KKD Krispy Kreme Doughnuts, Inc.

NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON [●], 2016

Dear Shareholder:

You are cordially invited to attend the special meeting of shareholders of Krispy Kreme Doughnuts, Inc., a North Carolina corporation (the “Company”), that will be held at [●], at [●], local time, on [●], 2016 (the “special meeting”) for the following purposes:

The merger agreement is attached as Annex A to the attached proxy statement, and a summary of the material terms of the merger agreement is included in the attached proxy statement. See “Summary Term Sheet” beginning at page 1 and “The Merger Agreement” beginning at page 65. JAB Holdings B.V. is a Dutch Besloten Vennootschap met beperkte aansprakelijkheid (private company with limited liability). Cotton Parent, Inc. is a Delaware corporation and an affiliate of JAB Holdings B.V. Cotton Merger Sub Inc. is a North Carolina corporation and a wholly owned subsidiary of Cotton Parent, Inc.

Shareholders of record at the close of business on [●], 2016 (the “record date”) are entitled to notice of and to vote at the special meeting and any adjournment or postponement of the special meeting.

Our board of directors reviewed and considered the terms and conditions of the merger and unanimously determined that the merger is fair to, and in the best interests of, the Company and its shareholders, unanimously adopted, approved and declared advisable the merger agreement, the merger and the other transactions contemplated by the merger agreement in accordance with North Carolina law, and unanimously resolved to submit and recommend the approval of the merger agreement and the transactions contemplated thereby, including the merger, to our shareholders. The board of directors of the Company made its determination after consideration of a number of factors more fully described in the proxy statement.

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THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE “FOR” THE MERGER PROPOSAL, “FOR” THE MERGER-RELATED COMPENSATION PROPOSAL AND “FOR” THE ADJOURNMENT PROPOSAL, IF  NECESSARY OR APPROPRIATE, FOR THE PURPOSE OF SOLICITING ADDITIONAL PROXIES TO VOTE IN FAVOR OF APPROVING THE MERGER  AGREEMENT.

YOUR VOTE IS IMPORTANT.

Under the North Carolina Business Corporation Act, in connection with the merger, shareholders have no right to demand appraisal of their shares of the Company’s common stock and obtain payment in cash for the fair value of such shares. See “The Merger—Appraisal Rights” beginning on page 59.

You should not send any certificates representing shares of the Company’s common stock with your proxy card. Upon the closing of the merger, you will be sent instructions regarding the procedure to exchange your share certificates for the cash merger consideration.

Your vote is very important, regardless of the number of shares you own. Even if you plan to attend the special meeting in person, we request that you complete, sign, date and return your proxy card in the enclosed envelope, or appoint a proxy over the Internet or by telephone as instructed in these materials, to ensure that your shares will be represented at the special meeting if you are unable to attend. If you sign, date and mail your proxy card or appoint a proxy over the Internet or by telephone without indicating how you wish to vote, your shares will be voted in favor of the approval of the merger proposal, in favor of the merger-related compensation proposal, and in favor of the adjournment proposal.

If you fail to return your proxy card or if you fail to appoint a proxy over the Internet or by telephone and you do not attend the special meeting, your shares will not be counted for purposes of determining whether a quorum is present at the special meeting and will have the same effect as a vote against the approval of the merger agreement. If you do attend the special meeting and wish to vote in person, you may withdraw your proxy appointment and vote in person. If your shares are held in the name of your bank, brokerage firm or other nominee, you must obtain a proxy appointment from the holder of record to be able to vote in person at the special meeting.

No person has been authorized to give any information or to make any representations other than those set forth in the proxy statement in connection with the solicitation of proxies made hereby, and, if given or made, such information must not be relied upon as having been authorized by the Company or any other person.

By Order of the Board of Directors,
 

Steven J. Ellcessor
Secretary

[●], 2016
Winston-Salem, North Carolina

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Summary Term Sheet

This Summary Term Sheet, together with the “Questions and Answers About the Special Meeting and the Merger,” highlights selected information in the proxy statement and may not contain all the information that may be important to you. You should carefully read this entire proxy statement and the other documents to which this proxy statement refers you for a more complete understanding of the matters being considered at the special meeting. In addition, you may obtain additional business and financial information about Krispy Kreme Doughnuts, Inc. without charge by following the instructions in “Where You Can Find More Information” beginning on page 91. We have included page references in parentheses to direct you to more complete descriptions of the topics presented in this summary. The Agreement and Plan of Merger, dated as of May 8, 2016, among Krispy Kreme Doughnuts, Inc., Cotton Parent, Inc., Cotton Merger Sub Inc. and JAB Holdings B.V. (the “merger agreement”), is attached as Annex A to this proxy statement. We encourage you to read the merger agreement, as it is the legal document that governs the merger of an affiliate of JAB Holdings B.V. with the Company, which is referred to in this proxy statement as the “Merger.” In this proxy statement, “we,” “us,” “our,” and the “Company” refer to Krispy Kreme Doughnuts, Inc.

The Merger and the Merger Agreement

The Parties to the Merger (see page 19). Krispy Kreme Doughnuts, Inc., a North Carolina corporation, is a leading branded specialty retailer and wholesaler of premium quality sweet treats and complementary products, including its signature Original Glazed® doughnut. JAB Holdings B.V. (“JAB Holdings”), a Dutch Besloten Vennootschap met beperkte aansprakelijkheid (private company with limited liability), is a privately held company focused on making long-term investments in companies with premium brands in the consumer goods category. Cotton Parent, Inc. (“Parent”), is a Delaware corporation and affiliate of JAB Holdings and has not engaged in any material business activities except in furtherance of the purpose of effecting the merger. Cotton Merger Sub Inc. (“Merger Sub”) is a North Carolina corporation, is a wholly owned subsidiary of Parent and has not engaged in any material business activities except in furtherance of the purpose of effecting the merger.

The Merger (see page 27). You are being asked to vote to approve the merger agreement. Pursuant to the merger agreement, Merger Sub will merge with and into the Company with the Company continuing as the surviving corporation in the merger. As a result of the merger, the Company will become an affiliate of Parent and will cease to be a publicly-traded company. Following consummation of the merger, you will no longer have any interest in the Company’s future earnings or growth, and the registration of the Company’s common stock and our reporting obligations with respect to our common stock under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), will be terminated upon application to the Securities and Exchange Commission (the “SEC”). In addition, following consummation of the merger, shares of our common stock will no longer be listed on any stock exchange, including the New York Stock Exchange (“NYSE”).

Merger Consideration (see page 66). Upon the consummation of the merger, each share of common stock, no par value, of the Company (the “Company’s common stock”) (excluding for these purposes any shares of the Company’s common stock which are granted in the form of “share units” described below) that is issued and outstanding immediately prior to the effective time of the merger (other than (i) shares owned by Parent, Merger Sub or any other affiliate, and (ii) shares owned by any direct or indirect wholly owned subsidiary of the Company), will be cancelled and automatically converted into the right to receive $21.00 in cash, without interest (the “merger consideration”), subject to applicable withholding tax.

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Treatment of Outstanding Stock Options and Share Units (see page 67). At least five days prior to the effective time of the merger, we will take all necessary action to accelerate the vesting of each outstanding stock option and provide each holder of such stock option the opportunity to exercise such stock option during such five-day period. At the effective time of the merger, each stock option outstanding immediately prior to the effective time of the merger (whether vested or unvested) will be cancelled and converted into the right to receive, as soon as reasonably practicable after the effective time of the merger, but in no event later than fifteen business days following the effective time of the merger, with respect to each share of the Company’s common stock subject to such stock option, a cash payment equal to the excess, if any, of $21.00 over the exercise price per share of such stock option, without interest and subject to applicable tax withholding.

At the effective time of the merger, each outstanding award of a right (other than stock options) entitling the holder thereof to receive or retain shares of the Company’s common stock or receive a cash payment equal to or based on the value of shares of the Company’s common stock, including any restricted stock units, referred to in this proxy statement as a “share unit”, outstanding or payable as of immediately prior to the effective time of the merger (whether vested or unvested) will be cancelled and converted into the right to receive, as promptly as reasonably practicable following the effective time of the merger, but in no event later than fifteen business days following the effective time of the merger, a cash payment equal to the product of (x) the number of shares of the Company’s common stock subject to such share unit and (y) $21.00, without interest and subject to applicable tax withholding; provided that the number of shares of the Company’s common stock subject to each share unit that is subject to performance-based vesting will be determined based on the level of achievement of such performance condition through the closing of the merger, measured in a manner that is consistent with our past practice regarding the methodology for such measurement, or, if greater, the target number of shares of the Company’s common stock subject to such share unit.

Conditions to the Merger (see page 80). The consummation of the merger by Parent and Merger Sub depends on the satisfaction or waiver of a number of conditions, including, among others, the following:

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JAB Holdings is a party to the merger agreement and has covenanted that it shall cause Parent to perform its payment obligations under the merger agreement and to be held liable for any breach by Parent of such obligations as if it were Parent. Parent has further made representations in the merger agreement that it will have sufficient cash available to pay all amounts to be paid by Parent in connection with the merger agreement. Parent’s and Merger Sub’s obligations to consummate the merger are not conditioned upon obtaining financing.

No Solicitation of Other Offers (see page 74). Under the merger agreement, we have agreed that, except as expressly permitted by the merger agreement, neither we nor any of our subsidiaries will, nor will we authorize or permit our respective representatives to, directly or indirectly:

Notwithstanding these restrictions, prior to the time that our shareholders approve the merger agreement, if we have not breached the solicitation restrictions summarized above, we may provide information (including non-public information) requested by a person who has made an unsolicited bona fide written acquisition proposal and engage in discussions and negotiations with such person, if and only to the extent that, prior to taking any action described above, our board of directors has determined in good faith, after consultation with our outside financial advisors and outside legal counsel, that:

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Ability to Change Board Recommendation (see page 76). The merger agreement provides that (subject to certain exceptions) our board of directors may not take or publicly propose to take any of the following actions:

However, prior to the time that our shareholders approve the merger agreement, our board of directors may, under specified circumstances, change its recommendation with respect to the merger and, with respect to a superior proposal, terminate the merger agreement if our board of directors has determined in good faith, after consultation with its outside financial advisors and outside legal counsel, that:

However, our board of directors may change its recommendation or terminate the merger agreement in connection with a superior proposal only if:

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Any modification to the financial or other material terms of any superior proposal made to the Company will be deemed a new acquisition proposal that will require giving of new notice and the commencement of a new three business day notice period, during which the Company must comply with the requirements summarized above.

Termination of the Merger Agreement (see page 82). The merger agreement may be terminated at any time prior to the effective time of the merger even if (except as described below) our shareholders have approved the merger agreement at the special meeting, in the following circumstances:

Termination Fee (see page 83). If the merger agreement is terminated under certain circumstances, generally involving competing acquisition proposals and a change in our board of directors’ recommendation with respect to the merger, we will be required to pay to Parent a termination fee of $42,000,000.

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The Special Meeting of the Company Shareholders

The special meeting will be held on [●], 2016, at [●] a.m. Eastern Time, at [●]. At the special meeting, you will be asked to, among other things, vote for the merger proposal. For additional information on the special meeting, including how to vote your shares of the Company’s common stock, see “Questions and Answers About the Special Meeting and Merger” beginning on page 9 and “The Special Meeting” beginning on page 20.

Other Important Considerations

Board Recommendation. Our board of directors recommends that the Company shareholders vote “FOR” the approval of the merger agreement, “FOR” the adoption of the resolution to approve, on an advisory basis, the merger-related compensation for our named executive officers, and “FOR” the adjournment of the special meeting, if necessary or appropriate, to solicit additional proxies. See “The Merger—Reasons for the Merger and Recommendation of the Board of Directors” beginning on page 36.

Reasons for the Merger. For a discussion of the material factors considered by our board of directors in reaching their conclusions and the reasons why our board of directors determined that the merger is advisable and fair to, and in the best interests of the Company and our shareholders, see “The Merger—Reasons for the Merger and Recommendation of the Board of Directors” beginning on page 36.

Share Ownership of Directors and Executive Officers. See “Security Ownership of Certain Beneficial Owners” beginning on page 86.

Interests of the Company’s Directors and Executive Officers in the Merger. In considering the recommendation of our board of directors that you vote in favor of the approval of the merger agreement, you should know that there are provisions of the merger agreement that will result in certain benefits to our directors and executive officers that are different from, or in addition to, the interests of our shareholders generally. Our board of directors knew of these interests and considered them, among other matters, in adopting and approving the merger agreement and the merger. These interests may present such directors and executive officers with actual or potential conflicts of interest, and these interests, to the extent material, are described in “The Merger—Interests of Our Directors and Executive Officers in the Merger” beginning on page 53 and include:

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As of May 26, 2016, our directors and executive officers collectively beneficially held, including shares underlying unvested share units that will vest, and shares subject to stock options exercisable, in each case, within 60 days of May 26, 2016, approximately 5.5% of the outstanding shares of the Company’s common stock. See “Security Ownership of Certain Beneficial Owners” beginning on page 86.

Opinion of Wells Fargo Securities, LLC (see page 45 ). On May 7, 2016, Wells Fargo Securities, LLC (“Wells Fargo Securities”) rendered its oral opinion to the Company’s board of directors (which was confirmed in writing by delivery of Wells Fargo Securities’ written opinion to the Company’s board of directors dated May 7, 2016), as to, as of May 7, 2016, the fairness, from a financial point of view, to the holders of the Company’s common stock, of the merger consideration to be received by the holders of the Company’s common stock in the merger pursuant to the merger agreement. Wells Fargo Securities’ opinion was for the information and use of our board of directors (in its capacity as such) in connection with its evaluation of the merger. Wells Fargo Securities’ opinion only addressed the fairness, from a financial point of view, to the holders of the Company’s common stock of the merger consideration to be received by the holders of the Company’s common stock in the merger pursuant to the merger agreement and did not address any other aspect or implication of the merger or any agreement, arrangement or understanding entered into in connection therewith or otherwise. The summary of Wells Fargo Securities’ opinion in this proxy statement is qualified in its entirety by reference to the full text of its written opinion, which is attached as Annex B to this proxy statement and describes the procedures followed, assumptions made, qualifications and limitations on the review undertaken and other matters considered by Wells Fargo Securities in connection with the preparation of its opinion. However, neither Wells Fargo Securities’ opinion nor the summary of its opinion and the related analyses set forth in this proxy statement are intended to be, and do not constitute, advice or a recommendation to our board of directors, any security holder of the Company or any other person as to how to vote or act with respect to any matter relating to the merger.

Regulatory Matters (see page 62). The merger agreement requires us and Parent to use reasonable best efforts to consummate the transactions contemplated by the merger agreement as soon as practicable. In furtherance of the foregoing, the Company and Parent have each agreed to (i) make a filing under the HSR Act as soon as practicable, (ii) use reasonable best efforts to supply as soon as practicable any additional information and documentary material reasonably requested pursuant to the HSR Act, and (iii) use reasonable best efforts to cause the expiration or termination of the applicable waiting periods under the HSR Act as soon as practicable. The Company and Parent both filed the required notifications under the HSR Act, on May 26, 2016, with the Federal Trade Commission (the “FTC”). The merger agreement also requires us and Parent to file as promptly as practicable all documentation to effect all necessary notices, reports or other filings and to obtain as promptly as practicable all consents, registrations, approvals, permits and authorizations necessary from any third party or any governmental entity in connection with the merger and the transactions contemplated by the merger agreement.

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Material U.S. Federal Income Tax Consequences of the Merger (see page 59). The merger will be a taxable transaction for U.S. federal income tax purposes if you are a U.S. person, as defined under “The Merger—Material U.S. Federal Income Tax Consequences of the Merger.” If you are a U.S. person, your receipt of cash in exchange for your shares of the Company’s common stock in the merger generally will cause you to recognize gain or loss measured by the difference, if any, between the cash you receive in the merger, determined before the deduction of any required tax withholdings, and your adjusted tax basis in your shares of the Company’s common stock. Any such gain or loss recognized generally will be treated as capital gain or loss and will be long-term capital gain or loss if your holding period for the Company’s common stock exceeds one year as of the date of the merger. Under U.S. federal income tax law, you will be subject to information reporting on cash received in the merger unless an exemption applies. Backup withholding may also apply with respect to cash you receive in the merger, unless you provide proof of an applicable exemption or a correct taxpayer identification number and otherwise comply with the applicable requirements of the backup withholding rules. You should consult your own tax advisor for a full understanding of how the merger will affect your U.S. federal, state and local and/or foreign taxes and, if applicable, the tax consequences of the receipt of cash in connection with the termination of, and full payment for, your stock options to purchase shares of the Company’s common stock, including the transactions described in this proxy statement relating to our other equity compensation and benefit plans. If you are not a U.S. person, the merger will generally not result in tax to you under U.S. federal income tax laws unless you have certain connections to the United States, and the Company encourages you to seek tax advice regarding such matters.

Appraisal Rights. Under the North Carolina Business Corporation Act, no appraisal rights will be available to shareholders in connection with the merger. See “The Merger—Appraisal Rights” beginning on page 59.

Litigation Relating to the Merger (see page 64). On May 26, 2016, in connection with the merger, legal advisors purportedly representing a shareholder of the Company submitted a letter to the board of directors of the Company demanding legal action against the board for purported breaches of fiduciary duty related to the merger. Among other things, the letter alleges that the board agreed to inadequate merger consideration and agreed to unreasonably protect the proposed merger from competing offers. The letter asks the Company’s board of directors to authorize litigation against Parent and its affiliated entities for aiding and abetting these supposed breaches. As of the date of the filing of this proxy statement, no further action regarding this matter has been taken.

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Questions and Answers About the Special Meeting and the Merger

The following questions and answers are intended to address briefly some commonly asked questions regarding the merger, the merger agreement and the special meeting. These questions and answers may not address all questions that may be important to you as a shareholder of the Company. Please refer to the “Summary Term Sheet” and the more detailed information contained elsewhere in this proxy statement, the annexes to this proxy statement and the documents referred to in this proxy statement, all of which you should read carefully. You may obtain the information incorporated by reference in this proxy statement without charge by following the instructions under “Where You Can Find More Information” beginning on page 91.

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Special Note Regarding Forward-Looking Statements

The foregoing contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. We intend for these forward-looking statements to be covered by the safe harbor provisions of the federal securities laws relating to forward-looking statements. Forward-looking statements are based on management’s beliefs, assumptions and expectations concerning the statements relating to regulatory approvals and the expected timing, completion and effects of the proposed merger and other future events and the transaction’s potential effects on the Company, including, but not limited to, statements relating to anticipated financial and operating results, the Company’s plans, objectives, expectations and intentions, cost savings, and other statements. Forward-looking statements involve risks and uncertainties that may cause our actual results, performance or financial condition to differ materially from the expectations of future results, performance or financial condition we express or imply in any forward-looking statements. Forward-looking statements often contain words such as “believe,” “may,” “forecast,” “could,” “will,” “should,” “would,” “anticipate,” “estimate,” “expect,” “intend,” “objective,” “seek,” “strive” or similar words, or the negative of these words. Actual results may differ materially from the results anticipated in these forward looking statements due to various factors, including, without limitation:

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In addition, we are subject to risks and uncertainties and other factors detailed in our filings with the United States Securities and Exchange Commission (“SEC”), including our Annual Report on Form 10-K for the fiscal year ended January 31, 2016 under “Item 1A. Risk Factors.” and in subsequent filings with the SEC, which should be read in conjunction with this proxy statement. See “Where You Can Find More Information” on page 91. These and other risks and uncertainties are difficult to predict, involve uncertainties that may materially affect actual results and may be beyond the Company’s control. New factors emerge from time to time, and it is not possible for management to predict all such factors or to assess the impact of each such factor on the Company. Any forward-looking statement speaks only as of the date on which such statement is made, and, except as required by law, the Company does not undertake any obligation to update any forward-looking statement to reflect actual results, changes in plans, assumptions, estimates or projections, or other circumstances occurring after the date of this proxy statement, even if such results, changes or circumstances make it clear that any forward-looking information will not be realized. Investors, potential investors and others are urged to carefully consider all such factors and are cautioned not to place undue reliance on these forward-looking statements.

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The Parties to the Merger

Krispy Kreme Doughnuts, Inc.

The Company is a North Carolina corporation with headquarters in Winston-Salem, North Carolina. We are a leading branded specialty retailer and wholesaler of premium quality sweet treats and complementary products, including our signature Original Glazed® doughnut. Headquartered in Winston-Salem, NC, the Company has offered the highest quality doughnuts and great tasting coffee since it was founded in 1937. Today, there are over 1,100 Krispy Kreme shops in more than 26 countries around the world. Our principal executive offices are located at 370 Knollwood Street, Winston-Salem, North Carolina 27103, and our telephone number is (336) 726-8876. Our website address is www.krispykreme.com . The information provided on our website is not part of this proxy statement and, therefore, is not incorporated herein by reference. Our common stock is publicly traded on the NYSE under the ticker symbol “KKD.”

JAB Holdings B.V.

JAB Holdings is a Dutch Besloten Vennootschap met beperkte aansprakelijkheid (private company with limited liability) with headquarters in The Netherlands. JAB Holdings is a privately held company focused on long-term investments in companies with premium brands in the consumer goods category. The principal executive offices of JAB Holdings are located at Oude Weg 147, 2033 Haarlem CC, The Netherlands, and its telephone number is +31 23 2302 866.

Cotton Parent, Inc.

Cotton Parent, Inc. is a Delaware corporation and an affiliate of JAB Holdings B.V. The principal executive offices of Cotton Parent, Inc. are located at 1701 Pennsylvania Avenue NW, Suite 801, Washington, DC 20006, and its telephone number is (202) 602-1302. Prior to the effective time of the merger, Cotton Parent, Inc. will have engaged in no other business activities and will have incurred no liabilities or obligations other than as contemplated in the merger agreement.

Cotton Merger Sub Inc.

Cotton Merger Sub Inc. is a North Carolina corporation and a wholly owned subsidiary of Cotton Parent, Inc. It has not engaged in any material business activities other than in connection with its formation and the merger. Prior to the effective time of the merger, Cotton Merger Sub Inc. will have engaged in no other business activities and will have incurred no liabilities or obligations other than as contemplated in the merger agreement. Upon completion of the merger, Cotton Merger Sub Inc. will merge with and into the Company, and Cotton Merger Sub Inc. will cease to exist.

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The Special Meeting

We are furnishing this proxy statement to you as part of the solicitation of proxies by the Company for use at the special meeting.

Date, Time and Place

The special meeting will be held at [●], at [●], local time, on [●], 2016.

Purpose of the Special Meeting

You will be asked at the special meeting to approve the merger agreement. Our board of directors reviewed and considered the terms and conditions of the merger and unanimously determined that the merger is fair to, and in the best interests of, the Company and its shareholders, unanimously adopted, approved and declared advisable the merger agreement, the merger and the other transactions contemplated by the merger agreement in accordance with North Carolina law, and unanimously resolved to submit and recommend the approval of the merger agreement and the transactions contemplated thereby, including the merger, to our shareholders. You will also be asked to approve, on an advisory basis, the merger-related compensation for the Company’s named executive officers. If necessary or appropriate, you will also be asked to vote on a proposal to adjourn the special meeting for the purpose of soliciting proxies to vote in favor of the approval of the merger agreement.

Record Date; Stock Entitled To Vote; Quorum

Only holders of record of the Company’s common stock at the close of business on [●], 2016 (the “record date”), are entitled to notice of and to vote at the special meeting. Each share of the Company’s common stock issued and outstanding on the record date is entitled to one vote at the special meeting. On the record date, [●] shares of the Company’s common stock were issued and outstanding and held by [●] holders of record. A quorum will be present at the special meeting if a majority of the outstanding shares of the Company’s common stock entitled to vote on the record date are represented in person or by proxy. In the event that a quorum is not present at the special meeting, or there are not sufficient votes at the time of the special meeting to approve the merger agreement, it is expected that the meeting may be adjourned to solicit additional proxies if the holders of a majority of the shares of the Company’s common stock present, in person or by proxy, and entitled to vote at the special meeting vote to approve an adjournment. Holders of record of the Company’s common stock on the record date are entitled to one vote per share at the special meeting on each proposal presented.

Vote Required

Merger Proposal . The merger proposal requires that shareholders of record as of the close of business on the record date holding a majority of all outstanding shares of our common stock entitled to vote at the special meeting vote “ FOR ” such proposal.

Merger-Related Compensation Proposal . The named executive officer merger-related compensation proposal requires that the number of votes cast in favor of the proposal exceeds the number of votes cast opposing the proposal.

Adjournment Proposal . The adjournment proposal requires that the number of votes cast in favor of the proposal exceed the number of votes cast opposing the proposal.

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Voting of Proxies

All shares represented by properly appointed proxies received in time for the special meeting will be voted at the special meeting in the manner specified by the holders. Proxies that are properly appointed without voting instructions will vote “ FOR ” the merger proposal, “ FOR ” the merger-related compensation proposal and “ FOR ” the adjournment proposal, as applicable.

To vote, please complete, sign, date and return the enclosed proxy card or, to appoint a proxy over the Internet or by telephone, follow the instructions provided below. If you attend the special meeting and wish to vote in person, you may revoke your proxy appointment and vote in person. If your shares are held in the name of your broker, bank or other nominee, you must obtain a proxy appointment from the holder of record to be able to vote at the special meeting.

If you wish to attend the special meeting, you may be asked to present photo identification. The special meeting is for the shareholders of the Company as of the record date. Accordingly, if you are a shareholder of record or hold a valid proxy appointment from a shareholder of record, we will verify your name (or the name of such shareholder) against the list of shareholders of record on the record date prior to your admission to the special meeting. If you are not a shareholder of record but your shares are held in street name by your bank, brokerage firm or other nominee, please bring and be prepared to provide upon request proof of beneficial ownership on the record date, such as your most recent account statement prior to [●], 2016, or other similar evidence of ownership. We reserve the right to refuse admittance to the special meeting to any person that we cannot verify, through the foregoing methods, is a shareholder (or a proxy of a shareholder) of the Company as of the record date . The meeting will begin promptly at [●], local time. Check in will begin at [●], local time. Please allow ample time for check in procedures.

Shares of the Company’s common stock represented at the special meeting but not voted, including shares of the Company’s common stock for which proxies have been appointed but for which shareholders have abstained, will be treated as present at the special meeting for purposes of determining the presence or absence of a quorum for the transaction of all business.

If you are a shareholder of record and do not vote by completing your proxy card, by telephone, through the Internet, or in person at the special meeting, your shares will not be voted.

No business may be transacted at the special meeting other than the merger proposal, the merger-related compensation proposal, and, if necessary or appropriate, the adjournment proposal, except such business as may properly be brought before the special meeting or any adjournment or postponement thereof. As of the date of this proxy statement, we know of no other matters that will be presented for consideration at the special meeting, or any adjournments or postponements thereof, other than as described in this proxy statement.

Voting over the Internet or by Telephone

You may also appoint a proxy to vote your shares over the Internet or by telephone. The Company’s bylaws and the North Carolina Business Corporation Act specifically permit electronically and telephonically appointed proxies, provided that each such proxy appointment contains or is submitted with information from which the inspector of election can reasonably assume that such proxy appointment was made or authorized by the shareholder.

The Internet and telephone voting procedures described below are designed to authenticate shareholders’ identities, to allow shareholders to appoint a proxy to vote their shares and to confirm that shareholders’ instructions have been recorded properly. Shareholders appointing a proxy to vote over the Internet should understand that there may be costs associated with electronic access, such as usage charges from Internet access providers and telephone companies that must be borne by the shareholder.

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For Shares of Common Stock Registered in Your Name

Shareholders of record may go to [●] to appoint a proxy to vote their shares over the Internet. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form. Any shareholder may also appoint a proxy to vote shares by calling [●] and following the recorded instructions.

For Shares Registered in the Name of a Broker or a Bank

Most beneficial owners whose stock is held in street name receive instructions for authorizing votes by their banks, brokers or other agents, rather than from our proxy card.

A number of brokers and banks are participating in a program that offers the means to authorize votes over the Internet and by telephone. If your shares are held in an account with a broker or bank participating in such a program, you may appoint a proxy to vote those shares over the Internet at the Internet URL specified on the instruction form received from your broker or bank, or by telephone by calling the telephone number shown on the instruction form received from your broker or bank.

General Information for All Shares Voted Over the Internet or by Telephone

Votes submitted over the Internet or by telephone must be received by [●], Eastern Time, on [●], 2016. Submitting your proxy appointment over the Internet or by telephone will not affect your right to vote in person should you decide to attend the special meeting.

Revocability of Proxies

The appointment of a proxy on the enclosed proxy card or over the Internet or by telephone does not preclude a shareholder from voting in person at the special meeting. You may revoke your proxy appointment at any time before the shares reflected on your proxy card are voted at the special meeting in any one of the following ways:

Your most current proxy card or telephone or Internet proxy appointment is the one that is counted. Please note that to be effective, your new proxy card, Internet or telephonic voting instructions or written notice of revocation must be received by the Corporate Secretary prior to the special meeting and, in the case of Internet or telephonic voting instructions, must be received before [●], Eastern Time, on [●], 2016.

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Your attendance at the special meeting will not in and of itself constitute the revocation of a proxy appointment. If you have instructed your broker to vote your shares, you must follow the directions received from your broker to change these instructions.

Solicitation Of Proxies

This proxy solicitation is being made and paid for by the Company on behalf of the Company’s board of directors. In addition, we have retained Innisfree M&A Incorporated to assist in the solicitation. We will pay Innisfree M&A Incorporated approximately $35,000 for its assistance. Our directors, officers and employees may also solicit proxies by personal interview, mail, e-mail, telephone or facsimile. These persons will not be paid additional remuneration for their efforts. We will also request brokers and other custodians, nominees and fiduciaries to forward proxy solicitation material to the beneficial owners of shares of the Company’s common stock that the brokers and other custodians, nominees and fiduciaries hold of record. We will reimburse them for their reasonable out-of-pocket expenses.

You should not send your share certificates with your proxy card. A letter of transmittal with instructions for the surrender of common share certificates will be mailed to our shareholders as soon as practicable after completion of the merger.

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Merger Proposal

As discussed elsewhere in this proxy statement, our shareholders will consider and vote on a proposal to approve the merger agreement. You should carefully read this proxy statement in its entirety for more detailed information concerning the merger agreement and the merger. In particular, you should read in its entirety the merger agreement, which is attached as Annex A to this proxy statement. In addition, see the sections entitled “The Merger,” beginning on page 27, and “The Merger Agreement,” beginning on page 65.

The approval of the merger proposal requires the affirmative vote of the holders of a majority of the outstanding shares of the Company’s common stock entitled to vote on such proposal.

Our board of directors unanimously recommends that you vote “ FOR ” the proposal to approve the merger agreement.

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Merger-Related Compensation Proposal

Under the Dodd-Frank Wall Street Reform and Consumer Protection Act and section 14A of the Exchange Act, when a company seeks shareholder approval in connection with its merger or acquisition, it is required to conduct a separate shareholder advisory vote on certain compensation arrangements between the company and its named executive officers. As a result, the Company’s shareholders are entitled to vote to approve or disapprove, on an advisory basis, the compensation of the named executive officers of the Company that is based on or otherwise relates to the merger as disclosed in this proxy statement, which compensation is referred to in this proxy statement as “merger-related compensation.” The terms of the merger-related compensation are described in this proxy statement under “The Merger—Interests of Our Directors and Executive Officers in the Merger” on page 53.

In accordance with the above requirements, the Company is asking its shareholders to vote on the adoption of the following resolution:

“RESOLVED, that the compensation that may be paid or become payable to the named executive officers of the Company in connection with the merger, as disclosed in the merger-related compensation table and narrative discussion as set forth in this proxy statement under ‘The Merger—Interests of Our Directors and Executive Officers in the Merger’ beginning on page 53, is hereby APPROVED.”

The named executive officer merger-related compensation proposal requires that the number of votes cast in favor of such proposal exceeds the number of votes cast opposing such proposal. Because the vote on this proposal is advisory, it will not be binding on the Company’s board of directors. Thus, regardless of the outcome of this advisory vote, such compensation will be payable if the merger is approved, subject only to other applicable conditions.

The advisory vote on the merger-related compensation is a vote separate and apart from the vote to approve the merger agreement. Accordingly, you may vote to approve, on an advisory basis, the merger-related compensation and vote against the merger proposal; or you may vote against this merger-related compensation proposal and vote to approve the merger agreement. Approval of this merger-related compensation proposal is not a condition to the completion of the merger, and the approval or failure of this proposal will have no impact on the completion of the merger.

Our board of directors recommends that you vote “FOR” the proposal to approve, on an advisory basis, the merger-related compensation as described in this proxy statement.

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Adjournment Proposal

If there are not sufficient votes at the time of the special meeting to approve the merger proposal, we intend to move to vote on the adjournment proposal. If the Company’s board of directors determines that it is necessary or appropriate, we will ask our shareholders to vote only upon the adjournment proposal and not the merger proposal. If the number of votes cast in favor of the adjournment proposal exceeds the number of votes cast opposing such proposal, the special meeting may be adjourned without notice (other than the announcement of adjournment made at the special meeting). We are soliciting proxies to grant the authority to vote in favor of any adjournment of the special meeting, if necessary or appropriate. In particular, authority is expected to be exercised if the purpose of an adjournment is to provide additional time to solicit votes in favor of approving the merger proposal and such adjournment is requested by JAB Holdings.

Our board of directors recommends that you vote “ FOR ” the proposal to grant the authority to vote your shares to adjourn the meeting, if necessary or appropriate, to provide additional time to solicit additional proxies.

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The Merger

The discussion of the merger contained in this section summarizes the material terms of the merger. Although we believe that the description in this section covers the material terms of the merger, this summary may not contain all of the information that is important to you. We urge you to read this proxy statement, the merger agreement, a copy of which is attached to this proxy statement as Annex A , and the other documents referred to herein (including the annexes) carefully for a more complete understanding of the merger.

Background of the Merger

As part of the Company’s long-term strategic planning process, the board regularly reviews the near-term and long-term strategy, performance, positioning, and operating prospects of the Company with a view toward enhancing shareholder value. These reviews have included consideration, from time to time, of potential strategic alternatives to enhance shareholder value. At the Company’s request, Wells Fargo Securities, as financial advisor to the Company, has upon various occasions over the past several years assisted the Company in evaluating certain potential strategic alternatives available to the Company.

During September 2015, representatives of JAB Holdings contacted James H. Morgan, Chairman of the board of the Company, to express an interest in a meeting to discuss the Company and to introduce him to JAB Holdings.

On October 6, 2015, Mr. Morgan held an in-person meeting with Olivier Goudet and Mike Tattersfield, each from JAB Holdings. At the meeting, the parties held preliminary discussions regarding possible strategic relationships between JAB Holdings and the Company, and JAB Holdings suggested a follow-up meeting to include Tony Thompson, the Chief Executive Officer of the Company. JAB Holdings did not propose to engage in any specific transaction with the Company during these discussions. Over the next few days, Mr. Morgan updated certain members of the board, including Mr. Thompson and Robert S. McCoy, Jr., Lead Director of the Company, regarding the meeting and the discussions that took place at the meeting.

On October 21, 2015, Mr. Thompson had an in-person meeting with Mr. Tattersfield in which they had preliminary discussions regarding the Company’s performance and prospects and Mr. Tattersfield introduced Mr. Thompson to JAB Holdings. Mr. Thompson subsequently updated Mr. Morgan on this meeting.

On October 23, 2015, Messrs. Morgan and Thompson received an invitation from Mr. Tattersfield to visit JAB Holdings’ offices in Washington D.C. to learn more about JAB Holdings’ history and philosophy in dealing with strategic partners, which invitation was accepted.

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On November 5, 2015, Messrs. Morgan and Thompson traveled to JAB Holdings’ Washington, D.C. offices and met with Mr. Goudet, Mr. Tattersfield, and Mr. David Bell, also from JAB Holdings. At this meeting, the representatives of JAB Holdings discussed JAB Holdings’ background and investment history and strategies, emphasizing that JAB Holdings was interested in the long-term growth of its portfolio companies. At this meeting, Mr. Goudet indicated orally that, if the Company’s board was receptive, and subject to satisfactory due diligence, JAB Holdings would be interested in making a confidential proposal to acquire the Company at a price of $18.75 per share in cash. (The closing price of the Company’s common stock on the previous day was $13.97.) Mr. Goudet indicated that JAB Holdings did not engage in unfriendly initiatives or auction processes and would withdraw if the Company was not interested in pursuing a possible transaction or wished to seek proposals from other potential acquirers. Messrs. Morgan and Thompson indicated that they would convey JAB Holdings’ indication of interest to the Company’s board, and that they would inform JAB Holdings of the board’s response. Messrs. Morgan and Thompson thereafter, and on an ongoing basis throughout the discussions with JAB Holdings, had conversations with various members of the Company’s board, including with Mr. McCoy, Jr., regarding JAB Holdings’ indication of interest.

On November 23, 2015, the board held a special meeting by telephone to discuss JAB Holdings’ indication of interest. Representatives of management were also in attendance. Messrs. Morgan and Thompson conveyed the background of their discussions with JAB Holdings and explained JAB Holdings’ interest in acquiring the Company at a price of $18.75 per share in cash. The Company’s Interim General Counsel, Steven Ellcessor, then advised the board of its fiduciary duties under North Carolina law in considering an acquisition proposal. The board discussed the indication of interest, the background and history of JAB Holdings, and the possible valuation of the Company in a potential sale transaction. The board determined that it needed more updated information regarding the revised strategic plan on which the management of the Company had been working over the past several months in order to appropriately assess JAB Holdings’ indication of interest. In that regard, the board decided to engage a financial advisor in connection with a possible sale or other strategic transaction involving the Company.

On December 7, 2015, the board held another special meeting by telephone to discuss JAB Holdings’ indication of interest. Representatives of management were also in attendance at this meeting. Mr. Morgan informed the board that JAB Holdings had recently entered into an acquisition agreement to acquire Keurig Green Mountain, Inc. and that representatives of JAB Holdings had telephoned Mr. Morgan subsequent to the announcement of that transaction, and such representatives indicated that the pending Keurig acquisition did not affect JAB Holdings’ interest in discussing an acquisition of the Company. Mr. Morgan informed the board that JAB Holdings had requested another meeting, but that Mr. Morgan had deferred scheduling any such meeting until the board could have an opportunity to inform itself regarding the additional information it had requested at the November 23 board meeting.

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On December 15 and 16, 2015, the board held regularly scheduled in-person meetings. Among other things, the board discussed JAB Holdings’ indication of interest. Representatives of management were in attendance at these meetings. The Company also invited representatives of Wells Fargo Securities to attend these meetings to review and discuss their perspectives on the industry in which the Company operates, as well as potential strategic alternatives that might be available to the Company. The Company sought Wells Fargo Securities’ perspective because of, among other things, Wells Fargo Securities’ knowledge of and familiarity with the Company and the industry in which it operates and Wells Fargo Securities’ experience as a financial advisor in mergers and acquisitions. At these meetings, Mr. Thompson and Price Cooper, the Chief Financial Officer of the Company, presented an update of the financial results of the Company for the third quarter of fiscal year 2016 and also discussed management’s long-term outlook for the Company. While management was still in the process of completing its long-term financial plan, management and the board reviewed and discussed the potential financial results that would result from the Company continuing to grow under its current balance between Company and franchise operations. In addition, there were discussions concerning management’s belief the Company would be more successful over the long-term by transitioning to more of a franchise-based system. Mr. Ellcessor and the Company’s Vice President and Associate General Counsel, Corena Norris-McCluney, also reviewed with the board its responsibilities and fiduciary duties in considering JAB Holdings’ indication of interest. Representatives of Wells Fargo Securities then discussed the current mergers and acquisitions environment generally and with respect to the quick service restaurant industry in particular and their preliminary views with respect to other parties that could potentially be interested in pursuing a strategic transaction with the Company. Among other things, representatives of Wells Fargo Securities noted that there were a limited number of potential strategic buyers in the quick service restaurant industry, that there had been a limited number of strategic mergers and acquisitions in the quick service restaurant industry in recent years and that there had been a limited number of mergers and acquisitions in the quick service restaurant industry in recent years with transaction values in excess of $1 billion. In addition, representatives of Wells Fargo Securities noted that, given the financial models typically employed by financial buyers in evaluating potential transactions, which require certain hurdle rates of return on investments, they believed it was unlikely that a financial buyer would be interested in making a fully financed, non-contingent offer to acquire the Company at a price per share greater than $18.75. The representatives of Wells Fargo Securities then discussed the public profile and investment philosophy of JAB Holdings, noting that JAB Holdings generally appeared to make long-term investments focused on growth opportunities and building businesses. After further discussion, the board determined that, while the indicative price was not adequate in its view to consider a sale of the Company, the Company should continue to engage with JAB Holdings in an effort to determine whether a price could be obtained from JAB Holdings that would be appropriate from the shareholders’ point of view for the board to consider. The board further determined that the Company should not agree to engage with JAB Holdings on an exclusive basis. Finally, the board determined that the Company should retain outside legal counsel to advise on a potential transaction and directed Mr. Ellcessor and Ms. Norris-McCluney to engage Simpson Thacher & Bartlett LLP (“Simpson Thacher”) as the Company’s outside legal counsel.

On December 17, 2015, Mr. Morgan informed representatives of JAB Holdings by telephone that the indicative purchase price of $18.75 per share was not sufficiently attractive for the Company to pursue a transaction with JAB Holdings at that time but that, if JAB Holdings was to increase its proposed purchase price, the board would, in good faith and consistent with the directors’ fiduciary duties, consider any such revised proposal. Representatives of JAB Holdings indicated that they would discuss the Company’s response internally and that they would respond after the beginning of the year. During the last week of December 2015, there were further discussions between representatives of JAB Holdings and the Company regarding setting up a meeting date in January 2016.

On December 31, 2015, the board held a special meeting by telephone with representatives of management in attendance for the purpose of discussing the formal engagement of Wells Fargo Securities as financial advisor to the Company. At the meeting, the board discussed Wells Fargo Securities’ prior relationships with the Company and information provided by Wells Fargo Securities regarding prior relationships between Wells Fargo Securities and JAB Holdings and, after discussion with the its legal advisors, determined that such relationships would not impair Wells Fargo Securities’ ability to provide the board with objective financial advice regarding a potential transaction with JAB Holdings and other strategic alternatives available to the Company. An engagement letter with Wells Fargo Securities was executed on December 31, 2015.

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In January 2016, Mr. Thompson received a telephone call from a representative of a private equity firm that expressed interest in learning more about the Company. Mr. Thompson brought this conversation to the attention of Mr. Morgan and other members of the board. Consistent with previous direction from the board, on February 9, 2016 Messrs. Thompson and Cooper met with a representative of the private equity firm, but the firm did not make any proposals regarding potential transactions or relationships. Mr. Thompson was invited by a representative of the private equity firm to visit the firm’s offices to meet with other representatives of the firm for them to learn more about the Company’s business. That meeting took place on February 29, 2016. The scope of the meeting was a general business overview of the Company, and the firm did not follow up with the Company in a substantive manner.

On or around January 29, 2016, representatives of JAB Holdings telephoned Mr. Morgan to indicate that JAB Holdings continued to be interested in pursuing a transaction with the Company and that it was willing to consider increasing its initial offer. However, representatives of JAB Holdings further indicated that they were then focused on closing the Keurig transaction and that they would likely need to wait until after that transaction closed to reengage with the Company. As such, the parties tentatively set up a meeting in late March 2016 to further discuss a potential transaction between the Company and JAB Holdings. On March 3, 2016, the Keurig transaction closed, and shortly thereafter, representatives of JAB Holdings contacted the Company to confirm the timing and logistics of a potential meeting in Winston-Salem, North Carolina to resume discussions concerning a potential transaction.

On March 15, 2016, the board held a regularly scheduled meeting. At that meeting, Messrs. Morgan and Thompson updated the directors on the status of discussions with JAB Holdings and Mr. Thompson’s meeting on February 9, 2016 with the other private equity firm. Also, members of management of the Company presented the Company’s updated long-term strategic plan, which had been in development since late summer of 2015, and which reflected a shift toward a more franchise-based business model. The presentation included management’s financial plan with respect to the Company, including the potential short- and long-term financial impacts of the Company’s base strategic initiatives, the challenging near-to-intermediate-term operating environment for the Company’s strategy to shift toward a more franchise-based business model, the resulting increased refranchising in the upcoming years related to shrinking of the Company store footprint, the impact on earnings growth and earnings predictability, and the impact of such a strategy on earnings before interest, taxes, depreciation, and amortization (“EBITDA”) and other financial metrics. Members of management of the Company also discussed the near term operational and financial risks associated with such a strategy to transition to a more franchise-based model and the inherent challenges with respect to operating an interrelated retail shop and consumer packaged goods platform. However, based on the Company’s strengths, management believed the best way to continue growing the brand was through a more franchise-based focus.

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On March 23, 2016, representatives of JAB Holdings visited Winston-Salem. Messrs. Morgan, Thompson, and Cooper hosted the representatives of JAB Holdings and directed a tour of certain of the Company’s facilities in the area. After the tour, Messrs. Morgan, Thompson, and Cooper held an in-person meeting with representatives of JAB Holdings who informed the Company that they were not yet prepared to submit a higher proposed price for the Company based on publicly available information, but that they expected to be in a position to do so in the upcoming days. Representatives of JAB Holdings further informed the Company that the preferred and customary transaction process for JAB Holdings was to seek to engage in confirmatory due diligence and negotiate a transaction solely on a bilateral basis and within a short time after entering into a confidentiality agreement. The JAB Holdings representatives further indicated that financing would not be a condition in any potential transaction.

On March 31, 2016, Messrs. Tattersfield and Bell telephoned Mr. Morgan to discuss JAB Holdings’ visit to the Company’s facilities on March 23, 2016, and the potential for a revised offer from JAB Holdings. Mr. Bell informed Mr. Morgan that JAB Holdings would propose that the Company allow JAB Holdings to engage in a week of diligence in the Winston-Salem area in the near future pursuant to a customary confidentiality agreement. He further indicated, however, that JAB Holdings was internally discussing the possibility of presenting a revised price on April 1, 2016, based on publicly available information and the meetings held in Winston-Salem on March 23, 2016.

On April 1, 2016, Mr. Goudet telephoned Mr. Morgan and made an oral offer to acquire all of the outstanding shares of the Company, subject to satisfactory due diligence, at $19.50 per share. Mr. Goudet further conveyed to Mr. Morgan that JAB Holdings was prepared to initiate the diligence process and might consider revising its offer price after the completion of such diligence process. Mr. Goudet also reiterated that JAB Holdings would disengage with the Company should the Company choose to seek other potential offers. Lastly, Mr. Goudet stated that, due to prior commitments and internal scheduling, JAB Holdings would not be able to begin diligence until the week of April 25, 2016.

On April 4, 2016, the board held a special meeting to discuss the revised offer from JAB Holdings. Representatives of management, Wells Fargo Securities, and Simpson Thacher participated in the meeting. Mr. Morgan updated the board on the status and background of the discussions with JAB Holdings and the oral offer proposed by JAB Holdings on April 1, 2016. The Company’s legal advisors reviewed with the board its fiduciary duties under North Carolina law. As part of their discussions with the board, representatives of Wells Fargo Securities discussed certain financial aspects of the revised offer from JAB Holdings, reiterated their view that there was a limited likelihood that a strategic buyer would be interested in pursuing a transaction with the Company, and stated that, given the financial models typically employed by financial buyers in evaluating potential transactions, which require certain hurdle rates of return on investments, they believed it was unlikely that a financial buyer would be interested in making a fully financed, non-contingent offer to acquire the Company at a price per share greater than $19.50. The board then discussed the offer and the negotiating process of JAB Holdings in precedent transactions, in connection with the board’s consideration whether the revised offer from JAB Holdings was sufficiently compelling to allow JAB Holdings to conduct due diligence, in anticipation of a potential further increase of its offer price. After deliberation, the board determined that it was not prepared to authorize a transaction at a purchase price of $19.50 per share, but that the Company should enter into a confidentiality and standstill agreement with JAB Holdings to allow it to engage in a due diligence review in order to enable it to justify an increased offer price. Later that day, representatives of Simpson Thacher delivered a draft confidentiality and standstill agreement to Skadden, Arps, Slate, Meagher & Flom LLP (“Skadden”), legal counsel to JAB Holdings, and the parties engaged in negotiations on the confidentiality and standstill agreement.

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On April 8, 2016, the Company and an affiliate of JAB Holdings executed the confidentiality and standstill agreement.

On April 12, 2016, representatives of JAB Holdings, Skadden, and the Company met in Winston-Salem to discuss the process for due diligence.

On April 25, 2016, representatives of JAB Holdings and its advisors arrived at a location in Greensboro, North Carolina, to engage in due diligence. Throughout the diligence process, representatives of JAB Holdings updated Mr. Morgan with respect to the results of their diligence and also reiterated that JAB Holdings might be willing to submit a revised offer after completion of its diligence review.

On April 29, 2016, Mr. Bell telephoned Mr. Morgan to inform him that, while JAB Holdings was still reviewing and discussing its diligence findings, JAB Holdings could potentially be willing to submit a revised offer with an increased purchase price during the week of May 2, 2016, after the due diligence findings were discussed in meetings among JAB Holdings’ partners.

On May 2, 2016, representatives of Skadden sent a preliminary draft of a merger agreement to Simpson Thacher.

On May 3, 2016, the board held an in-person meeting for the purposes of discussing the current offer from JAB Holdings and the potential for a revised offer from JAB Holdings. At the invitation of the board, members of the Company’s senior management and representatives of the Company’s legal and financial advisors—Wells Fargo Securities, Simpson Thacher and Womble Carlyle Sandridge & Rice, LLP (“Womble Carlyle”) (which had been retained as North Carolina counsel for the proposed transaction)—also attended the meeting. Mr. Morgan and members of management updated the board on the status of the diligence process and Mr. Morgan’s various interactions with representatives of JAB Holdings, including that he had received an additional communication from a representative of JAB Holdings indicating that he could anticipate receiving a revised proposal on May 4, 2016. Representatives of Simpson Thacher and Womble Carlyle then reviewed with the board its fiduciary duties under North Carolina law. At the request of the board, representatives of Wells Fargo Securities then reviewed and discussed their preliminary financial analyses with respect to the Company and the proposed transaction and their views with respect to the current mergers and acquisitions market generally and with respect to the quick service restaurant industry in particular. Representatives of Wells Fargo Securities further discussed information concerning other potential acquirers of the Company, the businesses and strategic activities of certain of those parties, and the likelihood that the Company would be able to generate interest from such other potential acquirers. Representatives of Wells Fargo Securities also reiterated their view that there was a limited likelihood that any strategic buyer would be interested in pursuing a transaction with the Company and, given the financial models typically employed by financial buyers in evaluating potential transactions, which require certain hurdle rates of return, they believed it was unlikely that a financial buyer would be interested in making a fully financed, non-contingent offer to acquire the Company at a price per share greater than $19.50.

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Members of management of the Company then once again, as they had at the March meeting of the board, reviewed management’s long-term strategic plan with respect to the Company. Management indicated that the strategic plan, while being the right approach for the long-term, was likely to negatively impact cash flow growth in the near term. Also, while management believed the plan was crucial to the Company’s ability to realize its long term potential, the Company was unlikely to recognize the full financial benefit of such plan for several years and no assurance could be given that such benefit would ultimately be obtained.

Representatives of Simpson Thacher and Womble Carlyle then summarized for the board the draft of the merger agreement received from Skadden on May 2, 2016, indicating that JAB Holdings had proposed a merger structure for the transaction and had requested that the Company agree to a customary “no-shop” provision. The legal advisors reviewed with the board the consequences of a “no-shop” provision versus a “go-shop” provision, and also noted that under the “no-shop” provision requested by JAB Holdings in the draft merger agreement it would be possible for a potential competing bidder to submit a superior proposal that the Company could accept by terminating the merger agreement and paying a termination fee. The board then discussed the benefits of a merger over an alternative structure. Mr. Morgan informed the board that JAB Holdings had consistently indicated that it would disengage with the Company should the Company choose to engage with alternative bidders and that JAB Holdings was likely to be strongly opposed to a “go-shop” provision. The board then discussed other potential bidders and the remote likelihood that another bidder (strategic or private equity) would seek to make an offer for the Company at a per share value in excess of JAB Holdings’ current proposal. The board discussed other provisions of the draft merger agreement and asked questions of its advisors with respect to the structure of the transaction, whether to request a “go-shop” provision, what a reasonable termination fee would be in connection with accepting a superior proposal, what the appropriate structure of a termination fee should be, and how the Company should react to the various other provisions of the merger agreement.

After further discussion, the board reaffirmed its prior determination that an offer price of $19.50 per share from JAB Holdings was not sufficiently compelling and that the Company should not proceed with a transaction at $19.50 per share. The directors further determined, however, that if the Company received a revised proposal from JAB Holdings with a higher offer price, the board would reconvene on May 5, 2016, to discuss such revised proposal.

Representatives of Simpson Thacher and Womble Carlyle also reviewed and discussed with the board the potential adoption of a forum selection bylaw that would designate the state courts of North Carolina (which would then be subject to designation or assignment to the North Carolina Business Court) or the United States District Court for the Middle District of North Carolina as the sole and exclusive forum for certain legal actions, unless the Company consented in writing to the selection of an alternative forum.

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On May 4, 2016, Mr. Goudet telephoned Mr. Morgan and delivered an oral proposal to acquire the Company at $20.50 per share in exchange for the Company agreeing to a customary “no-shop” provision and a termination fee of $50 million. Representatives of JAB Holdings indicated that this offer reflected internal discussions among the JAB Holdings partners, was close to its best and final offer, and that JAB Holdings could only agree to “fine tuning” around the terms.

On the morning of May 5, 2016, the board held a special meeting by telephone to discuss the revised proposal from JAB Holdings. Representatives of management, Wells Fargo Securities, Simpson Thacher, and Womble Carlyle were also in attendance. Mr. Morgan summarized the revised offer from JAB Holdings, the status of the negotiations otherwise, and also indicated his views with respect to such offer. The board discussed the terms of the offer, including that it required the Company to agree to a “no shop” provision with a single-tier termination fee at the higher end of the customary range of such fees. The representatives from Wells Fargo Securities responded to questions from members of the board regarding the proposed transaction. The board, with the assistance of the Company’s legal and financial advisors, also reviewed and discussed the potential legal and practical implications of the “no shop” provision and the proposed amount of the termination fee. The board then discussed a potential counterproposal and deliberated whether JAB Holdings would be willing to enhance its offer given its recent negotiating posture and record in precedent transactions. After further discussion and deliberation, the board ultimately determined that it would continue to request a “go-shop” provision unless the purchase price per share could be increased to $21.00 and the termination fee would be lowered to $42 million. The board further directed Mr. Morgan to convey this proposal to JAB Holdings, which Mr. Morgan did later that morning. The board agreed that if JAB Holdings would agree to its proposal, the Company would move forward with a transaction with JAB Holdings, subject to the satisfactory negotiation of the merger agreement.

In the afternoon on May 5, 2016, Messrs. Bell and Goudet telephoned Mr. Morgan communicating that, following extensive internal deliberations, JAB Holdings agreed to a $21.00 per share purchase price, provided that the Company agree to a customary “no-shop” provision and a single-tier termination fee of $42 million. Mr. Morgan and management of the Company conveyed this revised offer to the board and, following the board’s directive from earlier that morning, agreed to negotiate a definitive merger agreement with JAB Holdings consistent with such parameters.

On the evening of May 5, 2016, representatives of Simpson Thacher submitted a revised merger agreement to Skadden. Over the course of the next several days, representatives of JAB Holdings, the Company, Skadden, and Simpson Thacher held meetings and negotiated the merger agreement and other deliverables associated with the merger agreement.

On May 7, 2016, the board held a special meeting by telephone to further consider the proposed transaction with JAB Holdings. At the invitation of the board, members of the Company’s senior management and representatives of Wells Fargo Securities, Simpson Thacher, and Womble Carlyle were present at the meeting. Representatives of Simpson Thacher and Womble Carlyle again reviewed with the board its fiduciary duties under North Carolina law in considering an acquisition proposal. Mr. Morgan again reviewed with the board management’s business, strategic, financial, and shareholder value creation rationale for the proposed transaction, including, among other things, the all-cash merger consideration, which would provide certainty of value and liquidity to Company shareholders, enabling them to realize the value that had been created at the Company in recent years, while eliminating long-term business and execution risk, the challenges and risks of continuing as a stand-alone company, and the belief that no alternative transactions or competing bidders would create higher value for the shareholders of the Company than the proposed transaction with JAB Holdings.

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Simpson Thacher then reviewed with the board the material terms and provisions of the proposed form of the merger agreement and the terms of the debt commitment letter that had been obtained by JAB Holdings from Barclays Bank PLC (“Barclays”). As part of their review, representatives of Simpson Thacher also discussed the issues that were still being negotiated between JAB Holdings and the Company, including the nature and extent of matching rights for JAB Holdings in the event of a superior proposal and the bring-down standard for certain representations and warranties of the Company that act as closing conditions. The Company’s legal advisors also reviewed and discussed with the board the proposed adoption of a forum selection bylaw.

At the request of the board, representatives of Wells Fargo Securities then reviewed and discussed their financial analyses with respect to the Company and the proposed merger. Thereafter, at the request of the board, representatives of Wells Fargo Securities, rendered Wells Fargo Securities’ oral opinion to the board (which was subsequently confirmed in writing by delivery of Wells Fargo Securities’ written opinion addressed to the board dated May 7, 2016) regarding, as of May 7, 2016, the fairness, from a financial point of view, to the holders of the Company’s common stock, of the consideration to be received by the holders of the Company’s common stock in the merger pursuant to the merger agreement. Following further discussion and careful consideration of all the matters raised, the board unanimously:

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Following the meeting, on May 8, 2016, the Company and JAB Holdings and affiliates executed the merger agreement and JAB Holdings delivered a copy of the executed debt commitment letter. The Company and JAB Holdings issued a joint press release announcing the entry into the merger agreement before the opening of the U.S. stock exchanges on May 9, 2016.

Reasons for the Merger and Recommendation of the Board of Directors

On May 7, 2016, the board (i) unanimously determined that the merger is fair to, and in the best interests of, the Company and its shareholders, unanimously adopted, approved and declared advisable the merger agreement, the merger and the other transactions contemplated by the merger agreement in accordance with North Carolina law, and unanimously resolved to recommend the approval of the merger agreement and the transactions contemplated thereby, including the merger, to our shareholders and (ii) directed that the merger agreement and the merger be submitted for consideration by our shareholders at the special meeting.

In evaluating the merger agreement and the transactions contemplated thereby and reaching its determinations in connection therewith, the board consulted with the Company’s management and legal and financial advisors, and the board considered the following factors in reaching its conclusion to approve and adopt the merger agreement, to approve the merger and the other transactions contemplated by the merger agreement, and to recommend the approval of the merger agreement to our shareholders, all of which factors it viewed as generally supporting its decision to approve the merger with Merger Sub (which are not listed in any relative order of importance):

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The Company’s board also considered the potential risks of the merger and other potentially adverse factors, including the following:

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The board concluded that the risks, uncertainties, restrictions, and potentially adverse factors associated with the merger were greatly outweighed by the potential benefits of the merger.

The foregoing discussion of the board’s reasons for its recommendation that shareholders approve the merger agreement and the transactions contemplated thereby is not meant to be exhaustive, but addresses the material information and factors considered by the board in consideration of its recommendation. In view of the wide variety of factors considered by the board in connection with the evaluation of the merger and the complexity of these matters, the board did not find it practicable to, and did not, quantify or otherwise assign relative weights to the specific factors considered in reaching its determination and recommendation. Rather, the members of the board made their determinations and recommendations based on the totality of the information presented to them, and the judgments of individual members of the board may have been influenced to a greater or lesser degree by different factors. In arriving at their respective recommendations, the members of the board knew of the interests of executive officers and directors of the Company as described under “The Merger— Interests of Our Directors and Executive Officers in the Merger.”

The board unanimously recommends that you vote “ FOR ” the approval of the merger agreement.

Certain Financial Projections 

The Company does not, as a matter of course, publicly disclose forecasts or internal projections as to future performance or results of operations beyond the current or proximate fiscal year due to the inherent unpredictability of the underlying assumptions and estimates. In connection with the evaluation of the merger, management prepared updated long-range, non-United States generally accepted accounting principles (“GAAP”) financial forecasts regarding our anticipated future operations, which we refer to as “financial projections.” Our management provided the financial projections to the board of directors of the Company, the Company’s financial advisor, and JAB Holdings in connection with their evaluation of the proposed merger.

The financial projections were not prepared with a view toward public disclosure or with a view toward compliance with published guidelines of the SEC, the guidelines established by the American Institute of Certified Public Accountants for preparation and presentation of financial forecasts, or GAAP. Neither the Company’s independent registered public accounting firm nor any other independent accountants have compiled, examined or performed any procedures with respect to the financial projections included below, nor have they expressed any opinion or any other form of assurance on such information or its achievability. The financial projections are being provided in this proxy statement only because the Company made them available to its board of directors and financial advisors and, later in the process, to JAB Holdings in connection with the process of the transaction described herein and is not included in this proxy statement in order to influence any shareholder of the Company to vote in favor of the merger or for any other purpose.

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The financial projections estimate revenues, EBITDA (earnings before interest, taxes, depreciation and amortization), income from operations (also referred to as EBIT), net income and diluted earnings per share for fiscal years 2017 through 2023. In addition, the financial projections include estimates for cash flow from operations, capital expenditures and free cash flow for the same period.

In preparing the financial projections, management made a number of assumptions, including, but not limited to the following:

The financial projections reflect numerous estimates and other assumptions made by management with respect to general business, economic, competitive, market and financial conditions and other future events, as well as matters specific to the Company’s business, all of which are difficult to predict and many of which are beyond our control. Because the financial projections cover multiple years, by their nature, they become subject to greater uncertainty with each successive year, and therefore, are susceptible to multiple interpretations and periodic revisions based on actual experience and business developments. The assumptions upon which the financial projections were based necessarily involve subjective judgments with respect to, among other things, future economic, competitive and regulatory conditions and financial market conditions, all of which are difficult or impossible to predict accurately and many of which are beyond our control. The financial projections also reflect assumptions as to certain business decisions that are subject to change. Furthermore, the financial projections do not take into account any circumstances or events occurring after the date they were prepared, including the announcement of the potential acquisition of the Company by Parent pursuant to the merger agreement or our compliance with our covenants under the merger agreement. Important factors that may affect actual results and result in the financial projections not being achieved include, but are not limited to, the risk factors described in our annual report on Form 10-K for the fiscal year ended January 31, 2016, subsequent quarterly reports on Form 10-Q and current reports on Form 8-K. In addition, the financial projections may be affected by our ability to achieve strategic goals, objectives and targets over the applicable period.

The inclusion of the financial projections in this proxy statement should not be regarded as an indication that the Company or its representatives then considered, or now consider, such financial projections to be necessarily predictive of actual future events, and this information should not be relied upon as such. Neither the Company, its financial advisor nor any of its affiliates, or representatives intends to, and each of them disclaims any obligation to, update, revise or correct the financial projections if any of such projections becomes inaccurate (even in the short term).

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The financial projections should be evaluated, if at all, in conjunction with the historical financial statements and other information regarding the Company contained in the Company’s public filings with the SEC.

The financial projections do not take into account any circumstances or events occurring after the date they were prepared, including the merger. Further, the financial projections do not take into account the effect of any failure of the merger to be consummated and should not be viewed as accurate or continuing in that context. Due to such factors, as well as the other risks and uncertainties described above, shareholders are cautioned not to place undue reliance on the financial projections included in this proxy statement.

The financial projections resulted in the following estimates of the Company’s future financial performance:

EBITDA is a non-GAAP financial measure. Non-GAAP financial measures are not calculated in accordance with, and are not a substitute for financial measures calculated in accordance with, GAAP and may be different from non-GAAP financial measures used by other companies. Furthermore, there are limitations inherent in non-GAAP financial measures, in that they exclude a variety of charges and credits that are required to be included in a GAAP presentation.

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Note: the above cash flow information excludes any proceeds received in conjunction with the selling of 51 shops to franchisees.

Opinion of Wells Fargo Securities, LLC

On May 7, 2016, Wells Fargo Securities rendered its oral opinion to the Company’s board of directors (which was subsequently confirmed in writing by delivery of Wells Fargo Securities’ written opinion addressed to the Company’s board of directors dated May 7, 2016) as of May 7, 2016, as to, the fairness, from a financial point of view, to the holders of the Company’s common stock, of the merger consideration to be received by the holders of the Company’s common stock in the merger pursuant to the merger agreement.

Wells Fargo Securities’ opinion was for the information and use of our board of directors (in its capacity as such) in connection with its evaluation of the merger. Wells Fargo Securities’ opinion only addressed the fairness, from a financial point of view, to the holders of the Company’s common stock, of the merger consideration to be received by the holders of the Company’s common stock in the merger pursuant to the merger agreement and did not address any other aspect or implication of the merger or any agreement, arrangement or understanding entered into in connection therewith or otherwise. The summary of Wells Fargo Securities’ opinion in this proxy statement is qualified in its entirety by reference to the full text of its written opinion, which is attached as Annex B to this proxy statement and describes the procedures followed, assumptions made, qualifications and limitations on the review undertaken and other matters considered by Wells Fargo Securities in connection with the preparation of its opinion. However, neither Wells Fargo Securities’ opinion nor the summary of its opinion and the related analyses set forth in this proxy statement are intended to be, and do not constitute, advice or a recommendation to our board of directors, any security holder of the Company or any other person as to how to vote or act with respect to any matter relating to the merger.

In arriving at its opinion, Wells Fargo Securities, among other things:

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In connection with its review, Wells Fargo Securities assumed and relied upon the accuracy and completeness of all of the financial and other information provided or otherwise made available to it, discussed with or reviewed by it, or that was publicly available, and Wells Fargo Securities did not independently verify the accuracy or completeness of any such information. With respect to the financial projections, Wells Fargo Securities was advised by the management of the Company and Wells Fargo Securities assumed that they were reasonably prepared in good faith and reflected the best currently available estimates, judgments and assumptions of the management of the Company as to the future financial performance of the Company. With the Company’s consent, Wells Fargo Securities assumed that the financial projections were a reasonable basis on which to evaluate the Company and the proposed merger and, at the Company’s direction, Wells Fargo Securities relied upon the financial projections for purposes of its analyses and opinion. Wells Fargo Securities expressed no view or opinion as to, any such forecasts, projections, or estimates or the judgments or assumptions upon which they were based. Wells Fargo Securities also assumed there were no material changes in the business, operations, financial condition and prospects of the Company since the respective dates of the most recent financial statements and other information provided to Wells Fargo Securities. In arriving at its opinion, Wells Fargo Securities did not conduct any physical inspection of any of the properties or assets and was not provided with any independent evaluations or appraisals of any of the assets or liabilities (contingent or otherwise) of the Company.

In rendering its opinion, Wells Fargo Securities, with the Company’s consent, assumed that the final form of the merger agreement, when signed by the parties thereto, would not differ from the draft reviewed by Wells Fargo Securities in any respect material to its analyses or opinion and that the merger would be consummated in accordance with the merger agreement, in compliance with all applicable laws and without waiver, modification or amendment of any material terms or conditions, and that, in the course of obtaining any necessary legal, regulatory or third party consents or approvals for the merger, no delays, limitations, restrictions or conditions would be imposed that would have an adverse effect on the Company or the contemplated benefits of the merger. In addition, Wells Fargo Securities relied upon, without independent verification, the assessments of the management of the Company with respect to the risks associated with the Company’s existing and future products and services and business model.

Wells Fargo Securities’ opinion was necessarily based on economic, market, financial and other conditions existing, and information made available to Wells Fargo Securities, as of the date of its opinion. Although subsequent developments may affect its opinion, Wells Fargo Securities does not have any obligation to update, revise or reaffirm its opinion.

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Wells Fargo Securities’ opinion only addressed the fairness, from a financial point of view, to the holders of the Company’s common stock of the merger consideration to be received by such holders in the merger pursuant to the merger agreement and did not address any other terms, aspects or implications of the merger or any agreements, arrangements or understandings entered into in connection therewith or otherwise. Furthermore, its opinion did not address the fairness (financial or otherwise) of the amount or nature of, or any other aspect relating to, any compensation to be received by any officers, directors or employees of any parties to the merger, or class of such persons, relative to the merger consideration or otherwise. Wells Fargo Securities did not express any view, opinion or interpretation as to matters that require legal, regulatory, accounting, insurance, tax, environmental, employee compensation or other similar professional advice. Wells Fargo Securities assumed that the Company had or would obtain such advice, opinions or interpretations from the appropriate professional sources. Furthermore, Wells Fargo Securities, with the Company’s consent, relied upon the assessments of the Company and its advisors as to all legal, regulatory, accounting, insurance, tax and environmental matters with respect to the Company and the merger. Wells Fargo Securities’ opinion did not address the merits of the underlying decision by our board of directors or the Company to enter into the merger agreement or the relative merits of the merger as compared with alternative business strategies or transactions available to the Company or any other participant in the merger. Wells Fargo Securities’ opinion does not constitute a recommendation as to or otherwise address how the members of our board of directors, the holders of the Company’s common stock or any other person should vote or act in respect of the merger or any related matter.

Under the terms of its engagement, neither Wells Fargo Securities’ opinion nor any other advice or services rendered by it in connection with the proposed merger or otherwise, should be construed as creating, and Wells Fargo Securities will not be deemed to have, any fiduciary, agency or similar duty to our board of directors, the Company, the Parent, or any security holder or creditor of the Company, the Parent or any other person, regardless of any prior or ongoing advice or relationships. Under the terms of its engagement, Wells Fargo Securities was retained by the Company as an independent contractor and the opinion and other advice rendered by Wells Fargo Securities were provided solely for the use and benefit of our board of directors (in its capacity as such) in connection with its evaluation of the proposed merger. As a matter of state law, Wells Fargo Securities believes the opinion and other advice of Wells Fargo Securities may not be used or relied upon by any other person without its prior written consent. See e.g., Joyce v. Morgan Stanley , 538 F.3d 797 (7th Cir. 2008), HA2003 Liquidating Trust v. Credit Suisse Secs. (USA) LLC , 517 F.3d 454 (7th Cir. 2008) and Collins v. Morgan Stanley Dean Witter , 224 F.3d 496 (5th Cir. 2000). By limiting the foregoing statement to matters of state law, Wells Fargo Securities is not, and should not be deemed to be, admitting that Wells Fargo Securities has any liability to any persons with respect to its advice or opinion under the federal securities laws. Furthermore, such statement is not intended to affect the rights and responsibilities of our board of directors under governing state law or the federal securities laws. Any claims under the federal securities laws against Wells Fargo Securities or our board of directors will be subject to adjudication by a court of competent jurisdiction.

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In preparing its opinion to our board of directors, Wells Fargo Securities performed a variety of analyses, including those described below. The summary of Wells Fargo Securities’ analyses is not a complete description of the analyses underlying Wells Fargo Securities’ opinion. The preparation of such an opinion is a complex process involving various quantitative and qualitative judgments and determinations with respect to the financial, comparative and other analytical methods employed and the adaptation and application of these methods to the unique facts and circumstances presented. As a consequence, neither Wells Fargo Securities’ opinion nor its underlying analyses is readily susceptible to summary description. Wells Fargo Securities arrived at its opinion based on the results of all analyses undertaken by it and assessed as a whole and did not draw, in isolation, conclusions from or with regard to any individual analysis, methodology or factor. Accordingly, Wells Fargo Securities believes that its analyses and the following summary must be considered as a whole and that selecting portions of its analyses, methodologies and factors, without considering all analyses, methodologies and factors or the narrative description of the analyses, could create a misleading or incomplete view of the processes underlying Wells Fargo Securities’ analyses and opinion.

In performing its analyses, Wells Fargo Securities considered general business, economic, industry and market conditions, financial and otherwise, and other matters as they existed on, and could be evaluated as of, the date of its opinion. No company, transaction or business used in Wells Fargo Securities’ analyses for comparative purposes is identical to the Company or the proposed merger and an evaluation of the results of those analyses is not entirely mathematical. The financial analyses performed by Wells Fargo Securities were performed for analytical purposes only and are not necessarily indicative of actual values or predictive of future results or values, which may be significantly more or less favorable than those suggested by the analyses. In addition, any analyses relating to the value of assets, businesses or securities do not purport to be appraisals or to reflect the prices at which businesses or securities actually may be sold, which may depend on a variety of factors, many of which are beyond the control of the Company.

While the results of each analysis were taken into account in reaching its overall conclusion with respect to fairness, Wells Fargo Securities did not make separate or quantifiable judgments regarding individual analyses. Much of the information used in, and accordingly the results of, Wells Fargo Securities’ analyses are inherently subject to substantial uncertainty. Wells Fargo Securities’ opinion was only one of many factors considered by our board of directors in evaluating the proposed merger. Neither Wells Fargo Securities’ opinion nor its analyses were determinative of the merger consideration or of the views of our board of directors or management with respect to the merger or the merger consideration. The type and amount of consideration payable in the merger were determined through negotiation between the representatives of the Company and the representatives of the Parent, and the decision to enter into the merger agreement was solely that of our board of directors.

The following is a summary of certain of the financial analyses performed by Wells Fargo Securities in connection with the preparation of its opinion and reviewed with our board of directors on May 7, 2016. The summary does not contain all of the financial data that holders of the Company’s common stock may want or need for purposes of making an independent determination of fair value. Holders of the Company’s common stock are encouraged to consult their own financial and other advisors before making any investment decision in connection with the proposed merger. The order of the analyses summarized below does not represent relative importance or weight given to those analyses by Wells Fargo Securities. The analyses summarized below include information presented in tabular format. The tables alone do not constitute a complete description of the analyses. Considering the data in the tables below without considering the full narrative description of the analyses, as well as the methodologies underlying, and the assumptions, qualifications and limitations affecting, each analysis, could create an incomplete view of Wells Fargo Securities’ analyses.

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For purposes of its analyses, Wells Fargo Securities reviewed a number of financial metrics, including the following:

Unless the context indicates otherwise, (i) the enterprise values used in the selected companies analyses described below were calculated using the market price of the common stock of the selected companies listed below as of May 6, 2016, (ii) the relevant values for the selected transactions analysis described below were calculated on an enterprise value basis based on the consideration proposed to be paid in the selected transactions, and (iii) the estimates of the future financial performance of the Company relied upon for the financial analyses described below were based on the financial projections, and estimates of the future financial performance for the selected companies listed below were based on certain publicly available research analyst estimates for those companies.

Selected Companies Analysis . Wells Fargo Securities reviewed certain data for selected companies with publicly traded equity securities that Wells Fargo Securities deemed relevant. The selected companies were selected because they were deemed by Wells Fargo Securities to be similar to the Company in one or more respects.

The financial data reviewed included:

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The selected companies and mean, median, high and low of such financial data for the selected companies were:

Taking into account the results of the selected companies analysis, Wells Fargo Securities applied a multiple range of 12.0x to 14.0x based on the CY 2016E EBITDA multiples for the selected companies to the Company’s estimated EBITDA for the fiscal year ending January 31, 2017, or “FY 2017E EBITDA”; a multiple range of 11.0x to 13.0x based on the CY 2017P EBITDA multiples for the selected companies to the Company’s projected EBITDA for the fiscal year ending January 31, 2018, or “FY 2018P EBITDA”; a multiple range of 25.0x to 30.0x based on the CY 2016E EPS multiples for the selected companies to the Company’s estimated earnings per share for the fiscal year ending January 31, 2017, or “FY 2017E EPS”; and a multiple range of 20.0x to 25.0x based on the CY 2017P EPS multiples for the selected companies to the Company’s projected earnings per share for the fiscal year ending January 31, 2018, or “FY 2018P EPS.” The selected companies analysis indicated implied valuation reference ranges per share of $15.61 to $18.15 based on the Company’s FY 2017E EBITDA, $15.59 to $18.36 based on the Company’s FY 2018P EBITDA, $14.79 to $17.73 based on the Company’s FY 2017E EPS, and $14.34 to $17.89 based on the Company’s FY 2018P EPS, as compared to the proposed merger consideration in the merger pursuant to the merger agreement of $21.00 per share.

Selected Transactions Analysis . Wells Fargo Securities considered certain financial terms of certain transactions involving target companies that Wells Fargo Securities deemed relevant. The selected transactions were selected because they involved target companies that were deemed by Wells Fargo Securities to be similar to the Company in one or more respects.

The financial data reviewed included Enterprise Value as a multiple of Adjusted EBITDA for the last twelve months prior to the announcement of the applicable transaction ( “LTM Adjusted EBITDA”).

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The selected transactions and mean, median, high and low of such financial data for the selected transactions were:

Taking into account the results of the selected transactions analysis, Wells Fargo Securities applied a multiple range of 11.5x to 15.5x based on the LTM Adjusted EBITDA multiples for the target companies in the selected transactions to the Company’s Adjusted FY 2016 EBITDA. The selected transactions analysis indicated an implied valuation reference range per share of $13.33 to $17.85, as compared to the proposed merger consideration in the merger pursuant to the merger agreement of $21.00.

Discounted Cash Flow Analysis . Wells Fargo Securities performed a discounted cash flow analysis of the Company by calculating the estimated net present value of the projected unlevered, after-tax free cash flows of the Company based on the financial projections. For purposes of the discounted cash flow analyses, Wells Fargo Securities applied perpetuity growth rates ranging from 2.0% to 4.0% and discount rates ranging from 9.0% to 10.0%. The discounted cash flow analysis indicated an implied valuation reference range per share of $13.75 to $20.39, as compared to the proposed merger consideration in the merger pursuant to the merger agreement of $21.00.

Other Matters. Wells Fargo Securities was engaged by the Company as its financial advisor in connection with a potential sale or other strategic transaction involving a change-in-control of the Company. The Company engaged Wells Fargo Securities based on its experience and reputation. Wells Fargo Securities is regularly engaged to provide investment banking and financial advisory services in connection with mergers and acquisitions, financings, and financial restructurings. Wells Fargo Securities became entitled to an opinion fee of $2,000,000 upon the rendering of its opinion. Wells Fargo Securities will become entitled to receive a transaction fee, currently estimated to be approximately $11,400,000 based on the implied value of the proposed merger, upon the closing of the merger against which the opinion fee will be creditable to the extent previously paid. In addition, the Company agreed to reimburse Wells Fargo Securities for certain expenses and to indemnify Wells Fargo Securities and certain related parties against certain liabilities that may arise out of Wells Fargo Securities’ engagement.

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Wells Fargo Securities and its affiliates provide a full range of investment banking and financial advisory services, securities trading and brokerage services and lending services. In the ordinary course of business, Wells Fargo Securities and its affiliates may hold long or short positions, and may trade or otherwise effect transactions, for its and its affiliates’ own accounts and for the accounts of customers, in the equity, debt and other securities and financial instruments (including bank loans and other obligations) of the Company, Parent, JAB Holdings and their respective affiliates, as well as provide investment banking and other financial services to such companies and entities. Wells Fargo Securities and its affiliates, including Wells Fargo Bank, N.A., have in the past provided investment banking and other financial services to the Company and may in the future provide investment banking and other financial services to the Company, Parent, JAB Holdings and certain of their respective affiliates for which Wells Fargo Securities and its affiliates would expect to receive compensation. Wells Fargo Securities, or one or more of its affiliates, are lenders to or participants in the credit facilities of the Company and certain affiliates of JAB Holdings.

Delisting and Deregistration of the Company’s Common Stock

Following consummation of the merger, the registration of the Company’s common stock and our reporting obligations with respect to our common stock under the Exchange Act will be terminated upon application to the SEC. In addition, following consummation of the merger, shares of our common stock will no longer be listed on any stock exchange, including the NYSE.

Accounting

Parent will account for the merger as a “purchase business combination,” as that term is used under GAAP, for accounting and financial reporting purposes. Under purchase accounting, our assets (including identifiable intangible assets) and liabilities (including contracts and other commitments) as of the effective time of the merger will likely be recorded at their respective fair values. Any excess of purchase price over assets acquired and liabilities assumed will be recorded as goodwill. Financial statements issued after the merger would reflect these fair values and would not be restated retroactively to reflect our historical financial position or results of operations.

Effects on the Company If the Merger Is Not Completed

If our shareholders do not approve the merger agreement, or if the merger is not consummated for any other reason, shareholders will not receive any payment for their shares of the Company’s common stock in connection with the merger. Instead, the Company will remain a public company and our common stock will continue to be listed and traded on the NYSE. In addition, if the merger is not consummated, we expect that management will operate the business in a manner similar to that in which it is being operated today and that our shareholders will continue to be subject to the same risks and opportunities as they currently are, including, among other things, general industry, economic, regulatory, and market conditions. Accordingly, if the merger is not consummated, there can be no assurance as to the effect of these risks and opportunities on the future value of your shares of the Company’s common stock. From time to time, our board of directors will evaluate and review, among other things, our business operations, properties, dividend policy and capitalization and make such changes as are deemed appropriate and continue to seek to identify strategic alternatives to enhance shareholder value. If our shareholders do not approve the merger agreement, or if the merger is not consummated for any other reason, there can be no assurance that any other transaction acceptable to the Company will be offered, or that the business, prospects or results of operations of the Company will not be adversely impacted. We may also be required to pay the termination fee as described under “The Merger Agreement—Termination Fee” beginning on page 83.

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Interests of Our Directors and Executive Officers in the Merger

In considering the recommendation of our board of directors with respect to the merger, you should know that some of our directors and executive officers have interests in the merger that are different from, or in addition to, the interests of our shareholders generally. These interests may present such directors and executive officers with actual or potential conflicts of interest, and these interests, to the extent material, are described below. Our board of directors knew of these interests and considered them, among other matters, in adopting and approving the merger agreement and the merger.

Treatment of Outstanding Stock Options and Share Units

At least five days prior to the effective time of the merger, we will take all necessary action to accelerate the vesting of each outstanding stock option and provide each holder of such stock option the opportunity to exercise such stock option during such five-day period. At the effective time of the merger, each stock option outstanding immediately prior to the effective time of the merger (whether vested or unvested) will be cancelled and converted into the right to receive, as soon as reasonably practicable after the effective time of the merger, but in no event later than fifteen business days following the effective time of the merger, with respect to each share of the Company’s common stock subject to such stock option, a cash payment equal to the excess, if any, of $21.00 over the exercise price per share of such stock option, without interest and subject to applicable tax withholding.

At the effective time of the merger, each share unit outstanding or payable as of immediately prior to the effective time of the merger (whether vested or unvested) will be cancelled and converted into the right to receive, as promptly as reasonably practicable following the effective time of the merger, but in no event later than fifteen business days following the effective time of the merger with respect to each share of the Company’s common stock subject to such award, a cash payment equal to the product of (x) the number of shares of the Company’s common stock subject to such share unit and (y) $21.00, without interest and subject to applicable tax withholding; provided that the number of shares of the Company’s common stock subject to each share unit that is subject to performance-based vesting will be determined based on the level of achievement of such performance condition through the closing of the merger measured, in a manner that is consistent with our past practice regarding the methodology for such measurement, or if greater, the target number of shares of the Company’s common stock subject to such share unit.

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Payments for Unvested Stock Options and Share Units

The following table sets forth the amounts that each director and each executive officer of the Company would receive with respect to unvested stock options and share units, if any, assuming the completion of the merger occurred on May 26, 2016. These payments will be made in a lump sum cash payment as soon as reasonably practicable after the effective time of the merger, but in no event later than fifteen business days following the effective time of the merger. The number of vested options beneficially owned as of May 26, 2016, by each individual listed in the table below is included in the “Security Ownership of Certain Beneficial Owners” table beginning on page 86.

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Employment Agreements

We have employment agreements with each of our executive officers (other than Ms. Bay and Mr. Muir, each whose employment has terminated). If the executive officer’s employment is terminated by us without cause (as defined in each agreement) or by an executive officer for good reason (as defined in each agreement), in each case, within two years following a change in control, such executive officer generally is entitled to the following:

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The employment agreements provide that each executive officer is subject to a non-compete provision during the term of his or her employment and for a period of one year following the date of termination and is subject to a non-solicitation provision during the term of his or her employment and for a period of two years following the date of termination. If the employment of an executive officer is terminated for good reason or without cause following a change in control, the executive officer is entitled to any amounts payable, as described above, only if the executive officer has not breached and does not breach the non-compete and non-solicitation provisions in the employment agreement and executes a release of claims and does not revoke such release.

The employment agreements include a modified cutback provision which provides that excess parachute payments will be cut back to the “safe harbor amount,” but only if such a reduction would put the executive officer in a better after-tax position absent such a reduction after taking into account the applicable 20% excise tax on such excess parachute payments.

Retention Initiatives

Parent and the Company agree that they will negotiate in good faith the terms and conditions of a retention plan and a plan for awarding cash bonuses in connection with the consummation of the merger by June 22, 2016, pursuant to which certain of the Company’s executive officers may be granted the opportunity to earn a retention or cash bonus award; provided that, if the Company and Parent fail to successfully negotiate such plans within that time, the Company may adopt a retention plan, without the consent of Parent, where the amount payable, in the aggregate, does not exceed $3,000,000. The amount of such executive officer’s potential retention and/or transaction bonus, if any, has not yet been determined.