ANNEX I
[Letterhead of Chaffe & Associates, Inc.]
July 11, 2000
The Board of Directors
Cucos, Inc.
110 Veterans Blvd., Suite 222
Metairie, LA 70005
Members of the Board:
We understand that Cucos, Inc. (the "Company") is considering a
proposal to pass through to its shareholders an offer from
Jacksonville Restaurant Acquisition Corp. (the "Purchaser") to
purchase for cash up to a total of 1,200,000 of the outstanding
shares of common stock of the Company at $1.00 per share, net to
the seller (the "Purchase Price"). The offer is conditioned upon
there being validly tendered in accordance with the terms of the
offer and not withdrawn prior to the expiration date of the offer
at least 1,2000,000 shares of Company common stock and the
satisfaction of other specific conditions. The specific
conditions and other terms of the Tender Offer are more fully
described in the Tender Offer Statement.
You have asked our opinion as to whether on the date hereof,
from a financial point of view, the Purchase Price, subject to
the other terms and conditions of the Tender Offer, is a fair and
adequate price for a share of the Company common stock.
Chaffe & Associates, Inc. ("Chaffe"), through our experience in
the securities industry, investment analysis and appraisal, and
in related corporate finance and investment banking activities,
including mergers and acquisitions, corporate recapitalization,
and valuations for corporate and other purposes, states that we
are competent to provide an opinion as to the fairness and
adequacy of the Purchase Price. Neither Chaffe nor any of our
officers or employees has an interest in the Company common
stock. The fee received for the preparation and delivery of this
opinion is not dependent or contingent upon the successful
conclusion of the Tender Offer.
In connection with rendering our opinion, Chaffe, among other
things: (i) reviewed a copy of the draft Tender Offer Statement
dated July 10, 2000, particularly the terms affecting the
Purchase Price; (ii) reviewed and analyzed Company audited
financial statements for the years ending June 30, 1995 through
1999 and internally-prepared financial statements for the 48
weeks ending May 28, 2000, as well as other Company financial and
operating data prepared by its management, including certain
financial forecasts and projections; (iii) held discussions with
members of the management and a representative of the Board of
Directors of the Company concerning past and current operations,
financial condition, business environment, prospects and
strategic objectives; (iv) reviewed the reported prices and
trading activity for the Company common stock; (v) held
discussions with a representative of the Purchaser about
strategic objectives; (vi) compared the financial performance of
the Company and the prices and trading activity of the Company
common stock with those of certain comparable publicly-traded
companies and their securities; (vii) reviewed the financial
terms, to the extent publicly available, of certain comparable
merger and acquisitions transactions; and (viii) performed such
other studies and analyses as Chaffe deemed appropriate to this
opinion.
In our review, Chaffe relied, without independent verification,
upon the accuracy and completeness of financial and all other
information considered by us for purposes of our opinion, and we
have not assumed any responsibility for independent verification
of such information. Chaffe did not (i) make or obtain an
independent review of the Company's assets or liabilities, nor
was Chaffe furnished with any such appraisals; or (ii) conduct a
physical inspection of the properties and facilities of the
Company. With respect to the financial forecasts and projections
made available to us, Chaffe has assumed that they were
reasonably prepared on bases reflecting the Company management's
best currently available estimates and judgments of future
financial performance. We have further relied upon the
assurances of the management of the Company that they are unaware
of any facts that would make the information or projections
provided to us incomplete or misleading.
We have also relied on the Purchaser's representations
regarding its ability to finance the Tender Offer. We have not
reviewed internal business plans or financial projections of the
Purchaser concerning the Company, and have no knowledge of the
Purchaser's ability to provide additional capital to meet the
Company's working capital or capital expenditure needs.
Chaffe notes that as of the date of this letter, the Company
has outstanding 2,663,605 common shares and 400,000 preferred
shares, each convertible into one common share. The Company also
has vested options outstanding of 4,875, which are in the money
at $1 per share. If these are converted and exercised,
respectively, the Company will have 3,068,480 shares of common
stock outstanding.
This opinion was necessarily based upon market, economic,
financial and other conditions as they exist and can be evaluated
as of the date of this letter, and any change in such conditions
would require a reevaluation of this opinion. Chaffe expresses
no opinion as to the price at which the Company common stock will
trade subsequent to the Tender Offer. We also express no opinion
on the tax consequences of the Tender Offer on the Company or its
stockholders.
It is understood that this letter is for the information of the
Board of Directors of the Company and may be included in its
entirety in any correspondence from the Board of Directors to the
Company shareholders with respect to this transaction. This
letter may not be used for any other purposes without our prior
written consent. This letter does not constitute a
recommendation to any stockholder as to whether the stockholder
should tender his or her shares of the Company common stock.
Based upon and subject to the foregoing and after consideration
of such other matters as we deemed relevant, it is our opinion as
of the date of this letter, that from a financial point of view,
the Purchase Price, subject to the other terms and conditions of
the Tender Offer, is a fair and adequate price for a share of the
Company common stock.
Very truly yours,
CHAFFE & ASSOCIATES, INC.
/s/Chaffe & Associates, Inc.
