The Habit Restaurants, Inc. Litigation
On January 5, 2020, Yum! Brands, Inc. (the “Company”) entered into an Agreement and Plan of Merger with The Habit Restaurants, Inc. (“Habit”), providing for the acquisition of Habit by the Company in an all-cash acquisition for $14.00 per share for all of the outstanding shares of Habit’s common stock (the “Merger”). On February 4, 2020, Habit filed a Preliminary Proxy Statement with the Securities and Exchange Commission (“SEC”) relating to the Merger. On February 19, 2020, Habit filed a Definitive Proxy Statement (the “Proxy”), setting the Habit stockholder vote on the Merger for March 18, 2020.
On February 24, 2020, a stockholder of Habit (“Plaintiff”) filed a complaint (the “Action”) in the Court of Chancery of Delaware and named as defendants Habit and members of Habit’s Board of Directors (“Habit’s Board”). The complaint alleged, among other things, that Habit’s Board violated its fiduciary duties under Delaware law by failing to provide in the Proxy all material information needed by stockholders to make an informed decision whether to vote in favor of the Merger or seek appraisal. As relief, the complaint sought, among other things, an injunction against the stockholder vote and the Merger, rescissory damages should the stockholder vote and the Merger be consummated, and an award of attorneys’ and experts’ fees. Habit and Habit’s Board have denied that they have committed any violation of law or engaged in any of the wrongful acts that were or could have been alleged in the Action, and expressly maintain that they diligently and scrupulously complied with their fiduciary and other legal duties.
After the complaint was filed, Habit determined to provide certain additional disclosures that supplemented those contained in the Proxy, which were included in a Form 8-K filed by Habit with the SEC on March 9, 2020. On March 23, 2020, the Court approved a stipulation under which the Plaintiff voluntarily dismissed the Action with prejudice as to himself only, but without prejudice to any other putative class member. The Court retained jurisdiction solely for the purpose of adjudicating the anticipated application of Plaintiff’s counsel for an award of attorneys’ fees and reimbursement of expenses in connection with the Action (the “Fee Application”). Following negotiations, to eliminate any risk associated with Plaintiff’s fee petition, the Company agreed, while denying any and all liability of Habit and Habit’s Board, to pay $80,000 to Plaintiff’s counsel for attorneys’ fees and expenses in full satisfaction of the Fee Application. This fee has been paid by the Company and has not been approved or ruled upon by the Court.