Item
1.01. Entry into a Material
Definitive Agreement.
The
Merger Agreement and Special Dividend
On
October 22, 2009, Western Sizzlin Corporation (the “Company”), The Steak n Shake
Company, an Indiana corporation (“SNS”), and Grill Acquisition Corporation, a
Delaware corporation and wholly-owned subsidiary of SNS (“Merger Sub”), entered
into an Agreement and Plan of Merger (the “Merger Agreement”). Under the terms
of the Merger Agreement and subject to satisfaction or waiver of the conditions
therein, Merger Sub will merge with and into the Company, with the Company
surviving (the “Merger”). As a result of the Merger, the Company will become a
wholly-owned subsidiary of SNS (the “Surviving Corporation”).
As
contemplated by the Merger Agreement, on October 22, 2009 the Company declared a
special dividend payable to the Company’s stockholders in the form of 1,322,806
shares of SNS common stock presently beneficially owned by an investment
subsidiary of the Company (the “SNS Share Dividend”). Each
stockholder of the Company of record as of November 2, 2009, will be entitled to
receive the SNS Share Dividend, which will be distributed on November 6, 2009.
The SNS Share Dividend will be payable at the rate of approximately 0.4657
shares of SNS common stock for each share of the Company’s common stock, par
value $0.01 per share (the “Common Stock”), outstanding as of November 2, 2009,
with any fractional share interests to be settled by a cash
payment.
At the
effective time of the Merger, if completed, each share of the Company’s Common
Stock, issued and outstanding immediately prior to the effective time of the
Merger (other than any shares owned by stockholders who are entitled to and who
properly exercise appraisal rights under Delaware law) will be canceled and
converted into the right to receive a pro rata portion of a new issue, not
exceeding $22,959,000 in aggregate principal amount (subject to adjustment as
provided in the Merger Agreement), of 14% redeemable subordinated debentures
(the “Debentures”). Interest on the Debentures would be payable
semiannually, and the principal of the Debentures would be due in a single
installment on the fifth anniversary of the closing of the
Merger. SNS may, at its option, redeem the Debentures, in whole
or in part, without premium or penalty, on or after the date that is the first
anniversary of the date of issuance thereof at a redemption price equal to 100%
of the principal amount of the Debentures to be redeemed, plus any accrued and
unpaid interest to the date of redemption. The aggregate principal amount of
these Debentures is subject to reduction on account of certain potential tax
contingencies that could arise in connection with the SNS Share Dividend that
will be resolved as of the date of distribution of that dividend.
The board
of directors of the Company (the “Board”) approved the Merger Agreement
following the unanimous recommendation of a special committee of the Board
composed entirely of independent directors (the “Western Special
Committee”).
Certain
of the Company’s directors, executive officers and stockholders may have
interests in the Merger that are different from, or in addition to, the
interests of the Company’s stockholders generally and that may present actual or
apparent conflicts of interests. Three directors of the Company,
Sardar Biglari, Philip L. Cooley and Jonathan Dash, and John K. H. Linnartz, the
beneficial owner of approximately 2.3% of the Company’s Common Stock, exercise
voting control over an aggregate of 1,243,319 shares of the Company’s Common
Stock, or approximately 43.8% of its currently outstanding Common Stock, based
upon filings made by such persons with the Securities and Exchange Commission
(the “SEC”) to date, and are members of a “group,” within the meaning of Section
13(d)(3) of the Exchange Act, along with the Company, that beneficially owns an
aggregate of 2,753,155 share of SNS’s common stock, or approximately 9.6% of its
currently outstanding common stock, which includes the 1,322,806 shares owned by
an investment subsidiary of the Company that that will be distributed in the SNS
Share Dividend. Additionally, Mr. Biglari, the Company’s Chief Executive Officer
and Chairman of the Board, is also the Chief Executive Officer and Chairman of
the board of directors of SNS and Mr. Cooley, vice chairman of the Company’s
board of directors, is also a director of SNS. In recognition of
these close relationships, the Merger Agreement was negotiated between Western
Special Committee and a special committee of the board of directors of SNS, each
of which was composed entirely of directors that had no such
relationships.
The
consummation of the Merger is conditioned upon, among other things, the adoption
of the Merger Agreement by the stockholders of the Company and the satisfaction
or waiver of other customary closing conditions. SNS stockholders are
not required to adopt the Merger Agreement or approve the Merger or the issuance
of the Debentures in connection with the Merger. The Merger and
related transactions are expected to be completed by the end of the fourth
quarter of 2009 or the first quarter of 2010. However, no assurance can be made
that the Merger will close when expected, if at all.
The
Company, SNS and Merger Sub have made customary representations, warranties and
covenants in the Merger Agreement. Among other things, the Merger Agreement
contains provisions pursuant to which the Western Special Committee, with the
assistance of its independent advisors, may actively solicit alternative
acquisition proposals for a period of 30 days after the date of the Merger
Agreement. Thereafter, the Western Special Committee may not solicit competing
proposals but may, subject to exceptions that permit the members of the Western
Special Committee or the Board to comply with their fiduciary duties,
participate in discussions or negotiations regarding unsolicited alternative
proposals under certain circumstances.
The
Merger Agreement may be terminated under certain circumstances, including by the
Company if the Board, upon the advice of the Western Special Committee, has
determined that it intends to enter into a transaction with respect to certain
alternative proposals and the Company otherwise complies with the terms of the
Merger Agreement. Upon termination under specified circumstances
related to the acceptance or recommendation of an acquisition proposal or the
change of the Board’s recommendation in favor of the Merger, the Company would
be required to pay a termination fee of $1.25 million to SNS, except that the
Company will only be obligated to pay SNS a termination fee of $837,500 in the
case of a termination resulting from an acquisition proposal that was submitted
before November 21, 2009, subject to the terms of the Merger
Agreement. Furthermore, if the Merger Agreement is terminated by
reason of failure of the Company’s stockholders to approve the Merger and adopt
the Merger Agreement, the Company is required to pay SNS its reasonable
out-of-pocket transaction expenses, up to $1 million. The Merger
Agreement also provides that if SNS breaches or fails to perform certain of its
representations, warranties or covenants contained in the Merger Agreement under
certain circumstances, the Company may terminate the Merger Agreement and
require SNS to pay the Company a reverse termination fee of
$500,000.
The
foregoing description of the Merger Agreement is qualified in its entirety by
reference to the full text of the Merger Agreement, which is attached as Exhibit
2.1 to this Current Report on Form 8-K and incorporated herein by reference. The
Merger Agreement has been attached as an exhibit to provide investors with
information regarding its terms. It is not intended to provide any other factual
information about the Company or SNS. In particular, the assertions embodied in
the representations and warranties contained in the Merger Agreement are
qualified by information in disclosure schedules provided by the Company to SNS
in connection with the signing of the Merger Agreement. These disclosure
schedules contain information that modifies, qualifies and creates exceptions to
the representations and warranties set forth in the Merger Agreement. Moreover,
certain representations and warranties in the Merger Agreement were used for the
purpose of allocating risk between the Company and the SNS, rather than
establishing matters as facts. Investors are also cautioned that the Merger
Agreement may have different standards of materiality than standards of
materiality under applicable securities laws. Accordingly, you should not rely
on the representations and warranties in the Merger Agreement as
characterizations of the actual state of facts about the Company, SNS or Merger
Sub.
The
Company and SNS issued a joint press release on October 22, 2009, at
approximately 9:00 P.M., announcing the execution of the Merger Agreement and
declaration of the special dividend. A copy of the press release was
filed with the SEC as Rule 14a-12 proxy soliciting materials on October 23, 2009
and is incorporated herein by reference.
Additional
Information Concerning The Transaction
SNS plans
to file a registration statement on Form S-4 and SNS and the Company plan to
file related transaction statement on Schedule 13E-3 with the SEC with respect
to the Merger. The registration statement will include the Company’s
proxy statement for the special meeting of its stockholders to consider the
Merger and SNS’s prospectus with respect to the Debentures. INVESTORS
AND SECURITY HOLDERS ARE URGED TO READ THE REGISTRATION STATEMENT AND PROXY
STATEMENT/PROSPECTUS CAREFULLY WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL
CONTAIN IMPORTANT INFORMATION ABOUT SNS, THE COMPANY, THE MERGER AND RELATED
MATTERS. Investors will be able to obtain free copies of the
registration statement and proxy statement/prospectus and transaction statement,
when available, and other documents filed by the Company and SNS with the SEC
through the SEC’s web site at www.sec.gov. In addition, the Company’s
stockholders will be able to obtain free copies of the registration statement,
proxy statement/prospectus and transaction statement, when available, from the
Company by directing such requests to Western Sizzlin Corporation, attention:
Investor Relations, 401 Albemarle Ave SE, Roanoke, Virginia 24013, telephone at
(540) 345-3195.
Participants
In The Solicitation
The
Company, SNS, and the Company’s directors and officers may be deemed to be
participants in the solicitation of proxies from the Company’s stockholders in
connection with the proposed Merger. Information regarding the
Company’s directors and officers and a description of their interests in the
Company is contained in the Company’s definitive proxy statement on Schedule 14A
with respect to its 2009 Annual Meeting of Stockholders, which was filed with
the SEC on July 15, 2009, and will also be contained in the proxy
statement/prospectus relating to the proposed Merger when it becomes
available. The Company’s stockholders may obtain additional
information about the direct and indirect interests of the participants in the
acquisition, by security holdings or otherwise, by reading the proxy
statement/prospectus and other materials to be filed with the SEC when such
information becomes available.
Risks
Associated With Forward-Looking Statements
This
report including the news release incorporated by reference herein contains
“forward-looking statements” within the meaning of the Private Securities
Litigation Reform Act of 1995 and other federal securities laws and are intended
to be covered by the safe harbors created thereby. These statements
are based on current expectations and are subject to a number of risks and
uncertainties that could cause actual results to differ markedly from those
projected or discussed here. SNS and the Company caution readers not
to place undue reliance upon any such forward-looking statements, for actual
results may differ materially from expectations. Neither company
undertakes to publicly update or revise any forward-looking statements even if
experience or future changes make it clear that any projected results expressed
or implied will not be realized. Further information concerning the
types of factors that could impact the companies’ businesses can be found in
their filings with the SEC
Voting
Agreement
On
October 22, 2009, in connection with the Merger, The Lion Fund, L.P. and Dash
Acquisitions, LLC entered into a voting agreement with SNS (the “Voting
Agreements”) pursuant to which such parties have agreed to, among other things,
vote all shares of the Company’s Common Stock that they beneficially own or
exercise control and voting discretion over in favor of the proposal to adopt
the Merger Agreement and approve the Merger and against any action or agreement
that would result in a breach by the Company under the Merger Agreement or would
impede or interfere with the Merger. The Voting Agreements will
terminate and have no further force or effect upon the date on which the Merger
Agreement is terminated in accordance with its terms. The foregoing
is a summary of the Voting Agreements and is qualified in its entirety by the
form of Voting Agreements, which is included as Exhibit F to the Merger
Agreement filed as Exhibit 2.1 to this Current Report on Form 8-K and
incorporated herein by reference.
Item
9.01. Financial
Statements and Exhibits.
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2.1
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Agreement
and Plan of Merger, dated October 22, 2009, by and among Western Sizzlin
Corporation, The Steak n Shake Company and Grill Acquisition
Corporation*
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*
Schedules and exhibits omitted pursuant to Item 601(b)(2) of Regulation S-K. The
Company agrees to furnish supplementally a copy of any omitted schedule or
exhibit to the SEC upon request.
SIGNATURE
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this Current Report on Form 8-K to be signed on its behalf by the
undersigned hereunto duly authorized.
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October
23, 2009
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WESTERN
SIZZLIN CORPORATION
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By:
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Name:
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Robyn
B. Mabe
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Title:
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Vice
President and Chief Financial
Officer
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2.1
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Agreement
and Plan of Merger, dated October 22, 2009, by and among Western Sizzlin
Corporation, The Steak n Shake Company and Grill Acquisition
Corporation*
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*
Schedules and exhibits omitted pursuant to Item 601(b)(2) of Regulation S-K. The
Company agrees to furnish supplementally a copy of any omitted schedule or
exhibit to the SEC upon request.