<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
RULE 13e-3 TRANSACTION STATEMENT
(Pursuant to Section 13(e) of the Securities Exchange Act of 1934)
[Amendment No. ______]
THE VALLEY FAIR CORPORATION
(Name of the Issuer)
LITTLE FERRY CORP.
(Names of Person(s) filing Statement)
Common Stock, $.30 par value
(Title of Class of Securities)
919575-20-9
(CUSIP Number of Class Securities)
Thomas R. Ketteler, Vice President With Copies to:
LITTLE FERRY CORP Cornelius Bulman, Esq.
c/o Schottenstein Stores Corporation Porter, Wright, Morris & Arthur
1800 Moler Road 41 South High Street
Columbus, Ohio 43207 Columbus, Ohio 43221
(614) 449-4283 (614) 227-2219
(Name, Address and Telephone Number of Persons Authorized to receive Notices
and Communications on Behalf of Persons Filing Statement)
This statement is filed in connection with (check the appropriate
box):
a. [ ] The filing of solicitation materials or an information
statement subject to Regulation 14A, Regulation 14C, or Rule 13e-3(c) under the
Securities Exchange Act of 1934.
b. [ ] The filing of a registration statement under the Securities Act
of 1933
c. [ ] A tender offer
d. [X] None of the above
Check the following box if the soliciting materials are preliminary copies. [ ]
Calculation of Fee
Transaction Amount of Filing Fee
valuation*
*No filing fee is required in connection with this filing.
[ ] Check box if any part of the fee is offset as provided by Rule 0-11 (a)(2)
and identify the filing with which the offsetting fee was previously paid.
Identify the previous filing by registration statement number, or the Form or
Schedule and the date of its filing.
Amount Previously Paid:............................................
Form or Registration No: ..........................................
Filing Party:......................................................
Date Filed: ...........................................
<PAGE> 2
ITEM 1. ISSUER AND CLASS OF SECURITY SUBJECT TO THE TRANSACTION
(a) The name of the issuer is The Valley Fair Corporation, a
Delaware corporation (the "Company"). The principal executive
office of the Company is at 260 Bergen Turnpike, Little
Ferry, New Jersey 07643.
(b) The exact title of the class of securities is common stock,
$.30 par value (the "Common Stock"). The number of shares of
Common Stock outstanding as of April 3, 1997 is 367, 813
shares and the approximate number of holders of record is
1,281.
(c) There is currently no established trading market for the
common stock other than limited or sporadic quotations on the
OTC Bulletin Board Service and indications of interest
published by the National Quotation Bureau. An internet
search for a quotation on April 2, 1997 under the trading
symbol "VALL" showed a bid price of $26 per share and an
asked price of $30 per share and indicated the last trade was
on January 7 at $26 per share, with a 52 week range of $26
per share to $26 per share. The table below sets forth the
range of high and low bid quotations for each fiscal quarter
of the Company ended on the date indicated.
<TABLE>
<CAPTION>
FISCAL 1998 HIGH BID LOW BID
----------- -------- -------
<S> <C> <C>
First Quarter Ended April 6, 1997 $26 $25
FISCAL 1997
-----------
Fourth Quarter Ended February 2, 1997 $26 $26
Third Quarter Ended October 27, 1996 $26 $26
Second Quarter Ended August 3, 1996 $26 $26
First Quarter Ended May 5, 1996 $26 $26
FISCAL 1996
-----------
Fourth Quarter Ended January 28, 1996 $26 $26
Third Quarter Ended October 29, 1995 $26 $26
Second Quarter Ended July 30, 1995 $26 $26
First Quarter Ended April 30, 1995 $26 $26
</TABLE>
The above bid prices are as reported by the National
Quotation Bureau and do not necessarily represent firm
quotations. They do not represent actual sales and do not
include mark-ups, mark-downs or commissions. A transaction
report showing reported prices in the Common Stock from the
NASD OTC Bulletin Board Service is attached as Exhibit A
hereto.
(d) The Company has never paid any dividends. Historically, the
Company's lending agreements have prohibited the payment of
dividends, although the Company's
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current demand note bank facility does not specifically
prohibit the payment of cash dividends.
(e) Not Applicable.
(f) Schottenstein Professional Asset Management Corporation, an
Ohio corporation ("SPAM") is a stockholder and an affiliate
of Little Ferry Corp., a Delaware corporation (the "Filing
Person"). Since January 30, 1995, SPAM has purchased for $26
per share in unsolicited privately negotiated transactions:
3,000 shares of common stock on June 30, 1995, 5,000 shares
of common stock on July 12, 1995 and 7,916 shares of common
stock on July 31, 1995.
Since January 29, 1995, the Company has purchased for $26 per
share in unsolicited privately negotiated transactions the
following number of shares on the dates indicated:
<TABLE>
<CAPTION>
NO. OF NO. OF
DATE IN FISCAL 1996 SHARES DATE IN FISCAL 1997 SHARES
-------------------- ------ -------------------- ------
<S> <C> <C> <C>
03-10-95 3 02-03-96 3
03-22-95 4 03-14-96 16
04-30-95 6 04-18-96 1
07-06-95 6 05-21-96 1
10-24-95 15 06-20-96 100
11-17-95 33 06-28-96 6
01-05-96 3 08-19-96 10
--
09-03-96 33
---
TOTAL 70 TOTAL 170
</TABLE>
ITEM 2. IDENTITY AND BACKGROUND
This Schedule 13E-3 is being filed by the Filing Person. Schottenstein
Stores Corporation, a Delaware corporation ("SSC") is the corporation
ultimately in control of the Filing Person. Prior to March 31, 1997, SSC owned
287,861 shares of common stock, or 78.3% of the outstanding shares, and its
affiliated company, SPAM, owned 54,295 shares of common stock, or 14.8% of the
outstanding shares. SSC and SPAM formed the Filing Person solely for the
purpose of effecting a short form merger (the "Merger") under Section 253 of
Delaware General Corporation Law ("DGCL"). The sole purpose of the Merger is to
take the Company private by eliminating the equity interest of all stockholders
of the Company excluding SSC and SPAM ("the Unaffiliated
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Stockholders"), by converting their shares of Common Stock into the right to
receive a cash payment of $30 per share. Effective on March 31, 1997, SSC and
SPAM contributed all of their 342,156 shares of Common Stock to the Filing
Person, resulting in the Filing Person becoming the record holder of 93% of the
outstanding common stock of the Company.
SSC is a privately-held company, with interests in retailing, real
estate and manufacturing. It is beneficially owned by its Chairman and Chief
Executive Officer, Jay L. Schottenstein, and members of his family (the
"Schottenstein Family"). The principal executive offices of SSC are located at
1800 Moler Road, Columbus, Ohio 43207. The following is a list of the directors
and executive officers of SSC, including their current principal occupation or
employment and material occupations, positions, offices or employment during
the last five years. Unless otherwise indicated, the principal business address
of each director and officer is 1800 Moler Road, Columbus, Ohio 43207 and each
has held the positions indicated for more than the past five years.
Jay L. Schottenstein is the Chairman of the Board of SSC, the Company,
SPAM and the Filing Person. He is also Chairman of the Board of Value City
Department Stores, Inc., an Ohio corporation ("VCD"), which is a 64.9%
subsidiary of SSC and its shares are publicly traded on the New York Stock
Exchange. He is also Chairman of American Eagle Outfitters, Inc., an Ohio
corporation ("AEO"), which is a publicly traded corporation in which the
Schottenstein Family beneficially owns 60% of the outstanding common shares.
Saul Schottenstein is President of SSC, Vice President of the Company,
and Vice Chairman of VCD and AEO.
Geraldine Schottenstein is a director of SSC and a director of VCD.
She has served as a volunteer and board member for a variety of charitable and
community organizations for more than the past five years.
Ari Deshe has been a director of SSC since December, 1995. Mr. Deshe
has been Chief Executive Officer of Safe Auto Insurance Company, a property and
casualty insurance company, located at 3883 East Broad Street, Columbus, Ohio
43213 since August, 1993. From June, 1992 to August, 1993, he was President of
Safe Auto Insurance Agency and prior thereto he was President of Employee
Benefits Systems, Inc.
John P. Diamond has been a director of SSC since December, 1995. Mr.
Diamond has been President of Safe Auto Insurance Company since August, 1996.
Prior thereto, he was Executive Vice President of Safe Auto Insurance Company
since August, 1993 and prior thereto he was a Vice President of SSC.
Thomas R. Ketteler has served SSC as Chief Operating Officer since
April, 1995, as a director since 1985 and as Vice President of Finance since
1981. Mr. Ketteler is the Secretary and a director of the Company and a
director of AEO. He is also a director and Vice President and Treasurer of the
Filing Person and a Vice President and Treasurer of SPAM.
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Irwin A. Bain, Esq., is Secretary and General Counsel of SSC. He also
is also Secretary of the Filing Person and SPAM.
Jerry W. Kerr is Vice President - Information Systems of SSC.
Edward K. Arndt is Vice President - Real Estate of SSC.
During the past five years, none of the above-mentioned individuals or
entities have been convicted in a criminal proceeding (excluding traffic
violations or similar misdemeanors) or was a party to a civil proceeding of a
judicial or administrative body of competent jurisdiction and as a result of
such proceeding was or is subject to a judgment, decree or final order
enjoining violations of, or prohibiting activities subject to, federal or state
securities laws or finding any violation of such laws. Each of the entities is
incorporated in the jurisdictions indicated and each individual is a citizen of
the United States.
ITEM 3. PAST CONTRACTS, TRANSACTIONS OR NEGOTIATIONS
(a)(1) The Company has paid SSC an administrative services fee of
$125,000 during each of the Company's last two fiscal years.
VCD, a subsidiary of SSC, operates as licensee the apparel,
housewares and domestic departments in the two department
stores operated by the Company. VCD pays the Company a
license fee of 7.3% of the net sales of the departments for
occupancy and 3.7% of net sales for advertising, against an
annual aggregate minimum of $733,000 for both stores. VCD
uses employees of the Company to operate the departments and
reimburses the Company for all costs associated with such
employees. The license agreement terminates on December 31,
1997. The aggregate license fees, including advertising, paid
by VCD to the Company during fiscal 1997 and fiscal 1996 were
$2,679,219 and $2,346,684, respectively.
The Company's wholly-owned subsidiary, L. F. Widmann, Inc., a
Pennsylvania corporation ("Widmann"), operates as licensee
the health and beauty aids departments in the department
stores owned by VCD that have such departments. Widmann pays
annual license fees to VCD in an amount equal to 5% of net
sales and reimburses VCD 2% of net sales for advertising and
2.9% of net sales for administrative expenses. The license
fees paid by Widmann to VCD during fiscal 1997 and fiscal
1996 were $3,128,158 and $3,400,099, respectively.
(a)(2) See Item 4 for a description of the Merger and Item 3(b)
below for a description of current negotiations regarding
Widmann.
(b) SSC and VCD and the Company have been negotiating with a
third party for the sale of all of the stock of Widmann to a
proposed joint venture entity (the "JV") to be
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<PAGE> 6
formed and 50.1% owned by VCD and 49.9% owned by the third
party. Under the terms of the proposed transaction, Widmann
would distribute to the Company its ownership interest in its
warehouse and office facility located in McElhattan,
Pennsylvania (the "Widmann Warehouse") and, thereafter, the
JV will purchase all of the stock of Widmann from the Company
for a cash amount equal to the net book value of Widmann,
excluding the net book value of the Widmann Warehouse. A new
License Agreement would be entered into between Widmann
and/or the JV for operating the health and beauty aids
departments in the VCD department stores. The purchase price
received by the Company for Widmann would be reduced for any
net losses incurred by the JV within two years after the sale
directly attributable to either (a) moving the Widmann
Warehouse operation to a new warehouse or (b) closing any of
the Widmann store locations not located in VCD Department
Stores, with the Company required to refund to the JV an
amount equal to one-third of such losses to the extent they
do not exceed $6,000,000 and 100% of such losses to the
extent they exceed $6,000,000. The JV would be managed by the
third party. The parties are currently negotiating a
nonbinding letter of intent. There can be no assurance that a
letter of intent will be executed or that any transaction
will be completed, or, if completed, whether the final terms
will be the same or different than those currently being
discussed. Because the Merger will occur on May 9, 1997,
eliminating the equity interest of the Unaffiliated
Stockholders in the Company, the Unaffiliated Stockholders
would receive none of the benefit to the Company, if any,
associated with the proposed transaction.
ITEM 4. TERMS OF THE TRANSACTION
(a) At a meeting held on April 4, 1997, Jay L. Schottenstein and
Thomas R. Ketteler, being the sole members of the Board of
Directors of the Filing Person, met and adopted resolutions
approving the Merger. The Merger was also approved effective
that date by written consent of SSC and SPAM, as the sole
stockholders of the Filing Person. Under the terms of the
Merger, the Filing Person is merged with and into the
Company, with the Company as the surviving corporation. A
Certificate of Ownership and Merger will be filed with the
Secretary of State of Delaware on May 9, 1997 (the "Effective
Date"). On the Effective Date, each share of common stock of
the Company will be canceled. The shares of common stock of
the Company held by stockholders other than the Filing Person
shall be automatically converted, without further action on
the part of the holder thereof, into the right to receive
cash from the Company in an amount equal to $30 per share,
without interest, upon surrender by the holder to the Company
of the stock certificate representing such shares. A form of
Letter of Transmittal to be used for tendering shares for
payment is attached as Exhibit B to this Schedule 13E-3. Each
of the 930 shares of common stock of the Filing Person issued
and outstanding on the Effective Date shall, as a result of
the Merger, be automatically changed and converted, without
further action
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<PAGE> 7
on the part of the holder thereof, into one fully paid and
nonassessable share of Common Stock, $0.30 par value per
share, of the Company.
(b) As a result of the terms of the Merger, the equity ownership
of the Unaffiliated Stockholders in the Company will be
"cashed out" on May 9, 1997. The Unaffiliated Stockholders
will no longer be stockholders of the Company and will become
creditors of the Company, entitled to payment of $30 per
share in cash, without interest. As creditors, the
Unaffiliated Stockholders will have no say in the management
of the Company and will not participate in the risks and
benefits of equity ownership of the Company.
ITEM 5. PLANS OR PROPOSALS OF THE ISSUER OR AFFILIATE
The Merger will result in the Common Stock of the Company becoming
eligible for termination of registration pursuant to Section 12(g)(4) of the
Securities and Exchange Act of 1934, as amended (the "1934 Act"), because the
Company will have only two stockholders of record after the Merger. The Company
will file a Form 15 with the Securities and Exchange Commission ("SEC") which
will suspend the Company's obligation to file further annual, quarterly or
other reports or proxy statements with the SEC. Except for the foregoing and
the other plans or proposals that are disclosed elsewhere in this Schedule
13E-3, none of the Company, SSC or the Filing Person has any plan or proposal
regarding activities or transactions which are to occur after the Merger which
relate to, or would result in:
(a) an extraordinary corporate transaction, such as a merger,
reorganization or liquidation, involving the Company or any
of its subsidiaries;
(b) a sale or transfer of a material amount of assets of the
Company or any of its subsidiaries;
(c) any change in the present Board of Directors or management of
the Company, including, but not limited to, any plan or
proposal to change the number or term of directors, to fill
any existing vacancy on the Board or to change any material
term of the employment contract of any executive officer;
(d) any material change in the present dividend rate or policy or
indebtedness or capitalization of the Company; or
(e) any other material change in the Company's corporate
structure or business.
Although neither the Company, SSC nor the Filing Person has any plans or
proposals at this time relating to any of the above, the Company is currently
exploring options with respect to the operations of Widmann, specifically those
described in Item 3(b) above, and may undertake any of the above-described
activities or transactions at some time in the future after the Merger.
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<PAGE> 8
ITEM 6. SOURCE AND AMOUNTS OF FUNDS OR OTHER CONSIDERATION
(a) The estimated cost of the Merger is $805,000, which will be
paid by the Company from cash on hand.
(b) Estimated expenses of the Merger are $35,290, including
approximately $30,000 in legal fees and $5,290 for printing
and mailing expenses. The Company will pay all such expenses.
ITEM 7. PURPOSE(S), ALTERNATIVES, REASONS AND EFFECTS
See "Purpose of the Merger, Alternatives, Reasons and Effects" in the
letter to stockholders attached as Exhibit E hereto, which is incorporated
herein by reference.
ITEM 8. FAIRNESS OF THE TRANSACTION
See "Fairness of the Transaction" in the letter to stockholders
attached as Exhibit E hereto, which is incorporated herein by reference.
ITEM 9. REPORTS, OPINIONS, APPRAISALS AND CERTAIN NEGOTIATIONS
No report, opinion or appraisal from any outside party has been
obtained relating to the Merger.
ITEM 10. INTERESTS IN SECURITIES OF THE ISSUER
(a) See Item 2 for the ownership of Common Stock by the Filing
Person. In addition to such shares, officers and directors of
the Company, and members of their families, beneficially own
2,541 shares of Common Stock, which will be acquired by the
Company for $30 per share in the Merger.
(b) See Item 1(f) for information on purchases of shares of
Common Stock by SPAM and the Company.
ITEM 11. CONTRACTS, ARRANGEMENTS OR UNDERSTANDINGS WITH RESPECT TO
THE ISSUER'S SECURITIES
There are no contracts, arrangements, understanding or relationship in
connection with the Merger between the Filing Person and any person with
respect to any securities of the Company.
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<PAGE> 9
ITEM 12. PRESENT INTENTION AND RECOMMENDATION OF CERTAIN PERSONS WITH
REGARD TO THE TRANSACTION
(a) See Item 10(a).
(b) Not Applicable.
ITEM 13. OTHER PROVISIONS OF THE TRANSACTION
(a) Appraisal rights are provided under Delaware law to
stockholders of the Company who are not satisfied with the
$30 per share to be paid in the Merger. Holders of shares of
Common Stock who follow the procedures specified by Section
262 of the Delaware General Corporation Law ("Section 262")
will be entitled to appraisal by the Delaware Court of
Chancery and payment of the "fair value" of their shares, not
including value resulting from the accomplishment of the
Merger.
The following summary of the provisions of Section 262 of the
Delaware General Corporation Law is not intended to be a
complete statement of such provisions, the full text is
attached as Exhibit D hereto and is qualified in its entirety
by reference thereto.
A holder of Common Stock electing to exercise appraisal
rights must deliver to the Company a written demand for
appraisal of such shares made by or on behalf of the record
holder reasonably informing the Company of the identity of
such holder and of such holders intention thereby to demand
the appraisal of such holder's Common Stock.
Only a holder of record of Common Stock is entitled to assert
appraisal rights for the Common Stock . The demand should be
executed by or for the holder of record, fully and correctly,
as the holder's name appears on the holder's stock
certificates. If the shares are owned of record in a
fiduciary capacity, such as by a trustee, guardian or
custodian, execution of the demand should be made in that
capacity, and if the shares are owned of record by more than
one person, as in a joint tenancy or tenancy in common , the
demand should be executed by or for all joint owners. An
authorized agent, including one or two or more joint owners,
may execute the demand for appraisal for the holder of
record; however, the agent must identify the record holder or
holders and expressly disclose the fact that, in executing
the demand, the agent is acting as agent for the record
holder. A record holder, such as a broker, who holds Common
Stock as a nominee for the beneficial owner may exercise his
appraisal rights with respect to the shares held for one or
more beneficial owners while not exercising such rights for
other beneficial owners. In such case, the written demand
should set forth the number of shares covered by it. Where no
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<PAGE> 10
number of shares is expressly mentioned, the demand will be
presumed to cover all shares standing in the name of the
record owner.
This Schedule 13E-3 constitutes notice by the Company to each
person who held shares of Common Stock of the Company before
the Effective Date of the Merger to inform such persons that
appraisal rights are available for any or all of the Common
Stock, and includes a copy of Section 262 of the Delaware
General Corporation Law as Exhibit D hereto. It is being sent
by certified or registered mail, return receipt requested,
addressed to the stockholder at his address as it appears on
the records of the Company. Any stockholder entitled to
appraisal rights may, within 20 days after the date of
mailing of the notice, demand in writing from the Company the
appraisal of his shares. Such demand will be sufficient if it
reasonably informs the Company of the identity of the
stockholder and that the stockholder intends thereby to
demand the appraisal of his Common Stock. Within 120 days
after the effective date of the Merger, the Company or any
stockholder who has satisfied the foregoing provisions may
file a petition in the Delaware Court of Chancery demanding a
determination of the value of the Common Stock. At any time
within 60 days after the Effective Date of the Merger , any
stockholder has the right to withdraw his demand for
appraisal and to accept the terms offered in the Merger.
It is the obligation of stockholders to initiate all
necessary action to perfect their appraisal rights within the
time periods prescribed in Section 262. If no petition is
filed, all appraisal rights will be lost, notwithstanding any
previously submitted written demand for appraisal.
Within 120 days after the Effective Date of the Merger or
consolidation, any stockholder who has complied with the
requirements for the exercise of appraisal rights as
discussed above, is entitled, upon written request to receive
from the Company a statement setting forth the aggregate
number of shares of Common Stock of the Company with respect
to which demands for appraisal have been received and the
aggregate number of holders of such shares. Such written
statement must be mailed within 10 days after the written
request for such a statement is received by the Company.
Failure to follow the steps required by Delaware Law for
perfecting appraisal rights may result in the loss of such
rights.
(b) No provision has been made by the Company or SSC in
connection with the Merger to allow the Unaffiliated
Stockholders to obtain access to the corporate files of the
Company or obtain counsel or appraisal services at the
Company's or SSC's expense.
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ITEM 14. FINANCIAL INFORMATION
(a) Reference is hereby made to the Company's financial
statements for the years ended February 7, 1997, January 28,
1996 and January 29, 1995 as set forth in Exhibit C hereto,
all of which are incorporated by reference herein. The
Company's ratio of earnings to fixed charges for fiscal 1997
was (0.7) and for fiscal 1996 was 1.1. See Item 8 regarding
book value.
(b) Not Applicable.
ITEM 15. PERSONS AND ASSETS EMPLOYED, RETAINED OR UTILIZED
(a) Not Applicable.
(b) Not Applicable.
ITEM 16. ADDITIONAL INFORMATION
Not Applicable.
ITEM 17. MATERIAL TO BE FILED AS EXHIBITS
(a) Not Applicable.
(b) Not Applicable.
(c) Not Applicable.
(d) OTC Bulletin Board Stock Transaction Report (Exhibit A),
Letter of Transmittal (Exhibit B), Financial Statements of
the Company (Exhibit C) and Letter to Stockholders (Exhibit
E).
(e) Section 262 of DGCL regarding "Rights of Dissenting
Stockholders" (Exhibit D).
(f) Not applicable.
SIGNATURE
After due inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
April 8, 1997 LITTLE FERRY CORP.
By: /s/ THOMAS R. KETTELER
----------------------------
Thomas R. Ketteler
Vice President and Treasurer
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<PAGE> 12
EXHIBIT A TO SCHEDULE 13E-3
<TABLE>
<CAPTION>
OTC BULLETIN BOARD(R) MONTHLY HIGH, LOW, CLOSE AND VOLUME REPORT
- ----------------------------------------------------------------------------------
VALL 1/95 - 3/97
DATE BY MONTH HIGH LOW CLOSE VOLUME TRADES
- ------------- ---- --- ----- ------ ------
<S> <C> <C> <C> <C> <C>
February 1995 6.625 6.625 6.625 5,000 1
March 1995 26 25 26 3,025 4
April 1995 26 26 26 110 5
May 1995 26 26 3 2
June 1995 26 26 26 3,016 2
July 1995 26 24.5 24.5 17,932 4
August 1995 26 26 183 2
September 1995 26 26 26 3 1
October 1995 30 26 26 119 3
November 1995 26 26 72 2
January 1996 30 26 30 788 4
February 1996 26 26 26 29 3
March 1996 30 26 26 30 2
April 1996 26 26 26 34 2
May 1996 26 26 23 3
June 1996 26 26 26 18 3
August 1996 26 26 26 3 1
October 1996 26 26 26 3 1
December 1996 26 26 26 83 2
January 1997 26 25 26 214 2
SUMMARY: 30 6.625 26 30,688 49
</TABLE>
<PAGE> 13
EXHIBIT B TO SCHEDULE 13E-3
TRANSMITTAL LETTER
For the Surrender of Shares of Common Stock of
THE VALLEY FAIR CORPORATION
THE INSTRUCTIONS SHOULD BE READ CAREFULLY BEFORE COMPLETING THIS TRANSMITTAL
LETTER
<TABLE>
<CAPTION>
<S> <C> <C>
Certificate Number of Shares
Name of Registered Owner of Shares Number(s) Surrendered
- ----------------------------------------------------------------------------- --------------------- ----------------
- ----------------------------------------------------------------------------- --------------------- ----------------
- ----------------------------------------------------------------------------- --------------------- ----------------
(If additional space is required, attach a signed rider) TOTAL SHARES: ----------------
</TABLE>
ALL CERTIFICATES LISTED ABOVE MUST BE DELIVERED WITH THIS TRANSMITTAL LETTER
TO:
The Valley Fair Corporation
260 Bergen Turnpike
Little Ferry, New Jersey 07643
(201) 440-4000
Note: If you have lost your certificate or certificates, please so indicate by
filling in your name on the line below. Please continue to fill out all the
applicable information of this Transmittal Letter:
I, _____________________________, hereby declare that I have lost the
certificate or certificates representing my interest in the Company. (Please
note that a bonding fee may be assessed for each lost certificate.)
Ladies and Gentlemen:
Pursuant to the terms of the merger between Little Ferry Corp. and The
Valley Fair Corporation, effective as of May 9, 1997 (the "Merger"), the
undersigned owner hereby surrenders to The Valley Fair Corporation the
certificate or certificates listed above for shares of common stock, $.30 par
value, of The Valley Fair Corporation ("Valley Fair Shares"), with each such
share to be exchanged for a $30.00 cash payment, without interest.
The owner of such shares will, upon request, execute and deliver any
additional documents deemed by The Valley Fair Corporation to be necessary or
desirable to complete the exchange of the Valley Fair Shares surrendered
herewith. The owner understands and acknowledges that the owner is responsible
for any stock transfer tax payable upon transfer of the shares listed above.
Unless otherwise indicated herein under "Special Payment Instructions"
below, please issue checks representing payment for the Valley Fair Shares in
the name of the owner. Similarly, unless otherwise indicated under "Special
Delivery Instructions" below, please issue checks representing payment for the
Valley Fair Shares to the owner at the address shown below the signature of the
owner.
SHAREHOLDER SIGN HERE
Must be signed by the registered holder(s) as the name(s) appear(s) on
stock certificate(s) or by person(s) authorized to become registered holder(s)
by certificates and documents transmitted. If signature is by person acting in
a fiduciary or representative capacity, please set forth full title. See
Instruction 6.
- ------------------------------------ --------------------------------------
Signature of Owner Signature of Joint Owner
Dated:
------------------------------
Name (please print):
------------------------------------------------------------
Capacity (if applicable):
------------------------------------------------------
Address (including zip code):
--------------------------------------------------
Area Code and Tel. No.:( ) Tax Id. or Social Security No.:
---- --------- -----------
<PAGE> 14
SPECIAL PAYMENT INSTRUCTIONS
To be completed ONLY if the check issued in payment for the Valley Fair Shares
is to be made payable to the order of and sent to someone other than the owner.
Make Check Payable to the Order of:
Name:
--------------------------------------------------------------------------
Please Print
Address:
-----------------------------------------------------------------------
Zip Code
-----------------------------------------
Tax Identification or Social Security No.
SPECIAL DELIVERY INSTRUCTIONS
To be completed ONLY if the check issued in exchange for the Valley Fair Shares
is to be sent to someone other than the owner at an address other than the
address shown above. Mail Certificates To:
Name:
--------------------------------------------------------------------------
Please Print
Address:
-----------------------------------------------------------------------
MEDALLION SIGNATURE GUARANTEE
(If required by Instruction 7)
Authorized Signature:
----------------------------------------------------------
Name of Firm:
------------------------------------------------------------------
Please Print
Dated:
---------------------
TO BE COMPLETED BY ALL SURRENDERING SHAREHOLDERS
(SEE INSTRUCTION 9)
SUBSTITUTE Form W-9
Internal Revenue Service, Department of the Treasury
Payer's request for Taxpayer Identification Number ("TIN")
PART 1 - PLEASE PROVIDE YOUR CORRECT TIN BELOW AND CERTIFY BY SIGNING AND
DATING BELOW
-------------------------------------------
Social Security Number OR Employee ID Number
PART 2 - Certification - Under penalties of perjury, I certify that:
(1) the number shown on this form is my Taxpayer Identification Number (or I
am waiting for a number to be issued to me) and
(2) I am not subject to backup withholding because: (a) I am exempt from
backup withholding, or (b) I have not been notified by the Internal
Revenue Service (the "IRS") that I am subject to backup withholding as a
result of failure to report all income or dividends, or (c) the IRS has
notified me that I am no longer subject to backup withholding.
Certification Instructions -- You must cross out item (2) above if you
have been notified by the IRS that you are currently subject to backup
withholding insurance of any unreported interest or dividends on your tax
return. However, if after being notified by the IRS that you were subject
to backup withholding you received another notification from the IRS that
you are no longer subject to backup withholding, do not cross out such
item (2).
SIGNATURE DATE
------------------------------------- -------------------------
PRINT NAME
-----------------------------------------------------------------
PART 3 - Awaiting TIN
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP
WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU. PLEASE REVIEW THE
ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
<PAGE> 15
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification
number has not been issued to me, and either (a) I have mailed or delivered an
application to receive a taxpayer identification number to the appropriate
Internal Revenue Service Center or Social Security Administration Office, or
(b) I intend to mail or deliver an application in the near future. I understand
that if I do not provide a taxpayer identification number by the time of
payment, 31% of all reportable payments made to me thereafter will be withheld,
but that such amounts will be refunded to me if I then provide a Taxpayer
Identification Number within sixty (60) days.
SIGNATURE DATE
-------------------------------------- -----------------------
INSTRUCTIONS FOR SURRENDERING CERTIFICATES OF COMMON STOCK OF
THE VALLEY FAIR CORPORATION
In order to surrender certificates properly, please follow these instructions
carefully.
1. All certificates must be accompanied by a completed and signed Transmittal
Letter.
2. Certificates held under different names or capacities should be
accompanied by separate Transmittal Letters.
3. TO ASSIST IN TIMELY PAYMENT PROCEDURES, ALL SHARE CERTIFICATES REGISTERED
IN THE SAME NAME SHOULD BE SUBMITTED WITH ONE TRANSMITTAL LETTER.
QUESTIONS AND REQUESTS FOR ASSISTANCE, INCLUDING MATTERS CONCERNING LOST
CERTIFICATES OR ADDITIONAL COPIES OF TRANSMITTAL LETTERS, SHOULD BE
DIRECTED TO THE VALLEY FAIR CORPORATION.
4. In the spaces provided, please list the number of each certificate being
surrendered and indicate the number of shares evidenced by each
certificate.
5. Unless otherwise indicated under "Special Payment Instructions", all
checks in payment for Valley Fair Shares will be issued in the name of the
owner. Similarly, unless otherwise indicated under "Special Delivery
Instructions", all checks in payment for Valley Fair Shares will be mailed
to the owner at the address shown below the signature of the owner.
6. The Transmittal Letter must be signed by the registered owner(s) and must
correspond with the name(s) on the certificate(s) in every particular.
Transmittal Letters executed by trustees, executors, administrators,
guardians, officers of corporations, attorneys-in-fact or others in a
representative or fiduciary capacity must be accompanied by proper
evidence of the signer(s)' authority to act. If the certificate(s)
surrendered herewith are owned of record by two or more joint owners, all
such owners must sign this Transmittal Letter.
7. If shares are surrendered by registered holder(s) who have completed the
"Special Delivery Instructions" or the "Special Exchange Instructions",
signature(s) on the Transmittal Letter must be guaranteed by any member of
the Medallion signature guarantee program. Members include banks, credit
unions and other financial institutions as well as securities brokers. If
share certificate(s) are registered in the name(s) of person(s) other than
the person(s) signing the Transmittal Letter, the certificate(s) must be
duly endorsed, or accompanied by stock power(s) signed by the registered
holder(s), with the signature(s) on such endorsement or stock power(s)
guaranteed thereon and on the Transmittal Letter by any member of the
Medallion signature guarantee program.
8. DELIVERY IS AT THE RISK OF THE SURRENDERING SHAREHOLDERS. CERTIFICATES
SHOULD BE SENT BY REGISTERED MAIL AND SHOULD BE PROPERLY INSURED.
9. All holders of Valley Fair Shares are required to provide the Exchange
Agent with a correct Taxpayer Identification Number (TIN) on Substitute
Form W-9. Failure to provide the information on the form may subject the
holder to 31% Federal income tax withholding on any cash payment to be
received.
<PAGE> 16
EXHIBIT C TO SCHEDULE 13E-3
THE VALLEY FAIR CORPORATION
AND SUBSIDIARY
CONSOLIDATED FINANCIAL STATEMENTS
FEBRUARY 2, 1997, JANUARY 28, 1996,
AND JANUARY 29, 1995
<PAGE> 17
THE VALLEY FAIR CORPORATION AND SUBSIDIARY
CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
FEBRUARY 2, 1997, JANUARY 28, 1996, AND JANUARY 29, 1995
- -------------------------------------------------------------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Independent Auditors' Reports 2
Consolidated Balance Sheets - February 2, 1997
and January 28, 1996 3
Consolidated Statements of Operations for the Years Ended February 2, 1997,
January 28, 1996 and January 29, 1995 4
Consolidated Statements of Stockholders' Equity for the Years Ended
February 2, 1997, January 28, 1996 and January 29, 1995 5
Consolidated Statements of Cash Flows for the Years Ended 6 - 7
February 2, 1997, January 28, 1996 and January 29, 1995
Notes to the Consolidated Financial Statements 8 - 17
</TABLE>
<PAGE> 18
INDEPENDENT AUDITORS' REPORT
BOARD OF DIRECTORS AND STOCKHOLDERS
THE VALLEY FAIR CORPORATION
Little Ferry, New Jersey
We have audited the accompanying consolidated balance sheets of The
Valley Fair Corporation (a subsidiary of Schottenstein Stores Corporation) and
subsidiary as of February 2, 1997 and January 28, 1996, and the related
consolidated statements of operations, stockholders' equity, and cash flows for
each of the fiscal years in the period ended February 2, 1997. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the 1997 and 1996 financial statements referred to
above present fairly, in all material respects, the consolidated financial
position of The Valley Fair Corporation and subsidiary as of February 2, 1997
and January 28, 1996, and the results of their operations and their cash flows
for each of the fiscal years in the period ended February 2, 1997 in conformity
with generally accepted accounting principles.
/s/ Alpern, Rosenthal & Company
Pittsburgh, Pennsylvania
March 22, 1997 (Except April 4, 1997 as to Note 12)
<PAGE> 19
THE VALLEY FAIR CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
FEBRUARY 2 JANUARY 28
1997 1996
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 3,247,423 $ 2,459,442
Accounts receivable
Trade 637,064 711,188
Affiliate - Note 2 146,418 128,912
Merchandise inventories 20,977,647 23,955,006
Prepaid expenses 484,746 582,341
Deferred income taxes - Note 8 836,000 443,000
----------- -----------
TOTAL CURRENT ASSETS 26,329,298 28,279,889
----------- -----------
INVESTMENT IN EQUITY SECURITIES - Notes 4 and 9 1,385,588 1,149,163
----------- -----------
PROPERTY AND EQUIPMENT - At cost - Notes 3, 5, and 6 11,529,042 11,235,334
Less: Accumulated depreciation and amortization 7,509,283 6,969,475
----------- -----------
TOTAL PROPERTY AND EQUIPMENT - Net 4,019,759 4,265,859
----------- -----------
OTHER ASSETS 357,668 336,174
----------- -----------
TOTAL ASSETS $32,092,313 $34,031,085
=========== ===========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
<PAGE> 20
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
FEBRUARY 2 JANUARY 28
1997 1996
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Note payable - bank - Note 5 $ 8,567,000 $ 9,710,300
Current maturities of long-term debt - Note 6 36,714 65,010
Accounts payable
Trade 2,871,162 2,911,974
Affiliate - Note 2 377,032 405,764
Accrued liabilities 870,929 646,064
----------- -----------
TOTAL CURRENT LIABILITIES 12,722,837 13,739,112
LONG-TERM LIABILITIES
Long-term debt - less current maturities - Note 6 193,952 233,569
Deferred income taxes - Note 8 416,000 497,000
Other long-term liabilities - Note 9 1,051,146 1,093,225
----------- -----------
TOTAL LIABILITIES 14,383,935 15,562,906
----------- -----------
STOCKHOLDERS' EQUITY
Common stock, par value $.30 per share;
authorized 666,666 shares, issued and outstanding
367,813 in 1997 and 367,983 shares in 1996 110,344 110,395
Additional paid-in capital 798,375 802,754
Retained earnings 16,799,659 17,555,030
----------- -----------
TOTAL STOCKHOLDERS' EQUITY 17,708,378 18,468,179
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $32,092,313 $34,031,085
=========== ===========
</TABLE>
Page 3
<PAGE> 21
THE VALLEY FAIR CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
- -------------------------------------------------------------------------------
FOR THE YEARS ENDED FEBRUARY 2, 1997, JANUARY 28, 1996, AND JANUARY 29, 1995
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
NET SALES - Excluding license
departments $62,805,426 $68,034,924 $70,659,304
COST OF SALES 43,464,047 46,690,549 49,173,119
----------- ----------- -----------
GROSS PROFIT 19,341,379 21,344,375 21,486,185
TENANT DEPARTMENT LICENSE
REVENUE AND OTHER (related parties -
1997 - 49%, 1996 - 47%, 1995 - 47%) 5,460,487 4,962,810 4,903,342
----------- ----------- -----------
24,801,866 26,307,185 26,389,527
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES (related parties -
1997 - 12%, 1996 - 13%, 1995 - 14%) 25,316,305 25,214,754 25,542,116
----------- ----------- -----------
INCOME (LOSS) FROM OPERATIONS ( 514,439) 1,092,431 847,411
INTEREST EXPENSE 759,932 1,005,425 837,405
----------- ----------- -----------
INCOME (LOSS) BEFORE INCOME
TAXES ( 1,274,371) 87,006 10,006
PROVISION FOR (RECOVERY OF)
INCOME TAXES - Note 8 ( 519,000) 86,000 ( 16,000)
----------- ----------- -----------
NET INCOME (LOSS) ($ 755,371) $ 1,006 $ 26,006
=========== =========== ===========
NET INCOME (LOSS) PER COMMON SHARE ($ 2.05) $ .00 $ .07
=========== =========== ===========
WEIGHTED AVERAGE SHARES OUTSTANDING 367,882 368,030 368,309
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of
these consolidated financial statements.
Page 4
<PAGE> 22
THE VALLEY FAIR CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
- -------------------------------------------------------------------------------
FOR THE YEARS ENDED FEBRUARY 2, 1997, JANUARY 28, 1996, AND JANUARY 29, 1995
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Additional
Common Paid-In Retained
Stock Capital Earnings Total
----- ------- -------- -----
<S> <C> <C> <C> <C>
BALANCE - January 30, 1994 $ 110,465 $ 808,965 $17,528,018 $18,447,448
Purchase and retirement of
164 shares ( 49) ( 4,412) - ( 4,461)
Net income - - 26,006 26,006
---------- ---------- ----------- -----------
BALANCE - January 29, 1995 110,416 804,553 17,554,024 18,468,993
Purchase and retirement of
70 shares ( 21) ( 1,799) - ( 1,820)
Net income - - 1,006 1,006
---------- ---------- ----------- -----------
BALANCE - January 28, 1996 110,395 802,754 17,555,030 18,468,179
Purchase and retirement of
170 shares ( 51) ( 4,379) - ( 4,430)
Net loss - - ( 755,371) ( 755,371)
---------- ---------- ----------- -----------
BALANCE - February 2, 1997 $ 110,344 $ 798,375 $16,799,659 $17,708,378
========== ========== =========== ===========
</TABLE>
The accompanying notes are an integral part of
these consolidated financial statements.
Page 5
<PAGE> 23
THE VALLEY FAIR CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
- -------------------------------------------------------------------------------
FOR THE YEARS ENDED FEBRUARY 2, 1997, JANUARY 28, 1996, AND JANUARY 29, 1995
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
CASH PROVIDED BY (USED FOR) OPERATING ACTIVITIES
Net income (loss) ($ 755,371) $ 1,006 $ 26,006
Noncash items included in net income
Depreciation and amortization 586,475 632,487 884,655
Deferred income taxes ( 474,000) 64,000 ( 301,000)
Changes in
Accounts receivable 56,618 63,371 ( 223,211)
Merchandise inventories 2,977,359 1,481,846 ( 412,949)
Accounts payable and accrued expenses 155,321 ( 1,320,047) 288,261
Other items 34,022 ( 153,861) ( 77,365)
----------- ----------- -----------
NET CASH PROVIDED BY
OPERATING ACTIVITIES 2,580,424 768,802 184,397
----------- ----------- -----------
CASH PROVIDED BY (USED FOR) INVESTING ACTIVITIES
Acquisitions of property and equipment ( 340,375) ( 319,012) ( 472,948)
Purchase of investments ( 300,443) ( 1,149,163) -
Proceeds from sale of investments 64,018 - -
----------- ----------- -----------
NET CASH USED FOR INVESTING ACTIVITIES ( 576,800) ( 1,468,175) ( 472,948)
----------- ----------- -----------
CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES
Note payable - bank ( 1,143,300) 335,300 ( 625,000)
Proceeds from long-term debt - - 27,064
Payments of long-term debt ( 67,913) ( 827,231) ( 433,940)
Purchase and retirement of common stock ( 4,430) ( 1,820) ( 4,461)
----------- ----------- -----------
NET CASH USED FOR FINANCING ACTIVITIES ( 1,215,643) ( 493,751) ( 1,036,337)
----------- ----------- -----------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 787,981 ( 1,193,124) ( 1,324,888)
CASH AND CASH EQUIVALENTS - Beginning of year 2,459,442 3,652,566 4,977,454
----------- ----------- -----------
CASH AND CASH EQUIVALENTS - End of year $ 3,247,423 $ 2,459,442 $ 3,652,566
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of
these consolidated financial statements.
Page 6
<PAGE> 24
THE VALLEY FAIR CORPORATION AND SUBSIDIARY
- -------------------------------------------------------------------------------
CONSOLIDATED STATEMENT OF CASH FLOWS (CONTINUED)
For the Years Ended February 2, 1997, January 28, 1996, and January 29, 1995
- -------------------------------------------------------------------------------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
CASH PAID (REFUNDED) DURING THE YEAR FOR
Interest $ 768,128 $ 1,091,984 $ 735,859
========== =========== ==========
Income taxes ($ 84,239) $ 154,852 $ 353,040
========== =========== ==========
</TABLE>
The accompanying notes are an integral part of
these consolidated financial statements.
Page 7
<PAGE> 25
THE VALLEY FAIR CORPORATION AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. REPORTING ENTITY AND NATURE OF BUSINESS
The consolidated financial statements include the accounts of The
Valley Fair Corporation (Valley Fair) and its wholly-owned subsidiary,
L.F. Widmann, Inc. (Widmann), collectively referred to as "The Company".
All material intercompany transactions have been eliminated in
consolidation. The majority of the Company's stock (93%) is controlled
by Schottenstein Stores Corporation and affiliated companies (the
Parent).
Valley Fair currently operates, through a combination of owned and
licensed departments, two discount stores in the state of New Jersey.
The stores sell apparel, shoes, hard goods, e.g., hardware, stationery,
health and beauty aids, as well as food items in a full-line supermarket
at one location.
Widmann currently operates and licenses 115 retail health and
beauty aid stores primarily in Pennsylvania and also in 11 other
Mid-Atlantic and Mid-Western States. The stores sell non-prescription
proprietary drugs, tobacco, greeting cards, stationery, electronics,
toys, small appliances, cosmetics, hair care products and other
household items.
The Company, excluding licensed departments, is in one segment of
business - retail sales to the general public.
The Company's fiscal year ends on the Sunday closest to January
31. The fiscal year ended February 2, 1997 contained 53 weeks and the
fiscal years ended January 28, 1996, January 29, 1995 contained 52
weeks.
B. ESTIMATES
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions. These estimates and assumptions affect the
reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Page 8
<PAGE> 26
THE VALLEY FAIR CORPORATION AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
C. CASH AND CASH EQUIVALENTS
The Company considers all highly liquid debt instruments purchased
with a maturity of three months or less to be cash equivalents.
Approximately 35% ad 26% of cash and cash equivalents as of February 2,
1997 and January 28, 1996, respectively, were held in bankers
acceptances. Substantially all of the remaining cash and cash
equivalents were maintained in accounts with two banks.
D. INVESTMENT IN EQUITY SECURITIES
The Company classifies its investments in equity securities as
available-for-sale securities and carries them at fair value (Note 4).
Realized gains and losses on dispositions are based on the net proceeds
and the adjusted cost of the securities sold, using the specific
identification method. Realized gains and losses are included in income
in the year of sale. Unrealized gains and losses are based on the
difference between cost and fair market value of each security.
Unrealized gains and losses, if any, are recorded as a charge or credit
to stockholder's equity.
E. MERCHANDISE INVENTORIES
Merchandise inventories are valued at the lower of cost (first-in,
first-out basis) or market determined by the retail inventory method for
store inventories and an average cost method for the warehouse
inventory.
F. PROPERTY AND EQUIPMENT
Depreciation is provided by the straight-line method over the
estimated useful lives of assets.
Maintenance and repairs which are not considered to extend the
useful lives of assets are charged to operations as incurred. Additions
and improvements are capitalized. Upon sale or retirement, the cost of
assets and related allowances are removed from the accounts and any
resulting gains or losses are included in other income (expense).
G. STORE OPENING AND CLOSING COSTS
Expenditures of a non-capital nature incurred prior to the opening
of a new store are charged to operations as incurred. Costs of closing a
store are expensed in the year in which the store is closed.
Page 9
<PAGE> 27
THE VALLEY FAIR CORPORATION AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
H. INCOME TAXES
Income taxes are provided for the tax effects of transactions
reported in the financial statements and consist of taxes currently due
and deferred taxes relating to temporary differences. The primary
differences are in the inventory reserves, basis of property and
equipment and deferred compensation between financial and income tax
reporting. The deferred tax assets and liabilities represent the future
tax return consequences of those differences, which will either be
taxable or deductible when the assets and liabilities are recovered or
settled. Deferred taxes also are recognized for operating losses and tax
credits that are available to offset future Federal and state taxable
income. (See also Note 8.)
I. RECLASSIFICATIONS
Certain reclassifications have been made to the 1996 and 1995
financial statements in order to conform to 1997 presentations.
J. NET INCOME (LOSS) PER COMMON SHARE
Net income (loss) per common share has been computed based on the
weighted average number of shares of common stock outstanding during the
periods.
NOTE 2 - TRANSACTIONS WITH AFFILIATES
Valley Fair has entered into license agreements for tenant departments
with an affiliated company of its Parent. The consolidated statements of
operations include rental income earned from these licenses with affiliated
companies of approximately $2,679,000 in 1997, $2,347,000 in 1996 and
$2,312,000 in 1995.
Widmann's has entered into agreements to lease tenant retail space from
an affiliated company of Schottenstein Stores Corporation. Rents are based on a
percentage of sales. The related rental expense (Note 7) incurred was
approximately $1,980,000 in 1997, $2,195,000 in 1996, and $2,329,000 in 1995.
In addition, Widmann is charged approximately 2.9% of sales in those stores as
reimbursement for certain store operating expenses.
The accounts receivable and payable - affiliate are a result of the
above transactions.
The Company was charged $125,000 per year in 1997, 1996, and 1995 by the
Parent for certain administrative services provided.
Page 10
<PAGE> 28
THE VALLEY FAIR CORPORATION AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 3 - PROPERTY AND EQUIPMENT
Property and equipment consisted of the following:
<TABLE>
<CAPTION>
February 2 January 28
1997 1996
---- ----
<S> <C> <C>
Land $ 569,590 $ 569,590
Buildings 2,613,334 2,613,334
Fixtures and equipment 5,669,677 5,571,284
Automobiles and trucks 651,214 675,004
Leasehold improvements 2,025,227 1,806,122
----------- -----------
11,529,042 11,235,334
Less: Accumulated depreciation
and amortization 7,509,283 6,969,475
----------- -----------
$ 4,019,759 $ 4,265,859
=========== ===========
</TABLE>
NOTE 4 - INVESTMENT IN EQUITY SECURITIES
The Company's investments in mutual funds, which invest in government
securities, are carried at market, which approximates cost (see also Note 9).
NOTE 5 - NOTE PAYABLE - BANK
The Company has a $14,000,000 unsecured demand note agreement with a
bank. Borrowings under this arrangement bear interest at either a Euro-rate or
prime at the Company's option. Substantially all the line was subject to a
Euro-rate, which was 7.19% at February 2, 1997. The weighted average interest
rate at February 2, 1997 and January 28, 1996 was 7.21% and 7.43%,
respectively.
Page 11
<PAGE> 29
THE VALLEY FAIR CORPORATION AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 6 - LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
February 2 January 28
1997 1996
---- ----
<S> <C> <C>
Mortgage notes payable, Pennsylvania Industrial Development
Authority, interest at 3%, due September 2003, collateralized by
a first mortgage on the property and building,
guaranteed by the Parent Company. $223,470 $269,161
Various other installment notes payable 7,196 29,418
-------- --------
230,666 298,579
Less: Current maturities 36,714 65,010
-------- --------
Long-term Debt $193,952 $233,569
======== ========
</TABLE>
Approximate maturities of debt are as follows:
<TABLE>
<S> <C>
1998 $ 37,000
1999 32,000
2000 33,000
2001 34,000
2002 35,000
Thereafter 60,000
--------
$231,000
========
</TABLE>
NOTE 7 - LEASES
The Company leases retail store locations and delivery vehicles under
operating leases. Store leases provide for base rentals and the payment of
additional rentals based on sales levels, at certain locations (see also Note
2). In addition, the Company is typically responsible under its leases for real
estate taxes, insurance, maintenance and advertising.
Page 12
<PAGE> 30
THE VALLEY FAIR CORPORATION AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 7 - LEASES (CONTINUED)
Rent expense charged to operations under these types of arrangements
were as follows:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Minimum rentals $1,118,000 $1,240,000 $1,148,000
Contingent rentals - primarily
related party (Note 2) 1,992,000 2,231,000 2,731,000
---------- ---------- ----------
Total rent expense $3,110,000 $3,471,000 $3,879,000
========== ========== ==========
</TABLE>
Valley Fair also leases certain retail facilities to various tenants
under operating lease and sublease arrangements. The amounts received under
tenant sub-lease agreements, included below, were approximately $1,962,000 in
1997, $1,861,000 in 1996 and $2,133,000 in 1995. The rental income under tenant
lease and sub-lease arrangements, included in tenant revenue, were as follows:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Minimum rentals $2,352,000 $2,398,000 $2,355,000
Contingent rentals 2,103,000 1,672,000 1,672,000
---------- ---------- ----------
Total rental income $4,455,000 $4,070,000 $4,027,000
========== ========== ==========
</TABLE>
At February 2, 1997, the approximate minimum rental commitments and
tenant income from sublease agreements and other operating leases is as
follows:
<TABLE>
<CAPTION>
Tenant Income
-------------------------------
Operating Sub- Operating
Fiscal Leases Leases Leases
------ ------ ------ ------
<S> <C> <C> <C>
1998 $ 666,000 $1,225,000 $1,048,000
1999 522,000 638,000 381,000
2000 456,000 443,000 128,000
2001 424,000 392,000 38,000
2002 391,000 392,000 23,000
Thereafter 959,000 - -
---------- ---------- ----------
$3,418,000 $3,090,000 $1,618,000
========== ========== ==========
</TABLE>
Page 13
<PAGE> 31
THE VALLEY FAIR CORPORATION AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 8 - INCOME TAXES
The provision for (recovery of) income taxes for the years ended
February 2, 1997, January 28, 1996 and January 29, 1995 consisted of the
following:
<TABLE>
<CAPTION>
February 2 January 28 January 29
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Currently payable ($ 45,000) $ 22,000 $285,000
Deferred expense (benefit) ( 474,000) 64,000 ( 301,000)
-------- -------- --------
($519,000) $ 86,000 ($ 16,000)
======== ======== ========
</TABLE>
The Company has net operating losses totaling approximately $514,000
available to offset future state taxes. These losses expire in various years,
depending on state tax laws.
The reconciliation of income tax expense (benefit) at the statutory
Federal rate to the reported income tax expense is as follows:
<TABLE>
<CAPTION>
February 2 January 28 January 29
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Federal statutory tax rate 34.0% 34.0% 34.0%
State income taxes - net of Federal
tax benefit 6.0 6.0 5.8
Non-deductible (taxable) items - net 1.0 58.0 (199.8)
---- ---- -----
41.0% 98.0% (160.0%)
==== ==== =====
</TABLE>
Page 14
<PAGE> 32
THE VALLEY FAIR CORPORATION AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 8 - INCOME TAXES (CONTINUED)
The significant components of deferred income tax expense (benefit) for
the years ended February 2, 1997, January 28, 1996 and January 29, 1995 are as
follows:
<TABLE>
<CAPTION>
February 2 January 28 January 29
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Property and equipment ($ 82,000) $ 53,000 ($160,000)
Prepaid expenses ( 28,000) 20,000 ( 51,000)
Deferred compensation ( 3,000) ( 8,000) ( 14,000)
Inventory reserve ( 350,000) - -
State net operating loss
carryforward ( 4,000) ( 1,000) ( 41,000)
Other ( 7,000) - ( 35,000)
-------- ------- -------
($474,000) $ 64,000 ($301,000)
========= ======== ========
</TABLE>
The deferred income tax (assets) liabilities were as follows at
February 2, 1997 and January 28, 1996:
<TABLE>
<CAPTION>
February 2 January 28
1997 1996
---- ----
<S> <C> <C>
Property and equipment - depreciation $416,000 $498,000
Prepaid expenses 129,000 157,000
Vacation accrual ( 96,000) ( 88,000)
Inventory valuation allowance ( 412,000) ( 62,000)
Deferred compensation ( 405,000) ( 402,000)
State net operating loss carryforwards ( 46,000) ( 42,000)
Other ( 6,000) ( 7,000)
-------- --------
Net Deferred Tax (Asset) Liability ($420,000) $ 54,000
======== ========
Reflected on the balance sheet as
Current deferred asset ($836,000) ($443,000)
Noncurrent deferred liability 416,000 497,000
-------- --------
Net Deferred Tax (Asset) Liability ($420,000) $ 54,000
======== ========
</TABLE>
Page 15
<PAGE> 33
THE VALLEY FAIR CORPORATION AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 9 - RETIREMENT AND SAVINGS PLAN
The Company has a defined contribution retirement plan which covers
substantially all of its employees. The Plan is a cash deferred arrangement
described in Internal Revenue Code Section 401(k). The Company's contribution
to the Plan was $100,000 each in 1997, 1996, and 1995.
The Plan provides that employees of the Company may elect to defer a
certain portion of their compensation and contribute to the Plan. The
Corporation makes discretionary contributions as prescribed by the Plan.
The Company also has nonqualified deferred compensation agreements with
certain key employees. The accrued liability under these arrangements was
approximately $1,000,000 as of December 31, 1996 and 1995 and is included in
other long-term liabilities. The Company maintains a nonqualified trust, also
known as a "rabbi" trust, primarily to fund and secure the payment of benefits
to the employee participants. These arrangements offer the employees a degree
of assurance on the ultimate payment of benefits. The assets remain subject to
the claims of creditors of the Company and are not the property of the
employees. Therefore, they are accounted as assets of the Company and are
presented in investments in equity securities on the consolidated balance
sheet.
NOTE 10 - CONTINGENCIES
The Company is a defendant in various legal actions and claims arising
in the ordinary course of business. After taking into consideration legal
counsel's evaluation of such actions, management is of the opinion that such
litigation and claims will be resolved without material effect on the Company's
financial condition or will be covered by the Company's liability insurance.
NOTE 11 - FINANCIAL INSTRUMENTS
The Company has several financial instruments, none of which are held
for trading purposes. The Company estimates that the fair value of all
financial instruments at December 31, 1996, does not differ materially from the
aggregate carrying value of its financial instruments recorded in the
accompanying balance sheet. The fair value amounts have been estimated by the
Company using available market information and appropriate valuation
methodologies. Considerable judgement is required in interpreting market data
to develop the estimates of fair value and, accordingly, the estimates are not
necessarily indicative of the amounts that the Company could realize in a
current market exchange.
Page 16
<PAGE> 34
THE VALLEY FAIR CORPORATION AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 12 - SUBSEQUENT EVENTS
On April 4, 1997, the controlling stockholders of the Company adopted a
plan to take the Company private. Under the plan, the Company will convert the
common shares (344,697) currently owned by the controlling stockholders (93%)
to 930 shares of common stock. The remaining common shares (25,675 shares) will
be converted into the right to receive cash equal to $30 per share. The
anticipated costs of purchasing the minority stockholders' shares is
approximately $805,000, including expenses relating to this transaction.
Page 17
<PAGE> 35
EXHIBIT D TO SCHEDULE 13E-3
DELAWARE GENERAL CORPORATION LAW
SEC. 262. APPRAISAL RIGHTS.
(a) Any stockholder of a corporation of this State who holds shares of
stock on the date of the making of a demand pursuant to subsection (d) of this
section with respect to such shares, who continuously holds such shares through
the effective date of the merger or consolidation, who has otherwise complied
with subsection (d) of this section and who has neither voted in favor of the
merger or consolidation nor consented thereto in writing pursuant to sec. 228
of this title shall be entitled to an appraisal by the Court of Chancery of the
fair value of his shares of stock under the circumstances described in
subsections (b) and (c) of this section. As used in this section, the word
"stockholder" means a holder of record of stock in a stock corporation and also
a member of record of a nonstock corporation; the words "stock" and "share"
mean and include what is ordinarily meant by those words and also membership or
membership interest of a member of a nonstock corporation; and the words
"depository receipt" mean a receipt or other instrument issued by a depository
representing an interest in one or more shares, or fractions thereof, solely of
stock of a corporation, which stock is deposited with the depository.
(b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to be
effected pursuant to sec. 251 (other than a merger effected pursuant to
subsection (g) of Section 251), 252, 254, 257, 258, 263 or 264 of this title:
(1) Provided, however, that no appraisal rights under this
section shall be available for the shares of any class or series of stock,
which stock, or depository receipts in respect thereof, at the record date
fixed to determine the stockholders entitled to receive notice of and to vote
at the meeting of stockholders to act upon the agreement of merger or
consolidation, were either (i) listed on a national securities exchange or
designated as a national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc. or (ii) held of
record by more than 2,000 holders; and further provided that no appraisal
rights shall be available for any shares of stock of the constituent
corporation surviving a merger if the merger did not require for its approval
the vote of the holders of the surviving corporation as provided in subsection
(f) of sec. 251 of this title.
(2) Notwithstanding paragraph (1) of this subsection,
appraisal rights under this section shall be available for the shares of any
class or series of stock of a constituent corporation if the holders thereof
are required by the terms of an agreement of merger or consolidation pursuant
to secs. 251, 252, 254, 257, 258, 263 and 264 of this title to accept for such
stock anything except:
a. Shares of stock of the corporation surviving or
resulting from such merger or consolidation, or depository receipts in respect
thereof;
<PAGE> 36
b. Shares of stock of any other corporation, or
depository receipts in respect thereof, which shares of stock or depository
receipts at the effective date of the merger or consolidation will be either
listed on a national securities exchange or designated as a national market
system security on an interdealer quotation system by the National Association
of Securities Dealers, Inc. or held of record by more than 2,000 holders;
c. Cash in lieu of fractional shares or fractional
depository receipts described in the foregoing subparagraphs a. and b. of this
paragraph; or
d. Any combination of the shares of stock,
depository receipts and cash in lieu of fractional shares or fractional
depository receipts described in the foregoing subparagraphs a., b. and c. of
this paragraph.
(3) In the event all of the stock of a subsidiary Delaware
corporation party to a merger effected under sec. 253 of this title is not
owned by the parent corporation immediately prior to the merger, appraisal
rights shall be available for the shares of the subsidiary Delaware
corporation.
(c) Any corporation may provide in its certificate of incorporation
that appraisal rights under this section shall be available for the shares of
any class or series of its stock as a result of an amendment to its certificate
of incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the assets
of the corporation. If the certificate of incorporation contains such a
provision, the procedures of this section, including those set forth in
subsections (d) and (e) of this section, shall apply as nearly as is
practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal
rights are provided under this section is to be submitted for approval at a
meeting of stockholders, the corporation, not less than 20 days prior to the
meeting, shall notify each of its stockholders who was such on the record date
for such meeting with respect to shares for which appraisal rights are
available pursuant to subsections (b) or (c) hereof that appraisal rights are
available for any or all of the shares of the constituent corporations, and
shall include in such notice a copy of this section. Each stockholder electing
to demand the appraisal of his shares shall deliver to the corporation, before
the taking of the vote on the merger or consolidation, a written demand for
appraisal of his shares. Such demand will be sufficient if it reasonably
informs the corporation of the identity of the stockholder and that the
stockholder intends thereby to demand the appraisal of his shares. A proxy or
vote against the merger or consolidation shall not constitute such a demand. A
stockholder electing to take such action must do so by a separate written
demand as herein provided. Within 10 days after the effective date of such
merger or consolidation, the surviving or resulting corporation shall notify
each stockholder of each constituent corporation who has complied with this
subsection and has not voted in favor of or consented to the merger or
consolidation of the date that the merger or consolidation has become
effective; or
- 2 -
<PAGE> 37
(2) If the merger or consolidation was approved pursuant to
sec. 228 or sec. 253 of this title, each constituent corporation, either before
the effective date of the merger or consolidation or within ten days
thereafter, shall notify each of the holders of any class or series of stock of
such constituent corporation who are entitled to appraisal rights of the
approval of the merger or consolidation and that appraisal rights are available
for any or all shares of such class or series of stock of such constituent
corporation, and shall include in such notice a copy of this section; provided
that, if the notice is given on or after the effective date of the merger or
consolidation, such notice shall be given by the surviving or resulting
corporation to all such holders of any class or series of stock of a
constituent corporation that are entitled to appraisal rights. Such notice may,
and, if given on or after the effective date of the merger or consolidation,
shall, also notify such stockholders of the effective date of the merger or
consolidation. Any stockholder entitled to appraisal rights may, within twenty
days after the date of mailing of such notice, demand in writing from the
surviving or resulting corporation the appraisal of such holder's shares. Such
demand will be sufficient if it reasonably informs the corporation of the
identity of the stockholder and that the stockholder intends thereby to demand
the appraisal of such holder's shares. If such notice did not notify
stockholders of the effective date of the merger or consolidation, either (i)
each such constituent corporation shall send a second notice before the
effective date of the merger or consolidation notifying each of the holders of
any class or series of stock of such constituent corporation that are entitled
to appraisal rights of the effective date of the merger or consolidation or
(ii) the surviving or resulting corporation shall send such a second notice to
all such holders on or within 10 days after such effective date; provided,
however, that if such second notice is sent more than 20 days following the
sending of the first notice, such second notice need only be sent to each
stockholder who is entitled to appraisal rights and who has demanded appraisal
of such holder's shares in accordance with this subsection. An affidavit of the
secretary or assistant secretary or of the transfer agent of the corporation
that is required to give either notice that such notice has been given shall,
in the absence of fraud, be prima facie evidence of the facts stated therein.
For purposes of determining the stockholders entitled to receive either notice,
each constituent corporation may fix, in advance, a record date that shall be
not more than 10 days prior to the date the notice is given; provided that, if
the notice is given on or after the effective date of the merger or
consolidation, the record date shall be such effective date. If no record date
is fixed and the notice is given prior to the effective date, the record date
shall be the close of business on the day next preceding the day on which the
notice is given.
(e) Within 120 days after the effective date of the merger or
consolidation, the surviving or resulting corporation or any stockholder who
has complied with subsections (a) and (d) hereof and who is otherwise entitled
to appraisal rights, may file a petition in the Court of Chancery demanding a
determination of the value of the stock of all such stockholders.
Notwithstanding the foregoing, at any time within 60 days after the effective
date of the merger or consolidation, any stockholder shall have the right to
withdraw his demand for appraisal and to accept the terms offered upon the
merger or consolidation. Within 120 days after the effective date of the merger
or consolidation, any stockholder who has complied with the requirements of
subsections (a) and (d) hereof, upon written request, shall be entitled to
receive from the corporation surviving the merger or resulting from the
consolidation a statement setting forth the aggregate number of shares not
voted
- 3 -
<PAGE> 38
in favor of the merger or consolidation and with respect to which demands for
appraisal have been received and the aggregate number of holders of such
shares. Such written statement shall be mailed to the stockholder within 10
days after his written request for such a statement is received by the
surviving or resulting corporation or within 10 days after expiration of the
period for delivery of demands for appraisal under subsection (d) hereof,
whichever is later.
(f) Upon the filing of any such petition by a stockholder, service of
a copy thereof shall be made upon the surviving or resulting corporation, which
shall within 20 days after such service file in the office of the Register in
Chancery in which the petition was filed a duly verified list containing the
names and addresses of all stockholders who have demanded payment for their
shares and with whom agreements as to the value of their shares have not been
reached by the surviving or resulting corporation. If the petition shall be
filed by the surviving or resulting corporation, the petition shall be
accompanied by such a duly verified list. The Register in Chancery, if so
ordered by the Court, shall give notice of the time and place fixed for the
hearing of such petition by registered or certified mail to the surviving or
resulting corporation and to the stockholders shown on the list at the
addresses therein stated. Such notice shall also be given by 1 or more
publications at least 1 week before the day of the hearing, in a newspaper of
general circulation published in the City of Wilmington, Delaware or such
publication as the Court deems advisable. The forms of the notices by mail and
by publication shall be approved by the Court, and the costs thereof shall be
borne by the surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become entitled
to appraisal rights. The Court may require the stockholders who have demanded
an appraisal for their shares and who hold stock represented by certificates to
submit their certificates of stock to the Register in Chancery for notation
thereon of the pendency of the appraisal proceedings; and if any stockholder
fails to comply with such direction, the Court may dismiss the proceedings as
to such stockholder.
(h) After determining the stockholders entitled to an appraisal, the
Court shall appraise the shares, determining their fair value exclusive of any
element of value arising from the accomplishment or expectation of the merger
or consolidation, together with a fair rate of interest, if any, to be paid
upon the amount determined to be the fair value. In determining such fair
value, the Court shall take into account all relevant factors. In determining
the fair rate of interest, the Court may consider all relevant factors,
including the rate of interest which the surviving or resulting corporation
would have had to pay to borrow money during the pendency of the proceeding.
Upon application by the surviving or resulting corporation or by any
stockholder entitled to participate in the appraisal proceeding, the Court may,
in its discretion, permit discovery or other pretrial proceedings and may
proceed to trial upon the appraisal prior to the final determination of the
stockholder entitled to an appraisal. Any stockholder whose name appears on the
list filed by the surviving or resulting corporation pursuant to subsection (f)
of this section and who has submitted his certificates of stock to the Register
in Chancery, if such is required, may participate fully in all proceedings
until it is finally determined that he is not entitled to appraisal rights
under this section.
- 4 -
<PAGE> 39
(i) The Court shall direct the payment of the fair value of the
shares, together with interest, if any, by the surviving or resulting
corporation to the stockholders entitled thereto. Interest may be simple or
compound, as the Court may direct. Payment shall be so made to each such
stockholder, in the case of holders of uncertificated stock forthwith, and the
case of holders of shares represented by certificates upon the surrender to the
corporation of the certificates representing such stock. The Court's decree may
be enforced as other decrees in the Court of Chancery may be enforced, whether
such surviving or resulting corporation be a corporation of this State or of
any state.
(j) The costs of the proceeding may be determined by the Court and
taxed upon the parties as the Court deems equitable in the circumstances. Upon
application of a stockholder, the Court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and the
fees and expenses of experts, to be charged pro rata against the value of all
the shares entitled to an appraisal.
(k) From and after the effective date of the merger or consolidation,
no stockholder who has demanded his appraisal rights as provided in subsection
(d) of this section shall be entitled to vote such stock for any purpose or to
receive payment of dividends or other distributions on the stock (except
dividends or other distributions payable to stockholders of record at a date
which is prior to the effective date of the merger or consolidation); provided,
however, that if no petition for an appraisal shall be filed within the time
provided in subsection (e) of this section, or if such stockholder shall
deliver to the surviving or resulting corporation a written withdrawal of his
demand for an appraisal and an acceptance of the merger or consolidation,
either within 60 days after the effective date of the merger or consolidation
as provided in subsection (e) of this section or thereafter with the written
approval of the corporation, then the right of such stockholder to an appraisal
shall cease. Notwithstanding the foregoing, no appraisal proceeding in the
Court of Chancery shall be dismissed as to any stockholder without the approval
of the Court, and such approval may be conditioned upon such terms as the Court
deems just.
(1) The shares of the surviving or resulting corporation to
which the shares of such objecting stockholders would have been converted had
they assented to the merger or consolidation shall have the status of
authorized and unissued shares of the surviving or resulting corporation. (Last
amended by Ch. 349, L. '96, eff. 7-1-96.)
- 5 -
<PAGE> 40
EXHIBIT E TO SCHEDULE 13E-3
April 18, 1997
THE VALLEY FAIR CORPORATION
260 BERGEN TURNPIKE
LITTLE FERRY, NEW JERSEY 07643
Dear Stockholder:
Enclosed with this letter, which is being sent to you as a
nonaffiliated stockholder of The Valley Fair Corporation, a Delaware
corporation (the "Company"), in connection with a merger (the "Merger") of
Little Ferry Corp., a Delaware corporation (the "Filing Person"), with and into
the Company, are the following items: (1) a Schedule 13E-3 Transaction
Statement (the "Schedule 13E-3"); (2) financial statements of the Company for
the years ended February 2, 1997, January 28, 1996 and January 29, 1995; and
(3) a Letter of Transmittal for you to send in your stock certificate for your
Valley Fair common stock. No proxies are being solicited by the Company in
connection with the Merger and no proxy card is enclosed.
Schottenstein Stores Corporation ("SSC"), a Delaware corporation, and
Schottenstein Professional Asset Management Corporation ("SPAM"), an Ohio
corporation, formed the Filing Person solely for the purpose of effecting the
Merger and taking the Company private. As a result of the Merger, effective on
May 9, 1997 (the "Effective Date"), each share of Valley Fair common stock that
you own is converted into the right to receive $30.00 per share. No interest
will be paid on the amount owed to you. To receive payment for your shares
complete the enclosed Letter of Transmittal and return it to the Company with
your stock certificate. See "How to Receive Payment," below.
THIS TRANSACTION HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE FAIRNESS OR MERITS
OF SUCH TRANSACTION NOR UPON THE ACCURACY OR ADEQUACY OF THE INFORMATION
CONTAINED IN THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
SPECIAL FACTORS:
PURPOSE OF THE MERGER, ALTERNATIVES, REASONS AND EFFECTS
The purpose of the Merger is to take the Company private. The benefits
to the Company, and SSC and SPAM as its continuing owners, include eliminating
the cost and expense of SEC reporting and stock transfer agent and related
expenses for an estimated savings of approximately $30,000 per year,
eliminating any conflicts of interest between SSC and the Unaffiliated
Stockholders, and providing SSC with additional flexibility in attempting to
restructure or otherwise revive the Company's recent disappointing financial
results.
SSC considered other means of taking the Company private, including a
tender offer, reverse stock split and "long-form" merger. The tender offer was
rejected because it did not meet SSC's objective of eliminating the entire
ownership interest of the Unaffiliated Stockholders. The reverse stock split
and long-form merger were rejected because they would entail a vote of the
stockholders of the Company and the related expense of preparation of a proxy
statement and/or information statement. SSC also considered a transaction in
which the Unaffiliated Stockholders would not be "cashed-out" and would receive
an ongoing equity interest in VCD. That alternative was rejected for a number
of reasons, including (i) the expense of preparing and filing a registration
statement under the Securities Act of 1933, as amended, to register such shares
of VCD, (ii) the anticipated cost to VCD of increasing its stockholder base by
over 1,200 stockholders, each owning a relatively small number of shares of
VCD; and (iii) the belief that the Unaffiliated Stockholders would prefer to
have cash for their interest in the Company rather than VCD stock, since they
would incur brokerage commissions to convert their VCD stock to cash.
The Merger was structured as a "short-form" Merger under the Delaware
General Corporation Law ("DGCL") Section 253, because it did not require action
on the part of the directors or stockholders of the Company, and was viewed by
SSC as the most inexpensive way of accomplishing its objective of privatizing
the Company and causing the Company to acquire for cash the ownership interest
of the Unaffiliated Stockholders. SSC determined to effect the Merger at this
time for a number of reasons, including: (i) the Company's recent poor
financial performance, (ii) the lack of benefits to the Company from being
public in terms of having very little potential to raise capital in a public
<PAGE> 41
offering, (iii) the benefit to the Company of saving the cost associated with
being a public company, and (iv) the benefit to the Unaffiliated Stockholders
to receive cash for their common stock, without the requirement to pay
brokerage or other commissions.
The Merger will result in the Company becoming a privately-held
company, that is no longer subject to the reporting requirements under the 1934
Act. It will result in the Company utilizing a portion of its cash resources to
purchase the Common Stock held by the Unaffiliated Stockholders. The Merger
will not have any other effect on the Company. The Merger will result in SSC
and SPAM becoming the owners of 100% of the Company. Neither SSC nor SPAM will
incur any income taxes as a result of the Merger. The Unaffiliated Stockholders
will receive cash in the amount of $30 per share, without interest, for their
Common Stock and will generally realize a capital gain or loss in an amount
equal to the difference between $30 per share and their cost basis for the
Common Stock, which capital gain will either be long-term or short-term
depending on the stockholders' holding period.
The Company's financial statements for the fiscal years ended February
2, 1997, January 28, 1996 and January 29, 1995 are enclosed. At February 2,
1997, the Company had total stockholders' equity of $17,708,378 and had
outstanding 367,813 shares of Common Stock, with a book value of $48.15 per
share. At that date, the Company had cash and cash equivalents of $3,247,423.
The Merger will result in the Company utilizing approximately $805,000 of its
cash to repurchase the 25,657 shares of Common Stock held by the Unaffiliated
Stockholders at $30 per share. Because the cash price to Unaffiliated
Stockholders in the Merger of $30 per share is less than the $48.15 book value
per share, the Merger will result in an increase in the book value of the
remaining shares held by SSC and SPAM, which on a pro forma basis as if the
Merger had occurred on February 2, 1997 would be an increase of $1.25 per share
to a book value of $49.40 per share for a total increase of $427,695. As the
sole remaining stockholders of the Company, SSC and SPAM will have 100% of the
benefit of any future earnings or increase in value of the Company and will
bear the risk of any future losses or decrease in value of the Company.
FAIRNESS OF THE TRANSACTION
The Filing Person and SSC believe that the Merger and the $30 per
share in cash to be paid to Unaffiliated Stockholders is fair. The Merger
requires only the vote of the Board of Directors of the Filing Person and
consent of SSC and SPAM, as its sole stockholders. The terms of the Merger were
approved by Jay L. Schottenstein and Thomas R. Ketteler as the sole directors
of the Filing Person (the "Directors") and by each of them acting as officers
of SSC and SPAM, the sole stockholders of the Filing Person. Neither of the
Directors dissented nor abstained from voting on Merger.
The following are the material factors considered by the Directors in
determining that the Merger is fair to the Unaffiliated Stockholders. The
Directors considered the Company's recent history of marginal profitability,
including the net loss in fiscal 1997. The Directors considered the fact that
there is no established trading market for the Common Stock and that, but for
purchases by SSC, SPAM and the Company over the years, there is little or no
practical outlet for the Unaffiliated Stockholders to realize on their
investment in the Company. The Directors considered the fact that the Company
is substantially dependent on its relationship with VCD, as a major licensee
operating in its two department stores and as the licensor of the health and
beauty aids departments representing the majority of the sales of its Widmann
subsidiary. The Directors also considered the recent dissatisfaction expressed
with performance of the health and beauty aids departments by management of VCD
and the possibility that VCD could not renew the existing Licensing Agreement
for the health and beauty aids departments which expires June 30, 1997. The
Directors relied on their belief that because of its recent poor performance
and its reliance on VCD, it would be difficult to sell the Company to a third
party as a going concern. They also relied on their knowledge that the Company
has not received any firm offer for a merger or other business combination of
the Company. The Directors relied on their knowledge with respect to the
negotiation of the prospective transaction described under Item 3(b) of the
Schedule 13E-3 and its prospective effect on the value of the Company. Because
the Directors believe that a going concern valuation would not reflect the true
value of the Company and particularly in light of recent earnings performance,
to establish the $30 per share price the Directors relied on a liquidation
analysis in assuming that the Company elected to wind up its affairs and
liquidate its assets. The Directors made certain estimates with respect to the
fair realizable value of the assets of
-2-
<PAGE> 42
the Company as shown on its balance sheet dated February 2, 1997, including
assumptions with respect to the liquidation value of its inventory, elimination
of the value of prepaid assets and deferred income tax assets, increases in the
book value of the Company's real estate based upon assessed tax values and
discounted cash flow of the Company's leasehold interest for its Little Ferry
department store and overall costs of liquidating the Company, and the
Directors determined that the stockholders could expect to receive
approximately $29.88 per share if the Company were liquidated. The Directors
acknowledged that the amount is below the Company's current $48.15 book value
per share, but believe that book value is not a true indicator of the fair
value of the ownership of the Unaffiliated Stockholders, since it does not
incorporate expenses that would be incurred in connection with the liquidation
of the Company. The Directors also noted that the price of $30 per share is
higher than any price previously paid by the Company, SSC or SPAM and is as
high as any reported transaction price for the Common Stock during the
Company's last two fiscal years.
The Directors did not find it practicable to, and did not, quantify or
assign relative weights to the specific factors set forth above that were
considered in the determination of fairness.
As a "short-form" merger under DGCL Section 253, the Merger does not
require the approval of the Company's Board of Directors or its stockholders.
The Directors determined to utilize the short-form merger procedure to avoid
the cost and expense of preparing and filing either a proxy statement or an
information statement with the SEC as would be required under a long-form
merger or reverse stock split. Accordingly, the Merger will not require
approval of a majority of the Unaffiliated Stockholders.
A meeting of the Company's Board of Directors was held on March 19,
1997 to inform the Board of SSC's intentions with respect to the Merger.
However, no formal action on the part of the Board of the Company was taken,
since the Merger does not require Board action. The Company does not have any
directors who are "independent," since all directors are either officers or
directors of the Company or SSC or providers of significant services to the
Company and SSC. Accordingly, no independent directors retained an unaffiliated
representative to act on behalf of the Unaffiliated Stockholders for purposes
of negotiating the terms of the Merger and/or preparing a report concerning the
fairness of the Merger.
REPORTS, OPINIONS, APPRAISALS AND CERTAIN NEGOTIATIONS
No report, opinion or appraisal from any outside party has been
obtained relating to the Merger.
APPRAISAL RIGHTS AND FURTHER DETAILS CONCERNING THE MERGER:
Please read the Schedule 13E-3 carefully and pay particular attention
to Item 13 summarizing your appraisal rights under Delaware law. Please note
that Item 13 is a summary only. IT IS IMPORTANT THAT YOU READ THE FULL TEXT OF
SECTION 262 OF THE DGCL, WHICH IS ATTACHED AS AN EXHIBIT TO THE SCHEDULE 13E-3,
SO THAT YOU ARE FAMILIAR WITH ALL OF YOUR APPRAISAL RIGHTS UNDER DELAWARE LAW.
HOW TO RECEIVE PAYMENT:
As a result of the merger, on May 9, 1997, you will no longer be a
stockholder of the Company. Instead, you are entitled to receive $30.00 per
share, unless you decide to pursue appraisal rights as summarized in Item 13 of
the Schedule 13E-3. A form of Letter of Transmittal to be used for tendering
shares for payment is enclosed. Please carefully read the Instructions to
Letter of Transmittal and comply with the instructions in tendering your stock
for payment.
Very truly yours,
Jay L. Schotttenstein, Chairman
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