-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, NRd7bDc+JWc0wChhR5VbqNqfKMrkIPibF0+kBoKQ0B4lBgAN6XR8haRa2rnCnR3c bkqbHacpW8V3Zt4HCn2Fzg== 0000950144-99-006635.txt : 19990524 0000950144-99-006635.hdr.sgml : 19990524 ACCESSION NUMBER: 0000950144-99-006635 CONFORMED SUBMISSION TYPE: 424B2 PUBLIC DOCUMENT COUNT: 1 FILED AS OF DATE: 19990521 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ALEXANDERS J CORP CENTRAL INDEX KEY: 0000103884 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-EATING PLACES [5812] IRS NUMBER: 620854056 STATE OF INCORPORATION: TN FISCAL YEAR END: 0103 FILING VALUES: FORM TYPE: 424B2 SEC ACT: SEC FILE NUMBER: 333-74849 FILM NUMBER: 99631986 BUSINESS ADDRESS: STREET 1: 3401 WEST END AVE STREET 2: P O BOX 24300 CITY: NASHVILLE STATE: TN ZIP: 37202 BUSINESS PHONE: 6152691900 MAIL ADDRESS: STREET 1: 3401 WEST END AVE STREET 2: SUITE 260 CITY: NASHVILLE STATE: TN ZIP: 37202 FORMER COMPANY: FORMER CONFORMED NAME: VOLUNTEER CAPITAL CORP / TN / DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: WINNERS CORP DATE OF NAME CHANGE: 19890910 FORMER COMPANY: FORMER CONFORMED NAME: VOLUNTEER CAPITAL CORP DATE OF NAME CHANGE: 19820520 424B2 1 J. ALEXANDER'S FORM 424B2 1 Filed Pursuant to Rule 424(b)(2) Registration Number 333-74849 1,089,067 Shares of Common Stock Subscription Price $3.75 Per Share (J. ALEXANDER'S LOGO) ------------------------- J. Alexander's is distributing non-transferable rights to owners of shares of J. Alexander's common stock. During this rights offering, J. Alexander's will issue up to 5,445,335 rights to purchase shares and up to 1,089,067 shares of common stock.
NET PROCEEDS TO SUBSCRIPTION PRICE J. ALEXANDER'S(1) ------------------ ------------------- Per Share............ $ 3.75 $ 3.75 Total.............. $4,084,001 $4,084,001
(1) Before deducting expenses payable by J. Alexander's, estimated to be $150,000. THE EXERCISE OF THE RIGHTS INVOLVES SUBSTANTIAL RISK. YOU SHOULD REFER TO THE DISCUSSION OF MATERIAL RISK FACTORS BEGINNING ON PAGE 3 OF THIS PROSPECTUS. You will receive 1.0 right for each share of common stock that you own at the close of business on May 20, 1999. Each right entitles you to purchase 0.2 share of common stock, rounding up any remaining fractional share to the next whole number of shares, for $3.75 per share. To participate in this rights offering, you must exercise your rights by 5:00 pm, Central Daylight Time on June 21, 1999. Shares of J. Alexander's common stock are currently traded on the New York Stock Exchange under the symbol "JAX." The rights may not be transferred and will not trade on any exchange or market. On May 18, 1999, the closing price of a share of the common stock on the NYSE was $4.06. NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. The date of this prospectus is May 20, 1999 2 TABLE OF CONTENTS
PAGE ---- Prospectus Summary.................... 1 Risk Factors.......................... 3 J. Alexander's May Need Additional Capital Even After the Sale to Solidus and the Rights Offering, and Without Additional Capital, J. Alexander's May Not Be Able To Develop New Restaurants.......... 3 J. Alexander's Credit Facility or Satisfactory Alternative Financing May Not be Available After July 1, 2000, Which Could Have an Adverse Effect on Results of Operations or New Restaurant Openings......................... 3 If J. Alexander's Loses or is Not Able to Hire Key Personnel, Its Operations Could Suffer.......... 4 If We Are Not in Compliance With the New York Stock Exchange's Share- holder Voting, Market Capitalization or Operating Result Requirements, We May Be Delisted......................... 4 Certain Anti-takeover Provisions May Affect Your Rights as a Shareholder...................... 4 Significant Ownership Positions May Affect Your Rights as a Shareholder...................... 5 Provisions of Tennessee Law Applicable to J. Alexander's May Discourage Third Party Attempts to Acquire Control............... 5 J. Alexander's Does Not Anticipate Paying Dividends on Common Stock............................ 5 J. Alexander's Stock Price Has Been and May Continue to Be Volatile, and May Be Less than $3.75 Per Share............................ 5
PAGE ---- J. Alexander's Faces Challenges in Opening New Restaurants.......... 6 Intense Competition Could Damage Profitability.................... 6 J. Alexander's May Experience Fluctuations in Quarterly Results Because of Timing of Restaurant Openings and Fluctuations in Costs............................ 6 Government Regulation and Licensing May Delay New Restaurant Openings or Affect Operations............. 7 J. Alexander's May Encounter Problems With Year 2000 Compliance....................... 7 The IRS May Contend that Shareholders Must Pay Taxes on the Distribution of Rights....... 8 A Warning About Forward-Looking Statements.......................... 8 If You Do Not Exercise Your Rights, Your Ownership Interest May Be Diluted............................. 9 Recent Developments................... 10 Use of Proceeds....................... 11 Capitalization........................ 12 The Rights Offering................... 13 If You Have Questions................. 18 Plan of Distribution.................. 18 Federal Income Tax Considerations..... 19 Tax Consequences to Shareholders.... 19 Taxation of J. Alexander's.......... 21 Legal Matters......................... 21 Experts............................... 21 If You Would Like Additional Information......................... 22 Questions and Answers About the Rights Offering............................ 24
i 3 PROSPECTUS SUMMARY The information in this section is a summary and does not contain all of the information that you should consider before exercising your rights. You should read the entire prospectus carefully, including the "Risk Factors" section, which details the risks involved in the exercise of rights and the ownership of our common stock, and the documents listed under "If You Would Like Additional Information." J. ALEXANDER'S CORPORATION J. Alexander's Corporation operates 20 J. Alexander's full-service, casual dining restaurants located in Tennessee, Ohio, Florida, Kansas, Alabama, Michigan, Illinois, Colorado, Texas, Kentucky and Louisiana. J. Alexander's is a traditional restaurant with an American menu that features prime rib of beef; hardwood-grilled steaks, seafood and chicken; pasta; salads and soups; assorted sandwiches, appetizers and desserts; and a full-service bar. J. Alexander's corporate offices are located at 3401 West End Avenue, P.O. Box 24300, Nashville, Tennessee 37202, telephone (615) 269-1900. THE RIGHTS OFFERING In this rights offering, J. Alexander's will distribute to you 1.0 right to purchase common stock for each share of common stock that you own at the close of business on May 20, 1999. For every right you receive, you will be entitled to purchase 0.2 share of common stock, rounding up any remaining fractional share to the nearest whole number of shares, for $3.75 per share. You can "exercise" rights to purchase the shares of common stock by following the instructions in this prospectus. You may exercise any number of your rights, or you may choose not to exercise any rights. USE OF PROCEEDS J. Alexander's gross proceeds from the rights offering depend on the number of shares of common stock that are purchased when shareholders exercise rights. If J. Alexander's sells all 1,089,067 shares offered by this Prospectus, then J. Alexander's will receive proceeds of $4,084,001 from the rights offering before payment of estimated offering expenses of $150,000. J. Alexander's will use the proceeds from the rights offering to repay a portion of the debt under its revolving credit facility. J. Alexander's may not receive any proceeds from the rights offering if shareholders do not exercise their rights. FINANCING PLAN The rights offering is part of a financing plan to raise equity capital to repay some of J. Alexander's outstanding debt. J. Alexander's believes that this will benefit J. Alexander's by reducing its debt-to-equity ratio and reducing its interest expense, which will improve earnings. J. Alexander's believes that accomplishing these objectives will improve its financial condition and may allow it to negotiate improved terms for its credit facilities, including interest rates and availability. 1 4 The other part of J. Alexander's financing plan is the sale of $4.1 million of common stock to Solidus, LLC, a Tennessee limited liability company, whose principal owners are Dr. John Morris and members of his family. E. Townes Duncan, a director of J. Alexander's, is also an owner of and manages the investments of Solidus. J. Alexander's received $4,073,498 for the sale of 1,086,266 shares of common stock to Solidus on March 22, 1999. J. Alexander's completed the sale of common stock to Solidus before the rights offering to provide J. Alexander's with additional equity on favorable terms and more quickly than would have been possible through the rights offering, and to ensure that J. Alexander's obtained the minimum amount of new equity capital which it believed it needed to effectively carry out its long-term business plan. Because Solidus purchased these shares before the rights offering, Solidus agreed that it will not exercise any rights attributable to the 1,086,266 additional shares it purchased. In addition, Solidus agreed not to purchase or obtain additional shares in excess of 33% of the Company's outstanding common stock and also agreed not to sell any of its common stock for a period of seven years. 2 5 RISK FACTORS As you decide whether to exercise your rights, and when you evaluate J. Alexander's performance and the forward-looking statements in this prospectus, you should carefully consider the following risk factors, as well as the other information contained in this prospectus. J. ALEXANDER'S MAY NEED ADDITIONAL CAPITAL EVEN AFTER THE SALE TO SOLIDUS AND THE RIGHTS OFFERING, AND WITHOUT ADDITIONAL CAPITAL, J. ALEXANDER'S MAY NOT BE ABLE TO DEVELOP NEW RESTAURANTS Even after the completion of the sale to Solidus and the rights offering, J. Alexander's may need additional capital to meet its capital requirements. J. Alexander's cannot assure you that such capital will be available on satisfactory terms. If all of the rights are not exercised, or if J. Alexander's fails to reach sufficient cash flows, J. Alexander's will require additional debt or equity. J. Alexander's existing credit facility requires J. Alexander's to maintain certain financial ratios and also prohibits new borrowing other than under the revolving credit facility. J. Alexander's ability to conduct its business depends to a significant degree on its ability to incur indebtedness and obtain equity capital. J. Alexander's needs financing primarily to fund its development of new restaurants. To meet these needs, J. Alexander's currently uses cash from operations and borrowings under a revolving credit facility. Through the sale to Solidus and the rights offering, its existing credit facility and cash flow from operations, J. Alexander's believes that it will have access to sufficient funds to carry on its existing level of business and develop additional restaurants. J. ALEXANDER'S CREDIT FACILITY OR SATISFACTORY ALTERNATIVE FINANCING MAY NOT BE AVAILABLE AFTER JULY 1, 2000, WHICH COULD HAVE AN ADVERSE EFFECT ON RESULTS OF OPERATIONS OR NEW RESTAURANT OPENINGS J. Alexander's cannot assure you that its existing credit facility will remain available past July 1, 2000, and J. Alexander's cannot assure you that it will be successful in consummating any future financing transactions on satisfactory terms. If the credit facility is not available after July 1, 2000, J. Alexander's would be forced to seek alternative financing for its debt, whether through the sale of additional equity, issuance of debt securities or a new credit facility, which may be on less favorable terms, including increased interest rates. Costs incurred for future financing transactions, such as increased interest expense, could have an adverse effect on J. Alexander's results of operations and could result in delays of new restaurant openings. Factors which could affect J. Alexander's access to the capital markets, or the costs of such capital, include: - changes in interest rates, - general economic conditions, and - investors' perceptions of J. Alexander's business, results of operations, leverage, financial condition and business prospects. 3 6 Economic, financial, competitive and other matters strongly influence each of these factors, and J. Alexander's may not be able to control those influences. In addition, covenants under J. Alexander's existing or future debt securities and credit facilities may significantly restrict J. Alexander's ability to incur additional indebtedness or to issue preferred stock. IF J. ALEXANDER'S LOSES OR IS NOT ABLE TO HIRE KEY PERSONNEL, ITS OPERATIONS COULD SUFFER If J. Alexander's loses certain key employees or cannot retain or attract key employees in the future, J. Alexander's operations could be adversely affected. J. Alexander's depends on the efforts and abilities of a number of its current key management personnel, including Lonnie J. Stout II, its President and Chief Executive Officer. The success of J. Alexander's depends to a large extent on its ability to retain and continue to attract key employees through its compensation plans, including employee stock options. IF WE ARE NOT IN COMPLIANCE WITH THE NEW YORK STOCK EXCHANGE'S SHAREHOLDER VOTING, MARKET CAPITALIZATION OR OPERATING RESULT REQUIREMENTS, WE MAY BE DELISTED It is possible that the New York Stock Exchange may consider whether to delist J. Alexander's common stock because the New York Stock Exchange may assert that shareholder approval for J. Alexander's recent sale of common stock to Solidus or for the rights offering is required under its guidelines or that J. Alexander's is otherwise not in compliance with New York Stock Exchange requirements relating to market capitalization or operating results. If the New York Stock Exchange delists J. Alexander's common stock, J. Alexander's would apply for listing of the common stock for trading on The Nasdaq Stock Market's National Market or Small Cap Market. If the common stock was not listed on an exchange or a national market, shareholders would be able to trade common stock only in negotiated private transactions. This would significantly impair their liquidity and could adversely affect the price of the common stock. The New York Stock Exchange has authorized listing of the shares to be sold in the rights offering and the shares sold to Solidus, subject to notice of issuance. CERTAIN ANTI-TAKEOVER PROVISIONS MAY AFFECT YOUR RIGHTS AS A SHAREHOLDER The ability of the Board of Directors to issue preferred stock and the existence of a shareholder rights plan could discourage a takeover attempt or have a depressive effect on the price of the common stock. J. Alexander's has in effect a shareholder rights plan, which is intended to encourage third parties interested in acquiring J. Alexander's to negotiate with the Board of Directors. Under the shareholder rights plan, shares of common stock have attached Series A Junior Preferred Stock purchase rights, which may be exercised if a person or group (other than Solidus and its affiliates) acquires 20% of the outstanding common stock or if a person or group initiates a tender or exchange offer that would result in such person or group acquiring 10% or more of the outstanding common stock. Because a potential acquiror must negotiate with the Board of Directors in order to avoid triggering the preferred stock purchase rights, the existence of the shareholder rights plan could discourage a takeover attempt or have a depressive effect on the price of the common stock. J. Alexander's Board of Directors also has the authority to issue up to 1,000,000 shares of preferred stock and to determine the price, rights, preferences and privileges of those shares without any further vote of, or action by, J. Alexander's shareholders. Your rights will be subject to, and may be adversely affected by, the rights of 4 7 holders of preferred stock. If J. Alexander's chooses to issue preferred stock with voting rights, the issuance could provide desirable flexibility in connection with possible acquisitions and other corporate purposes. SIGNIFICANT OWNERSHIP POSITIONS MAY AFFECT YOUR RIGHTS AS A SHAREHOLDER Solidus currently owns approximately 24% of the outstanding common stock. In the future, Solidus' vote of its common stock will have a significant impact on the outcome of any matters that are determined by a majority vote of J. Alexander's shareholders. In addition, the ownership of a significant percentage of the common stock by a single shareholder, such as Solidus, could make it more difficult for a third party to acquire control of J. Alexander's. PROVISIONS OF TENNESSEE LAW APPLICABLE TO J. ALEXANDER'S MAY DISCOURAGE THIRD-PARTY ATTEMPTS TO ACQUIRE CONTROL Certain provisions of Tennessee law could make it more difficult for a third party to acquire control of J. Alexander's and therefore could have a depressive effect on the price of the common stock. The Tennessee Business Combination Act provides that generally, any party owning more than 10% of the stock in a publicly held Tennessee corporation cannot engage in a business combination with the corporation unless the combination takes place at least five years after the shareholder first acquired a 10% interest and either is approved by at least two-thirds of the noninterested voting shares of the corporation or satisfies certain fairness conditions. Tennessee's Investor Protection Act, in addition to prohibiting fraudulent, deceptive, or manipulative practices by any party in connection with a tender offer, requires a party making a tender offer directed at certain Tennessee corporations to file a registration statement with the Commissioner of Insurance. The Investor Protection Act also requires both the offeror and the offeree corporation to deliver all solicitation materials used in connection with the tender offer to the Commissioner. J. ALEXANDER'S DOES NOT ANTICIPATE PAYING DIVIDENDS ON COMMON STOCK J. Alexander's does not plan to pay cash dividends on its common stock in the foreseeable future. The Board of Directors will decide, in the exercise of its business judgment, whether to apply legally available funds to the payment of dividends. The Board of Directors will consider J. Alexander's results of operations and financial condition, any existing or proposed commitments for the use of available funds, and J. Alexander's obligations to its creditors or holders of preferred stock, if any preferred stock is issued. Financial covenants in J. Alexander's future credit agreements may restrict J. Alexander's ability to pay dividends. J. ALEXANDER'S STOCK PRICE HAS BEEN AND MAY CONTINUE TO BE VOLATILE, AND MAY BE LESS THAN $3.75 PER SHARE J. Alexander's cannot predict whether a shareholder will be able to sell common stock purchased in this rights offering for a price that equals or exceeds the subscription price of $3.75 per share. Trading volume and prices for the common stock have been subject to wide fluctuations during the past year and may continue to fluctuate in response to quarterly variations in operating results, announced earnings and other factors. 5 8 J. Alexander's cannot foresee or predict such events. The market price of J. Alexander's common stock could also be influenced by developments or matters not related to J. Alexander's, including the sale or attempted sale of a large amount of J. Alexander's common stock on the open market by a shareholder. A shareholder is not permitted to revoke the exercise of a right, even if the market price of the common stock falls prior to the closing of this rights offering. J. ALEXANDER'S FACES CHALLENGES IN OPENING NEW RESTAURANTS It has been J. Alexander's experience that new restaurants generally generate operating losses in the initial months following opening while they build sales levels to maturity. J. Alexander's currently operates twenty J. Alexander's restaurants, of which six have been open for less than two years. Because of J. Alexander's relatively small restaurant base, an unsuccessful new restaurant could have a more adverse effect on our results of operations than would be the case in a restaurant company with a greater number of restaurants. J. Alexander's continued growth depends on its ability to open new restaurants and to operate them profitably, which will depend on a number of factors, including: - the selection and availability of suitable locations, - the hiring and training of sufficiently skilled management and other personnel and - other factors, some of which are beyond the control of J. Alexander's. INTENSE COMPETITION COULD DAMAGE PROFITABILITY The restaurant industry is intensely competitive with respect to price, service, location and food quality, and there are many well-established competitors with substantially greater financial and other resources than J. Alexander's. Some of J. Alexander's competitors have been in existence for a substantially longer period than J. Alexander's and may be better established in markets where J. Alexander's restaurants are or may be located. The restaurant business is often affected by changes in consumer tastes, national, regional or local economic conditions, demographic trends, traffic patterns and the type, number and location of competing restaurants. J. ALEXANDER'S MAY EXPERIENCE FLUCTUATIONS IN QUARTERLY RESULTS BECAUSE OF TIMING OF RESTAURANT OPENINGS AND FLUCTUATIONS IN COSTS J. Alexander's quarterly results of operations are affected by timing of the opening of new J. Alexander's restaurants, and fluctuations in the cost of food, labor, employee benefits, and similar costs over which J. Alexander's has limited or no control. J. Alexander's business may also be affected by inflation, which could have the effect of increasing J. Alexander's costs for food, labor, employee benefits, and other routine expenditures. In the past, management has attempted to anticipate and avoid material adverse effects on J. Alexander's profitability from increasing costs through its purchasing practices and menu price adjustments, but there can be no assurance that it will be able to do so in the future. Fluctuations in quarterly results may have a negative impact on the stock price. 6 9 GOVERNMENT REGULATION AND LICENSING MAY DELAY NEW RESTAURANT OPENINGS OR AFFECT OPERATIONS The restaurant industry is subject to extensive state and local government regulation relating to the sale of food and alcoholic beverages, and sanitation, fire and building codes. Termination of the liquor license for any J. Alexander's restaurant would adversely affect the revenues for the restaurant. Restaurant operating costs are also affected by other government actions that are beyond J. Alexander's control, which may include increases in the minimum hourly wage requirements, workers' compensation insurance rates and unemployment and other taxes. If J. Alexander's experiences difficulties in obtaining or fails to obtain required licensing or other regulatory approvals, this delay or failure could delay or prevent the opening of a new J. Alexander's restaurant. The suspension of, or inability to renew, a license could interrupt operations at an existing restaurant, and the inability to retain or renew such licenses would adversely affect the operations of the new restaurants. J. ALEXANDER'S MAY ENCOUNTER PROBLEMS WITH YEAR 2000 COMPLIANCE The term "Year 2000" is a general term used to describe the various problems that may result from the improper processing of dates and date-sensitive calculations by computers and other machinery as the year 2000 is approached and reached. J. Alexander's has completed its assessment of its internal information technology systems and its major information technology vendors and detailed plans have been developed to address system modifications required by September 30, 1999. Generally, J. Alexander's information systems are relatively new systems based on personal computer, rather than mainframe, technology. As a result, J. Alexander's remediation process consists primarily of replacing personal computers which are not Year 2000 compliant and installing upgrades from certain third party software vendors which J. Alexander's has been advised will make that software Year 2000 compliant. As indicated, the assessment phase with respect to information technology systems has been completed. With respect to remediation, all of J. Alexander's personal computers have been tested for Year 2000 compliance, and replaced as necessary. Software upgrades are expected to be installed on or before August 31, 1999, with testing completed by September 30, 1999. J. Alexander's estimates that its Year 2000 readiness initiatives with respect to its information technology systems is approximately 50% complete. J. Alexander's is currently in the process of assessing its non-information technology systems that utilize embedded technology such as microcontrollers and reviewing them for Year 2000 compliance. J. Alexander's will continue to assess these systems and take appropriate action with respect to non-Year 2000 compliant systems of this nature where practicable. However, J. Alexander's does not believe that non-Year 2000 compliance of these systems will have a material effect on J. Alexander's operations. J. Alexander's information systems are generally not interfaced with third party vendors. However, to operate its business, J. Alexander's relies upon government agencies, utility companies, providers of telecommunication services, suppliers, and other third party service providers ("Material Relationships"), over which it can assert little control. J. Alexander's ability to conduct its core business is dependent upon the ability of these Material Relationships to rectify their Year 2000 issues to the extent they affect J. Alexander's. If the telecommunications carriers, public utilities and other Material Relationships do not appropriately rectify their Year 2000 issues, J. Alexander's ability to 7 10 conduct its core business may be materially impacted, which could result in a material adverse effect on J. Alexander's financial condition. J. Alexander has had discussions with a limited number of its Material Relationships regarding their Year 2000 readiness and plans to further query certain of its Material Relationships in order to obtain additional information from them. J. Alexander believes that making these inquiries nearer Year 2000 will allow it to receive the latest information from its Material Relationships regarding their state of readiness. J. Alexander's plans to complete its survey process prior to June 30, 1999, and will use information obtained from that process to further assess its risks and assist in the development of contingency plans prior to the end of 1999. Because J. Alexander's remediation, testing and, with respect to Material Relationships, assessment phases are not complete, it has not fully assessed its risk from potential Year 2000 failures, and has not yet developed detailed contingency plans specific to Year 2000 events for any specific area of business. J. Alexander's is unable to estimate the costs that it may incur as a result of Year 2000 problems suffered by the parties with which it deals, such as Material Relationships, and there can be no assurance that J. Alexander's will successfully address the Year 2000 problems present in its own systems. Year 2000 problems in J. Alexander's systems or those of its Material Relationships could cause J. Alexander's to be unable to keep its restaurants open in the initial days or weeks after January 1, 2000, which could result in a material adverse effect on J. Alexander's financial condition. THE IRS MAY CONTEND THAT SHAREHOLDERS MUST PAY TAXES ON THE DISTRIBUTION OF RIGHTS The Internal Revenue Service may contend that the distribution of rights to shareholders is a taxable distribution, although it is structured as a tax-free stock dividend under Section 305 of the Internal Revenue Code. If the IRS should prevail, you would be taxed on the fair market value of the rights you receive and you would have to pay taxes in cash based on the value of the rights even though you are not receiving a cash distribution in connection with the distribution or exercise of the rights. You would have to pay this tax whether or not you exercise the rights. Even if the distribution should be taxable, the fair market value of the rights is likely to be minimal because the rights are not transferable, because the exercise price is greater than the market price of our common stock on the date J. Alexander's announced the rights offering to the public and because the exercise price is likely to be only slightly less than the market price over the time period that the rights may be exercised. A WARNING ABOUT FORWARD-LOOKING STATEMENTS This prospectus may contain "forward-looking statements." Any statement in this prospectus, other than a statement of historical fact, may be a forward-looking statement. J. Alexander's believes forward-looking statements can generally be identified by looking for words such as "may," "will," "expect," "intend," "estimate," "anticipate," "believe" or "continue." Variations on those or similar words, or the negatives of such words, also may indicate forward-looking statements. Although J. Alexander's believes that the expectations reflected in this prospectus are reasonable, J. Alexander's cannot assure you that its expectations will be correct. Factors 8 11 which could affect actual results include, but are not limited to, J. Alexander's ability to increase sales in its restaurants; J. Alexander's ability to recruit and train qualified restaurant management personnel; intense competition within the casual dining industry; changes in business and economic conditions; changes in consumer tastes; and government regulations. J. Alexander's has included a discussion entitled "Risk Factors" in this prospectus, disclosing other important factors that could cause its actual results to differ materially from its expectations. If in the future you hear or read any forward-looking statements concerning J. Alexander's, you should refer back to these Risk Factors. IF YOU DO NOT EXERCISE YOUR RIGHTS, YOUR OWNERSHIP INTEREST MAY BE DILUTED If you do not exercise all of your rights, you may suffer significant dilution of your percentage ownership in J. Alexander's relative to shareholders who exercise their rights. Immediately after the rights offering, the net tangible book value per share of common stock will decrease. The chart below illustrates the potential dilution that could result immediately after the closing of the rights offering if a shareholder who owns 100,000 shares of common stock fails to exercise its rights, and other shareholders purchase all 1,069,067 remaining shares of common stock sold in the rights offering.
AFTER THE RIGHTS AFTER THE RIGHTS OFFERING OFFERING ASSUMING ASSUMING BEFORE THE SHAREHOLDER SHAREHOLDER RIGHTS EXERCISES EXERCISES NO OFFERING ALL RIGHTS RIGHTS ---------- ----------- ---------------- Shares Owned by Shareholder................. 100,000 120,000 100,000 Total Number of Common Shares Outstanding... 6,531,601 7,620,668 7,600,668 Shareholder's Percentage Ownership.......... 1.53% 1.57% 1.32%
9 12 RECENT DEVELOPMENTS FIRST QUARTER RESULTS On April 26, 1999, J. Alexander's reported operating results for the first quarter of 1999, with higher operating income and same store sales. For the first quarter of 1999, J. Alexander's had average weekly same store sales of $76,900, increasing by 3.8% over $74,100 posted for the first quarter of 1998. Net sales for the quarter rose 9.7% to $19,208,000 from $17,512,000. J. Alexander's reported net income of $244,000, or $.04 per share, for the first quarter of 1999, up from a loss of $1,104,000, or $.20 per share, in the first quarter of 1998. First quarter results of 1999 included a pre-tax gain of $90,000 related to the repurchase of a portion of J. Alexander's convertible debentures. These results are set out in the chart below.
FIRST QUARTER 1999 1998 ------------- ----------- ----------- Average Weekly Same Store Sales............. $ 76,900 $ 74,100 Net Sales................................... 19,208,000 17,512,000 Net Income.................................. 244,000 (1,104,000) Net Income Per Share........................ .04 (.20)
For 1999, J. Alexander's has plans to open a restaurant in West Bloomfield, Michigan, and is finalizing its plans for a restaurant in Cincinnati, Ohio, with construction expected to start in the fall of 1999. RECENT CONTINGENT PROPOSAL BY O'CHARLEY'S, INC. In April 1999, O'Charley's, Inc. proposed to the Board of Directors of J. Alexander's that the two companies discuss a business combination in which O'Charley's would consider paying an unspecified combination of cash and O'Charley's stock designed to be valued at $5.50 per share of J. Alexander's common stock. The proposal was conditioned on Solidus' agreeing to sell its 1,086,266 shares of J. Alexander's stock purchased on March 22, 1999 to O'Charley's at $3.75 per share. The proposal was also conditioned on J. Alexander's canceling this rights offering. The Board of Directors of J. Alexander's declined to pursue discussions with O'Charley's because J. Alexander's Board of Directors and management believe that it is in the best interest of J. Alexander's and its shareholders to continue to execute its strategic business plan as an independent public company. SALE OF COMMON STOCK TO SOLIDUS On March 22, 1999, Solidus purchased 1,086,266 additional shares of common stock for approximately $4.1 million. In addition, Solidus agreed to the following: - for a period of seven years, Solidus would not acquire or hold more than 33% of J. Alexander's common stock. - for a period of seven years, Solidus would not solicit proxies for a vote of the shareholders of J. Alexander's. 10 13 - for a period of seven years, Solidus would not sell J. Alexander's common stock it owns and would only transfer common stock to J. Alexander's, a person, entity or group approved by J. Alexander's or to an affiliate of Solidus. - the above restrictions on Solidus' ownership and ability to solicit proxies would terminate in the event of certain tender offers or exchange offers, a notice filing with the Department of Justice relating to the acquisition of more than 15% of the outstanding voting securities or with the SEC relating to the acquisition of more than 10% of the outstanding common stock, J. Alexander's proposing or approving a merger or other business combination, or a change to a majority of J. Alexander's Board of Directors over a two-year period. - Solidus would not exercise rights during this rights offering attributable to the 1,086,266 additional shares of common stock purchased on March 22, 1999. USE OF PROCEEDS J. Alexander's will apply its net proceeds from the rights offering to repay a portion of the debt under its revolving credit facility. Amounts repaid will continue to be available for reborrowing. Borrowings under the revolving credit facility bear interest at a rate equal to LIBOR plus a spread of two to three percent, depending on the ratio of J. Alexander's senior debt to EBITDA (earnings before interest, taxes, depreciation and amortization). The facility matures, unless J. Alexander's elects to convert outstanding borrowings to a term loan, on July 1, 2000. After applying the proceeds from the sale of 1,086,266 additional shares of common stock to Solidus, the principal amount outstanding as of April 29, 1999 under the revolving credit facility was $5.8 million. Borrowings under the credit facility were incurred to finance development of J. Alexander's restaurants. Assuming that shareholders exercise the rights to purchase 1,089,067 shares of common stock, J. Alexander's will receive net proceeds from this rights offering of approximately $3.9 million after payment of approximately $150,000 in offering expenses. J. Alexander's may not receive any proceeds from the rights offering if shareholders do not exercise their rights. 11 14 CAPITALIZATION The following table sets forth the short-term indebtedness and the capitalization of J. Alexander's, on an historical basis as of January 3, 1999, and on a pro forma basis as of January 3, 1999, based on completion of the Solidus purchase. The net proceeds from the sale to Solidus on March 22, 1999 were applied as set forth above in Use of Proceeds.
JANUARY 3, 1999 ------------------ AS ACTUAL ADJUSTED ------- -------- (IN THOUSANDS) Current portion of long-term debt:.......................... $ 1,917 $ 1,917 ======= ======= LONG-TERM DEBT: Long-term debt and obligations under capital leases, less current maturities........................................ $21,361 $17,288 ------- ------- STOCKHOLDERS' EQUITY: Common stock, $0.05 par value; 10,000,000 shares authorized; 5,431,335 issued and outstanding; 6,517,601 outstanding, as adjusted(1)............................................ 272 326 Preferred stock, no par value; authorized 1,000,000 shares; none issued............................................... -- -- Additional paid in capital.................................. 30,007 34,026 Retained earnings........................................... 4,272 4,272 ------- ------- 34,551 38,624 Note receivable -- Employee Stock Ownership Plan(2)......... (820) (820) ------- ------- Total stockholders' equity................................ 33,731 37,804 ------- ------- Total capitalization................................... $55,092 $55,092 ======= =======
- ------------------------- (1) Does not include 678,820 shares of common stock reserved for issuance upon the exercise of options granted pursuant to J. Alexander's existing stock option plans and 774,648 shares of common stock reserved for issuance upon conversion of J. Alexander's Convertible Subordinated Debentures due 2003. (2) During 1992, J. Alexander's established an Employee Stock Ownership Plan ("ESOP"), which purchased 457,055 shares of common stock for an aggregate purchase price of $1,714,000. J. Alexander's funded the ESOP by loaning it an amount equal to the purchase price. The loan is secured by a pledge of the unallocated stock held by the ESOP. J. Alexander's has made a contribution to the ESOP each year since the ESOP was established allowing the ESOP to make its scheduled loan repayments to J. Alexander's, with the exception of 1996 when no contribution was made. The terms of the ESOP note, as amended in 1997, call for interest to be paid at an annual rate of 10% and for repayment of the ESOP note's remaining principal in annual amounts ranging from $135,000 to $197,000 over the period 1999 through 2003. 12 15 THE RIGHTS OFFERING THE RIGHTS J. Alexander's is distributing non-transferable rights to owners of shares of its common stock at the close of business on May 20, 1999, at no cost to the shareholders. J. Alexander's will give you 1.0 right for each share of common stock that you own at the close of business on May 20, 1999. If you wish to exercise your rights, you must do so on or before June 21, 1999 at 5:00 p.m., Central Daylight Time. After that date, the rights will expire and will no longer be exercisable. BASIC SUBSCRIPTION RIGHT For each right you receive, you will be entitled to purchase, upon payment of $3.75 per share to J. Alexander's, 0.2 share of common stock, rounding up any remaining fractional share to the next whole number of shares (the "Basic Subscription Right"). J. Alexander's will send you certificates representing the shares of common stock that you purchase pursuant to your Basic Subscription Right as soon as practicable after June 21, 1999, whether you exercise your rights immediately prior to that date or earlier. EXPIRATION DATE The rights will expire at 5:00 p.m., Central Daylight Time, on June 21, 1999, unless J. Alexander's, in its discretion, extends the rights offering for up to 10 days. If you do not exercise your Basic Subscription Rights on or prior to June 21, 1999, the rights will be null and void. J. Alexander's will not be required to issue shares to you if the Subscription Agent receives your Subscription Certificate or your payment after that date, regardless of when you sent the Subscription Certificate and payment, unless you send the documents in compliance with the Guaranteed Delivery Procedures described below. WITHDRAWAL RIGHT J. Alexander's may withdraw the rights offering at any time prior to or on June 21, 1999, for any reason (including, without limitation, a change in the market price of the common stock). If J. Alexander's withdraws the rights offering, any funds received from shareholders will be promptly refunded, without interest or penalty. DETERMINATION OF SHARE PRICE J. Alexander's and its Board of Directors decided to offer shares for $3.75 per share during the rights offering after considering such factors as the historic and current market price of J. Alexander's common stock and J. Alexander's need for capital. Solidus also purchased 1,086,266 additional shares of common stock on March 22, 1999 at the $3.75 per share price. The $3.75 per share price should not be considered an indication of the actual value of J. Alexander's or its common stock. J. Alexander's cannot assure you that the market price of the common stock will not decline during the rights offering. J. Alexander's also cannot assure you that you will be able to sell shares of common stock purchased during the rights offering at a price equal to or greater than $3.75 per share. 13 16 NON-TRANSFERABILITY OF RIGHTS The rights may not be sold and may only be transferred by operation of law. J. Alexander's common stock will be represented by stock certificates. Common stock issued under this rights offering will be registered under the federal securities laws. Therefore, these shares of common stock may be sold freely after the rights offering, subject to restrictions on affiliates of J. Alexander's. See "-- Basic Subscription Right" for an explanation of what you will receive upon exercise of your rights. EXERCISE OF RIGHTS You may exercise your rights by delivering to the Subscription Agent on or prior to June 21, 1999: (1) a properly completed and duly executed Subscription Certificate; (2) any required signature guarantees; and (3) payment in full of $3.75 per share to be purchased through the Basic Subscription Right. You should deliver your Subscription Certificate and payment to the address set forth below under "-- Subscription Agent." METHOD OF PAYMENT Payment for the shares must be made by: (1) bank draft drawn upon a United States bank or a postal, telegraphic or express money order payable to "SunTrust Bank, Nashville, N.A., as Subscription Agent"; (2) wire transfer of funds to the account maintained by the Subscription Agent for such purpose at SunTrust Bank, Nashville, N.A. (please contact Subscription Agent for specific instructions); or (3) notice of guaranteed delivery of payment, as discussed below (a "Notice of Guaranteed Delivery"), from a member firm of a registered national securities exchange or a member of the National Association of Securities Dealers, Inc., or a commercial bank or trust company having an office or correspondent in the United States. Payment will be deemed to have been received by the Subscription Agent only upon: (1) clearance of any uncertified check; (2) receipt by the Subscription Agent of any certified check or bank draft drawn upon a U.S. bank or of any postal, telegraphic or express money order; or (3) receipt of actual funds pursuant to any Notice of Guaranteed Delivery. PLEASE NOTE THAT FUNDS PAID BY UNCERTIFIED PERSONAL CHECK MAY TAKE AT LEAST FIVE BUSINESS DAYS TO CLEAR. ACCORDINGLY, IF YOU WISH TO PAY BY MEANS OF AN UNCERTIFIED PERSONAL CHECK, J. ALEXANDER'S URGES YOU TO MAKE PAYMENT SUFFICIENTLY IN ADVANCE OF JUNE 21, 1999, TO ENSURE THAT THE PAYMENT IS RECEIVED AND CLEARS BEFORE THAT DATE. 14 17 J. ALEXANDER'S ALSO URGES YOU TO CONSIDER PAYMENT BY MEANS OF CERTIFIED OR CASHIER'S CHECK, MONEY ORDER OR WIRE TRANSFER OF FUNDS. GUARANTEED DELIVERY PROCEDURES THROUGH A BROKER If you want to exercise your rights, but time will not permit your payment or Subscription Certificate to reach the Subscription Agent on or prior to June 21, 1999, you may exercise your rights if you and your broker satisfy the following Guaranteed Delivery Procedures: (1) You send, and the Subscription Agent receives, on or prior to June 21, 1999, a Notice of Guaranteed Delivery, substantially in the form provided with the prospectus, from a member firm of a registered national securities exchange or a member of the National Association of Securities Dealers, Inc., or a commercial bank or trust company having an office or correspondent in the United States. The Notice of Guaranteed Delivery must state: - your name, - the number of rights that you hold, and - the number of shares that you wish to purchase pursuant to the Basic Subscription Right. The Notice of Guaranteed Delivery must guarantee the delivery of (a) payment in full for each share of common stock to be purchased through the Basic Subscription Right and (b) your Subscription Certificate to the Subscription Agent within three New York Stock Exchange trading days following the date of the Notice of Guaranteed Delivery; and (2) You send, and the Subscription Agent receives, (a) payment in full for each share of common stock to be purchased through the Basic Subscription Right and (b) your properly completed and duly executed Subscription Certificate, including any required signature guarantees, within three New York Stock Exchange trading days following the date of your Notice of Guaranteed Delivery. The Notice of Guaranteed Delivery may be delivered to the Subscription Agent in the same manner as your Subscription Certificate at the addresses set forth below, or may be transmitted to the Subscription Agent by facsimile transmission, to facsimile number (615) 748-5331. You can obtain additional copies of the form of Notice of Guaranteed Delivery by requesting it from the Subscription Agent at the address set forth below under "-- Subscription Agent." SIGNATURE GUARANTEES Signatures on the Subscription Certificate must be guaranteed by an Eligible Guarantor Institution, as defined in Rule 17Ad-15 of the Exchange Act, subject to the standards and procedures adopted by the Subscription Agent. Eligible Guarantor Institutions include banks, brokers, dealers, credit unions, national securities exchanges and savings associations. 15 18 Signatures on the Subscription Certificate do not need to be guaranteed if: (1) the Subscription Certificate provides that the shares and certificates for shares of common stock to be purchased are to be issued and delivered directly to you, the record owner of such rights, or (2) the Subscription Certificate is submitted for the account of a member firm of a registered national securities exchange or a member of the National Association of Securities Dealers, Inc., or a commercial bank or trust company having an office or correspondent in the United States. SHARES HELD FOR OTHERS If you hold shares of common stock for the account of others, such as a broker, a trustee or a depository for securities, you should notify the respective beneficial owners of such shares as soon as possible to obtain instructions with respect to the rights beneficially owned by them. If you are a beneficial owner of common stock held by a holder of record, such as a broker, trustee or a depository for securities, you should contact the holder and ask him to effect transactions in accordance with your instructions. AMBIGUITIES IN EXERCISE OF THE RIGHTS If you do not specify the number of rights being exercised on your Subscription Certificate, or if your payment is not sufficient to pay the total purchase price for all of the shares that you indicated you wished to purchase, you will be deemed to have exercised the maximum number of rights that could be exercised for the amount of the payment that the Subscription Agent receives from you. If your payment exceeds the total purchase price for all of the rights shown on your Subscription Certificate, your payment will be applied, until depleted, to subscribe for shares in the following order: (1) to subscribe for the number of shares, if any, that you indicated on the Subscription Certificate that you wished to purchase through your Basic Subscription Right; (2) to subscribe for shares until your Basic Subscription Right has been fully exercised. Any excess payment remaining after the foregoing allocation will be returned to you as soon as practicable by mail, without interest or deduction. IMPORTANT PLEASE CAREFULLY READ THE INSTRUCTIONS INCLUDED IN THIS PROSPECTUS AND THE SUBSCRIPTION CERTIFICATE AND FOLLOW THOSE INSTRUCTIONS IN DETAIL. DO NOT SEND SUBSCRIPTION CERTIFICATES TO J. ALEXANDER'S. YOU ARE RESPONSIBLE FOR CHOOSING THE PAYMENT AND DELIVERY METHOD FOR YOUR SUBSCRIPTION CERTIFICATE, AND YOU BEAR THE RISKS ASSOCIATED WITH SUCH DELIVERY. IF YOU CHOOSE TO DELIVER 16 19 YOUR SUBSCRIPTION CERTIFICATE AND PAYMENT BY MAIL, J. ALEXANDER'S RECOMMENDS THAT YOU USE REGISTERED MAIL, PROPERLY INSURED, WITH RETURN RECEIPT REQUESTED. J. ALEXANDER'S ALSO RECOMMENDS THAT YOU ALLOW A SUFFICIENT NUMBER OF DAYS TO ENSURE DELIVERY TO THE SUBSCRIPTION AGENT AND CLEARANCE OF PAYMENT PRIOR TO JUNE 21, 1999. BECAUSE UNCERTIFIED PERSONAL CHECKS MAY TAKE AT LEAST FIVE BUSINESS DAYS TO CLEAR, J. ALEXANDER'S STRONGLY URGES YOU TO PAY, OR ARRANGE FOR PAYMENT, BY MEANS OF CERTIFIED OR CASHIER'S CHECK, MONEY ORDER OR WIRE TRANSFER OF FUNDS. COMPANY'S DECISION BINDING All questions concerning the timeliness, validity, form and eligibility of any exercise of rights will be determined by J. Alexander's, whose determinations will be final and binding. J. Alexander's, in its sole discretion, may waive any defect or irregularity, or permit a defect or irregularity to be corrected within such time as it may determine, or reject the purported exercise of any right by reason of any defect or irregularity in such exercise. Subscriptions will not be deemed to have been received or accepted until all irregularities have been waived or cured within such time as J. Alexander's determines in its sole discretion. Neither J. Alexander's nor the Subscription Agent will be under any duty to give notification of any defect or irregularity in connection with the submission of Subscription Certificates or incur any liability for failure to give such notification. NO REVOCATION AFTER THE SUBSCRIPTION AGENT HAS RECEIVED YOUR SUBSCRIPTION CERTIFICATE OR A NOTICE OF GUARANTEED DELIVERY ON YOUR BEHALF, YOU MAY NOT REVOKE YOUR SUBSCRIPTION. FEES AND EXPENSES J. Alexander's will pay all fees charged by the Subscription Agent. You are responsible for paying any other commissions, fees, taxes or other expenses incurred in connection with the exercise of the rights. Neither J. Alexander's nor the Subscription Agent will pay such expenses. SUBSCRIPTION AGENT J. Alexander's has appointed SunTrust Bank, Nashville, N.A., as Subscription Agent for the rights offering. The Subscription Agent's address is:
U.S. MAIL BY COURIER OR OVERNIGHT DELIVERY --------- -------------------------------- SunTrust Bank SunTrust Bank Corporate Trust Department Corporate Trust Department SunTrust Financial Center, Sixth SunTrust Financial Center, Sixth Floor Floor P.O. Box 305110 424 Church Street Nashville, Tennessee 37230 Nashville, Tennessee 37219 Attn: Donna Williams Attn: Donna Williams Kyle Burchard Kyle Burchard
The Subscription Agent's telephone number is (615) 748-4745, and its facsimile number is (615) 748-5331. 17 20 You should deliver your Subscription Certificate, payment of the Subscription Price and Notice of Guaranteed Delivery (if any) to the Subscription Agent. J. Alexander's will pay the fees and expenses of the Subscription Agent. J. Alexander's has also agreed to indemnify the Subscription Agent from any liability which it may incur in connection with the rights offering. IF YOU HAVE QUESTIONS If you have questions or need assistance concerning the procedure for exercising rights, or if you would like additional copies of this prospectus or the Notice of Guaranteed Delivery, you should contact the Subscription Agent at the address set out above. If you have other questions concerning the rights offering or J. Alexander's, you may contact: R. Gregory Lewis Chief Financial Officer J. Alexander's Corporation P.O. Box 24300 3401 West End Avenue Nashville, Tennessee 37203 (615) 269-1900 TRANSFER AGENT AND REGISTRAR SunTrust Bank, Nashville, N.A. c/o SunTrust Bank, Atlanta, N.A. is the transfer agent and registrar for the common stock. PLAN OF DISTRIBUTION Promptly following the effective date of the Registration Statement that contains this prospectus, J. Alexander's will distribute the rights and copies of this prospectus to individuals who own shares of common stock at the close of business on May 20, 1999. If you wish to exercise your rights and to purchase shares, you should complete the Subscription Certificate and return it, with payment for the shares, to the Subscription Agent, SunTrust Bank, Nashville, N.A. at the address on page 17. For further instructions on how to exercise rights, see "The Rights Offering -- Exercise of Rights." If you have any questions, you should contact the Subscription Agent at the telephone number and address on page 17. 18 21 FEDERAL INCOME TAX CONSIDERATIONS The following general discussion summarizes the anticipated material federal income tax consequences of the issuance, exercise or lapse of the rights. This discussion does not consider any federal income tax consequences of the rights offering to any particular shareholder's individual situation or the federal income tax consequences of the rights offering that may be relevant to particular classes of stockholders, such as banks, insurance companies and foreign individuals and entities. In addition, this summary does not address the tax consequences of the rights offering under applicable state, local or foreign tax laws. This discussion assumes that your shares of common stock and the rights and shares issued to you during the rights offering constitute capital assets. This summary is based on current law, which is subject to change at any time, possibly with retroactive effect. THIS DISCUSSION IS INCLUDED FOR YOUR GENERAL INFORMATION ONLY. YOU SHOULD CONSULT YOUR TAX ADVISOR TO DETERMINE THE TAX CONSEQUENCES TO YOU OF THE RIGHTS OFFERING IN LIGHT OF YOUR PARTICULAR CIRCUMSTANCES, INCLUDING ANY STATE, LOCAL AND FOREIGN TAX CONSEQUENCES. TAX CONSEQUENCES TO SHAREHOLDERS ISSUANCE OF RIGHTS The rights offering is intended to be characterized as a tax-free distribution under Section 305(a) of the Internal Revenue Code of 1986, as amended (the "Code"). However, existing law is not clear as to whether the distribution of rights to shareholders will be characterized as a distribution under Section 305(a) of the Code or, alternatively, as a distribution under Sections 301 and 305(b) of the Code. Under Section 305(a) of the Code, a distribution of stock or stock rights to a corporation's shareholders is generally tax free. Section 305(b), however, provides certain instances where a distribution of stock or stock rights is taxable to the shareholders. One such instance is a "disproportionate distribution" in which the distribution (or a series of distributions) has the result of (1) the receipt of property by some shareholders, and (2) an increase in the proportionate interests of other shareholders in the assets or earnings and profits of the corporation. For purposes of this determination, the holders of J. Alexander's convertible debentures and holders of outstanding options will be treated as shareholders. If required under the terms of the convertible debentures, the rights offering will result in an adjustment in the conversion ratio. Such an adjustment might have the effect of avoiding an increase in the common stockholders' interests in the assets and earnings and profits of J. Alexander's as a result of the rights offering (when compared to the interest of the holders of convertible debentures). However, no such adjustment is provided under the terms of outstanding stock options. The Internal Revenue Service ("IRS") may contend that the distribution of rights is a disproportionate distribution of stock taxable to recipients of the rights under Section 305(b) of the Code. If the IRS were to prevail under this contention, a shareholder would be viewed as receiving a distribution equal to the fair market value of the rights, which would be taxable as a dividend to the extent of J. Alexander's current and accumulated earnings and profits. The determination of a corporation's earnings and profits is complex, and in the case of current earnings and profits, cannot be determined until the close of its taxable year. J. Alexander's presently has accumulated earnings and profits, but no computation has been made of the precise amount. 19 22 Notwithstanding the foregoing, the rights offering may properly be characterized as a tax-free distribution under Section 305(a) of the Code, in which case it will not be taxable regardless of whether J. Alexander's has current or accumulated earnings and profits for the year. BASIS Because the rights may not be sold or transferred, the tax basis assigned to the rights is relevant only if the rights are exercised. The tax basis of common stock acquired through exercise of rights will be equal to the sum of the exercise price therefor and the holder's tax basis in the rights, if any. The holder's tax basis in the rights is determined by allocation of the holder's tax basis in the common stock with respect to which the rights are received between that common stock and the rights. That allocation is made in the manner described in the paragraph immediately below. If the rights offering is characterized as a nontaxable Section 305(a) distribution, and if the fair market value of the rights on the date of distribution is less than 15% of the fair market value of the common stock with respect to which the rights are received, the shareholder will have the following choice: - a basis of zero may be assigned to the rights, or - an election may be made on the federal tax return for the taxable year in which the stock rights are received to allocate the basis of the common stock between the common stock and the rights in proportion to the fair market value of each. However, if the fair market value of the rights on the date of distribution is 15% or more of the fair market value of the common stock, the basis of the common stock must be allocated proportionately between the common stock and the rights. In either case, the tax basis allocation will occur only if the rights are exercised. If, however, the rights offering is characterized as a taxable dividend, each shareholder will have a tax basis in the rights equal to the fair market value of the rights on the date of the rights offering. LAPSE OF RIGHTS If the rights offering is characterized as a nontaxable Section 305(a) distribution, a shareholder who allows rights received by him or her to lapse without exercising them will not recognize any gain or loss, and, as the rights were not exercised, no adjustment will be made to the tax basis of the common stock owned by the shareholder. If, however, the rights offering is characterized as a taxable dividend, a shareholder who allowed the rights to lapse will have a short-term capital loss in an amount equal to his or her tax basis in the rights (as discussed above), and no adjustment will be made to the tax basis of the common stock owned by the shareholder. EXERCISE OF RIGHTS A shareholder will not recognize any gain or loss upon the exercise of rights. The tax basis of common stock acquired through exercise of rights will be equal to the sum of the exercise price therefor and the holder's tax basis in the rights, if any. The holding period 20 23 for the common stock acquired through exercise of the rights will begin on the day following the date the rights are considered exercised. COMMON STOCK ACQUIRED The sale or other disposition of common stock acquired will result in the recognition of gain or loss by the holder of such common stock in an amount equal to the difference between the amount realized and the holder's adjusted tax basis in the common stock. Any such gain or loss generally will be capital gain or loss and will be long-term capital gain or loss if the holder held the common stock for more than one year. TAXATION OF J. ALEXANDER'S J. Alexander's will not recognize any gain, other income or loss upon the issuance of the rights, the lapse of the rights or the receipt of payment for shares upon exercise of the rights. LEGAL MATTERS The validity of the issuance of the shares of common stock offered hereby and certain tax matters will be passed upon for J. Alexander's by Bass, Berry & Sims PLC, Nashville, Tennessee. Certain members of Bass, Berry & Sims PLC beneficially own shares of the common stock. EXPERTS The consolidated financial statements of J. Alexander's Corporation appearing in J. Alexander's Corporation's Annual Report (Form 10-K) for the year ended January 3, 1999, have been audited by Ernst & Young LLP, independent auditors, as set forth in their report thereon included therein and incorporated herein by reference. Such consolidated financial statements are incorporated herein by reference in reliance upon such report given on the authority of such firm as experts in accounting and auditing. 21 24 IF YOU WOULD LIKE ADDITIONAL INFORMATION J. Alexander's files annual, quarterly and special reports, proxy statements and other information with the U.S. Securities and Exchange Commission ("SEC"). You may read and copy this information at the SEC's public reference rooms, which are located at: 450 Fifth Street, NW 7 World Trade Center, Suite 1300 Washington, DC 20549 New York, NY 10048 500 West Madison Street, Suite 1400 Chicago, IL 60661-2511
Please call the SEC at 1-800-SEC-0330 for further information on the public reference rooms. This information is also available on-line through the SEC's Electronic Data Gathering, Analysis, and Retrieval System (EDGAR), located on the SEC's web site (http://www.sec.gov.). Also, J. Alexander's will provide you (free of charge) with any of its documents filed with the SEC. To get your free copies, please call or write: R. Gregory Lewis Chief Financial Officer J. Alexander's Corporation P.O. Box 24300 3401 West End Avenue Nashville, Tennessee 37203 (615) 269-1900 J. Alexander's has filed a Registration Statement with the SEC on Form S-3 with respect to the rights offering. This prospectus is a part of the Registration Statement, but the prospectus does not repeat important information that you can find in the Registration Statement, reports and other documents that J. Alexander's filed with the SEC. The SEC allows J. Alexander's to "incorporate by reference" those documents, which means that J. Alexander's can disclose important information to you by referring you to other documents. The documents that are incorporated by reference are legally considered to be a part of this prospectus. The documents incorporated by reference are: (1) Annual Report on Form 10-K, as amended, for the year ended January 3, 1999; (2) The description of the common stock contained in J. Alexander's Form 8-A, as amended; and (3) Any filings with the SEC pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act of 1934 between the date of this prospectus and the termination of the rights offering. As you read the above documents, you may find some inconsistencies in information from one document to another. If you find inconsistencies between the documents, or between a document and this prospectus, you should rely on the statements made in the most recent document. PROSPECTIVE INVESTORS MAY RELY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE PROSPECTIVE INVESTORS WITH INFORMATION DIFFERENT FROM THAT CONTAINED IN THIS PROSPECTUS. THIS PROSPECTUS IS NOT AN OFFER TO SELL NOR IS IT 22 25 SEEKING AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED. THIS PROSPECTUS IS NOT AN OFFER TO SELL NOR IS IT SEEKING AN OFFER TO BUY SECURITIES OTHER THAN THE SHARES OF COMMON STOCK TO BE ISSUED PURSUANT TO THE RIGHTS OFFERING. THE INFORMATION CONTAINED IN THIS PROSPECTUS IS CORRECT ONLY AS OF THE DATE OF THIS PROSPECTUS, REGARDLESS OF THE TIME OF THE DELIVERY OF THIS PROSPECTUS OR ANY SALE OF THESE SECURITIES. NO ACTION IS BEING TAKEN IN ANY JURISDICTION OUTSIDE THE UNITED STATES TO PERMIT A PUBLIC OFFERING OF THE COMMON STOCK OR POSSESSION OR DISTRIBUTION OF THIS PROSPECTUS IN ANY SUCH JURISDICTION. PERSONS WHO COME INTO POSSESSION OF THIS PROSPECTUS IN JURISDICTIONS OUTSIDE THE UNITED STATES ARE REQUIRED TO INFORM THEMSELVES ABOUT AND TO OBSERVE ANY RESTRICTIONS AS TO THIS OFFERING AND THE DISTRIBUTION OF THIS PROSPECTUS APPLICABLE IN THE JURISDICTION. 23 26 QUESTIONS AND ANSWERS ABOUT THE RIGHTS OFFERING WHAT IS A RIGHT? A right is an opportunity for you to purchase shares of common stock at a fixed price and in an amount proportional to your existing interest in J. Alexander's. When you "exercise" rights, that means that you choose to purchase the shares of common stock that the rights entitle you to purchase. WHAT IS THE RIGHTS OFFERING? J. Alexander's will distribute to you 1.0 right for each share of common stock that you own at the close of business on May 20, 1999. For every right you receive, you will be entitled to purchase 0.2 share of common stock, rounding up any remaining fractional share to the nearest whole number of shares, for $3.75 per share. You may exercise any number of your rights, or you may choose not to exercise any rights. For a discussion of the rights to be distributed in the rights offering, see "The Rights Offering -- The Rights." WHY IS J. ALEXANDER'S ENGAGING IN A RIGHTS OFFERING? The rights offering is part of a financing plan that J. Alexander's expects will raise up to approximately $8.1 million in equity for J. Alexander's. J. Alexander's believes that raising equity capital to repay some of its outstanding debt will benefit J. Alexander's by reducing its debt to equity ratio and reducing its interest expense, which will improve earnings. J. Alexander's believes that accomplishing these objectives will improve its financial condition and may allow it to negotiate improved terms for its credit facilities, including interest rates and availability. HOW DID J. ALEXANDER'S ARRIVE AT THE $3.75 PER SHARE PRICE? In determining the price per share for the sale to Solidus and for the Rights Offering, J. Alexander's considered current and historical market prices for the common stock and J. Alexander's need for capital. Solidus bought its shares on March 22, 1999 at the same price per share. For a further explanation of how J. Alexander's determined the per-share price, see "The Rights Offering -- Determination of Share Price." HOW DO I EXERCISE MY RIGHTS? You must properly complete the attached Subscription Certificate and forward it to SunTrust Bank, Nashville, N.A., as Subscription Agent, on or before 5:00 p.m., Central Daylight Time, on June 21, 1999. The address for the Subscription Agent is on page 17. See "The Rights Offering -- Exercise of Rights" for detailed instructions on how to exercise your rights. Your Subscription Certificate must be accompanied by proper payment for each share that you wish to purchase. For a full explanation of how to pay for your shares, see "The Rights Offering -- Method of Payment." HOW LONG WILL THE RIGHTS OFFERING LAST? If you do not exercise your rights before 5:00 p.m. Central Daylight Time, on June 21, 1999, the rights will expire. J. Alexander's, in its discretion, may decide to extend 24 27 the rights offering for up to 10 days. See "The Rights Offering -- Expiration Date" for a discussion of the expiration of the rights. AFTER I EXERCISE MY RIGHTS, CAN I CHANGE MY MIND? No. Once you send in your Subscription Certificate and payment, you cannot revoke the exercise of your rights. For further explanation of the no-revocation policy, see "Rights Offering -- No Revocation." WHAT HAPPENS IF I CHOOSE NOT TO EXERCISE MY RIGHTS? You will retain your current number of shares of common stock even if you do not exercise your rights. If you do not exercise your rights, you could diminish your proportionate interest in J. Alexander's, and your voting rights could be diluted. See "If You Do Not Exercise Your Rights, Your Ownership Interest May Be Diluted" for a discussion of this consequence. CAN I SELL MY RIGHTS? No. You may not sell or transfer your rights to another individual or entity. See "The Rights Offering -- Non-Transferability of Rights" for an explanation of the prohibition on the transfer of rights. CAN I SELL MY COMMON STOCK AFTER THE RIGHTS OFFERING? Yes. These shares of common stock may be sold freely after the rights offering, subject to restrictions on affiliates of J. Alexander's. Common stock sold in this rights offering will be registered under the federal securities laws. For information regarding the stock you will receive upon exercise of rights, see "The Rights Offering -- Basic Subscription Right." WHAT ARE THE FEDERAL INCOME TAX CONSEQUENCES OF EXERCISING MY RIGHTS? The rights offering is intended to be characterized as a nontaxable stock dividend. However, the IRS may view the distribution of the rights as ordinary income to the shareholder taxable in the amount of the fair market value of the rights. In any event, the exercise of the rights will not be taxable. You should seek specific tax advice from your personal tax advisor. See "Tax Consequences to Shareholders" for a detailed discussion of tax matters. WHEN WILL I RECEIVE MY NEW SHARES? If you purchase shares through the rights offering, J. Alexander's will send you a certificate representing shares of common stock as soon as practicable after the rights exercise period expires. CAN J. ALEXANDER'S CANCEL THE RIGHTS OFFERING? Yes. J. Alexander's can cancel the rights offering at any time on or before June 21, 1999, for any reason. 25 28 HOW MUCH MONEY WILL J. ALEXANDER'S RECEIVE FROM THE SALE TO SOLIDUS AND THE RIGHTS OFFERING? J. Alexander's received $4,073,498 for the sale of 1,086,266 shares of common stock to Solidus on March 22, 1999. J. Alexander's gross proceeds from the rights offering depend on the number of shares of common stock that are purchased. If J. Alexander's sells all 1,089,067 shares offered by this prospectus, then J. Alexander's will receive proceeds of $4,084,001 from the rights offering. If no shareholders exercise rights, J. Alexander's will not receive any proceeds from the rights offering. HOW MANY SHARES WILL BE OUTSTANDING AFTER THE RIGHTS OFFERING? The number of shares of common stock outstanding after the rights offering depends on the number of shares that are purchased. If J. Alexander's sells all of the shares offered by this prospectus, then J. Alexander's will issue during the rights offering 1,089,067 new shares of common stock. Based on this number, J. Alexander's anticipates that there will be 7,620,668 shares of J. Alexander's common stock outstanding after the rights offering. WHO CAN I TALK TO IF I HAVE MORE QUESTIONS? If you have questions or need assistance concerning the procedure for exercising rights, or if you would like additional copies of this prospectus or the Notice of Guaranteed Delivery, you should contact the Subscription Agent at the address on page 17 above. If you have more questions about the rights offering, please contact R. Gregory Lewis Chief Financial Officer J. Alexander's Corporation P.O. Box 24300 3401 West End Avenue Nashville, Tennessee 37203 (615) 269-1900 26 -----END PRIVACY-ENHANCED MESSAGE-----