Free Brief in Opposition to Motion - District Court of Colorado - Colorado

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DISTRICT COIJRT, DENVER COUNTY, COLORADO CourtAddress: 1437 Bannock Sheet Denver, CO Phone Number: 720-865-8301 Plainliff: EDWARD SBBESTA C. Individualy OnBehalfofAll and Othe$ SimilarlySituared COURTUSEONLY Defendants: RICHARDE. SCHADEN, R]CHARDF. SCHADEN, FREDERICK SCIIADEN, H. L. BROMBERG, ERIC J. LAWRENCE, JOHNJ. TODD, BRAD A. CRIFFIN,andTHE CORPORA]ION QUIZNO'S Defendant Quizno's The Corpomtion Theodore Altman MichaelR Hepwoflh Piper Marbury Wolfe Rudnick & 1251 of Avenue theAmeicas NewYork,NewYork 10020-1104 (212) 835-6000 (212) 835-6001 theodore.altman@piperudniok, oom
michael Name:

Case 0l-CV-6281 No, 9 Division/Courtroom:

Attomey for: Na.rne: Address:

Phone No.: Fax: E-Mail:

/ fit.\

1.cF-/

Phone I No. FaxNo.: E-Ma : Atty. Reg. #

R. MichaEl Daigle TheQuizno'sCorporation 14l5 Larimer St. Denver, 80202 CO (720) 359-3300 ('l20)3s9-339s mdaigle quiznos.com at R. (#31798) Michael Daigle

THE QUIZNO'SCORPORATION'S MEMORANDUMOT LAW IN OPPOSITION PLAINTIFF'SMOTIONTOR TO A TEMPORARY RXSTRAINING ORDER

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TABLE OF CONTENTS

FACTS
ARGIJ'I\4ENT I.

PLAINTIFFCANNOTSHOWA DANGEROF IRREPARABLE HARM BECAUSE HIS ALLEGEDINJURYCAN BE FULLY COMPBNSATED WITHMONEY DAMACES .._.......,.............. ...........................7 PLAINTIFFCANNOTSHOWA REASONABLE PROBABILITYOF ON SUCCESS THE MERITSBECAUSE THE PROXYSTATEMENT PROPERLY DISCLOSES MATERIAL THE FACTS, AND BECAUSE THEINDEPENDENT SPECIAL COMMITTEE ACTEDPROPBRLY..,........,.,.....,,,8 Contsary thooomplaint, PmxyStatement b the properlydiscloses lhe "FCI offer" for alleged $10.63, how theSpecial Committee anallzedit anddiscussedwithFCl,andwhyit wasnota firm offerat all ........,..-..........9 it B. to Contrary thecomplaint, ProxyStatement the accurately dcscribes '?ut option" FCIasked asa condition the tlat for o|: making offer,andexplains thatcondition an why could bemet................12 not Contrary the complaint, ProxyStatemqtaccuately to the the dcsodbcs Special as and CorEnittee indepgndent asconducting qualified its workwith ,.....,. tinancial legaladvisors ..., .... ,.,....,,. ,.....,,....,,. 13 aod Contrary thecomplainl" evidence to the shows the Special that properly Committee approved merger fair .......,.,,.................................l7 the as

I].

C.

D,
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PLA]NTIFFCANNOTSHOWTITATTHEREIS NO PLAIN AND l8 REMEDY I-A.W ADEQUATE AT .....,...,,............................PI.A,INTIFF CANNOTSHOWT}IAT TIIE TROW]LL NOT DtssERvE THEPUBLTC INTEREST........... ........................18

IV,

PLAINTIFFCANNOTSHOWTHAT THE BALANCEOF EQUITIES FAVORS TI{ETRO,. .........................19

vt.

PLA]NTIFFCANNOTSHOWTHAT THE TROWILL PRESEVE AIL l9 ASPECTS THESTATUS ..,.,................... OF QUO....,...........

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OF THE QUIZNO'SCORBORATION'S MEMORANDUM LAW TO PLATNTIFT'S MOTION FOR IN OPPOSITION

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Statement Prelinrltrary and TheCourtshould for dcnyPlaintiffs request a TRO. ThePlaintifs complaitrt danages. vith motionpapers showthathis alleged injury couldbereadilycompensated money Moreover, hasno evidnce heis likely to succegd themerits- in fact,thedocumonls he on that have bhassubmitted thismotiondemonstratg th9defendants donenothingwrongand on that thatthereis no rced for theemergency injunctive reliefhe requests. ofThe Quizno's ThePlaintiff, Edward Sebest4 claimsto bea minorityshareholder C. ("Quizno's"). He seeks TROthatwouldprcvent Corporation a Quizno'sfrom holdingits scheduled shareholde$' meting November 2001(the"Shrrholders'Methg"). Th on 30, purpose thShareholders' of ofFirenzeCorp.("Flrenze")with Meetingis to voteolt a merger and Richard schaden E. andinto Quizno's.Firenz owned Quizno'smajorityshareholders, is by Richand Schaden. theproposed Fstock(excluding ln merger, shares ofQuialo's common into certain shares will beconverted th beneficially ownedby the Schadens theiraffiliates) and 67% right to rcceiye$8,50per share, cash.TheSchadens ownapproximatoly of in beneficially is approval and Quizno'sshares havehdicatcdtheywill votefor themeryer,Iftlrc voteoccurs, pcr asswed.Shareholders believo who is $8.50 share not a fair pricewill be ableto exercise appraised paid ard their statutory rightsunderColorado to havethe faf valueoftheir shares law to them. is Sebesta claimsto bea shareholder thinks$8.50is not enough.His complaint who stook greater the$8.50 is than essontially money: thinks fairvalue about he the ofhis Quizno's per share pricethatthe Special ConEnifte's ofQuizno'sBoad" andtheSpecial Comrnittee

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professional financialadvisors, detemined fair. Scbesla was thinksthepdcshould at last be and pe! $10.63, hecalculates "direct the ha!m"at issue $2.13 sbsre. Motion7; Complaint as @1. priceon ar alleged is offer mad to his 1138.)Sebesta \itong aboutthefacts hebases $10,63 theSpecial per Committee, in factthereis no suchoffer for $10.63 share, theSpecial but as foundafterexploring proposal But Committee discusses. even ifhe the compliaint Sebsta's wereright hehasa fully adequate The remedy lawin theformofmoneydamages. availability at of mooy damages ernovesanybasis injuactivercJiel for Sebesta's woulddeprive ghareholdeN voti[g to approvg merger TRO the atd the of promptlyrcceiving significant a plemiumfor thehshares. do not knowhowmanyshares We Sebesta actuallyowrs (hisoounpapers not disclose or whyhe tlinks heshould reprseDt this) do all shaEholders. do knowtltat$8.50 a premium pdce;thataninvesune banking We lirm is hasgivena writtenopinionthatthepriceis fai4 andthatthc details thatopinionandthofacts of thatledto themergsrageement disclosed leng$ in Quizno's ProxyStatement Special for are at Meetingof Shareholders beHeldonNovember 2001(the"Proxy Statemerl'), Iiled with to 30, thSecurities Bxchange and Commission mailed Quizlo's shareholders. and to pricefor theshares the on $8.50per share a l2% premium is overtheaverage closing Nasdaq SmallcapMarketfor thsix month peliodended Juoe21,2001. It is a !5% trading p!4:@ overtheclosing pricafor theshares May 21,2001, datebeforeQuizno's on the priceofthe common announced merger the proposal, a Z6%!!@i!!q overtheclosing siock and on November 2000,thetradingdatebeforeQuizno's 9, an announoed earlierselftender.The price 26%premium themostmea[in8fulfigure,for it rflects indease is ove!themarket the beforethemarket reflecfd tender merger. the offer gr theproposed

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Thetermsof themerger, analyzed a Special by includingits price,werecorefully Committee of consisting ofnon-employee directors ofQuizno'swhowereindependeflt the (whoaremakingthe$8.50pershare Schadons the ofthe merger offer) andcouldasscss faime6s withoutbias. TheSpecial Carnmittee its TuckerAnthonySutro selected linancialadvisor, CapitalMarkets ('"TuckerAnoony'), afterintefliewinga number ofcandidates. Aftgr studing thetransaction, Tucker Anthonyconcluded in its profssional opirion, thepriceof that $8.50pcr share fair, was ThePlaintiffclairE hereedstheTRObecause ProxyStatement to disclose fails the certain alleged factsor to drawcefiainconclusions the Corutittee anda conoeming Special supposed alternative offer of$10,63persharc minoritysharcholdsr from "FCI", who is another ofQuizno's. But thPlaintiff camotshowa daogr ofireparableharmor anylikelihoodof success themerits,ard therefore hasno basis couldjustiry a TRO: on he that flrst, Sebesta's alleged damages. Colomdo's injuryis fullycompensable rnoney with procedure dissenting statuiory provideg legaldamager rmedy, and appraisal for shareholders o sodoes litigation. As Plaintiif knows,some have this indicated they that shareholders already will voteagainst merger commsnce appraisal the ar1d proooeding. This litigationandtl atr appraisal proceeding remove possible any need theTRO. for Second, Plaintiffs own eyidenoe conhadicts claimthatQuizno'sProxyStatemeot his "fails to disclose theSpecial with by that reftsedto negotiate FCI but instead, letter Committee dated October 2001,directed to negotiate LevineLeichtrnan,"(Conplainttl4l.) 22, FCI with TheSpecial and Committee its advisors considered FCI'8Foposalandits "put option" conditioq anallzedit, disrussed with FCI, anddetermined lhecotrdition that required the it consent ofQuizlo's lender, LevineLeichtman Il, Capital Partngrs LP ("Levin LeichhnrD').

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TheSpeciai Comdttee cootscted and the LevineLeichlman discussed FCI condition.As the Ploxy Statement repo(s,"LevineLeichtinan tlnt infome-d special committee theploposcd the io collditioqviolatedthetermsof its loatrfacility with usandthattheywouldnot colrsent ihe shareholder's that: condition." Thehoxy Statement reports also 22, the cnmmittee received detailed a On October 2001, special Iinancialanalysis ftom TuckeiAathonyofthe pBtoptionproposal uponits and it [te, theFCIproposau discussed i detail- Basd of evaluation ths rs6pon6 l-evineLeichtnan,thespecial and committee informed shareholder FCI] thatwe areunable the [r-.e, may to agre theco[ditiotrasproposed, thattheohaleholdr to and to negotiate directlywith Levile Leiohtman try to rea.har definitiveoffer to be acceptable to structure pennitanacceptable made.As thesharcholdefs condition notbeenmst, at thistime has 13,] theshareholder rrolmade firm offer. lProxyStatement has a misstates ' put option" the Third, Plaintiffis wrongin claimingthattheProxyStatement to requested FCI in its proposal.FCI'Sletters, by whichPlaintiffhassubmitted the Courton this this, accuntelyreports motion,state FCI 'lequiros" theputoptioh,andtheProxyStateoent that incorrectly Fouth, Plaintiff is wong iIt claimingthatQuizno'o ProxyStatement 'independent' "dcscribes Special when the as Committee's legalandIinancialadvisors being theyclearlyarnot." (Complaint 41.) ThePloxy Statement explairsin detailtheprior !l linancialadvieo!andits legal relationships betwcen Corrunittee's Quizno'sandtheSpecial law retainthem, Theoase advisor, why theSpecial and Committee concluded it should that werenot independent. that that shows on these facts,thereis no basis concluding the advisors for it I'lfth, theequities because deprives dictaletlut therequested should denid TRO be $8,50price. theminority sharcholders to of ofthe opportunity takeadvantage tbepremium and the Delaying Shareholders' the the to Meetingincreases costs Quizno's leaves slEreholders in a{!uncrtain the ltrgrger situatioo wherg proposed mayneveroccutandtheywill losethe price. There @ othorfiIm offer available.Evna short opportunity receive premium to a is

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delaycouldinvolvesubstatrtial distiaotion expense. mayrequirere-circulatio[ofthe and It ProxyStatement, updated financialreports attendant and prcfessiotal otherfees- But it and wouldnot addanything material thebodyofinformationavailable shareholders to !o considedng themerger.On theotherhand,ifthe TROis denied plaintiffis not injuredbecause has the he multiple damage remedies. Plaintiffhas known about Foposed the merger since wasannouncedJune it in 2001, Quizno'sfiled preliminary maierials Julyofthis year. Quizoo'sfiled a in Foxy statement definitive hoxy Staternent mailed to slnreholders November and it on 5,2001.plaintiffhas been thinking about litigating at since least August ofthis year.Yetthislawsuit notfild was unlilNovember andeven 13, no for thgn motion a TROwasmade.Onlyatthela$t minute has ihe Plaintiff sought emergency iljunotive relief, while at thesame 19, time - November 2001 - he is cncouraging olhershareholders voteagainst merger exercise to the their appraisal and dghts,tellingthemthat"t know of at least500,000 the shares will voteagainst merger that and send a request appraisal."(Affidavit of Theodore in ("Altman Aff "), Exh.B for Alt0dan (intemet message boardpostingfrom Sebesta); alsoAltmanAfl Exh.D (Sebesta nrcssagc see fromAugust 2001.)Plaintiffhas rernedy, it has a and to norhing dowith aTRO.

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Thefactsale explaind theaffidavitof Mark Brombrg in C'BrombrgAlT."),the chairman ofthe indepcnded merger Committee whichconsidered Schadens' the Special proposal, per [egotiated price share frotn$8.00 $8.50, haspersonal the knowledge of up to and thefactualinaccuracies tlrc plaintiffs motionpapers,Thefactsarealsoreported detailin in in theProxyStatenent, additional and factsarein theAltmanAffidavit andits exhibits.To avoid duplicatio4the factsarenot repeatcd in with hre,although arediscussed theargument they crtations the source. to

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ARGUMONT Under Colorado law,a TROor preliminary injunctive relif"shouldnot be indiscriminately gantedbut should exercised and and be sparingly cautiously with a ftlI conviction thepartofthe trial cour!ofits urgent on lJ.ecassiv." AtmelCorp,v. yitesse (reversiag couft's Seniconductor 792 trial Cotp.,30 P.3d 789, (Colo. App., Ct. Div. I, 2001) grant ofpeliminaryinjvrction), denied,200l 10, cert. Colo. Sept. 2001). LEXIS766(Colo. ln orderto obtaina TROor preliminary i4junction, padymustestablish: a (l) a reasoneble plobability (2) ofsuccess themerits; a danger on of real,imm{iiate, inparable and injury whichmaybe prventcd by injunctive relief; (3) thatthereis no plain,6pedy, adequate and remedy law; (4) thatlhe gra ing of apreli inaryinjunction[or at (5) TROIwill not disserve publicinterest; thatthebalance of the equities favors injunction; (6) thattheinjunctionwill the and pleseryo status pending trial onthemerits. quo the a Id (citing relyhgoi Rathke McFarlae,648P.2d (Colo.1982)); atuq and ree v. 648,653-54 ("The (Colo.1997) test e,g,, Kourlis DistrictCourt, Paso v, 1333 El Count,930P.2d 1329, usuallyapplicable injunctions for under Rule65 is setforthiDRarr,ke McFa one[supru]"); v, Baseline (Co]o. App.2001) FarmsTwo, IIP v.Hebnings,26 1209, 1212 P3d Ct. Game). "Unless ofthesecriteriaaremet,injunctive rgliefis not available."AtmelCorp,r4!! fiteste Semiconductor added).Here, Plaintiffmeets Co?.,30 P.3dat 791(emphasis !9!g ofthe ' necessary criteria.

questions" ratherthana Plaintiff mistakenly claimsit is enough show"sedous to (Pl-Motion4). Plaintiffcitosfederal law, likelihoodofsuccss federal casos applying but Colorado on state is different.Colorado's lalv Coui insists proofof Supreme provides likelihoodof success unless special a otlerwise. See Ralhkev. statute McFarlane, P.2dx 654;Baseline LLP r. Hennihgt,26P,3dat 1212. 648 FarmsTwo,

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PLAINTIFF CANNOT SHOW A DANGEROF IRREPARABLE HARM BECAUSEHIS ALLEGED INARY CA}I BE IULLY COMPENSATED WITH MONEY DAMAGES "As a prerequisite theissuance to ofan ofrcal, injunction, theremustbe a showing

irnmediate inepanbleidury to lthepeftyseeking injunction]whichwill ocsurpending and the final hearing, thattheiqjunction necessary prevent and Atnericafi is to suchinjury or d'l/nage." (eu Investors Ins. v. Green LiJe Co. (Colo.1960) banc).No Shield Plan, 1nc.,358 P.2d,413,475 inepalable halm existsiflhe alleged by damages. Colorado's injury canbeoompensated money "is courts reverse preliminary appellate will a injunction ifwhat a plaidiff seeks mcasffable and compensable money."Id at 476(reve$inggant ofpreliminaryinjunctiotr), in In thepresent case, factsshow, fou! does p&senta danger of decisively, this case that not ireparablginjury thatcallsfor ernergency injunctivcrelief. First Plaintiff spcilically amount of that alleges thedirecthannis theinadoquate he money will receive his Quizno's for (.leePl. Motiou 1,7; Complaiot 3, 38.) The shares. llil mergtoffen $8.5q Plaintiffc)aims priceshouldbe least$10.63.Plaintiffcalcu'lates his the at damages in dolla$ andasa percentager S8,50 money prioeis "$2.13lesspe! sharc" than both the (wrongly) an it should (P1. be whatheolaims Motionat7; Complaiot38),or'25% less" than is ll avlilable altemative offer. (Complaint3.) !l Secord,Colorado's this appraisal provides damago rcmcdyfor exactly rightsstatute a froma situation.Appraisal rightsfor shareholders granted sharcholders dissent are who to morger.Colo.Rev.Stat.$ 7-113-l0l b $ l7-lI3-302, Thstatute re4uires coudto the delennine fair valueofthe dissenter's the sharos award plu6accrued and it, inlerest,As Plaintiff "lf admits, theFoposed merger ayproved, is dissenting may thir stockholde.s still exercisc appraisai rights."(Pl.Motion n. l.) Plaintificomplains d) thatthisdgbtis (at 2

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"compromjsed" sharholdeN not haveenough but because do informalion, thePmxyStateme djscusses appraisal these rights(ProxySratcment & App,D) andftlly discloses facts the 44 ooncerning Special the procedue Committee. statutory The assures fair valuewill bepaid. that Thi.d, Plaintif knowsappraisal p.oceediogs takeplaceandis encouraging other will shareholders join in them. Oneshareholder repoded anSEClilillg thatit will seek to has in apFaisalrights. (See AltmauAff. ll!f4-5, Exh.A.) ThePlaintiff,in anintemetmssage dated Novombpr 2001,encouraggd Quizno's 19, other a for shareholdrs "create problem the to Schadens" votingno on themerger exercising by AltrnanAlf. 11 & and appnisal rights. (See 6 Exh.B.) Plaintiffinsisted "I knowof at least500,000 the that shares urill voteagainst that merger send a requst appraisal." and in (1/.) for Fourth, thpresent fo! actionalsoseeks monetary whichcancompensate aoy damages "compensatory injury. (See p. Complaint I l, asking Courtto award damages".) the Plaintiffhasnot citeda singleColorado holdingthatin these a TRO circumstances oase shouldissue despite availability the ofmoneydamages. only case does on injury is a The he cite (see Califomiadecision Pl. Motion8) thatdid not involvea merger shareholder meeting all, at or "greermail"palmentto a shareholder butwasabout alleged an group.Thecase irelevar{. is . PLAINTIFF CAI\NOT SHOWA RXASONABLEPROBABILITY OF SUCCESS ON THE MERITS BDCAUSE THE PROXYSTATEMf,NT PROPERLY DISCLOSES TIIE MATERIAL FACTS,,dNDBECAUSETIIE INDNPEI\DENT SPECIALCOMMITTEEACTEDPROPERLY TheComplaint motionallege thedeferdants a$d thot bleaohed liduoiarydulies their by inadequately disclosing information shareholders to the lo conceming merger bevotedon at the SharehoJders' Meeting, by approving merger and a whichis unfairbecause $8.50persharE its priceis lower thana supposed po (,tee altemative Complaint 1-4, 38ofirof$10.63 share. flJ 42; Pl. Motion 4-7.) TheComplaint themotionallege and conclusionsi threegroutdsfor these
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Supposedly ProxyStatement trotproperly tlre that a does disclose FCI made bona fide offer to purohase did that Comrnittee shares $10,63; thoSpeoial at Quizno's not reasonably infom thgmselves about andthatthe Special it; Committe 'tefnsedto negoliate with FCI but instead, l*rq datd October by 22,2001, directed to negotiate lvine Laichtman."(Pl. Motion2; Complaint FCI with lJ 41.) Supposedly ProxyStatement not accurately FCI'SFoposal the does descdbe whnit refersto the'but option"thatFCI discussed its ltteNto theSpecial in Conu ittee.(See Motion Complainr4l,) Pl. 2; { the Supposedly ProxyStatgment inaccurate is because descdbes Special the it "as Cornnittee'slegalatrdfinarcial advisors beint 'independent' whenthey clearly not."(Complaint41;Pl. Motion ar 3.) fl

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But Plaintiffhaspresented etiderceto suppod oftheoonclusions. fac! the any I$ !q hoxy Statement thefwo letters and offred Plaintiffdcmonstrate thercis no basisfor hi6 by that claims. Theaccuracy thePmxyStatement alsocorfirmedby theBromberg of is Alndavit. A. the Contrary to th complalnt,the Proxy ststmtrtproperly dlscloses (FCI offet" for alteged how the Spci.l Comnittee rnelyzdit !trd $10,63, discussed with F-1CI, why it war not a llrm offr rt .ll lt atrd

a Plaintif claimsthatthePloxy Statement lot adequately disclose FCI made that does bonalide offer to purchase that Committee not did shares $10.63; theSpeoial at Quizno's "refused negotiate reasonably with Committee lo infonn themslv9s abouiit; andthattheSpecial FCI but instead, letter dabdoctobet22,2M1, directed to negotiate Levin with by FCI Leichtman-" Motion Complaibtll4l.)Plaintiffs y support thisclsid iea letter or 2; for @1. (See dated 21,2001, a letter M. September and dated Ootober2,2001. Affidavitof Matthew Houston the lPlaintiffs legalcounrel]('PL Aff.'), Exh.B, C.) But theletters, ProxyStatement, andtheBromberg Afffdavit show Plaintiffis wrong. ThePrcxyStatement discussesnumber coniacts discussions FCIprior to and with a of andin thefall of200l, andreports in thendFCIdidDotreauy an that make offerat all: Thespecial oommitteg thatin orderto pursue sha&holder's the felt [i.e., FCI'sl willingness make offer it wouldrequircspeci{ics an regarding to - 9-

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thshareholder's cotrditions orderto determine in whether is in a it positionto negotiate suchconditions evidence finncial and of any ability. OnSeptember 2001, special 10, to the committee a ltter this snt effectto thesh&eholder. response thospeci4l cormittee's ln to provided with ce&in evidence request, shareholder ofhis the it financialability andwith thespecifics to an ofhis conditions mak informed offer. In a letterdated the oclobr2, 2001, slureholder the special for comnitteethathewouldmake offer of$t 0.63pe! shar an all ofthe minorityshares, y ifhe weregta eda put optionftom us or on tems similarto those theI-vine ir lrichtman loan" Thespecial committee a mecting October 2001to held S, on discuss proposal,Thespcial this conmilteeinitially rEviewed ard analyzed frnencial othe!isrglioations the ofthe ploposrl. atrd on Quizno's, requested and Tuckgr Anthonyto do a more comprehensive ofthe financialanallsis. In addition, chairman the special and cpmmittee with management LevineLeichtrnan met anddetailgd prapoced to the condition.Subscquent this mting, andafterdiscussiols informed the with oormsel, LevincL,eichtrnm the special that violated tormsof coBmittee theproposed condition its loanfacility with usandthattheywouldnot consent the to shareholde!'s condilion.OnOctober 2001,the special 22, committee received detailed a financial anal]sistom Tucker Anthory of tbeput optionprcposal discussd in detail. it and Based uponits evaluation theresponse Levinelpichtman, and of thespecial that committee infomed theshareholder we aleuoable to ageeto thgoondition proposed, thattheshareholder may as and negotiate to directlywith LevineLeiohtman try to reachan acceptable stucturcto permitanaccptable defiritive offer to b made.As thshareholde/s condition not been has met,at this time theshareholder notmade firm offer, a has (PrcxyStatement 13). WhattheProxyStatement is alsoconfirmed theBrcmberg by at sa)E did Aflidavit. It shows total lackofmerit to Plainlilfs claimthatthe Special Committee not the informitself (See Brornberg llll 10-19.) Aft Moreover, lette$ fromFCI themselves thatno firm offer wasmade. the show rcpodsthatafter TheSeptember 2001lctterfrona to theSpecial FCI Committee 21, letters "several phone and subsequnt FCI whatit'kould conversations," hasa'lropqsal" about of offei' ifcenainconditions met. (See Aff, Exh.B at l,) FCIclaims it is capable Pl. that were - l0-

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fundingits proposal, "FCI is reluclant reveal information but urtit Quizno's exhibitsa t0 that concretg corlrmitnent abaodoning Schaden to proposal."(1d, emphasis added.)In other the wods, FCIwasasking prcposa.l th when Quizno'sto connit itselfto abandoning Schaden's FCI hadllot evenshown howit wouldfinance ploposed its offer. 'bmpossl"from FCI alsootates TheSeptmber that'TCI wouldlqgtilg liquidity protection very similarto thatafiorded Levi$eLeichtr!.an, iocludinctag-aloqgddgagdS&t! marketvalueputoption:'(ld.atw.l-2.)Theputoption requircd asexplaitred the in is and, ProxyStalement quoted who above, conllicted this with thedghtsof LevineLeichtrnan, would not giveits co$ent to giveup its rights, The October the 2,2001letteroffercdby Plair{iffin suppod his claimsalsosuppods of conclusion no firm offer wasevrmade.Thislettorfrom FCI to theSpecial that Comrnittee reports "Al!!@gb_!gbiggjllQjb@g9, presntly will that that FCI contemplates theacquisition be partner." via ('LP"), with FCI actingasthegnral made a newlyfonnedli$ited partrlelsKp (Pl. Aff, Exh.C at 1,emphasis its ertity hadbenformed; added.)In odrer words, acquisition no form wasnot settled upon;it wasunloownwhowouldprovidethefunding. "FCI anticipates

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to not ofthecapital be not [i.e.,it does know]tlut a ponion [ie, it does knowhowmuch] will p4rties."(1d, emphasis the eonttibuted oome fiom related added,)But 'FCI leserve.s right to invite a smallnumber accredited of FCI investors contribute LP, although wouldnot to to approach suchinvesto$until it is clearthatanagrement Quizno'sis Soingto be any with (td.) Onitsfac,thisisrctafrnnoffer. olsoBro1nberg reached." Aff.lfi 1019, See "FCI contempjates TheOctobr ltteralsosays a 2 requiring put optionvirtuallyide0rtical "requidltg" gaveto LevineLeichtmn." (1d.2.) FCIn6verabandond to theonethatQuiano's theput option,andits letters Aff. nevetsayit would. See o/soBromberg $J10-19.

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Theallegdtions thecomplaint in Plaintifrs motionshould withdrawn in and be by Plaintiffas inaccurate withoutfoundation. letters and provided Plaintiffreponthatthe The by Speciai Committee disoussed matter length the with FCl. Theproxi Statement at rports not only thefaotsquoted above, whichinclude anallsisby theSpecial Committee's fiiaocial advisor, alsoea ierdiscussions FCI(the"sharehotder'). ProxyStatement but (See with 12-13.) TheSpecial Committce everlthingit couldreasonably with a proposal wasnot a firm did do that offer andthatwassubject conditions theSpecial to that investigated detenrined alld Conunitte oouldnotbe met- &e BrombqgAft lJT10-19. B. Coutrrry to the complrirqthe ProxyStrtemeDt accurqtely describes the "put optiotr" that FCI sskedfor r! r conditionof makltrgan offer, atrd explain8 that cotditioncouldnot bemet why

Contrary Plaintiff,it is ggl!accurate desoribo put optionrcferred itr FCI'S to to to tlrc letters merely'tontemplated" not required.Th6Septembef letterstates FCI as and 2l that "lgqgifgs"theput option, Theroquircmlt realfirmed theOctober letteraswell a! in was 2 in convorsations theSpecial vith (Se Aff Exh.C; Bromberg ulJ13-19 Conunittee. A{f. Pl. (confiming whatFCI required)).

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C.

Cotrtnry to the aomplaint, ?roxy Stltemnt accuratalydescrlberthe the SpeclalCommittGe lndeptrdent ascoDducting work wttlr qua[nd it! rs aDd Iin.Dcirl lld legaladvisors

Colorado courts hayenol hadoccasion develop law goveming the special oommitte6 !o ofindependfidirectors.'It is widelyrecognized thedecisions courts hav ofthe Delaware that addressed issues, theCourtmayconsider these ard thern. 1. Theiniependence the Speetq, of Comrrittee.Approvalby a q)eoialoommrttee

"strongevidence" a transaction a controllitlg of independent provides with directors that v, shareholder fair andthata courtshould interfere is not with it. Rotenblott GetlyOtl Co,,493 a A.2d 929,938n.7 (Del. 1985).To showtlnt a special cot4mittee not indpndenl was plaintiff hastheburden "showingthatthedireclors eitherbeholden thecontrolling to of are " shalreholder sounderits influence thirdiscrction sterilized In rc westemNalional or that is CorpSharcholdery Litigotior, C,A.No. I5927, 2000 Del.Ch.LEXIS82,at *37 (Del.Ch.May of 22,2000)(citingAronson Lewis,473A.2d 805,812(Del. 1984). Disqualilication a v. directorasnot indpeldent & requires ofdislo]"lty. See, e.g.,Cede Co.v. Techntevidence

expressly that Colorado's busircss statute, however, recognizes approval corporations by a corunitteeofdisjnterested will directors plovidcertainkindsofprctectionfor a has transaction beh{etl corpoBtion anentityh whicha director a ftnancial the and pa intercst. in relevant : Colo. Rev.Stat. 7-108-501provides $ "No conflictinginteresl set or transaction be void or voidable b enjoined, aside, shall by or giveriseto anaward damages othgrsanctions a proceeding a shaaeholdet in of or hansi orby or in therightofthecorporation, the solelybecause conflicting erest a directorofthe actioninvolvesa directorof thecorporation anentityin which or facts . corporatioo a directoror offlceror hasa financialinterest . . if: (a)the material is asto the director'srolalionship intr9$t asto theconlliotingintercsttransaction and or and aredisclosed areknownto theboaldofdirectorsor thecommittec, thc boardof or apploves, ratificstheconflicting ot directors committee goodfaithauthoizes, or in directors, interest hansaction theaffirmatiye voleof a majoritydfth disinterested by evsIlthoughthedisintelested directo$arolessthana quorum;. . . ."

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color, |nc.,634 (Del.1993), A.2d345,363 points,636 A.2d956(Del. nodilied part onother in 1994).Merercoeipt ofdirectors'feesor ofsomeimmaterial withoutotherevidence self-interest, ofdislolalty, notdisqualify dftector. e,g,, will lnc.,634 A.2d a See, Cede &Co,v, Technicolor, at 363;Globow Perot, A.2d180, (Del.1988). Spcial v. 539 188 must the The Committee have powerto say"no" to a transaction, should and and legal havgrelvant information appropriate andfinancialconsultants. et ll20-21. Id. Helethereis @ evidence theSpecial that was Colnmittee disloyalto Quimo'sor sterilized theSchadens. Special by The more said Committee "No" to theSchadens thal|once andactivelynegotiated rhemat arns' length.TheSchadens per with initially Foposd $8.00 shate the&erger. TheSpecial iD Committee then rejected price. TheSchadens increased that theiroffer to $8.21 share, again Speoial per but the rejected Schadem' the offer. The Committee Special Committe urged priceof $8.75, theSchadens rlot agree.Onlyafterthe a but did Schadens raioed theiroffer agaio $8.50 rheSpecial to did agre.Throughout these Committee negotiations Special the Cornmittee theadvice its financialadvisor.(tee ProxyStatemcnt had of ll; Bromberg Aff.ln 8-9;22-23,) Special The actions demonstrate its Commitlee's

"a

indeDendence, Thehdepe,tdenc. ofthe SpecislCommittee's,ldrrborr. Advisors mustbeable to functionindependently, this does require theadvisors but haveno pfior relationship not that with thecompany.Courts rcguladyuphold notwithdireotors' de-cisions retaitradvisoN to standing allegations stockholders suchadvisors by that lacked the itdependence because advisors a prior or current had lelationship with thecorpolation. See, e.g.,Kahnv. Caporella, No. 13,248, 1994 Ch.LEXIS29,at *20(Del.Ch.Mar.10,l9%) ('Althoueh Del. boththlegal andfinancialadvisors theSpecial to Committee performed for luve services Bumup& Simsin

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thc past,theleis no evidence those prior engagements extcnsive in anywayalfected that or wele theadvisors'loyalties thecurrent in matter."); Rosenblatt GettyOil Co.493 4,2d,929,943 v (Del. 1985)(in a merger Skellyinto Getty,valuation questions to of wereproperlydelegated D 'D & M eventhough & M hasvalued and Geny'sresrves since1939, hasdonesimilarwork "thereis no prooftbatD & M lacked with Skellyfor several yean," because independence or wasin anywaybeholdeNr eithrparty. Therecordfirlly supports oonolusion D & M had to a that therequisite reputation expeienc assist and to GettyandSko[y."). in Here,theprior connections and between Quizno'8 TuckerAnthonyarefully reported thehoxy Slatement, well asthereasons the Spcial as determined &fter why Committee intcrvigwing scvo.alcandidatcs TuckrAnthonywasstill thebeslchoiceto advise the that Special ProxyStatement Committee.(See 9-10.) Giventhese facts,asa mattrof law thereis nothingwrongwith TuckerAnthony'srole in advising Spccial Committee, the Thecase in this aleais particularly law inshuctive. In therecent decision Emerald ir Panners Berlir. No. 9700.2001Del. Ch.LEXIS 20 v. (Del. Ch.Feb.7, 2001),a plaintiffshareholder for breach fiduciarydutyin the merger of of sued May Petroleum theHall corporations, vr'ith whichwerecontrolled May's Chairman.The by merger negotiated approved theindependeot was and ofMay. Theplaintiffelaimd directols by thatthese directors May werenot reallyindependent hadbreached fiduciaryduties. their of and Panofthe plaintiffs argument thatthefinancialadvisor theMay directoE,BearSteams, was to couldnot givequalifiedadvice beoause hadpreviously it done work for the Hall corpoEtions. But thecourtrejoctd plaintiffs argument concluded thedefendant direotors had and that "testifiedthatBea!Stams adequately explaincd theirchoice ofBear Steams. Orc defendant wasthought bethmostsuitable to well candidate because hadperformed whenit advisgd it

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May's directors two other198Jhansactions. , . Therefore, non-affrliated on the direcrors concluded BearSteams that couldevaluate proposed the moreexpeditiously merger and rhoroughly thantheotherinvestrnent frms thatwereconsidered.,' 6t *22, plflr\iffs banking Id. clsims were dismissed. In Roberts General v. Instrument Corp., 11,639,slipop.at 26(Dcl,Ch.Aug.13, No. 1990), reprinted l6 Del.J.Cory.L. 1540, in (1991), plaintiffshareholder because 1560 sued a he objected a proposed to merger, claimed thedefendant atrd that boarddid notprcperlyapprove ths merger because, among otherthings,its financialadvisof, Menill Llnch, hada conflict in the transaction. the oout heldthatthealleged But conflictwasdisclosed tbeshareholdels to and presented problem. drerefore no Finally,Quizno'sbriefretention ofthe Brobeck film before Special law CorEnittee the retained themasits le8aladvisor disclosed theProxyStatement creates disabling was in and no conflict. e,g,,Kahx Caporella,No,|3,248, Del.Ch.LEXIS29,at *20 (Del.Ch. *ee v. 1994 Mar. 10, 1994)(legaladviso$to special committee wereappropriate thoughattomeys had even previously rcptesented corporation), the
The lato doesaot rcq itu the Proxy Stoterr.efilto adopt rhe Plsifitlffs inaccurare

charuclerizatiotrs directors ofthe SpecialContmlttee its advlsots.Whetrsolicitingproxies, afld mustdisclose matedalfactssurrounding proposed all a See, transaction. e.g.,Margoliesv. Pope & TalboiInc.,l2Del. t. Corp. 1092, L. tlO5(Del.Ch.1986). theyarenotrequired But to "engag confssions in ofcontested positions," 1994 WL Bragger Budacz,Civ, No. 13376, v. A. *8 698609, (Del.Ch.Doc.7, 1994), "to characterize conduct such wayasto admit in their a or (DeL wrongdoing." v. Loudon ArcherDatiels-Mclland A.2d,135,143 1997\; also, see Co.,700 Maryolies Pope Talbot, e.g., v. ("ld]irectols notrequired are & Inc.,12Del.J.Corp. ot 1105 L.

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to confess wrongdoing speculate or uponimproper in ents")lCitrone.E.I. motives proxystatem DuPonldeNemours Co., 584A.2d 490,503 (direoto$"arenot required (Del.Ch. 1990) & to confcss oorpomte wrongdoing engage 'self-flagellation' proxymaterials'). or in in Here,PlaintiffclaimstheProxyStatement should havedisclosed theSpecial that Committee not independeqt, thattheFCI proposal was and only "contsmplated" did not and "requite"theput option. (Complaint ale The T4t.) Plaintiffs assertioos not accurate. Proxy Statement discloses facts. NothingrequirerQuizno's adopt Plaintiffs inaccurate the .nd to the contested chamoterizations facts. of D. 1. Contrary to the complaitt, the evidnce shows that tbe SpecislCommitte proprlyapproved merger fiir the as Appruvalby qn independefi speclalcoumiieepruvides"strongetidesce"that

,he lrqnsoctionjsjab, andpuls the budeu ofptoofon thepo l chqlleaging traws.:llon, the A special committee ofdisinterested provides thet with directols assruanoe a transaction a controllingsharholder fair,' "[A;pprovalofthe ffa$aationby anindependent is of corunittee directon . , , shiflstbeburderofproofon theissue offaimessfrom tbecontrolli{gor doninatingslareholder thecballeDging to Kahnv.Lynch,638A.2d shareholder-plahtiff," (Del. 1999) I I 10, I I U (Del. 1994); ElnercldPaffiers v. Berlin,726A.2.d1215,1222.23 (iafte)iKahnv. Tremont (Del199?)(same). also provides Corp.,694 A.2d,422,429 It notjust y. evidence thetransaction fait but "strongovidence" faimess,See that is Rosenblatt Getty of Oil Co.,493 A.2d,929,938 (Del.1985) n,7 (characterizing ofa special use as committee "strong

As notedearlier, Colorado's statutes recognize a conflictingintgrest that traNaction receives cenain kinds ofprotection when is approved a committee by it ofdisinterested directors. Jrproat footnote quoting ,See Rev.Stat. 7-108-501. 2, Colo. $

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evidence offaimess'); also, see e.g.,lleinherger IIOP,(nc,,457 v. A.2d701, tr.7(Del. 709 1983)(useofan independent committee at ofoutsidedircctors negotiatiDg arm'slcngthcanbe "strongevidence" thetransaction that meets testof faimess). the properlyon the As explained above, evidence the shows theSpecial that Committee actgd Schadens' offer andthatPlaii iff hasno evidence showotherwise. merger to for$10.63 TheSpeclalCommltlee no atternatit f,rm ol&n FCI's proposal had e per share includes conditions cannot tulfillcd. (See that be Bromborg 'lJlJ Arf. l0-19; Proxy Statement FCI couldmakeanunconditional t3.) offer,but it hasnot dotrso. Theonly fum offer is theSchadens' oIler for $8.50.TheSpecialCommittee concluded theSchadens had that offer wasfair andin thebestinterest ofshareholders. After receiving punuingFCI's and proposal, Special quitepropoly adhered ils conclusions. Mendelv, thc Committee to See Carroll,65l A,2d297,306(Del,Ch. 1994); Freedrnan Restaurant v. Assoc. Ind.,Inc,, 1987WL 14323,18, Del.J.Corp. 651,663 (Del.Ch.Oct,16,1987). 13 L. I. Pldtrtllf cannotshowthrt there is no phitr, spedy, adequate remedyat larY atrd "Equitywill not intervene where plaintiffhasa plain,nd adequate a rcmedyat law." (en American Investors Ins. Co.v. Green Life Shield Plan,lnc.,358 P.2d473, 476(Colo, 1960) that banc).Plairtiff ha6morethanonefirlly adequate law remedy law. Colorado provides any at minorityshareholders oppose merger who {he havetheright to havethefair valueoftheir shares detennined a stratutory in appraisal proceeding. Colo.Rev.Stat.$7-113-101 l7-113-302, to$ Thedamage claimsin thepresnt a.tion alsoprovides fully adequat a remedy. IV. Plaitrtill cantrotshowthat the TRO will not dlsserve publlc lrterest the involves publicshareholders Ttis case whose right to voteon themergsrandroceive $8.50pr share tluealened theplaintilt Plaintiffdoes like thatprice,but he hasa fully is by not

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adequate appraisal proceeding will providehim with thefair valueofhis shares.Plaintiff that shouldnot be allowedto deprive pubticshareholdcN the the oftheir rights!o accept $8.50. V. Plaintilfcrtrnotshowthrt thebrlarceofequldqs f4vorstheTRO if Meetilg is Quizno'swouldbe unfairlyharmed theTROissued.Ifthe Shareholders' not heldandthemgrger does close, not who Quiato'sshareholders wantth$8.50pricwill be deprived ofthe only opportunity have ofobtainingthis premium price. Th they had uncertainties thmarketsirce September in makeit highlyproblematic whethcranybetterfirm offer will cometo Qui2no'sin theforeseeable futur. Evena shortdelaycouldinvolve substantial dishaction expenSe.mayrequire updated 8nd It ofthe ProxyStatemgnt, le-circulation flnancialreports attendant professional otherfees.But it wouldnot addanything and and to material thebodyofinformatiotravailable shareholders the to considering merger.Plaintiff wouldnotbe unfairlyharmed have ifthe TROweredenied because shareholders statutory all rightsandcalrrecover applaisal apprcpdate monetary damages, Vl. Plaitrtilfcantrot quo showtbat thcTRO n'll preservc aspects ofthe status all It is misleading saytherequestd will presesethestatus quo quo. Thestatus to TRO idcludes obligations plansfor lhe Shareholders' and and will Meetingandmerger, theEe be by disrupted therequested TROat a significant to Quizno's. cost CONCLUSTON Plaintiffs motionfor a TROshould denied. be

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Date,d: Novembr 2001 26.

{. Michael Dg6le(#31798)

FORDEFENDANT ATTORNEYS TlrE QUTZNO'S CORIORATION

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CERTIFICATE SERVICE OF I hereby certif thata trueandconectcopyofthe foregoing TIIE QLTIZNO'S COPBOMTION'S MEMORANDUM LAW IN OPPOSMON PLAINTIFF'S TO OF MOTIONFORA 'IEMPOMRY RESTMINING ORDER srved facsimilcand ras by ovemight nail on the l'?|"?ay ofNovember, 2001,addressed rhefollowing: ro Kip B. Shunan(#23593) (#28007) Jeftey .d Bereos DYER& SHIJMAN,LLP 801East17hAvenue Detrver, 8021t-1417 CO JoelC. Feffr Matthew Houston M. WECHSLER HARWOOD HALEBIAN & FEFFER LLP 488Madison Avenue New York,NY 10022 Chesley CulptrI Key Moye,Giles,OKeefe,Vermeire Gonpll LLP & 1225176stret,296Floor DlYer,CO 80202 Dean Kri$ty Brobeck Phleger HanisonLLP & SfeetTower Spear OneMa*et SarlFraocisco, CA 94105 CaryllMazi! Brobeck Ptleger& Harison LLP Interlocker Blvd.,Suite500 370 Broomfiel4CO 80021

{rtills