Get Started for Free Contexxia identifies hard-to-find pieces of information in SEC filings. No more highlighters, no more redlining, no more poring over huge documents. ALEXANDERS J CORP (103884) 10-Q published on Aug 15, 2012 at 2:21 pm
Reporting Period: Jun 30, 2012
On August 10, 2012, Advanced Advisors, a purported shareholder of the Company, filed a putative class action lawsuit in the Tennessee Chancery Court for Davidson County, 20th Judicial District (the “Advanced Advisors Complaint”), against the members of the Company’s board of directors (the “Board”), the Company, Fidelity National Financial, Inc. (“Fidelity”) and New Athena Merger Sub, Inc. (“Merger Sub”). The Advanced Advisors Complaint alleges that the members of the Board breached their fiduciary duties to shareholders in connection with the Company’s entry into an agreement pursuant to which Merger Sub will commence a tender offer to acquire all of the outstanding shares of the Company’s common stock at a purchase price of $13.00 per share (the “Offer”). It also alleges that the Board and the Company breached their fiduciary duties to shareholders by making materially inadequate disclosures or omissions in the Recommendation Statement filed by the Company with the SEC in connection with the Offer (“Recommendation Statement”). The Advanced Advisors Complaint further alleges that Fidelity aided and abetted the Board’s purported breach of its fiduciary duties. In addition to seeking compensatory damages and attorneys’ fees and expenses, the Advanced Advisors Complaint seeks to enjoin the sale of the Company until the Company remedies certain alleged disclosure deficiencies in its Recommendation Statement. The Company believes the plaintiff’s allegations are without merit, and, if the plaintiff proceeds with litigation, the Company will contest the allegations vigorously.
On July 30, 2012, the Company, entered into an Amended and Restated Agreement and Plan of Merger (the “Restated Merger Agreement”), with Fidelity, Merger Sub, an indirect, wholly owned subsidiary of Fidelity, and certain other affiliates of Fidelity. The Restated Merger Agreement is described in the Company’s Current Report on Form 8-K filed on August 2, 2012. The Restated Merger Agreement amends and restates in its entirety that certain Agreement and Plan of Merger, dated June 22, 2012, previously described in the Company’s Current Report on Form 8-K filed on June 28, 2012.
On July 30, 2012, the Company entered into an Amended and Restated Agreement and Plan of Merger (the “Restated Merger Agreement”) with Fidelity National Financial, Inc., a Delaware corporation (“Fidelity”), New Athena Merger Sub, Inc., a Tennessee Corporation and an indirect, wholly owned subsidiary of Fidelity (“Merger Sub”), and certain other affiliates of Fidelity. For more information, see Note G of the Notes to the Company’s Condensed Consolidated Financial Statements included in this Form 10-Q.
Total general and administrative expenses, which include all supervisory costs and expenses, management training and relocation costs, and other costs incurred above the restaurant level, increased by $1,230,000 in the second quarter of 2012 and by $1,471,000 for the first six months of 2012 compared to the corresponding periods of 2011. Expenses related to the evaluation of strategic alternatives by the Company, including expenses associated with the negotiation and execution of a definitive merger agreement for the sale of the Company, and a possible contested election of directors totaled approximately $900,000 and $1,050,000 for the second quarter and first half of 2012, respectively. Incentive compensation accruals and certain other expenses were also higher in the second quarter and first half of 2012 than in the corresponding periods of 2011.
Based on improvements in sales and operating performance in recent quarters as well as management’s current outlook, management expects continued improvement in restaurant operating performance during the remainder of 2012. There can be no assurance that these results will be achieved, however, given continuing uncertain economic conditions which could affect consumer discretionary spending and have a negative impact on the Company’s sales performance at some point during the year and management’s concerns about the possible impact of increases in food commodity costs, particularly with regard to the impact of current drought conditions across much of the United States which could further increase beef prices as well as other food commodities.
In June of 2012, the Company entered into a merger agreement for the sale of the Company that was subsequently amended and restated in July 2012 by the Restated Merger Agreement to provide for a two step tender offer and merger acquisition transaction. Expenses associated with the completion of this proposed transaction, including the costs of defense of shareholder litigation in connection with the transaction, or the Company’s evaluation of any alternative transaction to the extent allowed under the terms of the Restated Merger Agreement will involve significant legal and professional fees which cannot be reasonably estimated at this time but which will have a significant effect on consolidated operating results. In addition, the Company has and may continue to incur expenses in connection with the activities of an activist shareholder. Costs associated with these matters could be significant.