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OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
PJ AMERICA, INC.
AT $8.75 NET PER SHARE
BY
PJ ACQUISITION CORP.
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The Offer and withdrawal rights will expire at 12:00 midnight, Eastern
Daylight time on Monday, August 20, 2001, unless the Offer is extended.
A summary of the principal terms of this Offer appears on pages 1 to 4. You
should read this entire document carefully before deciding whether to tender
your shares of common stock.
The Offer is being made pursuant to an Agreement and Plan of Merger, dated
as of June 28, 2001 between PJ America, Inc. ("PJAM") and PJ Acquisition Corp.
(the "Purchaser"), an entity formed by several of PJAM's officers, directors
and significant stockholders (the "Investor Group").
XXXX's Board of Directors, by unanimous decision of those directors
participating and based upon the unanimous recommendation of a Special
Committee of independent directors:
. determined that each of the Offer, the Merger and the Merger Agreement
is advisable, fair to and in the best interests of PJAM and its
stockholders (other than the Purchaser and the Investor Group);
. approved the Offer, the Merger and the Merger Agreement and the
transactions contemplated by the Merger Agreement; and
. recommended that PJAM's stockholders accept the Offer and tender their
shares pursuant to the Offer, and, if applicable, approve and adopt the
Merger Agreement and the Merger.
The Offer is conditioned upon a number of things, including there being
validly tendered and not withdrawn prior to the expiration of the Offer a
number of shares of PJAM's common stock that together with the shares already
owned by the Purchaser and the Investor Group represent at least 90% of the
then outstanding shares; an absence of any material adverse change to PJAM;
and consummation of financing sufficient to complete the transactions. See
"The Tender Offer--Section 11. Conditions of the Offer." The Purchaser has
received a financing commitment letter which it believes will enable it to pay
for the Shares tendered in the Offer and acquired in the Merger.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of this transaction or passed upon the
fairness or merits of such transaction or upon the accuracy or adequacy of the
disclosure in this document. Any representation to the contrary is a criminal
offense.
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THE INFORMATION AGENT FOR THE OFFER IS:
[LOGO XXXXXXXXX SHAREHOLDER]
Brokers and Banks Call Collect: (000) 000-0000
All Others Call Toll Free: (000) 000-0000
July 20, 2001
IMPORTANT
If you want to tender all or any portion of your shares of common stock of
PJ America, Inc. ("Shares"), you should either (a) complete and sign the
Letter of Transmittal (or a facsimile thereof) in accordance with the
instructions in the Letter of Transmittal and mail or deliver it together with
the certificate(s) representing tendered Shares, and any other required
documents, to the Depositary or tender such Shares pursuant to the procedures
for book-entry transfer set forth in "The Tender Offer--Section 3. Procedures
for Accepting the Offer and Tendering Shares" or (b) request that your broker,
dealer, commercial bank, trust company or other nominee effect the transaction
for you. If your Shares are registered in the name of a broker, dealer,
commercial bank, trust company or other nominee, you must contact the broker,
dealer, commercial bank, trust company or other nominee if you want to tender
your Shares.
If you want to tender your Shares and your certificates evidencing such
Shares are not immediately available, or if you cannot comply with the
procedures for book-entry transfer described in this Offer to Purchase on a
timely basis, or you cannot deliver all required documents to the Depositary
prior to the expiration of the Offer, you may tender your Shares following the
procedures for guaranteed delivery set forth in "The Tender Offer--Section 3.
Procedures for Accepting the Offer and Tendering Shares."
You can ask questions or request assistance from the Information Agent at
the address and telephone number listed on the back cover of this Offer to
Purchase. Additional copies of this Offer to Purchase, the Letter of
Transmittal, the Notice of Guaranteed Delivery and other related materials may
be obtained from the Information Agent or from the broker, dealer, commercial
bank or trust company in whose name your Shares may be registered.
TABLE OF CONTENTS
Section Page
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SUMMARY TERM SHEET.................................................... 1
INTRODUCTION.......................................................... 5
SPECIAL FACTORS....................................................... 7
Background of the Offer............................................. 7
Recommendation of the Special Committee and the Board; Fairness of
the Offer and the Merger........................................... 12
Opinion of the Special Committee's Financial Advisor................ 15
Position of the Purchaser Regarding Fairness of the Offer and the
Merger............................................................. 22
The Investor Group's Purpose and Reasons for the Offer and the
Merger............................................................. 23
Plans for PJAM After the Offer and the Merger; Certain Effects of
the Offer.......................................................... 24
Interests of Certain Persons in the Offer and the Merger............ 26
The Merger Agreement................................................ 27
Appraisal Rights.................................................... 34
Beneficial Ownership of Common Stock................................ 35
Transactions and Arrangements Concerning the Shares................. 36
Related Party Transactions.......................................... 37
THE TENDER OFFER...................................................... 38
1. Terms of the Offer; Expiration Date............................. 38
2. Acceptance for Payment and Payment.............................. 39
3. Procedures for Accepting the Offer and Tendering Shares......... 40
4. Withdrawal Rights.............................................. 43
5. Certain Federal Tax Consequences................................ 44
6. Price Range of the Shares; Dividends............................ 45
7. Effect of the Offer on the Market for the Shares; Stock Exchange
Listing; Exchange Act Registration; Margin Regulations.......... 45
8. Certain Information Concerning PJAM............................. 46
9. Certain Information Concerning the Purchaser.................... 49
10. Source and Amount of Funds...................................... 49
11. Conditions of the Offer......................................... 50
12. Certain Legal Matters; Required Regulatory Approvals............ 52
13. Certain Fees and Expenses....................................... 53
14. Miscellaneous................................................... 54
EXHIBIT
Description Exhibit
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Section 262 of the Delaware General Corporation Law................... A
SCHEDULES
Description Schedule
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Officers and Directors of PJ America, Inc............................. I
Officers and Directors of the PJ Acquisition Corp..................... II
SUMMARY TERM SHEET
PJ Acquisition Corp. is offering to purchase all the outstanding shares of
common stock (the "Shares") of PJ America, Inc. for $8.75 per Share in cash.
The following are some of the questions that you, as a stockholder of PJ
America, Inc., may have and answers to those questions. Please read the
remainder of this Offer to Purchase and the accompanying Letter of Transmittal
because the information in this summary is not complete and additional
important information is contained in the remainder of this Offer to Purchase
and the accompanying Letter of Transmittal. In this document, PJ Acquisition
Corp. is referred to as the "Purchaser" and PJ America, Inc. is called "PJAM."
Who Is Offering to Buy My Securities?
Our name is PJ Acquisition Corp. We are a Delaware corporation created by
certain officers, directors and significant stockholders of PJAM and members of
their families (the "Investor Group") for the purpose of making this Offer. See
"The Tender Offer--Section 9. Certain Information Concerning the Purchaser."
The Investor Group currently owns 1,740,789 outstanding Shares. This represents
approximately 40% of PJAM's outstanding Shares as of July 19, 2001.
The Investor Group includes Xxxxxxx X. Xxxxxxx (Chairman of the Board of
Directors), Xxxxxxx X. Xxxxxxxx (President, Chief Executive Officer and a
director), Xxxxxxx X. Xxxxxxxxx (Vice Chairman, Secretary and a director),
Xxxxxx X. Xxxx (a director), Xxxxx X. Xxxxxx (a director), Xxxxxxx X. Xxxxxxxx
(a director), Xxxxxxx X. Xxxxxxxx (a significant stockholder), Xxxx X. Xxxxxxxx
(a significant stockholder), and Xx. Xxxxxxx'x adult children, Xxxxxx X.
Xxxxxxx and Xxxxxxxx X. Xxxxxxx. The ownership interest in the Purchaser of
each member of the Investor Group will be based on the number of Shares that
each owns in PJAM. The Purchaser's directors are Messrs. Xxxxxxxx, Xxxxxxx,
Xxxxxxxxx, Xxxx, Xxxxxx, Xxxxxxxx, Grisanti, and Xxxxxxxx. Xx. Xxxxxxx is
Chairman, Xx. Xxxxxxxx is President and Chief Executive Officer and Xx.
Xxxxxxxxx is Secretary of the Purchaser.
What Are the Classes and Amounts of Securities Sought in the Offer?
We are seeking to acquire all of PJAM's outstanding Shares that the Investor
Group does not already own. See "Introduction." There are currently 4,323,648
Shares outstanding, of which 2,582,859 are not owned by the Investor Group.
There are no other classes of PJAM stock outstanding.
How Much are You Offering to Pay and What is the Form of Payment?
We are offering to pay you $8.75 per Share, in cash, less any amounts
required by law to be withheld and paid to governmental entities. If you are
the record owner of your Shares and you tender your Shares to us in the Offer,
you will not have to pay brokerage fees, commissions or similar expenses. If
you own your Shares through a broker or other nominee, and your broker tenders
your Shares on your behalf, your broker or nominee may charge you a fee for
doing so. You should consult your broker or nominee to determine whether any
charges will apply. See "Introduction" and "The Tender Offer--Section 3.
Procedures for Accepting the Offer and Tendering Shares."
Do You Have the Financial Resources to Make Payment?
We have received a financing commitment letter from Bank One, Kentucky, NA,
relating to up to $25 million in debt financing for the Offer and the Merger.
We believe this financing will be sufficient to allow us to pay for the Shares
tendered in the Offer and to complete the second-step merger of the Purchaser
into PJAM. Our commitment letter also provides for an additional $5 million for
working capital. The commitment letter is subject to certain customary
conditions, including execution of definitive documentation and the absence of
any material adverse change. See "The Tender Offer--Section 10. Source and
Amount of Funds."
1
Is Your Financial Condition Relevant to My Decision to Tender in the Offer?
Our financial condition may be relevant to your decision to tender your
Shares in the Offer. However, since we were formed solely for the purpose of
making the Offer, have conducted no business activities other than those
related to structuring and negotiation of the Offer and Merger and arranging
financing therefor, and have no material assets or liabilities other than the
contractual rights and obligations related to the Merger Agreement and the
financing commitment letter, we have no meaningful historical financial
information. See "The Tender Offer--Section 9. Certain Information Concerning
the Purchaser." PJAM's financial information may also be relevant to your
decision whether to tender your Shares. See "The Tender Offer--Section 8.
Certain Information Concerning PJAM."
How Long Do I Have to Decide Whether to Tender in the Offer?
You will have until 12:00 midnight, Eastern Daylight time, on Monday August
20, 2001, to decide whether to tender your Shares in the Offer. If you cannot
deliver everything that is required in order to make a valid tender by that
time, you may be able to use a guaranteed delivery procedure, which is
described later in this Offer to Purchase. See "The Tender Offer--Section 3.
Procedures for Accepting the Offer and Tendering Shares."
Can the Offer Be Extended and Under What Circumstances?
Under the terms of the Merger Agreement, we can extend the Offer without the
consent of PJAM from time to time, for up to ninety days after commencement of
the Offer, if specified conditions to the Offer have not been satisfied. We may
establish a subsequent offering period of up to 20 business days under certain
circumstances. A subsequent offering period is an additional period of time
beginning after we have purchased Shares tendered in the Offer during which
time you can tender, but not withdraw, Shares and receive the Offer Price. See
"The Tender Offer--Section 1. Terms of the Offer; Expiration Date."
How Will I Be Notified if the Offer is Extended?
If we extend the Offer, we will inform National City Bank, the Depositary
for the Offer, and will make a public announcement of the extension, not later
than 9:00 a.m., Eastern Daylight time, on the next business day after the day
on which the Offer was scheduled to expire. See "The Tender Offer--Section 1.
Terms of the Offer; Expiration Date."
What Are the Most Significant Conditions to the Offer?
This Offer is conditioned upon, among other things, there being validly
tendered and not withdrawn prior to the expiration of the Offer, a number of
Shares that, when added to the Shares members of the Investor Group already
own, represents at least 90% of the outstanding Shares; absence of any material
adverse change to PJAM; and consummation of financing sufficient to complete
the Offer and the Merger. We can, in our discretion, waive the above-described
conditions. However, we may not accept any Shares, without the approval of the
Special Committee, unless a majority of the Shares not owned by the Purchaser
or the Investor Group are tendered in the Offer. See "The Tender Offer--Section
11. Conditions of the Offer."
How Do I Tender My Shares?
To tender your Shares, you must deliver the certificates evidencing your
Shares, together with a completed Letter of Transmittal, to the Depositary, not
later than the time the Offer expires. If your Shares are held in street name
(that is, through a broker, dealer or other nominee), the Shares can be
tendered by your nominee through The Depository Trust Company. If you are
unable to deliver everything that is required to the Depositary by the
expiration of the Offer, you may obtain extra time to do so by having a broker,
bank or other fiduciary who is a
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member of the Securities Transfer Agent Medallion Program or other eligible
institution guarantee that the missing items will be received by the Depositary
within three Nasdaq trading days. However, the Depositary must receive the
missing items within that three-day trading period or your Shares will not be
validly tendered. See "The Tender Offer--Section 3. Procedures for Accepting
the Offer and Tendering Shares."
Until What Time Can I Withdraw Previously Tendered Shares?
You can withdraw previously tendered Shares at any time until the Offer
expires on Monday August 20, 2001 and, if we have not agreed to accept your
Shares for payment by September 20, 2001, you can withdraw them at any time
after such time until we accept your Shares for payment. This right to withdraw
will not apply to any subsequent offering period. See "The Tender Offer--
Section 1. Terms of the Offer; Expiration Date" and "The Tender Offer--Section
4. Withdrawal Rights."
How Do I Withdraw Previously Tendered Shares?
To withdraw Shares, you must deliver a written notice of withdrawal, or a
facsimile of one, with the required information to the Depositary while you
still have the right to withdraw the Shares. See "The Tender Offer--Section 4.
Withdrawal Rights."
What Does PJAM's Board of Directors Think of the Offer?
PJAM's Board of Directors, by unanimous decision of those directors
participating and based upon the unanimous recommendation of a Special
Committee of independent directors: (1) determined that each of the Offer, the
Merger and the Merger Agreement is advisable, fair to and in the best interests
of, PJAM and its stockholders (other than the Purchaser and the members of the
Investor Group); (2) approved the Offer, the Merger and the Merger Agreement
and the transactions contemplated thereby; and (3) recommended that you accept
the Offer and tender your Shares and, if applicable, approve and adopt the
Merger Agreement and the Merger. See "Special Factors--Recommendation of the
Special Committee and the Board; Fairness of the Offer and the Merger."
Why Was the Special Committee Formed?
The Investor Group will own all the outstanding Shares of PJAM after the
Merger. Accordingly, the Board believed that a Special Committee of independent
directors who are not officers or employees of PJAM and who have no financial
interest in the transactions different from PJAM's stockholders generally
should be formed to evaluate, negotiate, and, if appropriate, approve the Offer
and the Merger. The Special Committee was also authorized to investigate other
strategic alternatives, including a sale to a third party buyer. See "Special
Factors--Background of the Offer" and "Special Factors--Related Party
Transactions."
Following the Offer, Will PJAM Continue as a Public Company?
No. If the Merger takes place, PJAM will no longer be publicly owned. See
"Special Factors--Plans for PJAM After the Offer and the Merger; Certain
Effects of the Offer."
Will the Offer Be Followed by a Merger if Not All of the Publicly Traded Shares
of PJAM are Tendered in the Offer?
Yes. Following the Offer, the parties intend to merge the Purchaser with and
into PJAM. If the Merger takes place, PJAM will be owned by the Investor Group,
and all of the remaining common stockholders of PJAM (other than the Purchaser
and members of the Investor Group) will receive $8.75 per Share in cash. In the
Merger, you may be entitled to demand appraisal of your Shares pursuant to
Section 262 of the Delaware General
3
Corporation Law (the "DGCL"). Stockholders who tender their Shares in the Offer
will not be able to exercise appraisal rights with respect to their tendered
Shares. If you properly demand the appraisal of your Shares, you will not
receive cash in the Merger, but rather you will be entitled to payment of the
fair value of your Shares in accordance with Section 262, which may be more
than, less than or equal to $8.75 per Share. See "Special Factors--The Merger
Agreement," "Special Factors--Plans for PJAM After the Offer and the Merger;
Certain Effects of the Offer" and "Special Factors--Appraisal Rights."
If I Decide Not to Tender, How Will the Offer Affect My Shares?
If the Merger takes place, stockholders who did not tender their Shares in
the Offer will receive in the Merger the same amount of cash per Share which
they would have received had they tendered their Shares in the Offer.
Therefore, if the Merger takes place, the only difference to you between
tendering your Shares and not tendering your Shares is that you will be paid
earlier if you tender your Shares in the Offer. However, in the Merger, you may
be entitled to demand appraisal of your Shares pursuant to Section 262 of the
DGCL. Stockholders who tender their Shares in the Offer will not be able to
exercise appraisal rights with respect to their tendered Shares. If you
properly demand the appraisal of your Shares, you will not receive cash in the
Merger, but rather will be entitled to payment of the fair value of your Shares
in accordance with Section 262 of the DGCL which may be more than, less than or
equal to $8.75 per Share. If for some reason the Merger does not take place,
the number of stockholders and Shares that are still in the hands of the public
after the Offer may be so small that the Shares may no longer be eligible for
listing on Nasdaq and there may no longer be an active public trading market
(or, possibly, any trading market) for the Shares. If this is the case, and you
do not tender your Shares, you may not be able to sell them in the open market.
Also, PJAM may no longer need to comply with the rules of the Securities and
Exchange Commission relating to publicly held companies. See "Special Factors--
Plans for PJAM After the Offer and the Merger; Certain Effects of the Offer"
and "Special Factors--Appraisal Rights."
What is the Market Value of My Shares as of a Recent Date?
On March 22, 2001, the last trading day before the submission of the
Purchaser's initial, conditional proposal to PJAM, the last sale price of the
Shares reported on Nasdaq was $6.625 per Share. On June 28, 2001, the last
trading day before PJAM announced the Merger Agreement had been signed, the
last sale price of the Shares reported on Nasdaq was $7.75 per Share. As of
July 19, 2001, the last full trading day prior to the commencement of the
Offer, the last sale price of the Shares reported on Nasdaq had been $8.50 per
Share on July 11, 2001. No trading activity in the Shares had been reported by
Nasdaq since July 11, 2001. You should get a recent quotation before deciding
whether to tender your Shares. See "The Tender Offer--Section 6. Price Range of
the Shares; Dividends."
What Are the Tax Consequences to Me of the Transaction?
If you tender Shares in the Offer, you will generally recognize gain or loss
measured by the difference between the cash you received and your tax basis in
the Shares tendered. See "The Tender Offer--Section 5. Certain Federal Tax
Consequences."
Who Can I Talk to if I Have Questions About the Offer?
You can call the information agent Xxxxxxxxx Xxxxxxxxxxx at 0-000-000-0000.
See the back cover of this Offer to Purchase for more details.
4
TO THE HOLDERS OF COMMON STOCK OF PJ AMERICA, INC:
INTRODUCTION
PJ Acquisition Corp., a Delaware corporation, hereby offers to purchase all
outstanding shares (the "Shares") of common stock, par value $0.01 per Share,
of PJ America, Inc., a Delaware corporation, at a price of $8.75 per Share in
cash (the "Offer Price"), less any amounts required by law to be withheld and
paid to governmental entities, upon the terms and subject to the conditions
set forth in this Offer to Purchase and in the related Letter of Transmittal
(which, together with any amendments or supplements thereto, constitute the
"Offer"). In this document, PJ Acquisition Corp. is referred to as the
Purchaser and PJ America, Inc. is called "PJAM."
The Purchaser was formed by a group consisting of certain officers,
directors and significant stockholders of PJAM and members of their families
(the "Investor Group"). The Investor Group formed the Purchaser for the
purpose of making this Offer. Members of the Investor Group currently own
approximately 40% of PJAM.
The Offer is being made pursuant to an Agreement and Plan of Merger, dated
as of June 28, 2001 (the "Merger Agreement"), between the Purchaser and PJAM.
The Offer is conditioned, among other things, upon there having been validly
tendered and not withdrawn prior to the expiration date of the Offer that
number of Shares that together with the Shares owned by the Investor Group
constitute at least 90% of the outstanding Shares; an absence of any material
adverse changes to PJAM; and consummation of financing sufficient to complete
the transactions. The Purchaser may waive the above described conditions.
However, the Purchaser may not accept any Shares, without the approval of the
Special Committee, unless a majority of the Shares not owned by the Purchaser
or the Investor Group are tendered in the Offer. See "The Tender Offer--
Section 11. Conditions of the Offer." The Purchaser has received a financing
commitment letter which it believes will enable it to pay for the Shares
tendered in the Offer and acquired in the Merger (as defined below).
As soon as practicable after the completion of the Offer and the
satisfaction or waiver of the conditions set forth in the Merger Agreement,
the Purchaser intends to merge with and into PJAM (the "Merger") in accordance
with the applicable provisions of the Delaware General Corporation Law (the
"DGCL"). Assuming the Purchaser owns 90% of the outstanding Shares after the
Offer, the Purchaser intends to effect the Merger as a "short-form" merger
under the DGCL without a vote of PJAM's stockholders. Following the Merger,
PJAM will be the surviving corporation (the "Surviving Corporation") and the
separate existence of the Purchaser will cease. Prior to the Merger, members
of the Investor Group will contribute their Shares to the Purchaser in
exchange for shares of common stock of the Purchaser. At the effective time of
the Merger, each issued and outstanding Share other than (i) the Shares owned
(or held in the treasury) by PJAM, (ii) Shares of holders exercising
dissenters' rights and (iii) Shares held by the Purchaser, will be converted
into and represent the right to receive the Offer Price (the "Merger
Consideration"). Each share of common stock of the Purchaser will be converted
into a share of the Surviving Corporation and accordingly the members of the
Investor Group will own the Surviving Corporation. See "Special Factors--The
Merger Agreement" for a description of the Merger and the Merger Agreement.
PJAM's Board of Directors, by unanimous decision of those directors
participating and based upon the unanimous recommendation of a Special
Committee of independent directors (the "Special Committee"): (i) has
determined that each of the Offer, the Merger and the Merger Agreement is
advisable, fair to and in the best interests of PJAM and its stockholders
(other than the Purchaser and the members of the Investor Group); (ii) has
approved the Offer, the Merger and the Merger Agreement and the transactions
contemplated thereby; and (iii) recommends that PJAM's stockholders accept the
Offer and tender their Shares pursuant to the Offer and, if applicable,
approve and adopt the Merger Agreement and the Merger. The Board's
recommendation is contained in the Solicitation/Recommendation Statement (the
"Recommendation") on Schedule 14D-9, which was filed by PJAM with the
Securities and Exchange Commission (the "Commission") in connection with this
Offer and which is being furnished to stockholders concurrently with this
Offer to Purchase. Stockholders should read the Recommendation Statement for
additional information regarding the Board's determination and recommendation.
5
On June 27, 2001, Banc of America Securities LLC, financial advisor to the
Special Committee, delivered its written opinion to the Special Committee
that, as of that date and based upon and subject to the various assumptions
and limitations described in the opinion, the Offer Price to be received by
the holders of Shares, other than the Purchaser and the Investor Group,
pursuant to the proposed transaction was fair from a financial point of view
to those holders. Banc of America Securities' opinion and presentation to the
Special Committee were among the many factors taken into consideration by the
Special Committee in its decision to recommend and by PJAM's Board of
Directors in making its determination to approve and to recommend that XXXX's
stockholders accept and approve the Offer and the Merger. Banc of America
Securities' written opinion to the Special Committee is attached as Annex A to
the Recommendation Statement which is being furnished to stockholders
concurrently with this Offer to Purchase and as Exhibit (c)(1) to the Schedule
TO which was filed with the Commission by the Purchaser in connection with the
Offer. The opinion sets forth assumptions, limitations and matters considered
in the review undertaken in connection with the opinion. The opinion does not
constitute a recommendation by Banc of America Securities to you as to whether
or not you should tender your Shares pursuant to the Offer or as to any other
matter relating to the Offer. You should read the opinion carefully and in its
entirety.
XXXX supplied the information contained in this Offer to Purchase
concerning PJAM, including, without limitation, information about the
deliberations of the Special Committee in connection with the Offer and the
Merger and the written opinion of Banc of America Securities as described
above. The Purchaser takes no responsibility for the accuracy or completeness
of such information.
THIS OFFER TO PURCHASE AND THE LETTER OF TRANSMITTAL CONTAIN IMPORTANT
INFORMATION THAT SHOULD BE READ CAREFULLY BEFORE ANY DECISION IS MADE WITH
RESPECT TO THE OFFER.
6
SPECIAL FACTORS
Background of the Offer
Over the last two years the market price of the Shares has significantly
declined. In the first two years following PJAM's October 1996 initial public
offering, PJAM successfully grew from 44 units at the initial public offering
date to 90 units at June 30, 1998 by expansion in its then existing core
markets or acquired Midwest and Southeast United States markets. In late 1998
PJAM opened or acquired its first restaurants in California, Oregon, Puerto
Rico and Utah, where the Papa Xxxx's brand was not well established, as well
as a commissary in Puerto Rico. Since June 30, 1998, PJAM opened or acquired
75 of its 86 new restaurants in these new markets. To date, PJAM's restaurants
in these new markets have not achieved expected sales levels despite increased
marketing and promotional efforts and have incurred significant losses and are
continuing to operate at a loss. The losses in these newer markets, the
reduction in PJAM's rate of new unit development and the consequent declines
in PJAM's growth rates have adversely impacted the market price of PJAM's
common stock.
Faced with this environment, PJAM has attempted to increase stockholder
value in a number of ways, including: (i) enhancing the management team, with
the addition of experienced professionals including a new Chief Operating
Officer, Xxx Xxxxxxx; (ii) increasing marketing expenditures and promotional
discounting; (iii) reducing restaurant development in the new markets to focus
on overall operations; and (iv) implementing a stock repurchase program,
pursuant to which as of December 31, 2000, PJAM had repurchased 1,624,000
Shares for a total of approximately $19 million (no additional Shares have
been repurchased since September 2000).
Because of the ineffectiveness of steps previously taken by PJAM, in
February 2001, Xx. Xxxxxxx and Xx. Xxxxxxxx met with several investment
bankers. In February and early March 2001, XXXX's management held informal
discussions with SunTrust Equitable Securities Corporation ("STES"), a
nationally recognized firm experienced in the restaurant industry, to consider
strategic alternatives for PJAM. During the first three weeks of March, STES
evaluated PJAM's options and, on March 15, 2001, representatives of STES met
with management at PJAM's headquarters in Birmingham, Alabama to discuss
PJAM's operations and historical results. STES indicated that it had, at
PJAM's request, considered several strategic alternatives, including a Dutch
auction tender offer by PJAM, a sale to a third party and a going private
transaction. Given the ineffectiveness of PJAM's stock repurchase program,
STES did not believe a Dutch auction tender offer would be effective in
increasing long-term stockholder value. Based on STES' review of the segment
of the restaurant industry in which PJAM operates, the state of the capital
markets at that time and its experience in the restaurant business generally,
STES did not anticipate significant interest by a third party purchaser at a
price that would be favorable to PJAM's stockholders.
On March 22, 2001, the Investor Group met to consider a going private
transaction. The Investor Group decided to present a proposal to the Board to
acquire all of the common stock not owned by the Investor Group through a
tender offer at a price of $8.00 per Share. On March 23, 2001 the Purchaser
formally engaged STES to represent the Purchaser in connection with the
proposed tender offer. Also present at this meeting was a representative of
Xxxxxxxxxx Xxxx & XxXxxxxx PLLC ("Xxxxxxxxxx"), which firm was retained as
legal counsel to the Purchaser and the Investor Group.
At a meeting of the Board held on March 23, 2001, the Investor Group
presented their proposal. The Board resolved to create a Special Committee
consisting of Xxx X. Xxxxx, Xxxxx Xxxxx and Xxxxxxxx Xxxxx, all of whom are
independent directors, to consider the proposal and explore strategic
alternatives for PJAM. Xx. Xxxxx is President and Chief Executive Officer of
Perfect Delivery, Inc., a 17-unit franchisee of Papa Xxxx's International,
Inc. with operations in South Carolina and North Carolina. Xx. Xxxxx is Chief
Financial Officer of Taco Bueno Restaurants, Inc., a privately-held Mexican
restaurant chain recently acquired from CKE Restaurants, Inc. and was formerly
Chief Financial Officer of Taco Cabana, Inc., then a publicly held Mexican
restaurant chain acquired by Carrols Corporation in December 2000. Xx. Xxxxx
is President and Chief Executive Officer of Tumbleweed, Inc., a publicly held
Southwest/Tex-Mex restaurant chain. The Board authorized the Special Committee
to retain legal and financial advisors to assist in its examination of the
Offer and to receive,
7
study, negotiate and make recommendations to the Board in connection with the
Offer. The Board also authorized the Special Committee to explore strategic
alternatives for PJAM. The Special Committee met that day and elected Xx.
Xxxxx as Chairman.
Between March 23 and March 26, 2001, four substantially similar purported
class action lawsuits were filed in the Court of Chancery of the State of
Delaware challenging the fairness of the proposed Offer and Merger. The
lawsuits and a proposed settlement of them are discussed under "The Tender
Offer--Certain Legal Matters; Required Regulatory Approvals."
On April 5, 2001 the Special Committee, accompanied by X. Xxxx Xxxxxxx,
PJAM's Chief Financial Officer, who is not a member of the Investor Group, met
at the offices of the law firm of Akin, Gump, Xxxxxxx, Xxxxx & Xxxx, L.L.P.
("Xxxx, Xxxx") in San Antonio, Texas for the primary purpose of retaining
financial and legal advisors. At that time the Special Committee retained
Xxxx, Gump to act as the Special Committee's legal advisor in connection with
its review of the Offer. At this April 5, 2001 meeting, the Special Committee
also interviewed four investment banking firms. Xxxx, Xxxx at that time
discussed with the Special Committee its fiduciary duties in connection with
the proposed Offer, the importance of retaining well-qualified financial
advisors to assist the Special Committee in considering and analyzing the
fairness of the Offer and factors related to the consideration of appropriate
alternative strategic transactions, including the potential continuation of
PJAM as a publicly-held entity without consummation of a business combination
transaction.
On April 10, 2001, after interviewing such investment banking firms, the
Special Committee retained the investment banking firm of Banc of America
Securities to act as its financial advisor. The Special Committee selected
Banc of America Securities on the strength of its experience with going
private transactions and the restaurant industry, including the franchisee
segment of the industry. Neither PJAM nor the Purchaser have had any business
relationships with Banc of America Securities over the last three years;
however, Xxxxxxxxxx Securities, a predecessor organization to Banc of America
Securities, was the lead underwriter of PJAM's 1996 initial public offering
and 1997 secondary offering.
XXXX publicly announced the retention of Banc of America Securities and
Akin, Gump on April 11, 2001. Beginning immediately thereafter, Banc of
America Securities and Akin, Gump commenced a due diligence review with
respect to the operations and material agreements of PJAM.
On April 19, 2001, representatives from Akin, Gump and Banc of America
Securities visited PJAM's headquarters in Birmingham, Alabama and interviewed
Xx. Xxxxxxxx and Xx. Xxxxxxx and reviewed PJAM's business and financial
projections. Thereafter, Banc of America Securities and Akin, Gump continued
their review of additional due diligence materials provided at Banc of America
Securities' request and Banc of America Securities continued its analysis of
the financial terms of the Offer.
In April 2001, cheese block prices began to rise dramatically going from
$1.36 on April 2 to $1.60 per pound on May 9, 2001. As of July 17, 2001,
cheese was $1.67 per pound. In December 1999, Papa Xxxx's International,
Inc.'s commissary entered into an arrangement with a third party formed for
the purpose of reducing cheese price volatility. Under this arrangement the
commissary purchases its cheese at a fixed quarterly price, based in part on
historical average cheese block prices. PJAM is obligated to purchase its
cheese from Papa Xxxx's International, Inc.'s commissary. Accordingly, PJAM's
cheese prices increased 36% for the third quarter and PJAM expects further
increases in the fourth quarter.
On May 2, 2001, the Special Committee, accompanied by Xx. Xxxxxxx, met with
its financial and legal advisors in Atlanta to hold preliminary discussions
regarding the Investor Group's proposal and review Banc of America Securities'
preliminary analysis. The Special Committee resolved to reject the initial
acquisition proposal and authorized Banc of America Securities to attempt to
negotiate on the Special Committee's behalf an enhanced offer from the
Purchaser. In addition, because of the Special Committee's views as to the
inadequacy of the initial offer and the absence of an indication from the
members of the Investor Group that they would not consider a sale of their own
Shares at an unspecified higher price, the Special Committee also directed its
8
advisors to begin preparation of executive summary materials and an
accompanying confidentiality agreement, in customary form, that could be used
to solicit other prospective financial and strategic acquirers of PJAM,
including Papa Xxxx's International, Inc.
On May 3, 2001, a representative from Banc of America Securities notified
STES via telephone that the Special Committee had determined the $8.00 offer
price to be inadequate in its view and expressed the Special Committee's
willingness to begin negotiations. Negotiations by means of telephone
discussions continued from May 4, 2001 through May 14, 2001.
In early May 2001, after analyzing current sales trends and the under-
performance of XXXX's April sales promotion, management realized that sales in
several core and new markets would be substantially below expectations and
original forecasts.
On May 14, 2001, Banc of America Securities commenced a limited market test
by contacting fourteen potential buyers, including Papa Xxxx's International,
Inc.
On May 14, 2001, the Purchaser, through its financial advisor STES, made a
revised offer to purchase all of the Shares not currently owned by the
Investor Group at an increased price of $8.50 per Share, in cash.
On May 17, 2001, the Special Committee telephonically met with its
financial and legal advisors and concluded that the $8.50 per Share offer was
inadequate. The Special Committee authorized Banc of America Securities to
reject the $8.50 offer as inadequate and to continue negotiations with STES
regarding an enhanced offer.
On May 17-18, 2001, in conversations occurring after such rejection between
Xxxxxxx Xxxxxxx and Xxxxx Xxxxx, between Xx. Xxxxxxx and Xxxxxxx Xxxxxxx of
Banc of America Securities, and between Xx. Xxxxxxx and Xx. Xxxxxxx Xxxxx of
STES, representatives of the Investor Group argued to the Special Committee
that the Special Committee's views on valuation did not give appropriate
effect to significant declines in operating performance then being experienced
by PJAM and the probable impact of such trends and increasing cheese and
utility prices on future operations.
On May 22, 2001, Xx. Xxxxxxx, Xx. Xxxxxxxx and representatives of STES and
Banc of America Securities met in Birmingham to discuss revised financial
projections for PJAM. Xx. Xxxxxxxx and Xx. Xxxxxxx had revised prior
projections to take into account the substantially increased cheese costs, a
significant component of PJAM's food costs, and declining unit performance in
certain historically strong core markets as well as continuing poor
performance in most of PJAM's newer markets. The parties agreed that the
revised projections more accurately reflected PJAM's current prospects than
the projections prepared in early April. At that time, the Purchaser
reiterated its $8.50 per Share offer despite the less favorable projections
and disappointing recent operating trends. The Purchaser also requested that
the Special Committee approve (i) a break-up fee of $1.5 million that would
become payable to the Purchaser by PJAM if, after signing the Merger
Agreement, PJAM received a superior unsolicited bid that the Board or the
Special Committee determined, consistent with their fiduciary duties, ought to
be recommended to PJAM's stockholders in preference to the transactions
contemplated by the Merger Agreement and (ii) a reimbursement of out-of-pocket
expenses of the Purchaser, not to exceed $1 million, if PJAM or the Purchaser
terminated the Merger Agreement for certain other reasons.
On May 23, 2001, the Special Committee met telephonically with Banc of
America Securities and Akin, Xxxx and again rejected the $8.50 per Share offer
and authorized Banc of America Securities to continue negotiations. The
Special Committee also discussed with Banc of America Securities and Xx.
Xxxxxxx the revised projections and recent business developments and trends
accounting for the revisions and directed Banc of America Securities to review
its previous analysis in light of such revised projections and recent business
developments and trends and report to the Special Committee any modified or
additional analytical views resulting therefrom. Negotiations continued for
the next month by means of telephonic discussions.
9
On May 29, 2001, Xxxxxxxxxx delivered a draft Merger Agreement to Xxxx,
Gump. Over the next month Xxxxxxxxxx and Xxxx, Xxxx conducted negotiations
concerning the terms of the Merger Agreement by means of telephonic
discussions and exchanges of written proposals for revision.
On May 30, 2001, Banc of America Securities concluded its limited market
test that had been conducted in an effort to identify other prospective
acquirers of PJAM. None of the parties contacted by Banc of America Securities
expressed interest in submitting an offer and at no time since the publicly
announced appointment of the Special Committee and of Banc of America
Securities to serve as its financial advisor have either the Special Committee
or Banc of America Securities received any unsolicited communication from a
third party presenting an offer to acquire PJAM or engage in another strategic
alternative. Of the fourteen prospective acquirers contacted by Banc of
America Securities on behalf of the Special Committee, six persons requested
and received a confidentiality agreement from Banc of America Securities and
three such persons executed the confidentiality agreement and received
executive summary materials regarding PJAM. None of the parties receiving
summary materials indicated any interest in conducting additional due
diligence or negotiations and none of them tendered any proposal to acquire
PJAM or its stock or otherwise engage in an alternative strategic transaction.
In mid-June 2001, Xx. Xxxxx and his associates who were working on this
transaction, left STES and joined First Tennessee Securities Corporation
("First Tennessee Securities"). Because of the close working relationship the
Investor Group had developed with Xx. Xxxxx and his team, the Investor Group
and STES mutually agreed to terminate their relationship and the Investor
Group formally engaged First Tennessee Securities.
On June 13, 2001, Xxxx, Xxxx and PJAM's Delaware counsel, Young Xxxxxxx
Stargatt & Xxxxxx ("Xxxxx Xxxxxxx") initiated discussions concerning valuation
issues with plaintiffs' counsel in the pending Delaware litigation.
On June 18, 2001, the Investor Group met in Louisville, Kentucky with its
legal and financial advisors to discuss status and timing issues and to
consider Xxxxxxxxx's raising the proposed offer price for the Shares. The
Investor Group agreed to authorize its representatives to increase the offer
price per Share to $8.75, provided that the shareholder litigation could be
settled on satisfactory terms.
On June 21, 2001, counsel for the plaintiffs, investment bankers engaged by
plaintiffs' counsel, Xxxxx Xxxxx, Chairman of the Special Committee, and
representatives of Xxxx, Gump, Young Xxxxxxx and Banc of America Securities
met via teleconference to discuss a potential settlement. On June 22, 2001,
counsel for the plaintiffs, investment bankers engaged by plaintiffs' counsel,
and representatives of Xxxxxxxxxx and First Tennessee Securities met via
teleconference. The plaintiffs' counsel, based upon the advice of their
investment bankers, reached a tentative agreement with the counsel to PJAM and
the defendant directors that a price of $8.75 per Share would, if offered by
the Purchaser, be fair to PJAM's stockholders. The parties continued to
negotiate over the next few weeks regarding the terms of a definitive
memorandum of understanding.
On June 22, 2001, Xx. Xxxxxxxx made a revised written offer, on behalf of
the Purchaser, to purchase all of the Shares not currently owned by the
Investor Group, at an increased price of $8.75 per Share and agreed to abandon
its request for a break-up fee.
On June 27, 2001, the Special Committee, with all its members
participating, met via teleconference with Xxxx, Gump and Banc of America
Securities. Banc of America Securities made a presentation and delivered its
written opinion to the Special Committee that, as of the date of the opinion
and subject to the various assumptions and limitations set forth in the
opinion, the Offer Price to be received by the holders of Shares, other than
the Purchaser and the Investor Group, pursuant to the proposed transaction was
fair from a financial point of view to those holders. The full text of the
opinion is attached as Annex A to the Recommendation Statement furnished to
stockholders with this Offer to Purchase and as Exhibit (c)(1) to the Schedule
TO filed with the Commission. Xxxx, Xxxx then reviewed the material terms of
the Merger Agreement for the Special Committee, discussed the directors'
fiduciary duties in connection with the proposed Offer, and reviewed with the
Special Committee the process by which it had obtained such improved Offer,
including the investigation of strategic alternatives. Following the
presentations by Banc of America Securities and Akin, Gump, and upon
10
conclusion of its deliberations, the Special Committee unanimously determined
to recommend that the Board (i) determine that each of the Offer, the Merger
and the other transactions contemplated by the Merger Agreement is advisable,
fair to, and in the best interests of, PJAM and its stockholders (other than
the Purchaser and the members of the Investor Group); (ii) approve the Offer,
the Merger and the Merger Agreement and the transactions contemplated thereby;
and (iii) recommend that the stockholders accept the Offer and tender their
Shares pursuant to the Offer and, if applicable, approve and adopt the Merger
Agreement and the Merger.
On June 28, 2001, representatives of Xxxx, Xxxx and Xxxxxxxxxx met via
teleconference to finalize terms of the Merger Agreement, including adding as
a condition to the Offer, at the request of the Special Committee, that the
Purchaser be prohibited from accepting any tendered Shares, without the
approval of the Special Committee, unless a majority of the Shares not owned
by the Purchaser or the Investor Group were tendered in the Offer. The
Agreement was also modified to reflect the Investor Group's requirement that
the Offer be subject to the consummation of financing sufficient to pay for
the Shares tendered in the Offer and acquired in the Merger, such as that
provided for by the Bank One financing commitment letter (subject to the
conditions thereof).
Later that day, prior to the meeting of PJAM's Board of Directors, the
Special Committee met via telephone with its counsel and Banc of America
Securities to discuss the revisions to the draft Merger Agreement. Banc of
America Securities confirmed that the financing condition would not affect its
fairness opinion since a bank commitment letter with customary terms had been
obtained. The Special Committee confirmed its approval of the Merger
Agreement, as modified, and the transactions contemplated thereby.
A meeting of PJAM's Board of Directors was then convened via teleconference
on the evening of June 28, 2001. Messrs. Xxxx and Xxxxxxxxx were traveling and
unable to attend, but all other directors, representing a quorum,
participated. Also participating were representatives of Xxxx, Xxxx,
Xxxxxxxxxx and First Tennessee Securities. At the meeting, the Special
Committee, through its counsel Xxxx, Gump, advised the Board of the results of
the Special Committee's process and deliberations and of its recommendations
to the Board of Directors with respect to the Offer, the Merger and the Merger
Agreement. Xxxxxxx Xxxx of Xxxx, Xxxx reviewed with the Board the material
terms of the Merger Agreement, the opinion as to fairness from a financial
point of view of Banc of America Securities, the principal analytical
determinations which had supported such fairness opinion, and the principal
business and procedural considerations which had supported the Special
Committee's recommendations. Xx. Xxxx noted that Banc of America Securities
had conducted a market check, described the material aspects of such process,
and indicated that no party other than the Investor Group had expressed any
interest in acquiring PJAM. The Board then reviewed and discussed such
recommendations and report and then proceeded to take appropriate action with
respect thereto. With Messrs. Xxxxxxx, Xxxxxxxx, Xxxxxxxx, and Xxxxxx
abstaining from voting because of their interest in the transaction, the
Board, by unanimous decision of those directors participating: (i) determined
that each of the Offer, the Merger and the Merger Agreement is advisable, fair
to and in the best interests of PJAM and its stockholders (other than the
Purchaser and the members of the Investor Group); (ii) approved the Offer, the
Merger and the Merger Agreement and the transactions contemplated thereby; and
(iii) recommended that PJAM's stockholders accept the Offer, tender their
Shares pursuant to the Offer and, if applicable, approve and adopt the Merger
Agreement and the Merger. The Board also approved the transactions for
purposes of Section 203 of the DGCL.
On the morning of June 29, 2001, before the opening of the market, PJAM
announced in a press release that PJAM and the Purchaser had executed the
Merger Agreement providing for the Offer and the acquisition of all Shares not
owned by the Purchaser or the Investor Group at a price of $8.75 in cash per
Share.
On July 19, 2001 the plaintiffs, PJAM and the defendant directors entered
into a Memorandum of Understanding. See "The Tender Offer--Certain Legal
Matters; Required Regulatory Approvals."
11
Recommendation of the Special Committee and the Board; Fairness of the Offer
and the Merger
Recommendation of the Special Committee and the Board
At a meeting held on June 27, 2001, the Special Committee unanimously
determined that the Merger Agreement and the other transactions contemplated
thereby, including the Offer and the Merger, are advisable, fair to and in the
best interests of, PJAM and its stockholders (other than the Purchaser and the
members of the Investor Group), and unanimously determined to recommend that
the Board (i) determine that each of the Offer, the Merger and the other
transactions contemplated by the Merger Agreement is advisable, fair to, and
in the best interests of, PJAM and its stockholders (other than the Purchaser
and the members of the Investor Group); (ii) approve the Offer, the Merger and
the Merger Agreement and the transactions contemplated thereby; and (iii)
recommend that the stockholders accept the Offer and tender their Shares
pursuant to the Offer and, if applicable, approve and adopt the Merger
Agreement and the Merger.
At a meeting held on June 28, 2001, the Board, by unanimous decision of
those directors participating and based upon the recommendation of the Special
Committee, (i) determined that each of the Offer, the Merger and the Merger
Agreement is advisable, fair to and in the best interests of PJAM and its
stockholders (other than the Purchaser and the members of the Investor Group);
(ii) approved the Offer, the Merger and the Merger Agreement and the
transactions contemplated thereby; and (iii) resolved to recommend that the
stockholders accept the Offer and tender their Shares pursuant to the Offer
and, if applicable, approve and adopt the Merger Agreement and the Merger.
Fairness of the Offer and the Merger
The Special Committee's Considerations.
In evaluating the Merger Agreement, the Offer and the Merger, the Special
Committee relied upon its knowledge of the business, financial condition and
the prospects of PJAM as well the advice of its financial and legal advisors.
In view of the wide variety of factors considered in connection with the
evaluation of the Offer and the Merger, the Special Committee did not find it
practicable to, and did not, quantify or otherwise attempt to assign relative
weights to the specific factors it considered in reaching its determinations.
The discussion herein of the information and factors considered and given
weight by the Special Committee is not intended to be exhaustive but is
believed to include all material factors considered by the Special Committee.
In determining that the Special Committee would recommend the Merger Agreement
and the transactions contemplated thereby, including the Offer and the Merger,
to the Board, the Special Committee considered the following factors which in
the view of the Special Committee, supported such determination:
Market Price and Premium. The Special Committee considered the historical
market and recent trading activity of the Shares, including the fact that the
$8.75 per Share cash consideration represents a 32.1% premium over the $6.625
per Share closing price on March 22, 2001, the last full trading day before
the public announcement of Purchaser's preliminary nonbinding proposal to
acquire all the Shares, a 41.7% premium over the average stock price for the
three months preceding March 22, 2001 and a 28.5% premium over the average
stock price for the six months preceding March 22, 2001. The Special Committee
noted that the Offer Price represented a 35.8% discount to the 52-week high
closing stock price on July 17, 2000, but believed based on PJAM's recent
operational trends and projections that a return to such higher stock price is
not foreseeable in the near future.
Board of Directors' Arm's-Length Negotiations. The Special Committee
considered the fact that the Merger Agreement and the transactions
contemplated thereby were the product of arm's-length negotiations between the
Purchaser and the Special Committee, composed exclusively of members of the
Board of Directors who were not PJAM employees and who were not affiliated
with the Investor Group, and their respective legal and financial advisors,
and that the Special Committee was expressly authorized to investigate other
strategic alternatives.
12
Offer Price and Merger Consideration. The Special Committee concluded,
based on its negotiations with the Purchaser and the Investor Group, that a
price higher than $8.75 per Share could not likely be obtained.
Relationship with Investor Group and Franchisor; Strategic
Alternatives. The Special Committee considered the Investor Group's ownership
of approximately 40% of the outstanding Shares and the effects of such
ownership on the alternatives available to PJAM. The Special Committee
recognized that the level of equity ownership of the Investor Group and PJAM's
status as a franchisee of Papa Xxxx's International, Inc. whose expansion and
development rights are subject to the terms of its franchise development
agreement would probably result in more limited interest on the part of
prospective acquirers in an alternative transaction than would be the case
with a restaurant company that owned its own concept and retained a greater
degree of flexibility with respect to its future growth potential and that was
not controlled by a 40% aggregate equity interest interested in itself
acquiring PJAM. None of the 14 prospective acquirers contacted by Banc of
America Securities on the Special Committee's behalf expressly attributed its
lack of interest in exploring or proposing an alternative transaction to these
concerns, but Banc of America Securities was not asked to, and did not, survey
the entities it contacted that declined to make an offer as to their reasons
for declining and the entities did not offer clear and specific reasons for
declining. The Special Committee believes, however, these factors limited, and
would continue to limit, the attractiveness of PJAM to prospective acquirers.
Decline in Operating Performance. The Special Committee considered the
declining sales performance of PJAM's restaurant units in certain historically
strong and mature markets, the continuing weakness of PJAM's units in most of
its newer markets, and the prospective impact of substantial increases in
cheese prices and utility costs in addition to these recent operational trends
upon PJAM's future prospects. These factors and the possibility of a decline
in the market price of the Shares to pre-announcement levels or lower
significantly impacted the Special Committee's views on the inadvisability of
rejecting the Offer and continuing PJAM's business as a publicly traded
company.
Possible Decline in Market Price of Shares. The Special Committee
considered the possibility that if a transaction with the Purchaser is not
consummated and PJAM remained a publicly-owned corporation, the price that
might be received by the holders of the Shares in the open market or in a
future transaction might be less than the price per Share to be received by
PJAM's stockholders in connection with the Offer and the Merger.
Opinion of the Special Committee's Financial Advisor. The Special Committee
considered the written opinion of Banc of America Securities to the Special
Committee that as of its date and based upon and subject to the various
assumptions and limitations described in the opinion, the Offer Price to be
received by the holders of Shares, other than the Purchaser and the Investor
Group, pursuant to the proposed transaction was fair from a financial point of
view to those holders.
Presentation of the Special Committee's Financial Advisor. The Special
Committee considered the various financial information, valuation analyses and
other factors set forth in the written presentation delivered to the Special
Committee at the meeting of the Special Committee on June 27, 2001, including
those described below in "Opinion of the Special Committee's Financial
Advisor."
Transaction Structure. The Special Committee evaluated the benefits of the
transaction being structured as an immediate cash tender offer for all of the
outstanding Shares, thereby enabling PJAM's stockholders the opportunity to
obtain cash for all of their Shares at the earliest possible time and the fact
that the per Share cash consideration to be paid in the Offer and the Merger
is the same.
Minimum Condition. The Special Committee considered the fact that the Offer
was conditioned upon a majority of the outstanding Shares not owned by the
Purchaser or the Investor Group being validly tendered and not withdrawn prior
to the expiration of the Offer and that such condition could not be waived by
the Purchaser without the prior written consent of the Special Committee. See
"Tender Offer--Section 11. Conditions of the Offer."
13
Financing. The Special Committee considered that, although financing is a
condition of the Purchaser's obligation to complete the Offer and Merger, the
Purchaser has obtained a financing commitment for up to $25 million to
complete the Offer and the Merger, subject to customary conditions.
Terms of the Merger Agreement. The Special Committee evaluated the terms of
the Merger Agreement, including the circumstances under which the Special
Committee and the Board of Directors may withdraw its recommendation of the
Merger and the Offer and may terminate the Merger Agreement, the parties'
representations, warranties and covenants and the conditions to their
respective obligations. The Special Committee also considered the absence of
any break-up fee, other than reimbursement of reasonable out-of-pocket
expenses of up to $1.0 million if the Merger Agreement is terminated prior to
the Effective Time.
Availability of Dissenters' Rights. The Special Committee considered the
fact that dissenters' appraisal rights will be available under Delaware law
with respect to the Merger.
The Board of Directors' Considerations.
In reaching its determinations referred to above, the Board considered the
following factors, each of which, in the view of the Board, supported such
determinations: (i) the conclusions and recommendations of the Special
Committee; (ii) the factors referred to above as having been taken into
account by the Special Committee; and (iii) the fact that the Offer Price and
terms and conditions of the Merger Agreement were the result of arm's-length
negotiations between the Special Committee and the Purchaser.
The members of the Board, including the members of the Special Committee,
but excluding directors who are members of the Investor Group, evaluated the
Offer and Xxxxxx in light of their knowledge of the business, financial
condition and prospects of PJAM, and based upon the advice of legal and
financial advisors.
The Board, including the members of the Special Committee, believes that
consideration of the Offer and the Merger was procedurally fair because, among
other things: (i) the Special Committee consisted of independent directors
appointed by the Board to represent solely the interests of PJAM's
stockholders (other than the Purchaser and the members of the Investor Group)
and a special committee is a mechanism well recognized under law to ensure
fairness in transactions of this type; (ii) the Special Committee retained and
was advised by an independent financial advisor, Banc of America Securities,
in evaluating the proposed transaction and independent legal counsel, Xxxx,
Gump; (iii) the Special Committee engaged in careful deliberations pursuant to
which the Special Committee evaluated the Offer and the Merger; and (iv) the
Special Committee was authorized to and did explore other strategic
alternatives for PJAM.
The Special Committee and the Board recognized that, while the consummation
of the Offer and the Merger will result in all stockholders (other than the
Purchaser and the members of the Investor Group) being entitled to receive
$8.75 per Share in cash, it will eliminate the opportunity for current
stockholders to participate in the benefit of increases, if any, in the value
of PJAM's business following the Merger. Nonetheless, the Special Committee
and the Board concluded that a speculative future return did not justify
foregoing the immediate cash premium represented by the $8.75 per Share Offer
Price.
Neither the Special Committee nor the Board considered the liquidation
value of PJAM's assets and neither considered liquidation to be a viable
course of action. Therefore, no appraisal of liquidation values was sought for
purposes of evaluating the Offer and the Merger.
In view of the wide variety of factors considered in connection with their
evaluation of the Offer and the Merger, neither the Special Committee nor the
Board found it practicable to, and did not, quantify or otherwise attempt to
assign relative weights to the specific factors they considered in reaching
their decisions.
The foregoing discussion of information and factors considered by the
Special Committee and the Board is not intended to be exhaustive but is
believed to include all material factors considered by the Special Committee
and the Board.
14
Opinion of the Special Committee's Financial Advisor
On April 10, 2001, the Special Committee retained Banc of America
Securities to act as its financial advisor in connection with a proposed
transaction involving acquisition by the Investor Group (or an affiliated
entity) of the Shares not already owned by them. Banc of America Securities is
a nationally recognized investment banking firm. Banc of America Securities is
regularly engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions, negotiated underwriting, secondary
distributions of listed and unlisted securities, private placements and
valuations for corporate and other purposes. The Special Committee selected
Banc of America Securities to act as its financial advisor on the basis of
Banc of America Securities' experience and expertise in transactions similar
to the Offer and the Merger, its reputation in the restaurant industry,
including the franchisee segment of the industry, and in the investment
community.
Banc of America Securities delivered its written opinion dated as of June
27, 2001 to the Special Committee that, as of that date and based upon and
subject to the assumptions and limitations described in the opinion, the Offer
Price to be received by the holders of Shares, other than Purchaser and the
Investor Group, pursuant to the proposed transaction was fair from a financial
point of view to those holders. The Special Committee did not limit the
investigations made or procedures followed by Banc of America Securities in
rendering its opinion.
The full text of Banc of America Securities' written opinion to the Special
Committee, which sets forth the assumptions made, matters considered and
limitations on the review undertaken, is attached as Annex A to the
Recommendation Statement which is being furnished to stockholders concurrently
with this Offer to Purchase and as Exhibit (c)(1) to the Schedule TO which was
filed with the Commission by Purchaser in connection with the Offer, and is
incorporated in its entirety in this document. You should read this opinion
carefully and in its entirety in connection with this Offer to Purchase.
However, we have also included the following summary of Banc of America
Securities' opinion, which is qualified in its entirety by reference to the
full text of the opinion.
Banc of America Securities' opinion is directed to the Special Committee.
It does not constitute a recommendation to you as to whether or not you should
tender your Shares pursuant to the Offer. The opinion addresses only the
financial fairness of the consideration to be received by the holders of the
Shares, other than Purchaser and the Investor Group. The opinion does not
address the relative merits of the Offer or the Merger or any alternatives to
the Offer or the Merger, the underlying decision of the Special Committee to
recommend or of PJAM's Board of Directors to approve or proceed with or effect
the Offer or the Merger, or any other aspect of the Offer or the Merger.
Banc of America Securities:
. reviewed publicly available financial statements and other business and
financial information of PJAM;
. reviewed internal financial statements and other financial and operating
data concerning PJAM prepared by its management;
. analyzed financial forecasts relating to PJAM prepared by its
management;
. discussed the past and current operations, financial condition and
prospects of PJAM with senior executives of PJAM;
. reviewed the reported prices and trading activity for PJAM common stock;
. compared the financial performance of PJAM and the prices and trading
activity of PJAM common stock with other publicly traded companies Banc
of America Securities deemed relevant;
. compared financial terms of the Offer to financial terms, to the extent
publicly available, of other transactions Banc of America Securities
deemed relevant;
. participated in discussions and negotiations among representatives of
PJAM, Xxxxxxxxx and the Investor Group and their financial and legal
advisors;
15
. reviewed the June 22, 2001 draft of the Merger Agreement (referred to as
the "draft Merger Agreement") and related documents;
. at the request of the Special Committee, spoke with a number of
potential purchasers concerning their interest in PJAM and their
preliminary range of possible purchase prices; and
. performed other analyses and considered other factors as Banc of America
Securities deemed appropriate.
Banc of America Securities reviewed the draft Merger Agreement in its
preparation of its opinion. While PJAM, Purchaser and the Investor Group had
the opportunity to agree to materially add, delete or alter material terms of
the Merger Agreement before its execution, the final Merger Agreement was
substantially similar to the draft Merger Agreement.
Banc of America Securities did not assume any responsibility to
independently verify the information listed above. Instead, with the consent
of the Special Committee, in conducting its review and arriving at its
opinion, Banc of America Securities assumed and relied upon, without
independent verification, the accuracy and completeness of the financial and
other information reviewed by it for the purposes of its opinion. Banc of
America Securities also made the following assumptions with the consent of the
Special Committee:
. regarding the financial forecasts that management of PJAM provided to
Banc of America Securities, on the advice of management, that the
forecasts were reasonably prepared on bases reflecting management's best
currently available estimates and good faith judgments of management as
to the future financial performance of PJAM;
. that the Offer and the Merger will be consummated in a manner that
complies in all respects with the applicable provisions of the
Securities Act, the Exchange Act and all other applicable federal and
state statutes, rules and regulations; and
. that the Offer and the Merger will be consummated in accordance with the
terms described in the draft Merger Agreement, and without waiver by
PJAM of any of the conditions to its obligations that are contained in
the Merger Agreement, and that the Merger Agreement would not differ in
any material respect from the draft Merger Agreement reviewed by Banc of
America Securities.
PJAM does not publicly disclose internal management forecasts of the type
provided to Banc of America Securities by the management of PJAM in connection
with Banc of America Securities' review of the proposed transaction. The
forecasts were not prepared with a view toward public disclosure. In addition,
the forecasts were based on numerous variables and assumptions that are
inherently uncertain, including factors related to general economic and
competitive conditions. Accordingly, actual results could vary significantly
from the results set forth in the forecasts. Banc of America Securities has
assumed no liability for the forecasts.
In addition, for purposes of its opinion, Banc of America Securities:
. relied on advice of counsel and independent accountants to PJAM as to
all legal and financial reporting matters with respect to PJAM, the
Offer and the Merger and the draft Merger Agreement; and
. did not assume responsibility for making an independent evaluation,
appraisal or physical inspection of any of the assets or liabilities,
contingent or otherwise, of PJAM, and did not receive any appraisals.
No opinion was expressed by Banc of America Securities as to whether any
alternative transaction might produce consideration for the holders of Shares
in an amount in excess of that contemplated in the Offer.
As is customary in the rendering of fairness opinions, Banc of America
Securities' opinion was based on economic, monetary and market and other
conditions in effect on, and the information made available to it as of, the
date of the opinion. Accordingly, it was understood that although subsequent
developments may affect its opinion, Banc of America Securities does not have
any obligation to update, revise or reaffirm its opinion. No
16
opinion was rendered by Banc of America Securities with respect to any shares
of PJAM common stock held by the Purchaser, any member of the Investor Group
or any affiliate of the Purchaser or any member of the Investor Group.
The following represents a brief summary of the material financial analyses
performed by Banc of America Securities in connection with providing its
opinion to the Special Committee. Some of the summaries of financial analyses
performed by Banc of America Securities include information presented in
tabular format. In order to understand more fully the financial analyses
performed by Banc of America Securities, you should read the tables together
with the rest of each summary. The tables alone do not constitute a complete
description of the financial analyses. Considering the data set forth in the
tables without considering the full narrative description of the financial
analyses, including the methodologies and assumptions underlying the analyses,
could create a misleading or incomplete view of the financial analyses
performed by Banc of America Securities.
Comparable Company Analysis. Based on public and other available
information, Banc of America Securities calculated the multiples of (a)
aggregate value to each of (i) revenues, (ii) earnings before interest and
taxes, referred to as EBIT, and (iii) earnings before interest, taxes,
depreciation and amortization, referred to as EBITDA, and (b) stock price to
earnings per share, in each case for the latest twelve months, for nine
companies in the restaurant industry, including the franchisee segment of the
industry, that Banc of America Securities deemed to be comparable to PJAM.
The selected companies included:
Papa Xxxx's International, Inc.
Pizza Inn, Inc.
NPC International, Inc.*
Xxxxxx'x Restaurants, Inc.
Garden Fresh Restaurant Corp.
Main Street and Main, Inc.
Piccadilly Cafeterias, Inc.
Quality Dining, Inc.
Steak n' Shake Co.
--------
* Due to an announced management buyout transaction, certain multiples of this
company were excluded from the summary statistics.
Banc of America Securities defined aggregate value to mean:
. equity value (defined as the product of the number of shares of common
stock outstanding for a company multiplied by its stock price, assuming
exercisable options are exercised and proceeds from the exercise are
used to repurchase common stock at the market price), plus
. total debt, plus
. minority interest and preferred stock, less
. cash and cash equivalents.
17
The following table sets forth multiples indicated by this analysis for
these nine companies:
Range of
Aggregate Value to: Multiples Median Average
------------------- ------------- ------ -------
Latest twelve months revenues................... .15x to .85x 0.54x 0.52x
Latest twelve months EBIT....................... 5.6x to 13.2x 8.1x 8.4x
Latest twelve months EBITDA..................... 2.8x to 6.3x 5.1x 4.7x
Range of
Stock Price* as a Multiple of: Multiples Median Average
------------------------------ ------------- ------ -------
Latest twelve months earnings per share........ 6.2x to 12.5x 11.4x 10.5x
--------
*Stock price based on closing prices on June 25, 2001.
The comparable company analysis compared PJAM to the nine companies
selected in the restaurant industry, including the franchisee segment of the
industry, on the basis that the companies selected were the most relevant.
Consequently, Banc of America Securities did not include every company that
could be deemed to be a participant in the same industry. There are few purely
comparable public companies because most of PJAM's competitors operate a
materially different concept or are privately held. The selected comparable
publicly traded companies differ in size, profitability and growth outlook and
thus provide imprecise valuation indications. In addition, market-based
valuation relies on public information and thus may not reflect undisclosed
company-specific opportunities or capabilities.
Comparable Transactions Analysis. Based on public and other available
information, Banc of America Securities calculated the multiples of (a)
aggregate value to each of (i) revenues, (ii) EBIT, and (iii) EBITDA, and (b)
stock price to earnings per share, in each case for the latest twelve months,
for the acquired company implied in ten acquisitions of companies in the
restaurant industry, including the franchisee segment of the industry, that
have been announced within the prior two year period. The valuation analysis
reflects historical prices paid for similar companies. The ten acquisitions
are as follows:
Announcement Date Acquiror Target
----------------- -------- ------
5/10/01................ Management NPC International, Inc.*
4/15/01................ Management UNO Restaurant Corp.
2/15/01................ Investor Group Vicorp Restaurants, Inc.
9/26/00................ Laundry's Seafood Restaurants, Inc. Rainforest Cafe
10/16/00............... Carrols Corporation Taco Cabana, Inc.
6/5/00................. Xxxxxx-Xxxxxx Capital, Inc Buffets, Inc.
3/1/00................. Acapulco Acquisition Corp. El Torito
2/10/00................ Capricorn Investors III L.P. TCBY Enterprises, Inc.
11/1/99................ American Securities Capital Partners El Pollo Loco
6/1/99................. SR Acquisition Corp. Xxxxx'x Restaurants, Inc.
--------
* Due to an announced management buyout transaction, certain multiples of this
company were excluded from the summary statistics.
18
The following table sets forth the multiples indicated by this analysis for
these ten acquisitions:
Range of
Aggregate Value to: Multiples Median Average
------------------- ------------- ------ -------
Latest twelve months revenues................... 0.2x to 1.4x 0.6x 0.7x
Latest twelve months EBIT....................... 6.7x to 9.4x 8.3x 8.0x
Latest twelve months EBITDA..................... 2.2x to 6.0x 5.1x 4.5x
Range of
Stock Price* As a Multiple of: Multiples Median Average
------------------------------ ------------- ------ -------
Latest twelve months earnings per share......... 8.2x to 14.1x 11.8x 11.9x
--------
*Stock price based on closing prices on June 25, 2001.
The comparable transaction analysis compared the proposed transaction to
the ten acquisitions for the prior two year period of companies in the
restaurant industry, including the franchisee segment of the industry, on the
basis that the transactions selected were the most relevant. Consequently,
Banc of America Securities did not include every transaction that could be
deemed to have occurred in the relevant industries.
No company or transaction used in the comparable company or comparable
transactions analyses is identical to PJAM or the Offer and the Merger.
Accordingly, an analysis of the foregoing results is not mathematical. Rather,
it involves complex considerations and judgments concerning differences in
financial and operating characteristics of the companies and other factors
that could affect the public trading value of the companies to which PJAM and
the proposed transaction were compared.
Discounted Cash Flow Analysis. Banc of America Securities used financial
cash flow forecasts for PJAM for the fiscal years ending December 31, 2001
through 2006, as estimated by the management of PJAM, to perform discounted
cash flow analysis. In conducting this analysis, Banc of America Securities
first calculated the present values of the forecasted cash flows. Second, Banc
of America Securities estimated the terminal value of PJAM at the end of 2006
by applying multiples to PJAM's estimated 2006 EBITDA, which multiples ranged
from 4.0x to 5.0x. Banc of America Securities then discounted the cash flows
and terminal values to present values using discount rates ranging from 14% to
16%. Banc of America Securities selected the range of discount rates to
reflect the estimated weighted average cost of capital for PJAM. The weighted
average cost of capital weights the cost of debt and equity by the proportion
of each type of capital employed by PJAM. Banc of America Securities used the
June 25, 2001 10-year treasury note for a risk free rate, a selected equity
risk premium, the average of the comparable companies' predicted betas derived
from a selected equity model and PJAM's targeted capital structure to
calculate PJAM's cost of capital.
This analysis indicated a range of aggregate value for PJAM, expressed as
multiples of EBITDA, as follows:
Multiple of Aggregate Value to LTM EBITDA
Terminal Terminal Terminal
Multiple of 4.0x Multiple of 4.5x Multiple of 5.0x
Projected Fiscal Projected Fiscal Projected Fiscal
Discount Rate Year 2006 EBITDA Year 2006 EBITDA Year 2006 EBITDA
------------- ---------------- ---------------- ----------------
14%....................... 4.6x 4.9x 5.3x
15%....................... 4.4x 4.7x 5.0x
16%....................... 4.2x 4.5x 4.8x
Leveraged Buyout Analysis. Banc of America Securities calculated the range
of hypothetical purchase prices achievable by a third-party financial buyer in
a leveraged buyout transaction. Banc of America Securities estimated the
implied equity value of PJAM at the end of 2006 by applying multiples to
PJAM's estimated 2006 EBITDA, which multiples ranged from 4.0x to 5.0x. Then,
Banc of America Securities calculated the implied price per share of PJAM
common stock by applying rate of return requirements of 25%, 30% and 35%. Banc
of America Securities assumed a maximum debt of $25.8 million, which is 2.75x
the latest twelve months EBITDA.
19
This analysis indicated a range of aggregate value for PJAM, expressed as
multiples of estimated XXXXXX, as follows:
Multiple of Aggregate Value to LTM EBITDA
Multiple of 4.0x Multiple of 4.5x Multiple of 5.0x
Projected Fiscal Projected Fiscal Projected Fiscal
Required Rate of Return Year 2006 EBITDA Year 2006 EBITDA Year 2006 EBITDA
----------------------- ---------------- ---------------- ----------------
25%...................... 4.2x 4.4x 4.6x
30%...................... 3.9x 4.0x 4.2x
35%...................... 3.6x 3.7x 3.9x
Leveraged buyout analyses are unique to specific points in time because
they are subject to constantly changing financial market environments. The
outcome of a leveraged buyout analysis may vary widely at various points in
time as investors and lenders react to exogenous and endogenous factors
impacting the markets.
Premiums Paid Analysis. Banc of America Securities reviewed the
consideration paid or offered in 546 acquisition transactions with aggregate
values between $25 million and $100 million announced between 1998 and 2001
involving U.S. companies. Banc of America Securities also reviewed the
consideration paid for 445 cash-only transactions with aggregate values
between $25 million and $100 million announced between 1998 and 2001. Banc of
America Securities calculated the premiums paid or offered relative to the
stock prices of the acquired companies one day and one month before the
announcement of the acquisition offer.
This analysis indicated the following average and median premiums:
Premium One Day Premium One
Before Month Before
Announcement Announcement
---------------- --------------
Average Median Average Median
-------- ------- ------- ------
Selected Transactions....................... 28.4% 20.0% 34.2% 23.3%
Selected Cash-Only Transactions............. 24.4% 18.5% 29.8% 21.8%
Banc of America Securities noted that the per share value of the stock
consideration to be received by PJAM stockholders in connection with the
proposed transaction implied a premium of 32.1% over PJAM's closing stock
price on March 22, 2001. The premium implied by the proposed transaction over
PJAM's closing stock price one month prior to that date was 34.6%.
The premiums paid analysis considers historical control premiums for
similar transactions and applies them to the current market valuation of the
company. The analysis does not adequately account for PJAM's individual
dynamics or future performance, which are reflected only in PJAM's current
stock price. The premiums paid analysis applies a broad range of transactions
and does not focus on purely comparable companies.
Banc of America Securities calculated the enterprise value as a multiple of
latest twelve months revenues, EBIT and EBITDA at per share prices of common
stock ranging from $8.00 per share to $9.25 per share in increments of $.25
using revenues, EBIT and EBITDA from PJAM's April 1, 2001 Form 10-Q.
Multiple Multiple Multiple Multiple Multiple Multiple
at $8.00 at $8.25 at $8.50 at $8.75 at $9.00 at $9.25
Per Share Per Share Per Share Per Share Per Share Per Share
--------- --------- --------- --------- --------- ---------
Latest twelve months
revenues............... 0.30x 0.31x 0.32x 0.33x 0.34x 0.35x
Latest twelve months
EBIT................... 6.7x 6.9x 7.1x 7.4x 7.6x 7.8x
Latest twelve months
EBITDA................. 3.7x 3.8x 3.9x 4.0x 4.2x 4.3x
Enterprise value........ $34.7 $35.8 $36.9 $38.0 $39.1 $40.2
20
Banc of America Securities also calculated the PJAM value per share of
common stock as a multiple of latest twelve months earnings per share at per
share prices of common stock ranging from $8.00 per share to $9.25 per share
in increments of $.25 using earnings per share from PJAM's April 1, 2001 Form
10-Q.
Multiple Multiple Multiple Multiple Multiple Multiple
at $8.00 at $8.25 at $8.50 at $8.75 at $9.00 at $9.25
Per Share Per Share Per Share Per Share Per Share Per Share
--------- --------- --------- --------- --------- ---------
Earnings per
Share............. 12.2x 12.6x 13.0x 13.4x 13.8x 14.1x
Historical Stock Price Analysis. Banc of America Securities reviewed the
performance of the per share market price and trading volume of PJAM common
stock for the period between June 23, 2000 through June 25, 2001. The analysis
indicated that the closing market price per share for PJAM common stock during
this period ranged from $5.25 to $13.19.
As noted above, the discussion above is merely a summary of the analyses
and examinations that Banc of America Securities considered to be material to
its opinion. It is not a comprehensive description of all analyses and
examinations actually conducted by Banc of America Securities. The preparation
of a fairness opinion involves various determinations as to the most
appropriate and relevant methods of financial analyses and the application of
these methods to the particular circumstances and, as a result, a fairness
opinion is not readily susceptible to partial analysis or summary description.
Banc of America Securities believes, and has advised the Special Committee,
that its analyses and the summary above must be considered as a whole and that
selecting portions of its analyses and the factors considered, without
considering all analyses and factors, would create an incomplete view of the
process underlying the analyses set forth in its presentation to the Special
Committee and in its written opinion. Banc of America Securities did not
assign any specific weight to any of the analyses or factors described above,
but rather made qualitative judgments as to the significance and relevance of
each analysis and factor. The fact that any specific analysis has been
referred to in the summary above is not meant to indicate that analysis was
given greater weight than any other analysis. Accordingly, the ranges of
valuations resulting from any particular analysis described above should not
be taken to be Banc of America Securities' view of the actual value of PJAM.
In performing its analyses, Banc of America Securities made numerous
assumptions with respect to industry performance, general business and
economic conditions and other matters, many of which are beyond the control of
PJAM and the Purchaser. The analyses performed by Banc of America Securities
are not necessarily indicative of actual values or actual future results,
which may be significantly more or less favorable than those suggested by
these analyses. These analyses were prepared solely as part of Banc of America
Securities' analysis of the financial fairness of the consideration to be
received by the holders of the Shares, other than Purchaser and the Investor
Group, in the Offer and were provided to the Special Committee in connection
with the delivery of Banc of America Securities' opinion. The analyses do not
purport to be appraisals or to reflect the prices at which a company might
actually be sold or the prices at which any securities have traded or may
trade at any time in the future. Accordingly, those analyses and estimates are
inherently subject to uncertainty, being based upon numerous factors or events
beyond the control of the parties or their respective advisors, and none of
the PJAM, Banc of America Securities or any other person assumes
responsibility if future results are materially different from those
projected.
As described above, Banc of America Securities' opinion and presentation to
the Special Committee were among the many factors taken into consideration by
the Special Committee in its decision to recommend and by PJAM's Board of
Directors in making its determination to approve, and to recommend that PJAM's
stockholders accept and approve, the Offer and the Merger.
XXXX agreed to pay Banc of America Securities a fee of $50,000 at the time
the engagement letter was executed. In addition, PJAM agreed to pay Banc of
America Securities a fee of $250,000 at the time Banc of America Securities
delivered its opinion and a fee contingent on the completion of a transaction.
The amount of the transaction fee will be determined at the time a transaction
is completed and will be based on the consideration paid in the transaction.
As of the date of this Offer to Purchase, based on the Offer Price, the
21
transaction fee was estimated to be approximately $200,000. The PJAM Board of
Directors was aware of this fee structure and took it into account in
considering Banc of America Securities' fairness opinion and in approving the
Offer and the Merger. The engagement letter calls for PJAM to reimburse Banc
of America Securities for all reasonable out-of-pocket expenses, including
reasonable fees and disbursements of Banc of America Securities' counsel, not
to exceed $50,000 without the prior consent of PJAM. XXXX has agreed to
indemnify Banc of America Securities, any controlling person of Banc of
America Securities and each of their respective directors, officers,
employees, agents, affiliates and representatives against particular
liabilities, including liabilities under the federal securities laws.
In the past Banc of America Securities or its affiliates have provided
financial advisory and financing services to PJAM and have received and may
continue to receive fees for rendering of such services. In the ordinary
course of their businesses, Banc of America Securities and its affiliates are
engaged in a broad range of securities activities and financial services, and
may actively trade or otherwise effect transactions in the debt and equity
securities of PJAM for their own account and for the accounts of customers
and, accordingly, Banc of America Securities or its affiliates may at any time
hold long or short positions in those securities. Xxxxxxxxxx Securities, a
predecessor firm of Banc of America Securities, also acted as underwriter in
connection with public offerings of PJAM's securities in 1996 and 1997.
Position of the Purchaser Regarding Fairness of the Offer and the Merger
The Purchaser believes that the consideration to be received by PJAM's
stockholders (other than the Purchaser and the members of the Investor Group)
pursuant to the Offer and the Merger is fair to and in the best interests of
PJAM's stockholders (other than the Purchaser and the members of the Investor
Group) and that the process followed by PJAM was procedurally fair. The
Purchaser bases its belief on the following factors:
(i) the deteriorating historical and projected financial performance of
PJAM and its inability to sustain an acceptable growth rate for the
public market;
(ii) the relationship of the Offer Price and Merger Consideration to the
historical and projected market prices for the Shares. The Offer
Price of $8.75 per Share represents a 32% premium over the closing
price on March 22, 2001, the day before the public announcement of
Purchaser's preliminary non-binding proposal to acquire all the
Shares, and a 42% premium over the closing average for the 90 days
preceding March 22, 2001;
(iii) highly competitive conditions in the restaurant industry, making
significant growth from same unit sales very difficult to achieve;
(iv) rising cheese prices, as well as increasing utility and labor costs
in certain of the markets in which PJAM operates;
(v) the fact that the Special Committee has received the written opinion
of Banc of America Securities, delivered to the Special Committee as
its financial advisor, that as of its date and based upon and subject
to the various assumptions and limitations described in the opinion,
the Offer Price to be received by the holders of Shares, other than
Purchaser and the Investor Group, pursuant to the proposed transaction
was fair from a financial point of view to those holders, although the
Purchaser acknowledges that the opinion was directed to the Special
Committee and that it is not to be relied upon by the Purchaser.
(vi) the fact that the Merger Agreement was the result of arm's length,
good faith negotiations between the Special Committee and the
Purchaser and their respective legal and financial advisors;
(vii) the fact that the Offer and Merger will each provide consideration
to the stockholders entirely in cash;
(viii) the availability of appraisal rights to the holders of Shares under
the DGCL in connection with the Merger;
22
(ix) the fact that the Purchaser may not accept, without the approval of
the Special Committee, any Shares tendered, unless a majority of the
outstanding Shares not owned by the Purchaser or the Investor Group
are validly tendered and not withdrawn in the Offer;
(x) the ability of the Special Committee to consider other strategic
alternatives for PJAM and the absence of any viable alternatives
emerging from the time the proposed tender offer was announced in
March 2001 through the present; and
(xi) the unanimous recommendation and approval of the Special Committee
and the approval of the Board of Directors by unanimous approval of
the directors participating.
There have been no other offers by third parties to acquire PJAM within the
last two years with which to compare this Offer. The Purchaser did not find it
practicable to assign, nor did it assign, relative weights to the individual
factors considered in reaching its conclusions as to fairness. The Purchaser
was of the view that the best measure of PJAM's value would be based on the
continued operation of PJAM as a going concern. Therefore, the Purchaser
believed that neither the book value (which was $6.74 as of April 1, 2001) nor
the liquidation value of PJAM was a meaningful measure of the fair value of
the Shares and no appraisal of liquidation value was sought for purposes of
valuing the Shares. While a valuation has not been performed, the Purchaser
believes that liquidation value is, and knows the book value to be,
substantially below the Offer Price.
The Purchaser recognized that, while the consummation of the Offer and the
Merger will result in all stockholders (other than the Purchaser and the
members of the Investor Group) being entitled to receive $8.75 per Share in
cash, it will eliminate the opportunity for current stockholders to
participate in the benefit of increases, if any, in the value of PJAM's
business following the Merger. Nonetheless, the Purchaser concluded that a
speculative future return did not justify foregoing the immediate cash premium
represented by the $8.75 per Share Offer Price.
Although STES and First Tennessee Securities generally assisted the
Purchaser with this transaction and, in particular advised the Purchaser on
negotiating strategies and participated in negotiations, they were not asked
to and did not deliver a fairness opinion as to the $8.75 per Share to be
received by stockholders of PJAM (other than the Purchaser and the members of
the Investor Group).
The Investor Group's Purpose and Reasons for the Offer and the Merger
The Investor Group formed the Purchaser and entered into the Merger
Agreement in order to acquire all the Shares of PJAM. The members of the
Investor Group currently intend to retain the Shares that they acquire in the
Offer and the Merger. The Investor Group and the Purchaser believe that
causing PJAM to be closely held will:
(i) Enable PJAM's management to focus on stabilizing PJAM's performance
without having to meet the expectations of many public stockholders for
short-term results. As a privately held entity, PJAM will have the
flexibility to focus on continuing improvements to its business without
the constraints and distractions caused by the public market's present
disfavor. While PJAM has taken steps to improve operating and cash flow
results in its new markets (namely Utah, California, Oregon and Puerto
Rico), its efforts have not resulted in an improvement in the market
price of the stock.
(ii) Reduce PJAM's costs associated with publishing and distributing to its
stockholders annual and quarterly reports and proxy statements, which
the Purchaser estimates will result in annual savings to PJAM of
approximately $100,000 since PJAM will no longer be subject to the
reporting requirements and proxy solicitation rules under the Exchange
Act.
(iii) Enable PJAM to elect to be taxed under the provisions of Subchapter S
of the Internal Revenue Code of 1986, as amended.
23
The Offer and the Merger were motivated by the relative lack of benefits of
being a public company as compared to the costs and burdens of this status.
The Investor Group decided to pursue the Offer at this time because of their
inability to improve PJAM's stock price through other means and given the
current favorable interest rate for financing the Offer and the Merger. The
Investor Group and PJAM considered the other strategic alternatives, including
seeking a third party buyer and an issuer self-tender, as described under the
"--Background of the Merger" and believe that, particularly given the lack of
interest on the part of any third party buyer, that the Offer will result in
the greatest value for PJAM's public stockholders.
The transaction was structured as an Offer, followed by a Merger, in order
to enable the stockholders to receive their money promptly. The Purchaser is
obligated to pay the same consideration for Shares received in the Merger as
Shares tendered in the Offer. The transaction was structured to require that a
majority the Shares not owned by the Investor Group be tendered in the Offer,
unless this requirement is waived by the Special Committee, in order to assure
that a majority of the public stockholders considered the transaction to be in
their best interests.
Plans for PJAM After the Offer and the Merger; Certain Effects of the Offer
Pursuant to the Merger Agreement, as soon as practicable after the
completion of the Offer and the satisfaction or waiver of the conditions set
forth in the Merger Agreement (including approval, if required, of PJAM's
stockholders), the Purchaser will merge with and into PJAM in accordance with
the applicable provisions of the DGCL. See "Special Factors--The Merger
Agreement."
PJAM, from to time, engages in discussions regarding the sale of
underperforming stores. In the first quarter of 2001, as previously announced,
PJAM sold eight restaurants in Louisiana. PJAM will continue to consider sales
of underperforming stores on terms it believes to be favorable. Likewise,
after the Merger, the Purchaser will consider sales of stores on terms it
believes to be favorable.
Following the Merger, the officers and directors of the Purchaser will be
certain of the officers and directors of PJAM. Accordingly the Board of
Directors will be reduced to eight members (Messrs. Xxxxxxx, Xxxxxxxx,
Xxxxxxxxx, Xxxxxx, Xxxx, Xxxxxxxx, Xxxxxxxx, Xxxxxxxx) and Xx. Xxxxxxx will be
Chairman, Xx. Xxxxxxxx will be President and Chief Executive Officer and Xx.
Xxxxxxxxx will be Secretary. Xx. Xxxxxxx, PJAM's CFO, has informed PJAM that
he intends to leave after the Merger. Xx. Xxxx, PJAM's Controller, will be
promoted to CFO. The Investor Group intends to amend PJAM's Articles of
Incorporation to reduce the number of authorized Shares after the Merger.
After the Merger, the Investor Group intends to elect that PJAM be taxed as
an S corporation under the Code and to have PJAM make distributions to them in
order to allow them to pay their income taxes related to that election.
The Purchaser and the Investor Group intend to repay the money borrowed to
finance the Offer and the Merger with cash flow from earnings and possibly
proceeds from sales of stores, if any.
24
The direct and indirect interest of the members of the Investor Group in
PJAM's net book value and net earnings will increase to the extent of the
number of Shares acquired under the Offer. Following consummation of the
Merger, the direct interest of the members of the Investor Group in such items
will increase to 100%. The members of the Investor Group will be entitled to
all benefits resulting from their increased ownership interest, including all
income generated by PJAM's operations and any future increase in PJAM's value.
The members of the Investor Group will also bear the risk of losses generated
by PJAM's operations and any decrease in the value of PJAM after the Merger.
The following table sets forth for each member of the Investor Group, his or
her interest in the net book value and net income of PJAM as of April 1, 2001
and after the Merger. The percentages are based on the number of outstanding
Shares beneficially owned by members of the Investor Group, exclusive of
options, since the members of the Investor Group do not intend to exercise any
options prior to the Merger and such options will terminate as a result of the
Merger.
As of April 1, 2001 Post Merger
------------------------- ----------------------------
Net Pro Forma Pro Forma
% Book Net % Net Book Net
Interest Value Earnings Interest Value Earnings
-------- ------- -------- -------- --------- ---------
(dollars in thousands) (dollars in thousands)
Xxxxxxx X. Xxxxxxx(1)... 5.9% $ 1,719 $ 50 14.7% $ 1,719 $ 83
Xxxxxx X. Xxxxxxx(2).... 4.6% $ 1,348 $ 39 11.5% $ 1,348 $ 65
Xxxxxxxx Xxxxxxx(3)..... 4.6% $ 1,382 $ 40 11.8% $ 1,382 $ 66
Xxxxxxx X. Xxxxxxxx..... 5.6% $ 1,635 $ 48 14.0% $ 1,635 $ 78
Xxxxxxx X. Xxxxxxxx..... 4.8% $ 1,397 $ 41 12.0% $ 1,397 $ 67
Xxxxxx X. Xxxx.......... 2.9% $ 843 $ 25 7.2% $ 843 $ 41
Xxxxxxx X. Xxxxxxxx..... 3.8% $ 1,108 $ 32 9.5% $ 1,108 $ 53
Xxxx X. Xxxxxxxx(4)..... 4.9% $ 1,416 $ 41 12.1% $ 1,416 $ 68
Xxxxx X. Xxxxxx......... 7.5% $ 2,189 $ 64 18.7% $ 2,189 $106
Xxxxxxx X.
Xxxxxxxxx(5)........... 4.7% $ 1,378 $ 40 11.8% $ 1,378 $ 66
Total................. 40.1% $11,685 $341 100% $11,685 $562
--------
(1) Includes 100,000 Shares held by the Xxxxxx X. Xxxxxxx Trust under an
Agreement dated 9/1/96 and 100,000 shares held Xxxxxxxx X. Xxxxxxx Trust
under an Agreement dated 9/1/96 and 5,000 held directly by Xxxxxxxx X.
Xxxxxxx. Xxxxxx and Xxxxxxxx Xxxxxxx are the adult children of Xxxxxxx
Xxxxxxx.
(2) Includes 100,000 Shares held by the Xxxxxx X. Xxxxxxx Trust under an
Agreement dated 9/1/96 and 100,000 Shares held by the Xxxxxxxx X. Xxxxxxx
Trust under an Agreement dated 9/1/96; Xx. Xxxxxxx is co-Trustee of such
trusts.
(3) Includes 100,000 Shares held by the Xxxxxx X. Xxxxxxx Trust under an
Agreement dated 9/1/96 and 100,000 Shares held by the Xxxxxxxx X. Xxxxxxx
Trust under an Agreement dated 9/1/96; Xx. Xxxxxxxx Xxxxxxx is co-Trustee
of such trusts.
(4) Excludes 3,300 Shares owned by the Xxxxxxxx Foundation which will be
tendered in the Offer.
(5) Includes 13,000 Shares held by Xx. Xxxxxxxxx'x wife and 3,000 Shares held
by Xx. Xxxxxxxxx'x wife as custodian for their minor child. Xx. Xxxxxxxxx
disclaims beneficial ownership of shares held by his wife.
Upon consummation of the Offer and the Merger, PJAM will become a privately
held corporation and the Shares will no longer be listed on the Nasdaq. In
addition, the registration of the Shares under the Securities Exchange Act of
1934, is expected to be terminated upon application by PJAM to the SEC, if, as
anticipated, the Shares are not listed on a national securities exchange or
authorized to be quoted in an inter-dealer quotation system of a registered
national securities association or there are fewer than 300 record holders of
PJAM's common stock. Accordingly, following the Merger, there will be no
publicly traded Shares of PJAM outstanding and stockholders tendering in the
Offer will not have the opportunity to participate in the earnings and growth
of PJAM after the completion of the Offer. After the Merger, PJAM will be
relieved of the duty to file proxy and information statements and its
officers, directors and more than 10% stockholders will be relieved of the
reporting requirements under, and the "short swing" profit liability provision
of, Section 16 of the Exchange Act.
25
See "The Tender Offer--Section 7. Effect of the Offer on the Market for the
Shares; Stock Exchange Listing; Exchange Act Registration; Margin
Regulations."
Except as set forth above or as otherwise described in this Offer to
Purchase, the Purchaser has no current plans, proposals or negotiations which
relate to or would result in any material change in PJAM's corporate structure
or business or any extraordinary transaction involving PJAM. The Purchaser
may, however, initiate a review of PJAM and its assets, corporate structure,
capitalization, operations, properties, policies, management and personnel to
determine what changes, if any, would be desirable following the Merger. The
Purchaser expressly reserves the right to make any changes that it deems
necessary or appropriate in light of its review or in light of future
developments.
Interests of Certain Persons in the Offer and the Merger
Interlocking Directors and Officers. In considering the recommendation of
the Board and the Special Committee with respect to the Offer and the Merger,
stockholders should be aware that certain officers and directors of the
Purchaser and PJAM have interests in the Offer and the Merger which may
present them with certain potential conflicts of interest. In particular, of
the ten directors of PJAM, six are members of the Investor Group. However, the
Special Committee was composed of three independent outside directors of PJAM,
who are not part of the Investor Group.
Indemnification. Under the Merger Agreement, the directors and officers of
PJAM are entitled to certain rights of indemnification and to be insured by
the Surviving Corporation with respect to certain matters from and after the
completion of the Merger. See "Special Factors--The Merger Agreement--
Indemnification."
Fees and Other Rights of the Special Committee. Each member of the Special
Committee, other than the Chairman of the Special Committee, is entitled to
payment by PJAM of a fee of $10,000. The Chairman of the Special Committee is
entitled to receive a $15,000 fee. In addition, XXXX has agreed to reimburse
each member of the Special Committee for all out-of-pocket expenses incurred
in connection with his service on the Special Committee. Payment of such fees
and expenses was in no way contingent on the recommendation made by the
Special Committee or the consummation of the Offer or the Merger.
Options. All outstanding options will vest upon the change in control and
terminate immediately after the Merger. PJAM will pay each option holder an
amount equal to the excess, if any, of the Merger Consideration over the per
Share exercise price multiplied by the number of Shares subject to the option.
The total amount to be paid to employees and non-employee directors is
$118,870, of which directors who are members of the Investor Group will
receive $22,400, in the aggregate and directors who are members of the Special
Committee will receive $80,520, in the aggregate.
The Special Committee and the Board were aware of these actual and
potential conflicts of interest and considered them along with the other
matters described under "Special Factors--Recommendation of the Special
Committee and the Board; Fairness of the Offer and the Merger."
26
THE MERGER AGREEMENT
THE FOLLOWING IS A SUMMARY OF MATERIAL PROVISIONS OF THE MERGER AGREEMENT.
THE SUMMARY IS NOT A COMPLETE DESCRIPTION AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO THE MERGER AGREEMENT, A COPY OF WHICH IS FILED AS AN EXHIBIT TO
THE SCHEDULE TO AND WHICH IS INCORPORATED BY REFERENCE HEREIN. CAPITALIZED
TERMS NOT OTHERWISE DEFINED IN THE FOLLOWING WILL HAVE THE MEANINGS SET FORTH
IN THE MERGER AGREEMENT.
The Offer. Pursuant to the Merger Agreement, the Purchaser is obligated to
commence the Offer as promptly as practicable after the date of the Merger
Agreement. On the terms and subject to the prior satisfaction or waiver of the
conditions of the Offer, the Purchaser will accept for payment and pay for all
Shares validly tendered and not withdrawn as soon as practicable after the
expiration of the Offer. The obligations of the Purchaser to accept for
payment, and pay for, any Shares tendered pursuant to the Offer are subject to
the conditions specified in "The Tender Offer--Section 11. Conditions of the
Offer." The Purchaser expressly reserves the right to modify the terms of the
Offer, except that, without the Special Committee's prior written consent, the
Purchaser may not (i) reduce the Offer Price per Share or change the form of
consideration to be paid pursuant to the Offer, (ii) decrease the number of
Shares sought; (iii) accept any tendered Shares unless Shares representing a
majority of the Shares not owned by the Purchaser or the Investor Group are
validly tendered and not withdrawn in the Offer; or (iv) otherwise amend any
other conditions of the Offer in any manner materially adverse to the holders
of Shares or impose additional conditions to the Offer.
The Merger. The Merger Agreement provides that, on the terms and subject to
the conditions set forth in the Merger Agreement, the Purchaser will be merged
with and into PJAM in accordance with the applicable provisions of the DGCL.
Following the Merger, the separate corporate existence of the Purchaser will
cease and PJAM will continue as the Surviving Corporation.
At the Effective Time, by virtue of the Merger and without any action on
the part of the holder of any Shares:
(i) each Share (other than Shares of holders exercising dissenters' rights
and Shares to be cancelled as provided in clause (2) below) will be
converted into the right to receive the Merger Consideration;
(ii) each Share of PJAM owned by PJAM or by the Purchaser will be
cancelled, and no consideration will be delivered with respect to such
Shares;
(iii) each share of Purchaser issued and outstanding immediately prior to
the Effective Time will be converted into one share of the Surviving
Corporation.
Options. Under the terms of the outstanding option agreements, each stock
option issued under PJAM's Non-Employee Directors 1996 Stock Incentive Plan
and the 1996 Stock Ownership Incentive Plan will vest upon the consummation of
the Offer and then be terminated in the Merger. The Surviving Corporation will
pay each option holder an amount equal to the product of (a) the excess, if
any, of the Merger Consideration over the per Share exercise price and (b) the
number of shares subject to the option.
Appraisal Rights. A stockholder who does not wish to receive the Merger
Consideration and who complies with all of the requirements of Section 262 of
the DGCL may seek an appraisal of and be paid the "fair value" of his or her
Shares as of the day before the date upon which the stockholders vote on the
Merger (exclusive of any element of value arising from the accomplishment or
expectation of the Merger). The requirements of Section 262 are described in
"Special Factors--Appraisal Rights" and the text of Section 262 appears in
Exhibit A to this Offer to Purchase.
Representations and Warranties. The Merger Agreement contains various
customary representations and warranties of PJAM including, among others,
representations as to due organization, existence, and good
27
standing to do business, capital structure, corporate authority to execute the
Merger Agreement, and the accuracy of information included in certain
materials in connection with the Offer and the Merger.
The Merger Agreement contains various customary representations and
warranties of the Purchaser, including, among others, representations as to
due organization, existence, and good standing to do business, corporate
authority to execute the Merger Agreement, the accuracy of information
included in certain materials in connection with the Offer and the Merger, and
the existence of a commitment letter with Bank One of Kentucky relating to
financing for this transaction.
Interim Operations. The Merger Agreement provides that, except for matters
expressly permitted by the Merger Agreement, from the date of the Merger
Agreement to the Effective Time, PJAM has agreed to, and has agreed to cause
each of its subsidiaries to, conduct its business in the usual, regular and
ordinary course consistent with past practice and use all reasonable efforts
to preserve intact its current business organization, keep available the
services of its current officers and employees and maintain its relationships
and goodwill with customers, suppliers and others having business dealings
with it. In addition, except for matters expressly contemplated by the Merger
Agreement, from the date of the Merger Agreement to the Effective Time, PJAM
will not, and will not permit any of its subsidiaries, without prior written
consent of the Purchaser, to:
(i) amend its articles of incorporation or by-laws (or other similar
governing instrument);
(ii) authorize for issuance, issue, sell, deliver or agree to issue, sell
or deliver any stock of any class or any other securities convertible
into or exchangeable for any stock or any equity equivalents;
(iii) (A) split, combine or reclassify any of its capital stock, (B)
declare, set aside or pay any dividends on, or make any other
distributions in respect of, any of its capital stock, (C) make any
other actual, constructive or deemed distributions in respect of any
shares of its capital stock or otherwise make any payments to
stockholders in their capacity as such, or (D) redeem, repurchase or
otherwise acquire any Shares of capital stock of PJAM or any of its
subsidiaries;
(iv) adopt a plan of complete or partial liquidation, dissolution, merger,
consolidation, restructuring, recapitalization or other reorganization
of PJAM or any of its subsidiaries;
(v) alter through merger, liquidation, reorganization, restructuring or in
any other fashion the corporate structure of any subsidiary of PJAM;
(vi) (A) incur any indebtedness for borrowed money or issue or sell any
debt securities, except for borrowing under existing lines of credit
in the ordinary and usual course of business consistent with past
practice, (B) assume, guarantee, endorse or otherwise become liable or
responsible for the obligations of any other person, except in the
ordinary course of business consistent with past practice, and except
for obligations of the wholly owned subsidiaries of PJAM, (C) make any
loans, advances or capital contributions to, or investments in, any
other person, other than to wholly owned subsidiaries of PJAM or
routine advances to employees consistent with past practice, (D)
pledge or otherwise encumber shares of capital stock of PJAM or any of
its subsidiaries, or (E) mortgage or pledge any of its material assets
or create any material lien thereon, except pursuant to after-acquired
property clauses under existing debt instruments;
(vii) enter into or adopt any bonus, profit sharing, compensation,
severance, termination, stock option, stock appreciation right,
restricted stock, performance unit, stock equivalent, stock purchase
agreement, pension, retirement, deferred compensation, employment,
severance or other employee benefit agreement, trust, plan, fund,
award or other arrangement for the benefit or welfare of any
director, officer or employee in any manner, or increase in any
manner the compensation or fringe benefits of any director, officer
or employee or pay any benefit not required by any plan and
arrangement as in effect as of the date of the Merger Agreement
(including, without limitation, the granting of stock appreciation
rights or performance units);
28
(viii) acquire, sell, lease or dispose of any assets outside the ordinary
and usual course of business consistent with past practice or any
assets which in the aggregate are material to PJAM and its
subsidiaries, taken as a whole, or enter into any commitment or
transaction outside the ordinary and usual course of business
consistent with past practices;
(ix) except as required by change in law or in GAAP, change any of the
accounting practices used by PJAM;
(x) revalue in any material respect any of its assets other than in the
ordinary and usual course of business consistent with past practice or
as required by GAAP;
(xi) (A) acquire by merging or consolidating with, or by acquisition of
equity interest or assets of, any corporation, partnership or other
business organization or division thereof or any equity interest
therein, (B) enter into any contract or agreement, other than in the
ordinary course of business consistent with past practice or amend in
any material respect any material contracts or agreements, including
franchise agreements, (C) authorize any capital expenditure or
expenditures which, individually, is in excess of $200,000 or, in the
aggregate, are in excess of $1,000,000, or (D) enter into or amend any
contract, agreement, commitment or arrangement providing for the
taking of any action that would be prohibited under the Merger
Agreement;
(xii) make or revoke any tax election, settle or compromise any tax
liability, change (or make a request to any taxing authority to
change) any aspect of its method of accounting for tax purposes;
(xiii) pay, discharge or satisfy any material claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent
or otherwise), other than the payment, discharge or satisfaction, in
the ordinary and usual course of business consistent with past
practice of liabilities reflected or reserved against in the
consolidated financial statements of PJAM and its subsidiaries or
incurred in the ordinary and usual course of business consistent
with past practice or waive the benefits of or agree to modify in
any manner, any confidentiality, standstill or similar agreement to
which PJAM or any of its subsidiaries is a party;
(xiv) settle or compromise any pending or threatened suit, action or claim
relating to the transactions contemplated in the Merger Agreement;
(xv) enter into any agreement that limits or otherwise restricts PJAM or
any of its subsidiaries or could limit or restrict the Surviving
Corporation and its affiliates (including the Purchaser) or successor
thereto after the Effective Time from engaging or competing in any
line of business or in any geographic area; or
(xvi) take, propose to take, or agree in writing or otherwise to take, any
of the foregoing actions or any action which would make any of the
representations or warranties of PJAM contained in the Merger
Agreement (i) which are qualified as to materiality untrue or
incorrect or (ii) which are not so qualified untrue or incorrect in
any material respect.
Stockholder Meeting; Preparation of Proxy Statement. PJAM has agreed in the
Merger Agreement that, if the adoption of the Merger Agreement by PJAM's
stockholders is required by applicable law in order to consummate the Merger,
PJAM will (i) as promptly as practicable following the acceptance for payment
and purchase of Shares by the Purchaser pursuant to the Offer, duly call a
special meeting of its stockholders for the purpose of considering and taking
action upon the approval of the Merger and the Merger Agreement and
(ii) prepare and file with the Commission a preliminary proxy statement and
after consultation with the Purchaser respond promptly to any comments of the
Commission with respect to such preliminary proxy.
Pursuant to the Merger Agreement, the Purchaser will vote, or cause to be
voted, all of the Shares then owned by it in favor of the approval and
adoption of Merger Agreement. It is a condition to the Merger that holders of
not more than 5% of PJAM's outstanding Shares have informed PJAM of their
intent to dissent from the Merger.
29
Acquisition Proposals. Pursuant to the Merger Agreement, PJAM has agreed
not to solicit, initiate or encourage, directly or indirectly, the submission
of any Acquisition Proposal (as defined below) or participate in any
discussions or negotiations regarding, or furnish to any person any
information with respect to, or take any other action to facilitate, any
Acquisition Proposal or any inquiries or the making of any proposal that
constitutes, or may be reasonably be expected to lead to, any Acquisition
Proposal. Notwithstanding the foregoing, prior to the acceptance for payment
of Shares pursuant to the Offer, PJAM may, to the extent required by the
fiduciary obligations of the Board, as determined in good faith by a majority
of the disinterested members thereof after consultation with outside counsel,
in response to any Acquisition Proposal that was made by a person whom the
Special Committee determines, in good faith after consultation with outside
counsel and an independent financial advisor, to be reasonably capable of
making a Superior Company Proposal (as defined below), that was not solicited
by PJAM and that did not otherwise result from a breach of its obligations
pursuant to the Merger Agreement, (x) furnish information with respect to PJAM
to the person or group making such Acquisition Proposal and its
representatives pursuant to a customary confidentiality agreement and (y)
participate in discussions and negotiations with such person or group and its
representatives to the extent required regarding such Acquisition Proposal.
PJAM agreed not to permit any of its subsidiaries nor will it authorize or
permit any officer, director or employee of any investment banker, attorney,
accountant or other advisor of, PJAM or any of its subsidiaries to take
similar actions. The Merger Agreement further provides that neither the Board
nor the Special Committee will withdraw or modify, or propose to withdraw or
modify, in a manner adverse to the Purchaser, its approval or recommendation
of the Merger Agreement, the Offer or the Merger, unless PJAM's Board or the
Special Committee, after consultation with independent legal counsel,
determines in good faith that such action is necessary for the Board or the
Special Committee to comply with its fiduciary duties under applicable Law.
"Acquisition Proposal" means an offer or proposal regarding any of the
following (other than the transactions contemplated by the Merger Agreement)
involving PJAM or any of its subsidiaries: (i) any merger, consolidation,
share exchange, recapitalization, business combination or other similar
transaction; (ii) any sale, lease, exchange, mortgage, pledge, transfer or
other disposition of all or a significant portion of the assets of PJAM and
its subsidiaries, taken as a whole, in a single transaction or series of
related transactions; (iii) any tender offer or exchange offer for 10% or more
of the outstanding Shares or the filing of any document under the Securities
Act of 1933 or the Exchange Act, in connection therewith; (iv) any other
transaction the consummation of which would reasonably be expected to impede,
interfere with, prevent or materially delay the transaction contemplated by
the Merger Agreement; or (v) any public announcement of a proposal, plan or
intention to do any of the foregoing or any agreement to engage in any of the
foregoing. "Superior Company Proposal" means any proposal made by a third
party to acquire all or substantially all the equity securities or assets of
PJAM, pursuant to a tender or exchange offer, a merger, a consolidation, a
liquidation or dissolution, a recapitalization or a sale of all or
substantially all of its assets, (i) on terms which a majority of the
disinterested directors of PJAM determines in its good faith judgment to
represent superior value for the holders of Shares compared to the Offer and
the Merger, taking into account all the terms and conditions of such proposal
and this Agreement (including any proposal by the Purchaser to amend the terms
of the Merger Agreement, the Offer and the Merger) and (ii) that is reasonably
capable of being completed, taking into account all financial, regulatory,
legal and other aspects of such proposal.
Contribution of Shares. Immediately prior to the Merger, the members of the
Investor Group will contribute their Shares to the Purchaser.
Indemnification. Pursuant to the Merger Agreement following the Effective
Time, to the fullest extent permitted by applicable law, the Purchaser has
agreed to cause the Surviving Corporation to indemnify, defend and hold
harmless each person who is now, or has been at any time prior to the date of
the Merger Agreement, or who becomes prior to the Effective Time, a director,
officer, agent, representative or employee of PJAM (an "Indemnified Party")
against all losses, claims, damages, liabilities, fees and expenses (including
reasonable attorneys' fees and expenses), and amounts paid in settlement, to
the extent based on or arising out of the fact that such person is or was a
director, officer, agent, representative or employee of PJAM or based on,
arising out of or pertaining to the transactions contemplated by the Merger
Agreement. In the event of any such loss, expense, claim, damage or liability
(whether or not arising before the Effective Time), (i) the Surviving
Corporation will advance the reasonable fees and expenses of counsel selected
by the Indemnified Parties, which
30
counsel will be reasonably satisfactory to the Surviving Corporation, promptly
after statements therefor are received and otherwise advance to such
Indemnified Party upon request reimbursement of documented expenses reasonably
incurred, in either case to the extent not prohibited by the DGCL and upon
receipt of any affirmation and undertaking required by the DGCL, (ii) the
Surviving Corporation will cooperate in the defense of any such matter, and
(iii) any determination required to be made with respect to whether an
Indemnified Party's conduct complies with the standards set forth under the
DGCL and PJAM's certificate of incorporation or bylaws will be made by
independent counsel mutually acceptable to the Surviving Corporation and the
Indemnified Party; provided, however, that the Surviving Corporation will not
be liable for any settlement effected without its written consent. The
Indemnified Parties as a group may retain only one law firm with respect to
each related matter except to the extent there is, in the opinion of counsel
to an Indemnified Party, under applicable standards of professional conduct, a
conflict on any significant issue between positions of any two or more
Indemnified Parties.
The Surviving Corporation has agreed to cause to be maintained in effect
for a period of three years from and after the Effective Time, the current
policies of directors' and officers' liability insurance maintained by PJAM
for the benefit of those persons who are covered by such policies at the
Effective Time (or the Surviving Corporation may substitute therefor policies
of at least the same coverage with respect to matters occurring prior to the
Effective Time) with respect to claims arising from or related to facts or
events which occurred at or before the Effective Time. Notwithstanding the
foregoing, the Surviving Corporation will not be obligated to make premium
payments for such insurance to the extent such premiums exceed 150% of the
annual premiums paid as of the date of the Merger Agreement by PJAM for such
insurance. If such insurance coverage cannot be obtained at all, or can only
be obtained at an annual premium in excess of such 150% amount, the Surviving
Corporation is required to maintain or obtain as much directors' and officers'
insurance as can be so maintained or obtained at a cost equal to 150% of the
current annual premiums of PJAM.
The Purchaser has agreed that, if the Surviving Corporation or any of its
successors or assigns (i) consolidates with or merges into any other person
and shall not be the continuing or surviving corporation or entity of such
consolidation or merger or (ii) transfers or conveys all or any substantial
portion of its properties and assets to any person, then, and in each such
case, proper provision shall be made so that the successors and assigns of
such party assume the indemnification obligations of such party as
contemplated by the Merger Agreement.
The Purchaser has agreed that, to the fullest extent permitted by Law, from
and after the Effective Time, all rights to indemnification now existing in
favor of the employees, agents, directors or officers of PJAM with respect to
their activities as such prior to the Effective Time, as provided in PJAM's
articles of incorporation or bylaws, in effect on the date thereof or
otherwise in effect on the date of the Merger Agreement, will survive the
Merger and will continue in full force and effect for a period of not less
than three years from the Effective Time.
Termination of the Offer. The Purchaser may terminate the Offer and not
accept tendered Shares, if, among other conditions:
(i) the Board or the Special Committee withdraws its recommendation of the
Offer or recommends another Acquisition Proposal;
(ii) there has not been validly tendered and not withdrawn that number of
Shares that when added to Shares already owned by the Investor Group
equals at least 90% of the outstanding Shares; or
(iii) Purchaser has not received proceeds from the financing commitment
letter in an amount sufficient to consummate the Offer and the
Merger, pursuant to the terms of the Bank One financing commitment
letter or on substantially similar terms; or
(iv) if there shall be a material breach by PJAM of any of its
representations, warranties, covenants or agreements contained in this
Agreement; or
31
(v) if, since the date of the Agreement, there shall have occurred any
event, circumstance, change, effect or development, including current
pending litigation, that, individually or in the aggregate with any
other events, circumstances, changes, effects or developments, has had
or would reasonably be expected to have a material adverse effect on
PJAM.
See "The Tender Offer--Section 11. Conditions to the Offer" for other
conditions to the Offer.
Conditions to the Merger. The Merger Agreement provides that the respective
obligation of each party to effect the Merger is subject to the satisfaction
or waiver on or prior to the Effective Date of each of the following
conditions:
(i) if required by applicable law, the Merger Agreement shall have been
approved and adopted by the requisite vote of PJAM's stockholders;
(ii) there shall not be in effect any Law of any Governmental Entity of
competent jurisdiction restraining or preventing the consummation of
the Merger or the other transactions contemplated by the Merger
Agreement or permitting such consummation only subject to any
condition or restriction that has or could reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect on
PJAM; and
(iii) the Purchaser shall have purchased the Shares validly tendered and
not withdrawn pursuant to the Offer.
In addition the Purchaser's obligation to consummate the Merger is
conditioned upon holders of not more than 5% of the outstanding Shares having
informed PJAM of their intent to dissent from the Merger.
Termination of the Agreement. The Merger Agreement may be terminated and
the Merger may be abandoned at any time prior to the Effective Time, whether
before or after receipt of the approval of PJAM's stockholders:
(i) by the mutual written consent of the Purchaser and PJAM;
(ii) by either the Purchaser or PJAM if a statute, rule or executive order
shall have been enacted, entered or promulgated prohibiting the
transactions on the terms contemplated by Merger Agreement or any
Governmental Entity issues an order, decree or ruling or takes any
other action, in each case permanently enjoining, restraining or
otherwise prohibiting the Merger and such order, decree, ruling or
other action shall have become final and non-appealable; or
(iii) by either the Purchaser or PJAM if the Merger is not consummated on
or before the 180th day following the commencement of the Offer (or,
if such date is not a business day in the United States, the first
such business day thereafter), so long as the party seeking to
terminate the Merger Agreement shall not have breached in any
material respect its obligations under the Merger Agreement in any
manner that shall have proximately contributed to the failure to
consummate the Merger on or before such date.
(iv) by PJAM
a. if PJAM receives a Superior Company Proposal;
b. if the Purchaser shall have terminated the Offer or the Offer
expires without the Purchaser purchasing any Shares thereunder;
provided that PJAM may not terminate the Merger Agreement pursuant
to this provision if PJAM is in material breach of the Merger
Agreement; or
c. if there is a material breach by the Purchaser of any of its
representations, warranties, covenants or agreements contained in
the Merger Agreement.
32
(v) by the Purchaser
a. if prior to the purchase of Shares pursuant to the Offer, (A) the
Board or Special Committee shall have withdrawn or modified, in a
manner adverse to the Purchaser, its approval or recommendation of
the Merger Agreement, the Offer or the Merger, or shall have
recommended or approved an Acquisition Proposal or (B) there shall
have been a material breach of the covenant regarding Acquisition
Proposals described above;
b. if the Purchaser terminates the Offer without purchasing any Shares;
provided that the Purchaser may not terminate the Merger Agreement
pursuant to this provision if it is in material breach of the Merger
Agreement;
c. if there is a material breach by PJAM of any of its representations,
warranties, covenants or agreements contained in the Merger
Agreement; or
d. if, since the date of the Agreement, there shall have occurred any
event, circumstance, change, effect or development, including
current pending litigation, that, individually or in the aggregate
with any other events, circumstances, changes, effects or
developments, has had or would reasonably be expected to have a
material adverse effect on PJAM.
In the event of such termination, the Merger Agreement will become void and
have no effect, without any liability or obligation on the part of the
Purchaser or PJAM, except that (i) if PJAM terminates the Merger Agreement
pursuant to clause (iv)(a) or the Purchaser terminates the Merger Agreement
for the reasons set forth in clause (v) under "Termination" above, PJAM must
pay the Purchaser's actual and reasonably documented out-of-pocket expenses in
connection with the Offer, the Merger, the Merger Agreement and the
consummation of the transactions contemplated by the Merger Agreement up to an
aggregate of $1.0 million, including, without limitation, legal fees and the
fees (other than any break-up, success or other contingent fee) and out-of-
pocket expenses payable to all banks, investment banking firms and other
financial institutions and persons and their respective agents and counsel
incurred in connection with acting as the Purchaser's financial advisor with
respect to, or arranging or committing to provide or providing any financing
for, the Offer and the Merger.
Amendments. The Merger Agreement may be amended by the parties at any time
before or after the approval of the Merger by the requisite vote of PJAM's
stockholders, if applicable; provided, however, that after any such approval,
no amendment may be made which requires the approval of such stockholders
under applicable law without such approval; provided, further, that no
amendment shall be made without the approval of the Special Committee. Any
amendment to the Merger Agreement must be made in writing.
Extension; Waiver. Pursuant to the Merger Agreement at any time prior to
the Effective Time, the parties to the Merger Agreement may (a) extend the
time for the performance of any of the obligations or other acts of the other
parties, (b) waive any inaccuracies in the representations and warranties
contained in the Merger Agreement or in any document delivered pursuant to the
Merger Agreement, or (c) waive compliance with any of the agreements or
conditions contained in the Merger Agreement.
Statutory Requirements. In general, under the DGCL a merger of two Delaware
corporations requires the adoption of a resolution by each of the corporations
desiring to merge approving an agreement of merger containing provisions with
respect to certain statutorily specified matters and the adoption of such
agreement of merger by the stockholders of each corporation by the affirmative
vote of the holders of a majority of all the outstanding shares of stock
entitled to vote on such merger.
The Offer is conditioned on there having been tendered, and not withdrawn
prior to the Expiration Date, that number of Shares that together with Shares
already owned by Investor Group, constitutes at least 90% of the outstanding
Shares. The DGCL provides that if a parent company owns at least 90% of each
class of stock of a subsidiary, the parent company can effect a short-form
merger with that subsidiary without the action of the other stockholders of
the subsidiary. Accordingly, if as a result of the Offer or otherwise,
Purchaser acquires or controls at least 90% of the Shares, Purchaser could,
and intends to, effect the Merger without prior notice to, or any action by,
any other stockholders of PJAM.
33
Appraisal Rights
No appraisal rights are available in connection with the Offer. If the
Merger is consummated, however, stockholders of PJAM who have not tendered
their Shares will have certain rights under the DGCL to dissent and demand
appraisal of, and to receive payment in cash of the fair value of, their
Shares. Stockholders who perfect such rights by complying with the procedures
set forth in Section 262 of the DGCL will have the fair value of their Shares
(exclusive of any element of value arising from the accomplishment or
expectation of the Merger) determined by the Delaware Court of Chancery and
will be entitled to receive a cash payment equal to such fair value from the
Surviving Corporation. In addition, such dissenting stockholders would be
entitled to receive payment of a fair rate of interest from the date of
consummation of the Merger on the amount determined to be the fair value of
their Shares. In determining the fair value of the Shares, the court is
required to take into account all relevant factors. Accordingly, such
determination could be based upon considerations other than, or in addition
to, the market value of the Shares, including, among other things, asset
values and earning capacity. In Xxxxxxxxxx v. UOP, Inc., the Delaware Supreme
Court stated that "proof of value by any techniques or methods which are
generally considered acceptable in the financial community and otherwise
admissible in court" should be considered in an appraisal proceeding. The
Xxxxxxxxxx court also noted that under Section 262, the fair value is to be
determined "exclusive of any element of value arising from the accomplishment
or expectation of the merger." In Cede & Co. v. Technicolor, Inc., however,
the Delaware Supreme Court stated that, in the context of a two-step cash
merger, "to the extent that value has been added following a change in
majority control before cash-out, it is still value attributable to the going
concern," to be included in the appraisal process. As a consequence of the
foregoing, the fair value determined in any appraisal proceeding could be the
same as or more or less than $8.75 per Share.
The Purchaser does not intend to object, assuming the proper procedures are
followed, to the exercise of appraisal rights by any stockholder and the
demand for appraisal of, and payment in cash for the fair value of, the
Shares. The Purchaser intends, however, to cause the Surviving Corporation to
argue in an appraisal proceeding that, for purposes of such proceeding, the
fair value of each Share is less than the Merger Consideration. In this
regard, stockholders should be aware that opinions of investment banking firms
as to the fairness from a financial point of view (including the opinion of
Banc of America Securities described herein) are not opinions as to "fair
value" under Section 262.
Several decisions by Delaware courts have held that, in certain
circumstances, a controlling stockholder of a company involved in a merger has
a fiduciary duty to other stockholders that requires that the merger be
"entirely fair" to such other stockholders. In determining whether a merger is
fair to minority stockholders, Delaware courts have considered, among other
things, the type and amount of consideration to be received by the
stockholders and whether there was fair dealing among the parties. The
Delaware Supreme Court stated in Xxxxxxxxxx and in Rabkin v. Xxxxxx X. Xxxx
Chemical Corp. that although the remedy ordinarily available to minority
stockholders in a cash-out merger that is found to be not fair to the minority
stockholders is the right to appraisal described above, monetary damages,
injunctive relief or such other relief as the court may fashion may be
available if a merger is found to be the product of procedural unfairness,
including fraud, misrepresentation or other misconduct.
THE FOREGOING SUMMARY OF THE RIGHTS OF DISSENTING STOCKHOLDERS UNDER THE
DGCL DOES NOT PURPORT TO BE A COMPLETE STATEMENT OF THE PROCEDURES TO BE
FOLLOWED BY STOCKHOLDERS DESIRING TO EXERCISE ANY APPRAISAL RIGHTS AVAILABLE
UNDER THE DGCL.
THE PRESERVATION AND EXERCISE OF APPRAISAL RIGHTS REQUIRE STRICT ADHERENCE
TO THE APPLICABLE PROVISIONS OF THE DGCL.
34
Beneficial Ownership of Common Stock
PJ America, Inc.
The following tables set forth certain information as of June 30, 2001 with
respect to the beneficial ownership of the Shares by each officer and director
of PJAM, each person known to PJAM to be the beneficial owner of more than
five percent of the outstanding Shares, and all the officers and directors of
PJAM as a group. All outstanding options vest upon the consummation of the
Offer and then terminate after the Merger. Most outstanding options have an
exercise price in excess of the Offer Price. Share ownership numbers only
include options for which the Offer Price exceeds the exercise price of the
option.
Number of Percent
Directors and Executive Officers Shares(1) of Class(2)
-------------------------------- --------- -----------
Xxxxxxx X. Xxxxxxx(3)............................. 259,000(4) 6.0%
Xxxxxxx X. Xxxxxxxx(3)............................ 242,464 5.6%
X. Xxxx Xxxxxxx................................... 0 *
Xxxxx X. Xxxxxxx.................................. 0 *
Xxxxxxx X. Xxxxxxxxx(3)........................... 208,430(5) 4.8%
Xxxxxx X. Xxxx(3)................................. 129,000(6) 3.0%
Xxxxx X. Xxxxxx(3)................................ 328,603(7) 7.6%
Xxxxxxx X. Xxxxxxxx(3)............................ 211,164(7) 4.9%
Xxx X. Xxxxx...................................... 12,000 *
Xxxxx X. Xxxxx.................................... 12,000 *
Xxxxxxxx X. Xxxxx................................. 12,000 *
All directors and executive officers as group (11
persons)......................................... 1,414,661 32.3%
Number of Percent
Other 5% Beneficial Owners Shares(1) of Class(2)
-------------------------- --------- -----------
PJ Acquisition Corp.(3)............................. 1,756,420 40.4%
0000 Xxxxxxxx Xxxxx
Xxxxxxxxxx, Xxxxxxx 00000
FMR Corp. .......................................... 738,900(8) 17.1%
00 Xxxxxxxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
X. Xxxx Price Associates, Inc. ..................... 623,500(8) 14.4%
P.O. Box 89000
Baltimore, Maryland 21289-9999
--------
* Represents less than 1% of class
(1) Except in the case of the Investor Group, based upon information furnished
to PJAM by the named persons, and information contained in filings with
the Commission. Unless otherwise indicated, the named persons have sole
voting and investment power with respect to Shares shown.
(2) Based on 4,323,648 Shares outstanding as of June 30, 2001.
(3) May be deemed to have beneficial ownership of the 1,756,420 Shares
(including options presently exercisable or exercisable within 60 days of
the date hereof with an option exercise price less than the Offer Price)
beneficially owned by the Investor Group.
(4) Includes 100,000 Shares held by the Xxxxxx X. Xxxxxxx Trust under an
Agreement dated September 1, 1996 and 100,000 shares held Xxxxxxxx X.
Xxxxxxx Trust under an Agreement dated September 1, 1996 and 5,000 held
directly by Xxxxxxxx X. Xxxxxxx. Xxxxxx and Xxxxxxxx Xxxxxxx are the adult
children of Xxxxxxx Xxxxxxx. Also includes 4,000 options presently
exercisable or exercisable within 60 days of the date hereof with an
option exercise price less than the Offer Price.
(5) Includes 13,000 shares held by Xx. Xxxxxxxxx'x wife, and 3,000 shares held
by Xx. Xxxxxxxxx'x wife as custodian for their minor child. Xx. Xxxxxxxxx
disclaims beneficial ownership of shares owned by his wife.
35
Also includes options to purchase 4,000 shares presently exercisable or
exercisable within 60 days of the date hereof with an option exercise price
less than the Offer Price.
(6) Includes an aggregate of 100,000 shares held by H Investment Company llp,
of which Xx. Xxxx is general partner. Includes options to purchase 4,000
shares presently exercisable or exercisable within 60 days of the date
hereof with an option exercise price less than the Offer Price.
(7) Includes options to purchase 4,000 shares presently exercisable or
exercisable within 60 days of the date hereof with an option exercise
price less than the Offer Price.
(8) As disclosed in a Schedule 13G filed with the Commission. Reflects
beneficial ownership (based on sole or shared voting or dispositive power)
of the reporting entity and its affiliates as of December 31, 2000.
PJ Acquisition Corp.
The following table sets forth certain information as of June 30, 2001 with
respect to the beneficial ownership of the Shares by (i) each officer and
director of the Purchaser, other than members of the Investor Group who are
directors of PJAM and whose Share ownership information is included in the
above table and (ii) by the Investor Group as a whole.
Number of Percentage
Directors and Executive Officers of the Purchaser Shares of Class
------------------------------------------------- --------- ----------
Xxxxxxx X. Xxxxxxxx(1).................................. 168,063 3.9%
Xxxx X. Xxxxxxxx(2)..................................... 214,065 4.9%
All members of the Investor Group(3).................... 1,764,089 40.6%
--------
(1) Includes 37,747 Shares held by the Xxxxxxxx Family Limited Partnership and
3,659 Shares held by the Xxxxxxxx Family Trust.
(2) Includes 3,300 Shares held by the Xxxxxxxx Foundation. Includes 2,800
Shares held by Xx. Xxxxxxxx'x wife, 975 Shares held in trust for Xx.
Xxxxxxxx'x grandchildren, and 235 Shares held by Xx. Xxxxxxxx as custodian
for his grandson.
(3) The 3,300 Shares held by the Xxxxxxxx Foundation and included in this
number will be tendered in the Offer since ownership in the Surviving
Corporation would not be an appropriate investment for this entity. This
number also includes 20,000 options presently exercisable or exercisable
within 60 days of the date hereof with an option exercise price less than
the Offer Price. The holders of these options will receive in the Merger
cash equal to the excess of the Offer Price over the option exercise
price.
Transactions and Arrangements Concerning the Shares
To the knowledge of PJAM and the Purchaser, no transactions in the Shares
have been effected during the past 60 days by PJAM or the Purchaser or their
executive officers, directors, affiliates and any associates or by any
executive officer, director, affiliate or associate of any majority owned
subsidiary of PJAM.
Since the commencement of PJAM's second full fiscal year preceding the date
of this Offer to Purchase, no purchases of Shares were made by the Purchaser
or the Investor Group, except on April 16, 2001, Xx. Xxxxxxxx acquired 20,074
shares of Common Stock from his daughter at a price of $7.75 per share, the
market price on the date of purchase.
In September 1998, PJAM's Board authorized a stock repurchase program.
Through December 31, 2000 PJAM repurchased 1,624,000 shares for a total of $19
million. PJAM has not purchased any Shares since September 2000.
Except as set forth in this Offer to Purchase, neither PJAM nor, to PJAM's
knowledge, any of its affiliates, directors or executive officers or any
person controlling PJAM is a party to any contract, arrangement, understanding
or relationship with any other person relating, directly or indirectly, to, or
in connection with, the Offer with respect to any securities of PJAM
(including, without limitation, any contract, arrangement, understanding or
relationship concerning the transfer or the voting of any such securities,
joint ventures, loan or option arrangements, puts or calls, guarantees of
loans, guarantees against loss or the giving or withholding of proxies,
consents or authorizations).
36
Except as described in this Offer to Purchase, since the second full fiscal
year preceding the date of this Offer to Purchase, no contracts or
negotiations concerning a merger, consolidation, or acquisition, a tender
offer for or other acquisition of any securities of PJAM, an election of
directors of PJAM, or a sale or other transfer of a material amount of assets
of PJAM, has been entered into or has occurred between any affiliates of PJAM
or the Purchaser or between PJAM or any of its affiliates and any unaffiliated
person.
Except as described in this Offer to Purchase, since the third full fiscal
year preceding the date of this Offer to Purchase, PJAM has not made any
underwritten public offering of the Shares that was (i) registered under the
Securities Act of 1933 or (ii) exempt from registration under the Securities
Act of 1933 pursuant to Regulation A thereunder.
To the best of PJAM's knowledge, after reasonable inquiry, and except as
set forth in this Offer to Purchase, all of the directors or executive
officers of PJAM (other than those individuals (i), if any, for whom the
tender of Shares could cause them to incur liability under the provisions of
Section 16(b) of the Exchange Act and (ii) members of the Investor Group)
intend to tender pursuant to the Offer or sell Shares held by them.
Related Party Transactions
The Investor Group consists of officers, directors and significant
stockholders of PJAM (or members of the immediate families of such
individuals), namely Xxxxxxx X. Xxxxxxx (Chairman of the Board of Directors),
Xxxxxx X. Xxxxxxx, Xxxxxxxx X. Xxxxxxx, Xxxxxxx X. Xxxxxxxx (President, Chief
Executive Officer and a director), Xxxxxxx X. Xxxxxxxx (a director), Xxxxxx X.
Xxxx (a director), Xxxxxxx X. Xxxxxxxx (a significant stockholder), Xxxx X.
Xxxxxxxx (a significant stockholder), Xxxxx X. Xxxxxx (a director), and
Xxxxxxx X. Xxxxxxxxx (Vice Chairman, Secretary and a director).
The professional service corporation of Xxxxxxx X. Xxxxxxxxx, an officer,
director and stockholder of the Purchaser and XXXX is a member of the law firm
of Xxxxxxxxxx Xxxx & XxXxxxxx PLLC. Xxxxxxxxxx served as counsel to the
Purchaser in connection with Merger Agreement and the transactions
contemplated thereby. Xxxxxxxxxx has served as counsel to PJAM since before
its initial public offering in 1996 and continues to serve as counsel to PJAM
on matters unrelated to the Offer and the Merger.
37
THE TENDER OFFER
1. Terms of the Offer; Expiration Date
Upon the terms and subject to the conditions of the Offer (including, if
the Offer is extended or amended, the terms and conditions of any such
extension or amendment), the Purchaser will accept for payment and thereby
purchase all Shares validly tendered and not withdrawn in accordance with the
procedures set forth in "The Tender Offer--Section 4. Withdrawal Rights" on or
prior to the Expiration Date at a price of $8.75 in cash. The term "Expiration
Date" means 12:00 midnight, Eastern Daylight time, on Monday August 20, 2001,
unless and until the Purchaser, in its sole discretion, shall have extended
the period of time for which the Offer is open, in which case the term
"Expiration Date" shall mean the time and date at which the Offer, as so
extended by the Purchaser, shall expire (provided, however, that without the
prior written consent of the Special Committee, the Expiration Date shall not
be extended beyond October 18, 2001).
Subject to the provisions of the Merger Agreement, the Purchaser may waive
certain of the conditions to its obligation to purchase Shares pursuant to the
Offer. If by the initial Expiration Date or any subsequent Expiration Date any
or all of the conditions to the Offer have not been satisfied or waived,
subject to the provisions of the Merger Agreement, the Purchaser may elect to
(i) terminate the Offer and return all tendered Shares to tendering
stockholders, (ii) except as provided below, waive the unsatisfied conditions
and, subject to any required extension, purchase all Shares validly tendered
by the Expiration Date and not properly withdrawn or (iii) extend the Offer
and, subject to the right of stockholders to withdraw Shares until the new
Expiration Date, retain the Shares that have been tendered until the
expiration of the Offer as extended.
The Merger Agreement provides that, without the prior written consent of
the Special Committee, the Purchaser will not (i) decrease the Offer Price or
decrease the number of Shares sought or change the form of consideration to be
paid pursuant to the Offer, (ii) accept any Shares unless a majority of the
outstanding Shares not owned by the Purchaser or members of the Investor Group
are validly tendered and not withdrawn in the Offer, (iii) impose additional
conditions to the Offer set forth in "The Tender Offer--Section 11. Conditions
of the Offer" or modify such conditions in any manner adverse to the holders
of Shares, or (iv) otherwise amend the Offer in any manner materially adverse
to the holders of Shares.
Notwithstanding the foregoing, the Purchaser may, without the consent of
the Special Committee, (i) extend the Offer if, at the scheduled Expiration
Date, any of the conditions to the Offer specified in the Section "The Tender
Offer--Section 11. Conditions of the Offer" are not satisfied, until such time
as such conditions have been satisfied or waived; and (ii) extend the Offer
for any period required by any rule, regulation, interpretation or position of
the Commission or the staff thereof applicable to the Offer.
Pursuant to Rule 14d-11 under the Exchange Act, the Purchaser may, subject
to certain conditions, provide a subsequent offering period following the
expiration of the Offer on the Expiration Date (a "Subsequent Offering
Period"). A Subsequent Offering Period is an additional period of time up to
twenty business days in length, beginning after the Purchaser purchases Shares
tendered in the Offer, during which stockholders may tender, but not withdraw,
their Shares and receive the Offer Price.
Subject to the applicable regulations of the Commission, the Purchaser also
expressly reserves the right, in its sole discretion, at any time or from time
to time, to (i) delay acceptance for payment of or, regardless of whether such
Shares were theretofore accepted for payment, payment for any Shares pending
receipt of any regulatory governmental approvals specified in Section 12, (ii)
terminate the Offer (whether or not any Shares have theretofore been accepted
for payment) if any of the conditions referred to in "The Tender Offer--
Section 11. Conditions of the Offer" has not been satisfied or upon the
occurrence of any of the events specified in Section 11, and (iii) waive any
condition or otherwise amend the Offer in any respect, subject to the limits
described above, in each case, by giving oral or written notice of such delay,
termination, waiver or amendment to the Depositary and by making a public
announcement thereof. The Purchaser acknowledges (i) that Rule 14e-1(c) under
the Exchange Act requires the Purchaser to pay the consideration offered or
return
38
the Shares tendered promptly after the termination or withdrawal of the Offer
and (ii) that the Purchaser may not delay acceptance for payment of, or
payment for (except as provided in clause (i) of the preceding sentence), any
Shares upon the occurrence of any of the conditions specified in "The Tender
Offer--Section 11. Conditions of the Offer" without extending the period of
time during which the Offer is open.
Any such extension, delay, termination, waiver or amendment will be
followed as promptly as practicable by public announcement thereof, and such
announcement in the case of an extension will be made no later than 9:00 a.m.,
Eastern Daylight time, on the next business day after the previously scheduled
Expiration Date. Without limiting the manner in which the Purchaser may choose
to make any public announcement, subject to applicable law (including Rules
13e-3(e), 14d-4(d), 14d-6(c) and 14e-1 under the Exchange Act, which require
that material changes be promptly disseminated to holders of Shares), the
Purchaser shall have no obligation to publish, advertise or otherwise
communicate any such public announcement other than by issuing a release to
the Dow Xxxxx News Service.
If the Purchaser makes a material change in the terms of the Offer, or if
it waives a material condition to the Offer, the Purchaser will extend the
Offer and disseminate additional tender offer materials to the extent required
by Rules 13e-3(e), 14d-4(d), 14d-6(c) and 14e-1 under the Exchange Act. The
minimum period during which an Offer must remain open following material
changes in the terms of the Offer, other than a change in price or a change in
percentage of securities sought or a change in any dealer's soliciting fee,
will depend upon the facts and circumstances, including the materiality, of
the changes. With respect to a change in price or, subject to certain
limitations, a change in the percentage of securities sought or a change in
any dealer's soliciting fee, a minimum ten business day period from the date
of such change is generally required to allow for adequate dissemination to
stockholders. Accordingly, if prior to the Expiration Date, the Purchaser
decreases the number of Shares being sought, or increases or decreases the
consideration offered pursuant to the Offer, and if the Offer is scheduled to
expire at any time earlier than the period ending on the tenth business day
from the date that notice of such increase or decrease is first published,
sent or given to holders of Shares, the Offer will be extended at least until
the expiration of such ten business day period. For purposes of the Offer, a
"business day" means any day other than a Saturday, Sunday or a Federal
holiday and consists of the time period from 12:01 a.m. through 12:00
midnight, Eastern Daylight time.
PJAM has provided the Purchaser with PJAM's stockholder lists and security
position listings for the purpose of disseminating the Offer to holders of
Shares. This Offer to Purchase and the related Letter of Transmittal will be
mailed to record holders of Shares and will be furnished to brokers, dealers,
banks and similar persons whose names, or the names of whose nominees, appear
on the stockholder lists or, if applicable, who are listed as participants in
a clearing agency's security position listing, for subsequent transmittal to
beneficial owners of Shares, or who are listed as participants in a clearing
agency's security position listing for subsequent transmittal to beneficial
owners of Shares.
2. Acceptance for Payment and Payment
Upon the terms and subject to the conditions of the Offer (including, if
the Offer is extended or amended, the terms and conditions of the Offer as so
extended or amended), the Purchaser will purchase, by accepting for payment,
and will pay for, all Shares validly tendered and not withdrawn (as permitted
by Section 4) prior to the Expiration Date promptly after the later to occur
of (i) the Expiration Date and (ii) the satisfaction or waiver of the
conditions to the Offer set forth in Section 11. In addition, subject to
applicable rules of the Commission, the Purchaser expressly reserves the right
to delay acceptance for payment of, or payment for, Shares pending receipt of
any regulatory or governmental approvals specified in Section 12.
In all cases, payment for Shares purchased pursuant to the Offer will be
made only after timely receipt by the Depositary of (i) certificates
representing such Shares or timely confirmation (a "Book-Entry Confirmation")
of the book-entry transfer of such Shares into the Depositary's account at The
Depository Trust Company (the "Book-Entry Transfer Facility"), pursuant to the
procedures set forth in Section 3, (ii) the Letter of Transmittal
39
(or a facsimile thereof), properly completed and duly executed, with any
required signature guarantees, or an Agent's Message (as defined below) in
connection with a book-entry transfer, and (iii) any other documents required
by the Letter of Transmittal.
The term "Agent's Message" means a message, transmitted by a Book-Entry
Transfer Facility to, and received by, the Depositary and forming a part of a
Book-Entry Confirmation, which states that such Book-Entry Transfer Facility
has received an express acknowledgment from the participant in such Book-Entry
Transfer Facility tendering the Shares which are the subject of such Book-
Entry Confirmation, that such participant has received and agrees to be bound
by the terms of the Letter of Transmittal and that the Purchaser may enforce
such agreement against such participant.
For purposes of the Offer, the Purchaser will be deemed to have accepted
for payment, and thereby purchased, Shares validly tendered and not withdrawn,
if and when the Purchaser gives oral or written notice to the Depositary of
the Purchaser's acceptance of such Shares for payment pursuant to the Offer.
In all cases, upon the terms and subject to the conditions of the Offer,
payment for Shares purchased pursuant to the Offer will be made by deposit of
the purchase price therefor with the Depositary, which will act as agent for
tendering stockholders for the purpose of receiving payment from the Purchaser
and transmitting payment to validly tendering stockholders. UNDER NO
CIRCUMSTANCES WILL INTEREST ON THE PURCHASE PRICE FOR SHARES BE PAID BY THE
PURCHASER BY REASON OF ANY DELAY IN MAKING SUCH PAYMENT.
If any tendered Shares are not purchased pursuant to the Offer for any
reason, or if certificates representing Shares are submitted representing more
Shares than are tendered, certificates representing unpurchased or untendered
Shares will be returned, without expense to the tendering stockholder (or, in
the case of Shares delivered by book-entry transfer into the Depositary's
account at the Book-Entry Transfer Facility pursuant to the procedures set
forth in Section 3, such Shares will be credited to an account maintained
within such Book-Entry Transfer Facility), as promptly as practicable
following the expiration, termination or withdrawal of the Offer.
IF, PRIOR TO THE EXPIRATION DATE, THE PURCHASER SHALL INCREASE THE
CONSIDERATION OFFERED TO HOLDERS OF SHARES PURSUANT TO THE OFFER, SUCH
INCREASED CONSIDERATION SHALL BE PAID TO ALL HOLDERS OF SHARES THAT ARE
PURCHASED PURSUANT TO THE OFFER, WHETHER OR NOT SUCH SHARES WERE TENDERED
PRIOR TO SUCH INCREASE IN CONSIDERATION.
The Purchaser reserves the right to transfer or assign, in whole or from
time to time in part, to one or more of the Purchaser's subsidiaries or
affiliates the right to purchase all or any portion of the Shares tendered
pursuant to the Offer, but any such transfer or assignment will not relieve
the Purchaser of its obligations under the Offer or prejudice the rights of
tendering stockholders to receive payment for Shares validly tendered and
accepted for payment pursuant to the Offer.
3. Procedures for Accepting the Offer and Tendering Shares.
Valid Tender of Shares
Except as set forth below, in order for Shares to be validly tendered
pursuant to the Offer, the Letter of Transmittal (or a facsimile thereof),
properly completed and duly executed, together with any required signature
guarantees, or an Agent's Message in connection with a book-entry delivery of
Shares, and any other documents required by the Letter of Transmittal, must be
received by the Depositary at one of its addresses set forth on the back cover
of this Offer to Purchase on or prior to the Expiration Date and either (i)
certificates representing tendered Shares must be received by the Depositary,
or such Shares must be tendered pursuant to the procedure for book-entry
transfer set forth below and a Book-Entry Confirmation must be received by the
Depositary, in each case on or prior to the Expiration Date, or (ii) the
guaranteed delivery procedures set forth below must be complied with.
40
THE METHOD OF DELIVERY OF CERTIFICATES REPRESENTING TENDERED SHARES, THE
LETTER OF TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS IS AT THE OPTION AND
SOLE RISK OF THE TENDERING STOCKHOLDER, AND THE DELIVERY WILL BE DEEMED MADE
ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY. IF DELIVERY IS BY MAIL,
REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS
RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY
DELIVERY.
Book-Entry Transfer
The Depositary will make a request to establish accounts with respect to
the Shares at the Book-Entry Transfer Facility for purposes of the Offer
within two business days after the date of this Offer to Purchase. Any
financial institution that is a participant in the system of the Book-Entry
Transfer Facility may make book-entry delivery of Shares by causing such Book-
Entry Transfer Facility to transfer such Shares into the Depositary's account
at such Book-Entry Transfer Facility in accordance with such Book-Entry
Transfer Facility's procedures for such transfer. However, although delivery
of Shares may be effected through book-entry transfer into the Depositary's
account at a Book-Entry Transfer Facility, the Letter of Transmittal (or
facsimile thereof), properly completed and duly executed, with any required
signature guarantees, or an Agent's Message in connection with a book-entry
transfer, and any other required documents must, in any case, be transmitted
to and received by the Depositary at one of its addresses set forth on the
back cover of this Offer to Purchase on or prior to the Expiration Date, or
the guaranteed delivery procedure set forth below must be complied with.
DELIVERY OF DOCUMENTS TO A BOOK-ENTRY TRANSFER FACILITY IN ACCORDANCE WITH
SUCH BOOK-ENTRY TRANSFER FACILITY'S PROCEDURES DOES NOT CONSTITUTE DELIVERY TO
THE DEPOSITARY.
Signature Guarantees
No signature guarantee is required on the Letter of Transmittal (i) if the
Letter of Transmittal is signed by the registered holder(s) (which term, for
purposes of this Section, includes any participant in the Book-Entry Transfer
Facility's systems whose names appears on a security position listing as the
owner of the Shares) of Shares tendered therewith and such registered holder
has not completed either the box entitled "Special Delivery Instructions" or
the box entitled "Special Payment Instructions" on the Letter of Transmittal
or (ii) if such Shares are tendered for the account of a financial institution
(including most commercial banks, savings and loan associations and brokerage
houses) that is a participant in the Security Transfer Agents Medallion
Program, the New York Stock Exchange Medallion Signature Guarantee Program or
the Stock Exchange Medallion Program (each, an "Eligible Institution" and,
collectively, "Eligible Institutions"). In all other cases, all signatures on
Letters of Transmittal must be guaranteed by an Eligible Institution. See
Instructions 1 and 5 to the Letter of Transmittal. If the certificates for
Shares are registered in the name of a person other than the signer of the
Letter of Transmittal, or if payment is to be made, or certificates for Shares
not tendered or not accepted for payment are to be returned, to a person other
than the registered holder of the certificates surrendered, then the tendered
certificates for such Share must be endorsed or accompanied by appropriate
stock powers, with the signatures on the certificates or stock powers
guaranteed as aforesaid. See Instruction 5 to the Letter of Transmittal.
Guaranteed Delivery
If a stockholder desires to tender Shares pursuant to the Offer and such
stockholder's certificates for Shares are not immediately available or the
procedures for book-entry transfer cannot be completed on a timely basis or
time will not permit all required documents to reach the Depositary prior to
the Expiration Date, such stockholder's tender may be effected if all the
following conditions are met:
(i) such tender is made by or through an Eligible Institution;
(ii) a properly completed and duly executed Notice of Guaranteed Delivery,
substantially in the form provided by the Purchaser, is received by
the Depositary, as provided below, prior to the Expiration Date; and
41
(iii) the certificates for (or a Book-Entry Confirmation with respect to)
such Shares, together with a properly completed and duly executed
Letter of Transmittal (or facsimile thereof), with any required
signature guarantees, or, in the case of a book-entry transfer, an
Agent's Message, and any other required documents, are received by
the Depositary within three (3) trading days after the date of
execution of such Notice of Guaranteed Delivery. A "trading day" is
any day on which Nasdaq is open for business.
The Notice of Guaranteed Delivery may be delivered by hand to the
Depositary or transmitted by telegram, facsimile transmission or mailed to the
Depositary and must include a guarantee by an Eligible Institution in the form
set forth in such Notice of Guaranteed Delivery.
Notwithstanding any other provision hereof, payment for Shares accepted for
payment pursuant to the Offer will in all cases be made only after timely
receipt by the Depositary of certificates for, or of Book-Entry Confirmation
with respect to, such Shares, a properly completed and duly executed Letter of
Transmittal (or facsimile thereof), together with any required signature
guarantees (or, in the case of a book-entry transfer, an Agent's Message), and
any other documents required by the Letter of Transmittal. Accordingly,
payment might not be made to all tendering stockholders at the same time, and
will depend upon when certificates representing, or Book-Entry Confirmations
of, such Shares are received into the Depositary's account at a Book-Entry
Transfer Facility.
Backup Federal Tax Withholding
UNDER THE FEDERAL INCOME TAX LAWS, THE DEPOSITARY WILL BE REQUIRED TO
WITHHOLD 31%, OR THE THEN CURRENT RATE, OF THE AMOUNT OF ANY PAYMENTS MADE TO
CERTAIN STOCKHOLDERS PURSUANT TO THE OFFER. TO PREVENT BACKUP FEDERAL INCOME
TAX WITHHOLDING ON PAYMENTS WITH RESPECT TO THE PURCHASE PRICE OF SHARES
PURCHASED PURSUANT TO THE OFFER, EACH STOCKHOLDER SHOULD PROVIDE THE
DEPOSITARY WITH HIS OR HER CORRECT TAXPAYER IDENTIFICATION NUMBER ("TIN") AND
CERTIFY THAT HE OR SHE IS NOT SUBJECT TO BACKUP FEDERAL INCOME TAX WITHHOLDING
BY COMPLETING THE SUBSTITUTE FORM W-9 INCLUDED IN THE LETTER OF TRANSMITTAL.
SEE INSTRUCTION 8 OF THE LETTER OF TRANSMITTAL. IF A STOCKHOLDER DOES NOT
PROVIDE ITS CORRECT TIN OR FAILS TO PROVIDE THE CERTIFICATION DESCRIBED ABOVE,
THE INTERNAL REVENUE SERVICE MAY IMPOSE A PENALTY ON THE STOCKHOLDER AND
PAYMENT OF CASH TO THE STOCKHOLDER PURSUANT TO THE OFFER MAY BE SUBJECT TO
BACKUP WITHHOLDING. IF BACKUP WITHHOLDING RESULTS IN AN OVERPAYMENT OF TAX, A
REFUND MAY BE OBTAINED FROM THE INTERNAL REVENUE SERVICE. CERTAIN STOCKHOLDERS
(INCLUDING, AMONG OTHERS, ALL CORPORATIONS AND CERTAIN FOREIGN INDIVIDUALS AND
ENTITIES) ARE NOT SUBJECT TO BACKUP WITHHOLDING. FOREIGN STOCKHOLDERS SHOULD
GENERALLY COMPLETE AND SIGN A FORM W-8BEN (CERTIFICATE OF FOREIGN STATUS OF
BENEFICIAL OWNER FOR U.S. WITHHOLDING) AND/OR OTHER APPLICABLE FORM(S) W-8BEN,
COPIES OF WHICH MAY BE OBTAINED FROM THE DEPOSITARY, IN ORDER TO AVOID BACKUP
WITHHOLDING. SEE INSTRUCTION 11 TO THE LETTER OF TRANSMITTAL.
Appointment as Proxy
By executing the Letter of Transmittal, a tendering stockholder irrevocably
appoints Xxxxxxx X. Xxxxxxx, Xxxxxxx X. Xxxxxxxx and Xxxxxxx X. Xxxxxxxxx, or
any other designees of the Purchaser, and each of them, as such stockholder's
attorneys-in-fact and proxies, each with full power of substitution to vote at
any annual or special meeting of PJAM's stockholders or any adjournment or
postponement thereof or otherwise in such manner as each such attorney-in-fact
and proxy or his or her substitute will in his or her sole discretion deem
proper with respect to, to execute any written consent concerning any matter
as each such attorney-in-fact and proxy or his or her substitute will in his
or her sole discretion deem proper with respect to, and to otherwise act as
each such attorney-in-fact and proxy or his or her substitute will in his or
her sole discretion deem proper with respect to, all of the Shares tendered
hereby and accepted for payment by the Purchaser. Such appointment
42
will be effective if and when, and only to the extent that, the Purchaser
accepts such Shares for payment pursuant to the Offer. All such powers of
attorney and proxies are irrevocable and are granted in consideration of the
acceptance for payment of such Shares in accordance with the terms of the
Offer. Such acceptance for payment will, without further action, revoke any
prior powers of attorney and proxies granted by the stockholder at any time
with respect to such Shares, and no subsequent powers of attorney, proxies,
consents or revocations may be given by such stockholder with respect thereto
(and, if given, will not be deemed effective). The Purchaser reserves the
right to require that, in order for Shares or other securities to be deemed
validly tendered, immediately upon the Purchaser's acceptance for payment of
such Shares, the Purchaser must be able to exercise full voting, consent and
other rights with respect to such Shares, including voting at any meeting of
PJAM's stockholders.
Determination of Validity
All questions as to the form of documents and validity, eligibility
(including time of receipt) and acceptance for payment of any tender of Shares
will be determined by the Purchaser, in its sole discretion, whose
determination shall be final and binding on all parties. The Purchaser
reserves the absolute right to reject any or all tenders determined by it not
to be in proper form or the acceptance of or payment for which may, in the
opinion of the Purchaser's counsel, be unlawful. The Purchaser also reserves
the right to waive any of the conditions of the Offer (other than the
requirement that at least a majority of the Shares not held by the Purchaser
or the Investor Group be tendered in the Offer which can only be waived with
the approval of the Special Committee) or any defect or irregularity in any
tender of Shares of any particular stockholder whether or not similar defects
or irregularities are waived in the case of other stockholders.
The Purchaser's interpretation of the terms and conditions of the Offer
(including the Letter of Transmittal and the instructions thereto) will be
final and binding. No tender of Shares will be deemed to have been validly
made until all defects and irregularities with respect to such tender have
been cured or waived. None of the Purchaser or any of its affiliates or
assigns, if any, the Depositary, the Information Agent or any other person
will be under any duty to give any notification of any defects or
irregularities in tenders or incur any liability for failure to give any such
notification.
The Purchaser's acceptance for payment of Shares tendered pursuant to any
of the procedures described above will constitute a binding agreement between
the tendering stockholder and the Purchaser upon the terms and subject to the
conditions of the Offer.
4. Withdrawal Rights.
Except as otherwise provided in this Section 4, tenders of Shares made
pursuant to the Offer are irrevocable. Shares tendered pursuant to the Offer
may be withdrawn at any time on or prior to the Expiration Date and, unless
theretofore accepted for payment as provided herein, may also be withdrawn at
any time after September 20, 2001 (or such later date as may apply in case the
Offer is extended).
If, for any reason whatsoever, acceptance for payment of any Shares
tendered pursuant to the Offer is delayed, or the Purchaser is unable to
accept for payment or pay for Shares tendered pursuant to the Offer, then,
without prejudice to the Purchaser's rights set forth herein, the Depositary
may, nevertheless, on behalf of the Purchaser, retain tendered Shares and such
Shares may not be withdrawn except to the extent that the tendering
stockholder is entitled to and duly exercises withdrawal rights as described
in this Section 4. Any such delay will be by an extension of the Offer to the
extent required by law.
To be effective, a written, telegraphic or facsimile transmission notice of
withdrawal must be timely received by the Depositary at one of its addresses
set forth on the back cover of this Offer to Purchase. Any such notice of
withdrawal must specify the name of the person who tendered the Shares to be
withdrawn, the number of Shares to be withdrawn and the name of the registered
holder of the Shares to be withdrawn, if different from the name of the person
who tendered the Shares. If certificates evidencing Shares to be withdrawn
have been
43
delivered or otherwise identified to the Depositary, then, prior to the
physical release of such certificates, the serial numbers shown on such
certificates must be submitted to the Depositary and, unless such Shares have
been tendered by an Eligible Institution, the signatures on the notice of
withdrawal must be guaranteed by an Eligible Institution. If Shares have been
delivered pursuant to the procedures for book-entry transfer as set forth in
Section 3, any notice of withdrawal must also specify the name and number of
the account at the Book-Entry Transfer Facility to be credited with the
withdrawn Shares and otherwise comply with such Book-Entry Transfer Facility's
procedures.
Withdrawals of Shares may not be rescinded. Any Shares properly withdrawn
will be deemed not validly tendered for purposes of the Offer, but may be
tendered again at any subsequent time prior to the Expiration Date by
following any of the procedures described in Section 3.
No withdrawal rights will apply to Shares tendered into a Subsequent
Offering Period under Rule 14d-11 under the Exchange Act and no withdrawal
rights apply during a Subsequent Offering Period under Rule 14d-11 under the
Exchange Act with respect to Shares tendered in the Offer and accepted for
payment.
All questions as to the form and validity (including time of receipt) of
notices of withdrawal will be determined by the Purchaser, in its sole
discretion, whose determination shall be final and binding. None of the
Purchaser or any of its affiliates or assigns, if any, the Depositary, the
Information Agent or any other person will be under any duty to give any
notification of any defects or irregularities in any notice of withdrawal or
incur any liability for failure to give any such notification.
5. Certain Federal Tax Consequences
The following is a summary of certain United States federal income tax
consequences of the Offer. This discussion is for general information only and
does not address all aspects of United States federal income taxation that may
be relevant to stockholders who tender Shares pursuant to the Offer in light
of their specific investment or tax circumstances. The discussion is based on
current provisions of the Internal Revenue Code of 1986, as amended (the
"Code"), Treasury regulations issued thereunder, and administrative and
judicial interpretations thereof, all of which are subject to change, possibly
with retroactive effect. The discussion applies only to stockholders in whose
hands the Shares are capital assets--generally, property held for investment--
and may not apply to stockholders who received their Shares pursuant to the
exercise of employee stock options or otherwise as compensation, or to certain
types of stockholders (including, but not limited to, insurance companies,
tax-exempt organizations, financial institutions or broker-dealers) who may be
subject to special rules under the United States federal income tax laws. This
discussion does not discuss the United States federal income tax consequences
to a stockholder who, for United States federal income tax purposes, is a non-
resident alien individual, a foreign corporation, a foreign partnership or a
foreign estate or trust, nor does it consider the effect of any state, local
or foreign income or other tax laws. STOCKHOLDERS SHOULD CONSULT THEIR TAX
ADVISORS REGARDING THE FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES OF
THE OFFER IN LIGHT OF THEIR SPECIFIC TAX SITUATION.
The receipt of cash for Shares pursuant to the Offer will be a taxable
transaction for United States federal income tax purposes. In general, a
stockholder will recognize gain or loss equal to the difference between (i)
the amount of cash received and (ii) the stockholder's adjusted tax basis in
the Shares sold pursuant to the Offer. Such gain or loss will be long-term
capital gain or loss if the holding period for the Shares exceeds one year at
the time of the sale. Long-term capital gains derived by individuals are
eligible for reduced rates of taxation (generally, 20% under current law). The
deductibility of capital losses is restricted and, in general, may only be
used to reduce capital gains to the extent thereof. However, taxpayers who are
individuals may generally deduct annually $3,000 of capital losses in excess
of their capital gains.
44
6. Price Range of the Shares; Dividends
The Shares are listed and traded principally on the Nasdaq National Market
System under the symbol "PJAM." As of June 30, 2001, there were 4,323,648
Shares outstanding. The following table sets forth, for the periods indicated,
the reported high and low sale prices for the Shares on Nasdaq, all as
reported in published financial sources.
Fiscal Year Ending December 31, 1999 High Low
------------------------------------ ------ ------
First Quarter................................................. $23.50 $16.00
Second Quarter................................................ $25.00 $19.38
Third Quarter................................................. $25.63 $18.13
Fourth Quarter................................................ $21.63 $12.00
Fiscal Year Ending December 31, 2000 High Low
------------------------------------ ------ ------
First Quarter................................................. $16.50 $10.00
Second Quarter................................................ $11.88 $ 8.75
Third Quarter................................................. $13.63 $ 6.63
Fourth Quarter................................................ $ 8.31 $ 5.31
Fiscal Year Ending December 31, 2001 High Low
------------------------------------ ------ ------
First Quarter................................................. $ 8.00 $5.125
Second Quarter................................................ $ 8.50 $7.375
Third Quarter*................................................ $ 8.56 $ 8.50
--------
*Through July 19, 2001.
On March 22, 2001, the last full day of trading prior to the public
announcement of the initial proposal of the Purchaser and the public
announcement of the execution of the Merger Agreement, the reported closing
price on Nasdaq for the Shares was $6.625 per Share. As of July 19, 2001, the
last full day of trading prior to the commencement of the Offer, the last sale
price of the Shares reported on Nasdaq had been $8.50 per Share on July 11,
2001. No trading activity in the Shares had been reported by Nasdaq since July
11, 2001. STOCKHOLDERS ARE URGED TO OBTAIN A CURRENT MARKET QUOTATION FOR THE
SHARES.
PJAM has not paid dividends on the Shares since its initial public offering
in October 1996. Under the terms of the Merger Agreement, between the date of
such agreement and the consummation of the Offer and the Merger, PJAM cannot
(i) declare, set aside or pay any dividends on, or make any other
distributions in respect of, any of its capital stock, (ii) make any other
actual, constructive or deemed distributions in respect of any shares of its
capital stock or otherwise make any payments to stockholders in their capacity
as such, or (iii) redeem, repurchase or otherwise acquire any Shares of
capital stock of PJAM or any of its subsidiaries.
7. Effect of the Offer on the Market for the Shares; Stock Exchange Listing;
Exchange Act Registration; Margin Regulations
Effect of the Merger on the Market for the Shares
The purchase of Shares pursuant to the Offer will reduce the number of
Shares that might otherwise trade publicly and could adversely affect the
liquidity and market value of the remaining Shares held by the public. The
purchase of Shares pursuant to the Offer can also be expected to reduce the
number of holders of Shares.
Stock Exchange Listing
According to the Nasdaq's published guidelines, the Nasdaq would consider
delisting the Shares if, among other things, the number of record holders of
at least 100 Shares should fall below 400 and the number of publicly held
Shares (exclusive of holdings of officers, directors, their immediate families
and other concentrated holdings of 10% or more (" Excluded Holdings")) should
fall below 1,100,000 or the aggregate market value of publicly held Shares
(exclusive of Excluded Holdings) should fall below $18,000,000.
45
Depending upon the number of Shares acquired pursuant to the Offer, the
Shares may no longer meet the requirements for continued listing on the
Nasdaq. Under the published guidelines described above, the purchase of
approximately 535,000 Shares pursuant to the Offer is likely to result in a
delisting of the Shares by the Nasdaq.
In the event that the Shares were no longer listed or traded on the Nasdaq,
it is possible that the Shares would trade on another securities exchange or
in the over-the-counter market and that price quotations would be reported by
such exchange, through the Nasdaq or other sources. Such trading and the
availability of such quotations would, however, depend upon the number of
stockholders and/or the aggregate market value of the publicly held Shares
remaining outstanding at such time, the interest in maintaining a market in
the Shares on the part of securities firms, the possible termination of
registration of the Shares under the Exchange Act as described below and other
factors.
Exchange Act Registration
The Shares are currently registered under the Exchange Act. The purchase of
the Shares pursuant to the Offer may result in the Shares becoming eligible
for deregistration under the Exchange Act. Registration of the Shares may be
terminated upon application by PJAM to the Commission if the Shares are not
listed on a "national securities exchange" and there are fewer than 300 record
holders of Shares. Termination of registration of the Shares under the
Exchange Act would substantially reduce the information required to be
furnished by PJAM to its stockholders and the Commission and would make
certain provisions of the Exchange Act, such as the short-swing profit
recovery provisions of Section 16(b) and the requirements of furnishing a
proxy statement in connection with stockholders' meetings pursuant to Section
14(a), no longer applicable to PJAM. If the Shares are no longer registered
under the Exchange Act, the requirements of Rule 13e-3 under the Exchange Act
with respect to "going private" transactions would no longer be applicable to
PJAM. Furthermore, the ability of "affiliates" of PJAM and persons holding
"restricted securities" of PJAM to dispose of such securities pursuant to Rule
144 promulgated under the Securities Act of 1933, as amended, may be impaired
or eliminated. If, as a result of the purchase of Shares pursuant to the
Offer, PJAM is no longer required to maintain registration of the Shares under
the Exchange Act, the Purchaser intends to cause PJAM to apply for termination
of such registration. See "Special Factors--Plans for PJAM after the Offer and
the Merger; Certain Effects of the Merger."
Margin Regulations
The Shares are currently "margin securities" under the regulations of the
Board of Governors of the Federal Reserve System (the "Federal Reserve
Board"), which have the effect, among other things, of allowing brokers to
extend credit on the collateral of such Shares for the purpose of buying,
carrying or trading in securities ("Purpose Loans"). Depending upon factors
such as the number of record holders of the Shares and the number and market
value of publicly held Shares, following the purchase of Shares pursuant to
the Offer the Shares might no longer constitute "margin securities" for
purposes of the Federal Reserve Board's margin regulations and, therefore,
could no longer be used as collateral for Purpose Loans made by brokers. In
addition, if registration of the Shares under the Exchange Act were
terminated, the Shares would no longer constitute "margin securities."
8. Certain Information Concerning PJAM
PJAM is the largest franchisee of "Papa Xxxx's" pizza delivery and carry-
out restaurants. PJAM currently operates 168 Papa John's restaurants in nine
states and Puerto Rico. Its principal executive offices are located at
0000 Xxxxxxxx Xxxxx, Xxxxxxxxxx, Xxxxxxx 00000 and its telephone number is
(000) 000-0000.
The name, business address, citizenship, present principal occupation and
employment history of the directors and executive officers of PJAM are set
forth in Schedule I of this Offer to Purchase.
46
The selected financial information of PJAM and its consolidated
subsidiaries set forth below has been excerpted and derived from PJAM's Annual
Report on Form 10-K for the year ended December 31, 2000 and December 26, 1999
and PJAM's Quarterly Report on Form 10-Q for the quarters ended April 1, 2001
and March 26, 2000. More comprehensive financial information is included in
such reports (including management's discussion and analysis of results of
operations and financial position) and other documents filed with the
Commission. The following financial information is qualified in its entirety
by reference to such Annual Report and all other such reports and documents
filed with the Commission and all of the financial statements and related
notes contained therein and such information is hereby incorporated by
reference herein. Such Annual Report and certain other reports may be examined
and copies may be obtained at the offices of the Commission in the manner set
forth below.
SELECTED CONSOLIDATED FINANCIAL DATA OF PJAM
(in thousands, except per share amounts and ratios)
Three Months Ended
For the Years Ended(1) (unaudited)
------------------------- -------------------
December 31, December 26, April 1, March 26,
2000 1999 2001 2000
------------ ------------ -------- ---------
Balance Sheet Data:
Total current assets.............. $ 3,249 $ 7,151 $ 4,390 $ 3,660
Total assets...................... 37,571 47,937 37,301 46,221
Total current liabilities......... 5,267 4,908 5,449 4,402
Total long term debt.............. 4,000 -- 2,700 --
Stockholders' equity.............. 23,304 41,538 29,152 40,129
Book value per share.............. $ 6.55 $ 7.67 $ 6.74 $ 7.77
Three Months Ended
For the Years Ended (unaudited)
------------------------- -------------------
December 31, December 26, April 1, March 26,
2000 1999 2001 2000
------------ ------------ -------- ---------
Income Statement Data:
Restaurant sales.................. $111,080 $95,489 $29,953 $25,825
Restaurant operating expenses:
Cost of sales................... 33,104 29,285 8,709 7,649
Salaries and benefits........... 32,284 26,649 8,733 7,526
Other operating expenses........ 29,193 22,871 8,061 6,525
Depreciation and amortization... 4,160 3,243 1,005 946
-------- ------- ------- -------
98,741 82,048 26,508 22,646
-------- ------- ------- -------
Restaurant operating income....... 12,339 13,441 3,445 3,179
General and administrative
expenses......................... 6,803 4,811 2,063 1,430
Other charges(2).................. 9,465 690 -- --
-------- ------- ------- -------
Operating income (loss)........... (3,929) 7,940 1,382 1,749
Other income (expense)............ (62) 617 (55) 106
-------- ------- ------- -------
Income (loss) before income taxes
and cumulative effect of change
in accounting principle.......... (3,991) 8,557 1,327 1,855
Income tax expense (benefit)...... (1,371) 2,909 478 649
-------- ------- ------- -------
Income (loss) before cumulative
effect of change in accounting
principle........................ (2,620) 5,648 849 1,206
Cumulative effect of change in
accounting principle, net of
taxes............................ -- (181) -- --
-------- ------- ------- -------
Net income (loss)................. $ (2,620) $ 5,467 $ 849 $ 1,206
======== ======= ======= =======
Basic earnings (loss) per
share:(3)
Income (loss) before cumulative
effect of change in accounting
principle...................... $ (0.55) $ 0.98 $ 0.20 $ 0.23
Cumulative effect of accounting
change, net of taxes........... -- (0.03) -- --
-------- ------- ------- -------
Net income (loss) per share--
Basic.......................... $ (0.55) $ 0.95 $ 0.20 $ 0.23
======== ======= ======= =======
Diluted earnings (loss) per
share:(3)
Income (loss) before cumulative
effect of change in accounting
principle...................... $ (0.55) $ 0.95 $ 0.20 $ 0.23
Cumulative effect of accounting
change net of taxes............ -- (0.03) -- --
-------- ------- ------- -------
Net income (loss) per share--
Diluted........................ $ (0.55) $ 0.92 $ 0.20 $ 0.23
======== ======= ======= =======
Weighted average share
outstanding--Basic............... 4,739 5,744 4,324 5,290
======== ======= ======= =======
Weighted average shares
outstanding--Diluted............. 4,739 5,942 4,327 5,312
======== ======= ======= =======
Ratio of earnings to fixed
changes(4)....................... (63.4) n/a 25.1 n/a
======== ======= ======= =======
47
--------
(1) PJAM operates on a 52-53 week year ending on the last Sunday in December
each year. Fiscal 2000 was a 53 week year.
(2) Other charges include asset impairment charges on PJAM's long-lived
assets. The pre-tax charges were $9,465,000 and $690,000 in 2000 and 1999,
respectively. The tax benefit of these charges was $3,288,000 and
$235,000, thus the charges net of taxes were $6,177,000 ($1.30 per share)
and $455,000 ($0.08 per share) in 2000 and 1999, respectively.
(3) Excluding the charges described in footnote 2, basic earnings per share
were $0.75 and $1.06 in 2000 and 1999, respectively. Diluted earnings per
share were $0.75 and $1.03 in 2000 and 1999, respectively.
(4) For 2000, the coverage deficiency to achieve a one-to-one coverage was
$3.99 million. For fiscal 1999 and three months ended March 26, 2000 the
ratio is not applicable as PJAM had net interest income.
As a matter of policy, PJAM does not make public forecasts or projections
of future performance or earnings. It does, however, prepare projections for
internal use in planning its operations, financial performance and needs for
external capital resources based upon the assumption that PJAM would continue
to be publicly held. Management provided two sets of internal projections, one
prepared in early April 2001 and one prepared on May 23, 2001 ("Revised
Projections"), to Banc of America Securities for purposes of assisting it in
its analysis. The revised projections were prepared to account for the
significantly decreased sales and performance of PJAM since the April
projections were prepared and the rise in cheese prices and related costs
since such time. The Investor Group provided projections to Bank One of
Kentucky, NA in connection with obtaining financing for the Offer and the
Merger.
These projections are included in this Offer to Purchase solely because
they were available to the Purchaser and the Investor Group and were provided
to and taken into account by Banc of America Securities, as financial advisor
to the Special Committee, in its preliminary analysis. These projections were
not prepared with a view to public disclosure or in compliance with published
guidelines of the Securities and Exchange Commission or the guidelines
established by the American Institute of Certified Public Accountants. These
forecasts were prepared with a limited degree of precision and were not
prepared in accordance with generally accepted accounting principles. These
projections were prepared by PJAM's management without assistance, review,
compilation or examination by independent accountants.
These projections are speculative in nature and are not meant to portray
all of the possible outcomes. While presented with numerical specificity,
these projections are based on informal estimates and assumptions, not all of
which are stated below, relating to the business and operations of PJAM. These
assumptions may not be realized and are subject to significant financial,
market, economic, and competitive uncertainties, contingencies, risks and
other factors which are difficult or impossible to predict accurately, all of
which are difficult to quantify and many of which are outside the control of
PJAM.
Set forth below is a summary of these projections. These projections should
be read together with PJAM's historical financial statements set forth in its
Annual Report on Form 10-K for the fiscal year ended December 31, 2000 .
XXXX has not updated these projections since May 23, 2001 and does not
intend to do so. In light of the uncertainties inherent in financial
projections of any kind, we strongly caution against placing undue reliance on
them since actual results may differ materially from the results reflected in
the financial projections.
Revised May 23, 2001 Projections
2001 2002 2003 2004 2005 2006
-------- -------- -------- -------- -------- --------
Sales..................... $115,894 $120,809 $126,642 $132,876 $138,636 $142,781
EBITDA.................... $ 8,793 $ 9,593 $ 10,710 $ 11,468 $ 12,533 $ 13,123
48
The significant assumptions used in preparation of the revised projections
were a slight increase of annual comparable restaurant sales from current
levels, and annual restaurant additions limited to five to six restaurants per
year through 2005. Food costs for purposes of determining EBITDA were assumed
to increase in 2001 to reflect current increases in cheese block prices; and
were assumed to return to normalized costs reflecting historically prevailing
cheese block prices in 2002 and thereafter.
April Projections
2001 2002 2003 2004 2005 2006
-------- -------- -------- -------- -------- --------
Sales..................... $117,489 $123,375 $129,500 $136,126 $142,499 $147,325
EBITDA.................... $ 9,922 $ 11,248 $ 12,909 $ 13,870 $ 15,198 $ 15,859
PJAM is subject to the information and reporting requirements of the
Exchange Act and in accordance therewith is required to file periodic reports,
proxy statements and other information with the Commission relating to its
business, financial condition and other matters. Certain information, as of
particular dates, concerning XXXX's directors and officers (including their
remuneration and the stock options granted to them), the principal holders of
PJAM's securities, any material interests of such persons in transactions with
PJAM and certain other matters is required to be disclosed in proxy statements
and annual reports distributed to PJAM's stockholders and filed with the
Commission. Such reports, proxy statements and other information may be
inspected and copied at the Commission's public reference facilities at Room
0000, Xxxxxxxxx Xxxxx, 000 Xxxxx Xxxxxx, X.X., Xxxxxxxxxx X.X. 00000, and
should also be available for inspection at the following regional offices of
the Commission: 7 World Trade Center, New York, New York 10048; and 000 Xxxx
Xxxxxxx Xxxxxx, Xxxxxxx, Xxxxxxxx 00000; and copies may be obtained by mail at
prescribed rates, from the principal office of the Commission at 000 Xxxxx
Xxxxxx, X.X., Xxxxxxxxxx, X.X. 00000. The Commission also maintains a website
at xxxx://xxx.xxx.xxx that contains reports, proxy statements and other
information relating to PJAM which have been filed electronically via the
XXXXX system.
9. Certain Information Concerning the Purchaser.
The Purchaser is a Delaware corporation incorporated on March 21, 2001 by
the Investor Group for the purposes of making the Offer. The Investor Group
consists of: Xxxxxxx X. Xxxxxxx, Xxxxxx X. Xxxxxxx, individually and as co-
Trustee of the Xxxxxx X. Xxxxxxx Trust under an Agreement dated September 1,
1996 and as co-Trustee of the Xxxxxxxx X. Xxxxxxx Trust under an Agreement
dated September 1, 1996, Xxxxxxxx X. Xxxxxxx, individually and as co-Trustee
of the Xxxxxx X. Xxxxxxx Trust under an Agreement dated September 1, 1996 and
as co-Trustee of the Xxxxxxxx X. Xxxxxxx Trust under an Agreement dated
September 1, 1996, Xxxxxxx X. Xxxxxxxx, Xxxxxxx X. Xxxxxxxx, Xxxxxx X. Xxxx,
Xxxxxxx X. Xxxxxxxx, Xxxx X. Xxxxxxxx, Xxxxx X. Xxxxxx and Xxxxxxx X.
Xxxxxxxxx. The members of the Investor Group are all officers, directors or
significant stockholders of PJAM or immediate family members of such
individuals and are the only stockholders of the Purchaser. The Purchaser has
minimal assets and has not engaged in any activities except in connection with
the Offer and the Merger Agreement. It has no meaningful historical financial
information other than the commitment by Bank One, Kentucky, NA to provide up
to $25 million in funding for the Offer and the Merger and $5 million in
working capital. The address of the Purchaser is c/o PJ America, Inc., 0000
Xxxxxxxx Xxxxx, Xxxxxxxxxx, Xxxxxxx 00000, Attention: Xxxxxxx X. Xxxxxxxx and
its telephone number is (000) 000-0000.
The name, business address, citizenship, present principal occupation and
employment history of the directors and executive officers of the Purchaser
are set forth in Schedule II of this Offer to Purchase.
10. Source and Amount of Funds.
The total amount of funds required by the Purchaser to consummate the Offer
and the Merger and to pay related fees and expenses is estimated to be
approximately $24.3 million. We have received a commitment letter, dated as of
May 31, 2001 from Bank One, Kentucky, NA, relating to up to $25 million in
debt financing for the Offer and the Merger and an additional $5 million for
working capital.
49
The loan will have a six year term. The interest rate will vary dependent
upon PJAM's ratio of total debt to EBITDA and range between LIBOR plus 150
basis points and 250 basis points. It will be subject to customary
representations and warranties, covenants and events of default. It will be
unsecured until the Merger, at which time Bank One will be granted a blanket
lien on all assets of the Surviving Corporation, the shares of stock of the
Surviving Corporation and the subsidiaries of the Surviving Corporation.
The financing is subject to certain conditions including (i) receipt and
satisfactory review by Bank One of financial statements and income tax
returns; (ii) accuracy of representations and warranties; (iii) absences of
default; (iv) negotiation and execution of documentation satisfactory to Bank
One; (v) satisfactory completion of Bank One's due diligence; and (vi) no
material adverse change in financial condition, assets, nature of the assets,
operations or prospects of the Purchaser.
The Purchaser and the Investor Group intend to repay the money borrowed to
finance the Offer and the Merger with cash flow from earnings and possibly
proceeds from sales of stores if any.
No alternative plans for financing the transactions have been made by the
Purchaser.
The following is a statement of the approximate fees and expenses related
to consummation of the Offer:
Fees and Expenses to be Paid by the Purchaser
Financial Advisor (First Tennessee Securities)................... $150,000
Information Agent................................................ $ 10,000
Depositary....................................................... $ 15,000
Legal............................................................ $170,000
Printer.......................................................... $ 30,000
Filing........................................................... $ 5,000
Miscellaneous.................................................... $300,000
--------
Total.......................................................... $680,000
========
Fees and Expenses to Be Paid by PJAM
Financial Advisor (Banc of America Securities)................... $500,000
Legal............................................................ $150,000
Miscellaneous.................................................... $200,000
--------
Total.......................................................... $850,000
========
The above fees of the Purchaser will in effect be borne by PJAM if the
Merger is consummated, since by operation of law in a Merger, the Surviving
Corporation becomes liable for obligations of the entity merging into it. If
the Merger is not consummated, each party will bear its respective fees and
expenses, except as otherwise provided in "Special Factor--The Merger
Agreement--Termination of the Agreement."
11. Conditions of the Offer.
Notwithstanding any other provision of the Offer, the Purchaser shall not
be required to accept for payment or, subject to any applicable rules and
regulations of the Commission, including Rule 14e-1(c) under the Exchange Act
(relating to the Purchaser's obligation to pay for or return tendered Shares
promptly after termination or withdrawal of the Offer), pay for, and may delay
the acceptance for payment of or, subject to the restriction referred to
above, the payment for, any tendered Shares, and, subject to the terms of the
Agreement, may delay acceptance for payment or terminate the Offer and not
accept for payment any tendered Shares, if at any time on or after the date of
the Agreement and prior to the Expiration Date, any of the following events
shall occur:
(i) there shall be any Law enacted, promulgated or deemed applicable to the
Offer or the Merger, or any suit, action or proceeding by any
Governmental Entity shall be pending (i) challenging or seeking to make
illegal, materially delay, or otherwise, directly or indirectly,
restrain or prohibit or make
50
materially more costly, the making of the Offer, the acceptance for
payment of any tendered Shares, or the purchase of Shares, or the
consummation of the Merger, or seeking to obtain material damages in
connection with the Offer or the Merger, (ii) seeking to prohibit or
impose any material limitations on Purchaser's ownership or operation
of all or a material portion of PJAM's businesses or assets, (iii)
seeking to compel Purchaser to dispose of or hold separate any material
portion of the business or assets of PJAM, (iv) seeking to impose
material limitations on the ability of Purchaser, or rendering
Purchaser unable, to accept for payment, pay for or purchase some or
all of the Shares pursuant to the Offer and the Merger, (v) imposing
material limitations on the ability of Purchaser effectively to
exercise full rights of ownership of the Shares, including, without
limitation, the right to vote the Shares purchased by it on all matters
properly presented to PJAM's stockholders, (vi) limit or prohibit any
material business activity by Purchaser, including, without limitation,
requiring the prior consent of any person or entity (including any
Governmental Entity) to future transactions by Purchaser, or (vii)
which otherwise would reasonably be expected to have a Material Adverse
Effect on PJAM or, the Surviving Corporation; or
(ii) there shall have occurred (1) any general suspension of trading in, or
limitation on prices for, securities on the New York Stock Exchange,
the American Stock Exchange and in the Nasdaq National Market System
(excluding suspensions or limitations resulting solely from physical
damage or interference with such exchanges not related to market
conditions), (2) a declaration of a banking moratorium or any
suspension of payments in respect of banks in the United States
(whether or not mandatory), (3) any limitation or proposed limitation
(whether or not mandatory) by any United States governmental entity
that has a material adverse effect generally on the extension of
credit by banks or other financial institutions, or (4) in the case of
any of the situations in clauses (1) through (3) inclusive, existing
at the time of the commencement of the Offer, a material acceleration
or worsening thereof; or
(iii) the representations and warranties of PJAM set forth in the Agreement
shall not be true and accurate as of the date of consummation of the
Offer as though made on or as of such date (except for those
representations and warranties that address matters only as of a
particular date or only with respect to a specific period of time
which need only be true and accurate as of such date or with respect
to such period) except, in each case where the failures of such
representations and warranties to be true and accurate (without
giving effect to any limitation as to "materiality" or "material
adverse effect" set forth therein) do not or would not reasonably be
expected, individually or in the aggregate, to have a Material
Adverse Effect on PJAM; or
(iv) PJAM shall have failed to perform, in any material respect, any
obligation or to comply, in any material respect, with any material
agreement or covenant of PJAM to be performed or complied with by it
under the Agreement; or
(v) the Board or the Special Committee (i) shall have withdrawn, or
modified or changed in a manner adverse to Purchaser (including by
amendment of the Schedule 14D-9) its recommendation of the Offer, the
Agreement, or the Merger, (ii) shall have recommended an Acquisition
Proposal, or (iii) shall have adopted any resolution to effect any of
the foregoing; or
(vi) since the date of the Agreement there shall have occurred any event,
circumstance, change, effect or development that, individually or in
the aggregate with any other events, circumstances, changes, effects
or developments, has had or would reasonably be expected to have a
Material Adverse Effect on PJAM; or
(vii) the Agreement shall have been terminated in accordance with its
terms; which in the sole judgment of Purchaser, and regardless of the
circumstances (including any action or inaction by Purchaser) giving
rise to such condition makes it inadvisable to proceed with the Offer
and/or with such acceptance for payment of or payments for Shares; or
(viii) that number of Shares that together with the Shares then owned by
Purchaser constitutes at least 90% of the outstanding common stock
have not been validly tendered prior to the expiration of the Offer;
or
51
(ix) the Purchaser shall not have received proceeds from the Financing in
an amount sufficient to consummate the Offer and the Merger, pursuant
to the terms of the Financing Letter or on substantially similar
terms.
The foregoing conditions are for the sole benefit of the Purchaser and may
be waived by the Purchaser, in whole or in part, at any time and from time to
time, in the sole discretion of the Purchaser. The failure by the Purchaser at
any time to exercise any of the foregoing rights shall be deemed a waiver of
any right and each such right shall be deemed an ongoing right which may be
asserted at any time and from time to time.
Notwithstanding the foregoing, the Purchaser may not accept for purchase
any Shares, without the approval of the Special Committee, unless a majority
of the Shares not owned by the Purchaser or the Investor Group are tendered in
the Offer.
12. Certain Legal Matters; Required Regulatory Approvals.
Except as set forth in this Offer to Purchase, based on its review of
publicly available filings by PJAM with the Commission and other publicly
available information regarding PJAM, the Purchaser is not aware of any
licenses or regulatory permits that would be material to the business of PJAM
and its subsidiaries, taken as a whole, and that might be adversely affected
by the Purchaser's acquisition of Shares as contemplated herein, or any
filings, approvals or other actions by or with any domestic, foreign or
supranational governmental authority or administrative or regulatory agency
that would be required prior to the acquisition of Shares by the Purchaser
pursuant to the Offer as contemplated herein. Should any such approval or
other action be required, there can be no assurance that any such additional
approval or action, if needed, would be obtained without substantial
conditions or that adverse consequences might not result to PJAM's business.
The Purchaser's obligation to purchase and pay for Shares is subject to
certain conditions, including conditions with respect to governmental actions.
See "Introduction" and Section 11 for a description of conditions to the
Offer, including with respect to litigation and governmental actions.
State Takeover Law. PJAM is incorporated under the laws of the State of
Delaware. In general, Section 203 of the DGCL ("Section 203") prevents an
"interested stockholder" (including a person who owns or has the right to
acquire 15% or more of the corporation's outstanding voting stock) from
engaging in a "business combination" (defined to include mergers and certain
other actions) with a Delaware corporation for a period of three years
following the date such person became an interested stockholder. XXXX has
represented to the Purchaser that the Board has taken all necessary action so
that the restrictions contained in Section 203 of the DGCL applicable to a
"business combination" will not apply to the execution, delivery or
performance of the Merger Agreement, the Offer, the Merger or the transactions
contemplated by the Merger Agreement.
A number of other states have adopted laws which purport, to varying
degrees, to apply to attempts to acquire corporations that are incorporated
in, or which have substantial assets, stockholders, principal executive
offices or principal places of business or whose business operations otherwise
have substantial economic effects in, such states. In 1982, in Xxxxx x. MITE
Corp., the Supreme Court of the United States invalidated on constitutional
grounds the Illinois Business Takeover Statute which, as a matter of state
securities law, made takeovers of corporations meeting certain requirements
more difficult. However, in 1987 in CTS Corp. v. Dynamics Corp. of America,
the Supreme Court held that the State of Indiana could, as a matter of
corporate law, constitutionally disqualify a potential acquirer from voting
shares of a target corporation without the prior approval of the remaining
stockholders where, among other things, the corporation is incorporated, and
has a substantial number of stockholders, in the state. Subsequently, in TLX
Acquisition Corp. v. Telex Corp., a Federal District Court in Oklahoma ruled
that the Oklahoma statutes were unconstitutional insofar as they apply to
corporations incorporated outside Oklahoma in that they would subject such
corporations to inconsistent regulations. Similarly, in Tyson Foods, Inc. x.
XxXxxxxxxx, a Federal District Court in Tennessee ruled that four Tennessee
takeover statutes were unconstitutional as applied to corporations
incorporated outside Tennessee. This decision was affirmed by the United
States Court of Appeals for the Sixth Circuit. In December 1988, a Federal
52
District Court in Florida held in Grand Metropolitan PLC x. Xxxxxxxxxxx, that
the provisions of the Florida Affiliated Transactions Act and the Florida
Control Share Acquisition Act were unconstitutional as applied to corporations
incorporated outside of Florida.
We do not believe that the anti-takeover laws and regulations of any state
other than the State of Delaware will by their terms apply to the Offer and
the Merger, and, except as described above with respect to Section 203 of the
DGCL, neither PJAM nor the Purchaser has attempted to comply with any state
anti-takeover statute or regulations in connection with the Merger. If any
government official or third party should seek to apply any state takeover law
to the Offer, the Merger or other business combination between us or any of
our affiliates and PJAM, we will take such action as then appears desirable,
which action may include challenging the applicability or validity of such
statute in appropriate court proceedings. In the event it is asserted that one
or more state takeover statutes is applicable to the Offer, the Merger or
other business combination and an appropriate court does not determine that it
is inapplicable or invalid as applied to the Offer, the Merger or other
business combination, we might be required to file certain information with,
or to receive approvals from, the relevant state authorities or holders of
Shares, and we might be unable to accept for payment or pay for Shares
tendered pursuant to the Offer, or be delayed in continuing or consummating
the Offer, the Merger or other business combination. In such case, we may not
be obligated to accept for payment or pay for any tendered Shares. See "The
Offer--Conditions of the Offer."
Antitrust. Under the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976,
as amended, and the rules and regulations that have been promulgated
thereunder by the Federal Trade Commission, certain acquisition transactions
may not be consummated until certain information and documentary material has
been furnished for review by the Antitrust Division of the Department of
Justice and the Federal Trade Commission and certain waiting period
requirements have been satisfied. The purchase of Shares pursuant to the Offer
is not subject to such requirements because PJAM has less than $50 million in
assets.
Litigation. Between March 23 and March 26, 2001, four substantially similar
purported class actions styled Xxxxxx Xxxxxxx v. PJ America, Inc., et al.,
Civil Action No. 18758-NC, Xxx Xxxxxx v. Xxxxxxx Xxxxxxx, et al., Civil Action
No. 18765-NC, Xxxxxx X. Xxxx v. PJ America, Inc. et al., Civil Action No.
18766-NC; and Xxxxx Xxxxxxxx, Xx. v. PJ America, Inc. et al., Civil Action No.
18767-NC were filed in the Court of Chancery of the State of Delaware in and
for New Castle County alleging that the Investor Group's proposal was unfair
to PJAM's public stockholders and that some or all of the individual
defendants breached their fiduciary duties to PJAM's public stockholders and
seeking injunctive relief and damages in connection with the Investor Group's
proposal.
On July 19, 2001, PJAM, the defendant directors and the named plaintiffs
reached an agreement in principle with respect to the settlement of the
litigation and counsel to each of the parties to the litigation entered into a
Memorandum of Understanding agreeing (1) the lawsuits were a material factor
considered by the Investor Group in determining to raise the per Share
consideration to $8.75, (2) to use their best efforts to execute and seek
court approval of a definitive settlement agreement without any admission of
any breach of fiduciary duty or other wrongdoing on the part of the defendants
and (3) not to oppose an application by plaintiffs' counsel for attorney fees
and expenses not to exceed $185,000 in the aggregate. PJAM anticipates that
any settlement of this litigation will not have a material adverse effect on
PJAM's financial condition, results of operations or liquidity.
Provision for Unaffiliated Stockholders. In connection with the Offer and
the Merger, neither PJAM nor the Purchaser has granted unaffiliated security
holders access to their corporate files or arranged for counsel or appraisal
services at the expenses of PJAM or the Purchaser.
13. Certain Fees and Expenses
First Tennessee Securities has provided certain financial advisory services
to the Purchaser in connection with the Offer and the Merger. Pursuant to the
terms of the engagement letter, dated June 25, 2001, between the Purchaser and
First Tennessee Securities (the "Engagement Letter"), the Purchaser has agreed
to pay to First
53
Tennessee Securities a fee of $150,000 payable at the closing of the going
private transaction. In addition, the Purchaser has agreed to reimburse First
Tennessee Securities, upon request from time to time, for all reasonable fees
and expenses of First Tennessee Securities' counsel and all travel and other
expenses incurred in connection with First Tennessee Securities' engagement
pursuant to the Engagement Letter. The Purchaser also agreed to indemnify
First Tennessee Securities from certain liabilities arising from its
engagement. The Purchaser has terminated its engagement letter with STES. The
Purchaser has reimbursed STES for its out-of-pocket expenses (including those
of its counsel), and does not have any additional fee obligations to STES,
although certain indemnification obligations remain.
Xxxxxxxxx Xxxxxxxxxxx has been retained by the Purchaser as Information
Agent in connection with the Offer. The Information Agent may contact holders
of Shares by mail, telephone, telex, telegraph and personal interview and may
request brokers, dealers and other nominee stockholders to forward material
relating to the Offer to beneficial owners. Customary compensation will be
paid for all such services in addition to reimbursement of reasonable out-of-
pocket expenses. The Purchaser has agreed to indemnify the Information Agent
against certain liabilities and expenses, including liabilities under the
federal securities laws.
In addition, National City Bank has been retained as the Depositary. The
Depositary has not been retained to make solicitations or recommendations in
its role as Depositary. The Depositary will receive reasonable and customary
compensation for its services in connection with the Offer, will be reimbursed
for its reasonable out-of-pocket expenses and will be indemnified against
certain liabilities and expenses in connection therewith.
Except as set forth above, the Purchaser will not pay any fees or
commissions to any broker, dealer or other person (other than the Information
Agent and the Depositary) for soliciting tenders of Shares pursuant to the
Offer. Brokers, dealers, commercial banks and trust companies and other
nominees will, upon request, be reimbursed by the Purchaser for customary
clerical and mailing expenses incurred by them in forwarding materials to
their customers.
14. Miscellaneous
The Offer is not being made to (nor will tenders be accepted from or on
behalf of) holders of Shares residing in any jurisdiction in which the making
of the Offer or the acceptance thereof would not be in compliance with the
securities, blue sky or other laws of such jurisdiction. However, the
Purchaser may, in its discretion, take such action as it may deem necessary to
make the Offer in any jurisdiction and extend the Offer to holders of Shares
in such jurisdiction. In any jurisdiction where the securities, blue sky or
other laws require the Offer to be made by a licensed broker or dealer, the
Offer will be deemed to be made on behalf of the Purchaser by one or more
registered brokers or dealers that are licensed under the laws of such
jurisdiction.
The Purchaser has filed with the Commission a Tender Offer Statement on
Schedule TO, together with exhibits, pursuant to Regulation M-A under the
Exchange Act, furnishing certain additional information with respect to the
Offer which includes the information required by Schedule 13E-3, and may file
amendments thereto. Such Schedule TO and any amendments thereto, including
exhibits, may be examined and copies may be obtained from the office of the
Commission in the same manner as described in Section 8 with respect to
information concerning PJAM, except that they will not be available at the
regional offices of the Commission.
No person has been authorized to give any information or to make any
representation on behalf of the Purchaser not contained in this Offer to
Purchase or in the Letter of Transmittal and, if given or made, any such
information or representation must not be relied upon as having been
authorized. Neither the delivery of the Offer to Purchase nor any purchase
pursuant to the Offer shall, under any circumstances, create any implication
that there has been no change in the affairs of the Purchaser or PJAM since
the date as of which information is furnished or the date of this Offer to
Purchase.
PJ Acquisition Corp.
July 20, 2001
54
SCHEDULE I
DIRECTORS AND EXECUTIVE OFFICERS OF PJ AMERICA, INC.
The name, current principal occupation or employment and material
occupations, positions, offices or employment for the past five years of each
executive officer and director of PJAM are set forth below. The principal
place of business of PJ America, Inc., and unless otherwise indicated below,
the principal business address of each officer and director, is 0000 Xxxxxxxx
Xxxxx, Xxxxxxxxxx, Xxxxxxx 00000 and its telephone number is (000) 000-0000.
During the past five years, neither PJAM nor, to the best knowledge of PJAM,
any of the persons listed below (i) has been convicted in a criminal
proceeding (excluding traffic violations or similar misdemeanors) or (ii) was
a party to any judicial or administrative proceeding (except for matters that
were dismissed without sanction or settlement) that resulted in a judgment,
decree or final order enjoining the person from future violations of, or
prohibiting activities subject to, federal and state securities laws, or a
finding of any violation of such laws. Each of the individuals listed below is
a citizen of the United States.
Current Principal Occupation or Employment and
Five-Year Employment History
Name and Address ------------------------------
-----------
Xxxxxxx X. Xxxxxxx........... Director and Chairman of the Board of PJ
000 Xxxxxxxx Xxxx Xxxxxxx, Inc. or certain of its predecessors
Duck Key, Florida 33050 since 1991; member of the Executive Committee
since 1999. Private investor and franchisee and
consultant to Papa Xxxx's International since
1991. Director of Papa Xxxx's International
since 1993. Director and Chairman of the Board
of PJ Acquisition Corp.
Xxxxxxx X. Xxxxxxxx.......... Director, President and Chief Executive Officer
of PJ America, Inc. or certain of its
predecessors since 1991; member of the
Executive Committee since 1999. Director,
President and Chief Executive Officer of PJ
Acquisition Corp.
X. Xxxx Xxxxxxx.............. Director of PJ America, Inc. since March 2001.
Vice President Administration-Chief Financial
Officer and Treasurer of PJ America, Inc. since
1996. Xx. Xxxxxxx has notified PJAM that he
intends to resign after the Merger.
Xxxxx X. Xxxxxxx............. Chief Operating Officer of PJ America, Inc.
since January 2001. President/COO with
XxxXxxxx, L.L.C., a Pizza Hut franchisee, from
1997-2001. Various operation positions with
Pizza Hut corporate from 1977-1997.
X. Xxxxxx Xxxxxxx............ Vice President-Training of PJ America, Inc.
since February 2000. Training Director for Just
for Feet from 1999-2000. Various positions at
Just for Feet University from 1995-1999.
Xxxxxxxxxxx X. Xxxxxxxx...... Vice President of Marketing of PJ America, Inc.
since June 2001. Served in various marketing
positions for PJ America, Inc. and
predecessors.
Xxxxx X. Xxxx................ Controller and Assistant Treasurer of PJ
America, Inc. since November 2000. Various
positions with Caremark, Inc. from 1995-2000,
most recently Director of External Reporting.
Xx. Xxxx will become CFO after Xx. Xxxxxxx'x
scheduled departure.
55
Current Principal Occupation or Employment and
Five-Year Employment History
Name and Address ------------------------------
-----------
Xxxxxxx X. Xxxxxxxxx......... Director and Secretary of PJ America, Inc. or
3300 National City Tower certain of its predecessors since 1991; member
Louisville, Kentucky 40202 of the Executive Committee since 1999. In June
1997 became Vice Chairman of the Board of
PJ America, Inc. Since 1970, Xx. Xxxxxxxxx or
his professional service corporation has been a
member of Xxxxxxxxxx Xxxx & XxXxxxxx PLLC.
Director and Secretary of PJ Acquisition Corp.
Xxxxxx X. Xxxx............... Director of PJ America, Inc. or certain
0000 Xxxx Xxxxxx Xxxxxx, Xxx predecessors since 1992. Currently a private
250 investor. Trustee of MassMutual Corporate
Denver, Colorado 80206 Investors since 1991. Director of Xxxxxxx
Homes, Inc., Vail Banks, Inc., T-Netix, Inc.
and presently is the Chairman of the Board of
Trustees of Regis University.
Xxxxx X. Xxxxxx.............. Director of PJ America, Inc. or certain
00000 X. Xxxxxxx Xxxxxx predecessors since 1991; member of the
Suite A-12 Executive Committee since 1999. Currently a
Henderson, Nevada 89052 private investor; Executive Vice President of
First American National Bank, Nashville,
Tennessee from 1993 to 1998.
Xxxxxxx X. Xxxxxxxx.......... Director of PJ America, Inc. or certain
WAVE TV predecessors since 1991. General Manager of
000 X. Xxxxx Xxxxxx, XXXX-TV an NBC affiliate from October 1998 to
Louisville Kentucky 40232 present and from 1987 to 1997. General Manager
of WFIE NBC-14 from January 1997 to October
1998.
Xxx X. Xxxxx................. Director of PJ America, Inc. since December
2015 X. Xxxxxxx Road 2000. President and CEO of Perfect Delivery,
Greenville, South Carolina Inc., a Xxxx Xxxxx franchisee since 1992.
29607
Xxxxx X. Xxxxx............... Director of PJ America, Inc. since March 2001.
1414 Xxxxxx Currently CFO of Taco Bueno Restaurants, Inc.
San Antonio, Texas 78209 Vice President-Finance, Chief Financial
Officer, Secretary and Treasurer of Taco Cabana
October 1994 to 2000. (Senior Vice President
from May 1996).
Xxxxxxxx X. Xxxxx............ Director of PJ America, Inc. since March 2001.
0000 Xxxxxxxx Xxxxxx President and CEO of Tumbleweed, Inc. since
Louisville, Kentucky 40206 August 2000; director of Tumbleweed, Inc. since
June1998. President of Tumbleweed
International, LLC since 1997. President and
Chief Executive Officer of Chi-Chi's
International Operations, Inc. from 1988-1997.
56
SCHEDULE II
DIRECTORS AND EXECUTIVE OFFICERS OF PJ ACQUISITION CORP.
The name, current principal occupation or employment and material
occupations, positions, offices or employment for the past five years of each
officer and director of Purchaser are set forth below. The principal place of
business of PJ Acquisition Corp. is c/o PJ America, Inc., 0000 Xxxxxxxx Xxxxx,
Xxxxxxxxxx, Xxxxxxx 00000 and its telephone number is (000)000-0000. During
the past five years, neither Purchaser nor, to the best knowledge of
Purchaser, any of the persons listed below (i) has been convicted in a
criminal proceeding (excluding traffic violations or similar misdemeanors) or
(ii) was a party to any judicial or administrative proceeding (except for
matters that were dismissed without sanction or settlement) that resulted in a
judgment, decree or final order enjoining the person from future violations
of, or prohibiting activities subject to, federal and state securities laws,
or a finding of any violation of such laws. Each of the individuals listed
below is a citizen of the United States.
Current Principal Occupation or Employment
and
Name and Address Five-Year Employment History
----------- ------------------------------
Xxxxxxx X. Xxxxxxx........... Director and Chairman of the Board of PJ
000 Xxxxxxxx Xxxx Acquisition Corp. Director and Chairman of the
Duck Key, Florida 33050 Board of PJ America, Inc. or certain of its
predecessors since 1991; member of the
Executive Committee since 1999. Private
investor and franchisee and consultant to Papa
Xxxx's International since 1991. Director of
Papa Xxxx's International since 1993.
Xxxxxxx X. Xxxxxxxx.......... Director, President and Chief Executive Officer
c/o PJ America, Inc. of PJ Acquisition Corp. Director, President and
0000 Xxxxxxxx Xxxxx, Chief Executive Officer of PJ America, Inc. or
Birmingham, Alabama 35242 certain of its predecessors since 1991; member
of the Executive Committee since 1999.
Xxxxxxx X. Xxxxxxxxx......... Director and Secretary of PJ Acquisition Corp.
3300 National City Tower Director and Secretary of PJ America, Inc. or
Louisville, Kentucky 40202 certain of its predecessors since 1991; member
of the Executive Committee since 1999. In June
1997 became Vice Chairman of the Board of PJ
America, Inc. Since 1970, Xx. Xxxxxxxxx or his
professional service corporation has been a
member of Xxxxxxxxxx Xxxx & XxXxxxxx PLLC.
Xxxxxx X. Xxxx............... Director of PJ Acquisition Corp. Director of PJ
America, Inc. or certain predecessors since
1992. Currently a private investor. Trustee of
MassMutual Corporate Investors since 1991.
Director of Xxxxxxx Homes, Inc., Vail Banks,
Inc. and presently is the Chairman of the Board
of Trustees of Regis University.
0000 Xxxx Xxxxxx Xxxxxx, Xxx 000
Xxxxxx, Xxxxxxxx 00000
Xxxxx X. Xxxxxx.............. Director of PJ Acquisition Corp. Director of PJ
00000 X. Xxxxxxx Xxxxxx Xxxxxxx, Inc. or certain predecessors since
Suite A-12 1991; member of the Executive Committee since
Henderson, Nevada 89052 1999. Currently a private investor; Executive
Vice President of First American National Bank,
Nashville, Tennessee from 1993 to 1998.
Xxxxxxx X. Xxxxxxxx.......... Director of PJ Acquisition Corp. Director of PJ
Wave TV America, Inc. or certain predecessors since
000 X. Xxxxx Xxxxxx 1991. General Manager of WAVE-TV an NBC
Louisville, Kentucky 40232 affiliate from October 1998 to present and from
1987 to 1997. General Manager of WFIE NBC-14
from January 1997 to October 1998.
57
Current Principal Occupation or Employment
and
Name and Address Five-Year Employment History
----------- ------------------------------
Xxxxxxx X. Xxxxxxxx.......... Director of PJ Acquisition Corp. Private
investor.
0000 Xxxxxxxxxxx Xxxx,
Xxxxx 000
Xxxxxxxxxx, Xxxxxxxx 00000
Xxxx X. Xxxxxxxx............. Director of PJ Acquisition Corp. Private
#25197 investor and Xxxx Xxxxx franchisee. Trustee of
0000 X. Xxxxx Xxx, #000 MassMutual Corporate Investors and MassMutual
Wilson, Wyoming 83014-9129 Participation Investors since 1996, Director of
Papa Xxxx's International since 1993.
58
EXHIBIT A
262 APPRAISAL RIGHTS.--(a) Any stockholder of a corporation of this State
who holds shares of stock on the date of the making of a demand pursuant to
subsection (d) of this section with respect to such shares, who continuously
holds such shares through the effective date of the merger or consolidation,
who has otherwise complied with subsection (d) of this section and who has
neither voted in favor of the merger or consolidation nor consented thereto in
writing pursuant to (S)228 of this title shall be entitled to an appraisal by
the Court of Chancery of the fair value of the stockholder's shares of stock
under the circumstances described in subsections (b) and (c) of this section.
As used in this section, the word "stockholder" means a holder of record of
stock in a stock corporation and also a member of record of a nonstock
corporation; the words "stock" and "share" mean and include what is ordinarily
meant by those words and also membership or membership interest of a member of
a nonstock corporation; and the words "depository receipt" mean a receipt or
other instrument issued by a depository representing an interest in one or
more shares, or fractions thereof, solely of stock of a corporation, which
stock is deposited with the depository.
(b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to
be effected pursuant to (S)251 (other than a merger effected pursuant to
(S)251(g) of this title), (S)252, (S)254, (S)257, (S)258, (S)263 or (S)264 of
this title:
(1) Provided, however, that no appraisal rights under this section shall be
available for the shares of any class or series of stock, which stock, or
depository receipts in respect thereof, at the record date fixed to determine
the stockholders entitled to receive notice of and to vote at the meeting of
stockholders to act upon the agreement of merger or consolidation, were either
(i) listed on a national securities exchange or designated as a national
market system security on an interdealer quotation system by the National
Association of Securities Dealers, Inc. or (ii) held of record by more than
2,000 holders; and further provided that no appraisal rights shall be
available for any shares of stock of the constituent corporation surviving a
merger if the merger did not require for its approval the vote of the
stockholders of the surviving corporation as provided in subsection (f) of
(S)251 of this title.
(2) Notwithstanding paragraph (1) of this subsection, appraisal rights
under this section shall be available for the shares of any class or series of
stock of a constituent corporation if the holders thereof are required by the
terms of an agreement of merger or consolidation pursuant to (S)(S)251, 252,
254, 257, 258, 263 and 264 of this title to accept for such stock anything
except:
a. Shares of stock of the corporation surviving or resulting from such
merger or consolidation, or depository receipts in respect thereof;
b. Shares of stock of any other corporation, or depository receipts in
respect thereof, which shares of stock (or depository receipts in respect
thereof) or depository receipts at the effective date of the merger or
consolidation will be either listed on a national securities exchange or
designated as a national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc. or held of
record by more than 2,000 holders;
c. Cash in lieu of fractional shares or fractional depository receipts
described in the foregoing subparagraphs a. and b. of this paragraph; or
d. Any combination of the shares of stock, depository receipts and cash in
lieu of fractional shares or fractional depository receipts described in the
foregoing subparagraphs a., b. and c. of this paragraph.
(3) In the event all of the stock of a subsidiary Delaware corporation
party to a merger effected under (S)253 of this title is not owned by the
parent corporation immediately prior to the merger, appraisal rights shall be
available for the shares of the subsidiary Delaware corporation.
(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of any
class or series of its stock as a result of an amendment to its certificate of
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incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the assets
of the corporation. If the certificate of incorporation contains such a
provision, the procedures of this section, including those set forth in
subsections (d) and (e) of this section, shall apply as nearly as is
practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal rights are
provided under this section is to be submitted for approval at a meeting of
stockholders, the corporation, not less than 20 days prior to the meeting,
shall notify each of its stockholders who was such on the record date for such
meeting with respect to shares for which appraisal rights are available
pursuant to subsection (b) or (c) hereof that appraisal rights are available
for any or all of the shares of the constituent corporations, and shall
include in such notice a copy of this section. Each stockholder electing to
demand the appraisal of such stockholder's shares shall deliver to the
corporation, before the taking of the vote on the merger or consolidation, a
written demand for appraisal of such stockholder's shares. Such demand will be
sufficient if it reasonably informs the corporation of the identity of the
stockholder and that the stockholder intends thereby to demand the appraisal
of such stockholder's shares. A proxy or vote against the merger or
consolidation shall not constitute such a demand. A stockholder electing to
take such action must do so by a separate written demand as herein provided.
Within 10 days after the effective date of such merger of consolidation, the
surviving or resulting corporation shall notify each stockholder of each
constituent corporation who has complied with this subsection and has not
voted in favor of or consented to the merger or consolidation of the date that
the merger or consolidation has become effective; or
(2) If the merger or consolidation was approved pursuant to (S)228 or
(S)253 of this title, each constituent corporation, either before the
effective date of the merger or consolidation or within ten days thereafter,
shall notify each of the holders of any class or series of stock of such
constituent corporation who are entitled to appraisal rights of the approval
of the merger or consolidation and that appraisal rights are available for any
or all shares of such class or series of stock of such constituent
corporation, and shall include in such notice a copy of this section; provided
that, if the notice is given on or after the effective date of the merger or
consolidation, such notice shall be given by the surviving or resulting
corporation to all such holders of any class or series of stock of a
constituent corporation that are entitled to appraisal rights. Such notice
may, and, if given on or after the effective date of the merger or
consolidation, shall, also notify such stockholders of the effective date of
the merger or consolidation. Any stockholder entitled to appraisal rights may,
within 20 days after the date of mailing of such notice, demand in writing
from the surviving or resulting corporation the appraisal of such holder's
shares. Such demand will be sufficient if it reasonably informs the
corporation of the identity of the stockholder and that the stockholder
intends thereby to demand the appraisal of such holder's shares. If such
notice did not notify stockholders of the effective date of the merger or
consolidation, either (i) each such constituent corporation shall send a
second notice before the effective date of the merger or consolidation
notifying each of the holders of any class or series of stock of such
constituent corporation that are entitled to appraisal rights of the effective
date of the merger or consolidation or (ii) the surviving or resulting
corporation shall send such a second notice to all such holders on or within
10 days after such effective date; provided, however, that if such second
notice is sent more than 20 days following the sending of the first notice,
such second notice need only be sent to each stockholder who is entitled to
appraisal rights and who has demanded appraisal of such holder's shares in
accordance with this subsection. An affidavit of the secretary or assistant
secretary or of the transfer agent of the corporation that is required to give
either notice that such notice has been given shall, in the absence of fraud,
be prima facie evidence of the facts stated therein. For purposes of
determining the stockholders entitled to receive either notice, each
constituent corporation may fix, in advance, a record date that shall be not
more than 10 days prior to the date the notice is given, provided, that if the
notice is given on or after the effective date of the merger or consolidation,
the record date shall be such effective date. If no record date is fixed and
the notice is given prior to the effective date, the record date shall be the
close of business on the day next preceding the day on which the notice is
given.
A-2
(e) Within 120 days after the effective date of the merger or
consolidation, the surviving or resulting corporation or any stockholder who
has complied with subsections (a) and (d) hereof and who is otherwise entitled
to appraisal rights, may file a petition in the Court of Chancery demanding a
determination of the value of the stock of all such stockholders.
Notwithstanding the foregoing, at any time within 60 days after the effective
date of the merger or consolidation, any stockholder shall have the right to
withdraw such stockholder's demand for appraisal and to accept the terms
offered upon the merger or consolidation. Within 120 days after the effective
date of the merger or consolidation, any stockholder who has complied with the
requirements of subsections (a) and (d) hereof, upon written request, shall be
entitled to receive from the corporation surviving the merger or resulting
from the consolidation a statement setting forth the aggregate number of
shares not voted in favor of the merger or consolidation and with respect to
which demands for appraisal have been received and the aggregate number of
holders of such shares. Such written statement shall be mailed to the
stockholder within 10 days after such stockholder's written request for such a
statement is received by the surviving or resulting corporation or within 10
days after expiration of the period for delivery of demands for appraisal
under subsection (d) hereof, whichever is later.
(f) Upon the filing of any such petition by a stockholder, service of a
copy thereof shall be made upon the surviving or resulting corporation, which
shall within 20 days after such service file in the office of the Register in
Chancery in which the petition was filed a duly verified list containing the
names and addresses of all stockholders who have demanded payment for their
shares and with whom agreements as to the value of their shares have not been
reached by the surviving or resulting corporation. If the petition shall be
filed by the surviving or resulting corporation, the petition shall be
accompanied by such a duly verified list. The Register in Chancery, if so
ordered by the Court, shall give notice of the time and place fixed for the
hearing of such petition by registered or certified mail to the surviving or
resulting corporation and to the stockholders shown on the list at the
addresses therein stated. Such notice shall also be given by 1 or more
publications at least 1 week before the day of the hearing, in a newspaper of
general circulation published in the City of Wilmington, Delaware or such
publication as the Court deems advisable. The forms of the notices by mail and
by publication shall be approved by the Court, and the costs thereof shall be
borne by the surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become entitled
to appraisal rights. The Court may require the stockholders who have demanded
an appraisal for their shares and who hold stock represented by certificates
to submit their certificates of stock to the Register in Chancery for notation
thereon of the pendency of the appraisal proceedings; and if any stockholder
fails to comply with such direction, the Court may dismiss the proceedings as
to such stockholder.
(h) After determining the stockholders entitled to an appraisal, the Court
shall appraise the shares, determining their fair value exclusive of any
element of value arising from the accomplishment or expectation of the merger
or consolidation, together with a fair rate of interest, if any, to be paid
upon the amount determined to be the fair value. In determining such fair
value, the Court shall take into account all relevant factors. In determining
the fair rate of interest, the Court may consider all relevant factors,
including the rate of interest which the surviving or resulting corporation
would have had to pay to borrow money during the pendency of the proceeding.
Upon application by the surviving or resulting corporation or by any
stockholder entitled to participate in the appraisal proceeding, the Court
may, in its discretion, permit discovery or other pretrial proceedings and may
proceed to trial upon the appraisal prior to the final determination of the
stockholder entitled to an appraisal. Any stockholder whose name appears on
the list filed by the surviving or resulting corporation pursuant to
subsection (f) of this section and who has submitted such stockholder's
certificates of stock to the Register in Chancery, if such is required, may
participate fully in all proceedings until it is finally determined that such
stockholder is not entitled to appraisal rights under this section.
(i) The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation to
the stockholders entitled thereto. Interest may be simple or compound, as the
Court may direct. Payment shall be so made to each such stockholder, in the
case of holders of uncertificated
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stock forthwith, and the case of holders of shares represented by certificates
upon the surrender to the corporation of the certificates representing such
stock. The Court's decree may be enforced as other decrees in the Court of
Chancery may be enforced, whether such surviving or resulting corporation be a
corporation of this State or of any state.
(j) The costs of the proceeding may be determined by the Court and taxed
upon the parties as the Court deems equitable in the circumstances. Upon
application of a stockholder, the Court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and the
fees and expenses of experts, to be charged pro rata against the value of all
the shares entitled to an appraisal.
(k) From and after the effective date of the merger or consolidation, no
stockholder who has demanded appraisal rights as provided in subsection (d) of
this section shall be entitled to vote such stock for any purpose or to
receive payment of dividends or other distributions on the stock (except
dividends or other distributions payable to stockholders of record at a date
which is prior to the effective date of the merger or consolidation);
provided, however, that if no petition for an appraisal shall be filed within
the time provided in subsection (e) of this section, or if such stockholder
shall deliver to the surviving or resulting corporation a written withdrawal
of such stockholder's demand for an appraisal and an acceptance of the merger
or consolidation, either within 60 days after the effective date of the merger
or consolidation as provided in subsection (e) of this section or thereafter
with the written approval of the corporation, then the right of such
stockholder to an appraisal shall cease. Notwithstanding the foregoing, no
appraisal proceeding in the Court of Chancery shall be dismissed as to any
stockholder without the approval of the Court, and such approval may be
conditioned upon such terms as the Court deems just.
(l) The shares of the surviving or resulting corporation to which the
shares of such objecting stockholders would have been converted had they
assented to the merger or consolidation shall have the status of authorized
and unissued shares of the surviving or resulting corporation.
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Facsimile copies of letters of transmittal, properly completed and duly
executed, will be accepted. Letters of transmittal, PJAM stock certificates and
any other required documents should be sent or delivered by each PJAM
stockholder or broker, dealer, commercial bank, trust company or other nominee
to the Depositary at its address set forth below:
THE DEPOSITARY FOR THE OFFER IS:
NATIONAL CITY BANK
Corporate Trust Operations
3rd Floor--North Annex
0000 X. 000xx Xxxxxx
Xxxxxxxxx, Xxxx 00000
(000) 000-0000 (phone)
(000) 000-0000 (fax)
You may direct questions and requests for assistance to the Information Agent
at the address and telephone number set forth below. You may obtain additional
copies of this Offer to Purchase, the Letter of Transmittal and other Offer
materials from the Information Agent as set forth below, and they will be
furnished promptly at the Purchaser's expense. You may also contact your
broker, dealer, commercial bank, trust company or other nominee for assistance
concerning the Offer.
THE INFORMATION AGENT FOR THE OFFER IS:
[XXXXXXXXX SHAREHOLDER]
000 Xxxxxxxx Xxxx
Xxxxxxxxx, Xxx Xxxxxx 00000
Banks & Brokers Call Collect: (000) 000-0000
All Others Call Toll Free: (000) 000-0000
