Importance for the firm

Acquisitions are the single most important event in most corporations’ existences. On a formal level, the corporation may cease to exist after the acquisition (see transactional technique below).

More importantly, however, most acquisitions profoundly affect the substantive organization of the business. This is especially so for the acquired firm (the “target”). The target’s management will usually leave (or be made to leave) following the acquisition. Often, business units are sold or shut down. But acquisitions tend to be major events for the acquirer as well, because the acquirer’s business may grow and change dramatically through the transaction.

Acquisitions are routine events only if the acquirer is much bigger than the target. (For example, big pharmaceutical companies frequently buy small biotechs or other startups to add to their technology portfolio.)

Importance for the social allocation of productive capacity

In a broader social perspective, acquisitions reallocate large pools of assets to different management and possibly different economic tasks (e.g., Google’s acquisition of Motorola; Facebook’s acquisition of Instagram).

Oftentimes, the capital structure of the corporation changes dramatically as well. This is particularly so in acquisitions or divestitures by so called “financial acquirers” — mainly private equity funds (acquirers who do not have a stand-alone line of business but specialize in acquiring and then improving existing companies).

Importance for corporate governance

From the perspective of corporate governance, the most important aspect of acquisitions may be their role as a governance device.

Takeovers have a direct effect on governance when a better-governed firm takes over a worse-governed firm. After the takeover, both firms’ assets will be managed under the former’s better governance structure.

But takeovers also have an indirect effect on governance. The threat of a takeover may incentivize boards to do a better job. If they don’t, the corporation’s stock price may fall below potential. This may create an opportunity for a potential acquirer to take over the firm at a profit. While this indirect effect is hard to measure, it may well be more important than the direct effect.

Hostile takeovers and takeover defenses

To be sure, the threat of a takeover would be empty if takeovers only occurred with the approval of the current management (so-called “friendly takeovers”). This is why “hostile takeovers”—  takeovers without the approval of current management — deserve special attention as a potentially potent governance device.

By definition, target management opposes hostile takeovers. Over time, target managers and their advisers have devised various “takeover defenses” to fend off such “attacks.” The defenses may be justified because hostile takeovers and the threat thereof can be abused to disrupt the target’s business. The defenses can also be an important bargaining tool to get a better price for target shareholders. At the same time, target management may use defenses merely to perpetuate itself in office and to blunt the governance mechanism of hostile takeovers. We will study an important string of cases struggling with the double-edged nature of takeover defenses— “entrenchment” on the one hand and legitimate protection of corporate interests on the other.

Most acquisitions are structured to involve a “merger” in a technical legal sense. In this sense, it would be more accurate to speak of “acquisitions by way of merger” instead of “mergers and acquisitions.”

A merger in this legal sense is the fusion of two corporations into one (cf. DGCL subchapter 9, especially sections 251, 259-261). The target merges with the acquirer or, more frequently, a wholly-owned subsidiary of the acquirer. The acquirer thus obtains control over the target’s assets directly (if the target merges with the acquirer) or indirectly (if the target merges into the acquirer’s subsidiary). The target shareholders obtain the merger consideration for their shares, if they have not already sold them earlier.

Because a merger tends to be such an important transaction, it generally requires approval by the board and a majority of the shareholders (DGCL 251(b)/(c)). Furthermore, shareholders can request to receive the “fair value” of their shares as appraised by the Chancery Court rather than the merger consideration (appraisal, cf. DGCL 262). There are, however, numerous exceptions and conditions – see Delaware Merger ABC below.

The shareholder approval requirement has major implications for deal structure and timing even if a clear majority of shareholders approves of the deal when it is signed. Properly calling a shareholder meeting and soliciting proxies takes time – usually several months. (You wouldn’t know this from DGCL 213(a) and 222 alone, but you need to factor in the time it takes to clear the proxy statement with the SEC [again, not a statutory or regulatory requirement but everybody does it] and then to solicit the proxies – at least 50% of the shareholder need to approve, DGCL 251©.) Many things can happen between signing and shareholder vote. Most importantly, a new bidder may arrive on the scene—usually to the (then) delight of the seller and dismay of the buyer

Question: Why do sellers tend to like the appearance of other bidders whereas bidders dread them?

A partial alternative is to structure the deal as a tender offer, i.e., an offer to all shareholders to sell (“tender”) their shares to the bidder at the price announced by the offeror (and, in a friendly deal, agreed by the target corporation’s board). Under SECrules, a tender offer must be open for at least 20 business days (rule 14e-1, see below), but it can still be quicker than calling a shareholder meeting. The tender offer is only a partial alternative because not all of the shares will be tendered, and so the offeror will have to conduct a follow-up merger to “squeeze out” (see below) the remaining shareholders. (But see now DGCL251(h), which greatly facilitates the post-tender squeeze-out – more on this below.)

Mergers vs. asset sales

The use of the merger technique is a choice of convenience (and possibly tax and accounting considerations, but those are beyond this course). The alternative to a merger is an asset sale, as in Hariton v. Arco Electronics below.

The hassles of asset sales

In an asset sale, the target transfers its assets individually to the acquirer. The sales contract must carefully describe all assets and employ transfer mechanisms compliant with the applicable transfer rules, which differ by asset type (e.g., personal property, real property, contracts, negotiable instruments, etc.). If the sales contract fails to do so, the acquirer will not obtain ownership rights in all the assets. Moreover, some assets cannot be transferred in this way without the affirmative approval of some third party. In particular, by default, contracts cannot be transferred without the approval of the contract counterparty. All of this makes asset sales extremely cumbersome. (Unless, of course, the assets are shares in one or more subsidiaries. That sort of asset sale would be very simple.)

An asset sale does have two potential advantages. First, dissenting shareholders do not get appraisal rights (cf. DGCL 262 and Hariton v. Arco Electronics below). Second, the acquirer does not automatically assume all the liabilities of the target. In practice, however, a variety of rules limit the importance of this second point. Some liabilities automatically transfer with ownership of the asset (such as environmental cleanup obligations). Further, a variety of rules covered later in the class protect creditors against opportunistic asset transfers. Last but not least, major debt contracts usually restrict a debtor’s ability to sell off a substantial part of its assets.

To be sure, a contract might also require approval for a merger, and many important ones do. In general, as always, contractual arrangements, including charter arrangements, can add or efface distinctions between asset sales and mergers. What will usually remain, however, is the hassle of transferring assets individually in an asset sale.

The ease of mergers

The merger, on the other hand, is easy. It usually requires only an agreement between the two corporations, and approval by both boards and shareholder meetings, usually by simple majority vote. Unanimous approval is not required.

In addition, the merger agreement can freely determine just about anything in the organization of the joint entity: its charter, its ownership, and its management. For example, there is no requirement that the shareholders of both merging corporations remain shareholders in the joint entity.

A warning: Don’t be misled by expressions such as “surviving entity.” They are merely naming conventions. In particular, the shareholders, board, management, and charter of the “surviving entity” could all be eliminated in the merger (in the case of shareholders, for due compensation) and replaced by those of the other entity.

A side note: Because the merger is so easy and flexible, it is a versatile device with many uses outside of M&A. For example, it can be used for internal rearrangements inside a corporate group (cf. DGCL 253, 267), reincorporation from one state to another (by merging the corporation into a shell company incorporated in the destination state; this can also be achieved directly by “conversion” under DGCL 265, 266), and so on.

Other steps in the acquisition process

To be sure, the merger is not the only step in many acquisitions. This is most obvious in a hostile takeover. A merger requires approval by the target board. By definition, the hostile takeover is a situation in which the target board is unwilling to approve a merger. So how can a merger happen in a hostile takeover?

The answer is that the merger will come last in a chain of hostile acquisition steps. In a standard hostile takeover, the acquirer would first acquire a majority of the target stock through a “tender offer” (i.e., an offer addressed to all target shareholders to purchase their stock) and then replace the resisting target board. The new board would then cause the target to enter into a merger agreement with the acquirer.

Friendly acquisitions can also involve more than just the merger step. In these cases, however, the merger agreement may act as a road map containing the earlier steps. The 3G / Burger King agreement below provides an example of such a structure.

Sources of law

M&A involves a complicated mix of statutes, rules, and precedents, from many areas of law, including corporate law, securities law, and antitrust.

Securities laws

The securities laws and rules not only regulate disclosure, but also set important timing requirements. In particular, the Williams Act of 1968 requires an acquirer of 5% or more of a corporation’s voting stock to disclose this fact within ten days of crossing the 5% threshold (Exchange Act §13(d)). This means that an acquirer cannot gain control of the target secretly and slowly.

The Williams Act also regulates tender offers (Exchange Act §14(d)/(e)). Among other things, the SEC rules require that any tender offer remain open for at least 20 business days (rule 14e-1). This prevents quick acquisitions by way of a tender offer. Moreover, while the offer remains open, shareholders who already tendered may reverse their decision and withdraw their shares (rule 14d-7(1)).

Other Williams Act rules of particular importance for deal structure are:

• “All holders, best price:” the tender offer must be open to all shareholders, and all must be paid the same consideration (rule 14d-10);
• Conversely, the tender offeror may not buy stock in side deals between public announcement and expiry of the offer (rule 14e-5: “Prohibiting purchases outside of a tender offer”);
• Pro-rata allocation: if the tender offer is oversubscribed — the tender offer is for less than all of the corporation’s outstanding stock, and more shares are tendered — the offeror must take up tendered shares pro rata (Exchange Act §14(d)(6), rule 14d-8).

Stock exchange listing rules

The listing rules of the stock exchanges can play an important role as well. For example, rule 312.03 of the New York Stock Exchange’s Listed Company Manual requires stockholder approval for certain stock issuances, including those of a certain size (≥20%) or leading to a change in control. Rule 402.04 requires active proxy solicitation for any stockholder meeting, triggering the SEC’s proxy rules and associated delay.

Corporate law

Within corporate law, the statutory provisions relating to mergers are of obvious importance for M&A (e.g., DGCL 251, 253, 262, 271). But as we have already seen (Blasius), many general and perhaps deceivingly innocuous provisions of the DGCL, such as those governing director removal and appointment (DGCL 141, 223), can also play an important role in M&A.

Fiduciary duties play a major role in M&A as well. In fact, most of the cases that we will read will deal with the shaping of fiduciary duties in the M&A context. Nevertheless, this should not lead you to think that the statute is unimportant. Fiduciary duties only become important to the extent that the statute has not preempted a particular question. In other words, the statute demarcates the field on which the game is played, and fiduciary duties regulate the behavior of the players on the field. Both are important to understand the game.

Other law

Depending on the industry, various other areas of law may come into play. For example, banks require approval from the banking regulator for acquisitions.

One area of law that is always important in M&A is antitrust. It is covered in a separate course. Here you just need to know that the Hart-Scott-Rodino Act requires that certain antitrust filings be made fifteen or thirty days before the closing of an acquisition. This may be an additional source of delay — and, in the case of “hostile” acquisitions, an early warning to the corporation's management.

The following paragraphs summarize the basic statutory rules for mergers of Delaware corporations: who needs to approve them, and who has appraisal rights. You should look up the cited statutory provisions and verify that this summary is correct.

Approval requirements

Generally, both corporations’ boards (DGCL 251(b)) and shareholders (DGCL 251(c)) need to approve the merger.

Exceptions:

- cash-deal, small deal (DGCL 251(f)): the approval by shareholders of a surviving corporation is not required if

- the surviving corporation’s charter is not amended through the merger, and

- the surviving corporation issues less than 20% of new shares in the merger

- “short-form merger” (DGCL 253(a)): if one of the constituent corporations (“parent”) already owns at least 90% of all classes of voting stock of the other (“subsidiary”):

- the approval of subsidiary’s board and shareholders is never required;

- the approval of parent’s shareholders is not required if parent is the surviving corporation and its charter is not changed in the merger

- “back-end squeeze-out" (DGCL 251(h) – since 2013): the approval by remaining target shareholders is not required if

- the target is a public corporation (listed or >2,000 shareholders),

- the bidder acquires the otherwise requisite majority of shares in a tender offer for all of the target’s stock pursuant to a merger agreement with the target, and

- the merger consideration is the same as the tender offer consideration.

Appraisal rights

NB: To perfect appraisal rights, the shareholder must not vote in favor of the merger, must deliver a written notice of objection before the vote, and must hold the shares through the effective date of the merger (DGCL 262(a)/(d)). Shareholders who demand appraisal do not receive the merger consideration; they only receive the value of their shares as appraised by the court (cf. DGCL 262(k)).

Appraisal rights are generally available for shareholders of both corporations (DGCL 262(b)).

Exceptions:

- “short-form merger”: the parent’s shareholders do not have appraisal rights (DGCL 253(c)/(d), 262(b)(3))

- “market-out” (DGCL 262(b)(1)/(2)): Shareholders

- of a public corporation (listed or >2,000 shareholders), or

- whose approval vote was not required for the merger under DGCL 251(f)

do not have appraisal rights if they receive as merger consideration shares of the surviving corporation or shares of another public corporation.

Questions

1. Do the exceptions to the shareholder approval requirement make sense?
2. Do the exceptions to the appraisal remedy make sense?
3. What is the point of the appraisal remedy, if any?

AGREEMENT AND PLAN OF MERGER

This AGREEMENT AND PLAN OF MERGER (this “Agreement”), dated as of September 2, 2010, is entered into by and among Blue Acquisition Holding Corporation, a Delaware corporation (“Parent”), Blue Acquisition Sub, Inc., a Delaware corporation and a wholly owned Subsidiary of Parent (“Sub”), and Burger King Holdings, Inc., a Delaware corporation (the ‘‘Company”). Each of Parent, Sub and the Company are referred to herein as a ‘‘Party” and together as “Parties”. Capitalized terms used and not otherwise defined herein have the meanings set forth in Article X.

RECITALS

WHEREAS, the respective boards of directors of each of Parent, Sub and the Company have unanimously (i) determined that this Agreement and the transactions contemplated hereby, including the Offer and the Merger, are advisable, fair to and in the best interests of their respective stockholders and (ii) approved this Agreement and the transactions contemplated hereby, including the Offer and the Merger, on the terms and subject to the conditions set forth in this Agreement;

WHEREAS, Parent proposes to cause Sub to commence a tender offer (as it may be amended from time to time as permitted under this Agreement, the “Offer”) to purchase all the outstanding shares of common stock, par value $0.01 per share, of the Company (the “Company Common Stock”) at a price per share of Company Common Stock of $24.00, without interest (such amount, or any other amount per share paid pursuant to the Offer and this Agreement, the “Offer Price”), net to the seller thereof in cash, on the terms and subject to the conditions set forth in this Agreement;

WHEREAS, concurrently with the execution and delivery of this Agreement, the Company has entered into a Sponsor Tender Agreement with certain investment funds affiliated with Bain Capital Investors, LLC, TPG Capital, L.P. and The Goldman Sachs Group, Inc. and their respective Affiliates set forth therein (collectively, the “Sponsor Tender Agreements”), pursuant to which, among other things, such investment funds have irrevocably agreed to tender shares of Company Common Stock beneficially owned by them in the Offer (the shares subject to such agreements constituting, in the aggregate, approximately 31% of the Company Common Stock as of the date hereof) and to take certain actions and exercise certain rights, and to refrain from taking other actions or exercising other rights, in each case, as set forth therein;

WHEREAS, regardless of whether the Offer Closing occurs, Sub will merge with and into the Company, with the Company continuing as the surviving corporation in the merger (the ‘‘Merger”), upon the terms and subject to the conditions set forth in this Agreement, whereby, except as expressly provided in Section 3.01, each issued and outstanding share of Company Common Stock immediately prior to the effective time of the Merger will be cancelled and converted into the right to receive the Offer Price; and

WHEREAS Parent, Sub and the Company desire to make certain representations, warranties, covenants and agreements in connection with the Offer and the Merger and also to prescribe various conditions to the Offer and the Merger.

NOW, THEREFORE, in consideration of the foregoing premises and the representations, warranties, covenants and agreements contained in this Agreement, and subject to the conditions set forth herein, as well as other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and intending to be legally bound hereby, the Parties agree as follows:

ARTICLE I

The Offer

Section 1.01  The Offer.  

(a) Commencement of the Offer.  As promptly as reasonably practicable (and, in any event, within 10 business days) after the date of this Agreement, Sub shall, and Parent shall cause Sub to, commence (within the meaning of Rule 14d-2 under the Securities Exchange Act of 1934, as amended (together with the rules and regulations promulgated thereunder, the “Exchange Act”)) the Offer to purchase all of the outstanding shares of Company Common Stock at a price per share equal to the Offer Price (as adjusted as provided inSection 1.01(c), if applicable).

(b) Terms and Conditions of the Offer.  The obligations of Sub to, and of Parent to cause Sub to, accept for payment, and pay for, any shares of Company Common Stock tendered pursuant to the Offer are subject only to the conditions set forth in Annex I (the “Offer Conditions”). The Offer Conditions are for the sole benefit of Parent and Sub, and Parent and Sub may waive, in whole or in part, any Offer Condition at any time and from time to time, in their sole discretion, other than the Minimum Tender Condition, which may be waived by Parent and Sub only with the prior written consent of the Company. Parent and Sub expressly reserve the right to increase the Offer Price or to waive or make any other changes in the terms and conditions of the Offer; provided, however, that unless otherwise provided in this Agreement or previously approved by the Company in writing, Sub shall not, and Parent shall not permit Sub to, (i) reduce the number of shares of Company Common Stock sought to be purchased in the Offer, (ii) reduce the Offer Price, (iii) change the form of consideration payable in the Offer, (iv) amend, modify or waive the Minimum Tender Condition, (v) add to the Offer Conditions or amend, modify or supplement any Offer Condition, or (vi) extend the expiration date of the Offer in any manner other than in accordance with the terms of Section 1.01(d).

(c) Adjustments to Offer Price.  The Offer Price shall be adjusted appropriately to reflect the effect of any stock split, reverse stock split, stock dividend (including any dividend or distribution of securities convertible into Company Common Stock), cash dividend (other than the First Quarter Dividend), reorganization, recapitalization, reclassification, combination, exchange of shares or other like change with respect to Company Common Stock occurring on or after the date hereof and prior to Sub’s acceptance for payment of, and payment for, Company Common Stock tendered in the Offer.

(d) Expiration and Extension of the Offer.  The Offer shall initially be scheduled to expire at midnight, New York City time, on the later of (x) the 20th business day following the commencement of the Offer (determined using Rule 14d-1(g)(3) under the Exchange Act) and (y) the second business day following the No-Shop Period Start Date (such later date being the “Initial Offer Expiration Date”), provided, however, if at the Initial Offer Expiration Date, any Offer Condition is not satisfied or waived, Sub shall, and Parent shall cause Sub to, extend the Offer for ten (10) business days; provided, further, that if the only Offer Condition not satisfied at such time is the Financing Proceeds Condition, then such Initial Offer Expiration Date may be extended, at Parent’s option, for less than ten (10) business days. Thereafter, if at any then scheduled expiration of the Offer, any Offer Condition is not satisfied or waived, Sub shall, and Parent shall cause Sub to, extend the Offer on one or more occasions, in consecutive increments of up to five (5) business days (or such longer period as the Parties may agree) each; provided, however, if the Proxy Statement Clearance Date has occurred on or prior to November 24, 2010, then no such extension shall be required after November 24, 2010; provided, further, however, if the Proxy Statement Clearance Date has not occurred on or prior to November 24, 2010, then either Parent or the Company may request, and upon such request, Sub shall extend the Offer in increments of up to five (5) business days (or such longer period as the Parties may agree) each until the Proxy Statement Clearance Date; it being understood that nothing contained herein shall limit or otherwise affect the Company’s right to terminate this Agreement pursuant to Section 9.01(g) in accordance with the terms thereof. ‘‘Proxy Statement Clearance Date” means the date on which the SEC has, orally or in writing, confirmed that it has no further comments on the Proxy Statement, including the first date following the tenth calendar day following the filing of the preliminary Proxy Statement if the SEC has not informed the Company that it intends to review the Proxy Statement. In addition, Sub shall, and Parent shall cause Sub to, extend the Offer on one or more occasions for the minimum period required by any rule, regulation, interpretation or position of the Securities and Exchange Commission (the “SEC”) or the staff thereof applicable to the Offer; provided, however, that Sub shall not be required to extend the Offer beyond the Outside Date and such extension shall be subject to the right to terminate the Offer in accordance with Section 1.01(f). The last date on which the Offer is required to be extended pursuant to this Section 1.01(d) is referred to as the “Offer End Date” (it being understood that under no circumstances shall the Offer End Date occur prior to November 24, 2010).

(e) Payment.  On the terms and subject to the conditions of the Offer and this Agreement, Sub shall, and Parent shall cause Sub to, accept for payment, and pay for, all shares of Company Common Stock validly tendered and not withdrawn pursuant to the Offer promptly (and in any event within 3 business days) after the applicable expiration date of the Offer (as it may be extended in accordance with Section 1.01(d)) and in any event in compliance with Rule 14e-1(c) promulgated under the Exchange Act. The date of payment for shares of Company Common Stock accepted for payment pursuant to and subject to the conditions of the Offer is referred to in this Agreement as the “Offer Closing”, and the date on which the Offer Closing occurs is referred to in this Agreement as the “Offer Closing Date”.

[...]

(h) Funds.  Subject to the other terms and conditions of this Agreement and the Offer Conditions, Parent shall provide or cause to be provided to Sub on a timely basis the funds necessary to purchase any shares of Company Common Stock that Sub becomes obligated to purchase pursuant to the Offer.

[...]

Section 1.03  Top-Up. [NB: Today, this provision would no longer be necessary. In 2013, Delaware adopted DGCL 251(h). Read!]

(a) Top-Up.  The Company hereby grants to Sub an irrevocable right (the ‘‘Top-Up”), exercisable on the terms and conditions set forth in this Section 1.03, to purchase at a price per share equal to the Offer Price that number of newly issued, fully paid and nonassessable shares of Company Common Stock (the “Top-Up Shares”) equal to the lowest number of shares of Company Common Stock that, when added to the number of shares of Company Common Stock directly or indirectly owned by Parent and Sub at the time of the Top-Up Closing (after giving effect to the Offer Closing), shall constitute one share more than 90% of the shares of the Company Common Stock outstanding immediately after the issuance of the Top-Up Shares; provided,however, that the Top-Up may not be exercised to purchase an amount of Top-Up Shares in excess of the number of shares of Company Common Stock authorized and unissued (treating shares owned by the Company as treasury stock as unissued) and not reserved for issuance at the time of exercise of the Top-Up. The Top-Up shall be exercisable only once, in whole but not in part.

(b) Exercise of Top-Up; Top-Up Closing.  If there shall have not been validly tendered and not validly withdrawn that number of shares of Company Common Stock which, when added to the shares of Company Common Stock owned by Parent and its Affiliates, would represent at least 90% of the shares of the Company Common Stock outstanding on the Offer Closing Date, Sub shall be deemed to have exercised the Top-Up and on such date shall give the Company prior written notice specifying the number of shares of Company Common Stock directly or indirectly owned by Parent and its Subsidiaries at the time of such notice (giving effect to the Offer Closing). The Company shall, as soon as practicable following receipt of such notice (and in any event no later than the Offer Closing), deliver written notice to Sub specifying, based on the information provided by Sub in its notice, the number of Top-Up Shares. At the closing of the purchase of the Top-Up Shares (the “Top-UpClosing”), which shall take place at the location of the Merger Closing specified in Section 2.02, and shall take place simultaneously with the Offer Closing, the purchase price owed by Sub to the Company to purchase theTop-Up Shares shall be paid to the Company, at Sub’s option, (i) in cash, by wire transfer of same-day funds, or (ii) by (x) paying in cash, by wire transfer of same-day funds, an amount equal to not less than the aggregate par value of the Top-Up Shares and (y) executing and delivering to the Company a promissory note having a principal amount equal to the aggregate purchase price pursuant to the Top-Up less the amount paid in cash pursuant to the preceding clause (x) (the “Promissory Note”). The Promissory Note (i) shall be due on the first anniversary of the Top-Up Closing, (ii) shall bear simple interest of 5% per annum, (iii) shall be full recourse to Parent and Sub, (iv) may be prepaid, in whole or in part, at any time without premium or penalty, and (v) shall have no other material terms. At the Top-Up Closing, the Company shall cause to be issued to Sub a certificate representing the Top-Up Shares.

[…]

ARTICLE II

The Merger

Section 2.01  The Merger.  Upon the terms and subject to the conditions set forth in this Agreement, and in accordance with the General Corporation Law of the State of Delaware (the ‘‘DGCL”), Sub shall be merged with and into the Company at the Effective Time. Following the Effective Time, the separate corporate existence of Sub shall cease, and the Company shall continue as the surviving corporation in the Merger (the “Surviving Corporation”).

Section 2.02  Closing.  The closing of the Merger (the “Merger Closing”) will take place at (a) if the Offer Closing shall have not occurred at or prior to the Merger Closing, 10:00 a.m., New York City time, on the second business day after satisfaction or (to the extent permitted by Law) waiver of the conditions set forth inArticle VIII (other than those conditions that by their terms are to be satisfied at the Merger Closing, but subject to the satisfaction or (to the extent permitted by Law) waiver of those conditions), or (b) if the Offer Closing shall have occurred on or prior to the Merger Closing, on the date of, and immediately following the Offer Closing (or the Top-Up Closing if the Top-Up has been exercised), in either case at the offices of Kirkland & Ellis LLP, located at 601 Lexington Avenue, New York, New York 10022, unless another time, date or place is agreed to in writing by Parent and the Company. The date on which the Merger Closing occurs is referred to in this Agreement as the “Merger Closing Date”.

Section 2.03  Effective Time.  Subject to the provisions of this Agreement, as promptly as reasonably practicable on the Merger Closing Date, the Parties shall file a certificate of merger (the “Certificate of Merger”) in such form as is required by, and executed and acknowledged in accordance with, the relevant provisions of the DGCL, and shall make all other filings and recordings required under the DGCL. The Merger shall become effective on such date and time as the Certificate of Merger is filed with the Secretary of State of the State of Delaware or at such other date and time as Parent and the Company shall agree and specify in the Certificate of Merger. The date and time at which the Merger becomes effective is referred to in this Agreement as the ‘‘Effective Time”.

Section 2.04  Effects of the Merger.  The Merger shall have the effects set forth in the applicable provisions of the DGCL. Without limiting the generality of the foregoing, from and after the Effective Time, the Surviving Corporation shall possess all properties, rights, privileges, powers and franchises of the Company and Sub, and all of the claims, obligations, liabilities, debts and duties of the Company and Sub shall become the claims, obligations, liabilities, debts and duties of the Surviving Corporation.

Section 2.05  Certificate of Incorporation and By-Laws.  

(a) At the Effective Time, the certificate of incorporation of Sub as in effect immediately prior to the Effective Time (which shall not be amended by Sub from the date hereof until such time except as otherwise contemplated hereby) shall be the certificate of incorporation of the Surviving Corporation until thereafter changed or amended (subject to Section 7.06(a)) as provided therein or by applicable Law; provided, however, that at the Effective Time the certificate of incorporation of the Surviving Corporation shall be amended so that the name of the Surviving Corporation shall be “Burger King Holdings, Inc.”

(b) The by-laws of Sub as in effect immediately prior to the Effective Time shall be the by-laws of the Surviving Corporation until thereafter changed or amended (subject to Section 7.06(a)) as provided therein or by applicable Law.

Section 2.06  Directors.  The directors of Sub immediately prior to the Effective Time shall be the directors of the Surviving Corporation until the earlier of their resignation or removal or until their respective successors are duly elected and qualified, as the case may be.

Section 2.07  Officers.  The officers of the Company immediately prior to the Effective Time shall be the officers of the Surviving Corporation, until the earlier of their resignation or removal or until their respective successors are duly elected and qualified, as the case may be.

Section 2.08  Taking of Necessary Action.  If at any time after the Effective Time any further action is necessary or desirable to carry out the purposes of this Agreement and to vest the Surviving Corporation with full right, title and possession to all assets, property, rights, privileges, powers and franchises of the Company and Sub, the Surviving Corporation, the board of directors of the Surviving Corporation and officers of the Surviving Corporation shall take all such lawful and necessary action, consistent with this Agreement, on behalf of the Company, Sub and the Surviving Corporation.

ARTICLE III

Effect of the Merger on the Capital Stock of the Constituent Corporations

Section 3.01  Effect on Capital Stock.  At the Effective Time, by virtue of the Merger and without any action on the part of the holder of any shares of Company Common Stock or any shares of capital stock of Parent or Sub:

(a) Capital Stock of Sub.  Each share of capital stock of Sub issued and outstanding immediately prior to the Effective Time shall be converted into and become one validly issued, fully paid and nonassessable share of common stock, par value $0.01 per share, of the Surviving Corporation.

(b) Cancellation of Treasury Stock and Parent-Owned Stock.  Each share of Company Common Stock issued and outstanding immediately prior to the Effective Time that is directly owned by the Company as treasury stock, or by Parent or Sub at such time, shall automatically be canceled and shall cease to exist, and no consideration shall be delivered in exchange therefor.

(c) Conversion of Company Common Stock.  Each share of Company Common Stock issued and outstanding immediately prior to the Effective Time (excluding shares to be canceled in accordance with Section 3.01(b)and, except as provided in Section 3.01(d), the Appraisal Shares) shall be converted into the right to receive the Offer Price in cash, without interest (the ‘‘Merger Consideration”). At the Effective Time, all such shares of Company Common Stock shall no longer be outstanding and shall automatically be canceled and shall cease to exist, and each holder of a certificate (or evidence of shares in book-entry form) that immediately prior to the Effective Time represented any such shares of Company Common Stock (each, a ‘‘Certificate”) shall cease to have any rights with respect thereto, except the right to receive the Merger Consideration and any dividends declared from and after the date hereof in accordance with Section 6.01(a) with a record date prior to the Effective Time that remain unpaid at the Effective Time and that are due to such holder.

(d) Appraisal Rights.  Notwithstanding anything in this Agreement to the contrary, shares of Company Common Stock issued and outstanding immediately prior to the Effective Time that are held by any holder who is entitled to demand and properly demands appraisal of such shares pursuant to, and who complies in all respects with, the provisions of Section 262 of the DGCL (the ‘‘Appraisal Shares”) shall not be converted into the right to receive the Merger Consideration as provided in Section 3.01(c), but instead such holder shall be entitled to payment of the fair value of such shares in accordance with the provisions of Section 262 of the DGCL. At the Effective Time, the Appraisal Shares shall no longer be outstanding and shall automatically be canceled and shall cease to exist, and each holder of Appraisal Shares shall cease to have any rights with respect thereto, except the right to receive the fair value of such Appraisal Shares in accordance with the provisions of Section 262 of the DGCL. Notwithstanding the foregoing, if any such holder shall fail to perfect or otherwise shall waive, withdraw or lose the right to appraisal under Section 262 of the DGCL or a court of competent jurisdiction shall determine that such holder is not entitled to the relief provided by Section 262 of the DGCL, then the right of such holder to be paid the fair value of such holder’s Appraisal Shares under Section 262 of the DGCL shall cease and such Appraisal Shares shall be deemed to have been converted at the Effective Time into, and shall have become, the right to receive the Merger Consideration as provided in Section 3.01(c), without any interest thereon. The Company shall give prompt notice to Parent of any demands for appraisal of any shares of Company Common Stock or written threats thereof, withdrawals of such demands and any other instruments served pursuant to the DGCL received by the Company, and Parent shall have the right to participate in and direct all negotiations and proceedings with respect to such demands. Prior to the Effective Time, the Company shall not, without the prior written consent of Parent (which consent shall not be unreasonably withheld or delayed), voluntarily make any payment with respect to, or settle or offer to settle, any such demands, or agree to do or commit to do any of the foregoing.

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ARTICLE V

Representations and Warranties of Parent and Sub

Parent and Sub jointly and severally represent and warrant to the Company as follows:

[...]

Section 5.04  Financing.  Parent has delivered to the Company true and complete copies of (i) the executed equity commitment letter, dated as of the date of this Agreement (the “Equity Financing Commitment”), pursuant to which 3G Special Situations Fund II L.P. (“Sponsor”) has committed, upon the terms and subject to the conditions thereof, to invest in Parent the cash amount set forth therein (the “Equity Financing”), and (ii) the executed commitment letter, dated as of the date hereof, among Parent, J.P. Morgan Chase Bank, N.A., J.P. Morgan Securities LLC, and Barclays Bank PLC (the “Debt Commitment Letter”), pursuant to which the lenders party thereto have agreed, upon the terms and subject to the conditions thereof, to lend the amounts (which includes up to $900,000,000.00 in bridge financing (the “Bridge Financing”) to be utilized in the event the placement of senior notes (the “High Yield Financing”) is not consummated) set forth therein for the purposes of financing the transactions contemplated by this Agreement and related fees and expenses and the refinancing of any outstanding indebtedness of the Company (including under the Existing Credit Agreement) (the ‘‘Debt Financing” and, together with the Equity Financing, the “Financing”). The Debt Commitment Letter and the related Fee Letter and the Equity Financing Commitment are referred to collectively in this Agreement as the “Financing Agreements”. None of the Financing Agreements has been amended or modified prior to the date of this Agreement, no such amendment or modification is contemplated and none of the respective commitments contained in the Financing Agreements have been withdrawn or rescinded in any respect. As of the date of this Agreement, the Financing Agreements are in full force and effect. Except for a fee letter and fee credit letter relating to fees with respect to the Debt Financing and an engagement letter (complete copies of which have been provided to the Company, with only the fee amounts and certain economic terms of the market flex (none of which would adversely effect the amount or availability of the Debt Financing) redacted), as of the date of this Agreement there are no side letters or other agreements, Contracts or arrangements related to the funding or investment, as applicable, of the Financing other than as expressly set forth in the Financing Agreements delivered to the Company prior to the date hereof. Parent has fully paid any and all commitment fees or other fees in connection with the Financing Agreements that are payable on or prior to the date hereof. The only conditions precedent or other contingencies related to the obligations of the Sponsor to fund the full amount of the Equity Financing and lenders to fund the full amount of Debt Financing are those expressly set forth in the Equity Financing Commitment and the Debt Commitment Letter, respectively. As of the date of this Agreement, no event has occurred which, with or without notice, lapse of time or both, would constitute a default or breach on the part of Parent, Sub or any direct investor in Parent under any term, or a failure of any condition, of the Financing Agreements or otherwise be reasonably likely to result in any portion of the Financing contemplated thereby to be unavailable. As of the date of this Agreement, neither Parent nor Sub has any reason to believe that it will be unable to satisfy on a timely basis any term or condition of the Financing Agreements required to be satisfied by it. Based on the terms and conditions of this Agreement, the proceeds from the Financing will be sufficient to provide Parent and Sub with the funds necessary to pay the aggregate Offer Price and Merger Consideration, the Equity Awards Amount, any repayment or refinancing of debt contemplated in this Agreement or the Financing Agreements (including repayment of indebtedness under the Existing Credit Agreement), the payment of all other amounts required to be paid in connection with the consummation of the transactions contemplated by this Agreement and to allow Parent and Sub to perform all of their obligations under this Agreement and pay all fees and expenses to be paid by Parent or Sub related to the transactions contemplated by this Agreement.

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ARTICLE VII

Additional Agreements

Section 7.01  Preparation of the Proxy Statement; Stockholders’ Meeting.

(a) Preparation of Proxy Statement.  As soon as practicable after the date hereof (and in any event, but subject to Parent’s timely performance of its obligations under Section 7.01(b), within 15 business days hereof), the Company shall prepare and shall cause to be filed with the SEC in preliminary form a proxy statement relating to the Stockholders’ Meeting (together with any amendments thereof or supplements thereto, the “Proxy Statement”). Except as expressly contemplated by Section 6.02(f), the Proxy Statement shall include the Recommendation with respect to the Merger, the Fairness Opinions and a copy of Section 262 of the DGCL. The Company will cause the Proxy Statement, at the time of the mailing of the Proxy Statement or any amendments or supplements thereto, and at the time of the Stockholders’ Meeting, to not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading;provided, however, that no representation or warranty is made by the Company with respect to information supplied by Parent or Sub for inclusion or incorporation by reference in the Proxy Statement. The Company shall cause the Proxy Statement to comply as to form in all material respects with the provisions of the Exchange Act and the rules and regulations promulgated thereunder and to satisfy all rules of the NYSE. The Company shall promptly notify Parent and Sub upon the receipt of any comments from the SEC or the staff of the SEC or any request from the SEC or the staff of the SEC for amendments or supplements to the Proxy Statement, and shall provide Parent and Sub with copies of all correspondence between the Company and its Representatives, on the one hand, and the SEC or the staff of the SEC, on the other hand. The Company shall use reasonable best efforts to respond as promptly as reasonably practicable to any comments of the SEC or the staff of the SEC with respect to the Proxy Statement, and the Company shall provide Parent and Sub and their respective counsel a reasonable opportunity to participate in the formulation of any written response to any such written comments of the SEC or its staff. Prior to the filing of the Proxy Statement or the dissemination thereof to the holders of Company Common Stock, or responding to any comments of the SEC or the staff of the SEC with respect thereto, the Company shall provide Parent and Sub a reasonable opportunity to review and to propose comments on such document or response.

[…]

(c) Mailing of Proxy Statement; Stockholders’ Meeting.  If the adoption of this Agreement by the Company’s stockholders is required by applicable Law, then the Company shall have the right at any time after the Proxy Statement Clearance Date to (and Parent and Sub shall have the right, at any time after the later of the Proxy Statement Clearance Date and November 1, 2010, to request in writing that the Company, and upon receipt of such written request, the Company shall, as promptly as practicable and in any event within ten (10) business days), (x) establish a record date for and give notice of a meeting of its stockholders, for the purpose of voting upon the adoption of this Agreement (the “Stockholders’ Meeting”), and (y) mail to the holders of Company Common Stock as of the record date established for the Stockholders’ Meeting a Proxy Statement (the date the Company elects to take such action or is required to take such action, the ‘‘Proxy Date”). The Company shall duly call, convene and hold the Stockholders’ Meeting as promptly as reasonably practicable after the Proxy Date; provided, however, that in no event shall such meeting be held later than 35 calendar days following the date the Proxy Statement is mailed to the Company’s stockholders and any adjournments of such meetings shall require the prior written consent of the Parent other than in the case it is required to allow reasonable additional time for the filing and mailing of any supplemental or amended disclosure which the SEC or its staff has instructed the Company is necessary under applicable Law and for such supplemental or amended disclosure to be disseminated and reviewed by the Company’s stockholders prior to the Stockholders’ Meeting. Notwithstanding the foregoing, Parent may require the Company to adjourn or postpone the Stockholders’ Meeting one (1) time (for a period of not more than 30 calendar days but not past 2 business days prior to the Outside Date), unless prior to such adjournment the Company shall have received an aggregate number of proxies voting for the adoption of this Agreement and the transactions contemplated hereby (including the Merger), which have not been withdrawn, such that the condition in Section 8.01(a) will be satisfied at such meeting. Once the Company has established a record date for the Stockholders’ Meeting, the Company shall not change such record date or establish a different record date for the Stockholders’ Meeting without the prior written consent of Parent, unless required to do so by applicable Law or the Company’s By-Laws. Unless the Company Board shall have withdrawn, modified or qualified its recommendation thereof or otherwise effected an Adverse Recommendation Change, the Company shall use reasonable best efforts to solicit proxies in favor of the adoption of this Agreement and shall ensure that all proxies solicited in connection with the Stockholders’ Meeting are solicited in compliance with all applicable Laws and all rules of the NYSE. Unless this Agreement is validly terminated in accordance with Section 9.01, the Company shall submit this Agreement to its stockholders at the Stockholders’ Meeting even if the Company Board shall have effected an Adverse Recommendation Change or proposed or announced any intention to do so. The Company shall, upon the reasonable request of Parent, advise Parent at least on a daily basis on each of the last seven business days prior to the date of the Stockholders’ Meeting as to the aggregate tally of proxies received by the Company with respect to the Stockholder Approval. Without the prior written consent of Parent, the adoption of this Agreement and the transactions contemplated hereby (including the Merger) shall be the only matter (other than procedure matters) which the Company shall propose to be acted on by the stockholders of the Company at the Stockholders’ Meeting.

[…]

(e) Short Form Merger.  Notwithstanding the foregoing, if, following the Offer Closing and the exercise, if any, of the Top-Up, Parent and its Affiliates shall own at least 90% of the outstanding shares of the Company Common Stock, the Parties shall take all necessary and appropriate action, including with respect to the transfer to Sub of any shares of Company Common Stock held by Parent or its Affiliates, to cause the Merger to become effective as soon as practicable after the Offer Closing without the Stockholders’ Meeting in accordance with Section 253 of the DGCL.

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Section 7.08  Financing.

(a) Each of Parent and Sub shall use, and cause its Affiliates to use, its reasonable best efforts (unless, with respect to any action, another standard for performance is expressly provided for herein) to take, or cause to be taken, all actions and to do, or cause to be done, all things necessary, proper or advisable to consummate and obtain the Financing on the terms and conditions (including the flex provisions) set forth in the Financing Agreements and any related Fee Letter (taking into account the anticipated timing of the Marketing Period), including using reasonable best efforts to seek to enforce (including through litigation) its rights under the Debt Commitment Letter in the event of a material breach thereof by the Financing sources thereunder, and shall not permit any amendment or modification to be made to, or consent to any waiver of any provision or remedy under, the Financing Agreements or any related Fee Letter, if such amendment, modification or waiver (i) reduces the aggregate amount of the Financing (including by changing the amount of fees to be paid or original issue discount) from that contemplated in the Financing Agreements, (ii) imposes new or additional conditions or otherwise expands, amends or modifies any of the conditions to the receipt of the Financing in a manner adverse to Parent or the Company, (iii) decreases the aggregate Equity Financing as set forth in the Equity Financing Commitment delivered on the date hereof, (iv) amends or modifies any other terms in a manner that would reasonably be expected to (x) delay or prevent the Offer Closing or the Merger Closing Date or (y) make the timely funding of the Financing or satisfaction of the conditions to obtaining the Financing less likely to occur or (v) adversely impact the ability of Parent or Sub to enforce its rights against the other parties to the Financing Agreements. For purposes of clarification, the foregoing shall not prohibit Parent from amending the Debt Commitment Letter and any related Fee Letter to add additional lender(s) (and Affiliates of such additional lender(s)) as a party thereto. Any reference in this Agreement to (A) ‘‘Financing” shall include the financing contemplated by the Financing Agreements as amended or modified in compliance with this Section 7.08(a), and (B) “Financing Agreements” or “Debt Commitment Letter” shall include such documents as amended or modified in compliance with this Section 7.08(a).

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ARTICLE VIII

Conditions Precedent

 Section 8.01  Conditions to Each Party’s Obligation to Effect the Merger.  The respective obligation of each party to effect the Merger is subject to the satisfaction or (to the extent permitted by Law) waiver at or prior to the Effective Time of the following conditions:

 (a) Stockholder Approval.  If required by applicable Law, the Stockholder Approval shall have been obtained.

 (b) Regulatory Approvals.  The waiting period applicable to the consummation of the Merger and, unless the Offer Termination shall have occurred, the Offer under the HSR Act (or any extension thereof) shall have expired or early termination thereof shall have been granted. In addition, the consummation of the Merger and, unless the Offer Termination shall have occurred, the Offer, is not unlawful under any Foreign Merger Control Law of any jurisdiction set forth in Section 8.01(b) of the Company Disclosure Letter.

 (c) No Injunctions or Restraints.  No temporary restraining order, preliminary or permanent injunction, Law or other Judgment issued by any court of competent jurisdiction (collectively, “Restraints”) shall be in effect enjoining or otherwise preventing or prohibiting the consummation of the Merger.

 (d) Purchase of Company Common Stock in the Offer.  Unless the Offer Termination shall have occurred, Sub shall have accepted for payment all shares of Company Common Stock validly tendered and not validly withdrawn pursuant to the Offer.

Section 8.02  Conditions to Obligations of Parent and Sub to Effect the Merger.  Solely if the Offer Termination shall have occurred or the Offer Closing shall not have occurred, the obligations of Parent and Sub to effect the Merger are further subject to the satisfaction or (to the extent permitted by Law) waiver at or prior to the Effective Time of the following conditions:

 (a) Representations and Warranties.  The representations and warranties of the Company (i) set forth in Section 4.03, Section 4.04, Section 4.26and Section 4.27 shall be true and correct in all material respects as of the date of this Agreement and as of the Merger Closing Date as though made on the Merger Closing Date, (ii) set forth in Section 4.07 shall be true and correct as of the date of this Agreement and as of the Merger Closing Date as though made on the Merger Closing Date without disregarding the “Material Adverse Effect” qualification set forth therein and (iii) set forth in this Agreement, other than those described in clauses (i) and (ii) above, shall be true and correct (disregarding all qualifications or limitations as to “materiality”, “Material Adverse Effect” and words of similar import set forth therein) as of the date of this Agreement and as of the Merger Closing Date as though made on the Merger Closing Date, except, in the case of this clause (iii), where the failure of such representations and warranties to be so true and correct would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect; provided in each case that representations and warranties made as of a specific date shall be required to be so true and correct (subject to such qualifications) as of such date only. Parent shall have received a certificate signed on behalf of the Company by the chief executive officer or chief financial officer thereof to such effect.

 (b) Performance of Obligations of the Company.  The Company shall have performed or complied in all material respects with its obligations required to be performed or complied with by it under this Agreement at or prior to the Merger Closing, and Parent shall have received a certificate signed on behalf of the Company by the chief executive officer or chief financial officer thereof to such effect.

 (c) No Material Adverse Effect.  Since the date of this Agreement, there shall not have occurred any change, event or occurrence that has had or would reasonably be expected to have a Material Adverse Effect, and Parent shall have received a certificate signed on behalf of the Company the chief executive officer or chief financial officer thereof to such effect.

 (d) Pre-Closing Solvency.  As of immediately prior to the Merger Closing Date (and, for the avoidance of doubt, before giving effect to the incurrence of the Debt Financing and the consummation of the transactions contemplated by this Agreement and such Debt Financing), the Company is Solvent, and Parent shall have received a certificate signed on behalf of the Company by the chief executive officer or chief financial officer thereof to such effect.

 Section 8.03  Conditions to Obligation of the Company to Effect the Merger.  Solely if the Offer Termination shall have occurred or the Offer Closing shall not have occurred, then the obligation of the Company to effect the Merger is further subject to the satisfaction or (to the extent permitted by Law) waiver at or prior to the Effective Time of the following conditions:

(a) Representations and Warranties.  The representations and warranties of Parent and Sub set forth in this Agreement shall be true and correct (disregarding all qualifications or limitations as to “materiality”, “Parent Material Adverse Effect” and words of similar import set forth therein) as of the date of this Agreement and as of the Merger Closing Date as though made on the Merger Closing Date (except to the extent such representations and warranties expressly relate to an earlier date, in which case as of such earlier date), except where the failure of such representations and warranties to be so true and correct would not, individually or in the aggregate, reasonably be expected to have a Parent Material Adverse Effect. The Company shall have received a certificate signed on behalf of Parent by an executive officer thereof to such effect.

 (b) Performance of Obligations of Parent and Sub.  Parent and Sub shall have performed or complied in all material respects with its obligations required to be performed or complied with by it under this Agreement at or prior to the Merger Closing, and the Company shall have received a certificate signed on behalf of Parent by an executive officer thereof to such effect.

Section 8.04  Frustration of Closing Conditions.  Neither Parent nor Sub may rely on the failure of any condition set forth in Sections 8.01 or 8.02 to be satisfied if such failure was caused by the failure of Parent or Sub to perform any of its obligations under this Agreement. The Company may not rely on the failure of any condition set forth in Sections 8.01 or 8.03 to be satisfied if such failure was caused by its failure to perform any of its obligations under this Agreement.

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ANNEX I

Conditions to the Offer

Notwithstanding any other term of the Offer or this Agreement, Sub shall not be required to, and Parent shall not be required to cause Sub to, accept for payment or, subject to any applicable rules and regulations of the SEC, including Rule 14e-1(c) under the Exchange Act (relating to Sub’s obligation to pay for or return tendered shares of Company Common Stock promptly after the termination or withdrawal of the Offer), pay for any shares of Company Common Stock tendered pursuant to the Offer if: (a) there shall have not been validly tendered and not validly withdrawn prior to the expiration of the Offer that number of shares of Company Common Stock which, when added to the shares of Company Common Stock owned by Parent and its Affiliates, would represent at least 79.1% of the shares of the Company Common Stock outstanding as of the expiration of the Offer (the “Minimum Tender Condition”); (b) the waiting period applicable to the purchase of shares of Company Common Stock pursuant to the Offer and the consummation of the Merger under the HSR Act (or any extension thereof) shall have neither expired nor terminated; (c) Parent (either directly or through its Subsidiaries) shall not have received the proceeds of the Debt Financing (or any Alternative Debt Financing) and/or the lenders party to the Debt Financing Letter (or New Debt Commitment Letter for any Alternative Debt Financing) shall not have confirmed to Parent or Sub that the Debt Financing (or any Alternative Debt Financing) in an amount sufficient to consummate the Offer and the Merger will be available at the Offer Closing on the terms and conditions set forth in the Debt Financing Letter (or New Debt Commitment Letter for any Alternative Debt Financing) (“Financing Proceeds Condition”), or (d) any of the following conditions shall have occurred and be continuing as of the expiration of the Offer:

(i) there shall be any Restraint in effect enjoining or otherwise preventing or prohibiting the making of the Offer or the consummation of the Merger or the Offer;

(ii) the consummation of the Offer is unlawful under any Foreign Merger Control Law of any jurisdiction set forth in Section 8.01(b) of the Company Disclosure Letter;

(iii) any of the representations and warranties of the Company (A) set forth in Section 4.03, Section 4.04,Section 4.26 and Section 4.27 shall not be true and correct in all material respects, (B) set forth in Section 4.07shall not be true and correct without disregarding the “Material Adverse Effect” qualification set forth therein and (C) set forth in this Agreement, other than those described in clauses (A) and (B) above, shall not be true and correct (disregarding all qualifications or limitations as to “materiality”, “Material Adverse Effect” and words of similar import set forth therein), except, in the case of this clause (C), where the failure of such representations and warranties to be so true and correct would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect and except, in each case, to the extent such representations and warranties are made as of a specific date (in which case such representations and warranties shall not be true and correct (subject to such qualifications) as of such specific date only);

(iv) the Company shall have failed to perform or comply in all material respects with its obligations required to be performed or complied with by it under this Agreement;

(v) since the date of this Agreement, there shall have occurred any change, event or occurrence that has had or would reasonably be expected to have a Material Adverse Effect;

(vi) as of immediately prior to the Offer Closing Date (and, for the avoidance of doubt, before giving effect to the incurrence of the Debt Financing and the consummation of the transactions contemplated by this Agreement and such Debt Financing), the Company is not Solvent;

(vii) in the event that the exercise of the Top-Up is necessary to ensure that Parent or Sub owns at least 90% of the outstanding shares of Company Common Stock immediately after the Acceptance Time, there shall exist under applicable Law or other Restraint any restriction or legal impediment on Sub’s ability and right to exercise the Top-Up, or the shares of Company Common Stock issuable upon exercise of the Top-Up together with the shares of Company Common Stock validly tendered in the Offer and not properly withdrawn are insufficient for Sub to owns at least 90% of the outstanding shares of Company Common Stock;

(viii) a Triggering Event shall have occurred; and

(ix) this Agreement shall have been terminated in accordance with its terms.

At the request of Parent, the Company shall deliver to Parent a certificate executed on behalf of the Company by the chief executive officer or the chief financial officer of the Company certifying that none of the conditions set forth in clauses (d)(iii), (d)(iv), (d)(v) and (d)(vi) above shall have occurred and be continuing as of the expiration of the Offer.

For purposes of determining whether the Minimum Tender Condition and the condition set forth in clause (d)(vii) have been satisfied, Parent and Sub shall have the right to include or exclude for purposes of its determination thereof shares tendered in the Offer pursuant to guaranteed delivery procedures. [Eds: These are shares that are promised to be delivered pursuant to some pre-agreed form but that are not available for delivery immediately. This is not the same as the shares committed to be tendered under the Sponsor Tender Agreements, which presumably are available for delivery.]

The foregoing conditions shall be in addition to, and not a limitation of, the rights and obligations of Parent and Sub to extend, terminate or modify the Offer pursuant to the terms and conditions of this Agreement.

The foregoing conditions are for the sole benefit of Parent and Sub and, subject to the terms and conditions of this Agreement and the applicable rules and regulations of the SEC, may be waived by Parent and Sub in whole or in part at any time and from time to time in their sole discretion (other than the Minimum Tender Condition). The failure by Parent or Sub at any time to exercise any of the foregoing rights shall not be deemed a waiver of any such right and each such right shall be deemed an ongoing right that may be asserted at any time and from time to time.

The capitalized terms used in this Annex I and not defined in this Annex I shall have the meanings set forth in the Agreement and Plan of Merger, dated as of September 2, 2010, by and among Blue Acquisition Holding Corporation, Blue Acquisition Sub, Inc. and Burger King Holdings, Inc.