Jamba Juice 2009 Annual Report Download - page 87

Table of Contents
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The following payments were made pursuant to the Merger Agreement:
Cash payment to equity holders: Each of Jamba Juice Company’s 10.9 million shares of common stock and 26.0 million shares of preferred stock
were converted into the right to receive $6.03 in cash per share less $0.52 per share for amounts to be held in escrow for a total payment of $203.3 million.
Holders of options to purchase 4.4 million shares of Jamba Juice Company common stock exercised their options for cash proceeds of $11.2 million and
received a cash payment of $24.5 million for a net payment of $13.3 million. Holders of warrants to purchase approximately 725,000 shares of Jamba Juice
Company common stock received a net cash payment of $2.2 million.
Cash held in escrow: In accordance with the Merger Agreement, $19.9 million (or $0.47 per share) of the merger consideration otherwise payable to
each stockholder was deposited in an escrow account through November 29, 2007 (the “Escrow Period”) to satisfy the indemnity obligations under the Merger
Agreement. An additional $2.0 million (or $0.05 per share) was deposited in a separate interest bearing account to reimburse the stockholder representative for
its fees and costs, and to fund any costs of defense of any indemnity claims. Such amounts, less any amounts applied in satisfaction of indemnification
claims or stockholder representative fees and expenses, were released to the former Jamba Juice Company shareholders, option holders, and warrant holders on
a pro-rata basis based on their respective ownership percentages. The first holdback escrow release payment of approximately $11.8 million was made in
January 2007. The second holdback escrow release payment of approximately $3.9 million was made in May 2007. The third and final holdback escrow
release payment for approximately $4.2 million was made on July 31, 2007. Of the $2.0 million in the shareholder representative account, approximately $1.8
million was paid to Jamba Juice Company shareholders on or about July 31, 2007. Approximately $150,000 had been disbursed subsequent to August 1,
2007. As these amounts were originally considered part of the purchase price of the Merger, the tax impacts of these payouts resulted in an offset to goodwill.
The remaining balance of $55,000 owed to former Jamba Juice Company shareholders as of January 1, 2008 was paid during fiscal 2008.
Fair value of options and warrants assumed: As of the Merger Date, vested and unvested options to purchase 1.4 million shares and warrants to
purchase 0.6 million shares of Jamba Juice Company common stock were converted into options to purchase 0.7 million shares and exchanged for warrants to
purchase 0.3 million shares of Company common stock. The exchange ratio of 0.53 for warrants was calculated by dividing the per share merger
consideration of $6.03 by the average daily closing price per share of Company common stock over a period of 5 trading days immediately preceding the
Merger Date. The exchange ratio of 0.51 for options assumed was calculated by dividing the per share merger consideration of $6.03 by the closing price per
share of the Company’s common stock on the day before the completion of the Merger. The exchange ratios were also applied to adjust the exercise price of the
options and warrants so that the aggregate intrinsic value of the new Company options and warrants was not greater than the aggregate intrinsic value of the
Jamba Juice Company options and warrants immediately prior to the Merger.
The fair value of options assumed and warrants exchanged was determined using a Black-Scholes valuation model with the following assumptions:
average stock price of $11.53, expected lives of 0.5 to 5.0 years, risk-free interest rates of 4.3% to 5.0%, expected volatility of 35.7% to 39.7% and expected
dividends of zero. See discussion of how the Company determines these assumptions in Note 12. The fair value of the options assumed and warrants
exchanged has been included as part of the purchase price. The portion of the fair value of unvested options that relates to future service of $1.9 million will be
recognized into expense over the remaining weighted-average vesting period of the options of 2.2 years.
Acquisition related transaction costs: Acquisition related transaction costs include legal and accounting fees and other external costs directly related to
the acquisition.
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