UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE TO
(Rule 14d-100)
TENDER OFFER STATEMENT UNDER SECTION 14(d)(1)
OR SECTION 13(e)(1) OF THE SECURITIES EXCHANGE ACT OF 1934
(Amendment No. 3)
CALIFORNIA PIZZA KITCHEN, INC.
(Name of Subject Company (Issuer))
CPK MERGER SUB INC.
CPK HOLDINGS INC.
(Name of Filing Persons (Offeror))
GOLDEN GATE CAPITAL OPPORTUNITY FUND, L.P.
(Name of Filing Persons (Other Person(s))
Common Stock, Par Value $0.01 Per Share
(Title of Class of Securities)
13054D109
(CUSIP Number of Class of Securities)
Joshua Olshansky
CPK Holdings Inc.
c/o Golden Gate Capital
One Embarcadero Center, 39th Floor
San Francisco, CA 94111
Tel: (415) 983-2700
Fax: (415) 983-2828
(Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications on Behalf of Filing Persons)
With a copy to:
David Breach, Esq.
Daniel Wolf, Esq.
Kirkland & Ellis LLP
601 Lexington Avenue
New York, NY 10022
(212) 446-4800
CALCULATION OF FILING FEE
Transaction Valuation* | Amount of Filing Fee** | |
$470,717,365 | $54,651 | |
* | Calculated solely for purposes of determining the filing fee. The calculation assumes the purchase of 24,616,701 shares of common stock, par value $0.01 per share, at $18.50 per share. The transaction value also includes the aggregate offer price for 827,481 shares issuable pursuant to the cashless net exercise at the offer price of outstanding options with an exercise price less than $18.50 per share, which is calculated by multiplying the number of shares issuable pursuant to the cashless net exercise at the offer price of such outstanding options by $18.50. The share numbers have been provided to the Offerors by the Issuer and are as of May 31, 2011 (and include shares issuable to holders of stock options from which the Issuer or its representatives have received notices of exercise as of May 31, 2011). |
** | Calculated in accordance with Exchange Act Rule 0-11, as amended, and Fee Rate Advisory #5 for fiscal year 2011, issued December 22, 2010, by multiplying the transaction value by 0.0001161. |
x | Check the box if any part of the fee is offset as provided by Rule 0-11(a)(2) and identify the filing with which the offsetting fee was previously paid. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. |
Amount Previously Paid: | $54,651 | Filing Party: | CPK Holdings Inc. | |||
Form or Registration No.: | Schedule TO | Date Filed: | June 8, 2011 |
¨ | Check the box if the filing relates solely to preliminary communications made before the commencement of a tender offer. |
Check the appropriate boxes below to designate any transactions to which the statement relates:
x | third-party tender offer subject to Rule 14d-1. |
¨ | issuer tender offer subject to Rule 13e-4. |
¨ | going-private transaction subject to Rule 13e-3. |
x | amendment to Schedule 13D under Rule 13d-2. |
Check the following box if the filing is a final amendment reporting the results of the tender offer: ¨
If applicable, check the appropriate box(es) below to designate the appropriate rule provision(s) relied upon:
¨ | Rule 13e-4(i) (Cross-Border Issuer Tender Offer). |
¨ | Rule 14d-1(d) (Cross-Border Third-Party Tender Offer). |
This Amendment No. 3 to the Tender Offer Statement on Schedule TO (the Schedule TO) amends and supplements the Schedule TO relating to the tender offer by CPK Merger Sub Inc., a Delaware corporation (Purchaser) and a direct wholly-owned subsidiary of CPK Parent Inc., a Delaware corporation (Parent), for all of the outstanding common stock, par value $0.01 per share (Shares), of California Pizza Kitchen, Inc., a Delaware corporation (CPK), at a price of $18.50 per share net to the seller in cash without interest and less any required withholding taxes, if any, upon the terms and conditions set forth in the offer to purchase dated June 8, 2011 (the Offer to Purchase), a copy of which is attached as Exhibit (a)(1)(A), and in the related letter of transmittal (the Letter of Transmittal), a copy of which is attached as Exhibit (a)(1)(B), which, together with any amendments or supplements, collectively constitute the Offer.
All the information set forth in the Offer to Purchase is incorporated by reference herein in response to Items 1 through 9 and Item 11 of this Schedule TO, and is supplemented by the information specifically provided in this Schedule TO.
This Amendment No. 3 is being filed to amend and supplement Items 11 and 12 as reflected below.
Item 11. | Additional Information. |
Regulation M-A Item 1011
(a) Agreements, Regulatory Requirements and Legal Proceedings. Item 11(a) of the Schedule TO is hereby amended and supplemented by adding the following paragraphs immediately before the last paragraph of the sub-section captioned Litigation.
On June 24, 2011, a putative class action lawsuit captioned Del Pino v. Flax, et al., Case No. CV11-05311 PA (AGRx), was filed in the United States District Court for the Central District of California. The complaint names as defendants the members of the CPK Board, as well as CPK, Golden Gate Capital, Parent and the Purchaser. The plaintiff alleges that the CPK Board violated the federal securities laws and breached its fiduciary duties to CPKs stockholders in connection with the Offer and the Merger, and further claims that Golden Gate Capital, Parent and Purchaser aided and abetted those alleged breaches of fiduciary duty. The complaint alleges that the Offer and the Merger involve an unfair price, an inadequate sales process, that the deal protections contained in the Merger Agreement are preclusive, and that CPK has failed to make adequate disclosures about the background of the Offer and the Merger and the work performed by Moelis as CPKs financial advisor with respect to the Offer and the Merger. The complaint seeks injunctive relief, including to enjoin the Offer and the Merger, rescission or rescissory damages in the event the Offer or the Merger is consummated, and an award of attorneys and other fees and costs, in addition to other relief. Golden Gate Capital, Parent and Purchaser believe the plaintiffs allegations lack merit and intends to contest them vigorously.
On June 27, 2011, solely to avoid the costs, risks and uncertainties inherent in litigation, and without admitting any liability or wrongdoing, the parties to the actions pending in the Delaware Court of Chancery and Los Angeles County Superior Court signed a memorandum of understanding (the MOU) regarding a proposed settlement of all claims asserted in the actions related to the Offer and the Merger. In connection with the MOU, CPK has agreed to further amend the Schedule 14D-9, previously filed with the SEC, to include certain supplemental disclosures set forth in Amendment No. 4 to the Schedule 14D-9. The settlement is contingent upon, among other items, the execution of a formal stipulation of settlement and court approval, as well as the Merger becoming effective under applicable law. Subject to satisfaction of the conditions set forth in the MOU, the defendants will be released by the plaintiffs and all members of the relevant class of CPK stockholders from all claims arising out of the Offer and the Merger, upon which occurrence defendants will seek termination of any and all continuing shareholder actions in which the released claims are asserted. In the event the settlement is not approved or such conditions are not satisfied, Golden Gate Capital, Parent and Purchaser will continue to vigorously defend all the actions related to the Offer and the Merger.
Item 12. | Exhibits. |
Regulation M-A Item 1016
Item 12 of the Schedule TO is amended and supplemented by adding the following exhibit:
Exhibit No. |
||
(a)(10) | Class Action Complaint dated June 24, 2011 (Del Pino v. Larry S. Flax, et al.). |
SIGNATURES
After due inquiry and to the best of their knowledge and belief, each of the undersigned certifies that the information set forth in this statement is true, complete and correct.
Dated: June 28, 2011
CPK MERGER SUB INC. | ||
By: | /s/ Joshua Olshansky | |
Name: | Joshua Olshansky | |
Title: | President |
CPK HOLDINGS INC. | ||
By: | /s/ Joshua Olshansky | |
Name: | Joshua Olshansky | |
Title: | President |
GOLDEN GATE CAPITAL OPPORTUNITY FUND, L.P. | ||
By: | GGC Opportunity Fund Management, L.P., its general partner |
By: | GGC Opportunity Fund Management GP, Ltd., its general partner | |||
By: | /s/ David Dominik | |||
Name: | David Dominik | |||
Title: | Director |
EXHIBIT INDEX
Exhibit No. |
Description | |
(a)(1)(A) | Offer to Purchase, dated June 8, 2011.* | |
(a)(1)(B) | Letter of Transmittal.* | |
(a)(1)(C) | Notice of Guaranteed Delivery.* | |
(a)(1)(D) | Letter from the Information Agent to Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees.* | |
(a)(1)(E) | Letter to Clients for Use by Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees.* | |
(a)(1)(F) | Joint Press Release issued by CPK and Golden Gate Capital on May 25, 2011 (incorporated by reference to Exhibit 99.1 to the Form 8-K filed by CPK with the Securities and Exchange Commission on May 25, 2011).* | |
(a)(1)(G) | Summary Advertisement as published in the Wall Street Journal on June 8, 2011.* | |
(a)(5) | Class Action Complaint dated May 26, 2011 (Hilary Kramer v. Larry S. Flax, et al.)* | |
(a)(6) | Class Action Complaint dated May 26, 2011 (Lisa Palma v. California Pizza Kitchen, Inc., et al.)* | |
(a)(7) | Class Action Complaint dated May 27, 2011 (Mitchell Anderson v. California Pizza Kitchen, Inc., et al.)* | |
(a)(8) | Joint Press Release issued by CPK and Golden Gate Capital on June 8, 2011.* | |
(a)(9) | Class Action Complaint dated June 10, 2011 (Lane v. Larry S. Flax, et al.)* | |
(a)(10) | Class Action Complaint dated June 24, 2011 (Del Pino v. Larry S. Flax, et al.) | |
(b) | None. | |
(d)(1) | Agreement and Plan of Merger, dated as of May 24, 2011, by and among CPK, Purchaser and Parent (incorporated by reference to Exhibit 2.1 to the Form 8-K filed by CPK with the Securities and Exchange Commission on May 27, 2011).* | |
(d)(2) | Confidentiality Agreement, dated as of April 19, 2010, between Golden Gate Private Equity, Inc. and CPK (incorporated by reference to Exhibit (e)(4) of the |
Solicitation/Recommendation Statement on Schedule 14D-9 filed by CPK with the Securities and Exchange Commission on June 8, 2011).* | ||
(d)(3) | Exclusivity Agreement, dated as of April 11, 2011, between Golden Gate Private Equity, Inc. and CPK.* | |
(d)(4) | Letter Agreement Extending the Term of the Exclusivity Agreement, dated as of May 7, 2011, between Golden Gate Private Equity, Inc. and CPK.* | |
(d)(5) | Limited Guarantee, dated as of May 24, 2011, delivered by Golden Gate Capital Opportunity Fund, L.P. in favor of CPK.* | |
(d)(6) | Equity Commitment Letter, dated as of May 24, 2011, from Golden Gate Capital Opportunity Fund, L.P. to Parent.* | |
(d)(7) | Debt Commitment Letter, dated as of May 24, 2011, from General Electric Capital Corporation, GE Capital Markets, Inc., and Jefferies Finance LLC to Purchaser.* | |
(d)(8) | Stockholder Tender and Support Agreement, dated as of May 24, 2011, by and among Parent, Purchaser, CPK and Susan M. Collyns (incorporated by reference to Exhibit 99.1 to the Form 8-K filed by CPK with the Securities and Exchange Commission on May 27, 2011).* | |
(d)(9) | Stockholder Tender and Support Agreement, dated as of May 24, 2011, by and among Parent, Purchaser, CPK and Larry S. Flax (incorporated by reference to Exhibit 99.2 to the Form 8-K filed by CPK with the Securities and Exchange Commission on May 27, 2011).* | |
(d)(10) | Stockholder Tender and Support Agreement, dated as of May 24, 2011, by and among Parent, Purchaser, CPK and Sarah A. Goldsmith-Grover (incorporated by reference to Exhibit 99.3 to the Form 8-K filed by CPK with the Securities and Exchange Commission on May 27, 2011).* | |
(d)(11) | Stockholder Tender and Support Agreement, dated as of May 24, 2011, by and among Parent, Purchaser, CPK and Richard L. Rosenfield (incorporated by reference to Exhibit 99.4 to the Form 8-K filed by CPK with the Securities and Exchange Commission on May 27, 2011).* | |
(g) | None. | |
(h) | None. |
* | Previously filed. |
Exhibit (a)(10)
LEVI & KORSINSKY, LLP David E. Bower, Esq. SBN 119546 600 Corporate Pointe, Suite 1170 Culver City, CA 90230-7600 310-839-044 Fax: 310-558-3005 Email: dbower@zlk.com |
![]() | |
LEVI & KORSINSKY, LLP Eric M. Andersen, Esq. Joseph Levi, Esq. 30 Broad Street, 15th Floor New York, New York 10004 Tel: 212-363-7500 Fax: 212-363-7171 |
||
Attorneys for Plaintiff
UNITED STATES DISTRICT COURT FOR THE
CENTRAL DISTRICT OF CALIFORNIA
RICHARD D. DEL PINO, individually and on behalf of all others similarly situated, | Case No.:
| |||
Plaintiff,
v.
LARRY S. FLAX, RICHARD L. ROSENFIELD, LESLIE E. BIDER, MARSHALL S. GELLER, CHARLES G. PHILLIPS, ALAN I. ROTHENBERG, CALIFORNIA PIZZA KITCHEN, INC., GOLDEN GATE CAPITAL, CPK HOLDINGS INC., and CPK MERGER SUB INC.,
Defendants. |
CLASS ACTION COMPLAINT
1. VIOLATION OF EXCHANGE ACT
2. BREACH OF FIDUCIARY DUTIES - VALUE
3. BREACH OF FIDUCIARY DUTIES - DISCLOSURE
4. AIDING AND ABETTING
JURY TRIAL DEMANDED |
CLASS ACTION COMPLAINT
Plaintiff, by his attorneys, alleges upon information and belief, except for his own acts, which are alleged on knowledge, as follows:
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CLASS ACTION COMPLAINT
INTRODUCTION
1. Plaintiff brings this class action on behalf of the public stockholders of California Pizza Kitchen, Inc. (CPK1 or the Company) against CPKls Board of Directors (the Board or the Individual Defendants) for their breaches of fiduciary duties arising out of their attempt to sell the Company to affiliates of Golden Gate Capital (Golden Gate) pursuant to an unfair price, an unfair process, and through a materially misleading recommendation statement. Additionally, Plaintiff, individually, brings a claim against Defendants for their violations of Sections 14(d)(4) and 14(e) of the Securities Exchange Act of 1934 (the Exchange Act).
2. CPKI is a leading casual dining chain featuring an imaginative line of hearth-baked pizzas, and a broad selection of distinctive pastas, salads, appetizers, soups, sandwiches and desserts. Of the chains 265 restaurants, 205 are company-owned and 60 operate under franchise or license agreements.
3. On May 25, 2011, CPKI and Golden Gate announced a definitive agreement under which Golden Gate, through its affiliates CPK Holdings Inc. (CPK Holdings) and CPK Merger Sub Inc. (Merger Sub), will commence a tender offer to acquire all of the outstanding shares of CPKI for $18.50 per share in cash (the Proposed Transaction). The tender offer was commenced on June 8, 2011, and it is scheduled to expire on July 6, 2011.
4. The Board has breached their fiduciary duties by agreeing to the Proposed Transaction for grossly inadequate consideration. As described in more detail below, the consideration shareholders are to receive is inadequate and undervalues the Company.
5. Defendants have exacerbated their breaches of fiduciary duty by agreeing to lock up the Proposed Transaction with deal protection devices that preclude other bidders from making a successful competing offer for the Company. Specifically, pursuant to the merger agreement dated May 24, 2011 (the Merger Agreement), defendants agreed to: (i) a strict no-solicitation provision
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CLASS ACTION COMPLAINT
that prevents the Company from soliciting other potential acquirors or even in continuing discussions and negotiations with potential acquirors; (ii) a provision that provides Golden Gate with five business days to match any competing proposal in the event one is made; and (iii) a provision that requires the Company to pay Golden Gate a termination fee of $18 million in order to enter into a transaction with a superior bidder. These provisions substantially and improperly limit the Boards ability to act with respect to investigating and pursuing superior proposals and alternatives including a sale of all or part of CPKI.
6. On June 8, 2011, the Company filed a Schedule 14D-9 Recommendation Statement, which were further amended on June 15, 20, ad 23rd, 2011 (collectively, the Recommendation Statement) with the United States Securities and Exchange Commission (SEC) in connection with the tender offer and Proposed Transaction. The Recommendation Statement fails to provide the Companys shareholders with material information and provides them with materially misleading information thereby rendering the shareholders unable make an informed decision regarding whether to tender their shares in the tender offer. Defendants have violated Sections 14(d)(4) and 14(e) of the Exchange Act, by omitting material facts necessary to render the Recommendation Statement non-misleading. Defendants have also breached their fiduciary duty of candor by failing to disclose material information to the CPKI shareholders necessary for them to determine whether to tender their shares in support of the tender offer.
7. The misrepresentations and omissions in the Recommendation Statement are material to Plaintiff and the class he seeks to represent. Without this information, Plaintiff and the other CPKI shareholders will be deprived of their entitlement to make an informed decision on whether to tender their shares should these misrepresentations and omissions not be cured prior to the July 6, 2011 expiration of the tender offer.
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CLASS ACTION COMPLAINT
8. The Individual Defendants have breached their fiduciary duties of loyalty, due care, independence, good faith and fair dealing, and CPKI and Golden Gate have aided and abetted such breaches by CPKIs officers and directors. Plaintiff seeks to enjoin the Proposed Transaction unless and/or until defendants cure their breaches of fiduciary duty.
JURISDICTION AND VENNUE
9. The claims asserted herein arise under sections 14(d)(4) and 14(e) of the Exchange Act [15 U.S.C. § 78n] and state common law. This Court has subject matter jurisdiction pursuant to Section 27 of the Exchange Act, 15 U.S.C. § 78aa, and 28 U.S.C. § 1331. This court has jurisdiction over the state law claim pursuant to 28 U.S.C. §1367.
10. Venue is proper in this District because many of the acts and practices complained of herein occurred in substantial part in this District, including the dissemination of the materially misleading statements and omissions alleged herein. Defendant CPKI is headquartered in this District.
PARTIES
11. Plaintiff is, and has been at all relevant times, the owner of shares of common stock of CPKI.
12. CPKI is a corporation organized and existing under the laws of the State of Delaware. It maintains its principal corporate offices at 6053 West Century Boulevard, 11th Floor, Los Angeles, California 90045.
13. Defendant Larry S. Flax (Flax) has served as Co-Chief Executive Officer and Co-President of the Company and Co-Chairman of the Board. Flax, a co-founder of the Company, was named co-President in January 2004 and has served as co-Chief Executive Officer since July 2003 and as co-Chairman of the Board since the Companys formation in March 1985.
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CLASS ACTION COMPLAINT
14. Defendant Richard L. Rosenfield (Rosenfield) is Co-Chief Executive Officer and Co-President of the Company and Co-Chairman of the Board. Rosenfield, a co-founder of the Company, was named co-President in January 2004 and has served as co-CEO since July 2003 and as co-Chairman of the Board since the Companys formation in March 1985.
15. Defendant Leslie E. Bider (Bider) has been a director of the Company since 2008.
16. Defendant Marshall S. Geller (Geller) has been a director of the Company since 2008.
17. Defendant Charles G. Phillips (Phillips) has been a director of the Company since 2000.
18. Defendant Alan I. Rothenberg (Rothenberg) has been a director of the Company since 2006.
19. Defendants referenced in 13 through 18 are collectively referred to as Individual Defendants and/or the Board.
20. Defendant Golden Gate is a private equity firm headquartered in San Francisco, California that has approximately $9 billion of capital under management.
21. Defendant CPK Holdings Inc. is a Delaware corporation and is an affiliate of Golden Gate.
22. Defendant CPK Merger Sub Inc. is a Delaware corporation wholly owned by CPK Holdings Inc. that was created for the purposes of effectuating the Proposed Transaction.
INDIVIDUAL DEFENDANTS FIDUCIARY DUTIES
23. By reason of Individual Defendants positions with the Company as officers and/or directors, they are in a fiduciary relationship with Plaintiff and the other public shareholders of CPKI and owe them, as well as the Company, a duty of care, loyalty, good faith, candor, and independence.
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CLASS ACTION COMPLAINT
24. Under Delaware law, where the directors of a publicly traded corporation undertake a transaction that will result in either a change in corporate control or a break up of the corporations assets, the directors have an affirmative fiduciary obligation to obtain the highest value reasonably available for the corporations shareholders, and if such transaction will result in a change of corporate control, the shareholders are entitled to receive a significant premium. To diligently comply with their fiduciary duties, the Individual Defendants may not take any action that:
(a) adversely affects the value provided to the corporations shareholders;
(b) favors themselves or will discourage or inhibit alternative offers to purchase control of the corporation or its assets;
(c) adversely affects their duty to search and secure the best value reasonably available under the circumstances for the corporations shareholders; and/or
(d) will provide the Individual Defendants with preferential treatment at the expense of, or separate from, the public shareholders.
25. In accordance with their duties of loyalty and good faith, the Individual Defendants are obligated to refrain from:
(a) participating in any transaction where the Individual Defendants loyalties are divided;
(b) participating in any transaction where the Individual Defendants receive, or are entitled to receive, a personal financial benefit not equally shared by the public shareholders of the corporation; and/or
(c) unjustly enriching themselves at the expense or to the detriment of the public shareholders.
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CLASS ACTION COMPLAINT
26. Defendants also owe the Companys stockholders a duty of candor, which includes the disclosure of all material facts concerning the Proposed Transaction and, particularly, the fairness of the price offered for the stockholders equity interest. Defendants are knowingly or recklessly breaching their fiduciary duties of candor by failing to disclose all material information concerning the Proposed Transaction, and/or aiding and abetting other Defendants breaches.
27. Plaintiff alleges herein that the Individual Defendants, separately and together, in connection with the Proposed Transaction, are knowingly or recklessly violating their fiduciary duties, including their duties of care, loyalty, good faith, candor, and independence owed to plaintiff and other public shareholders of CPKI.
CLASS ACTION ALLEGATIONS
28. Plaintiff brings this action on its own behalf and as a class action on behalf of all owners of CPKI common stock and their successors in interest, except Defendants and their affiliates (the Class).
29. This action is properly maintainable as a class action for the following reasons:
(a) the Class is so numerous that joinder of all members is impracticable. As of June 23, 2011, CPKI has approximately 24.59 million shares outstanding.
(b) questions of law and fact are common to the Class, including, inter alia, the following:
(i) | Have the Individual Defendants breached their fiduciary duties of undivided loyalty, independence, or due care with respect to plaintiff and the other members of the Class in connection with the Proposed Transaction; |
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CLASS ACTION COMPLAINT
(ii) | Have the Individual Defendants breached their fiduciary duty to secure and obtain the best price reasonable under the circumstances for the benefit of plaintiff and the other members of the Class in connection with the Proposed Transaction; |
(iii) | Have the Individual Defendants misrepresented and omitted material facts in violation of their fiduciary duties owed by them to Plaintiff and the other members of the Class; |
(iv) | Have the defendants breached any of their other fiduciary duties to plaintiff and the other members of the Class in connection with the Proposed Transaction, including the duties of good faith, diligence, honesty and fair dealing; |
(v) | Have the defendants, in bad faith and for improper motives, impeded or erected barriers to discourage other strategic alternatives including offers from interested parties for the Company or its assets; |
(vi) | Whether plaintiff and the other members of the Class would be irreparably harmed were the transactions complained of herein consummated. |
(vii) | Have CPKI, Golden Gate, CPK Holdings Inc., and Merger Sub aided and abetted the Individual Defendants breaches of fiduciary duty; and |
(viii) | Is the Class entitled to injunctive relief or damages as a result of defendants wrongful conduct. |
(c) Plaintiff is committed to prosecuting this action, is an adequate representative of the Class, and has retained competent counsel experienced in litigation of this nature.
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CLASS ACTION COMPLAINT
(d) Plaintiffs claims are typical of those of the other members of the Class.
(e) Plaintiff has no interests that are adverse to the Class.
(f) The prosecution of separate actions by individual members of the Class would create the risk of inconsistent or varying adjudications for individual members of the Class and of establishing incompatible standards of conduct for the party opposing the Class.
(g) Conflicting adjudications for individual members of the Class might as a practical matter be dispositive of the interests of the other members not parties to the adjudications or substantially impair or impede their ability to protect their interests.
(h) Plaintiff anticipates that there will be no difficulty in the management of this litigation. A class action is superior to other available methods for the fair and efficient adjudication of this controversy
FURTHER SUBSTANTIVE ALLEGATIONS
30. CPKI, founded in 1985, is a leading casual dining chain featuring an imaginative line of hearth-baked pizzas, including the original BBQ Chicken Pizza, and a broad selection of distinctive pastas, salads, appetizers, soups, sandwiches and desserts. Of the chains 265 restaurants, 205 are company-owned and 60 operate under franchise or license agreements. CPK premium pizzas are also available to sports and entertainment fans at three Southern California venues: Dodger Stadium, Angel Stadium of Anaheim and STAPLES Center. Also included in the Companys portfolio of concepts is LA Food Show Grill & Bar, which is located in Manhattan Beach, California.
31. In a press release dated May 25, 2011, the Company announced that it had entered into a merger agreement with Golden Gate pursuant to which Golden Gate, through CPK Holdings and Merger Sub, will commence a tender offer to acquire all of the outstanding shares of the
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CLASS ACTION COMPLAINT
Company for $18.50 per share. Golden Gate commenced the tender offer on June 8, 2011, and it is scheduled to expire on July 6, 2011.
32. The Proposed Transaction consideration is inadequate. The Proposed Transaction represents a paltry premium of just 10.7% based on the $16.71 closing price of CPKI stock on May 24, 2011, the day prior to the announcement of the Proposed Transaction.
33. The Discounted Cash Flow Analysis conducted by Moelis & Company LLC (Moelis) yielded a value for the Company as high as $19.24 per share. The Selected Transactions Analysis conducted by Moelis yielded a value for the Company as high as $19.31 per share.
34. Indeed, numerous analysts set target prices for CPKI above the Proposed Transaction consideration of $18.50 per share. Specifically, Scott Swanson of Crowell, Weedon & Co. had a target price of $24 per CPK share; Bill Kavaler of Oscar Gruss & Son had a target price of $22 per CPK share; Lynn Collier of Sterne, Agee & Leach had a target price of $21 per CPK share; Bryan Elliott of Raymond James had a target price of $20 per CPK share; Larry Miller of RBC Capital Markets had a target price of $20 per CPK share; and Mitchell Speiser of The Buckingham Research Group had a target price of $19.50 per CPK share.
CPKIs Executives Officers and Directors Stand to Receive Unique Material Financial Benefits in the Proposed Transaction Not Available to CPKIs Public Shareholders
35. The Companys executive officers and directors have material conflicts of interest and are acting to better their own personal interests through the Proposed Transaction at the expense of CPKIs public shareholders.
36. For example, defendants Flax and Rosenfield are expected to join the post-merger company. As stated in the Recommendation Statement, as amended on June 23, 2011, on May 23, 2011 Rosenfeld and Flax engaged in discussions with representatives of Golden Gate Private Equity regarding the potential post-merger role of Mr. Rosenfield and Mr. Flax with the Company,
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CLASS ACTION COMPLAINT
and that Rosenfield and Flax and representatives of Golden Gate Private Equity also indicated a mutual willingness for Messrs. Rosenfield and Flax to continue to serve the Company post-merger in one or more capacities.
37. In addition, the Companys directors and executive officers hold restricted stock units and/or unvested stock options of the Company that, pursuant to the Merger Agreement, will no longer be subject to restrictions and will be converted into a right to receive the Proposed Transaction consideration of $18.50 per share. The following chart shows the value of the restricted stock units and unvested stock option held by the Companys executive officers and directors that they will be able to cash out pursuant to the Merger Agreement with Golden Gate:
Name of Executive Officer or Director |
Unvested Stock Options ($) |
Unvested
Company Restricted Stock ($)(1) |
||||||
Executive Officers |
||||||||
Richard L. Rosenfield |
0 | 986,679 | ||||||
Larry S. Flax |
0 | 986,679 | ||||||
Susan M. Collyns |
43,200 | 740,000 | ||||||
Thomas P. Beck |
70,706 | 0 | ||||||
Sarah A. Goldsmith-Grover |
54,694 | 0 | ||||||
Peter C. Gillette |
70,692 | 0 | ||||||
Directors |
||||||||
Leslie E. Bider |
0 | 78,403 | ||||||
Marshall S. Geller |
0 | 78,403 | ||||||
Charles G. Phillips |
20,207 | 47,508 | ||||||
Alan I. Rothenberg |
20,207 | 47,508 |
38. In addition, on April 2010, after the Company had already begun a process to shop the Company, the Board adopted a severance plan providing for the payment of severance benefits to its executive officers in the event of their termination under certain circumstances following a change of control. As stated in the Recommendation Statement:
In April 2010, the Company Board adopted, and in February 2011 it extended, the Severance Plan, which sets forth the terms of severance benefits in the event of a qualifying termination for employees holding the title of Vice President or above who are designated as participants by the Company Board or Compensation
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CLASS ACTION COMPLAINT
Committee. Messrs. Beck and Gillette and Ms. Goldsmith-Grover participate in the Severance Plan. The Severance Plan will become effective upon the consummation of a Corporate Transaction (as defined in the Severance Plan and which, for purposes of the Severance Plan, includes the consummation of the Offer) and will automatically terminate on the second anniversary of the date on which the Plan was adopted if no Corporate Transaction occurs before that date. The Severance Plan provides that a participant will be entitled to severance benefits if his or her employment is terminated by the Company without Cause or if the participant terminates his or her employment for Good Reason (each, as defined in the Severance Plan) within twelve months following a Corporate Transaction.
Under the Severance Plan, if a participants employment is terminated by the Company other than for Cause or by the participant for Good Reason within twelve months following a Corporate Transaction, the participant will be entitled to receive, subject to the signing of a general release of any claims against the Company, (i) any unpaid compensation and benefits accrued prior to the date of termination, (ii) a lump-sum payment equal to twelve months base salary and (iii) if the executive elects to receive COBRA benefits, a lump-sum payment equal to six months of the monthly COBRA premium in effect immediately prior to the date of termination. The Severance Plan also provides for customary confidentiality protections.
The Recommendation Statement fails to, but should, disclose the amount of severance payments expected to be received by each executive officer as a result of the Proposed Transaction pursuant to their respective agreements.
39. Based on the above, the Proposed Transaction is unfair to CPKIs public shareholders, and represents an effort by the Individual Defendants to aggrandize their own financial position and interests at the expense of and to the detriment of Class members.
The Unfair and Inadequate Sales Process
40. In order to procure for themselves and Company insiders the financial benefits and post-merger opportunities discussed above, the Board was predisposed to entering into a deal with a private equity bidder, as opposed to entering a deal with a strategic partner or pursuing other strategic alternatives. In April 2010, when the Company had just begun to explore strategic alternatives, representatives of the Companys legal counsel, Latham & Watkins LLP, discussed with the Board the fact that private equity partners often request or require that a targets existing
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CLASS ACTION COMPLAINT
management team remain in place and potentially make equity investments in the post-acquisition entity.
41. The Board focused its efforts on securing a deal with a private equity firm. On April 22, 2010, the Board received ten indications of interest, nine of which were from private equity firms, and one of which was a private equity bidder working with a strategic party. Although the Recommendation Statement does not state the breakdown of how many strategic and financial parties were contacted, there is no doubt the Companys main efforts were focused on private equity bidders.
42. Accordingly, the Board has not adequately shopped the Company among the whole universe of potential buyers, nor did they adequately consider other strategic alternatives outside of a sale of the Company as a whole. As described in the Recommendation Statement, on October 26, 2010, the Company received a revised proposal from Bidder C consisting of a self-tender by the Company for 75% of its outstanding Company Common Stock at $20.00 per share and the issuance to Bidder C of shares of a newly created preferred stock, with Bidder C becoming the majority stockholder of the Company and that on November 18, 2010, Bidder C had returned with a proposal to acquire approximately 80% of the outstanding Company Common Stock for $20.00 per share on November 18. Rather than pursuing either of these alternatives, the Company categorically determined to pursue a sale of the Company as a whole.
43. Indeed, a large CPKI shareholder has already spoken out publicly about the inadequacy of the Proposed Transaction. In a Schedule 13D filed with the SEC on May 25, 2011, Clinton Group, Inc., which owns about 5.1% of the Companys shares stated that it believe[s] that there may be other alternatives to maximize shareholder value including, but not limited to, (i) conducting a leveraged recapitalization and a self-tender offer at or above $19.50 per share and (ii) establishing a management succession plan.
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CLASS ACTION COMPLAINT
The Preclusive Deal Protection Devices
44. As part of the Merger Agreement, Defendants agreed to certain onerous and preclusive deal protection devices that operate conjunctively to make the Proposed Transaction a fait accompli and ensure that no competing offers will emerge for the Company.
45. By way of example, §6.02(a) of the Merger Agreement includes a no solicitation provision barring the Company from soliciting interest from other potential acquirers in order to procure a price in excess of the amount offered by Golden Gate. This section also demands that the Company terminate any and all prior or on-going discussions with other potential acquirors.
46. In addition, pursuant to §6.02 of the Merger Agreement, should an unsolicited bidder submit a competing proposal, the Company must notify Golden Gate of the bidders identity and the terms of the bidders offer. Thereafter, should the Board determine that the unsolicited offer is superior, before the Company can terminate the Merger Agreement with Golden Gate in order to enter into the competing proposal, it must grant Golden Gate five business days in which the Company must negotiate in good faith with Golden Gate (if Golden Gate so desires) and allow Golden Gate to amend the terms of the Merger Agreement to make a counter-offer so that the competing bid ceases to constitute a superior proposal. In other words, the Merger Agreement gives Golden Gate access to any rival bidders information and allows Golden Gate a free right to top any superior offer simply by matching it. Accordingly, no rival bidder is likely to emerge and act as a stalking horse, because the Merger Agreement unfairly assures that any auction will favor Golden Gate and piggy-back upon the due diligence of the foreclosed second bidder.
47. The Merger Agreement also provides that a termination fee of $18 million must be paid to Golden Gate by CPKI if the Company decides to pursue the competing offer, thereby essentially requiring that the competing bidder agree to pay a naked premium for the right to provide the shareholders with a superior offer.
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CLASS ACTION COMPLAINT
48. Golden Gate is also the beneficiary of a Top-Up provision that ensures that Golden Gate gains the shares necessary to effectuate a short-form merger. Pursuant to the Merger Agreement, if Golden Gate receives one share more than 90% of the shares outstanding through its tender offer, it can effect a short-form merger. In the event Golden Gate fails to acquire the 90% plus one required, the Merger Agreement also contains a Top-Up provision that grants Golden Gate an option to purchase additional shares from the Company in order to reach the 90% plus one share threshold required to effectuate a short-form merger.
49. Concurrently with the execution of the Merger Agreement, defendants Rosenfield and Flax, COO/CFO Susan Collyns and Chief Communications Officer Sarah Goldsmith-Grover, who together with their affiliates own in the aggregate approximately 11% of the Companys outstanding shares, have entered into agreements pursuant to which they will tender their shares into the tender offer and, if applicable, vote in favor of the merger with Golden Gate.
50. Ultimately, these preclusive deal protection provisions illegally restrain the Companys ability to solicit or engage in negotiations with any third party regarding a proposal to acquire all or a significant interest in the Company. The circumstances under which the Board may respond to an unsolicited written bona fide proposal for an alternative acquisition that constitutes or would reasonably be expected to constitute a superior proposal are too narrowly circumscribed to provide an effective fiduciary out under the circumstances.
The Materially Misleading and Incomplete Recommendation Statement
51. The Recommendation Statement fails to provide the Companys shareholders with material information and provides them with materially misleading information thereby rendering the shareholders unable make an informed decision regarding whether to tender their shares in the tender offer.
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CLASS ACTION COMPLAINT
52. The Recommendation Statement states that in March 2010, Moelis contacted 31 parties regarding their interest in a possible transaction involving CPKI, and that the Company ended up receiving indications of interest from nine private equity bidders and one joint private equity/strategic bidder. The Recommendation Statement must disclose the criteria used to select the 31 parties and how many of the 31 parties contacted were strategic parties, which is particularly important to gauge whether the Company adequately pursued possible acquirers and whether the Companys sales process even included strategic parties.
53. The Recommendation Statement must also disclose when Golden Gate first indicated their intent to retain certain executive officers of the Company post-merger, as well as when and whether all other interested parties (including Bidders A through F) indicated their intent for the post-merger employment of the Companys executive officers. This is particularly important in gauging whether the Board favored Golden Gate over other potential acquirers.
54. The Recommendation Statement states that the Board determined on March 30, 2011 that it would not formally respond to Bidder E or pursue further action with Golden Gate Private Equity until it received managements presentation of the Companys annual business plan, yet on April 11, 2011, prior to the annual business plan presentation, the Company entered into a three week exclusivity period with Golden Gate. The Recommendation Statement must disclose the reasons the Company did not wait until it received managements annual business plan presentation prior to entering into the exclusivity period.
55. The Recommendation Statement also:
(a) Fails to disclose the factors depressing CPKIs valuation considered by the Board in late 2009, and the reasons such factors were unlikely to change in the short terms, and potentially for a number of years;
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CLASS ACTION COMPLAINT
(b) Fails to disclose the reasons and factors considered by the Board in determining that a sale of CPK was likely to be the most effective way to maximize stockholder value in early 2010;
(c) Fails to disclose whether Moelis contacted any other parties other than Golden Gate on April 12, 2011 to seek interest in a transaction with the Company;
(d) Fails to disclose the nature of the interest from additional potential bidders did the April 12, 2011 press release generate, including how many parties contacted the Company and whether they were strategic or financial parties;
(e) Fails to disclose whether Bidder C was strategic or financial, and whether it had any discussions or contact with the Company regarding their interest in acquiring the Company prior to their submitting a bid on July 22, 2010;
(f) Fails to disclose the potential risks and effects of ending the sales process that were discussed by the Board on July 26, 2010;
(g) Fails to disclose the reasons the Company recontacted Golden Gate in early August 2010, and whether any other parties were also contacted at this time;
(h) Fails to disclose the reasons provided by Golden Gate, if any, for reducing its offer that was submitted on September 22, 2010;
(i) Fails to disclose the reasons the Board determined that Bidder Cs October 26, 2010 proposal for a self-tender by the Company for 75% of its outstanding Company Common Stock at $20.00 per share was too uncertain to CPKs stockholders in its current structure.
(j) Fails to disclose the risks and benefits of Bidder Cs offer to acquire approximately 80% of the Companys common stock for $20.0 per share compared to a cash offer to acquire all of the Companys outstanding shares that was discussed by the special committee on December 8, 2010;
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CLASS ACTION COMPLAINT
(k) Fails to disclose whether Bidder D was solicited or unsolicited, and whether it had any discussions or contact with the Company regarding their interest in acquiring the Company prior to their submitting a bid on November 29, 2010;
(1) Fails to disclose the reasons provided by Bidder C, if any, in late December 2010, that it not further pursue a transaction with CPKI;
(m) Fails to disclose whether Bidder E and Bidder F were strategic or financial parties, and whether they were solicited or unsolicited parties;
(n) Fails to disclose the reasons the Board determined on April 15, 2011 that continuing to pursue a potential strategic alternative was likely to be the most effective way to maximize stockholder value.
56. The Recommendation Statement also completely fails to disclose the underlying methodologies, key inputs and multiples relied upon and observed by Moelis, the Companys financial advisor, so that shareholders can properly assess the credibility of the various analyses performed by Moelis and relied upon by the Board in recommending that shareholders tender their shares in the tender offer. For example, the Recommendation Statement fails to disclose:
(a) The free cash flows of the Company for years 2011 through 2015 calculated by Moelis in the Discounted Cash Flow Analysis, as well as disclosure of all line items used to calculate the Companys free cash flows;
(b) The criteria used to select the 4.75x to 5.25x terminal EBITDA multiple range used in the Discounted Cash Flow Analysis, as well as the key inputs used to calculated the Companys weighted average cost of capital that was used to select the discount rate range used in the analysis;
(c) The criteria used to select the 5.0x to 6.5x multiple range that was applied to the Companys EBITDA in the Selected Publicly Traded Companies Analysis, which is particularly
- 18 -
CLASS ACTION COMPLAINT
important considering the range was well below the 7.6x median multiples and 8.2x mean multiple for EV/EBITDA multiples observed for all the selected companies;
(d) The reasons Moelis did not calculate an implied value for the Company using the Price/EPS multiples that it observed in the Selected Publicly Traded Companies Analysis;
(e) The criteria used to select the transaction used in the Selected Transactions Analysis, as well as the criteria used to select the 5.0x to 7.0x reference range applied to the Company in the analysis;
57. Accordingly, Plaintiff seeks injunctive and other equitable relief to prevent the irreparable injury that Company shareholders will continue to suffer absent judicial intervention.
CLAIMS FOR RELIEF
COUNT I
Violations of Section 14(d)(4) and 14(e) of the Exchange Act
(Brought Individually Against Individual Defendants)
58. Plaintiff repeats all previous allegations as if set forth in full herein.
59. Plaintiff brings this claim individually and not on behalf of the class.
60. Defendants have issued the Recommendation Statement with the intention of soliciting shareholder support of the Proposed Transaction.
61. Sections 14(d)(4) and 14(e) of the Exchange Act require full and complete disclosure in connection with tender offers. Specifically, Section 14(e) provides that:
It shall be unlawful for any person to make any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made, in the light of the circumstances under which they are made, not misleading, or to engage in any fraudulent, deceptive, or manipulative acts or practices, in connection with any tender offer or request or invitation for tenders, or any solicitation of security holders in opposition to or in favor of any such offer, request, or invitation. The Commission shall, for the purposes of this subsection, by rules and regulations define, and prescribe means
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CLASS ACTION COMPLAINT
reasonably designed to prevent, such acts and practices as are fraudulent, deceptive, or manipulative
62. The Recommendation Statement violates the Sections 14(d)(4) and 14(e) because it omits material facts, including those set forth above. Moreover, in the exercise of reasonable care, Defendants should have known that the Recommendation Statement is materially misleading and omits material facts that are necessary to render them non-misleading.
63. The misrepresentations and omissions in the Recommendation Statement are material to Plaintiff, and Plaintiff will be deprived of her entitlement to make a fully informed decision if such misrepresentations and omissions are not corrected prior to the expiration of the tender offer.
COUNT II
Breach of Fiduciary Duties
(Against All Individual Defendants)
64. Plaintiff repeats all previous allegations as if set forth in full herein.
65. The Individual Defendants have knowingly and recklessly and in bad faith violated fiduciary duties of care, loyalty, good faith, and independence owed to the public shareholders of CPKI and have acted to put their personal interests ahead of the interests of CPKI shareholders.
66. The Individual Defendants recommendation of the Proposed Transaction will result in change of control of the Company which imposes heightened fiduciary responsibilities to maximize CPKIs value for the benefit of the stockholders and requires enhanced scrutiny by the Court.
67. The Individual Defendants have breached their fiduciary duties of loyalty, good faith, and independence owed to the shareholders of CPKI because, among other reasons:
(a) they failed to take steps to maximize the value of CPKI to its public shareholders and took steps to avoid competitive bidding;
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CLASS ACTION COMPLAINT
(b) they failed to properly value CPKI; and
(c) they ignored or did not protect against the numerous conflicts of interest resulting from the directors own interrelationships or connection with the Proposed Transaction.
68. As a result of the Individual Defendants breaches of their fiduciary duties, Plaintiff and the Class will suffer irreparable injury in that they have not and will not receive their fair portion of the value of CPKIs assets and will be prevented from benefiting from a value-maximizing transaction.
69. Unless enjoined by this Court, the Individual Defendants will continue to breach their fiduciary duties owed to Plaintiff and the Class, and may consummate the Proposed Transaction, to the irreparable harm of the Class.
70. Plaintiff and the Class have no adequate remedy at law.
COUNT III
Breach of Fiduciary Duty Disclosure
(Against Individual Defendants)
71. Plaintiff repeats all previous allegations as if set forth in full herein.
72. The fiduciary duties of the Individual Defendants in the circumstances of the Proposed Transaction require them to disclose to Plaintiff and the Class all information material to the decisions confronting CPKIs shareholders.
73. As set forth above, the Individual Defendants have breached their fiduciary duty through materially inadequate disclosures and material disclosure omissions.
74. As a result, Plaintiff and the Class members are being harmed irreparably.
75. Plaintiff and the Class have no adequate remedy at law.
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CLASS ACTION COMPLAINT
COUNT IV
Aiding and Abetting
(Against CPKI, Golden Gate, CPK Holdings Inc., and Merger Sub)
76. Plaintiff repeats all previous allegations as if set forth in full herein.
77. As alleged in more detail above, Defendants CPKI, Golden Gate, CPK Holdings Inc., and Merger Sub have aided and abetted the Individual Defendants breaches of fiduciary duties.
78. As a result, Plaintiff and the Class members are being harmed.
79. Plaintiff and the Class have no adequate remedy at law.
WHEREFORE, Plaintiff demands judgment against defendants jointly and severally, as follows:
(A) declaring this action to be a class action and certifying Plaintiff as the Class representatives and his counsel as Class counsel;
(B) declaring that the Recommendation Statement is materially misleading and contains omissions of material fact in violation of Section 14(d)(4) and 14(e) of the Exchange Act;
(C) enjoining, preliminarily and permanently, the Proposed Transaction;
(D) in the event that the transaction is consummated prior to the entry of this Courts final judgment, rescinding it or awarding Plaintiff and the Class rescissory damages;
(E) directing that Defendants account to Plaintiff and the other members of the Class for all damages caused by them and account for all profits and any special benefits obtained as a result of their breaches of their fiduciary duties;
(F) awarding Plaintiff the costs of this action, including a reasonable allowance for the fees and expenses of Plaintiffs attorneys and experts; and
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CLASS ACTION COMPLAINT
(G) granting Plaintiff and the other members of the Class such further relief as the Court deems just and proper.
June 22, 2011 | LEVI & KORSINSKY, LLP | |
| ||
DAVID E. BOWER | ||
600 Corporate Pointe, Suite 1170 | ||
Culver City, CA 90230-7600 | ||
Tel: 310-839-0442 | ||
Fax: 310-558-3005 | ||
LEVI & KORSINSKY, LLP | ||
Eric M. Andersen, Esq. | ||
Joseph Levi, Esq. | ||
30 Broad Street, 15th Floor | ||
New York, NY 10004 | ||
Tel: 212-363-7500 | ||
Fax: 212-363-7171 | ||
Attorneys for Plaintiff |
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