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OFFER TO PURCHASE FOR CASH
BY
BIG DOG HOLDINGS, INC.
UP TO 3,500,000 SHARES OF ITS COMMON STOCK AT A
PURCHASE PRICE OF $6.25 PER SHARE
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THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS
EXPIRE AT 9:00 A.M., PACIFIC TIME, ON WEDNESDAY, AUGUST 30, 2000
UNLESS THE OFFER IS EXTENDED.
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Big Dog Holdings, Inc., a Delaware corporation (the "Company"), invites
its stockholders to tender shares of its common stock, par value $.01 per share,
to the Company at a price of $6.25 per share in cash, upon the terms and subject
to the conditions set forth in this offer to purchase and the related letter of
transmittal, which together constitute the "offer." We will pay $6.25 per share,
net to the seller in cash, for up to 3,500,000 shares validly tendered and not
withdrawn, upon the terms and subject to the conditions of the offer, including
the proration terms. The Company reserves the right, in its sole discretion, to
purchase more than 3,500,000 shares pursuant to the offer. Whenever this offer
refers to rights "we" have, actions "we" may take or similar matters, it is
referring to rights or actions of the Company.
THE OFFER IS NOT CONDITIONED ON ANY MINIMUM NUMBER OF SHARES BEING
TENDERED. THE OFFER IS, HOWEVER, SUBJECT TO CERTAIN OTHER CONDITIONS. SEE
SECTION 6.
The common stock is listed and principally traded on the NASDAQ
National Market System (the "NASDAQ") under the symbol "BDOG." On July 28, 2000,
the last full trading day on the NASDAQ prior to the announcement by the Company
of the offer, including the price and number of shares sought, the closing per
share sales price as reported on the NASDAQ was $4.625 STOCKHOLDERS ARE URGED TO
OBTAIN CURRENT MARKET QUOTATIONS FOR THE SHARES. SEE SECTION 7.
THE BOARD OF DIRECTORS OF THE COMPANY HAS APPROVED THE OFFER. HOWEVER,
STOCKHOLDERS MUST MAKE THEIR OWN DECISION WHETHER TO TENDER SHARES AND, IF SO,
HOW MANY SHARES TO TENDER. NEITHER THE COMPANY NOR ITS BOARD OF DIRECTORS MAKES
ANY RECOMMENDATION AS TO WHETHER TO TENDER OR REFRAIN FROM TENDERING SHARES. THE
COMPANY HAS BEEN ADVISED THAT EACH OF ITS DIRECTORS AND OFFICERS WHO OWN SHARES
INTENDS TO TENDER SHARES IN THE OFFER.
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THE DATE OF THIS OFFER TO PURCHASE IS JULY 31, 2000.
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IMPORTANT
Except as described below, any stockholder of the Company desiring to
accept the offer should either:
(1) complete and sign the letter of transmittal or a facsimile
thereof in accordance with the instructions in the letter of
transmittal, mail or deliver it with any required signature guarantee
and any other required documents to U.S. Stock Transfer Corporation, as
the depositary, and either mail or deliver the stock certificates for
such shares to the depositary, with all such other documents, or follow
the procedure for book-entry delivery set forth in Section 3, or
(2) request the stockholder's broker, dealer, commercial bank,
trust company or other nominee to effect the transaction for him or
her.
A stockholder having shares registered in the name of a broker, dealer,
commercial bank, trust company or other nominee must contact that broker,
dealer, commercial bank, trust company or other nominee if such stockholder
desires to tender such shares. Stockholders who desire to tender shares and
whose certificates for such shares are not immediately available or who cannot
comply with the procedure for book-entry transfer on a timely basis or whose
other required documentation cannot be delivered to the depositary, in any case,
by the expiration of the offer should tender such shares by following the
procedures for guaranteed delivery set forth in Section 3. FOR SHARES TO BE
PROPERLY TENDERED, THE DEPOSITARY MUST TIMELY RECEIVE A PROPERLY COMPLETED
LETTER OF TRANSMITTAL.
If you have any questions or requests for assistance or for additional
copies of this offer to purchase, the letter of transmittal or the notice of
guaranteed delivery, please call (805) 963-8727 x1360.
WE HAVE NOT AUTHORIZED ANY PERSON TO MAKE ANY RECOMMENDATION ON BEHALF OF US AS
TO WHETHER STOCKHOLDERS SHOULD TENDER OR REFRAIN FROM TENDERING SHARES PURSUANT
TO THE OFFER. WE HAVE NOT AUTHORIZED ANY PERSON TO GIVE ANY INFORMATION OR TO
MAKE ANY REPRESENTATION IN CONNECTION WITH THE OFFER ON OUR BEHALF OTHER THAN
THOSE CONTAINED IN THIS OFFER TO PURCHASE OR IN THE LETTER OF TRANSMITTAL. DO
NOT RELY ON ANY SUCH RECOMMENDATION OR ANY SUCH INFORMATION OR REPRESENTATIONS,
IF GIVEN OR MADE, AS HAVING BEEN AUTHORIZED BY US.
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TABLE OF CONTENTS
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Page
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Summary Term Sheet......................................................................................1
Introduction............................................................................................6
The Offer...............................................................................................7
1. Number Of Shares; Proration....................................................................7
2. Tenders By Owners Of Fewer Than 100 Shares.....................................................8
3. Procedure For Tendering Shares.................................................................9
4. Withdrawal Rights.............................................................................12
5. Purchase Of Shares And Payment Of Purchase Price.............................................13
6. Certain Conditions Of The Offer...............................................................13
7. Price Range Of Shares.........................................................................15
8. Background And Purpose Of The Offer; Certain Effects Of The Offer.............................15
9. Interests Of Directors And Executive Officers; Transactions And Arrangements
Concerning The Shares.........................................................................16
10. Source And Amount Of Funds....................................................................19
11. Certain Information About The Company.........................................................19
12. Effect Of The Offer On The Market For Shares; Registration Under The Securities
Exchange Act..................................................................................21
13. Certain Legal Matters; Regulatory Approvals...................................................21
14. Certain United States Federal Income Tax Consequences.........................................21
15. Extension Of The Offer; Termination; Amendment................................................25
16. Fees And Expenses.............................................................................25
17. Miscellaneous.................................................................................26
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SUMMARY TERM SHEET
Big Dog Holdings, Inc. is offering to purchase up to 3,500,000
shares of common stock, par value $.01 per share, at a price, net to the
seller in cash, of $6.25 per share. Through a question and answer format,
this Summary Term Sheet will explain to you, the stockholders of Big Dog
Holdings, Inc., the important terms of the proposed transaction. This
explanation will assist you in deciding whether to tender your shares to Big
Dog Holdings, Inc. This Summary Term Sheet serves only as an introduction,
and we urge you to carefully read the remainder of this offer to purchase and
the accompanying letter of transmittal in order to fully educate yourself on
the details of the proposed tender offer. Cross-referenced text refers to
sections within this offer to purchase, unless otherwise noted.
WHO IS OFFERING TO BUY THE COMMON STOCK OF BIG DOG HOLDINGS, INC.?
- Big Dog Holdings, Inc., a Delaware corporation, is offering to buy
back its own common stock in a self-tender offer.
WHAT ARE THE CLASSES AND AMOUNTS OF SECURITIES SOUGHT IN THE OFFER? HOW MUCH IS
BIG DOG HOLDINGS, INC. OFFERING TO PAY AND WHAT IS THE FORM OF PAYMENT?
- We are offering to purchase up to 3,500,000 shares of common stock for
$6.25 per share, net to you, in cash. See "Introduction" and Section 1
("Number Of Shares; Proration").
DOES BIG DOG HOLDINGS, INC. HAVE TO ACCEPT FOR PAYMENT ALL OF THE TENDERED
SHARES?
- If the number of shares validly tendered and not withdrawn prior to
the expiration date is less than or equal to 3,500,000 shares (or any
greater number that we may elect to purchase), we will purchase at the
purchase price all shares so tendered.
- If more than the prescribed number of shares are validly tendered and
not withdrawn, we will purchase shares in the following order of
priority:
- all shares validly tendered and not withdrawn prior to the
expiration date by any odd lot owner (beneficial owner of
less than 100 shares of common stock as of July 31, 2000 who
continues to beneficially own less than 100 shares of common
stock on the expiration date) who (i) tenders all shares
beneficially owned and (ii) completes the box captioned "Odd
Lots" on the letter of transmittal and, if applicable, on
the notice of guaranteed delivery; and then
- all other shares validly tendered and not withdrawn prior to
the expiration date on a pro rata basis.
- If proration is required, we will determine the final proration factor
as promptly as practicable after the expiration date.
- See "Introduction," Section 1 ("Number Of Shares; Proration"), Section
2 ("Tenders By Owners Of Fewer Than 100 Shares") and Instruction 8 of
the letter of transmittal.
WILL I BE CHARGED ANY TRANSFER TAXES, FEES OR COMMISSIONS WHEN I TENDER MY
SHARES?
- We will pay all stock transfer taxes payable on the transfer of shares
pursuant to the tender offer. However, if we are going to make payment
of the purchase price to any person other than the registered holder
or if any tendered shares are registered in the name of any person
other than the person signing the letter of transmittal then we will
deduct from the purchase price the amount of any stock transfer taxes
payable on account of the transfer unless we receive satisfactory
evidence that such taxes have been paid or there is an adequate
exemption.
- If you are the record owner of your shares and you tender shares to
us, you will not have to pay any brokerage fees or commissions. If you
own your shares through a broker or other nominee,
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and your broker tenders your shares on your behalf, then your broker
or nominee may charge you a fee or commission for doing so. You should
contact your broker or nominee to determine whether you will be
charged a fee.
- See Section 5 "Purchase Of Shares And Payment Of Purchase Price,"
Section 16 ("Fees And Expenses") and Instruction 6 of the letter of
transmittal.
WHAT IS THE PURPOSE OF THE TENDER OFFER?
- The overall purpose of the tender offer is to increase stockholder
value. More specifically, we are making the tender offer, among other
reasons, because we believe that:
- the common stock is undervalued on the public market;
- the tender offer will provide you with an opportunity of
cash liquidity at a premium above recent prices; and
- the tender offer will increase stockholder value for
those of you who own shares after the tender offer.
- Other purposes for the tender offer are set forth in "Introduction"
and Section 8 ("Background And Purpose Of The Offer; Certain Effects
Of The Offer").
WHAT ARE THE SIGNIFICANT CONDITIONS TO THE OFFER? UNDER WHAT CONDITIONS CAN BIG
DOG HOLDINGS, INC. TERMINATE THE TENDER OFFER?
- The tender offer is not conditioned on the stockholders tendering any
minimum number of shares.
- We can terminate the tender offer, in our sole discretion, if, among
other things:
- any action by any governmental agency or other person is
instituted or threatened, that (i) challenges or otherwise
adversely affects our ability to make or complete the tender
offer or (ii) could, in our sole judgment, materially affect
our business;
- there is a significant decrease in the market price of our
shares or of equity securities generally in the United
States; or
- a change or event occurs, is discovered, or is threatened to
our business which, in our sole judgment, is material to us.
- Other conditions are set forth in Section 6 ("Certain Conditions Of
The Offer").
HOW LONG DO I HAVE TO DECIDE WHETHER TO TENDER MY SHARES IN THE OFFER? CAN BIG
DOG HOLDINGS, INC. EXTEND THE OFFER PAST THE INITIAL EXPIRATION DATE?
- Our offer to purchase your shares expires at 9:00 a.m., Pacific time,
on Wednesday, August 30, 2000.
- Yes, we can extend the offer past this scheduled expiration date in
our sole discretion. If we choose to do so, you will be able to tender
your shares until the end of the day selected as the new expiration
date.
- See Section 1 ("Number Of Shares; Proration") and Section 15
("Extension Of The Offer; Termination; Amendment").
CAN BIG DOG HOLDINGS, INC. AMEND THE TERMS OF THE TENDER OFFER?
- We reserve the right in our sole discretion to amend the tender offer
in any respect. See Section 15 ("Extension Of The Offer; Termination;
Amendment").
HOW DO I FIND OUT IF BIG DOG HOLDINGS, INC. AMENDS THE TERMS OF THE TENDER
OFFER?
- We will announce any amendment to the tender offer by making a public
announcement of the amendment. We will announce any extension no
later than 9:00 a.m., Pacific time, on the next business day after
the last previously scheduled or announced expiration date. In the
event of a termination or postponement of the tender offer, we will
also give written or oral notice to the depositary.
- We will disseminate any public announcement promptly to you in a
manner reasonably designed to inform you of the amendment. Without
limiting the manner in which we may choose to make any public
announcement, we will have no obligation to publish, advertise or
otherwise
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communicate any public announcement other than by making a release to
the Dow Jones News Service.
- See Section 15 ("Extension Of The Offer; Termination; Amendment").
HOW DO I GET PAID FOR MY TENDERED SHARES?
- We will pay for the shares accepted for payment by depositing the
aggregate purchase price with the depositary as soon as practicable
after the expiration date of the tender offer. The depositary will act
as your agent and will transmit to you the payment for all shares
accepted for payment. See Section 5 ("Purchase Of Shares And Payment
Of Purchase Price").
HOW DO I TENDER MY SHARES?
- To tender your shares, you must deliver your share certificates,
together with a completed letter of transmittal, to the depositary on
or prior to the expiration date. If your shares are held in street
name, you can tender the shares by your nominee through the
depositary.
- If you are an odd lot owner who is tendering all of your shares, you
must also complete the section entitled "Odd Lots" in the letter of
transmittal in order to qualify for the preferential treatment
available to odd lot owners.
- If you cannot get all of the documents or instruments that you are
required to deliver to the depositary on or prior to the expiration
date, you can still tender your shares if:
- you tender through an eligible institution;
- the depositary receives, on or prior to the expiration date,
a properly completed and duly executed notice of guaranteed
delivery, including a signature guarantee by an eligible
institution; and
- the depositary receives the certificates for all tendered
shares with all other required documentation within three
NASDAQ trading days after the date the depositary receives
the notice of guaranteed delivery.
- For a more detailed explanation of the tendering procedures, see
Section 3 ("Procedure For Tendering Shares").
UNTIL WHEN CAN I WITHDRAW MY PREVIOUSLY TENDERED SHARES?
- You can withdraw your tendered shares at any time on or prior to the
expiration date. After the offer expires, the tender is irrevocable
unless we have not accepted for payment your shares by 12:00 midnight,
Pacific time, on Wednesday, September 27, 2000. At this date, you can
withdraw your tendered shares until we accept them for payment. See
Section 4 ("Withdrawal Rights").
HOW DO I WITHDRAW PREVIOUSLY TENDERED SHARES?
- To withdraw your shares, you must deliver a written, telegraphic or
facsimile transmission of notice of withdrawal to the depositary that
specifies your name, the number of shares being withdrawn, and the
name of the registered holder of the shares, if different from the
person who tendered the shares. If you have tendered pursuant to the
procedure for book-entry transfer, the notice of withdrawal must also
specify the name and the number of the account at the book-entry
transfer facility to be credited with the withdrawn shares. See
Section 4 ("Withdrawal Rights").
WHAT ARE THE TAX CONSEQUENCES OF THE SALE OF SHARES TO BIG DOG HOLDINGS, INC.?
- The sale of shares to us is a taxable transaction for federal, and
potentially state and foreign, income tax purposes.
- We encourage you to consult with your own tax advisor about the
particular effect the tender will have on you.
- See Section 14 ("Certain United States Federal Income Tax
Consequences").
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WHAT IS THE MARKET VALUE OF MY SHARES AS OF A RECENT DATE?
- On July 28, 2000, the last full trading day before we announced the
tender offer, the closing price per share of the common stock on the
NASDAQ was $4.625.
- We encourage you to obtain a current market quotation for your shares
before deciding whether to tender your shares.
- See "Introduction" and Section 7 ("Price Range Of Shares").
WHAT DOES THE BOARD OF DIRECTORS OF BIG DOG HOLDINGS, INC. THINK OF THE TENDER
OFFER?
- Our board of directors unanimously adopted resolutions approving the
tender offer. However, neither we nor our board of directors makes any
recommendation to you as to whether to tender or refrain from
tendering shares and neither we nor our board of directors has
authorized any person to make any such recommendation.
- We encourage you to make your own decision whether to tender shares
and, if so, how many shares to tender.
- See Section 8 ("Background And Purpose Of The Offer; Certain Effects
Of The Offer") and Section 9 ("Interests Of Directors And Executive
Officers; Transactions And Arrangements Concerning The Shares").
DO ANY DIRECTORS OR EXECUTIVE OFFICERS OF BIG DOG HOLDINGS, INC. INTEND TO
TENDER SHARES PURSUANT TO THE TENDER OFFER?
- Yes. Our directors and executive officers as a group beneficially own
7,985,230 shares, which represents 65.9% of the outstanding shares.
Our directors and executive officers who own shares have indicated an
intent to tender, in the aggregate, up to 4,373,120 shares and to
retain their other shares and their tendered shares which are not
purchased due to proration.
- See "Introduction" and Section 9 ("Interests Of Directors And
Executive Officers; Transactions And Arrangements Concerning The
Shares").
WHAT IS THE TOTAL AMOUNT OF FUNDS THAT BIG DOG HOLDINGS, INC. WILL REQUIRE TO
CONSUMMATE THE TENDER OFFER?
- Assuming we purchase 3,500,000 shares in the tender offer at a
purchase price of $6.25 per share, we expect the maximum aggregate
cost, including all fees and expenses applicable to the tender offer,
to be approximately $22,085,000. See Section 10 ("Source And Amount Of
Funds").
HOW WILL BIG DOG HOLDINGS, INC. OBTAIN THE FUNDS TO MAKE PAYMENT?
- We will obtain all necessary funds from borrowings under a revolving
credit facility with a group of banks led by Bank of America, N.A. and
available cash and cash equivalents. The maximum amount available to
us under the revolving credit facility is $30,000,000. See Section 10
("Source And Amount Of Funds").
WHAT EFFECT WILL THE TENDER OFFER HAVE ON MY SHARES THAT ARE NOT PURCHASED IN
THE OFFER, OR THAT I DO NOT TENDER?
- Our purchase of the shares in the tender offer will reduce the number
of shares that might otherwise trade publicly and will likely reduce
the number of stockholders. We anticipate, however, that there will
still be a sufficient number of shares outstanding and publicly traded
following the tender offer to ensure a continued trading market in the
shares on the NASDAQ.
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- The shares are currently registered under the Securities Exchange Act
of 1934, as amended, and we believe that our purchase of the shares in
the tender offer will not result in the shares becoming eligible for
deregistration under these rules.
- See Section 12 ("Effect Of The Offer On The Market For Shares;
Registration Under The Securities Exchange Act").
WHO CAN I TALK TO IF I HAVE QUESTIONS ABOUT THE TENDER OFFER?
- You can call the Company at (805) 963-8727 x1360.
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TO THE HOLDERS OF SHARES OF COMMON STOCK OF
BIG DOG HOLDINGS, INC.:
INTRODUCTION
We invite the stockholders of Big Dog Holdings, Inc., a Delaware
corporation (the "Company"), to tender to the Company shares of its common
stock, par value $.01 per share, at a price of $6.25 per share in cash, upon the
terms and subject to the conditions set forth in this offer to purchase and the
related letter of transmittal, which together constitute the "offer."
We will pay $6.25 per share, net to the seller in cash, for up to
3,500,000 shares validly tendered prior to the expiration date, as defined in
Section 1, and not withdrawn, upon the terms and subject to the conditions of
the offer, including the proration terms described below. We reserve the right,
in our sole discretion, to purchase more than 3,500,000 shares pursuant to the
offer.
If, before the expiration date, more than 3,500,000 shares, or such
greater number of shares as the Company may decide to purchase, are validly
tendered and not withdrawn, we will, upon the terms and subject to the
conditions of the offer, purchase shares first from all odd lot owners, as
defined in Section 2, who validly tender all their shares and complete the
box captioned "Odd Lots" in the letter of transmittal, and, if applicable, the
notice of guaranteed delivery; and then on a pro rata basis from all other
stockholders who validly tender shares and do not withdraw them prior to the
expiration date. We will return at our own expense all shares not purchased
pursuant to the offer, including shares not purchased because of proration.
The $6.25 per share purchase price will be paid net to the tendering
stockholder in cash for all shares. Tendering stockholders will not be obligated
to pay brokerage commissions, solicitation fees or, subject to Instruction 6 of
the letter of transmittal, stock transfer taxes on the Company's purchase of
shares pursuant to the offer. HOWEVER, ANY TENDERING STOCKHOLDER OR OTHER PAYEE
WHO FAILS TO COMPLETE, SIGN AND RETURN TO THE DEPOSITARY THE SUBSTITUTE FORM W-9
THAT IS INCLUDED WITH THE LETTER OF TRANSMITTAL MAY BE SUBJECT TO REQUIRED
BACKUP FEDERAL INCOME TAX WITHHOLDING OF 31% OF THE GROSS PROCEEDS PAYABLE TO
SUCH STOCKHOLDER OR OTHER PAYEE PURSUANT TO THE OFFER. SEE SECTION 3.
On July 31, 2000, we announced our intention to make an offer to
purchase up to 3,500,000 shares at $6.25 per share with the offer to commence on
August 2, 2000. We are making the offer because we believe:
(1) the shares are undervalued in the public market;
(2) the offer will provide an opportunity of cash liquidity to
stockholders by allowing them to sell a substantial portion of their
stock at a premium to the NASDAQ trading price at the time of
announcement without payment of brokerage commissions, while allowing
those stockholders who do not wish to sell at the offer price to elect
not to do so;
(3) for those stockholders who hold shares after the offer is
completed, the offer has the potential to increase returns on equity
capital by reducing the number of shares outstanding and to improve our
over-all weighted cost of capital;
(4) after the offer is completed, we expect to have sufficient
cash flow and access to funding to meet the Company's cash needs for
normal operations and anticipated capital expenditures for the
foreseeable future; and
(5) after considering alternatives, investing in our shares is
an attractive use of capital and an efficient means to provide value to
our stockholders.
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As of July 28, 2000 there were 11,976,350 shares outstanding, and
1,138,550 shares issuable upon exercise of all outstanding stock options of
which 295,370 and 295,620 options are exercisable as of July 31, 2000 and August
30, 2000, respectively. The 3,500,000 shares that we are offering to purchase
represent approximately 29.2% of the outstanding shares and approximately 26.7%
assuming the exercise of all outstanding options. The shares are listed on the
NASDAQ under the symbol "BDOG." On July 28, 2000, the last full trading day on
the NASDAQ prior to our announcement of the offer, the closing per share sales
price, as reported on the NASDAQ, was $4.625. WE URGE STOCKHOLDERS TO OBTAIN
CURRENT QUOTATIONS ON THE MARKET PRICE OF THE SHARES.
THE OFFER
1. NUMBER OF SHARES; PRORATION
Upon the terms and subject to the conditions of the offer, we will
accept for payment and purchase 3,500,000 shares or such lesser number of shares
as are validly tendered before the expiration date, and not withdrawn in
accordance with Section 4, at a net cash price of $6.25 per share. The term
"expiration date" means 9:00 a.m., Pacific time, on Wednesday, August 30, 2000,
unless we, in our sole discretion, extend the period of time during which the
offer is open, in which event the term "expiration date" shall refer to the
latest time and date at which the offer, as so extended by us, is scheduled to
expire. See Section 15 for a description of our right to extend the time during
which the offer is open and to postpone, terminate or amend the offer. Subject
to Section 2 below, if the offer is oversubscribed, shares tendered and not
withdrawn before the expiration date will be eligible for proration.
We reserve the right, in our sole discretion, to purchase more than
3,500,000 shares pursuant to the offer. See Section 15. In accordance with
applicable regulations of the Securities and Exchange Commission, we may
purchase pursuant to the offer an additional number of shares not to exceed 2%
of the outstanding shares without extending the offer.
If:
(1) (a) we increase or decrease the price to be paid for shares,
or
(b) we increase the number of shares being sought and such
increase in the number of shares being sought exceeds 2% of the
outstanding shares, or
(c) we decrease the number of shares being sought, and
(2) the offer is scheduled to expire at any time earlier than the
expiration of a period ending on the tenth business day from, and including, the
date that notice of such increase or decrease is first published, sent or given
as specified in Section 15,
then we will extend the offer until the expiration of such ten-business day
period. For purposes of the offer, a "business day" means any day that is not a
Saturday, Sunday or federal holiday and consists of the time period from 12:01
a.m. through 12:00 midnight, Pacific time.
THE OFFER IS NOT CONDITIONED ON ANY MINIMUM NUMBER OF SHARES BEING
TENDERED. THE OFFER IS, HOWEVER, SUBJECT TO CERTAIN OTHER CONDITIONS. SEE
SECTION 6.
We will pay the $6.25 per share purchase price for all shares validly
tendered on or prior to the expiration date and not withdrawn, upon the terms
and subject to the conditions of the offer. We will return, at our expense, as
promptly as practicable following the expiration date all shares that we do not
purchase in the offer, including shares we do not purchase because of proration.
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If the number of shares validly tendered and not withdrawn prior to the
expiration date is less than or equal to 3,500,000 shares (or such greater
number of shares as we may elect to purchase), we will, upon the terms and
subject to the conditions of the offer, purchase at the purchase price all
shares so tendered.
PRIORITY. Upon the terms and subject to the conditions of the offer, in
the event that prior to the expiration date more than 3,500,000 shares (or such
greater number of shares as we may elect to purchase in the offer) are validly
tendered and not withdrawn, we will purchase such validly tendered shares in the
following order of priority:
(1) all shares validly tendered and not withdrawn prior to the
expiration date by any odd lot owner who:
(a) tenders all shares beneficially owned by such odd
lot owner (partial tenders will not qualify for this
preference); and
(b) completes the box captioned "Odd Lots" on the
letter of transmittal and, if applicable, on the notice of
guaranteed delivery; and
(2) after purchase of all of the foregoing shares, all other
shares validly tendered and not withdrawn prior to the expiration date
on a pro rata basis.
PRORATION. If proration is required, we will determine the final
proration factor as promptly as practicable after the expiration date. Proration
for each stockholder tendering shares, other than odd lot owners, shall be based
on the ratio of the number of shares tendered by such stockholder to the total
number of shares tendered by all stockholders, other than odd lot owners. This
ratio will be applied to stockholders tendering shares, other than odd lot
owners, by multiplying the ratio by the number of shares to be purchased after
odd lots, to determine the number of shares that we will purchase from each such
stockholder in the offer. Although we do not expect to be able to announce the
final results of such proration until approximately seven business days after
the expiration date, we will announce preliminary results of the proration by
press release as promptly as practicable after the expiration date. Such
preliminary information can be obtained from the Company and may be available
from a stockholder's broker.
As described in Section 14, the number of shares that we will purchase
from a stockholder may affect the United States federal income tax consequences
to the stockholder of such purchase and therefore may be relevant to a
stockholder's decision whether to tender shares. The letter of transmittal
affords each tendering stockholder the opportunity to designate the order of
priority in which shares tendered are to be purchased in the event of proration.
We will mail this offer to purchase and the related letter of
transmittal to record holders of shares as of July 31, 2000 and furnish to
brokers, banks and similar persons whose names, or the names of whose nominees,
appear on our stockholder list or, if applicable, who are listed as participants
in a clearing agency's security position listing for subsequent transmittal to
beneficial owners of shares.
2. TENDERS BY OWNERS OF FEWER THAN 100 SHARES
Upon the terms and subject to the conditions of the offer, we will
accept for purchase, without proration, all shares validly tendered and not
withdrawn on or prior to the expiration date by or on behalf of odd lot owners,
that is stockholders who beneficially owned as of the close of business on July
31, 2000, and continue to beneficially own as of the expiration date, an
aggregate of fewer than 100 shares. To avoid proration, however, an odd lot
owner must validly tender all such shares that such odd lot owner beneficially
owns; partial tenders will not qualify for this preference. This preference is
not available to partial tenders or to owners of 100 or more shares in the
aggregate, even if such owners have separate stock certificates for fewer than
100 such shares. Any odd lot owner wishing to tender all such shares
beneficially owned by such stockholder in this offer must complete the box
captioned "Odd Lots" in the letter of transmittal and, if applicable, on the
notice of guaranteed delivery. See Section 3 below. Stockholders
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owning an aggregate of less than 100 shares whose shares are purchased pursuant
to the offer will avoid both the payment of brokerage commissions and any
applicable odd lot discounts payable on a sale of their shares.
We also reserve the right, but will not be obligated, to purchase all
shares duly tendered by any stockholder who tendered all shares beneficially
owned and who, as a result of proration, would then beneficially own an
aggregate of fewer than 100 shares. If we exercise this right, we will increase
the number of shares that we are offering to purchase in the offer by the number
of shares we purchase through the exercise of such right.
3. PROCEDURE FOR TENDERING SHARES
PROPER TENDER OF SHARES. For shares to be validly tendered pursuant to
the offer:
(1) the certificates for such shares, or confirmation of
receipt of such shares pursuant to the procedures for book-entry
transfer set forth below, together with a properly completed and duly
executed letter of transmittal, or manually signed facsimile thereof,
with any required signature guarantees, and any other documents
required by the letter of transmittal, must be received prior to 9:00
a.m., Pacific time, on the expiration date by the depositary at its
address set forth on the back cover of this offer to purchase; or
(2) the tendering stockholder must comply with the guaranteed
delivery procedure set forth below.
Odd lot owners who tender all shares must complete the section entitled
"Odd Lots" on the letter of transmittal in order to qualify for the preferential
treatment available to odd lot owners as set forth in Section 2 above.
SIGNATURE GUARANTEES AND METHOD OF DELIVERY. No signature guarantee is
required on the letter of transmittal if:
(1) the letter of transmittal is signed by the registered
holder of the shares tendered and payment and delivery are to be made
directly to such registered holder. Registered holder, for purposes of
this Section 3, includes any participant in The Depository Trust
Company, as the book-entry transfer facility, whose name appears on a
security position listing as the holder of the shares, or
(2) shares are tendered for the account of an eligible
institution, that is a member firm of a registered national securities
exchange, a member of the National Association of Securities Dealers,
Inc. or a commercial bank or trust company, not a savings bank or
savings and loan association, having an office, branch or agency in the
United States.
In all other cases, all signatures on the letter of transmittal must be
guaranteed by an eligible institution. See Instruction 1 of the letter of
transmittal.
If a certificate representing shares is registered in the name of a
person other than the signer of a letter of transmittal, or if payment is to be
made, or shares not purchased or tendered are to be issued, to a person other
than the registered holder, the certificate must be endorsed or accompanied by
an appropriate stock power, in either case signed exactly as the name of the
registered holder appears on the certificate, with the signature on the
certificate or stock power guaranteed by an eligible institution. In this
regard, see Section 5 for information with respect to applicable stock transfer
taxes. In all cases, payment for shares tendered and accepted for payment
pursuant to the offer will be made only after timely receipt by the depositary
of certificates for such shares, or a timely confirmation of a book-entry
transfer of such shares into the depositary's account at the book-entry transfer
facility as described above, a properly completed and duly executed letter of
transmittal, or manually signed facsimile thereof, and any other documents
required by the letter of transmittal.
9
<PAGE>
THE METHOD OF DELIVERY OF ALL DOCUMENTS, INCLUDING SHARE CERTIFICATES,
THE LETTER OF TRANSMITTAL AND ANY OTHER REQUIRED DOCUMENTS, IS AT THE ELECTION
AND RISK OF THE TENDERING STOCKHOLDER. IF YOU DECIDE TO MAKE DELIVERY BY MAIL,
WE RECOMMEND YOU USE REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY
INSURED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO INSURE TIMELY
DELIVERY.
BOOK-ENTRY DELIVERY. The depositary will establish an account with
respect to the shares at the book-entry transfer facility for purposes of the
offer within two business days after the date of this offer to purchase. Any
financial institution that is a participant in the book-entry transfer
facility's system may make book-entry delivery of the shares by causing such
facility to transfer such shares into the depositary's account in accordance
with such facility's procedure for such transfer. Even though delivery of shares
may be effected through book-entry transfer into the depositary's account at the
book-entry transfer facility, a properly completed and duly executed letter of
transmittal, or manually signed facsimile thereof, with any required signature
guarantees and other required documents must, in any case, be transmitted to and
received by the depositary at one of its addresses set forth on the back cover
of this offer to purchase prior to the expiration date. DELIVERY OF THE LETTER
OF TRANSMITTAL AND ANY OTHER REQUIRED DOCUMENTS TO THE BOOK-ENTRY TRANSFER
FACILITY DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITARY.
GUARANTEED DELIVERY. If a stockholder desires to tender shares pursuant
to the offer and such stockholder's share certificates cannot be delivered to
the depositary on or prior to the expiration date (or the procedures for
book-entry transfer cannot be completed on a timely basis) or time will not
permit all required documents to reach the depositary on or prior to the
expiration date, such shares may nevertheless be tendered provided that all of
the following conditions are satisfied:
(1) such tender is made by or through an eligible institution;
(2) the depositary receives (by hand, mail, overnight courier,
telegram or facsimile transmission), on or prior to the expiration
date, a properly completed and duly executed notice of guaranteed
delivery substantially in the form we have provided with this offer to
purchase, including (where required) a signature guarantee by an
eligible institution in the form set forth in such notice of guaranteed
delivery; and
(3) the certificates for all tendered shares in proper form
for transfer (or confirmation of book-entry transfer of such shares
into the depositary's account at the book-entry transfer facility),
together with a properly completed and duly executed letter of
transmittal (or manually signed facsimile thereof) and any required
signature guarantees or other documents required by the letter of
transmittal, are received by the depositary within three NASDAQ trading
days after the date the depositary receives such notice of guaranteed
delivery.
RETURN OF CERTIFICATES. If we do not purchase all of the tendered
shares, or if less than all shares evidenced by a stockholder's certificates are
tendered, certificates for unpurchased shares will be returned at our expense as
promptly as practicable after the expiration or termination of the offer. If
shares are tendered by book-entry transfer at the book-entry transfer facility,
such shares will be credited to the appropriate account maintained by the
tendering stockholder at the book-entry transfer facility, without expense to
such stockholder.
BACKUP FEDERAL INCOME TAX WITHHOLDING. Under the United States federal
income tax backup withholding rules, unless an exemption applies under the
applicable law and regulations, 31% of the gross proceeds payable to a
stockholder or other payee pursuant to the offer must be withheld and remitted
to the United States Treasury, unless the stockholder or other payee provides
such person's taxpayer identification number, employer identification number or
social security number, to the depositary and certifies under penalties of
perjury that such number is correct. Therefore, each tendering stockholder
should complete and sign the Substitute Form W-9 included as part of the letter
of transmittal so as to provide the information
10
<PAGE>
and certification necessary to avoid backup withholding, unless such stockholder
otherwise establishes to the satisfaction of the depositary that the stockholder
is not subject to backup withholding. Certain stockholders, including, among
others, corporations and certain foreign stockholders, in addition to foreign
corporations, are not subject to the backup withholding and reporting
requirements described herein. However, for a non-corporate foreign stockholder
to qualify as an exempt recipient, that stockholder must submit an IRS Form W-8,
a Substitute Form W-8 or a W-8BEN, signed under penalties of perjury, attesting
to that stockholder's exempt status. Such statements can be obtained from the
depositary. See Instructions 10 and 11 of the letter of transmittal.
TO PREVENT BACKUP FEDERAL INCOME TAX WITHHOLDING EQUAL TO 31% OF THE
GROSS PAYMENTS MADE TO STOCKHOLDERS FOR SHARES PURCHASED PURSUANT TO THE OFFER,
EACH STOCKHOLDER WHO DOES NOT OTHERWISE ESTABLISH AN EXEMPTION FROM SUCH
WITHHOLDING MUST PROVIDE THE DEPOSITARY WITH THE STOCKHOLDER'S CORRECT TAXPAYER
IDENTIFICATION NUMBER AND PROVIDE CERTAIN OTHER INFORMATION BY COMPLETING THE
SUBSTITUTE FORM W-9 INCLUDED WITH THE LETTER OF TRANSMITTAL.
For a discussion of certain United States federal income tax
consequences to tendering stockholders, see Section 14.
WITHHOLDING FOR FOREIGN STOCKHOLDERS. Even if a foreign stockholder has
provided the required certification to avoid backup withholding, the depositary
will withhold United States federal income taxes equal to 30% of the gross
payments payable to a foreign stockholder or his or her agent unless the
depositary determines that a reduced rate of withholding is available pursuant
to a tax treaty or that an exemption from withholding is applicable because such
gross proceeds are effectively connected with the conduct of a trade or business
within the United States. For this purpose, a foreign stockholder is any
stockholder that is not (1) a citizen or resident of the United States, (2) a
corporation or other entity taxed as a corporation created or organized in or
under the laws of the United States, any State or any political subdivision
thereof, (3) an estate, the income of which is subject to United States federal
income taxation regardless of the source of such income or (4) a trust if a
court within the United States is able to exercise primary supervision over the
administration of the trust and one or more United States fiduciaries have the
authority to control all substantial decisions relating to the trust. In order
to obtain a reduced rate of withholding pursuant to a tax treaty, a foreign
stockholder must deliver to the depositary before the payment a properly
completed and executed IRS Form 1001 or IRS Form W-8BEN. In order to obtain an
exemption from withholding on the grounds that the gross proceeds paid pursuant
to the offer are effectively connected with the conduct of a trade or business
within the United States, a foreign stockholder must deliver to the depositary a
properly completed and executed IRS Form 4224 or IRS Form W-8ECI. The depositary
will determine a stockholder's status as a foreign stockholder and eligibility
for a reduced rate of, or exemption from, withholding by reference to any
outstanding certificates or statements concerning eligibility for a reduced rate
of, or exemption from, withholding (e.g., IRS Form 1001, IRS Form 4224, IRS Form
W-8BEN or IRS Form W-8ECI), unless facts and circumstances indicate that such
reliance is not warranted. A foreign stockholder may be eligible to obtain a
refund of all or a portion of any tax withheld if such stockholder meets the
"complete termination," "substantially disproportionate" or "not essentially
equivalent to a dividend" test described in Section 14 or is otherwise able to
establish that no tax or a reduced amount of tax is due. Foreign stockholders
are urged to consult their own tax advisors regarding the application of United
States federal income tax withholding, including eligibility for a withholding
tax reduction or exemption, and the refund procedure. See Instructions 10 and 11
of the letter of transmittal.
TENDERING STOCKHOLDER'S REPRESENTATION AND WARRANTY; THE COMPANY'S
ACCEPTANCE CONSTITUTES AN AGREEMENT. It is a violation of Rule 14e-4 under the
Securities Exchange Act of 1934 for a person acting alone or in concert with
others, directly or indirectly, to tender shares for such person's own account
unless at the time of tender and at the expiration date such person (1) has a
"net long position" equal to or greater than the number of shares tendered and
will deliver or cause to be delivered such shares for the purpose of tender to
us within the period specified in the offer, or (2) is the beneficial owner of
equivalent securities (that is other securities immediately convertible into,
exercisable for or exchangeable into shares) and, upon
11
<PAGE>
the acceptance of such tender, will acquire such shares by conversion, exchange
or exercise of such equivalent securities to the extent required by the terms of
the offer and will deliver or cause to be delivered such shares so acquired for
the purpose of tender to us within the period specified in the offer. Rule 14e-4
also provides a similar restriction applicable to the tender on behalf of
another person. A tender of shares made pursuant to any method of delivery
permitted by the offer will constitute the tendering stockholder's
representation and warranty to us that (1) such stockholder has a "net long
position" in shares or equivalent securities being tendered within the meaning
of Rule 14e-4, and (2) such tender of shares complies with Rule 14e-4. Our
acceptance for payment of shares tendered pursuant to the offer will constitute
a binding agreement between the tendering stockholder and us upon the terms and
subject to the conditions of the offer.
DETERMINATION OF VALIDITY; REJECTION OF SHARES; WAIVER OF DEFECTS;
NO OBLIGATION TO GIVE NOTICE OF DEFECTS. We will determine, in our sole
discretion, all questions as to the number of shares to be accepted, the
price to be paid therefor and the validity, form, eligibility, including time
of receipt, and acceptance for payment of any tender of shares. Our
determination will be final and binding on all parties. We reserve the
absolute right to reject any or all tenders we determine not to be in proper
form or the acceptance of or payment for which may, in the opinion of our
counsel, be unlawful. We also reserve the absolute right to waive any of the
conditions of the offer and any defect or irregularity in the tender of any
particular shares or any particular stockholder. No tender of shares will be
deemed to be properly made until all defects or irregularities have been
cured or waived. None of the Company, the depositary, or any other person is
or will be obligated to give notice of any defects or irregularities in
tenders, and none of them will incur any liability for failure to give any
such notice.
Certificates for shares, together with a properly completed letter of
transmittal and any other documents required by the letter of transmittal, must
be delivered to the depositary and not to the Company. Any such documents
delivered to the Company will not be forwarded to the depositary and therefore
will not be deemed to be validly tendered.
4. WITHDRAWAL RIGHTS
Except as otherwise provided in this Section 4, tenders of shares
pursuant to the offer are irrevocable. Shares tendered pursuant to the offer may
be withdrawn at any time on or prior to the expiration date and, unless the
Company has accepted the shares for payment as provided in this offer to
purchase, may also be withdrawn after 12:00 midnight, Pacific time, on
Wednesday, September 27, 2000.
For a withdrawal of shares to be effective, the depositary must
receive, at its address set forth on the back cover of this offer to purchase, a
notice of withdrawal in written, telegraphic or facsimile transmission form on a
timely basis. Such notice of withdrawal must specify the name of the person who
tendered the shares to be withdrawn, the number of shares tendered, the number
of shares to be withdrawn and the name of the registered holder, if different
from that of the person who tendered such shares. If the certificates have been
delivered or otherwise identified to the depositary, then, prior to the release
of such certificates, the tendering stockholder must also submit the serial
numbers shown on the particular certificates evidencing the shares and the
signature on the notice of withdrawal must be guaranteed by an eligible
institution, except in the case of shares tendered by an eligible institution.
If shares have been tendered pursuant to the procedure for book-entry transfer
set forth in Section 3, the notice of withdrawal must specify the name and the
number of the account at the book-entry transfer facility to be credited with
the withdrawn shares and otherwise comply with the procedures of such facility.
We will determine, in our sole discretion, all questions as to the form
and validity, including time of receipt, of notices of withdrawal. Our
determination will be final and binding on all parties. Neither the Company, the
depositary, nor any other person is or will be obligated to give any notice of
any defects or irregularities in any notice of withdrawal, and none of them will
incur any liability for failure to give any such notice. Withdrawals may not be
rescinded, and any shares properly withdrawn will thereafter be deemed not
tendered for purposes of the offer. However, withdrawn shares may be re-tendered
before the expiration date by again following any of the procedures described in
Section 3.
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<PAGE>
If we extend the offer, or if we are delayed in our purchase of shares
or are unable to purchase shares in the offer for any reason, then, without
prejudice to our rights under the offer, the depositary may, subject to
applicable law, retain on our behalf all tendered shares, and such shares may
not be withdrawn except to the extent tendering stockholders are entitled to
withdrawal rights as described in this Section 4.
5. PURCHASE OF SHARES AND PAYMENT OF PURCHASE PRICE
Upon the terms and subject to the conditions of the offer, we will
purchase and pay the $6.25 per share purchase price for all of the shares we
accept for payment in the offer as soon as practicable after the expiration
date. In all cases, we will make prompt payment for shares tendered and
accepted for payment in the offer, subject to possible delay in the event of
proration, but only after the depositary timely receives certificates for
shares, or timely confirmation of a book-entry transfer of such shares into
the depositary's account at one of the book-entry transfer facilities, a
properly completed and duly executed letter of transmittal, or manually
signed facsimile thereof, and any other required documents.
We will pay for the shares purchased in the offer by depositing the
aggregate purchase price therefor with the depositary, which will act as agent
for tendering holders of such shares for the purpose of receiving payment from
us and transmitting payment to the tendering stockholders. In the event of
proration, we will determine the proration factor and pay for those tendered
shares accepted for payment as soon as practicable after the expiration date.
However, we do not expect to be able to announce the final results of any such
proration until approximately seven business days after the expiration date.
Under no circumstances will we pay interest on the purchase price including,
without limitation, by reason of any delay in making payment. Certificates for
all shares not purchased, including all shares not purchased due to proration,
will be returned, or, in the case of shares tendered by book-entry transfer,
such shares will be credited to the account maintained with the book-entry
transfer facility by the participant who so delivered such shares, as promptly
as practicable following the expiration date or termination of the offer without
expense to the tendering stockholder. In addition, if certain events occur, we
may not be obligated to purchase any shares in the offer. See Section 6.
We will pay all stock transfer taxes, if any, payable on the transfer
to us of shares purchased pursuant to the offer; provided, however, that if
payment of the purchase price is to be made to, or, in the circumstances
permitted by the offer, if unpurchased shares are to be registered in the name
of, any person other than the registered holder, or if tendered certificates are
registered in the name of any person other than the person signing the letter of
transmittal, the amount of all stock transfer taxes, if any, whether imposed on
the registered holder or such other person, payable on account of the transfer
to such person will be deducted from the purchase price unless evidence
satisfactory to us of the payment of such taxes or exemption therefrom is
submitted. See Instruction 7 of the letter of transmittal.
Any tendering stockholder or other payee who fails to complete fully,
sign and return to the depositary the Substitute Form W-9 included with the
letter of transmittal may be subject to required backup federal income tax
withholding of 31% of the gross proceeds paid to such stockholder or other payee
pursuant to the offer. See Section 3. Also see Section 3 regarding federal
income tax consequences for foreign stockholders.
6. CERTAIN CONDITIONS OF THE OFFER
Notwithstanding any other provision of the offer, we will not be
required to accept for payment, purchase or pay for any shares tendered, and may
terminate or amend the offer or may postpone the acceptance for payment of, or
the purchase of and the payment for shares tendered, subject to Rule 13e-4(f)
promulgated under the Securities Exchange Act, if at any time on or after July
31, 2000 and prior to the time of payment for any such shares, regardless of
whether we have accepted for payment, purchased or paid for any shares pursuant
to the offer, any of the following events occur, or are determined by us to have
occurred, that, in our sole judgment regardless of the cause of the event,
including any action or omission to act by us, makes it inadvisable to proceed
with the offer or with such acceptance for payment:
13
<PAGE>
(1) any action, suit or proceeding by any government or
governmental, regulatory or administrative agency or authority or by
any other person, domestic or foreign, is threatened, instituted or
pending before any court, agency, authority or other tribunal, or any
judgment, order or injunction is entered, enforced or deemed applicable
by any such court, authority, agency or tribunal, that (a) challenges
or seeks to make illegal, or to delay or otherwise directly or
indirectly to restrain, prohibit or otherwise affect the making of the
offer, the acquisition of shares pursuant to the offer or is otherwise
related in any manner to, or otherwise affects, the offer; or (b)
could, in our sole judgment, materially affect our business, condition,
financial or otherwise, income, operations or prospects, taken as a
whole, or otherwise materially impair in any way the contemplated
future conduct of our business, taken as a whole, or materially impair
the offer's contemplated benefits to us;
(2) any action is threatened or taken, or any approval is
withheld, or any statute, rule or regulation is invoked, proposed,
sought, promulgated, enacted, entered, amended, enforced or deemed to
be applicable to the offer or us or any of our subsidiaries, by any
government or governmental, regulatory or administrative authority or
agency or tribunal, domestic or foreign, which, in our sole judgment,
would or might directly or indirectly result in any of the consequences
referred to in clause (a) or (b) of paragraph (1) above;
(3) the declaration of any banking moratorium or any
suspension of payments in respect of banks in the United States
(whether or not mandatory);
(4) any general suspension of trading in, or limitation on
prices for, securities on any United States national securities
exchange or in the over-the-counter market;
(5) the commencement of a war, armed hostilities or any other
national or international crisis directly or indirectly involving the
United States;
(6) any limitation (whether or not mandatory) by any
governmental, regulatory or administrative agency or authority on, or
any event that, in our sole judgment, might materially affect, the
extension of credit by banks or other lending institutions in the
United States;
(7) any significant decrease in the market price of the shares
or in the market prices of equity securities generally in the United
States or any change in the general political, market, economic or
financial conditions or in the commercial paper markets in the United
States or abroad that could have, in our sole judgment, a material
adverse effect on our business, condition, financial or otherwise,
income, operations or prospects, taken as a whole, or on the trading in
the shares;
(8) in the case of any of the foregoing existing at the time
of the announcement of the offer, a material acceleration or worsening
thereof;
(9) any decline in the NASDAQ Composite Index, the Dow Jones
Industrial Average or the S&P 500 Composite Index by an amount in
excess of 10% measured from the close of business on July 31, 2000;
(10) any change or event occurs, is discovered, or is
threatened to our business, condition, financial or otherwise, income,
operations, stock ownership or prospects, taken as a whole, which in
our sole judgment is or may be material to us;
(11) a tender or exchange offer with respect to some or all of
our outstanding shares, other than the offer, or a merger or
acquisition proposal for us, is proposed, announced or made by another
person or is publicly disclosed, or we learn that any person or
"group," within the meaning of Section 13(d)(3) of the Securities
Exchange Act, has acquired or proposes to acquire beneficial ownership
of more than 5% of the outstanding shares, or any new group is formed
that beneficially owns more than 5% of our outstanding shares; or
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<PAGE>
(12) any person or group files a Notification and Report Form
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976
reflecting an intent to acquire us or any of our shares.
The foregoing conditions are for our sole benefit and may be asserted
by us regardless of the circumstances giving rise to any such condition,
including any action or inaction by us, or may be waived by us in whole or in
part. Our failure at any time to exercise any of the foregoing rights shall not
be deemed a waiver of any such right, and each such right shall be deemed an
ongoing right that may be asserted by us at any time and from time to time. Our
determination concerning the events described above and any related judgment or
decision by us regarding the inadvisability of proceeding with the purchase of
or payment for any shares tendered will be final and binding on all parties.
7. PRICE RANGE OF SHARES
The shares are listed on the NASDAQ under the symbol "BDOG". The high
and low closing sales prices per share on the NASDAQ as compiled from published
financial sources for the periods indicated are listed below:
<TABLE>
<CAPTION>
HIGH LOW
---- ---
<S> <C> <C>
Fiscal 1998
3rd Fiscal Quarter............................................... $5.625 $3.000
4th Fiscal Quarter............................................... 5.500 2.500
Fiscal 1999
1st Fiscal Quarter............................................... 7.062 4.750
2nd Fiscal Quarter............................................... 5.937 4.812
3rd Fiscal Quarter............................................... 6.000 5.125
4th Fiscal Quarter............................................... 7.875 5.000
Fiscal 2000
1st Fiscal Quarter............................................... 7.000 3.937
2nd Fiscal Quarter............................................... 5.187 4.031
3rd Fiscal Quarter (through July 28, 2000)....................... 5.000 4.250
</TABLE>
On July 28, 2000, the last full trading day on the NASDAQ prior to our
announcement of the purchase price and the number of shares sought in the offer,
the closing per share price on the NASDAQ was $4.625. WE URGE STOCKHOLDERS TO
OBTAIN CURRENT QUOTATIONS OF THE MARKET PRICE OF THE SHARES.
8. BACKGROUND AND PURPOSE OF THE OFFER; CERTAIN EFFECTS OF THE OFFER
We believe the repurchase of our common stock is consistent with our
long-term goal of increasing stockholder value. In February 1998, the board of
directors of the Company approved a share repurchase program based on the view
that the Company's shares were undervalued. Under such program, we have
repurchased 1,207,200 shares. In August 1999, the Company announced that it had
engaged Deutsche Banc Alex Brown to explore corporate opportunities and
strategic alternatives for increasing stockholder value, including the possible
sale of the Company. However, that effort failed to generate any offers that our
board of directors viewed as sufficiently meaningful and value-enhancing to
stockholders.
We are now making the offer because we believe:
(1) the shares are undervalued in the public market;
(2) the offer will provide an opportunity of cash liquidity to
stockholders by allowing them to sell a substantial portion of their
stock at a premium to the NASDAQ trading
15
<PAGE>
price at the time of announcement without the payment of brokerage
commissions, while allowing those stockholders who do not wish to sell
at the offer price to elect not to do so;
(3) for those stockholders who hold shares after the offer is
completed, the offer has the potential to increase returns on equity
capital by reducing the number of shares outstanding and to improve our
over-all weighted cost of capital;
(4) after the offer is completed, we expect to have sufficient
cash flow and access to funding to meet the Company's cash needs for
normal operations and anticipated capital expenditures for the
foreseeable future; and
(5) after considering alternatives, investing in our shares is
an attractive use of capital and an efficient means to provide value to
our stockholders.
Our board of directors has approved the offer. However, stockholders
must make their own decision whether to tender shares and, if so, how many
shares to tender. Neither we nor our board of directors makes any recommendation
to any stockholder as to whether to tender or refrain from tendering shares and
neither we nor our board of directors has authorized any person to make any such
recommendation. As described in Section 9, we have been advised that each of our
directors and executive officers that is also a stockholder intends to tender
shares in the offer.
In February 1999, the board of directors approved a policy of paying a
discretionary cash dividend annually following the determination of the
Company's year-end financial results, with the determination of whether such
dividend is to be paid and the amount thereof to be in the discretion of the
board of directors based on such results. Under such policy, the Company paid a
cash dividend of $0.10 per share in March 1999 and March 2000. However,
following the offer, we do not expect to pay dividends in the near future.
We may in the future repurchase additional shares, options or warrants
in the open market, private transactions, tender offers or otherwise. Any such
purchases may be on the same terms as, or on terms more or less favorable to
stockholders than, the terms of the offer. However, Rule 13e-4 under the
Securities Exchange Act generally prohibits us and our affiliates from
purchasing any shares, other than through the offer, until at least ten business
days after the expiration or termination of the offer. Any possible future
purchases by us will depend on many factors, including the market price of the
shares, the results of the offer, our business and financial position and
general economic and market conditions.
Except as required by applicable law or, if required, the rules of any
securities exchange or over-the-counter market, such as the NASDAQ, on which our
shares are listed or traded, shares we acquire pursuant to the offer will be
retained as treasury stock by us, unless and until we determine to retire such
shares, and will be available for us to issue without further stockholder
action, for purposes including, but not limited to, the acquisition of other
businesses, the raising of additional capital for use in our business and the
satisfaction of obligations under existing or future employee benefit plans. We
have no current plans for issuance of the shares repurchased pursuant to the
offer.
9. INTERESTS OF DIRECTORS AND EXECUTIVE OFFICERS; TRANSACTIONS AND
ARRANGEMENTS CONCERNING THE SHARES
The following table sets forth certain information regarding the
beneficial ownership of our common stock as of July 28, 2000 for each of our
executive officers and directors and all of our directors and executive officers
as a group. The business address of each director and executive officer is 121
Gray Avenue, Santa Barbara, CA 93101, unless otherwise set forth below.
16
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<TABLE>
<CAPTION>
Percent Ownership of
Name and Address of Beneficial Number of Shares of Common Common Stock
Owner/title Stock Beneficially Owned(1) Outstanding(2)
----------- --------------------------- --------------
<S> <C> <C>
Fred Kayne 5,974,110(3) 49.9%
Chairman
Fortune Financial
1800 Avenue of the Stars, Suite 310
Los Angeles, CA 90067
Andrew D. Feshbach 1,198,900(4) 10.0%
President, Chief Executive Officer, and
Director
Big Dog Holdings, Inc.
121 Gray Avenue
Santa Barbara, CA 93101
Robert H. Schnell 358,220(5) 3.0%
Director
Fortune Financial
1800 Avenue of the Stars, Suite 310
Los Angeles, CA 90067
Anthony J. Wall 126,500(6) 1.1%
Executive Vice President-Business Affairs,
General Counsel and Secretary
Douglas N. Nilsen 113,500(7) *
Executive Vice President-Merchandising
Roberta J. Morris 77,500(8) *
Chief Financial Officer and Treasurer
Andrew W. Wadhams 63,500(9) *
Executive Vice President-Retail
David J. Walsh 44,000(10) *
Director
FortuneLinx, Inc.
7481 W. Oakland Park Blvd., Suite 200
Ft. Lauderdale, FL 33319
Steven C. Good 17,000(11) *
Director
Good, Swartz & Berns
11755 Wilshire Blvd., Suite 1700
Los Angeles, CA 90025
Kenneth A. Solomon 12,000(12) *
Director
IBlast Networks
9333 Wilshire Blvd., 1st Floor
Beverly Hills, CA 90210
All directors and executive officers as a 7,985,230 65.9%
group (10 persons)
</TABLE>
----------
(1) Unless otherwise indicated, each person has sole voting and dispositive
power with respect to the shares shown.
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(2) Based upon a total number of shares of common stock as of July 28, 2000
comprised of 11,976,350 shares of common stock outstanding as adjusted for
options and warrants to purchase common stock held by the person or group
indicated that are exercisable over the next 60 days.
(3) Includes 206,610 shares of common stock held in trust (of which Mr. Kayne
is one of two co-trustees) for the benefit of certain relatives. Mr. Kayne
disclaims any pecuniary interest in the trust's shares. Includes 5,000 shares of
common stock issuable upon exercise of outstanding stock options or warrants
exercisable within 60 days.
(4) The Feshbach Trust, of which Mr. Feshbach is a co-trustee with his wife,
owns 1,193,900 shares of common stock. Includes 5,000 shares of common stock
issuable upon exercise of outstanding stock options or warrants exercisable
within 60 days.
(5) Includes 41,000 shares of common stock issuable upon exercise of outstanding
stock options or warrants exercisable within 60 days. The Robert and Renee
Schnell Living Trust, of which Mr. Schnell and his wife are co-trustees, owns
317,220 shares of the common stock.
(6) Includes 9,500 shares of common stock issuable upon exercise of outstanding
stock options or warrants exercisable within 60 days.
(7) Includes 13,500 shares of common stock issuable upon exercise of outstanding
stock options or warrants exercisable within 60 days.
(8) Includes 7,500 shares of common stock issuable upon exercise of outstanding
stock options or warrants exercisable within 60 days.
(9) Includes 13,500 shares of common stock issuable upon exercise of outstanding
stock options or warrants exercisable within 60 days.
(10) Includes 24,000 shares of common stock issuable upon exercise of
outstanding stock options or warrants exercisable within 60 days.
(11) Includes 12,000 shares of common stock issuable upon exercise of
outstanding stock options or warrants exercisable within 60 days.
(12) Includes 12,000 shares of common stock issuable upon exercise of
outstanding stock options or warrants exercisable within 60 days.
* Represents less than one percent.
As of July 28, 2000, there were 11,976,350 shares outstanding and
1,138,550 shares issuable upon exercise of all outstanding options. As of July
28, 2000, our directors and executive officers as a group (10 persons)
beneficially owned 7,985,230 shares, including 143,000 shares issuable to such
persons upon exercise of options and warrants exercisable within 60 days of
such date, which constituted approximately 65.9% of the outstanding shares.
Percentages are based on 11,976,350 common shares outstanding, as adjusted for
options and warrants to purchase common shares held by the person or group
indicated that are exercisable over the next 60 days. As described below, we
have been advised that our directors and executive officers who own shares
intend to tender shares pursuant to the offer.
Our directors and executive officers have indicated an intent to
tender, in the aggregate, up to 4,373,120 shares and to retain their other
shares and their tendered shares which are not purchased due to proration. As
part of the group of directors and executive officers who have indicated an
intent to tender shares, Fred Kayne has indicated an intent to tender up to
2,500,000 shares and to retain his other shares and his tendered shares which
are not purchased due to proration. The remaining directors and executive
officers who own shares have indicated an intent to tender all of their shares
and to retain their tendered shares which are not purchased due to proration.
The number of shares which the executive officers and directors have
indicated an intention to tender is based on their present intention, and each
officer and director has reserved the right to tender all or any portion of the
shares beneficially owned by him or her.
Based upon our records and upon information provided to us by our
directors, executive officers, associates and subsidiaries, neither we nor any
of our associates or subsidiaries or persons controlling us nor, to the best of
our knowledge, any of our directors or executive officers or any of our
subsidiaries, nor any associates or subsidiaries of any of the foregoing, has
effected any transactions in the shares during the 60 days prior to the date
hereof, except that 5,000 shares were purchased by the Company in a private
transaction from a departing employee at $4.50 per share on June 9, 2000.
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Except for outstanding options or warrants to purchase shares granted
to certain employees (including executive officers) and except as otherwise
described herein, neither we nor any person controlling us nor, to our
knowledge, any of our directors or executive officers, is a party to any
contract, arrangement, understanding or relationship with any other person
relating, directly or indirectly, to the offer with respect to any of our
securities, including, but not limited to, any contract, arrangement,
understanding or relationship concerning the transfer or the voting of any such
securities, joint ventures, loan or option arrangements, puts or calls,
guarantees of loans, guarantees against loss or the giving or withholding of
proxies, consents or authorizations.
In 1996, a director and certain officers and key employees of the
Company pledged some of their shares of Company stock to secure loans made in
connection with the purchase of the stock. All such loans will be paid off upon
the closing of the offer.
Except as disclosed herein, we currently have no plans or proposals
which relate to or would result in:
- an extraordinary transaction, such as a merger, reorganization or
liquidation, involving us or any of our subsidiaries;
- a purchase, sale or transfer of a material amount of our assets
or any of our subsidiaries;
- any material change in our present dividend rate or policy,
indebtedness or capitalization;
- any change in our present board of directors or management;
- any other material change in our corporate structure or business;
- a class of our equity security being delisted from a national
securities exchange or ceasing to be authorized to be quoted in
an automated quotations system of a registered national
securities association;
- a class of our equity securities becoming eligible for
termination of registration pursuant to Section 12 (g)(4) of the
Exchange Act;
- the suspension of our obligation to file reports pursuant to
Section 15(d) of the Exchange Act;
- the acquisition by any person of additional securities of ours or
the disposition of our securities; or
- any changes in our charter, bylaws or other governing instruments
or other acquisitions that could impede acquisition or control of
the Company.
10. SOURCE AND AMOUNT OF FUNDS
Assuming we purchase 3,500,000 shares in the offer at a purchase
price of $6.25 per share, we expect the maximum aggregate cost, including all
fees and expenses applicable to the offer, to be approximately $22,085,000.
This amount will be paid from borrowings under the Company's revolving credit
facility with a group of banks led by Bank of America, N. A. and available
cash and cash equivalents. The maximum amount available to the Company under
the revolving credit facility is $30,000,000. Amounts outstanding under the
revolving credit facility bear a variable interest rate. Interest is payable
monthly. The outstanding principal and accrued interest is due on July 28,
2003. Substantially all of the Company's assets are pledged as security for
the revolving credit facility.
11. CERTAIN INFORMATION ABOUT THE COMPANY
Big Dog Holdings, Inc., a Delaware corporation, and its subsidiaries,
which do business as "Big Dog Sportswear," develop, market and retail a branded,
lifestyle collection of unique, high-quality, popular-priced consumer products,
including activewear, casual sportswear, accessories and gifts. The BIG
DOGS-Registered Trademark- brand image is one of quality, fun and a sense of
humor. The BIG DOGS-Registered Trademark- brand is designed to appeal to people
of all ages and demographics, particularly baby boomers and their kids, big and
tall
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customers, and pet owners. The Company is in the process of extending its brand
equity through selective licensing, cross promotions and the building of an
Internet enterprise for its market. In addition to its 198 retail stores, the
Company markets its products through its catalog, better wholesale accounts and
Internet sales.
Our executive offices are located at 121 Gray Avenue, Santa Barbara,
California 93101, our telephone number is (805) 963-8727 and our Web site is
located at http://www.bigdogs.com.
ADDITIONAL INFORMATION. We are subject to the informational filing
requirements of the Securities Exchange Act of 1934 and, in accordance
therewith, are obligated to file reports and other information with the
Securities and Exchange Commission (the "Commission") relating to our business,
financial condition and other matters. Information, as of particular dates,
concerning our directors and officers, their remuneration, options granted to
them, the principal holders of our securities and any material interest of such
persons in transactions with us is required to be disclosed in proxy statements
distributed to our stockholders and filed with the Commission. Such reports,
proxy statements and other information can be inspected and copied at the public
reference facilities maintained by the Commission at 450 Fifth Street, N.W.,
Room 2120, Washington D.C. 20549; and at its regional offices located at 500
West Madison Street, Suite 1400, Chicago, Illinois 60661-2511 and 7 World Trade
Center, New York, New York 10048. Copies of such material may also be obtained
by mail, upon payment of the Commission's customary charges, from the Public
Reference Section of the Commission at Judiciary Plaza, 450 Fifth Street, N.W.,
Washington D.C. 20549. The Commission also maintains a Web site at
http://www.sec.gov that contains reports, proxy and information statements and
other information regarding registrants that file electronically with the
Commission. Such reports, proxy statements and other information concerning us
also can be inspected at the offices of the NASDAQ, Reports Section, 1735 K
Street, N.W., Washington, D.C. 20549.
FORWARD-LOOKING STATEMENTS. This offer to purchase contains
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995. These statements relate to analyses and other
information which are based on forecasts of future results and estimates of
amounts not yet determinable. These statements also relate to our future
prospects, developments and business strategies. These forward-looking
statements are identified by their use of terms and phrases such as
"anticipate," "believe," "could," "estimate," "expect," "intend," "may," "plan,"
"predict," "project," "will" and similar terms and phrases, including references
to assumptions. Such forward-looking statements and the Company's operations,
financial condition and results of operations involve known and unknown risks,
and uncertainties. Such risks and factors include, but are not limited to, the
following:
- changes in consumer preferences resulting in a decline in demand
for the Company's products;
- the ability to locate and open new stores that will maintain the
Company's growth and profitability levels;
- the loss of key executives or the ability to hire new qualified
employees;
- factors effecting the third-party and foreign manufactures on
which the Company depends for it products;
- added competition from new or existing competitors;
- a decrease in the customer traffic at factory outlet malls and
other venues where the Company's stores are located;
- the inability to effectively enforce the Company's trademark
rights in a cost-efficient manner; and
- disruptions in the Company's information systems.
We believe we will have the cash flow to service the debt incurred in this
transaction based upon our projections of future sales and earnings. However,
the above factors could result in us failing to meet such projections, which
could impair our ability to expand and to service such debt. For further
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information regarding these factors, please refer to the Company's Form 10-K
for the year ended December 31, 1999 filed with the Securities and Exchange
Commission.
12. EFFECT OF THE OFFER ON THE MARKET FOR SHARES; REGISTRATION UNDER THE
SECURITIES EXCHANGE ACT
Our purchase of shares in the offer will reduce the number of shares
that might otherwise trade publicly and is likely to reduce the number of
stockholders. Nonetheless, the Company anticipates that there will still be a
sufficient number of shares outstanding and publicly traded following the offer
to ensure a continued trading market in the shares. Based on the published
guidelines of the NASDAQ, we do not believe that our purchase of shares pursuant
to the offer will cause our remaining shares to be delisted from the NASDAQ.
The shares are currently "margin securities" under the rules of the
Federal Reserve Board. This has the effect, among other things, of allowing
brokers to extend credit on the collateral of the shares. The Company believes
that, following the purchase of shares pursuant to the offer, the shares will
continue to be "margin securities" for purposes of the Federal Reserve Board's
margin regulations. Eligibility for treatment as "margin securities" will,
however, continue to depend on maintenance of a minimum daily trading volume.
The shares are registered under the Securities Exchange Act, which
requires, among other things, that we furnish certain information to our
stockholders and to the Commission and comply with the Commission's proxy rules
in connection with meetings of our stockholders. We believe that our purchase of
shares in the offer will not result in the shares becoming eligible for
deregistration under the Securities Exchange Act.
13. CERTAIN LEGAL MATTERS; REGULATORY APPROVALS
We are not aware of any license or regulatory permit that appears to be
material to our business that might be adversely affected by our acquisition of
shares as contemplated in the offer or of any approval or other action by any
government or governmental, administrative or regulatory authority or agency,
domestic or foreign, that would be required for our acquisition or ownership of
shares as contemplated by the offer. Should any such approval or other action be
required, we currently contemplate that we will seek such approval or other
action. We cannot predict whether we may determine that we are required to delay
the acceptance for payment of, or payment for, shares tendered in the offer
pending the outcome of any such matter. There can be no assurance that any such
approval or other action, if needed, would be obtained at all or without
substantial conditions or that the failure to obtain any such approval or other
action might not result in adverse consequences to our business. Our obligations
under the offer to accept for payment and pay for shares are subject to certain
conditions. See Section 6.
14. CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
IN GENERAL. The following summary describes certain United States
federal income tax consequences relevant to the offer. The discussion contained
in this summary is based upon the Internal Revenue Code of 1986, as amended (the
"Code"), existing, final, temporary and proposed United States Treasury
regulations promulgated thereunder, rulings, administrative pronouncements and
judicial decisions, changes to which could materially affect the tax
consequences described herein and could be made on a retroactive or prospective
basis. As discussed below, depending upon a stockholder's particular
circumstances, our purchase of such stockholder's shares pursuant to the offer
will be treated either as a sale or a dividend for United States federal income
tax purposes. Accordingly, such a purchase generally will be referred to in this
section of the offer to purchase as an "exchange" of shares for cash.
SCOPE. This summary does not apply to shares acquired as compensation,
including shares acquired upon the exercise of options or which were or are
subject to forfeiture restrictions. The summary also does not address the state,
local or foreign tax consequences of participating in the offer. The summary
discusses only shares held as capital assets, within the meaning of Section 1221
of the Code, and does not
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address all of the tax consequences that may be relevant to particular
stockholders in light of their personal circumstances, or to certain types of
stockholders, such as certain financial institutions, dealers in securities or
commodities, insurance companies, tax-exempt organizations or persons who hold
shares as a position in a "straddle" or as a part of a "hedging", "conversion"
or "constructive sale" transaction for United States federal income tax purposes
or persons whose functional currency is not the United States dollar.
In particular, the discussion of the consequences of an exchange of
shares for cash pursuant to the offer applies only to a United States
stockholder. For purposes of this summary, a "stockholder" is a holder of shares
that is (1) a citizen or resident of the United States, (2) a corporation or
other entity taxable as a corporation created or organized in or under the laws
of the United States, any state or any political subdivision thereof, (3) an
estate, the income of which is subject to United States federal income taxation
regardless of its source or (4) a trust if a court within the United States is
able to exercise primary supervision over the administration of the trust and
one or more United States fiduciaries have the authority to control all
substantial decisions relating to the trust.
This discussion does not address the tax consequences to foreign
stockholders who will be subject to United States federal income tax on a net
basis on the proceeds of their exchange of shares pursuant to the offer because
such income is effectively connected with the conduct of a trade or business
within the United States. Such stockholders are generally taxed in a manner
similar to United States holders. Foreign stockholders who are not subject to
United States federal income tax on a net basis should see Section 3 for a
discussion of the applicable United States withholding rules and the potential
for obtaining a refund of all or a portion of the tax withheld. Each stockholder
should consult such stockholder's tax advisor as to the particular consequences
of participation in the offer.
CHARACTERIZATION OF THE SALE. An exchange of shares by a stockholder
pursuant to the offer will be a taxable transaction for United States federal
income tax purposes and may also be a taxable transaction under any applicable
state, local and foreign tax laws. The United States federal income tax
consequences of such exchange to a stockholder may vary depending upon the
stockholder's particular facts and circumstances. Under Section 302 of the Code,
an exchange of shares by a stockholder to the Company pursuant to the offer will
be treated as a "sale or exchange" of such shares for United States federal
income tax purposes, rather than as a deemed distribution by the Company with
respect to shares continued to be held, or deemed to be constructively held, by
the tendering stockholder, if the receipt of cash upon such exchange (1) is
"substantially disproportionate" with respect to the stockholder, (2) results in
a "complete termination" of the stockholder's interest in the Company, or (3) is
"not essentially equivalent to a dividend" with respect to the stockholder.
These Section 302 tests are explained more fully below.
If any of the Section 302 tests are satisfied, and the sale of the
tendered shares is therefore treated as a "sale or exchange" of such shares for
United States federal income tax purposes, the tendering stockholder will
recognize capital gain or loss equal to the difference between the amount of
cash received by the stockholder pursuant to the offer and the stockholder's
adjusted tax basis in the shares sold pursuant to the offer. Any such gain or
loss recognized by individuals, trusts or estates will be long-term capital gain
or loss if the shares have been held for more than 12 months. Therefore, a
tendering stockholder may want to take the various adjusted tax bases and
holding periods of his shares, if such characteristics are not uniform, into
account in determining which shares to tender.
If none of the Section 302 tests is satisfied, then, to the extent of
our current and accumulated earnings and profits, the tendering stockholder will
be treated as having received a dividend taxable as ordinary income in an amount
equal to the entire amount of cash received by the stockholder pursuant to the
offer, without reduction for the adjusted tax basis of the shares sold pursuant
to the offer, no loss will be recognized, and, subject to reduction as described
below for corporate stockholders eligible for the dividends-received deduction,
the tendering stockholder's adjusted tax basis in the shares exchanged pursuant
to the offer will be added to such stockholder's adjusted tax basis in its
remaining shares, if any. No assurance can be given that any of the Section 302
tests will be satisfied as to any particular stockholder (other than odd lot
stockholders who tender according to Section 2 above) and thus no assurance can
be given that any particular stockholder will not be treated as having received
a dividend taxable as ordinary income. If the exchange of shares by a
stockholder is not treated as a sale or exchange for federal income
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tax purposes, any cash received for shares pursuant to the offer in excess of
our current and accumulated earnings and profits will be treated, first, as a
nontaxable return of capital to the extent of the stockholder's adjusted tax
basis in such shares, and thereafter, as taxable capital gain, to the extent the
cash received exceeds such basis.
CONSTRUCTIVE OWNERSHIP OF STOCK. In determining whether any of the
Section 302 tests are satisfied, a stockholder must take into account not only
the shares which are actually owned by the stockholder, but also shares which
are constructively owned by the stockholder by reason of the attribution rules
set forth in Section 318 of the Code. Under Section 318 of the Code, a
stockholder may be treated as owning (1) shares that are actually owned, and in
some cases constructively owned, by certain related individuals or entities in
which the stockholder owns an interest, or, in the case of stockholders that are
entities, by certain individuals or entities that own an interest in the
stockholder, and (2) shares which the stockholder has the right to acquire by
exercise of an option or a conversion right contained in another instrument held
by the stockholder. Contemporaneous dispositions or acquisitions of shares by a
stockholder or related individuals or entities may be deemed to be part of a
single integrated transaction which will be taken into account in determining
whether any of the Section 302 tests have been satisfied in connection with
shares sold pursuant to the offer. Each stockholder should be aware that because
proration may occur in the offer, even if all the shares actually and
constructively owned by a stockholder are tendered pursuant to the offer, we may
purchase fewer than all of such shares. Thus, proration may affect whether a
sale by a stockholder pursuant to the offer will meet any of the Section 302
tests.
SECTION 302 TESTS. One of the following tests must be satisfied in
order for the exchange of shares pursuant to the offer to be treated as a sale
or exchange for federal income tax purposes.
(1) SUBSTANTIALLY DISPROPORTIONATE TEST. The receipt of cash
by a stockholder will be "substantially disproportionate" if the
percentage of the outstanding shares actually and constructively owned
by the stockholder immediately following the exchange of shares
pursuant to the offer (treating all shares purchased pursuant to the
offer as not being outstanding) is less than 80% of the percentage of
the outstanding shares actually and constructively owned by such
stockholder immediately before the exchange of shares pursuant to the
offer (treating all shares purchased pursuant to the offer as
outstanding). Stockholders should consult their own tax advisors with
respect to the application of the "substantially disproportionate" test
to their particular situation and circumstances.
(2) COMPLETE TERMINATION TEST. The receipt of cash by a
stockholder will be a "complete termination" of the stockholder's
interest in the Company if either (1) all of the shares actually and
constructively owned by the stockholder are exchanged pursuant to the
offer, or (2) all of the shares actually owned by the stockholder are
exchanged pursuant to the offer and, with respect to the shares
constructively owned by the stockholder which are not exchanged
pursuant to the offer, the stockholder is eligible to waive (and
effectively waives) constructive ownership of all such shares under
procedures described in Section 302(c) of the Code. Stockholders
considering making such a waiver should do so in consultation with
their own tax advisors.
(3) NOT ESSENTIALLY EQUIVALENT TO A DIVIDEND TEST. Even if the
receipt of cash by a stockholder fails to satisfy the "substantially
disproportionate" test and the "complete termination" test, a
stockholder may nevertheless satisfy the "not essentially equivalent to
a dividend" test if the stockholder's exchange of shares pursuant to
the offer results in a "meaningful reduction" in the stockholder's
proportionate interest in the Company. Whether the receipt of cash by a
stockholder who exchanges shares pursuant to the offer will be "not
essentially equivalent to a dividend" will depend upon the
stockholder's particular facts and circumstances The IRS has indicated
in published Revenue Rulings that even a small reduction in the
proportionate interest of a small minority stockholder in a publicly
held corporation who exercises no control over corporate affairs may
constitute such a "meaningful reduction." Stockholders expecting to
rely on the "not essentially equivalent to a dividend" test should
consult their own tax advisors as to its application to their
particular situation and circumstances.
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Although the issue is not free from doubt, it may be possible for a
tendering stockholder to satisfy one of the above three tests by
contemporaneously selling or otherwise disposing of all or some of the shares
that are actually owned (or by causing another to sell or otherwise dispose of
all or some of the shares that are constructively owned) by such stockholder but
are not purchased pursuant to the offer. Correspondingly, a tendering
stockholder may not be able to satisfy one of the above three tests because of
contemporaneous acquisitions of shares by such stockholder or by some person or
entity whose shares would be treated as constructively owned by such
stockholder. Stockholders should consult their tax advisors regarding the tax
consequences of such sales or acquisitions in their particular circumstances.
CORPORATE STOCKHOLDER DIVIDEND TREATMENT. If an exchange of shares
pursuant to the offer by a corporate stockholder is treated as a dividend, the
corporate stockholder may be entitled to claim a deduction in an amount equal to
70% of the gross dividend under Section 243 of the Code, subject to applicable
limitations. Corporate stockholders should consider the effect of Section 246(c)
of the Code, which disallows the 70% dividends-received deduction with respect
to any dividend on any share of stock that is held for 45 days or less during
the 90-day period beginning on the date which is 45 days before the date on
which such share becomes ex-dividend with respect to such dividend. For this
purpose, the length of time a taxpayer is deemed to have held stock may be
reduced by periods during which the taxpayer's risk of loss with respect to the
stock is diminished by reason of the existence of certain options or other
hedging transactions. Moreover, under Section 246A of the Code, if a corporate
stockholder has incurred indebtedness directly attributable to an investment in
shares, the 70% dividends-received deduction may be reduced by a percentage
generally computed based on the amount of such indebtedness and the
stockholder's total adjusted tax basis in the shares.
In addition, any amount received by a corporate stockholder pursuant to
the offer that is treated as a dividend will generally constitute an
"extraordinary dividend" under Section 1059 of the Code. Generally, an
"extraordinary dividend" is a dividend that (1) equals or exceeds 10% of the
stockholder's tax basis in its shares (treating all dividends having ex-dividend
dates within an 85-day period as a single dividend) or (2) exceeds 20% of the
stockholder's adjusted tax basis in the shares (treating all dividends having
ex-dividend dates within a 365-day period as a single dividend). Accordingly, a
corporate stockholder would be required under Section 1059(a) of the Code to
reduce its adjusted tax basis, but not below zero, in its shares by the
non-taxed portion of the extraordinary dividend (i.e., the portion of the
dividend for which a deduction is allowed) and, if such portion exceeds the
stockholder's adjusted tax basis in its shares, to treat the excess as gain from
the sale of such shares in the year in which the dividend is received. These
basis reduction and gain recognition rules would be applied by taking account
only of the stockholder's adjusted tax basis in the shares that were sold,
without regard to other shares that the stockholder may continue to own.
Corporate stockholders should consult their own tax advisors as to the
application of Sections 243, 246, 246A and 1059 of the Code to the offer, and to
any dividends which may be treated as paid with respect to shares sold pursuant
to the offer.
We cannot predict whether or to what extent the offer will be
oversubscribed. If the offer is oversubscribed, proration of the tenders
pursuant to the offer will cause us to accept fewer shares than are tendered.
Therefore, a stockholder (other than an odd lot stockholder who tenders
according to Section 2 above) can be given no assurance that a sufficient number
of such stockholder's shares will be exchanged pursuant to the offer to ensure
that such exchange will be treated as a sale, rather than as a dividend, for
United States federal income tax purposes pursuant to the rules discussed above.
BACKUP WITHHOLDING. See Section 3 with respect to the application of
United States federal income tax backup withholding.
THE TAX CONSEQUENCES OF A SALE OF SHARES IN THE OFFER MAY VARY
DEPENDING UPON, AMONG OTHER THINGS, THE PARTICULAR SITUATION AND CIRCUMSTANCES
OF THE TENDERING STOCKHOLDER. NO INFORMATION IS PROVIDED HEREIN AS TO THE STATE,
LOCAL OR FOREIGN TAX CONSEQUENCES OF THE TRANSACTION CONTEMPLATED BY THE OFFER.
STOCKHOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS TO DETERMINE THE
SPECIFIC FEDERAL, STATE, LOCAL, FOREIGN AND OTHER TAX CONSEQUENCES OF SALES MADE
BY THEM PURSUANT
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TO THE OFFER, INCLUDING THE EFFECT OF THE STOCK OWNERSHIP ATTRIBUTION RULES
MENTIONED ABOVE.
15. EXTENSION OF THE OFFER; TERMINATION; AMENDMENT
We expressly reserve the right, in our sole discretion, at any time and
from time to time, and regardless of whether or not any of the events set forth
in Section 6 occur or are deemed by us to have occurred, to extend the period of
time during which the offer is open and thereby delay acceptance for payment of,
and payment for, any shares by giving oral or written notice of such extension
to the depositary and making a public announcement of the extension. We also
expressly reserve the right, in our sole discretion, to terminate the offer and
not accept for payment or pay for any shares not already accepted for payment or
paid for or, subject to applicable law, to postpone payment for shares upon the
occurrence of any of the conditions specified in Section 6 by giving oral or
written notice of such termination or postponement to the depositary and making
a public announcement of the termination or postponement. Our reservation of the
right to delay payment for shares which we have accepted for payment is limited
by Rule 13e-4(f)(5) under the Securities Exchange Act, which requires that we
must pay the consideration offered or return the shares tendered promptly after
termination or withdrawal of a tender offer.
Subject to compliance with applicable law, we further reserve the
right, in our sole discretion, and regardless of whether any of the events set
forth in Section 6 will occur or are deemed by us to have occurred, to amend the
offer in any respect, including, without limitation, by decreasing or increasing
the consideration offered in the offer to holders of shares or by decreasing or
increasing the number of shares being sought in the offer. Amendments to the
offer may be made at any time and from time to time effected by public
announcement. Such announcement, in the case of an extension, shall be issued no
later than 9:00 a.m., Pacific time, on the next business day after the last
previously scheduled or announced expiration date. Any public announcement made
pursuant to the offer will be disseminated promptly to stockholders in a manner
reasonably designed to inform stockholders of such change. Without limiting the
manner in which we may choose to make any public announcement, except as
provided by applicable law, including Rule 13e-4(e)(2) promulgated under the
Securities Exchange Act, we shall have no obligation to publish, advertise or
otherwise communicate any such public announcement other than by making a
release to the Dow Jones News Service.
If we make a material change in the terms of the offer or the
information concerning the offer, or if we waive a material condition of the
offer, we will extend the offer to the extent required by Rules 13e-4(d)(2) and
13e-4(e)(3) under the Securities Exchange Act. If (1) we increase or decrease
the price to be paid for shares, we increase the number of shares being sought
and such increase in the number of shares being sought exceeds 2% of the
outstanding shares, or we decrease the number of shares being sought, and (2)
the offer is scheduled to expire at any time earlier than the expiration of a
period ending on the tenth business day from, and including, the date that
notice of such increase or decrease is first published, sent or given, we will
extend the offer until the expiration of such period of ten business days.
16. FEES AND EXPENSES
We have retained U.S. Stock Transfer Corporation as the depositary
in connection with the offer. The depositary will receive reasonable and
customary compensation for their services. We will also reimburse the
depositary for out-of-pocket expenses and have agreed to indemnify the
depositary against certain liabilities in connection with the offer,
including certain liabilities under the federal securities laws. The
depositary has not been retained to make solicitations or recommendations in
connection with the offer.
We will not pay fees or commissions to any broker, dealer, commercial
bank, trust company or other person for soliciting any shares pursuant to the
offer. We will, however, on request, reimburse such persons for customary
handling and mailing expenses incurred in forwarding materials in respect of the
offer to the beneficial owners for which they act as nominees. No such broker,
dealer, commercial bank or trust company has been authorized to act as our agent
for purposes of the offer. We will pay, or cause to be paid, any stock transfer
taxes on our purchase of shares, except as otherwise provided in Instruction 6
of the letter of transmittal.
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17. MISCELLANEOUS
We are not aware of any jurisdiction where the making of the offer is
not in compliance with applicable law. If we become aware of any jurisdiction
where the making of the offer is not in compliance with any valid applicable
law, we will make a good faith effort to comply with such law. If, after such
good faith effort, we cannot comply with such law, we will not make the offer
to, nor will we accept tenders from or on behalf of, the holders of shares
residing in such jurisdiction. In any jurisdiction where the securities or blue
sky laws require the offer to be made by a licensed broker or dealer, the offer
is being made on our behalf by one or more registered brokers or dealers
licensed under the laws of such jurisdiction.
Pursuant to Rule 13e-4 promulgated under the Securities Exchange Act,
we have filed with the Commission an Issuer Tender Offer Statement on Schedule
TO that contains additional information with respect to the offer. The Schedule
TO, including the exhibits and any amendments thereto, may be examined, and
copies may be obtained, at the same places and in the same manner as is set
forth in Section 11 with respect to information concerning us.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATION ON BEHALF OF US IN CONNECTION WITH THE OFFER OTHER THAN THOSE
CONTAINED IN THIS OFFER TO PURCHASE OR IN THE RELATED LETTER OF TRANSMITTAL. IF
GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY US.
BIG DOG HOLDINGS, INC.
July 31, 2000
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Facsimile copies of the letter of transmittal will be accepted. A
holder of shares or such stockholder's broker, dealer, commercial bank, trust
company or other nominee should properly complete and send or deliver the letter
of transmittal and certificates for the shares and any other required documents
to the depositary at its address set forth below:
U.S. STOCK TRANSFER CORPORATION
The Depositary Agent
BY MAIL: BY HAND OR OVERNIGHT DELIVERY:
Transfer Department Transfer Department
1745 Gardena Avenue 1745 Gardena Avenue
Glendale, CA 91204 Glendale, CA 91204
BY FACSIMILE TRANSMISSION
(For Eligible Institutions Only)
(818) 502-1737
FOR CONFIRMATION BY TELEPHONE:
(818) 502-1404
Any questions or requests for assistance or for additional copies of
this offer to purchase, the letter of transmittal or the notice of guaranteed
delivery may be directed to the Company at (805) 963-8727 x1360 or by mail to
Big Dog Holdings, Inc., 121 Gray Avenue, Santa Barbara, California 93101,
attention Legal Department. Stockholders may also contact their broker, dealer,
commercial bank or trust company for assistance concerning the offer. To confirm
delivery of shares, stockholders are directed to contact the depositary.
July 31, 2000
