30th calendar day following Darden’s written notice describing such breach to us; or

 

•

prior to obtaining the company stockholder approval, the board of directors has effected an adverse recommendation change, provided that the exercise of such termination right by Darden must occur within 10 business days after the board of directors makes an adverse recommendation change or we materially breach the no-shop restrictions in the merger agreement.

If the merger agreement is terminated as described above, the merger agreement will become void and of no effect, without liability of any party (or any representative of such party) to any other party, except for certain specified provisions of the merger agreement that survive such termination, including, among others, the provisions of the merger agreement related to termination fees. Nothing in the merger agreement will relieve any party from liability for any intentional and material breach or an intentional and material failure to perform, in each case that is the consequence of an act or omission by a party with the knowledge that the taking of such act or failure to take such act would cause a breach of the merger agreement prior to such termination.

TERMINATION FEES

We have agreed to pay Darden a termination fee of $11,210,529 if, prior to the 10^th day after the No-Shop Period Start Date, we terminate the merger agreement to enter into an agreement providing for a superior proposal with a party who submitted a written bona fide acquisition proposal after the date we entered into the merger agreement and before the No-Shop Period Start Date, which we refer to as a “Go-Shop Termination”.

We have also agreed to pay Darden a termination fee of $22,421,057 if:

 

•

prior to obtaining the company stockholder approval, we terminate the merger agreement to enter into an agreement providing for a superior proposal other than in connection with a Go-Shop Termination;

 

•

prior to obtaining the company stockholder approval, Darden terminates the merger agreement because of an adverse recommendation change, provided that such termination must occur within 10 business days of such adverse recommendation change, or if we materially breach the “no-shop” restrictions in the merger agreement, which we refer to as an Adverse Recommendation Change Termination;

 

•

we or Darden terminate the merger agreement because the company stockholder approval was not obtained at the special meeting and Darden would have also been entitled to terminate the merger agreement because of an Adverse Recommendation Change Termination; or

 

•

(A)(i) the merger agreement is terminated by us or Darden because the transactions contemplated by the merger agreement were not completed on or before the end date, (ii) the merger agreement is terminated by us or Darden because the company stockholder approval was not obtained or (iii) Darden terminates the merger agreement because the we breached any representation, warranty, covenant or agreement in the merger agreement and did not timely cure such breach, (B) an acquisition proposal has been publicly disclosed (and not publicly withdrawn), and (C) we consummate an acquisition proposal within 12 months of such termination or we enter into a definitive agreement for an acquisition proposal within 12 months of such termination, which transaction is ultimately consummated.

SPECIFIC ENFORCEMENT

Prior to the valid termination of the merger agreement, each of Darden, Merger Sub and Chuy’s is entitled to an injunction or injunctions to prevent or remedy any breaches or threatened breaches of the merger agreement by any other party or to enforce specifically the performance of the terms and provisions of the merger agreement.

 

74

ASSIGNMENT

Except as provided in the following sentence, the merger agreement may not be assigned (whether by operation of law or otherwise) by any of the parties to the merger agreement without the prior written consent of the other parties to the merger agreement.

Darden or Merger Sub may transfer or assign its rights and obligations under the merger agreement, in whole or from time to time in part, to (1) one or more of its affiliates at any time or (2) at or after the effective time, to any debt financing sources for purposes of creating a security interest in the merger agreement or otherwise assigning the merger agreement as collateral in respect of such secured debt financing.

No such assignment by Darden or Merger Sub will relieve such party of any of its obligations under the merger agreement.

AMENDMENT AND MODIFICATION

Any provision of the merger agreement may be amended or waived prior to the effective time if, but only if, such amendment or waiver is in writing and is signed, in the case of an amendment, by each party to the merger agreement or, in the case of a waiver, by each party against whom the waiver is to be effective; provided, however, that following receipt of stockholder approval, no amendment may be made that requires the further approval of the company’s stockholders under the DGCL unless the required further approval is obtained.

GOVERNING LAW

The merger agreement is governed by and construed in accordance with the laws of the State of Delaware.

 

75

THE MERGER PROPOSAL (PROPOSAL #1)

The information below regarding the merger proposal should be read together with the rest of this proxy statement, particularly “The Special Meeting” beginning on page 16, “The Merger” beginning on page 21, “The Merger Agreement” beginning on page 58, and the copy of the merger agreement attached as Appendix A.

VOTE ON ADOPTION OF THE MERGER AGREEMENT

We are asking you to approve a proposal to adopt the merger agreement. A copy of the merger agreement is attached as Appendix A. For a discussion of the terms and conditions of the merger agreement, see the section entitled “The Merger Agreement” beginning on page 58. For a discussion of other considerations related to the merger, see the section entitled “The Merger” beginning on page 21.

VOTE REQUIRED FOR APPROVAL

To be approved, the merger proposal requires the affirmative vote of a majority of the outstanding common stock.

Abstentions and broker non-votes will have the same effect as a vote “AGAINST” the proposal.

BOARD RECOMMENDATION

Our board of directors unanimously recommends that you vote “FOR” approval of the merger proposal. For a summary of the reasons for our board of directors’ recommendation, see “The Merger—Reasons for Our Board’s Recommendation in Favor of the Merger” beginning on page 29.

 

76

THE ADVISORY COMPENSATION PROPOSAL (PROPOSAL #2)

The information below regarding the advisory compensation proposal should be read together with the rest of this proxy statement, particularly “The Special Meeting” beginning on page 16, and “The Merger—Interests of Our Directors and Executive Officers in the Merger” beginning on page 44.

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

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

For purposes of this proposal, our named executive officers and their respective merger-related compensation that is the subject of the advisory compensation proposal are set forth in “The Merger—Interests of Our Directors and Executive Officers in the Merger—Quantification of Payments and Benefits to Named Executive Officers” beginning on page 47, including the footnotes to the table and related narrative discussion.

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

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

The vote on this proposal is separate and apart from the vote on the proposal to adopt the merger agreement and is not a condition to completion of the merger. Accordingly, you may vote to adopt the merger agreement and vote not to approve the advisory compensation proposal, or you may vote not to adopt the merger agreement and vote to approve the advisory compensation proposal.

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

The disclosure of the merger-related compensation subject to this proposal is required to be disclosed pursuant to Item 402(t) of Regulation S-K under the Exchange Act. The non-binding, advisory vote on this proposal is required by Section 14A of the Exchange Act and the SEC rules thereunder.

VOTE REQUIRED FOR APPROVAL

To be approved, the advisory compensation proposal requires the affirmative vote of the majority of the votes of the shares present in person or represented by proxy at the meeting and entitled to vote on the subject matter.

An abstention will have the same effect as a vote “AGAINST” this proposal. Broker non-votes will not have an effect on this proposal.

BOARD RECOMMENDATION

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

 

77

THE ADJOURNMENT PROPOSAL (PROPOSAL #3)

The information below regarding the adjournment proposal should be read together with the rest of this proxy statement, particularly “The Special Meeting—Adjournment” beginning on page 16.

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

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

If our stockholders approve the adjournment proposal, we could adjourn the special meeting and any adjourned session of the special meeting and use the additional time to solicit additional proxies, including the solicitation of proxies from stockholders that have previously returned properly executed proxies voting against adoption of the merger agreement. Among other things, approval of the adjournment proposal could mean that, even if we had received proxies representing a sufficient number of votes against adoption of the merger agreement such that the proposal to adopt the merger agreement would be defeated, we could adjourn the special meeting without a vote on the adoption of the merger agreement and seek to convince the holders of those shares to change their votes to votes in favor of adoption of the merger agreement.

VOTE REQUIRED FOR APPROVAL

To be approved, the adjournment proposal requires the affirmative vote of holders of a majority of the shares present in person or represented by proxy at the meeting.

An abstention will have the same effect as a vote “AGAINST” this proposal. Broker non-votes will not have an effect on this proposal.

BOARD RECOMMENDATION

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

 

78

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The tables below set forth the beneficial ownership information of our common stock as of August 9, 2024, for:

 

•

each of our named executive officers;

 

•

each of our directors;

 

•

all of our executive officers and directors as a group; and

 

•

each person known to us to be the beneficial owner of more than 5% of our shares of common stock.

Unless otherwise noted below, the address of the persons and entities listed in the tables is c/o Chuy’s Holdings, Inc., 1623 Toomey Rd., Austin, Texas 78704. We have determined beneficial ownership in accordance with the rules of the SEC. Except as indicated by the footnotes below, we believe, based on the information furnished to us, that the persons and entities named in the table below have sole voting and investment power with respect to all shares of common stock reflected as beneficially owned, subject to applicable community property laws.

Beneficial ownership and percentage of beneficial ownership is based on 17,230,823 shares of our common stock outstanding as of August 9, 2024. Shares of common stock subject to options or restricted stock units that a person has the right to acquire or receive within 60 days of August 9, 2024 are deemed to be outstanding and beneficially owned by the person holding the options or restricted stock units for the purpose of computing the percentage of beneficial ownership of that person and any group of which that person is a member, but are not deemed outstanding for the purpose of computing the percentage of beneficial ownership for any other person.

 

Directors and Named Executive Officers		Number of Shares Beneficially Owned				Percent of Class (1)
Steve Hislop			130,083				*
Jon Howie (2)			85,712				*
John Korman (3)			10,856				*
John Mountford			16,332				*
Michael Hatcher			28,405				*
Saed Mohseni			13,007				*
Ira Zecher			5,658				*
Randall Dewitt			9,580				*
Jody Bilney (4)			1,744				*
Nancy Freda-Smith			—				*
All Executive Officers and Directors as a Group (10 Persons) (5)			301,377				1.7	%

 

*

Less than one percent.

 

(1)	Based on 17,230,823 shares of our common stock outstanding as of August 9, 2024.

(2)	Shares beneficially owned by Mr. Howie include 3,100 shares owned by his spouse.

(3)	Includes 77 shares of common stock issuable upon vesting of restricted stock units within 60 days after August 9, 2024.

(4)	Includes 240 shares of common stock issuable upon vesting of restricted stock units within 60 days after August 9, 2024.

(5)	Includes 317 shares of common stock issuable upon vesting of restricted stock units within 60 days after August 9, 2024.

Five Percent Holders

The following table sets forth information regarding the number and percentage of shares of common stock held by all persons and entities who are known by the company to beneficially own five percent or more of the company’s outstanding common stock. The information regarding beneficial ownership of common stock by the

 

79

entities identified below is included in reliance on a report filed with the SEC by such entity, except that the percentages are based upon the company’s calculations made in reliance upon the number of shares reported to be beneficially owned by such entity in such report and the number of shares of common stock outstanding on August 9, 2024.

 

Name or Identity of Group		Number of Shares Beneficially Owned				Percent of Class (1)
BlackRock, Inc. (2)			2,955,162				17.2	%
Vanguard Group (3)			1,265,718				7.3	%
Macquarie Group Limited (4)			1,066,379				6.2	%
T. Rowe Price Investment Management, Inc. (5)			1,039,319				6.0	%
Dimensional Fund Advisors LP (6)			897,008				5.2	%

 

(1)	Based on 17,230,823 shares of our common stock outstanding as of August 9, 2024.

(2)

According to Amendment No. 2 to Schedule 13G filed on January 22, 2024 by BlackRock, Inc., BlackRock, Inc. beneficially owns and has sole dispositive power with respect to 2,955,162 shares of our common stock and has sole voting power with respect to 2,915,917 shares of our common stock. The address of BlackRock, Inc. is 50 Hudson Yards, New York, NY 10001.

(3)

According to Amendment No. 4 to Schedule 13G filed on February 13, 2024 by Vanguard Group, Vanguard Group beneficially owns 1,265,718 shares of our common stock and has sole dispositive power with respect to 1,220,205 shares of our common stock, and shared voting and dispositive power with respect to 29,400 and 45,513 shares of our common stock, respectively. The address of Vanguard Group is 100 Vanguard Blvd, Malvern, PA 19355.

(4)

According to Amendment No. 1 to Schedule 13G filed on February 14, 2024 by Macquarie Group Limited (“MGL”), Macquarie Management Holdings Inc. (“MMH”), and Macquarie Investment Management Business Trust (“MIMBT”), MGL beneficially owns 1,066,379 shares of our common stock and has no voting or dispositive power with respect to our shares, MMH beneficially owns 1,066,379 shares our common stock and has sole voting and dispositive power with respect to 1,066,379 shares of our common stock and MIMBT beneficially owns 1,066,379 shares of our common stock and has sole voting and dispositive power with respect to 1,066,379 shares of our common stock. The address of MGL is 50 Martin Place Sydney, New South Wales, Australia. The address of MMH and MIMBT is 610 Market Street, Philadelphia, PA 19106.

(5)

According to Amendment No. 3 to Schedule 13G filed on May 10, 2024 by T. Rowe Price Investment Management, Inc., as of April 30, 2024, T. Rowe Price Investment Management, Inc. beneficially owns and has sole dispositive power with respect to 1,039,319 shares of our common stock and has sole voting power with respect to 1,031,659 shares of our common stock. The address of T. Rowe Price Investment Management, Inc. is 101 East Pratt St., Baltimore, MD 21201.

(6)

According to Schedule 13G filed on February 9, 2024 by Dimensional Fund Advisors LP, Dimensional Fund Advisors LP beneficially owns and has sole dispositive power with respect to 897,008 shares of our common stock and has sole voting power with respect to 877,038 shares of our common stock. The address of Dimensional Fund Advisors LP is 6300 Bee Cave Road, Building One, Austin, TX 78746.

 

80

MARKET PRICES AND DIVIDEND DATA

THE MARKET FOR OUR COMMON STOCK

Currently, our shares of common stock are traded on Nasdaq under the symbol “CHUY.” As of the close of business on the record date there were    shares of our common stock outstanding, held by approximately    stockholders of record.

Following the merger, there will be no further market for our common stock. In particular, if the merger is completed:

 

•

Our stock will be delisted from Nasdaq and deregistered under the Exchange Act.

 

•

We will no longer file periodic reports with the SEC.

 

•

Out stock transfer books will be closed when the merger closes, and there will be no further registration of shares transfers on our stock transfer books.

 

•

Subject to appraisal rights (described above under “The Merger—Appraisal Rights” beginning on page 51), all shares of our common stock outstanding prior to the effective time will be automatically canceled and converted into the right to receive the merger consideration.

HISTORICAL MARKET PRICES

The following table sets forth on a per share basis the high and low sales prices for consolidated trading in our common stock as reported on the Nasdaq during each the quarters indicated.

 

		Price Range of Common Stock
		High				Low
Fiscal Year Ended December 25, 2022
Quarter Ended March 27, 2022		$	32.71				22.60
Quarter Ended June 26, 2022			28.33				18.64
Quarter Ended September 25, 2022			24.56				18.98
Quarter Ended December 25, 2022			34.64				22.40
Fiscal Year Ended December 31, 2023
Quarter Ended March 26, 2023		$	39.96				27.70
Quarter Ended June 25, 2023			43.17				33.11
Quarter Ended September 24, 2023			42.89				34.00
Quarter Ended December 31, 2023			39.41				31.60
Fiscal Year Ending December 31, 2024
Quarter Ended March 31, 2024		$	38.38				31.63
Quarter Ended June 30, 2024			34.13				25.2
Quarter Ending September 29, 2024 (through September [ ], 2024)			[	]			[	]

The closing price of our common stock on Nasdaq on July 16, 2024, the trading day before the public announcement of the merger agreement, was $25.35 per share. On September [ ], 2024, the latest practicable trading day before the printing of this proxy statement, the closing price of our common stock on Nasdaq was $[ ] per share. You are encouraged to obtain current market quotations for our common stock.

 

81