<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
PJ AMERICA, INC.
- - --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- - --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[x] No fee required
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
-------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------------------------
(5) Total fee paid:
-------------------------------------------------------------------------
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-------------------------------------------------------------------------
(3) Filing Party:
-------------------------------------------------------------------------
(4) Date Filed:
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Notes:
<PAGE>
[PAPA JOHN'S LETTERHEAD]
April 21, 1997
Dear Stockholder:
On behalf of the entire PJ America management team, I invite you to join us
for the Company's upcoming Annual Meeting of Stockholders. The meeting will
begin at 10:30 am (Central Daylight time) on Wednesday, June 4, 1997 at the
Holiday Inn Express, 4627 Highway 280, Birmingham, Alabama.
In addition to the formal items of business to be brought before the
meeting, we will discuss our 1996 results and answer your questions. After the
meeting, we hope you will join us for a slice of the Perfect Pizza at our
Inverness restaurant, which recently opened.
Thank you for your support of PJ America. We look forward to seeing you on
June 4th.
Sincerely,
/s/ Douglas S. Stephens
Douglas S. Stephens
President and Chief Executive Officer
[PAPA JOHN'S LETTERHEAD]
<PAGE>
PJ AMERICA, INC.
9109 Parkway East
Birmingham, Alabama 35206
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 4, 1997
To the Stockholders:
The Annual Meeting of Stockholders of PJ America, Inc. (the "Company")
will be held at the Holiday Inn Express, 4627 Highway 280, Birmingham, Alabama
on Wednesday, June 4, 1997 at 10:30 a.m. (C.D.T.), for the following purposes:
(1) To elect two directors to serve until the 2000 annual meeting of
stockholders or until their successors are elected and qualified;
(2) To ratify the appointment of Ernst & Young LLP as the Company's
independent auditors for the fiscal year ending December 28, 1997, and
(3) To transact such other business as may properly come before the
meeting or any adjournment thereof.
A Proxy Statement describing matters to be considered at the Annual Meeting
is attached to this Notice. Only stockholders of record at the close of
business on April 17, 1997, are entitled to receive notice and to vote at the
meeting.
By Order of the Board of Directors
/s/ Michael M. Fleishman
Michael M. Fleishman
Secretary
Birmingham, Alabama
April 21, 1997
IMPORTANT
WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE MEETING, PLEASE MARK, DATE AND
SIGN THE ENCLOSED PROXY AND RETURN IT IN THE ENVELOPE WHICH HAS BEEN PROVIDED.
IN THE EVENT YOU ATTEND THE MEETING, YOU MAY REVOKE YOUR PROXY AND VOTE YOUR
SHARES IN PERSON.
<PAGE>
PJ AMERICA, INC.
9109 Parkway East
Birmingham, Alabama 35206
___________
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 4, 1997
___________
GENERAL INFORMATION
This Proxy Statement and accompanying proxy are being furnished in
connection with the solicitation of proxies by the Board of Directors (the
"Board") of PJ America, Inc., a Delaware corporation (the "Company"), to be
voted at the Company's Annual Meeting of Stockholders (the "Annual Meeting") and
any adjournments thereof. The Annual Meeting will be held at the Holiday Inn
Express, 4627 Highway 280, Birmingham, Alabama on Wednesday, June 4, 1997, at
10:30 a.m. (C.D.T.) for the purposes set forth in this Proxy Statement and the
accompanying Notice of Annual Meeting. This Proxy Statement and accompanying
proxy are first being mailed to stockholders on or about April 21, 1997.
A stockholder signing and returning a proxy has the power to revoke it at
any time before the shares subject to it are voted by (i) notifying the
Secretary of the Company in writing of such revocation, (ii) filing a duly
executed proxy bearing a later date or (iii) attending the Annual Meeting and
voting in person. If the proxy is properly signed and returned to the Company
and not revoked, it will be voted in accordance with the instructions contained
therein. Unless contrary instructions are given, the proxy will be voted FOR
the nominees for director named in the Proxy Statement, FOR the ratification of
Ernst & Young LLP as the Company's independent auditors for the 1997 fiscal year
and in the discretion of proxy holders on such other business as may properly
come before the Annual Meeting.
The original solicitation of proxies by mail may be supplemented by
telephone and other means of communication and through personal solicitation by
officers, directors and other employees of the Company, at no compensation.
Proxy materials are being distributed by Corporate Investor Communications, Inc.
for a fee of approximately $1,000. Proxy materials will also be distributed
through brokers, custodians and other like parties to the beneficial owners of
the Company's Common Stock, par value $.01 per share (the "Common Stock"), and
the Company will reimburse such parties for their reasonable out-of-pocket and
clerical expenses incurred in connection therewith.
<PAGE>
RECORD DATE AND VOTING SECURITIES
The Board has fixed the record date (the "Record Date") for the Annual
Meeting as the close of business on April 17, 1997, and all holders of record of
Common Stock on this date are entitled to receive notice of and to vote at the
Annual Meeting and any adjournment thereof. A list of stockholders entitled to
vote at the Annual Meeting will be available for inspection by any stockholder
for any purpose reasonably related to the Annual Meeting for a period of ten
days prior to the Annual Meeting at the Company's principal executive offices at
9109 Parkway East, Birmingham, Alabama 35206. At the Record Date, there were
4,755,000 shares of Common Stock outstanding. For each share of Common Stock
held on the Record Date, a stockholder is entitled to one vote on each matter to
be considered at the Annual Meeting. A majority of the outstanding shares
present in person or by proxy is required to constitute a quorum to transact
business at the meeting.
Votes cast by proxy or in person at the Annual Meeting will be tabulated by
the inspectors of election appointed for the meeting, who also will determine
whether a quorum exists. Abstentions or "withheld" votes will be treated as
present and entitled to vote for purposes of determining a quorum, but as
unvoted for purposes of determining the approval of matters submitted to the
stockholders. Since Delaware law treats only those shares voted "for" a matter
as affirmative votes, abstentions or withheld votes will have the same effect as
negative votes or votes "against" a particular matter. If a broker indicates
that it does not have discretionary authority as to certain shares to vote on a
particular matter, such shares will not be considered as present and entitled to
vote with respect to that matter.
SECURITY OWNERSHIP OF MANAGEMENT AND PRINCIPAL HOLDERS
The following table sets forth certain information as of the Record Date
with respect to the beneficial ownership of the common stock by (i) each
director or nominee for director of the Company, (ii) each of the executive
officers named in the summary compensation table in this Proxy Statement, (iii)
all directors and executive officers as a group and (iv) each person known to
the Company to be the beneficial owner of more than 5% of the outstanding common
stock.
<TABLE>
<CAPTION>
Numbers of Percent of
Shares (1) Class (2)
Directors and Executive Officers
- - -----------------------------------------------------------------------
<S> <C> <C>
Richard F. Sherman (3) 542,351 (4) 11.4%
Douglas S. Stephens (3) 292,464 6.2%
D. Ross Davison - *
James S. Riekel 60,294 1.3%
Michael M. Fleishman (3) 312,930 (5) 6.6%
Martin T. Hart 218,711 (6) 4.6%
Frank O. Keener (3) 459,603 9.7%
Stephen P. Langford (3) 257,164 5.4%
Charles W. Schnatter 5,000 (7) *
All directors and executive officers as
a group (Nine persons, including those
named above) 2,148,517 45.2%
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
Numbers of Percent of
Other 5% Beneficial Owners Shares (1) Class (2)
- - --------------------------------------------------------------------------
<S> <C> <C>
Strong Capital Management, Inc.
One Hundred Heritage Reserve, P.O. Box 2936 436,200 (8) 9.2%
Milwaukee, Wisconsin 53201
Jack A. Laughery
800 Tiffany Blvd., Suite 305 285,080 6.0%
Rocky Mount, North Carolina 27804
- - -------------------------
</TABLE>
* Represents less than 1% of class
(1) Based upon information furnished to the Company by the named persons, and
information contained in filings with the Securities and Exchange
Commission (the "Commission"). Under the rules of the Commission, a person
is deemed to beneficially own shares over which the person has or shares
voting or investment power or which the person has the right to acquire
beneficial ownership within 60 days. Unless otherwise indicated, the named
persons have sole voting and investment power with respect to shares shown.
(2) Based on 4,755,000 shares outstanding as of April 17, 1997, the Record Date
for the Annual Meeting.
(3) Mr. Sherman's address is 202 Schooner Lane, Duck Key, Florida 33050. Mr.
Stephens address is PJ America, Inc., 9109 Parkway East, Birmingham,
Alabama 35206. Mr. Fleishman's address is Greenebaum Doll & McDonald PLLC,
3300 National City Tower, Louisville, Kentucky 40202. Mr. Keener's address
is First American Bank, 300 Deaderick Street, Third Floor, Nashville,
Tennessee 37237. Mr. Langford's address is WFIE-NBC 14, 1115 Mount Auburn
Road, Evansville, Indiana 47720.
(4) Includes 418,327 shares held by Mr. Sherman, as trustee of the Richard
Sherman trust, and 72,352 shares held by his family members.
(5) Includes 20,000 shares held by Mr. Fleishman's wife, and 3,000 shares held
by Mr. Fleishman's wife as custodian for their minor child.
(6) Includes an aggregate of 180,880 shares held by family members.
(7) Mr. Schnatter is a director and Senior Vice President, General Counsel and
Secretary of Papa John's International, Inc. ("PJI"). Excludes 225,000
shares of common stock beneficially owned by PJI pursuant to a presently
exercisable warrant. Mr. Schnatter disclaims beneficial ownership of the
securities underlying this warrant.
(8) As disclosed in a Schedule 13G filed with the Commission. Reflects
beneficial ownership (based on sole or shared voting or dispositive power)
of the reporting entity and its affiliates as of December 31, 1996.
3
<PAGE>
1. ELECTION OF DIRECTORS
The Company's Articles of Incorporation provide for a classified board of
directors with three classes of directors each nearly as equal in number as
possible. Each class serves for a three-year term and one class is elected each
year. The Board of Directors is authorized to fix the number of directors within
the range of three to fifteen members, and the Board size is currently fixed at
seven members. The two nominees identified below are the members of the class to
be elected at the Annual Meeting, for a three-year term expiring at the annual
meeting to be held in 2000. The remaining five directors will continue to serve
in accordance with their previous elections.
It is intended that shares represented by proxies received in response to
this Proxy Statement will be voted for the nominees listed below, unless
otherwise directed by a stockholder in his or her proxy. Although it is not
anticipated that the nominees will decline or be unable to serve, if that should
occur, the proxy holders may, in their discretion, vote for substitute nominees.
Directors are elected by a plurality of the votes cast.
Set forth below is information concerning the nominees and the other
directors who will continue in office, each of whom is currently a member of the
Board.
<TABLE>
<CAPTION>
Director
Name Age Position or Office Since
- - ---- --- ------------------- --------
<S> <C> <C> <C>
NOMINEES FOR ELECTION TO THE BOARD
For a 3-Year Term Expiring in 2000
Stephen P. Langford 42 Director 1991
Charles W. Schnatter 33 Director 1996
DIRECTORS CONTINUING IN OFFICE
Term Expiring in 1998
Martin T. Hart 60 Director 1996
Michael M. Fleishman 52 Director, Secretary 1991
DIRECTORS CONTINUING IN OFFICE
Term Expiring in 1999
Richard F. Sherman 53 Chairman of the 1991
Board, Director
Frank O. Keener 53 Director 1991
Douglas S. Stephens 33 Director, Chief 1991
Executive Officer
and President
</TABLE>
4
<PAGE>
Stephen P. Langford has served as a director of the Company and its
predecessor, Extra Cheese, Inc., since 1991. Mr. Langford served as a director
of Textra Cheese Corp. and Twice the Cheese, Inc. from 1994 and 1995,
respectively, until their acquisition by the Company in October, 1996. Mr.
Langford has been involved in the television industry since 1979 and was the
General Sales Manager of WAVE TV, an NBC affiliate, from 1987 through January
1997. In January, 1997, Mr. Langford became Vice President / General Manager of
WFIE - TV, an NBC affiliate. Mr. Langford currently serves on the Executive
Board of the Sales Advisory Council of the Television Bureau of Advertising and
as Chairman of the fifth district of the American Advertising Federation.
Charles W. Schnatter has served as a director of the Company since August
1996. Mr. Schnatter has served as General Counsel and Secretary of Papa John's
International, Inc. ("PJI") since 1991 and has been a director and a Senior Vice
President of PJI since 1993. From 1988 to 1991, Mr. Schnatter was an attorney
with Greenebaum Doll & McDonald PLLC. Mr. Schnatter has been a franchisee of PJI
since 1989.
Martin T. Hart has served as a director of the Company and its predecessor,
Extra Cheese, Inc., since August 1996. Mr. Hart has served as a director of
PJVA, Inc. and PJV, Inc. from 1992 and 1993, respectively, until their
acquisition by the Company in October, 1996. Mr. Hart is a Denver-based private
investor. Mr. Hart has been a Trustee of MassMutual Corporate Investors and
MassMutual Participation Investors since 1991. Mr. Hart serves on the Board of
Directors of Schuler Homes, Inc., Optical Securities Group, Inc., and PNB
Financial Group (a bank holding company).
Michael M. Fleishman has served as a director and secretary of the Company
and its predecessor, Extra Cheese, Inc., since August 1996. Mr. Fleishman served
as a director of Textra Cheese Corp. and Twice the Cheese, Inc. from 1994 and
1995, respectively, until their acquisition by the Company in October, 1996.
Since 1970, Mr. Fleishman or his professional service corporation has been a
member of Greenebaum Doll & McDonald PLLC. a law firm which provides legal
services to the Company. Mr. Fleishman served as a director of Chi-Chi's, Inc.,
from 1983 to 1987. Mr. Fleishman also served as a director of Rally's
Hamburgers, Inc. from 1988 through April 1996.
Richard F. Sherman has served as a director and Chairman of the Board of
the Company and its predecessor, Extra Cheese, Inc., since 1991. Mr. Sherman
served as a director of Textra Cheese Corp., Twice the Cheese, Inc., PJVA, Inc.
and PJV, Inc. from 1994, 1995, 1992 and 1993, respectively, until their
acquisition by the Company in October, 1996. Mr. Sherman is a private investor
who has been a franchisee and a consultant to PJI since 1991. From 1993 to
present, Mr. Sherman has been a director of PJI. From 1987 to 199, Mr. Sherman
was Chairman of the Board and President of Rally's Hamburgers, Inc. From 1984 to
1987, Mr. Sherman was President and a director of Church's Chicken, Inc. From
1971 to 1984, Mr. Sherman was Group Executive Vice President and director of
Hardee's Food Systems, Inc. and its parent, Imasco USA, Inc. Mr. Sherman serves
on the board of directors of Taco Cabana, Inc., Hartz Restaurants, Inc. and
Reed's Jewelers, Inc.
Frank O. Keener has served as a director of the Company and its
predecessor, Extra Cheese, Inc., since 1991. Mr. Keener served as a director of
Textra Cheese Corp. and Twice the Cheese, Inc. from 1994 and 1995, respectively,
until their acquisition by the Company in October, 1996. Since 1993, Mr. Keener
has served as Executive Vice President of First American National Bank,
Nashville, Tennessee. From 1991 to 1993, Mr. Keener served as Senior Vice
President of Dominion Banks. From 1989 to 1990, Mr. Keener was President and
Chief Executive Officer of the Kentucky Lottery Corporation.
5
<PAGE>
Douglas S. Stephens has served as a director, President and Chief Executive
Officer of the Company and its predecessor, Extra Cheese, Inc., since 1991. Mr.
Stephens has served as a director and the President of Textra Cheese Corp. and
Twice the Cheese, Inc. from 1994 and 1995, respectively, until their acquisition
by the Company in October, 1996. From 1989 to 1991, Mr. Stephens was the Vice
President of Information Systems for the Kentucky Lottery Corporation. From 1986
to 1989, Mr. Stephens was a systems consultant for Andersen Consulting, a
division of Arthur Andersen, LLP, an international professional services firm.
Meetings of the Board of Directors
The Board met on two occasions during 1996. Each director attended all
meetings of the Board and its committees on which such director served during
his period of service in 1996.
Committees of the Board of Directors
In addition to an Executive Committee, which is comprised of Richard F.
Sherman and Douglas S. Stephens, the Board of Directors has standing
Compensation and Audit Committees. The Board does not have a nominating
committee or other committee serving a similar function.
The Compensation Committee is comprised of Messrs. Sherman, Fleishman, Hart
and Langford. The functions of the Compensation Committee are to review and
approve annual salaries and bonuses for all corporate officers and management
personnel, review, approve and recommend to the Board of Directors the terms and
conditions of all employee benefit plans and administer the 1996 Stock Ownership
Incentive Plan. The Compensation Committee met once in 1996.
The Audit Committee is comprised of Messrs. Sherman, Schnatter, Hart and
Keener. The functions of the Audit Committee are to recommend annually to the
Board of Directors the appointment of the independent public accountants of the
Company, discuss and review the scope and the fees of the prospective annual
audit and review the results thereof with the independent public accountants,
review and approve non-audit services of the independent public accountants,
review compliance with accounting and financial policies of the Company, review
the adequacy of the financial organization of the Company and review
management's procedures and policies relative to the adequacy of the Company's
internal accounting controls and compliance with federal and state laws relating
to accounting practices. The Audit Committee met once in 1996.
Compensation of Directors
Directors who are not also employees of the Company are eligible to
participate in the Company's 1996 Non-Employee Directors Stock Option Plan (the
"Director Plan"). Under the terms of the Director Plan, directors received an
initial, one-time grant of an option to purchase 12,000 shares of common stock
at the initial public offering price. All future options will be granted at fair
market value at the date of the grant. In addition, new non-employee directors,
upon their initial election to the Board, will be awarded an initial option to
purchase 12,000 shares of Common Stock upon joining the board. Each non-employee
director is eligible to receive an additional option to purchase 4,000 shares of
common stock on each anniversary date of the initial grant. Options vest in four
equal annual installments, beginning on the first anniversary of their grant
date.
6
<PAGE>
Non-employee directors also receive reimbursement of reasonable out-of-
pocket expenses incurred in connection with their attendance at Board and
Committee meetings. Directors who are employees of the Company do not receive
additional compensation for services rendered as a director.
7
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth information concerning the annual and long-
term compensation paid, earned or accrued by the Company's Chief Executive
Officer and its other executive officers for services rendered in all capacities
to the Company for the years indicated.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term
Compensation
Awards
------------
Securities
Underlying
Name and Stock
Principal Position Year Salary($) Bonus($) Options(#)
- - --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Douglas S. Stephens 1996 $80,000 $47,250 62,500
President and Chief 1995 75,000 36,000
Executive Officer 1994 55,900 40,000
D. Ross Davison (2) 1996 $37,500 $ 7,500 27,500
Chief Financial Officer
and Treasurer
James S. Riekel (2) 1996 $10,000 $ 5,000 20,000
Vice President and
Chief Operating Officer
- - -------------------------
</TABLE>
(1) Except as otherwise indicated, perquisites and other personal benefits paid
to each named executive officer were less than 10% of the officer's annual
salary and bonus.
(2) First became an executive officer of the Company in 1996. Accordingly,
disclosure with respect to previous years is not required under applicable
Commission rules.
The 1996 Stock Ownership Incentive Plan ("1996 Plan") provides for the
granting of any of the following awards to eligible employees of the Company and
its subsidiaries: (i) stock options which do not constitute "incentive stock
options" within the meaning of section 422 of the Internal Revenue Code of 1986,
as amended ("non qualified stock options"); (ii) incentive stock options; (iii)
restricted shares; and (iv) performance units. The 1996 Plan is intended to
provide incentives and rewards for employees to support the implementation of
the Company's business plan and to associate the interests of employees with
those of the Company's stockholders.
8
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth information as to stock options granted to
the named executive officers during the 1996 fiscal year. The Company does not
grant stock appreciation rights ("SARs").
<TABLE>
<CAPTION>
% of
Total
# of Options Potential Realizable
Securities Granted to Exercise Value at Assumed
Underlying Employees or Base Annual Rates of Stock
Options in Fiscal Price Expiration Price Appreciation
Name Granted(1) Year ($/Share) Date for Option Term(2)
- - ---- ------------- ---------- -------- --------- ---------------------
5% ($) 10% ($)
-------- ----------
<S> <C> <C> <C> <C> <C> <C>
Douglas S. Stephens 62,500(3) 23.5% $12.50 10/24/06 $491,324 $1,245,111
D. Ross Davison 27,500(3) 10.3 12.50 10/24/06 216,183 547,849
James S. Riekel 20,000(3) 7.5 12.50 10/24/06 157,224 398,436
</TABLE>
- - ----------------------
(1) All options were awarded under the 1996 Stock Ownership Incentive Plan (the
"Incentive Plan"), have a term of 10 years and vest immediately in the
event of a change in control of the Company.
(2) Assumed annual appreciation rates are set by the Securities and Exchange
Commission and are not a forecast of future appreciation. The amounts shown
are pre-tax and assume the options will be held throughout the entire ten-
year term. If the Company's Common Stock does not increase in value, the
options are valueless.
(3) These options become exercisable in four equal annual installments
beginning October 24, 1997, the first anniversary of the grant date.
9
<PAGE>
AGGREGATE OPTION EXERCISES IN LAST
FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES
Set forth below is information with respect to unexercised stock options
held by the named executive officers at the end of the Company's 1996 fiscal
year. None of the options held by named executive officers vested during 1996,
therefore there were no exercises. Also, there were no SARs outstanding at the
1996 fiscal year-end.
Number of Unexercised Value of Unexercised
Options at In-the-Money Options at
Fiscal Year-End(#) Fiscal Year-End ($)(1)
-------------------------- --------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
- - ---- ----------- ------------- ----------- -------------
Douglas S. Stephens - 62,500 - $414,063
D. Ross Davison - 27,500 - 182,188
James S. Riekel - 20,000 - 132,500
- - ----------------------
(1) Based on the difference between the option exercise price and the last
reported sale price of the Common Stock ($19.13) as reported on the Nasdaq
Stock Market on December 27, 1996, the last trading day of the Company's
1996 fiscal year.
Employment Agreement
Ross Davison serves as Vice President, Chief Financial Officer and Treasurer
pursuant to a two year Employment Agreement with the Company dated June 28, 1996
(the "Employment Agreement"). Under the terms of the Employment Agreement, Mr.
Davison is paid an annual salary of not less than $75,000, and is guaranteed a
bonus of at least $15,000 during the first twelve months of employment.
Pursuant to the Employment Agreement, Mr. Davison was granted options to
purchase 27,500 shares of the Company's Common Stock at an exercise price of
$12.50, equal to the initial public offering price. Mr. Davison's stock option
shall vest in the event of a change in control of the Company, or upon his death
or disability.
10
<PAGE>
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The following report includes a discussion of the Compensation Committee's
philosophy on executive compensation, the primary components of the Company's
compensation program and a description of the Chief Executive Officer's
compensation package during 1996.
Compensation Principles. The Compensation Committee is responsible for
advising the Board of Directors on matters relating to the compensation of the
Company's executive officers and administering the Company's 1996 Stock
Ownership Incentive Plan (the "Incentive Plan"). The Compensation Committee
believes the following principles are important in compensating executive
officers:
. Compensation awarded by the Company should be effective in attracting,
motivating and retaining key executives;
. Incentive compensation should be awarded based on the achievement of
growth or operational targets at the Company, as appropriate to the
executive officer; and
. Executive officers should have an equity interest in the Company to
encourage them to manage the Company for the long-term benefit of
stockholders.
The Company's executive officers are compensated through a combination of
salary, stock option or cash bonuses and awards under the Incentive Plan, each
of which is discussed below.
Annual Salary. The Committee reviews salary levels on an annual basis with
the Chief Executive Officer and the Company's other senior managers, and makes
adjustments as appropriate or necessary to keep employees motivated. The
Committee gives great weight to the Chief Executive Officer's recommendations as
to annual salary levels of the Company's executive officers.
Bonus Programs. The 1996 Bonus Program was established by the Boards of
Directors of Extra Cheese, Inc., Textra Cheese Corp., and Twice the Cheese, Inc.
The Board of Directors of the Company established a 1997 Bonus Program at the
beginning of the 1997 fiscal year. Under each Bonus Program, executive officers
and other key employees are eligible to earn cash bonuses based on the
achievement of operating or earnings goals established at the beginning of each
fiscal year by the Board of Directors.
1996 Stock Ownership Incentive Plan Awards. In October 1996, the
Compensation Committee and Board of Directors established the Company's 1996
Stock Ownership Incentive Plan (the "1996 Plan"). With the completion of the
initial public offering, the Company granted options to purchase 62,500, 27,500,
and 20,000 shares of Common Stock (the "Initial Grants") to Mr. Stephens, Mr.
Davison, and Mr. Riekel respectively. The initial grants of options to purchase
shares of Common Stock were granted with an exercise price of $12.50 per share,
the initial public offering price, and will become exercisable in four equal
annual installments, beginning on the first anniversary of the grant date.
11
<PAGE>
The Committee believes that stock options and other equity-based incentives
are a valuable tool in encouraging executive officers and other employees to
align their interests with the interests of the stockholders and to manage the
Company for the long-term. Non-qualified options to purchase 110,000 shares of
the Company's Common Stock were granted to all executive officers (including the
Company's Chief Executive Officer) in 1996, with an exercise price equal to the
fair market value of the underlying Common Stock on the date of the grant. The
options become exercisable in four equal annual installments, beginning on the
first anniversary of the date of the grant.
Compensation of Chief Executive Officer. Consistent with the compensation
policies and components described above, the Boards of Directors of Extra
Cheese, Inc., Textra Cheese Corp. and Twice the Cheese, Inc. determined the
salary and bonus received by Douglas S. Stephens, Chief Executive Officer and
President of the Company, for services rendered in 1996. Mr. Stephens received a
base salary of $80,000 for 1996, and also received an annual bonus of $47,250
based on the Company exceeding net income goals during the year. Mr. Stephens
also received non-qualified options to purchase 62,500 shares of the Company's
Common Stock pursuant to the 1996 Plan described above for his actual and
potential contribution to the Company.
OBRA Deductibility Limitation. The Omnibus Budget Reconciliation Act of
1993 ("OBRA") limits the deduction by public companies of compensation of
certain executive officers to $1 million per year, per executive officer, unless
certain criteria are met. The Company has determined not to take any action at
this time with respect to its compensation plans to seek to meet these criteria.
COMPENSATION COMMITTEE
Richard F. Sherman
Michael M. Fleishman
Martin T. Hart
Stephen P. Langford
12
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Reorganization
Merger. The Company acquired the business and operations of Extra Cheese,
Inc., Twice the Cheese, Inc., Textra Cheese Corp., PJVA, Inc., and PJV, Inc.
(the "Predecessor Companies") in a reorganization. Pursuant to an Agreement
dated June 10, 1996 as amended July 10, 1996, and a Plan of Merger (the
"Reorganization"), the stockholders of the Predecessor Companies received shares
of Common Stock of the Company in the proportion determined by the respective
boards of directors of each of the Predecessor Companies through arm's length
negotiations. The factors considered by each of the Predecessor Companies in
determining exchange ratio included revenues, financial condition and results of
operations, and past and projected earnings for each Predecessor Company. An
aggregate of 3,000,000 shares of Common Stock was issued to the stockholders of
the Predecessor Companies in the Reorganization. The following officers,
directors and 5% stockholders of the Company received the number of shares of
Common Stock listed opposite their name in the Reorganization:
<TABLE>
<CAPTION>
Name Number of Shares
----------------------------------------
<S> <C>
Douglas S. Stephens 292,464
Richard F. Sherman 661,551
James S. Riekel 60,294
Michael M. Fleishman 356,430
Martin T. Hart 248,711
Frank O. Keener 522,603
Stephen P. Langford 292,464
Michael J. Grisanti 248,713
Jack A. Laughery 324,080
</TABLE>
Indemnification Agreement. The Predecessor Companies and each of their
stockholders (which includes certain officers, directors and 5% stockholders of
the Company) entered into an Indemnification Agreement (the "Indemnification
Agreement") pursuant to which the stockholders of the Predecessor Companies made
customary representations and warranties to the Company with respect to the
business, assets, financial condition and operations of the Predecessor
Companies. In addition, the stockholders of the Predecessor Companies have
indemnified the Company for a period of 18 months from October 30, 1996, against
breaches of such representations and warranties as well as other breaches of the
Indemnification Agreement, or breaches of the June 10, 1996 Agreement (as
amended July 10, 1996) or the Plan of Merger. The stockholders of the
Predecessor Companies have established an escrow account in support of such
indemnities, which has been funded with an aggregate of $100,000 in cash and
300,000 shares of Common Stock received in the Reorganization. In general, the
Indemnification Agreement provides the sole remedy for claims brought in
connection with the Reorganization and the aggregate amount of the claims is
limited to the cash and shares deposited in the escrow account.
13
<PAGE>
Undistributed S Corporation Earnings. Following the Reorganization, the
Company made total distributions to stockholders of the Predecessor Companies
(which include certain officers, directors and 5% stockholders of the Company)
of approximately $2.0 million of earnings that were not distributed by the
Predecessor Companies when certain of them were S Corporations.
Stockholder Loans. From time to time prior to the Reorganization, Michael
M. Fleishman, Frank O. Keener, Stephen P. Langford, Richard F. Sherman, Douglas
S. Stephens, Jack A. Laughery, Martin T. Hart and Michael J. Grisanti, who were
all stockholders of certain Predecessor Companies, and who are officers,
directors and/or 5% stockholders of the Company, advanced funds to the
Predecessor Companies. The loans accrued interest at a rate of 7% per annum. At
October 30, 1996, the Predecessor Companies repaid obligations to the following
persons in the following amounts: Messrs. Fleishman, $169,073; Keener $174,117;
Langford, $166,352; Sherman $355,297; Stephens, $137,047; Laughery, $188,250;
Hart $188,250; and Grisanti $188,250.
Registration Rights Agreement. The Company has granted certain
registration rights to the stockholders of the Predecessor Companies, who
received shares of Common Stock of the Company in connection with the
Reorganization. The Company also has granted certain registration rights to PJI
in connection with the warrant issued to PJI to purchase 225,000 shares of
Common Stock. The Company will pay the fees and expenses of the registrations,
while such stockholders and PJI will pay all underwriting discounts and
commissions. These registration rights expire October 30, 2001, and are subject
to certain conditions and limitations, including the right of underwriters to
limit the number of shares owned by such stockholders and PJI included in such
registration.
Guarantees. From time to time, Extra Cheese, Inc., PJV, Inc. and PJVA,
Inc. have borrowed funds from banks. These borrowings, which were guaranteed by
the stockholders of Extra Cheese, Inc. and PJVA, Inc. based on their
proportionate ownership in each company, totaled $2.0 million at October 30,
1996. Such guarantees were released in connection with the repayment of the
outstanding loans. The stockholders of Extra Cheese and PJVA, Inc. included the
following officers, directors and/or 5% stockholders of the Company: Messrs.
Fleishman, Grisanti, Hart, Keener, Langford, Laughery, Sherman and Stephens.
PJI Warrant. In connection with the Company's initial public offering, the
Company issued a warrant to PJI to purchase 225,000 shares of Common Stock. The
purchase price for each share of Common Stock is $11.25 per share which is equal
to 90% of the initial public offering price per share. The warrant was issued in
consideration for, among other things, the rights to enter into development
agreements for Ventura, Kern, San Luis Obispo and Santa Barbara counties in
California; Vancouver, Canada and the surrounding area; and Puerto Rico; as well
as PJI's waiver of its $3,000 per market transfer fee with respect to the
restaurants acquired in the Reorganization as well as any other Papa John's
restaurants acquired by the Company prior to October 30, 1997. The Company
expects to pay all standard development and franchise fees in connection with
opening restaurants in these territories. The warrant is exercisable in whole or
in part at any time prior to October 30, 2001. In addition, the warrant will be
transferable subject to applicable securities laws restrictions.
14
<PAGE>
Consulting Fees. In connection with the Company's initial public offering,
Messrs. Sherman, Hart and Fleishman, and Jason T. Fleishman (Mr. Fleishman's
son) and Judy H. Keener (Mr. Keener's wife) received $78,750, $56,250, $51,500,
$38,500 and $35,000, respectively, for consulting services provided with respect
to the structuring, organization and implementation of the offering.
Other Transactions and Agreements
Utah Option Agreement. PJ Utah, LLC holds the development and franchise
rights for Papa John's restaurants in Utah. The Company and PJ Utah, LLC have
entered into an option agreement granting the Company the option to acquire for
cash the operations and development rights for the franchised Papa John's
restaurants in Utah. The option is exercisable at any time during 1998. The
purchase price of the option is equal to the aggregate amount invested in the
Papa John's restaurants, operations (including operating losses, if any) and
related matters in Utah by PJ Utah, LLC, including interest paid to a third
party and/or its members on any loans, an imputed yield on all equity invested
in PJ Utah, LLC equal to the "prime rate," as published in The Wall Street
Journal, plus $10,000 for each store that is open at the time the option is
exercised. The option expires on December 31, 1998. The Company expects, but is
not obligated, to exercise such option in 1998. PJ Utah, LLC is owned by the
following officers, directors and/or 5% stockholders of the Company: Messrs.
Davison (2.0%), Fleishman (11.5%), Grisanti (7.75%), Hart (7.75%), Keener
(16.75%), Langford (9.25%), Laughery (10.25%), Riekel (2.0%), Sherman (19.5%)
and Stephens (9.25%).
In connection with the option agreement, the Company will provide
operational supervision and managerial services (e.g., payroll, accounting, tax,
human resources and other administrative services) to PJ Utah, LLC on a fee for
service basis. The cost to PJ Utah, LLC for such services is $20,000 per month.
The Predecessor Companies began providing such services on August 1, 1996 and
expect to continue to provide such services through December 31, 1998. The
Company believes these fees are comparable to fees that would be charged by
unaffiliated third parties for comparable services. PJ Utah, LLC paid management
fees of $100,000 in 1996.
Right of First Refusal; Management Services (Iowa markets). PJIowa, LC
holds the Papa John's development and franchise rights for Papa John's
restaurants in Iowa, including the Moline and Rock Island, Illinois areas, but
excluding the Council Bluffs area. The Company has obtained a right of first
refusal to acquire such franchise and development rights; however, there is no
agreement or understanding between the Company and PJIOWA, LC or its
stockholders for the Company to acquire such entity or any of its assets.
PJIOWA, LC is owned in part by the following officers, directors and/or 5%
stockholders of the Company: Messrs. Riekel (2.5%), Sherman (21.0%), Laughery
(21.0%), Hart (18.0%) and Grisanti (18.0%). The right of first refusal expires
in August 2001. The Company provides operational supervision, managerial and
administrative services to PJIOWA, LC at a cost of approximately $5,000 per
month depending on the services rendered. PJIowa, LC paid management fees of
$10,000 in 1996.
Right of First Refusal; Management Services (Louisiana markets). PJ
Louisiana, Inc. holds the Papa John's development and franchise rights for Baton
Rouge, Lafayette and Lake Charles, Louisiana and the surrounding areas. The
Company has obtained a right of first refusal to acquire such franchise and
development rights; however, there is no agreement or understanding between the
Company and PJ Louisiana, Inc. or its stockholders for the Company to acquire
such entity or any of its assets.
15
<PAGE>
PJ Louisiana, Inc. is owned in part by Messrs. Keener (19.5%), Fleishman
(19.5%), Langford (19.5%), Sherman (19.5%), Stephens (19.5%) and Curtis (2.5%).
The right of first refusal expires in August 2001. The Company provides
operational supervision, managerial and administrative services to PJ Louisiana,
Inc. at a cost of approximately $5,000 per month depending on the services
rendered. PJ Louisiana, Inc. paid management fees of $20,000 in 1996.
16
<PAGE>
Comparison of Five Year-Cumulative Total Returns
Performance Graph for
PJ America, Inc
Prepared by the Center for Research in Security Prices
Produced on 04/14/97 including data to 12/27/96
[PERFORMANCE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
- - ---------------------------------------------------------------------------------------------------------------------------
Legend
Symbol CRSP Total Returns Index for: 12/27/91 12/29/92 12/29/93 12/29/94 12/29/95 12/27/96
- - ----- ---------------------------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
_____ . PJ America, Inc. 116.8
..._. . Nasdaq Stock Market (US Companies) 45.0 53.7 61.6 60.8 86.2 106.1
- - ----- . NASDAQ Stocks (SIC 5800-5899 US Companies) 78.7 111.2 116.4 83.6 102.7 99.8
Eating and drinking places
Notes:
A. The lines represent monthly index levels derived from compounded daily returns that include all dividends.
B. The indexes are reweighted daily, using the market capitalization on the previous trading day.
C. If the monthly interval, based on the fiscal year-end, is not a trading day, the preceding trading day is used.
D. The index level for all series was set to $100.0 on 10/25/96.
- - ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
17
<PAGE>
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and executive officers, and persons who own more than 10% of the
Company's Common Stock, to file initial stock ownership reports and reports of
changes in ownership with the Securities and Exchange Commission and The Nasdaq
Stock Market. Based on a review of these reports and written representations
from the reporting persons, the Company believes that all applicable Section
16(a) reporting requirements were complied with for all Common Stock
transactions in 1996, except that Mr. Schnatter's Form 3 inaccurately reported
the number of shares beneficially owned by him, which report has been corrected.
18
<PAGE>
2. RATIFICATION OF THE SELECTION OF AUDITORS
The Board of Directors will request stockholders to ratify its selection of
Ernst & Young LLP, independent auditors, to examine the consolidated financial
statements of the Company for the fiscal year ending December 28, 1997. Ernst &
Young LLP has audited the Company's financial statements since 1996.
Representatives of Ernst & Young LLP will be present at the Annual Meeting to
make a statement if they desire to do so and respond to questions by
stockholders. The affirmative vote of a majority of the shares represented at
the meeting is required for the ratification of the Board's selection of Ernst &
Young LLP as the Company's auditors. THE BOARD OF DIRECTORS RECOMMENDS A VOTE
"FOR" THE RATIFICATION OF THE SELECTION OF ERNST & YOUNG LLP AS INDEPENDENT
AUDITORS OF THE COMPANY.
OTHER BUSINESS
The Board of Directors is not aware of any other matters to be presented
at the Annual Meeting other than those set forth in the Notice of Annual Meeting
and routine matters incident to the conduct of the meeting. If any other matters
should properly come before the Annual Meeting or any adjournment or
postponement thereof, the persons named in the proxy, or their substitutes,
intend to vote on such matters in accordance with their best judgement.
STOCKHOLDER PROPOSALS
Any stockholder proposal intended to be presented at next year's Annual
Meeting of Stockholders must be received by the Company by December 17, 1997, to
be considered for inclusion in the Company's proxy materials for such meeting.
In addition, a stockholder who wishes to introduce a proposal at an annual
meeting of stockholders, regardless of whether the stockholder wants the
proposal included in the Company's proxy materials, must comply with certain
requirements set forth in the Company's Certificate of Incorporation. A copy of
the Certificate of Incorporation may be obtained by written request to the Chief
Financial Officer of the Company at its principal executive offices at 9109
Parkway East, Birmingham, Alabama 35206.
ANNUAL REPORT
The Company's Annual Report to Stockholders on Form 10-K for the fiscal
year ending December 29, 1996, accompanies this Proxy Statement.
By Order of the Board of Directors
/s/ Michael M. Fleishman
Michael M. Fleishman
Secretary
Birmingham, AL
April 21, 1997
19
<PAGE>
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS
This Proxy is Solicited on Behalf of the Board of Directors. The undersigned
Stockholder of PJ America, Inc., a Delaware corporation, hereby appoints RICHARD
F. SHERMAN, DOUGLAS S. STEPHENS AND D. ROSS DAVISON, or any one of them acting
in the absence of the others, as the attorneys and proxies of the undersigned
with full power of substitution, to vote all shares of stock of PJ America, Inc.
as designated below which the undersigned holders of record at close of business
on April 17, 1997 and is entitled to vote at the annual meeting of Stockholders
to be held at HOLIDAY INN EXPRESS, 4627 HIGHWAY 280, BIRMINGHAM, ALABAMA, at
10:30 a.m. (CDT), on June 4, 1997, and at any adjournment thereof.
THE BOARD OF DIRECTORS PROPOSES AND RECOMMENDS A VOTE FOR THE ELECTION OF THE
NOMINEES SET FORTH BELOW AND FOR PROPOSAL NO. 2.
1. ELECTION OF DIRECTORS:
[_] FOR all nominees listed below (except as marked to the contrary below)
[_] WITHHOLD AUTHORITY to vote for all nominees listed below
Stephen P. Langford and Charles W. Schnatter.
(or any substitute nominee should any of the above become unavailable for any
reason)
(INSTRUCTION: To withhold authority to vote for any individual nominee write
that nominee's name on the space provided below.)
-----------------------------------------------------
2. Proposal to ratify the appointment of ERNST & YOUNG LLP as PJ America,
Inc.'s Independent Certified Accountants for the fiscal year ending December 28,
1997.
FOR [_] AGAINST [_] ABSTAIN [_]
WHEN PROPERLY EXECUTED, THIS PROXY WILL BE VOTED IN THE MANNER DIRECTED BY THE
STOCKHOLDER. IF NO SPECIFIC DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED FOR
PROPOSAL NOS. 1 AND 2 AND, IN THE DISCRETION OF THE PROXIES, UPON SUCH OTHER
BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING OR ANY ADJOURNMENT THEREOF.
3. In their discretion, the Proxies are authorized to vote in accordance with
their judgment upon such other business as may properly come before the meeting
or any adjournment thereof.
The undersigned hereby revokes any proxy or proxies heretofore given, and
ratifies and confirms all that the proxies appointed hereby or any of them, or
their substitutes, may lawfully do or cause to be done by virtue thereof.
Please mark, sign, date, and return this proxy in the enclosed envelope. No
postage is required if mailed within the United States.
Date: , 1997
-----------
----------------------------
Signature
----------------------------
Signature (if jointly held)
Please sign exactly as name appears on label. When shares are held by joint
tenants, both should sign. When signing as attorney, as executor, administrator,
trustee or guardian, please give full title as such. If a corporation, the
President or other authorized officer should sign in the full corporate name. If
a partnership, an authorized person should sign in partnership name.
