<PAGE> 1
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13E-4
ISSUER TENDER OFFER STATEMENT
(Pursuant to Section 13(e)(1) of the Securities Exchange Act of 1934)
NITCHES, INC.
(Name of Issuer)
NITCHES, INC.
(Name of Person(s) Filing Statement)
COMMON STOCK
(Title of Class of Securities)
65476M109
(CUSIP Number of Class of Securities)
Steven P. Wyandt
President
10280 Camino Santa Fe
San Diego, California 92121
(619) 625-2633
(Name, Address and Telephone Number of Person Authorized to Receive
Notices and Communications on Behalf of the Person(s) Filing Statement)
Copy to:
James A. Mercer III, Esq.
Luce, Forward, Hamilton & Scripps
600 West Broadway, Suite 2600
San Diego, CA 92101
(619) 699-2447
AUGUST 18, 1998
(Date Tender Offer First Published, Sent or Given to Security Holders)
<TABLE>
<CAPTION>
CALCULATION OF FILING FEE
=====================================================================================================
<S> <C>
Transaction Valuation* Amount of Filing Fee
$4,000,000 $800
=====================================================================================================
</TABLE>
* Based upon $4.00 cash per share for 1,000,000 shares.
[ ] Check here 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.
<TABLE>
<S> <C> <C> <C>
Amount Previously Paid:___________ Not Applicable Filing Party:____________ Not Applicable
Form or Registration No.:_________ Not Applicable Date Filed:______________ Not Applicable
</TABLE>
================================================================================
<PAGE> 2
ITEM 1. SECURITY AND ISSUER
(a) The issuer of the securities to which this statement relates is
Nitches, Inc., a California corporation (the "Company"), and the address of its
principal executive office is 10280 Camino Santa Fe, San Diego, 92121.
(b) This statement on Schedule 13E-4 relates to an offer by the
Company to purchase up to 1,000,000 shares (or such lesser number of shares as
are properly tendered or, in the sole discretion of the Company, a greater
number of shares) of its common stock (the "Shares"), at $4.00 per Share, net to
the sellers, in cash, upon the terms and subject to the conditions set forth in
the Offer to Purchase, dated August 18, 1998 (the "Offer to Purchase"), and in
the related Letter of Transmittal (which together constitute the "Offer"),
copies of which are filed as Exhibits 99.(a)-1 and 99.(a)-2, respectively. The
information set forth in the "Introduction" and Sections 7 "Interest of Certain
Persons; Transactions and Arrangements Concerning the Shares" and 9 "Background
and Purpose of the Offer" of the Offer to Purchase is incorporated herein by
reference.
(c) The Shares are listed and traded on the National Association of
Securities Dealers National Market System under the symbol "NICH". The
information set forth in Section 6 "Price Range of Shares; Dividends" of the
Offer to Purchase is incorporated herein by reference.
(d) This statement is being filed by the Company.
ITEM 2. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATIONS.
(a) The information set forth in Section 8 "Source and Amount of
Funds" of the Offer to Purchase is incorporated herein by reference.
(b)(1)-(2) The information set forth in Section 8 "Source and Amount
of Funds" of the Offer to Purchase is incorporated herein by reference.
ITEM 3. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE ISSUER OR
AFFILIATE.
The information set forth in the "Introduction" and Section 9
"Background and Purpose of the Offer" and Section 10 "Certain Information About
the Company" of the Offer to Purchase is incorporated herein by reference.
(a)-(g) Inapplicable.
(h)-(j) The information set forth in Section 11 "Effects of the Offer
on the Market for Shares; Registration under the Exchange Act" of the Offer to
Purchase is incorporated herein by reference.
ITEM 4. INTEREST IN SECURITIES OF THE ISSUER.
The information set forth in Section 7 "Interest of Certain Persons;
Transactions and Arrangements Concerning the Shares" of the Offer to Purchase is
incorporated herein by reference.
ITEM 5. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO
THE ISSUER'S SECURITIES.
Inapplicable.
2
<PAGE> 3
ITEM 6. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
The information set forth in the "Introduction" and Section 16 "Fees
and Expenses" of the Offer to Purchase is incorporated herein by reference.
ITEM 7. FINANCIAL INFORMATION.
(a)-(b) The information set forth in Section 10 "Certain Information
About the Company", "--General", "--Historical Financial Information" of the
Offer to Purchase is incorporated herein by reference.
ITEM 8. ADDITIONAL INFORMATION.
(a) Inapplicable.
(b) The information set forth in Section 12 "Certain Legal Matters;
Regulatory Approvals" of the Offer to Purchase is incorporated herein by
reference.
(c) The information set forth in Section 11 "Effects of the Offer on
the Market for Shares; Registration under the Exchange Act" of the Offer to
Purchase is incorporated herein by reference.
(d) Inapplicable.
(e) Reference is hereby made to the Offer to Purchase and the related
Letter of Transmittal, forms of which are attached hereto as Exhibits 99.(a)-1
and 99.(a)-2, respectively, which are incorporated in their entirety herein by
reference.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
<TABLE>
<S> <C>
Exhibit 99.(a)-1 - Form of Offer to Purchase, dated August 18, 1998.
Exhibit 99.(a)-2 - Form of Letter of Transmittal
(including Guidelines for Certification of
Taxpayer Identification Number on Substitute
Form W-9).
Exhibit 99.(a)-3 - Form of Notice of Guaranteed Delivery.
Exhibit 99.(a)-4 - Form of Letter to Brokers, Dealers, Commercial
Banks, Trust Companies and Other Nominees.
Exhibit 99.(a)-5 - Form of Letter to Clients for use
by Brokers, Dealers, Commercial Banks, Trust
Companies and Other Nominees.
Exhibit 99.(a)-6 - Press Release issued by the Company on August 11, 1998.
Exhibit 99.(a)-7 - Form of Letter to the Company's shareholders from
the President of the Company, dated August 18, 1998.
Exhibit 99.(g) - Documents incorporated by reference
into the Offer to Purchase: Nitches, Inc.
Annual Report on Form 10-K for the year ended
August 31, 1997 and Quarterly Report on Form
10-Q for the three-month period ended May 31,
1998.
Exhibit 99.(h) - Independent Auditors' Consent.
</TABLE>
3
<PAGE> 4
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.
Nitches, INC.
By: /S/ STEVEN P. WYANDT
-------------------------------------------
Steven P. Wyandt, President
Dated: August 18, 1998
4
<PAGE> 5
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<S> <C>
99.(a)-1 Form of Offer to Purchase, dated August 18, 1998.
99.(a)-2 Form of Letter of Transmittal (including Guidelines for Certification of
Taxpayer Identification Number of Substitute Form W-9).
99.(a)-3 Form of Notice of Guaranteed Delivery.
99.(a)-4 Form of Letter to Brokers, Dealers, Commercial Banks, Trust Companies and
other Nominees.
99.(a)-5 Form of Letter to Clients for use by Brokers, Dealers, Commercial Banks, Trust
Companies and Other Nominees.
99.(a)-6 Press Release issued by the Company on August 11, 1998.
99.(a)-7 Form of Letter to the Company's shareholders from the President of the
Company, dated August 18, 1998.
99.(g) Documents incorporated by reference into the Offer to
Purchase Agreement: Nitches, Inc. Annual Report on Form
10-K for the year ended August 31, 1997; and Quarterly
Report on Form 10-Q for the three-month period ended May
31, 1998.
99.(h) Independent Auditors' Consent.
</TABLE>
5
<PAGE> 1
EXHIBIT 99.(a)-1
NITCHES, INC.
Offer to Purchase for Cash Up to 1,000,000 Shares of its
Common Stock at a Purchase Price of $4.00 net per Share
THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS EXPIRE AT 5:00 P.M.
NEW YORK CITY TIME, SEPTEMBER 16, 1998, UNLESS THE OFFER IS EXTENDED.
Nitches, Inc., a California corporation (the "Company"), invites its
shareholders to tender 1,000,000 shares of its Common Stock (the "Shares"), at
$4.00 per Share net to the shareholder, in cash (the "Purchase Price"), upon the
terms and subject to the conditions set forth in this Offer to Purchase and the
related Letter of Transmittal (which together constitute the "Offer"). The
Company reserves the right, in its sole discretion, to purchase more than
1,000,000 Shares pursuant to the Offer. All Shares properly tendered and not
withdrawn prior to the expiration of the Offer will be purchased at the Purchase
Price, upon the terms and subject to the conditions of the Offer, including its
proration terms.
THE OFFER IS NOT CONDITIONED ON ANY MINIMUM NUMBER OF SHARES BEING
TENDERED. THE OFFER IS, HOWEVER, SUBJECT TO CERTAIN OTHER CONDITIONS. SEE
SECTION 5.
The Shares are listed and principally traded on the National Association
of Securities Dealers SmallCap Market System (NASDAQ). On August 10, 1998, the
last trading day before the Company announced its intention to commence the
Offer, the closing per Share sales price as reported on NASDAQ was $2.75. The
Company urges shareholders to obtain current market quotations for the Shares
prior to tendering any Shares pursuant to the Offer. See Introduction and
Section 6.
NEITHER THE COMPANY NOR ITS BOARD OF DIRECTORS MAKES ANY RECOMMENDATION
TO ANY SHAREHOLDER AS TO WHETHER TO TENDER OR TO REFRAIN FROM TENDERING SHARES
PURSUANT TO THE OFFER. EACH SHAREHOLDER MUST MAKE HIS OR HER OWN DECISION
WHETHER TO TENDER SHARES AND, IF SO, HOW MANY SHARES TO TENDER. SEE INTRODUCTION
AND SECTION 7 FOR INFORMATION CONCERNING THE INTENTION OF ARJUN C. WANEY, THE
COMPANY'S PRINCIPAL SHAREHOLDER, IN CONNECTION WITH THE OFFER. THE COMPANY HAS
BEEN ADVISED THAT CERTAIN OF ITS DIRECTORS AND OFFICERS INTEND TO TENDER SHARES
PURSUANT TO THE OFFER. SEE INTRODUCTION AND SECTION 7.
The objective of the Offer is to deliver directly to shareholders a
portion of the Company's current value and to provide the Company's shareholders
with a means of furthering their investment objectives with respect to the
Shares. The Offer provides shareholders who wish to currently realize a portion
of, or perhaps all, their investment in the Company in cash with an opportunity
to sell a portion of, or perhaps all, their Shares at a premium over current
market prices of the Shares. The Offer also is intended to provide shareholders
with an opportunity to increase their proportionate ownership interest in the
Company, either by not participating in the Offer or by participating in the
Offer and reinvesting their after-tax proceeds in additional Shares. See
Sections 9 and 13.
<PAGE> 2
IMPORTANT
Any shareholder desiring to tender all or any portion of the Shares
should either (i) complete and sign a Letter of Transmittal or a facsimile copy
thereof in accordance with the instructions in such Letter of Transmittal, mail
or deliver it and any other required documents to American Stock Transfer &
Trust Company (the "Depositary"), and either mail or deliver the certificates
for such Shares to the Depositary (with all such other documents) or follow the
procedure for book-entry transfer set forth in Section 2; or (ii) request such
shareholder's broker, dealer, commercial bank, trust company or other nominee to
effect the transaction for such shareholder. A shareholder having Shares
registered in the name of a broker, dealer, commercial bank, trust company or
other nominee must contact that entity if such shareholder desires to tender and
such Shares. Shareholders who desire to tender Shares and whose certificates for
such Shares cannot be delivered to the Depositary or who cannot comply with the
procedures for book-entry transfer or whose other required documents cannot be
delivered to the Depositary, in any such case, prior to the expiration of the
Offer must tender such Shares by following the procedures for guaranteed
delivery set forth in Section 2.
Questions and requests for assistance or for additional copies of this
Offer to Purchase may be directed to D. F. King & Co., Inc., the Information
Agent, at the addresses and telephone numbers set forth on the back cover of
this Offer to Purchase.
August 18, 1998
NO PERSON HAS BEEN AUTHORIZED TO MAKE ANY RECOMMENDATION ON BEHALF OF
THE COMPANY AS TO WHETHER SHAREHOLDERS SHOULD TENDER OR REFRAIN FROM TENDERING
SHARES PURSUANT TO THE OFFER. NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THE OFFER OTHER
THAN THOSE CONTAINED IN THIS OFFER TO PURCHASE AND IN THE LETTER OF TRANSMITTAL.
IF GIVEN OR MADE, SUCH RECOMMENDATION, INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY.
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Section Page
- ------- ----
<S> <C>
INTRODUCTION 1
1. Number of Shares; Extension; Proration 2
2. Procedures for Tendering Shares 3
3. Withdrawal Rights 5
4. Purchase of Shares and Payment of Purchase Price 5
5. Certain Conditions of the Offer 6
6. Price Range of Shares; Dividends 8
7. Interest of Certain Persons; Transactions and Arrangements
Concerning the Shares 8
8. Source and Amount of Funds 9
9. Background and Purpose of the Offer 9
10. Certain Information About the Company 10
11. Effects of the Offer on the Market for Shares; Registration
under the Exchange Act 15
12. Certain Legal Matters; Regulatory Approval 15
13. Certain Federal Income Tax Consequences 15
14. Certain Limitation on Purchases of Shares by the Company 17
15. Extension of the Tender Period; Termination; Amendments 18
16. Fees and Expenses 19
17. Miscellaneous 19
SCHEDULE I 20
</TABLE>
<PAGE> 4
(This page intentionally left blank)
<PAGE> 5
TO THE HOLDERS OF COMMON STOCK OF NITCHES, INC.:
INTRODUCTION
Nitches, Inc., (the "Company"), hereby offers to purchase, and invites
its shareholders to tender, up to 1,000,000 shares of its common stock (the
"Shares"), at $4.00 per Share, net to the seller, in cash, (the "Purchase
Price"), upon the terms and subject to the conditions set forth in this Offer to
Purchase and in the related Letter of Transmittal (the "letter of Transmittal,"
which together with this Offer to Purchase, constitute the "Offer"). The Company
reserves the right, in its sole discretion, to purchase more than 1,000,000
Shares pursuant to the Offer. See Section 1. All Shares properly rendered and
not withdrawn prior to the expiration of the Offer will be purchased at the
Purchase Price, upon the terms and subject to the conditions of the Offer,
including the proration terms described below. Shares not purchased because of
proration will be returned.
THE OFFER IS NOT CONDITIONED ON ANY MINIMUM NUMBER OF SHARES BEING
TENDERED. THE OFFER IS, HOWEVER, SUBJECT TO CERTAIN OTHER CONDITIONS, SEE
SECTION 5.
Upon the terms and subject to the conditions of the Offer, if at the
expiration of the Offer more than 1,000,000 Shares are properly tendered, the
Company will buy Shares on a pro rata basis (with appropriate adjustments to
avoid purchases of fractional Shares) from all shareholders who properly tender
Shares and do not withdraw them prior to the expiration of the Offer. See
Sections 1 and 3. The Company will return all Shares not purchased because of
proration. Tendering shareholders will not be obligated to pay brokerage
commissions, solicitation fees or, subject to Instruction 6 of the Letter of
Transmittal, stock transfer taxes because of the Company's purchase of Shares
pursuant to the Offer. In addition, the Company will pay all fees and expenses
of D. F. King & Co., Inc. (the "Information Agent") and American Stock Transfer
& Trust Company (the "Depositary") in connection with the Offer. See Section 16.
NEITHER THE COMPANY NOR ITS BOARD OF DIRECTORS MAKES ANY RECOMMENDATION
TO ANY SHAREHOLDER AS TO WHETHER TO TENDER OR TO REFRAIN FROM TENDERING SHARES
PURSUANT TO THE OFFER. EACH SHAREHOLDER MUST MAKE HIS OR HER OWN DECISION
WHETHER TO TENDER SHARES AND, IF SO, HOW MANY SHARES TO TENDER.
The Company has been advised that each of its directors and executive
officers intend to tender Shares on at least a pro rata basis with the aggregate
of all Shares tendered by other shareholders. See Section 7.
The Shares are listed and principally traded on the National Association
of Securities Dealers SmallCap Market System (NASDAQ) under the symbol "NICH".
On August 10, 1998, the last trading day before the Company announced its
intention to commence the Offer, the closing per Share sales price as reported
on NASDAQ was $2.75. The Company urges shareholders to obtain current market
quotations of the Shares prior to tendering any Shares pursuant to the Offer.
See also Section 6 regarding entitlement to dividends.
The 1,000,000 Shares that the Company is offering to purchase pursuant
to the Offer represent approximately 49.70% of the 2,012,030 Shares issued and
outstanding as of August 18, 1998. In addition, as of such date, an aggregate of
up to 294,000 additional Shares were issuable upon exercise of outstanding stock
options.
Shareholders whose Shares are not purchased in the Offer will obtain a
proportionate increase in their ownership interest in the Company immediately
after consummation of the Offer, depending on the number of Shares purchased as
a result of the Offer. Any Shares acquired by the Company pursuant to the Offer
will initially be cancelled and become authorized and unissued Shares and will
be available for issuance by the Company without further shareholder action
(except as required by applicable law or the rules of any securities exchange on
which the Shares are then listed) for general or other corporate purposes,
including stock splits or dividends, acquisitions, the raising of additional
capital for use in the Company's business and the implementation of employee
benefit plans. See also Section 9.
The Offer to Purchase and the Letter of Transmittal are being mailed to
holders of record of Shares and will be furnished to brokers, dealers,
commercial banks, trust companies and similar persons whose names, or the names
of whose nominees, appear on the Company's shareholder list or, if applicable,
who are listed as participants in a clearing agency's security position listing,
for subsequent transmittal to beneficial owners of Shares.
<PAGE> 6
1. NUMBER OF SHARES; EXTENSION; PRORATION.
Number of Shares. Upon the terms and subject to the conditions of the
Offer, the Company will accept for payment and pay for (and thereby purchase) up
to 1,000,000 Shares or such lesser number of Shares as are properly tendered,
and not withdrawn in accordance with Section 3, prior to the Expiration Date (as
defined below) at a price of $4.00 per Share net to the seller in cash. The term
"Expiration Date" means 5:00 P.M., New York City time, on September 16, 1998,
unless and until the Company shall have extended the period of time during which
the Offer will remain open, in which event the term "Expiration Date" shall
refer to the latest time and date at which the Offer, as so extended by the
Company, shall expire. If the Offer is over-subscribed, Shares tendered and not
withdrawn prior to the Expiration Date will be prorated. The proration period
also expires at the Expiration Date.
The Company reserves the right to purchase more than 1,000,000 Shares
pursuant to the Offer. In accordance with applicable regulations of the
Securities and Exchange Commission (the "Commission"), the Company may accept
for payment pursuant to the Offer an additional amount of Shares not to exceed
2% of the Shares (approximately 40,241 Shares based upon Shares outstanding as
of August 18, 1998) without extending the Offer.
See below and Section 15 for a description of the Company's rights to
extend the time during which the Offer is open and to delay, terminate or amend
the Offer. See also Section 5 for a description of certain conditions of the
Offer.
Extension. If the following events occur:
(a) the Company increases or decreases the price to be paid for
the Shares, or the Company increases the number of Shares being sought
and any such increase in the number of Shares being sought exceeds 2% of
the outstanding Shares, or the Company decreases the number of Shares
being sought, and
(b) the Offer is scheduled to expire less than ten business days
from and including the date that notice (the "Notice") of such increase
or decrease is first published, sent or given in the manner set forth in
Section 15.
then the Offer will be extended so that it will not expire until at least the
end of the tenth business day from and including the date of such Notice. For
purposes of the Offer, a "business day" means any day other than a Saturday,
Sunday or federal holiday until 5:00 P.M., New York City time on such day.
Acceptance in Full. Upon the terms and subject to the conditions of the
Offer, if the number of Shares properly tendered and not withdrawn prior to the
Expiration Date is less than or equal to 1,000,000 Shares (or such greater
number of Shares as the Company may elect to purchase pursuant to the Offer),
the Company will, upon the terms and subject to the conditions of the Offer,
accept for payment at the Purchase Price all Shares so tendered.
Proration. Upon the terms and subject to the conditions of the Offer, in
the event that at the Expiration Date a greater number of Shares than 1,000,000
Shares (or such greater number of Shares as the Company may elect to purchase
pursuant to the Offer) are properly tendered, the Company will accept all Shares
properly tendered and not withdrawn prior to the Expiration Date on a pro rata
basis (with appropriate adjustments to avoid purchases of fractional shares)
based upon the number of such Shares.
In the event the proration of tendered Shares is required, the Company
will determine the final proration factor as promptly as practicable following
the Expiration Date. Proration for each shareholder tendering Shares shall be
based on the ratio of the number of Shares tendered by such shareholder to the
total number of Shares tendered by all shareholders. Although the Company does
not expect to be able to announce the final results of any proration until
approximately seven trading days after the Expiration Date, it will announce
preliminary results of the prorations by press release as promptly as
practicable following the Expiration Date. Shareholders may obtain such
preliminary information from the Information Agent and may also be able to
obtain such information from their brokers or other nominees. All Shares not
purchased pursuant to the Offer because of proration will be returned to the
tendering shareholders at the Company's expense as promptly as practicable
following the Expiration Date.
2
<PAGE> 7
2. PROCEDURES FOR TENDERING SHARES.
Proper Tender of Shares. For Shares to be properly tendered pursuant to
the Offer:
(a) the certificates for such Shares or confirmation of delivery of such
Shares pursuant to the procedure for book-entry transfer set forth below,
together with a properly completed and duly executed Letter of Transmittal (or
facsimile thereof) including any required signature guarantees, and any other
documents required by the Letter of Transmittal, must be received prior to the
Expiration Date by the Depositary at its address set forth on the back cover of
this Offer to Purchase; or
(b) the tendering shareholder must comply with the guaranteed delivery
procedure set forth below.
It is a violation of Section 14(e) of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), and Rule 14e-4 promulgated thereunder,
for a person to tender Shares for such person's own account unless the person so
tendering:
(a) owns such Shares; or
(b) owns other securities convertible into or exchangeable for Shares
or owns an option, warrant or right to purchase Shares and intends to acquire
such Shares for tender by conversion, exchange or exercise of such option,
warrant or right.
Section 14(e) and Rule 14e-4 contain a similar restriction applicable to a
tender or guarantee of a tender on behalf of another person.
The acceptance of Shares by the Company for payment will constitute a
binding agreement between the tendering shareholder and the Company upon the
terms and subject to the conditions of the Offer, including the tendering
shareholder's representation that (I) such shareholder owns the Shares being
tendered within the meaning of Rule 14e-4; and (ii) the tender of such Shares
complies with Rule 14e-4.
Signature Guarantees and Method of Delivery. No signature guarantee is
required on a Letter of Transmittal (i) if such Letter of Transmittal is signed
by the registered institutional holder of the Shares (which term, for purposes
of the Offer, includes The Depository Trust Company [the "Book-Entry Transfer
Facility"] whose name appears on a security position listing as the holder of
such Shares) tendered therewith and such holder has not completed either the box
entitled "Special Delivery Instructions" or the box entitled "Special Payment
Instructions" on the Letter of Transmittal; or (ii) if Shares are tendered for
the account of a member firm of a registered national securities exchange, a
member of the National Association of Securities Dealers, Inc. or a commercial
bank or trust company having an office, branch or agency in the United States
(each such entity being hereinafter referred to as an "Eligible Institution").
In all other cases, all signatures on a Letter of Transmittal must be
guaranteed by an Eligible Institution. See Instruction 1 of the Letter of
Transmittal. If a certificate representing Shares is registered in the name of a
person other than the signer of a Letter of Transmittal, or if payment is to be
made, or Shares not purchased or tendered are to be issued, to a person other
than the registered holder, the certificate must be endorsed or accompanied by
an appropriate stock power, in either case signed exactly as the name of the
registered holder appears on the certificate, with the signature on the
certificate guaranteed by an Eligible Institution. In all cases, payment for
Shares tendered and accepted for payment pursuant to the Offer will be made only
after timely receipt by the Depositary of (i) certificates for such Shares (or
timely confirmation of a book-entry transfer of such Shares into the
Depositary's account at the Book-Entry Transfer Facility), (ii) a properly
completed and duly executed Letter of Transmittal (or facsimile thereof) and
(iii) any other documents required by the Letter of Transmittal. The method of
delivery of all documents, including stock certificates, the Letter of
Transmittal and any other required documents, is at the election and risk of the
tendering shareholder. If delivery is by mail, registered mail with return
receipt requested, properly insured, is recommended.
Book-Entry Transfer. The Depositary will establish an account with
respect to the Shares at the Book-Entry Transfer Facility for purposes of the
Offer within two business days after the date of this Offer to Purchase. Any
financial institution that is a participant in a Book-Entry Transfer Facility's
system may make book-entry
3
<PAGE> 8
transfer of Shares by causing such Facility to transfer such Shares into the
Depositary's account in accordance with such Facility's procedure for such
transfer. Even though delivery of Shares may be effected through book-entry
transfer into the Depositary's account at the Book-Entry Transfer Facility,
either (i) a properly completed and duly executed Letter of Transmittal (or
facsimile thereof) with any required signature guarantees and any other required
documents must be transmitted to and received by the Depositary at its address
set forth on the back cover of this Offer to Purchase prior to the Expiration
Date; or (ii) the guaranteed delivery procedure set forth below must be
followed. Delivery of a Letter of Transmittal and any other required documents
to the Book-Entry Transfer Facility does not constitute delivery to the
Depositary.
Guaranteed Delivery. If a shareholder desires to tender Shares pursuant
to the Offer and such shareholder's certificates cannot be delivered to the
depositary prior to the Expiration Date or the procedure for book-entry transfer
cannot be completed on a timely basis or all require documents cannot be
delivered to the Depositary prior to the Expiration Date, such Shares may
nevertheless be tendered provided that all of the following conditions are
satisfied:
(a) such tender is made by or through an Eligible Institution;
(b) the Depositary receives (by hand, mail or facsimile
transmission) prior to the Expiration Date, a properly completed and
duly executed Notice of Guaranteed Delivery substantially in the form
the Company has provided with this Offer to Purchase; and
(c) the certificates for all tendered Shares in proper form for
transfer or confirmation of book-entry transfer of such Shares into the
Depositary's account at any Book-Entry Transfer Facility, together with
a properly completed and duly executed Letter of Transmittal (or
facsimile thereof) and any other documents required by the Letter of
Transmittal, are received by the Depositary within five trading days
after the date the Depositary receives such Notice of Guaranteed
Delivery.
Determination of Validity, Rejection of Shares, Waiver of Defects, No
Obligation to Give Notice of Defects. All questions as to the number of Shares
to be accepted, and the form, eligibility, validity (including time of receipt)
and acceptance for payment of any tender of Shares will be determined by the
Company, in its sole discretion, which determinations shall be final and binding
on all parties. The Company reserves the absolute right to reject any or all
tenders it determines not to be in proper form or the acceptance for payment of
or payment for which may, in the opinion of the Company's counsel, be unlawful.
The Company also reserves the absolute right to waive any defect or irregularity
in the tender of any particular Shares. No tender of Shares will be deemed to be
properly made until all defects and irregularities have been cured or waived.
Neither the Company nor the Depositary nor any other person is or will be
obligated to give notice of any defects or irregularities in tenders, and
neither of them will incur any liability for failure to give such notice.
Federal Income Tax Withholding. To prevent back up federal income tax
withholding equal to 31% of the gross payments made pursuant to the Offer, each
shareholder who does not otherwise establish an exemption from such withholding
must certify to the Depositary such shareholder's correct social security number
or taxpayer identification number (or certify that such taxpayer is awaiting
such number) and provide certain other information by completing the Substitute
Form W-9 included in the Letter of Transmittal. A foreign shareholder who is an
individual must submit a Form W-8 (obtainable from the Depositary) in order to
avoid back up withholding.
The Depositary will withhold 31% of the gross payment payable to a
foreign shareholder unless the Depositary determines that a reduced rate of
withholding or an exemption from withholding is applicable. For this purpose, a
foreign shareholder is a shareholder that is not (i) a citizen or resident of
the United States, (ii) a corporation, partnership or other entity created or
organized in or under the laws of the United States or any political subdivision
thereof, or (iii) any estate or trust the income of which is subject to United
States federal income taxation regardless of the source of such income. The
Depositary will determine a shareholder's status as a foreign shareholder and
eligibility for a reduced rate of, or an exemption from, withholding by
reference to the shareholder's address and to any outstanding certificates or
statements concerning eligibility for a reduced rate of, or exemption from,
withholding unless facts and circumstances indicate that reliance is not
warranted. A foreign shareholder who has not previously submitted the
appropriate certificates or statements with respect to a reduced rate of, or
exemption from, withholding for which such shareholder may be eligible should
consider doing so in order to avoid over-withholding. A foreign shareholder may
be eligible to obtain a refund of tax withheld if such shareholder
4
<PAGE> 9
meets one of the tests for capital gain or loss treatment described in Section
13 or its otherwise able to establish that no tax or a reduced amount of tax was
due.
For a discussion of certain other federal income tax consequences to
tendering shareholders, see Section 13.
3. WITHDRAWAL RIGHTS.
Except as otherwise provided in this Section, a tender of Shares made
pursuant to the Offer is irrevocable. Shares tendered to the Offer may be
withdrawn at any time prior to the Expiration Date and, unless thereafter
accepted for payment by the Company, may also be withdrawn after 5:00 P.M., New
York City time, on September 16, 1998.
For a withdrawal to be effective, the Depositary must timely receive a
written, telegraphic, telex or facsimile transmission notice of withdrawal at
its address set forth on the back cover of this Offer to Purchase. Such notice
of withdrawal must specify the name of the person who tendered the Shares to be
withdrawn, the number of Shares tendered, the number of Shares to be withdrawn
and the name of the registered holder, if different from that of the person who
tendered such Shares. If the certificates for Shares to be withdrawn have been
delivered or otherwise identified to the Depositary, then, prior to the physical
release of such certificates, the tendering shareholder must also submit the
serial numbers of the particular certificates evidencing such Shares and the
signature on the notice of withdrawal must be guaranteed by an Eligible
Institution (except in the case of Shares tendered by an Eligible Institution).
If Shares have been tendered pursuant to the procedure for book-entry transfer
set forth in Section 2, the notice of withdrawal must specify the name and the
account number at the applicable Book-Entry Transfer Facility to be credited
with the withdrawn Shares and otherwise comply with the procedures of such
facility.
All questions as to the form and validity (including time of receipt) of
notices of withdrawal will be determined by the Company, in its sole discretion,
which determination shall be final and binding in all parties. Neither the
Company nor the Depositary nor any other person is or will be obligated to give
notice of any defects or irregularities in any notice of withdrawal, and neither
of them will incur any liability for failure to give such notice. Any Shares
properly withdrawn will thereafter be deemed not tendered for purposes of the
Offer. Withdrawn Shares may, however, be retendered prior to the Expiration Date
by again following any of the procedures set forth in Section 2.
4. PURCHASE OF SHARES AND PAYMENT OF PURCHASE PRICE.
Upon the terms and subject to the conditions of the Offer, the Company
will accept for payment and pay for (and thereby purchased) Shares properly
tendered, and not withdrawn prior to the Expiration Date, as promptly as
practicable following the Expiration Date. For purposes of the Offer, the
Company will be deemed to have accepted for payment (and thereby purchase),
subject to proration, Shares which are tendered and not withdrawn prior to the
Expiration Date if and when it gives oral and written notice to the Depositary
of its acceptance of such Shares for payment pursuant to the Offer.
Upon the terms and subject to the conditions of the Offer, promptly
following the Expiration Date the Company will accept for payment and pay a
single per Share Purchase Price for 1,000,000 Shares (subject to increase or
decrease as provided in Section 1 and Section 15) or such lesser number of
Shares as are properly tendered and not withdrawn as permitted in Section 3.
Payment for Shares accepted for payment pursuant to the Offer will be
made by deposit of the aggregate Purchase Price therefor with the Depositary
which will act as the agent for shareholders whose Shares have been accepted for
payment for the purpose of receiving payment from the Company and transmitting
payment to such shareholders. In all cases, payment for Shares accepted for
payment pursuant to the Offer will be made only after timely receipt by the
Depositary of certificates for such Shares (or of a timely confirmation of a
book-entry transfer of such Shares into the Depositary's account at the
Book-Entry Transfer Facility), a properly completed and duly executed Letter of
Transmittal (or duly executed photocopy thereof) and any other documents
required by the Letter of Transmittal. The Company expressly reserves the right,
in its sole discretion, to delay the acceptance for payment of or payment for
Shares in order to comply, in whole or in part, with any applicable legal
requirement or court order. See Sections 5 and 12. The Company's reservation of
the right to delay payment for Shares that the Company
5
<PAGE> 10
has accepted for payment is limited by Rule 13e-4(f)(5) promulgated under the
Exchange Act, which rule requires that the Company pay the consideration offered
or return the Shares tendered promptly after termination or withdrawal of a
tender offer.
In the event of proration, the Company will determine the final
proration factor and pay for Shares accepted for payment promptly following the
Expiration Date. However, the Company does not expect to be able to announce the
final results of any proration until approximately seven trading days after the
Expiration Date. Certificates for all Shares not purchased, including Shares not
purchased because of proration, will be returned (or, in the case of Shares
tendered by book-entry transfer, such Shares will be credited to the account
maintained with the Book-Entry Transfer Facility by the participant therein who
so delivered such Shares) as soon as practicable following the Expiration Date
without expense to the tendering shareholders. Under no circumstances will the
Company pay interest on the aggregate Purchase Price or any portion thereof.
The Company will pay the stock transfer taxes, if any, payable on
account of the transfer to it of Shares purchased pursuant to the Offer;
provided, however, that if payment of the Purchase Price is to be made to, or
(in the circumstances permitted by the Offer) if unpurchased Shares are to be
registered in the name of any person other than the registered holder, or if
tendered certificates are registered in the name of any person other than the
person signing the Letter of Transmittal, the amount of any stock transfer taxes
(whether imposed on the registered holder or such other person) payable on
account of such payment, transfer or tender will be deducted from the Purchase
Price paid to any such holder or person unless evidence satisfactory to the
Company of the Payment of such taxes or exemption therefrom is submitted. See
Instruction 6 of the Letter of Transmittal.
ANY TENDERING SHAREHOLDER OR OTHER PAYEE WHO FAILS TO COMPLETE FULLY AND
TO SIGN THE SUBSTITUTE FORM W-9 INCLUDED IN THE LETTER OF TRANSMITTAL MAY BE
SUBJECT TO REQUIRED FEDERAL INCOME TAX WITHHOLDING OF 31% OF THE GROSS PROCEEDS
PAYABLE TO SUCH SHAREHOLDER OR OTHER PAYEE PURSUANT TO THE OFFER. SEE SECTION 2.
5. CERTAIN CONDITIONS OF THE OFFER.
Notwithstanding any other provision of the Offer, the Company shall not
be required to accept for payment or pay for any Shares tendered, and may
terminate or amend the Offer or may postpone the acceptance for payment of, or
the payment for, Shares tendered, if at any time on or after August 18, 1998,
and at or before the time of acceptance for payment of or payment for any such
Shares, any of the following events shall have occurred (or shall have been
determined by the Company to have occurred) which, in the Company's sole
judgement in any such case and regardless of the circumstances giving rise
thereto (including any action or omission to act by the Company), makes it
inadvisable to proceed with the Offer or with such acceptance for payment or
payment:
(a) there shall be any claim, action or proceeding threatened,
pending or instituted, or any consent, license, authorization, permit,
or approval withheld, or any statute, rule, regulation, judgment, order
or injunction threatened, proposed, sought, promulgated, enacted,
entered, amended, enforced or deemed to be applicable to the Offer or
the Company or any of its subsidiaries, by or before any court or any
government or governmental, regulatory or administrative authority,
agency or tribunal, domestic or foreign, which challenges the making of
the Offer or the acquisition of Shares pursuant to the Offer or
otherwise relates in any manner to the Offer or which could directly or
indirectly:
(1) make the acceptance for payment of, or payment for,
some or all of the Shares illegal or otherwise restrict or
prohibit consummation of the Offer;
(2) delay or restrict the ability of the Company, or
render the Company unable, to accept for payment or pay for some
or all of the Shares;
(3) in the Company's sole judgement, materially affect
the business, condition (financial or other), income, operations
or prospects of the Company and its subsidiaries, taken as a
whole, or otherwise materially impair in any way the
contemplated future conduct of the business of the Company or
any of its subsidiaries; or
(4) materially impair the Offer's contemplated benefits
to the Company; or
6
<PAGE> 11
(b) there shall have occurred:
(1) the declaration of any banking moratorium or
suspension of payments in respect of banks in the United
States;
(2) any general suspension of trading in, or
limitation on prices for, securities on any United
States national securities exchange or in the
over-the-counter market;
(3) the commencement of a war, armed hostilities
or any other national or international crisis directly
or indirectly involving the United States;
(4) any limitation (whether or not mandatory) by
any governmental, regulatory or administrative agency or
authority on, or any event that in the Company's sole
judgment might affect, the extension of credit by banks
or other lending institutions in the United States;
(5) any significant decrease in the market price
of the Shares ($2.75 per Share at the close of business
on August 10, 1998) or in the market prices of equity
securities generally in the United States or any change
in the general political, economic or financial
conditions in the United States or abroad that in the
Company's sole judgment, could have a material adverse
effect on the business, condition (financial or other),
income operations or prospects of the Company and its
subsidiaries, taken as a whole;
(6) in the case of any of the foregoing existing
at the time of the commencement of the Offer, a material
acceleration or worsening thereof;
(7) it is publicly disclosed or the Company
learns that any person or "group" (within the meaning of
section 13(d)(3) of the Exchange Act) has acquired, or
proposes to acquire, more than five percent of the
outstanding Shares, other than acquisitions of
additional Shares representing not more than two percent
of the outstanding Shares by any person or group owning
more than five percent of the outstanding Shares on the
date hereof, as disclosed in a Schedule 13D or 13G on
file with the Commission on that date;
(8) a default has occurred under the Credit
Agreement (as defined in Section 8), and/or a
representation or warranty thereunder of the Company is
no longer accurate; or
(9) any decline in either the Dow Jones
Industrial Average (8,574 at the close of business on
August 10, 1998) or the Standard & Poor's Index of 500
Companies (1083 at the close of business August 10,
1998) by an amount in excess of 10% measured from the
close of business in August 10, 1998; or
(c) any charge shall occur or be threatened in the business,
condition (financial or other), income, operations or prospects of the
Company and its subsidiaries, taken as a whole, which, in the Company's
sole judgment, is or may be material to the Company or its shareholders;
or
(d) a tender or exchange offer for any or all of the Shares
(other than the Offer), or any merger, business combination or other
similar transaction with or involving the Company or any of its
subsidiaries, shall have been proposed, announced or made by any person,
including the Company, or the Company shall determine to make a
disposition of all or substantially all of its assets other than in the
regular course of its business.
The foregoing conditions are for the Company's sole benefit and may be
asserted by the Company regardless of the circumstances giving rise to any such
condition (including any action or omission to act by the Company) or may be
waived by the Company in whole or part. The Company's failure at any time to
exercise any of the foregoing rights shall not be deemed a waiver of any such
right and each such right shall be deemed an ongoing right which may be asserted
at any time and from time to time. Any determination by the Company concerning
any of the events described in this Section and any related judgment by the
Company regarding the
7
<PAGE> 12
inadvisability of proceeding with the purchase of or payment for Shares tendered
shall be final and binding on all parties.
6. PRICE RANGE OF SHARES; DIVIDENDS.
The Shares are traded on NASDAQ. The following table sets forth for the
fiscal periods indicated the high and low closing per Share sales prices on
NASDAQ and the dividends declared per Share over the past two years as reported
in published financial sources. All per share information has been adjusted to
reflect a two-for-one stock split effective May 4, 1998:
<TABLE>
<CAPTION>
High Low Dividends
---- --- ---------
<S> <C> <C> <C>
Fiscal 1998:
3rd Quarter (through
May 31, 1998) 3.313 2.563
2nd Quarter 3.406 2.50
1st Quarter 3.438 2.281
Fiscal 1997:
4th Quarter 3.50 2.6875
3rd Quarter 4.125 2.50
2nd Quarter 3.375 2.50
1st Quarter 4.5625 2.6875
Fiscal 1996:
4th Quarter 4.5625 3.1875 $.50
</TABLE>
On August 10, 1998, the last trading day before the Company announced
its intention to commence the Offer, the closing per Share sales price as
reported on NASDAQ was $2.75. The Company urges shareholders to obtain current
market quotations for the Shares prior to tendering any Shares pursuant to the
Offer.
In April 1994, the Company suspended its regular quarterly dividend, and
has not declared a dividend since a special dividend of $.50 per share was paid
on September 30, 1996. Were any dividend to be announced, shareholders would not
be entitled to receive any dividend with respect to Shares tendered and
purchased by the Company prior to the record date for such dividend.
The timing and amount of future dividends declared by the Board of
Directors is at the discretion of the Board of Directors and will be dependent
upon the Company's results of operations and financial condition, cash
requirements for its business, contractual restrictions on payment of dividends,
economic and market conditions and other factors deemed relevant by the
Company's Board of Directors.
7. INTEREST OF CERTAIN PERSONS; TRANSACTIONS AND ARRANGEMENTS CONCERNING THE
SHARES.
Mr. Arjun C. Waney is the beneficial owner of approximately 21.6% of the
outstanding Shares and may be deemed to control the Company.
As of August 11, 1998, the Company's directors and executive officers as
a group beneficially owned an aggregate of approximately 44.2% of the
outstanding Shares (which includes 294,000 Shares which the executive officers
of the Company have the right to acquire through exercises of stock options).
See Schedule I.
The Company has been advised that each director and executive officer
will tender shares pursuant to this Offer on at least a pro rata basis with the
aggregate amount tendered by all other shareholders.
The Company engaged in no transactions involving Shares during the forty
business days prior to August 11, 1998. To the Company's knowledge, none of the
directors or executive officers of the Company, none of its associates, nor any
person controlling the Company or any executive officer or director of any such
person has effected any transactions in the Shares during the 40 business days
prior to the date hereof.
Arjun Waney and Luther Henderson, each directors and principal
shareholders of the Company have entered into a Stock Purchase Agreement with
Steven P. Wyandt, a director and President of the Company, pursuant to which
Messrs. Waney and Henderson have agreed to sell, and Mr. Wyandt has agreed to
purchase, all of the
8
<PAGE> 13
shares of the Company's common stock owned by Messrs. Waney and Henderson and
not purchased pursuant to the Offer. The consummation of the transactions
contemplated by the Stock Purchase Agreement is subject to the condition that
the Company close upon the Offer and purchase not less than 1,000,000 Shares.
Assuming that all of the outstanding Shares are tendered, after giving effect to
the transactions contemplated by the Offer and the Stock Purchase Agreement,
Messrs. Waney and Henderson will not have any equity ownership in the Company
and Mr. Wyandt will own approximately 30% of the Company's outstanding common
stock. In the event that the shareholders other than Messrs. Waney and Henderson
do not tender all of their shares, then the portion of Mr. Waney's and Mr.
Henderson's shares acquired by the Company pursuant to the Offer will increase,
and the portion acquired by Mr. Wyandt pursuant to the Stock Purchase Agreement
will decline. Messrs. Waney and Henderson have indicated a desire to remain on
the Board of Directors of the Company following the consummation of the Offer,
and Mr. Waney will continue to serve as Chairman of the Board of Directors. Mr.
Wyandt has indicated to the Company that he intends to hold any shares he
acquires pursuant to the Stock Purchase Agreement for investment purposes and
not with a view to effect a change in the management or policies of the Company.
Under the Stock Purchase Agreement, Mr. Wyandt would acquire the shares
for cash at a price per share equal to that paid in connection with the Offer.
Mr. Wyandt has indicated that he intends to acquire the funds for the purchase
from a third party lender and will pledge the shares acquired as security for
such loan.
The Offer is not conditional upon the execution of the Stock Purchase
Agreement or consummation of the transactions contemplated thereby.
Except as set forth in this Offer to Purchase, neither the Company nor,
to the Company's knowledge, any of its directors or executive officers, or any
person controlling the Company or any executive officer or director of any such
person, is a party to any contract, arrangement, understanding or relationship
with any other person relating, directly or indirectly, to the Offer with
respect to any securities of the Company (including, but not limited in, any
contract, arrangement, understanding or relationship concerning the transfer or
the voting of any such securities, joint ventures, loans or option arrangements,
puts or calls, guarantees of loans, guarantees against loss or the giving or
withholding of proxies, consents or authorizations).
8. SOURCE AND AMOUNT OF FUNDS.
Assuming that the Company purchases 1,000,000 Shares pursuant to the
Offer, the Company expects the maximum aggregate cost, including all fees and
expenses related to the Offer, to be approximately $4,075,000. It is anticipated
that the funds required to pay all such costs will be obtained from cash and
cash equivalents of the Company. The Company may also borrow a portion of such
funds pursuant to its Credit Agreement.
The Company has agreements (the "Credit Agreement") with Congress
Talcott Corporation ("Congress") pursuant to which the Company sells
substantially all of its trade accounts receivable on a pre-approved
non-recourse basis. Payment for such receivables is made at the time customers
make payment to Congress or, if a customer is financially unable to make
payment, within approximately 180 days of the invoice due date. The Company may
request advances in anticipation of customer collections at Congress' prime rate
(currently 8.5%) less one-half percent, and open letters of credit through
Congress. The amount of such borrowings, including a portion of outstanding
letters of credit, are limited to certain percentages of outstanding accounts
receivable and finished goods inventory owned by the Company and are
collateralized by all of the assets of the Company. Under these agreements, the
Company is required to maintain certain levels of net worth and working capital.
The Company has discussed the material terms of the Offer with Congress and
based upon representations and warranties from Congress does not believe that
the Offer will materially affect its credit arrangements under the Credit
Agreement. The Credit Agreement can be terminated by either party on 60-days
prior written notice. Borrowings under the Credit Agreement, if any, are
expected to be repaid over not more than 12 months by cash flow from operations.
The Credit Agreement has been filed with the Commission. The foregoing
description of the Credit Agreement is qualified in its entirety by reference to
such document, which may be examined and a copy of which may be obtained as set
forth in Section 10 "Certain Information About the Company--Additional
Information."
9. BACKGROUND AND PURPOSE OF THE OFFER.
Purpose of the Offer. The Objective of the Offer is to deliver to
shareholders a portion of the Company's current value and to provide the
Company's shareholders with a means of furthering their investment objectives
with
9
<PAGE> 14
respect to the Shares. The Offer provides shareholders who wish to currently
realize a portion of their investment in the Company in cash with an opportunity
to sell a portion of, or perhaps all, their Shares at a premium over current
market prices of the Shares. The Offer also is intended to provide shareholders
with an opportunity to increase their proportionate ownership interest in the
Company, either by not participating in the Offer or by participating in the
Offer and reinvesting their after-tax proceeds in additional Shares.
NEITHER THE COMPANY NOR ITS BOARD OF DIRECTORS MAKES ANY RECOMMENDATION
TO ANY SHAREHOLDER AS TO WHETHER TO TENDER OR TO REFRAIN FROM TENDERING ANY OR
ALL OF SUCH SHAREHOLDER'S SHARES AND HAS NOT AUTHORIZED ANY PERSON TO MAKE ANY
SUCH RECOMMENDATION. EACH SHAREHOLDER IS URGED TO EVALUATE CAREFULLY ALL
INFORMATION IN THE OFFER, CONSULT THE SHAREHOLDER'S OWN INVESTMENT AND TAX
ADVISORS AND MAKE SUCH SHAREHOLDER'S OWN DECISION WHETHER TO TENDER SHARES AND,
IF SO, HOW MANY SHARES TO TENDER.
Any Shares acquired by the Company pursuant to the Offer will initially
be canceled and become authorized and unissued Shares and will be available for
issuance by the Company without further shareholder action (except as required
by applicable law or the rules of any securities exchanges on which the Shares
are then listed). Such Shares could be issued for general or other corporate
purposes, including stock splits or dividends, acquisitions, the raising of
additional capital for use in the Company's business and the implementation of
employee benefit plans.
10. CERTAIN INFORMATION ABOUT THE COMPANY.
General. The Company is an importer and wholesaler of women's
sportswear; its subsidiary, Body Drama, Inc., imports and wholesales women's
intimate apparel, including daywear and sleepwear. The Company is a California
corporation founded in 1971. The Company's principal executive offices are
located at 10280 Camino Santa Fe, San Diego, California 92121, and its telephone
number is (619) 625-2633.
Recent Developments. The Company has determined to pursue a strategy of
seeking niche product markets which offer the potential for higher profit
margins. In connection with this strategy, the Company has sold or discontinued
product lines which have historically contributed to gross revenues, but have
not generated significant profits in recent years. The Company has also reduced
its overhead in connection with these dispositions. However, no assurance can be
given that the Company's efforts in this regard will result in increased profit
margins or profitability. The Company periodically evaluates acquisitions of
interests in, or combinations with, other companies engaged in businesses that
may or may not be related to the Company's current business. It will continue to
do so in the future, with an emphasis for seeking product markets in the apparel
industry which offer the potential for above average profit margins. In
connection with these activities, the Company may consider issuing additional
equity securities or incurring indebtedness.
Historical Financial Information. The following table sets forth certain
historical consolidated financial information of the Company and its
subsidiaries. The historical financial information as of and for the years ended
August 31, 1997 and 1996 has been taken from the Company's audited consolidated
financial statements included in the Company's Annual Report on Form 10-K for
the fiscal year ended August 31, 1997 (the "1997 10-K"). The historical
consolidated financial information as of and for the nine-month periods ended
May 31, 1998 and 1997 has been taken from the unaudited consolidated financial
statements included in the Company's Quarterly Report on Form 10-Q for the
quarter ended May 31, 1998 (the "1998 Third Quarter 10-Q"). More comprehensive
financial information is included in the 1997 10-K and the 1998 Third Quarter
10-Q. The historical information as of and for the nine-month periods ended May
31, 1998 and 1997 has been derived from the Company's unaudited financial
statements for such periods, which statements in the opinion of the Company's
management include all adjustments (which adjustments consist of normal
recurring entries) that are necessary for a fair presentation of such
information.
10
<PAGE> 15
The following historical financial information is qualified in its
entirety by, and should be read in conjunction with, the 1997 10-K and 1998
Third Quarter 10-Q, incorporated by reference herein.
Nitches, Inc. and Subsidiaries
Consolidated Balance Sheets(1)
<TABLE>
<CAPTION>
May 31, August 31,
1998 1997
----------- -----------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 1,264,000 $ 955,000
Receivables:
Trade accounts, less allowances ($402,000 at May 31,
1998 and $352,000 at August 31, 1997) 4,561,000 6,906,000
Income taxes receivable 241,000 41,000
Due from affiliates and employees 263,000 82,000
----------- -----------
5,065,000 7,029,000
Inventories, net 2,791,000 4,272,000
Deferred income taxes 769,000 769,000
Other current assets 2,274,000 860,000
----------- -----------
Total current assets 12,163,000 13,885,000
Furniture, fixtures and equipment, net 140,000 219,000
Deferred income taxes 699,000 699,000
Other assets 80,000 276,000
----------- -----------
$13,082,000 $15,079,000
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 1,842,000 $ 2,377,000
----------- -----------
Total current liabilities 1,842,000 2,377,000
Deferred income taxes 972,000 1,021,000
Shareholders' equity:
Preferred stock, no par value, 25,000,000 shares
authorized Common stock, no par value,
50,000,000 shares authorized; (2,012,030
issued and outstanding at May 31, 1998; 2,345,192
issued and outstanding at August 31, 1997) 1,314,000 2,421,000
Retained earnings 8,954,000 9,260,000
----------- -----------
Total shareholders' equity 10,268,000 11,681,000
----------- -----------
$13,082,000 $15,079,000
=========== ===========
</TABLE>
(Notes on page 14)
11
<PAGE> 16
Nitches, Inc. and Subsidiaries
Consolidated Statements of Operations(1)
<TABLE>
<CAPTION>
Nine Months ended
May 31,
Year Ended August 31, (unaudited)
-------------------------------- --------------------------------
1997 1996 1998 1997
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net sales $ 48,414,000 $ 54,381,000 $ 23,740,000 $ 37,961,000
Cost of goods sold 36,190,000 40,396,000 18,009,000 28,440,000
------------ ------------ ------------ ------------
Gross profit 12,224,000 13,985,000 5,731,000 9,520,000
Expenses:
Selling, general and administrative 11,888,000 12,547,000 6,437,000 9,042,000
------------ ------------ ------------ ------------
Income (loss) from operations 336,000 1,437,000 (706,000) 478,000
Other income 151,000 319,000 229,000 70,000
Interest expense (167,000) (52,000) (24,000) (96,000)
------------ ------------ ------------ ------------
Income (loss) before income taxes 320,000 1,705,000 (501,000) 452,000
Provision (benefit) for income taxes 125,000 279,000 (195,000) 131,000
------------ ------------ ------------ ------------
Net income (loss) $ 195,000 $ 1,426,000 ($ 306,000) $ 321,000
============ ============ ============ ============
Earnings per share:
Basic $ .08 $ .57 ($ .14) $ .13
============ ============ ============ ============
Diluted $ .08 $ .55 ($ .14) $ .13
============ ============ ============ ============
</TABLE>
(Notes on page 14)
12
<PAGE> 17
Nitches, Inc. and Subsidiaries
Pro Forma Consolidated Balance Sheets(2), (3)
(Unaudited)
<TABLE>
<CAPTION>
Year ended August 31, 1997 Nine Months ended May 31, 1998
------------------------------------------ ------------------------------------------
Pro Forma Pro Forma
Historical Adjustments Pro Forma Historical Adjustments Pro Forma
------------ -------------- ------------ ------------ ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 955,000 ($ 955,000) $ 0 $ 1,264,000 ($ 1,264,000) $ 0
Receivables:
Trade accounts 6,906,000 6,906,000 4,561,000 4,561,000
Income taxes receivable 41,000 149,000 190,000 241,000 119,000 360,000
Due from affiliates and employees 82,000 82,000 263,000 263,000
------------ ------------ ------------ ------------
7,029,000 7,178,000 5,065,000 5,184,000
Inventories 4,272,000 4,272,000 2,791,000 2,791,000
Deferred income taxes 769,000 769,000 769,000 769,000
Other current assets 860,000 860,000 2,274,000 2,274,000
------------ ------------ ------------ ------------
Total current assets 13,885,000 13,079,000 12,163,000 11,018,000
Furniture, fixtures and equipment 219,000 219,000 140,000 140,000
Deferred income taxes 699,000 699,000 699,000 699,000
Other assets 276,000 276,000 80,000 80,000
------------ ------------ ------------ ------------
$ 15,079,000 14,273,000 $ 13,082,000 11,937,000
============ ============ ============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Notes payable $ 0 $ 3,502,000 $ 3,502,000 $ 0 $ 3,116,000 $ 3,116,000
Accounts payable and accrued expenses 2,377,000 2,377,000 1,842,000 1,842,000
------------ ------------ ------------ ------------
Total current liabilities 2,377,000 5,879,000 1,842,000 4,958,000
Deferred income taxes 1,021,000 1,021,000 972,000 972,000
Shareholders' equity:
Common stock 2,421,000 2,421,000 1,314,000 1,314,000
Retained earnings 9,260,000 (4,308,000) 4,952,000 8,954,000 (4,261,000) 4,693,000
------------ ------------ ------------ ------------
Total shareholders' equity 11,681,000 7,373,000 10,268,000 6,007,000
------------ ------------ ------------ ------------
$ 15,079,000 14,273,000 $ 13,082,000 11,937,000
============ ============ ============ ============
Number of shares outstanding 2,345,000 (1,000,000) 1,345,000 2,012,000 (1,000,000) 1,012,000
============ ============ ============ ============
Book value per share $ 4.98 $ 5.48 $ 5.10 $ 5.94
============ ============ ============ ============
</TABLE>
(Notes on Page 14)
13
<PAGE> 18
Nitches, Inc. and Subsidiaries
Pro Forma Consolidated Statements of Operations(2), (3)
(Unaudited)
<TABLE>
<CAPTION>
Year ended August 31, 1997 Nine Months ended May 31, 1998
-------------------------------------------- ------------------------------------------
Pro Forma Pro Forma
Historical Adjustments Pro Forma Historical Adjustments Pro Forma
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Net sales $ 48,414,000 $ 48,414,000 $ 23,740,000 $ 23,740,000
Cost of goods sold 36,190,000 36,190,000 18,009,000 18,009,000
------------ ------------ ------------ ------------
Gross profit 12,224,000 12,224,000 5,731,000 5,731,000
Expenses:
Selling, general and administrative 11,888,000 11,888,000 6,437,000 6,437,000
------------ ------------ ------------ ------------
Income (loss) from operations 336,000 336,000 (706,000) (706,000)
Other income 151,000 (49,000) 102,000 229,000 (28,000) 201,000
Interest expense (167,000) (333,000) (500,000) (24,000) (277,000) (301,000)
------------ ------------ ------------ ------------
Income (loss) before income taxes 320,000 (62,000) (501,000) (806,000)
Provision (benefit) for income taxes 125,000 (149,000) (24,000) (195,000) (119,000) (314,000)
------------ ------------ ------------ ------------
Net income (loss) $ 195,000 (38,000) ($ 306,000) ($ 492,000)
Weighted average number of shares 2,536,000 (1,000,000) 1,536,000 2,244,000 (1,000,000) 1,244,000
outstanding
============ ============ ============ ============
Earnings (loss) per share $ .08 ($ .02) ($ .14) ($ .40)
============ ============ ============ ============
</TABLE>
Notes to Financial Statements:
1. The Notes to financial statements appearing in the 1997 10-K and the
1998 Third Quarter 10-Q are incorporated by reference herein.
2. The unaudited pro forma consolidated financial information assumes the
Offer had occurred as of September 1, 1996 for the August 31, 1997
fiscal year end, and September 1, 1997 for the nine-month period ended
May 31, 1998. The pro forma financial information is not necessarily
indicative of the Company's consolidated financial position or results
of operations as they may be in the future. The pro forma financial
information and accompanying notes are qualified in their entirely by,
and should be read in conjunction with, the Company's consolidated
financial statements incorporated by reference herein.
3. The pro forma data assumes the Company has purchased 1,000,000 Shares at
September 1, 1996 for the August 31, 1997 fiscal year end, and September
1, 1997 for the nine-month period ended May 31, 1998, pursuant to the
Offer at the purchase price per Share of $4.00 and paid for the expenses
of the Offer estimated to aggregate $75,000.
Pre-tax rates of interest of 6.5% and 10% were used to calculate the pro
forma decrease in other income and increase in interest expense,
respectively, for the year ended August 31, 1997, and the nine-month
period ended May 31, 1998, respectively, attributable to the cash and
cash equivalents assumed to have been used for the purchase of 1,000,000
Shares pursuant to the Offer and pay for related expenses. Such rate is
based on the Company's assumed historical average rates of interest
paid, calculated on a daily basis.
The pro forma decrease in other income, which includes interest income,
assumes the Company did not have the use of the gross proceeds of the
Offer and associated expenses for the period indicated.
The pro forma weighted average Shares outstanding are based upon the
historical weighted average Shares outstanding during each period
presented less the 1,000,000 Shares assumed to have been acquired
pursuant to the Offer.
14
<PAGE> 19
Additional Information. Additional information concerning the Company is
set forth in the Company's most recent proxy statement which has previously been
provided to shareholders, in the 1997 10-K and 1998 Third Quarter 10-Q.
Additional copies of such documents are available upon request from the Company.
The Company has also filed an Issuer Tender Offer Statement on Schedule 13E-4
(the "Schedule 13E-4") with the Commission which includes certain additional
information relating to the Offer. The Company is subject to the informational
reporting requirements of the Exchange Act and in accordance therewith files
periodic reports, proxy statements and other information with the Commission
relating to its business, financial conditions and other matters. The Company is
required to disclose in such reports and proxy statements certain information,
as of particular dates, concerning the Company's directors and officers, their
remuneration, stock options granted to them, the principal owners of the
Company's securities and any material interest of such persons in transactions
with the Company.
Such material may be inspected and copied upon payment of the prescribed
rates at the public reference facilities of the Commission, at Room 1024, 450
Fifth Street, N.W., Washington, D.C. 20549, and at its regional offices at 7
World Trade Center, New York, New York 10048 and Northwestern Atrium Center, 500
West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies may also be
obtained by mail upon payment of the prescribed rates from the Commission's
Public Reference Room, 450 Fifth Street, N.W., Washington, D.C. 20549, or by
calling the Public Reference office at (202) 942-8090. The Schedule 13E-4 will
not be available at the Commission's regional offices. The Commission's Web site
is located on the Internet at http://www.sec.gov. E-mail inquiries may be sent
to the Commission's Office of Investor Education and Assistance at e-mail:
[email protected].
11. EFFECTS OF THE OFFER ON THE MARKET FOR SHARES; REGISTRATION UNDER THE
EXCHANGE ACT.
The Company's purchase of Shares pursuant to the Offer will reduce the
number of Shares that might otherwise trade publicly and could reduce the number
of shareholders. Nonetheless, the Company anticipates that there will still be a
sufficient number of Shares outstanding and publicly traded following
consummation of the Offer to ensure a continued trading market in the Shares.
Based on the published guidelines of the NASD, the Company does not believe that
its purchase of Shares pursuant to the Offer will cause the remaining Shares to
be delisted from the NASD.
The Shares are currently "margin securities" under the rules of the
Federal Reserve Board. This has the effect, among other things, of allowing
brokers to extend credit on the collateral of the Shares. The Company believes
that, following the purchase of Shares pursuant to the Offer, the remaining
Shares will continue to qualify to be margin securities for purposes of the
Federal Reserve Board's margin regulations.
The Shares are registered under the Exchange Act which requires, among
other things, that the Company furnish certain information to its shareholders
and to the Commission and comply with the Commission's proxy rules in connection
with meetings of the Company's shareholders. The Company believes that its
purchase of Shares pursuant to the Offer will not result in the Shares becoming
eligible for deregistration under the Exchange Act.
12. CERTAIN LEGAL MATTERS; REGULATORY APPROVAL.
The Company is not aware of any license or regulatory permit that
appears to be material to its business that might be adversely affected by its
acquisition of Shares pursuant to the Offer or of any approval or other action
by any government or governmental, administrative or regulatory authority or
agency, domestic or foreign, that would be required for the Company's
acquisition of Shares pursuant to the Offer. Should any such approval or other
action be required, the Company currently contemplates that it will seek such
approval or other action. The Company cannot predict whether it may determine
that it is required to delay the acceptance for payment of or payment for Shares
tendered pursuant to the Offer pending the outcome of any such matter. There can
be no assurance that any such approval or other action, if needed, would be
obtained or would be obtained without substantial condition or that the failure
to obtain any such approval or other action might not result in adverse
consequences to the Company's business. The Company's obligation under the Offer
to accept for payment and pay for Shares is subject to certain conditions. See
Section 5.
13. CERTAIN FEDERAL INCOME TAX CONSEQUENCES.
The following summary is a general discussion of certain anticipated
Federal income tax consequences of a sale of Shares pursuant to the Offer. This
summary does not discuss all aspects of Federal income taxation that may
15
<PAGE> 20
be relevant to a particular shareholder in light of personal circumstances or to
certain types of shareholders subject to special treatment under the Federal
income tax laws (for example, financial institutions, tax-exempt organizations,
foreign investors, dealers in securities and shareholders who received their
Shares pursuant to compensation arrangements with the Company) and does not
discuss any aspect of state, local or foreign tax laws. Each shareholder is
urged to consult his or her own tax advisor as to the particular tax
consequences of a sale of Shares pursuant to the Offer.
The sale of Shares pursuant to the Offer will be a taxable transaction
for Federal income tax purposes and may also be taxable under applicable state,
local, foreign or other tax laws. The Federal income tax consequences to a
shareholder will be determined under Sections 301 and 302 of the Internal
Revenue Code of 1986, as amended (the "Code") and may vary depending upon a
shareholder's particular facts and circumstances. Under Section 302 of the Code,
a sale of Shares pursuant to the Offer to Purchase will generally be treated as
a sale or exchange if such sale (i) is "substantially disproportionate" with
respect to the shareholder, (ii) results in a "complete redemption" of the
shareholder's interest in the Company, or (iii) is "not essentially equivalent
to a dividend" with respect to the shareholder.
If any one of these three tests is satisfied, the shareholder tendering
Shares pursuant to the Offer will recognize gain or loss equal to the difference
between the amount of cash received by the shareholder pursuant to the Offer and
the shareholder's tax basis in the Shares sold. The gain or loss recognized
generally will be capital gain or loss if the Shares have been held for a period
of more than one year.
In determining whether any of the three tests is satisfied, a
shareholder must take into account not only Shares actually owned but also
Shares that are "constructively owned" under Section 318 of the Code. Generally,
a shareholder will be considered to constructively own Shares which the
shareholder has an option to acquire and Shares owned (and in some cases
constructively owned) by certain related individuals or entities.
The sale of Shares pursuant to the Offer will be "substantially
disproportionate" with respect to a shareholder if the percentage of the
outstanding voting stock of the Company actually and constructively owned by the
shareholder immediately after the Offer is less than 80% of the percentage of
the outstanding voting stock of the Company actually and constructively owned by
such shareholder immediately before the sale of the Shares pursuant to the
Offer. Assuming that the maximum number of Shares (1,000,000) is purchased
pursuant to the Offer, a shareholder would have to sell approximately 58.6% or
more of the Shares actually and constructively owned by the shareholder in order
to meet the "substantially disproportionate" test. Shareholders should consult
their own tax advisor to determine whether the "substantially disproportionate"
test applies to their particular facts and circumstances.
The sale of the Shares pursuant to the Offer will be treated as a
"complete redemption" of the shareholder's interest in the Company if either (i)
all Shares actually and constructively owned by the shareholder are sold
pursuant to the Offer, or (ii) all of the Shares actually owned by the
shareholder are sold pursuant to the Offer and the shareholder is eligible to
waive and does effectively waive attribution of all Shares constructively owned
by the shareholder in accordance with Section 302(c) of the Code.
If the sale of Shares by a shareholder fails to satisfy the
"substantially disproportionate" test or the "complete redemption" test, the
shareholder may nevertheless receive sale or exchange treatment in the event the
sale pursuant to the Offer is "not essentially equivalent to a dividend." A
shareholder will generally meet this test in the event the sale of Shares
pursuant to the Offer by the shareholder results in a "meaningful reduction" in
the shareholder's proportional interest in the Company. The determination as to
whether a sale of Shares by a shareholder pursuant to the Offer will be "not
essentially equivalent to a dividend" will depend on the individual
shareholder's facts and circumstances. The Internal Revenue Service has held in
a published ruling that a 3.3% reduction in the proportionate interest of a less
than 1% shareholder in a publicly held corporation who exercised no control over
corporate affairs constitutes a "meaningful reduction." Shareholders should
consult their own tax advisors as to whether the "not essentially equivalent to
a dividend test" applies to their individual circumstances.
Shareholders should be aware that their ability to satisfy any of the
tests indicated above could be affected by any proration pursuant to the Offer.
16
<PAGE> 21
In addition, it may be possible for a shareholder to satisfy one or more
of the above tests by contemporaneously selling or otherwise disposing of some
or all of Shares that are actually or constructively owned by a shareholder but
which are not purchased pursuant to the Offer. Shareholders should also be aware
that the acquisition of additional Shares or an option to acquire additional
Shares, or the acquisition by certain related parties, could adversely effect
whether such shareholder qualifies for any of the tests set forth above.
In the event that none of the three tests is satisfied by the selling
shareholder and the Company has "sufficient" earnings and profits, the selling
shareholder will be treated as having received a dividend that must be included
in such selling shareholder's gross income in an amount equal to the entire cash
received by the shareholder pursuant to the Offer. In such event, the selling
shareholder will not be entitled to offset the amount received by the
shareholder's basis in the redeemed Shares and the basis in the redeemed Shares
will be added to the basis in the selling shareholder's remaining Shares. In the
event there are "insufficient" earning and profits, the shareholder will have a
non-taxable return of capital to the extent of the shareholders tax basis and
thereafter, capital gain to the extent the distribution exceeds the earnings and
profits.
In the case of a corporate shareholder, any amount received which is
treated as a dividend may be eligible for the 70% "dividends received" deduction
allowable to domestic corporate shareholders under Section 243 of the Code
subject to certain limitations which would include those relating to "debt
finance portfolio stock" under Section 246A of the Code and to the holding
period requirements set forth in Section 246 of the Code. Any amount treated as
a dividend by a corporate shareholder may constitute an "extraordinary dividend"
subject to Section 1059 of the Code. In such event a corporate shareholder would
be required to reduce the tax basis of its remaining Shares (but not below zero)
by the portion of any "extraordinary dividend," which is deducted under the
dividends received deduction. In the event such portion exceeds the
shareholder's tax basis in the remaining Shares, the shareholder must treat any
such excess as additional gain or loss upon the subsequent sale or other
disposition of the Shares. A dividend will be considered extraordinary in the
event (i) the dividends attributable to Shares held for two years or less
exceeds 10% of the greater of (a) the shareholder's adjusted basis in the Shares
or (b) the fair market value of the Shares, or (ii) except as otherwise set
forth in Treasury Regulations which have not yet been promulgated, any amount
treated as a dividend under Section 301 which is not part of a pro rata
redemption. It is not anticipated that the sales pursuant to the Offer will be
pro rata. Thus, it is anticipated that the extraordinary dividend rules will
apply to any amount received pursuant to the Offer which is taxable as a
dividend to a corporate shareholder. Corporate shareholders should be aware of
special aggregation rules that may apply under Section 1059. Corporate
shareholders are urged to consult their own tax advisors as to effect of Section
1059 of the Code on their Shares.
A foreign shareholder may be subject to dividend tax withholding at
either the 30% rate or a lower applicable treaty rate on the gross proceeds of
the sale of Shares pursuant to the Offer. Foreign shareholders should consult
their tax advisors regarding application of these withholding rules.
THE FOREGOING TAX DISCUSSION IS INCLUDED FOR GENERAL INFORMATION ONLY.
THE TAX CONSEQUENCES OF A SALE OF SHARES PURSUANT TO THE OFFER MAY VARY
DEPENDING UPON, AMONG OTHER THINGS, THE PARTICULAR CIRCUMSTANCES OF THE
TENDERING SHAREHOLDER. NO INFORMATION IS PROVIDED HEREIN AS TO THE STATE, LOCAL,
FOREIGN OR OTHER TAX CONSEQUENCES OF THE TRANSACTION CONTEMPLATED BY THE OFFER
TO PURCHASE. EACH SHAREHOLDER IS URGED TO CONSULT WITH SUCH SHAREHOLDER'S OWN
TAX ADVISORS TO DETERMINE THE PARTICULAR FEDERAL, STATE, LOCAL, FOREIGN AND
OTHER TAX CONSEQUENCES OF SALES MADE PURSUANT TO THE OFFER AND THE EFFECT OF THE
CONSTRUCTIVE STOCK OWNERSHIP RULES MENTIONED ABOVE.
14. CERTAIN LIMITATION ON PURCHASES OF SHARES BY THE COMPANY.
Although the Company is authorized by California law to purchase or
redeem its own shares of capital stock, the Company may not do so if (i) the
amount of retained earnings immediately prior thereto does not equal or exceed
the amount of the aggregate purchase price, or (ii) immediately after giving
effect to the purchase, the sum of the Company's adjusted assets would be at
least equal to 1 1/4 times the sum of its adjusted liabilities, and its current
assets would be at least equal to 1 1/4 times its current liabilities.
Based on the Company's consolidated balance sheet as of May 31, 1998,
which balance sheet was prepared in accordance with generally accepted
accounting principles, the recorded amount of the Company's adjusted assets
17
<PAGE> 22
as of such date exceeded the amount of the Company's adjusted liabilities and
its current assets exceeded its current liabilities, each by more than the
required amounts. The Board of Directors has determined, based upon the Board's
familiarity with the Company's management and its advisors, that after giving
effect to the purchase pursuant to the Offer, of Shares having an aggregate
purchase price of $4.0 million, such ratios will continue to be complied with.
If a court, in a lawsuit brought by an unpaid creditor of the Company or
a representative of such creditors (such as a trustee in bankruptcy or the
Company as a debtor-in-possession), were to find that the Company (i) was
insolvent at the time the Company purchased Shares pursuant to the Offer, (ii)
was rendered insolvent by reason of such purchase, (iii) was engaged, or was
about to engage, in a business or a transaction for which the assets remaining
with the Company constituted an unreasonably small capital, (iv) intended to
incur, or believed, or reasonably should have believed, that the Company would
incur, debts and other liabilities beyond its ability to pay as such debts and
liabilities matured, or (v) entered into such transaction with the actual intent
to hinder, delay or defraud creditors, then such court could, among other
remedies, avoid the purchase of Shares from shareholders and require that such
shareholders return the amount of cash received, or a portion thereof, in such
purchase to the Company, to a complaining creditor, or to a fund for the benefit
of its creditors. The measure of insolvency for purposes of the foregoing will
vary depending upon the law being applied. Generally, however, the Company would
be considered insolvent if the fair value of the Company's assets were less than
the amount of the Company's total debts and liabilities or if the present fair
saleable value of the Company's property were less than the amount that would be
required to pay the Company's probable liability on its existing debts as they
become absolute or mature. There can be no assurance that a court would value
the Company's assets on the same basis as the Board of Directors in determining
whether the Company was insolvent at the time of the purchase of Shares by the
Company or that, regardless of the method of valuation, a court would not
determine that the Company was insolvent at such time.
The Board of Directors and the Company's management believe, based on
management's internal projections and other financial information (including the
Company's historical and pro forma financial statements), that at the time of
the purchase of Shares pursuant to the Offer, the Company will be solvent, will
have sufficient capital for carrying on its business and will be able to pay its
debts as they mature.
15. EXTENSION OF THE TENDER PERIOD; AMENDMENTS.
The Company expressly reserves the right, at any time and from time to
time, to extend the period of time during which the Offer is open by giving oral
or written notice of such extension to the Depositary and making a public
announcement thereof. There can be no assurance that the Company will exercise
its right to extend the Offer. The Company also expressly reserves the right, in
its sole discretion, to terminate the Offer and not accept for payment or pay
for any Shares not theretofore accepted for payment or paid for or, subject to
applicable law, to postpone payment for Shares upon the occurrence of any of the
conditions specified in Section 5 by giving oral or written notice of such
termination or postponement to the Depositary and making a public announcement
thereof. The Company's reservation of the right to delay payment for Shares
which it has accepted for payment is limited by Exchange Act Rule 13e-4(f)(5),
which requires that the Company pay the consideration offered or return the
Shares tendered promptly after termination or withdrawal of the Offer. Subject
to compliance with applicable law, the Company further reserves the right, in
its sole discretion, to amend the Offer in any respect or to waive the
limitation on the maximum number of Shares to be purchased pursuant to the
Offer. Amendments to and extensions of the Offer may be made at any time and
from time to time by public announcement thereof, such announcement, in the case
of an extension, to be issued no later than 12:00 noon, New York City time, on
the next business day after the previously scheduled Expiration Date. Any public
announcement made pursuant to the Offer will be disseminated promptly to
shareholders in a manner reasonably designed to inform shareholders. Without
limiting the manner in which the Company may choose to make a public
announcement, the Company shall have no obligation to publish, advertise or
otherwise communicate any such public announcement, except as required by
applicable law, other than by issuing a release to the Dow Jones News Service.
If the Company materially changes the terms of the Offer or the
information concerning the Offer, or if it waives a material condition of the
Offer, the Company will disclose promptly such material change and extend the
Offer to the extent required by Exchange Act Rule 13e-4(f)(l)(ii). This Rule
requires that (other than with respect to a change in price or a change in
percentage of securities sought) the maximum period during which an offer must
remain open following material changes in the terms of an offer or the
information concerning an offer (other than with respect to a change in price or
a change in percentage of securities sought) will depend on the facts and
18
<PAGE> 23
circumstances, including the relative materiality of such terms or information.
If (i) the Company increases or decreases the price to be paid for Shares, or
the Company increases the number of Shares being sought and any such increase in
the number of Shares being sought exceeds 2% of the outstanding Shares, or the
Company decreases the number of Shares being sought; and (ii) the Offer is
scheduled to expire at any time earlier than the expiration of a period ending
on the tenth business day from, and including, the date that notice of such
increase or decrease is first published, sent or given, the Offer will be
extended until at least the end of such tenth business day.
16. FEES AND EXPENSES.
The Company has retained D. F. King & Co., Inc. as the Information Agent
and American Stock Transfer and Trust Company as Depositary. The Information
Agent will assist shareholders who request assistance in connection with the
Offer, may contact shareholders by mail, telephone, facsimile and in person and
may request brokers, dealers and other nominee shareholders to forward materials
relating to the Offer to beneficial owners. The Depositary and the Information
Agent will receive reasonable and customary compensation for their services. The
Company will also reimburse the Depositary and the Information Agent for
out-of-pocket expenses, including reasonable attorneys' fees.
The Company will not pay fees or commissions to any broker, dealer,
commercial bank, trust company or other person (other than fees to the
Information Agent and the Depositary as described above) for soliciting tenders
of Shares pursuant to the Offer. The Company will, however, on request through
the Information Agent, reimburse such persons for customary handling and mailing
expenses incurred in forwarding material with respect to the Offer to the
beneficial owners for which they act as nominees or fiduciaries. No such broker,
dealer, commercial bank, trust company or other person has been authorized to
act as the Company's agent for purposes of this Offer. The Company will pay (or
cause to be paid) any stock transfer taxes payable because of its purchase of
Shares pursuant to the Offer, except as otherwise provided in Instruction 6 of
the Letter of Transmittal.
17. MISCELLANEOUS.
The Company is not aware of any jurisdiction where the making of the
Offer is not in compliance with applicable law. If the Company becomes aware of
any jurisdiction where the making of the Offer is not in compliance with any
valid applicable law, the Company will make a good faith effort to comply with
such law. If, after such good faith effort, the Company cannot comply with such
law, the Offer will not be made to (nor will tenders be accepted from or on
behalf of) the holders of Shares residing in such jurisdiction. In any
jurisdiction the securities or blue sky laws of which require the Offer to be
made by a licensed broker or dealer, the Offer is being made on the Company's
behalf by one or more registered brokers or dealers licensed under the laws of
such jurisdiction.
No person has been authorized to give any information or make any
representation on behalf of the Company not contained herein or in the Letter of
Transmittal and, if given or made, such information or representation must not
be relied upon as having been authorized.
NITCHES, INC.
August 18, 1998
19
<PAGE> 24
SCHEDULE I
OWNERSHIP OF SHARES
The following table and notes set forth as of August 11, 1998 (i) the
beneficial ownership, as defined by regulations of the Commission, of Shares
held by (a) each person or group of persons known by the Company who
beneficially owns more than 5% of the outstanding Shares, (b) each director or
nominee for director of the Company and (c) by all persona who serve as
executive officers and directors of the Company as a group. All information is
taken from or based upon ownership filings made by such persons to the Company,
or upon information provided by such persons to the Company and has been
adjusted to reflect the May 5, 1998 two-for-one stock split.
<TABLE>
<CAPTION>
NAME AND ADDRESS OF BENEFICIAL OWNER Shares Percent of Class
- ------------------------------------ ------ ----------------
<S> <C> <C>
Arjun C. Waney(1) 499,448 21.6%
10280 Camino Santa Fe
San Diego, CA 92121
Luther A. Henderson(2) 245,972 10.7%
5608 Malvey Ave., #104
Ft. Worth, TX 76107
Grace & White, Inc.(3) 213,600 9.3%
515 Madison Avenue, Suite 1700
New York, NY 10022
Steven P. Wyandt(4) 156,668 6.8%
10280 Camino Santa Fe
San Diego, CA 92121
Dimensional Fund Advisors, Inc.(5) 119,836 5.2%
1299 Ocean Avenue, Suite 650
Santa Monica, CA 90401
Eugene B. Price II(6) 67,718 2.9%
10280 Camino Santa Fe
San Diego, CA 92121
William L. Hoese, Esq.(6) 52,000 2.3%
2800 West Higgins Road, Suite 805
Hoffman Estates, IL 60195
All directors and current 1,021,806 44.3%
officers as a group (5 persons)(7)
</TABLE>
Notes:
1. Includes 13,298 shares held in a trust for the benefit of Mr. Waney's
daughter and 34,000 shares which are issuable upon the exercise of
outstanding stock options.
2. 195,972 of the shares attributed to Mr. Henderson are held in the name
of Pirvest, Inc., a corporation in which Mr. Henderson owns 100% of the
outstanding common stock. Also includes 50,000 shares issuable upon the
exercise of outstanding stock options.
3. Based upon filings with the NASDAQ at March 31, 1998. Those filings
indicate that Grace & White, Inc. does not have voting authority over
any of the shares held in its name.
20
<PAGE> 25
4. All 110,000 shares issuable upon the exercise of outstanding stock
options.
5. The Company has been advised by a filing made with the Securities and
Exchange Commission by Dimensional Fund Advisors, Inc. ("Dimensional"),
a registered investment advisor, that it is deemed to have beneficial
ownership of 119,836 shares of the Company's common stock as of March
31, 1998, all of which shares are held in portfolios of DFA Investment
Dimensions Group, Inc., a registered open-end investment company, the
DFA Investment Trust Company, a registered open-end investment company
of the DFA Group Trust and the DFA Participating Group Trust, investment
vehicles for qualified employee benefit plans, all of which Dimensional
serves as investment manager. Dimensional has advised the Company that
it disclaims beneficial ownership of all such shares.
6. Includes 50,000 shares which are issuable upon the exercise of
outstanding stock options.
7. Includes 294,000 shares issuable upon the exercise of outstanding stock
options.
21
<PAGE> 26
Facsimile copies of the Letter of Transmittal will be accepted from
Eligible Institutions. A Letter of Transmittal and certificates for Shares and
any other required documents should be sent or delivered by each shareholder or
the shareholder's broker, dealer, commercial bank, trust company or other
nominee to the Depositary at its address set forth below.
The Depositary of the Offer is:
AMERICAN STOCK TRANSFER & TRUST COMPANY
<TABLE>
<S> <C> <C>
Facsimile Transmission By Hand or Overnight
By Mail: (for Eligible Institutions Only): Delivery:
American Stock Transfer & (718) 234-5001 American Stock Transfer &
Trust Company Trust Company
40 Wall Street, 46th Floor Confirm Facsimile by Telephone 40 Wall Street, 46th Floor
New York, NY 10005 at Shareholder Services: New York, NY 10005
(800) 937-5449
</TABLE>
Any questions or requests for assistance or for additional copies of
this Offer to Purchase, the Letter of Transmittal or the Notice of Guaranteed
Delivery may be directed to the Information Agent at the telephone numbers and
addresses listed below. You may also contact your broker, dealer, commercial
bank, trust company or other nominee for assistance concerning the Offer. To
confirm delivery of your Shares, you are directed to contact the Depositary.
The Information Agent for the Offer is:
D. F. KING & CO., INC.
77 Water Street
New York, NY 10005
(212) 269-5550 (collect)
or
Call toll free (800) 347-4750
22
<PAGE> 1
EXHIBIT 99.(a)-2
THE OFFER WILL EXPIRE ON WEDNESDAY, SEPTEMBER 16, 1998 AT 5:00 P.M., NEW YORK
CITY TIME, UNLESS EXTENDED BY THE COMPANY. TENDERING SHAREHOLDERS HAVE THE RIGHT
TO WITHDRAW SHARES TENDERED AT ANY TIME PRIOR TO EXPIRATION OF THE OFFER AND
THEY MAY WITHDRAW SHARES AFTER SATURDAY, OCTOBER 17, 1998, UNLESS ACCEPTED BY
THE COMPANY BY THAT DATE.
LETTER OF TRANSMITTAL
TO ACCOMPANY SHARES OF COMMON STOCK
OF
NITCHES, INC.
TENDERED PURSUANT TO THE OFFER TO PURCHASE
DATED AUGUST 18, 1998
DEPOSITARY: AMERICAN STOCK TRANSFER & TRUST COMPANY
<TABLE>
<S> <C> <C>
Facsimile Transmission
By Mail: (For Eligible Institutions Only): By Hand or Overnight Delivery:
American Stock Transfer & Trust (718) 234-5001 American Stock Transfer &
Company Trust Company
40 Wall Street, 46th Floor Confirm Facsimile by Telephone: 40 Wall Street, 46th Floor
New York, NY 10005 New York, NY 10005
(800) 937-5449
</TABLE>
Delivery of this Letter of Transmittal to an address other than as
set forth above or transmission to a facsimile number other than the one listed
above will not constitute a valid delivery. The instructions accompanying this
Letter of Transmittal should be read carefully before this Letter is completed.
Shares of Common Stock must be properly tendered prior to 5:00 P.M.,
New York City time, on Wednesday, September 16, 1998 to assure that at least a
portion of such shares will be purchased if more than 1,000,000 shares are
properly tendered by that date.
This Letter of Transmittal is to be completed by holders of shares
of Common Stock if either (1) certificates for such shares are to be forwarded
herewith or (2) delivery of shares is to be made by book-entry transfer to the
account maintained by the Depositary at The Depository Trust Company ("DTC")
pursuant to the procedures set forth in Section 2 of the Offer to Purchase.
Holders of shares of Common Stock whose certificates are not immediately
available or who cannot deliver their certificates and all other documents
required hereby to the Depositary prior to the Expiration Date (or who are
unable to complete the procedure for book-entry transfer on a timely basis) must
tender their shares according to the guaranteed delivery procedure set forth in
Section 2 of the Offer to Purchase. See Instruction 2.
1
<PAGE> 2
NITCHES, INC. TENDER
(BOXES BELOW FOR USE BY ELIGIBLE INSTITUTIONS ONLY)
[ ] CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER
MADE TO THE ACCOUNT MAINTAINED BY THE DEPOSITARY WITH DTC AND COMPLETE THE
FOLLOWING (ONLY PARTICIPANTS IN DTC MAY DELIVER SHARES BY BOOK-ENTRY
TRANSFER):
Name of Tendering Institution..............................................
DTC Account Number.........................................................
Transaction Code Number....................................................
[ ] CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED PURSUANT TO A NOTICE OF
GUARANTEED DELIVERY PREVIOUSLY SENT TO THE DEPOSITARY PRIOR TO THE DATE
HEREOF AND COMPLETE THE FOLLOWING:
Name of Registered Owner(s)................................................
Date of Execution of Notice of Guaranteed Delivery.........................
Name of Institution which Guaranteed Delivery..............................
DTC Account Number (if to be delivered by book-entry transfer).............
NOTE: SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
The undersigned hereby tenders to Nitches, Inc., a California
corporation (the "Company"), the certificates described below representing
shares of its Common Stock (the "Shares"), at $4.00 per Share net to the seller
in cash, upon the terms and conditions set forth in the Offer to Purchase dated
August 18, 1998, receipt of which is hereby acknowledged, and in this Letter of
Transmittal (which together constitute the "Offer").
The undersigned hereby sells, assigns and transfers to or upon the
order of the Company all Shares tendered hereby that are purchased pursuant to
the Offer and hereby irrevocably constitutes and appoints the Depositary as
attorney-in-fact of the undersigned, with full power of substitution (such power
of attorney being deemed to be an irrevocable power coupled with an interest),
to (a) deliver certificates for such Shares or transfer ownership of such Shares
on the account books maintained by DTC, together in either case with all
accompanying evidences of transfer and authenticity, to or upon the order of the
Company upon receipt by the Depositary, as the undersigned's agent, of the
purchase price, (b) present such certificates for cancellation and transfer of
such Shares on the Company's books and (c) receive all benefits and otherwise
exercise all rights of beneficial ownership of such Shares, all in accordance
with the terms of the Offer. The undersigned hereby warrants that the
undersigned has full authority to sell, assign and transfer the Shares tendered
hereby and that the Company will acquire good title thereto, free and clear of
all liens, charges, encumbrances, conditional sale agreements or other
obligations relating to the sale or transfer thereof, and not subject to any
adverse claim, when and to the extent the same are purchased by it. Upon
request, the undersigned will execute and deliver any additional documents
necessary to complete the sale, assignment and transfer.
The undersigned understands that tenders of Shares pursuant to any
of the procedures described in the Offer to Purchase or in the Instructions
hereto will constitute an agreement between the undersigned and the Company upon
the terms and subject to the conditions of the Offer.
2
<PAGE> 3
NITCHES, INC. TENDER
<TABLE>
<CAPTION>
DESCRIPTION OF SHARES TENDERED
(SEE INSTRUCTIONS 3 AND 4)
Name(s) and Address(es) of Registered Holder(s) Certificate(s) Enclosed
(Please fill in exactly as Name(s) appear(s) on certificate(s) (Attach signed supplemental list if necessary)
<S> <C> <C> <C>
Total No.
of Shares Number of Shares
Certificate No.(s)* Represented by Tendered**
Certificate(s)*
Total No. of Shares Tendered
* Need not be completed by Shareholders who tender Shares by book-entry
transfer.
** If you desire to tender fewer than all Shares evidenced by any
certificate listed above, please indicate in this column the number you
wish to tender. Otherwise all Shares evidenced by such certificates will
be deemed to have been tendered.
</TABLE>
The undersigned recognizes that under certain circumstances set
forth in the Offer to Purchase, the Company may not be required to purchase any
of the Shares tendered hereby or may accept for purchase fewer than all of the
Shares tendered hereby. In either event, the undersigned understands that
certificate(s) for any Shares not purchased will be returned to the undersigned
at the address indicated above unless otherwise indicated under the Special
Delivery Instructions or Special Payment Instructions below. The undersigned
recognizes that the Company has no obligation, pursuant to the Special Payment
Instructions, to transfer any certificate for Shares from the name of the
registered holder thereof to another name if the Company purchases none of the
Shares represented by such certificates.
The check for the purchase price for such of the tendered Shares as
are purchased will be issued to the undersigned and mailed to the address
indicated above unless otherwise indicated under the Special Delivery
Instructions or Special Payment Instructions below.
All authority hereby conferred shall survive the death or incapacity
of the undersigned and all obligations of the undersigned hereunder shall be
binding upon the heirs, personal representatives, successors and assigns of the
undersigned. Except as stated in the Offer, this tender is irrevocable.
3
<PAGE> 4
NITCHES, INC. TENDER
SIGN HERE
(SEE INSTRUCTIONS 1, 5, 6 AND 9)
................................................................................
................................................................................
(Signature(s) of Owner(s)
Dated....................................................................., 1998
Name(s).........................................................................
................................................................................
(Please Print)
Area Code and Telephone Number: (Day)...........................................
(Night).........................................
Tax ID or Social Security No.(s)................................................
................................................................................
GUARANTEE OF SIGNATURE(S)
(If Required by Instruction 1)
Authorized Signature............................................................
Name............................................................................
(Please Print)
Name of Firm....................................................................
Address.........................................................................
(Including Zip Code)
Dated..............................., 1998
The shareholder represents to the Company that such shareholder owns
the Shares being tendered within the meaning of Exchange Act Rule 14e-4 and the
tender of such Shares complies with Rule 14e-4.
4
<PAGE> 5
NITCHES, INC. TENDER
SPECIAL PAYMENT INSTRUCTIONS
(SEE INSTRUCTIONS 5 AND 7)
To be completed ONLY if certificates for unpurchased Shares and/or
any check are to be issued in the name of and sent to someone other than the
undersigned.
Issue Check and/or Certificates to:
Name(s).........................................................................
(Please Print)
Address.........................................................................
................................................................................
(Include Zip Code)
................................................................................
(Tax Identification or Social Security No.)
SIGNATURE
(IF SPECIAL PAYMENT INSTRUCTIONS ARE GIVEN)
(SEE INSTRUCTION 9)
................................................................................
................................................................................
Signature(s) of Substitute Payee(s)
Dated....................................................................., 1998
By signing and completing the form above, under the penalties of perjury, I/we
certify that the above tax identification or social security number(s) is/are
correct.
Note: Failure to complete and sign may result in backup withholding
of 31% of the payments due to you. See Instruction 10.
Signature(s) of Owner(s) (if the box above has been completed): ----------------
-------------------------
5
<PAGE> 6
NITCHES, INC. TENDER
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTION 7)
To be completed ONLY if certificates for unpurchased Shares and/or
the check, issued in the name of the undersigned, are to be sent to someone
other than the undersigned or to the undersigned at an address other than that
shown above.
Deliver [ ] check and/or [ ] certificates to:
Name(s).........................................................................
(Please Print)
Address.........................................................................
................................................................................
(Include Zip Code)
Signature(s) of Owner(s) ......................................................
......................................................
SUBSTITUTE FORM W-9 BELOW MUST BE
COMPLETED - SEE INSTRUCTION 9
PAYER'S NAME: AMERICAN STOCK TRANSFER & TRUST COMPANY
SUBSTITUTE
FORM W-9
DEPARTMENT OF THE TREASURY
INTERNATIONAL REVENUE SERVICE
Part 1 -- PLEASE PROVIDE YOUR TIN IN THE
BOX AT RIGHT AND CERTIFY BY SIGNING
AND DATING BELOW.
__________________________________________________
Name
--------------------------------------------------
Address
-------------------------------------------------
City State Zip Code
TIN______________________________
SOCIAL SECURITY NUMBER OR
EMPLOYER IDENTIFICATION NUMBER
Part 2 -- Check the box if you are NOT subject to backup withholding under the
provisions of section 3406(a)(1)(C) of the Internal Revenue Code because (1) you
have not been notified that you are subject to backup withholding as a result of
failure to report all interest or dividends or (2) the Internal Revenue Service
has notified you that you are no longer subject to backup withholding. o
PAYER'S REQUEST FOR TAXPAYER
IDENTIFICATION NUMBER (TIN)
CERTIFICATION -- UNDER THE PENALTIES OF PERJURY, I
CERTIFY THAT THE INFORMATION PROVIDED ON THIS FORM IS
TRUE, CORRECT AND COMPLETE.
SIGNATURE:______________________________________ DATE:_____________, 1998
Part 3 --
Awaiting TIN [ ]
6
<PAGE> 7
NITCHES, INC. TENDER
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER
1. Guarantee of Signatures. If this Letter of Transmittal is signed
by the registered institutional holder of the Shares (which registered holder,
for purposes of this document, shall include any participant in DTC whose name
appears on a security position listing as the owner of the Shares) tendered
herewith and payment is to be made directly to such holder, or if such Shares
are tendered for the account of a member firm of a registered national
securities exchange, a member of the National Association of Securities Dealers,
Inc. or a commercial bank or trust company having an office, branch or agency in
the United States (each being hereinafter referred to as an "Eligible
Institution"), no signature guarantee is required. In all other cases all
signatures in the box entitled "Sign Here" on this Letter of Transmittal must be
guaranteed by an Eligible Institution.
2. Delivery of Letter of Transmittal and Certificates; Guaranteed
Delivery Procedures. This Letter of Transmittal is to be completed by
shareholders if either (1) certificates are to be forwarded herewith or (2)
tenders are to be made pursuant to the procedures for tender by book-entry
transfer set forth in Section 2 of the Offer to Purchase. Certificates for all
physically tendered Shares or confirmation of any book-entry transfer into the
Depositary's accounts at DTC of Shares tendered electronically, as well as a
properly completed and duly executed Letter of Transmittal or facsimile thereof
and any other documents required by this Letter of Transmittal, must be received
by the Depositary at the appropriate address set forth herein prior to the
Expiration Date of the Offer as defined in Section 1 of the Offer to Purchase.
If certificates representing Shares are not immediately available (or if the
book-entry transfer procedure cannot be completed on a timely basis) or if time
will not permit all required documents to reach the Depositary prior to the
Expiration Date, Shares may be tendered by or through an Eligible Institution by
properly completing and duly executing and delivering a Notice of Guaranteed
Delivery and by otherwise complying with the guaranteed delivery procedures set
forth in Section 2 of the Offer to Purchase. Note that the Notice of Guaranteed
Delivery may be completed only by an Eligible Institution.
THE METHOD OF DELIVERY OF CERTIFICATES REPRESENTING SHARES AND OTHER
DOCUMENTS IS AT THE ELECTION AND RISK OF THE TENDERING SHAREHOLDER. IF DELIVERY
IS BY MAIL, INSURED REGISTERED MAIL, RETURN RECEIPT REQUESTED, IS RECOMMENDED.
No alternative, conditional or contingent tenders will be accepted,
and no fractional Shares will be purchased. All tendering shareholders, by
execution of this Letter of Transmittal, waive any right to receive any notice
of the acceptance of their Shares for payment.
3. Inadequate Space. If the space provided is inadequate, the
certificate numbers and number of Shares should be listed on a separate signed
schedule attached hereto.
4. Partial Tenders. (Not applicable to shareholders who tender by
book-entry transfer). If fewer than all of the shares of Common Stock evidenced
by any certificate submitted are to be tendered, fill in the number of Shares
which are to be tendered in the column entitled "Number of Shares Tendered" in
the box captioned "Description of Shares Tendered." A new certificate for the
remainder of the Shares evidenced by the old certificate(s) and for the number
of Shares not purchased after proration, if any, will be sent to you, unless
otherwise specified in the "Special Delivery Instructions" or "Special Payment
Instructions" boxes on this Letter of Transmittal, as soon as practicable after
the Expiration Date of the Offer. All Shares represented by certificates listed
are deemed to have been tendered unless otherwise indicated.
5. Signatures on Letter of Transmittal, Stock Powers and
Endorsements.
(a) If this Letter of Transmittal is signed by the
registered holder of the Shares represented by the certificates tendered hereby,
the signature(s) must correspond with the name(s) as written on the face of the
certificate without any change whatsoever.
(b) If any of the Shares tendered hereby are held of
record by two or more joint holders, all such holders must sign this Letter of
Transmittal.
(c) If any tendered Shares are registered in different
names on several certificates, it will be necessary to complete, sign and submit
as many separate Letters of Transmittal as there are different registrations of
certificates. Photocopies of this form of Letter of Transmittal will be accepted
if original signatures are affixed.
(d) When this Letter of Transmittal is signed by the
registered holder(s) of the certificates listed and transmitted hereby, no
endorsements of certificates or separate stock powers are required. If, however,
the certificates for unpurchased Shares are to be issued to a person other than
the registered holder(s), then the certificates transmitted hereby must be
endorsed or accompanied by appropriate stock powers, in either case signed
exactly as the
7
<PAGE> 8
NITCHES, INC. TENDER
name(s) of the registered holder(s) appears on the certificates. Signatures on
such certificates or stock powers must be guaranteed by an Eligible Institution.
See also Instruction 1.
(e) If this Letter of Transmittal or any certificates or
stock powers are signed by trustees, executors, administrators, guardians,
attorneys-in-fact, officers of corporations or others acting in a fiduciary or
representative capacity, such persons should so indicate when signing, and must
submit proper evidence satisfactory to the Company of their authority so to act.
(f) If this Letter of Transmittal is signed by a person
other than the registered holder(s) of the certificates listed, the certificates
must be endorsed or accompanied by appropriate stock powers, in either case
signed exactly as the name of the registered holder(s) appears on the
certificates. Signatures on such certificates or stock powers must be guaranteed
by an Eligible Institution. See also Instruction 1.
6. Stock Transfer Taxes. The Company will pay all stock transfer
taxes, if any, payable on the transfer to it of Shares purchased pursuant to the
Offer. If, however, payment of the purchase price is to be made to, or (in the
circumstances permitted by the Offer) if unpurchased Shares are to be registered
in the name of, any person other than the registered holder, or if tendered
certificates representing Shares are registered in the name of any person other
than the registered holder, or if tendered certificates are registered in the
name of any person other than the person(s) signing this Letter of Transmittal,
the amount of any stock transfer taxes (whether imposed on the registered holder
or such other person) payable on account of the transfer to such person will be
deducted from the purchase price unless satisfactory evidence of the payment of
such taxes, or exemption therefrom, is submitted to the Depositary.
7. Special Payment and Delivery Instructions. If certificates
representing unpurchased Shares and/or checks are to be issued in the name of a
person other than the signer of this Letter of Transmittal or if such
certificates and/or checks are to be delivered to someone other than the signer
of this Letter of Transmittal, the appropriate boxes on this Letter of
Transmittal should be completed.
8. Irregularities. All questions as to the validity, form,
eligibility (including time of receipt) and acceptance of any tender of Shares
will be determined by the Company, which determination shall be final and
binding. The Company reserves the absolute right to reject any or all tenders
determined by it to be not in appropriate form or which would, in the opinion of
the Company's counsel, be unlawful to pay for or accept. The Company also
reserves the absolute right to waive any of the conditions of the Offer or any
defect in any tender with respect to any particular Shares or any particular
shareholder, and the Company's interpretations of the terms and conditions of
the Offer (including these instructions) shall be final and binding. Unless
waived, any defects or irregularities in connection with tenders must be cured
within such time as the Company shall determine. Neither the Company, the
Depositary nor the Information Agent shall be obligated to give notice of
defects or irregularities in tenders, nor shall they incur any liability for
failure to give any such notice. Tenders will not be deemed to have been made
until all defects and irregularities have been cured or waived.
9. Substitute Form W-9. Each tendering shareholder is required to
provide the Depositary with a correct Taxpayer Identification Number ("TIN") on
Substitute Form W-9 attached as part of the Letter of Transmittal. Failure to
provide the information on the form may subject the tendering shareholder to 31%
withholding on the payment of the purchase price. The box in Part 3 of the
Substitute Form W-9 may be checked if the tendering shareholder has not been
issued a TIN and has applied for a number or intends to apply for a number in
the near future. If the box in Part 3 is checked and the Depositary is not
provided with a TIN within 60 days, the Depositary will withhold 31% of all
payments of the purchase price thereafter until a TIN is provided to the
Depositary.
10. Requests for Assistance or Additional Copies. Questions and
requests for assistance or additional copies of the Offer to Purchase, this
Letter of Transmittal and the Notice of Guaranteed Delivery, may be directed to
the Information Agent at the address set forth below.
IMPORTANT: This Letter of Transmittal or facsimile thereof (together
with the certificates or confirmation of book-entry transfer and other required
documents), or the Notice of Guaranteed Delivery must be received by the
Depositary prior to 5:00 P.M., New York City time on September 16, 1998.
8
<PAGE> 9
NITCHES, INC. TENDER
The Information Agent is:
D.F. King & Co., Inc.
77 Water Street
New York, NY 10005
(212) 269-5550 (collect)
or
Call toll free (800) 347-4750
IMPORTANT TAX INFORMATION
Under the federal income tax law, a shareholder whose tendered
Shares are accepted for purchase is required by law to provide the Depositary
(as payer) with his/her correct Taxpayer Identification Number ("TIN") on the
Substitute Form W-9 attached as part of the Letter of Transmittal. If such
shareholder is an individual, the TIN is his/her social security number. If the
Depositary is not provided with the correct TIN, the shareholder may be subject
to a $50 penalty imposed by the Internal Revenue Service. In addition, payments
that are made to such shareholder with respect to Shares purchased pursuant to
the Offer may be subject to backup withholding.
Exempt shareholders (including, among others, all corporations and
certain foreign individuals) are not subject to these backup withholding and
reporting requirements. (In order for a foreign individual to qualify as an
exempt recipient, that shareholder must submit a statement, signed under
penalties of perjury, attesting to that individual's exempt status. Such
statements may be obtained from the Depositary.) See the enclosed Guidelines for
Certification of Taxpayer Identification Number on Substitute Form W-9 for
additional instructions.
If backup withholding applies, the Depositary is required to
withhold 31% of any payments made to the shareholder. Backup withholding is not
an additional tax. Rather, the tax liability of persons subject to backup
withholding will be reduced by the amount of tax withheld. If withholding
results in any overpayment of taxes, a refund may be obtained.
Purpose of Substitute Form W-9. To prevent backup withholding on
payments that are made to a shareholder with respect to Shares purchased
pursuant to the Offer, the shareholder is required to notify the Depositary of
his/her correct TIN by completing the Substitute Form W-9 certifying that the
TIN provided on such Form is correct (or that such shareholder is awaiting a TIN
and that (1) the shareholder has not been notified by the Internal Revenue
Service that he/she is subject to backup withholding as a result of failure to
report all interest or dividends or (2) the Internal Revenue Service has
notified the shareholder that he/she is no longer subject to backup withholding.
What Number to Give the Depositary. The shareholder is required to
give the Depositary the social security number or employer identification number
of the record owner of the Shares. If the Shares are in more than one name or
are not in the name of the actual owner, consult the enclosed Guidelines for
Certification of Taxpayer Identification Number on Substitute Form W-9 for
additional guidelines on which number to report.
9
<PAGE> 1
EXHIBIT 99.(a)3
NOTICE OF GUARANTEED DELIVERY
FOR TENDER OF SHARES OF COMMON STOCK
OF
NITCHES, INC.
The below form or a form substantially equivalent to that set forth
below must be used to accept the Offer (as defined below) if a shareholder's
stock certificates are not immediately available or the procedures for
book-entry transfer cannot be completed on a timely basis or time will not
permit the Letter of Transmittal and other required documents to reach the
Depositary prior to the Expiration Date (as defined in Section 1 of the Offer to
Purchase (as defined below)). Such form may be delivered by hand or mail, or
transmitted by facsimile transmission to the Depositary. See Section 2 of the
Offer to Purchase.
DEPOSITARY:
AMERICAN STOCK TRANSFER & TRUST COMPANY
<TABLE>
<S> <C> <C>
Facsimile Transmission
By Mail: (For Eligible Institutions Only): By Hand or Overnight Delivery:
American Stock Transfer & Trust (718) 234-5001 American Stock Transfer &
Company Trust Company
40 Wall Street, 46th Floor Confirm Facsimile by Telephone: 40 Wall Street, 46th Floor
New York, NY 10005 New York, NY 10005
(800) 937-5449
</TABLE>
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN TO ONE OF THOSE
SHOWN ABOVE OR TRANSMISSION TO A FACSIMILE NUMBER OTHER THAN THE ONE LISTED
ABOVE DOES NOT CONSTITUTE A VALID DELIVERY.
Ladies and Gentlemen:
The undersigned hereby tender to Nitches, Inc. (the "Company") upon
the terms and conditions set forth in its Offer to Purchase dated August 18,
1998 (the "Offer to Purchase"), and the related Letter of Transmittal (which
together constitute the "Offer"), receipt of which is hereby acknowledged, the
number of Shares specified below, pursuant to the guaranteed delivery procedures
set forth in Section 2 of the Offer to Purchase.
NUMBER OF SHARES TENDERED:_________
Name(s) of Record Holder(s): Stock Certificate Nos. (if available)
- ----------------------------------- -------------------------------------
- ----------------------------------- -------------------------------------
(Please type or print)
If Shares will be delivered by book-
entry transfer, please complete the
following:
Address(es)
- -----------------------------------
Zip Code The Depository Trust Company
Area Code and Telephone Number: Account Number
-------------------------------------
Dated: , 1998
- ----------------------------------- ---------------------------------
- -----------------------------------
- -----------------------------------
(Signature(s))
GUARANTEE OF DELIVERY
1
<PAGE> 2
Nitches, Inc. Tender
The undersigned, a member firm of a registered national securities
exchange or a member of the National Association of Securities Dealers, Inc., or
a commercial bank or trust company having an office, branch or agency in the
United States, guarantees (i) that the above-named person(s) "own(s)" the Shares
tendered hereby within the meaning of Rule 14e-4 under the Securities Exchange
Act of 1934 and (ii) that it will deliver to the Depositary certificates for the
Shares tendered hereby in proper form for transfer, or confirmation of
book-entry transfer of such Shares into the Depositary's account at The
Depository Trust Company, together with a properly completed and duly executed
Letter of Transmittal (or facsimile thereof) with any required signature
guarantees, and any other documents required by the Letter of Transmittal,
within five trading days after the date of receipt of this Notice of Guaranteed
Delivery by the Depositary.
Firm:
----------------------------------------
Sign Here:
-----------------------------------
(Authorized Signature)
Dated: _________________, 1998 Name:
----------------------------------------
(Please Type or Print)
---------------------------------------------
(Area Code and Telephone Number)
---------------------------------------------
(Address) (Zip Code)
DO NOT SEND STOCK CERTIFICATES WITH THIS FORM. STOCK CERTIFICATES
ARE TO BE DELIVERED WITH A LETTER OF TRANSMITTAL.
2
<PAGE> 1
EXHIBIT 99.(a)4
NITCHES, INC.
Offer to Purchase for Cash
Up to 1,000,000 Shares of its Common Stock
at a Purchase Price of
$4.00 per Share
THE OFFER WILL EXPIRE ON WEDNESDAY, SEPTEMBER 16, 1995 AT 5:00 P.M., NEW YORK
CITY TIME, UNLESS EXTENDED BY THE COMPANY, TENDERING SHAREHOLDERS HAVE THE RIGHT
TO WITHDRAW SHARES TENDERED AT ANY TIME, PRIOR TO EXPIRATION OF THE OFFER AND
THEY MAY WITHDRAW SHARES AFTER SATURDAY, OCTOBER 17, 1998 UNLESS ACCEPTED BY THE
COMPANY BY THAT DATE.
August 18, 1998
TO BROKERS, DEALERS, COMMERCIAL BANKS, TRUST COMPANIES AND NOMINEES:
We are enclosing herewith the material listed below relating to the
offer by Nitches, Inc., (the "Company") to purchase up to 1,000,000 shares of
the Company's Common Stock (the "Shares"), at $4.00 per Share net to the seller
in cash, upon the terms and subject to the conditions set forth in the Offer to
Purchase dated August 18, 1998 (the "Offer to Purchase") and in the related
Letter of Transmittal (which together constitute the "Offer").
We are asking you to contact your clients for whom you hold Shares
registered in your name (or in the name of your nominee). Please bring the Offer
to their attention as promptly as possible. No fees or commissions will be
payable to brokers, dealers or other persons for soliciting tenders of Shares
pursuant to the Offer. The Company will, however, upon request, reimburse you
for customary mailing and handling expenses incurred by you in forwarding any of
the enclosed materials to your clients. The Company will also pay all transfer
taxes on its purchase of Shares, subject to Instruction 6 of the Letter of
Transmittal. However, back-up tax withholding at a 31% rate may be required
unless an exemption is proved or unless the required taxpayer identification
information is provided. See Instruction 9 to the Letter of Transmittal.
For your information and for forwarding to your clients, we are
enclosing the following documents:
(1) Letter dated August 18, 1998 from the President and Chief
Executive Officer of the Company, to the shareholders;
(2) Offer to Purchase dated August 18, 1998;
(3) Letter of Transmittal for your use and for the information of
your clients;
(4) Notice of Guaranteed Delivery to be used to accept the Offer if
stock certificates are not immediately available or if the procedure for
book-entry transfer (as described in the Offer to Purchase) cannot be completed
in a timely manner; and
(5) Form of letter to clients which may be sent to your clients for
whose accounts you hold Shares registered in your name (or in the name of your
nominee), with space provided for obtaining such clients' instructions with
regard to the Offer.
We urge you to contact your clients promptly. Please note that the
Offer will expire at 5:00 p.m., New York City time, on Wednesday, September 16,
1998, unless the Offer is extended. Shares may be withdraw at any time prior
1
<PAGE> 2
to the expiration of the Offer and may be withdrawn after Saturday, October 17,
1998 unless accepted by the Company by that date.
The Offer is made solely by the Offer to Purchase and the related
Letter of Transmittal and is not being made to holders of Shares in any
jurisdiction in which the making or acceptance of the Offer would not be in
compliance with law.
The Offer is not conditioned upon any minimum number of Shares being
tendered.
As described in Section 2, "Procedures for Tendering Shares," of the
Offer to Purchase , tenders may be made without the concurrent deposit of stock
certificates (or concurrent compliance with the procedure for book-entry
transfer) if such tenders are made pursuant to a Notice of Guaranteed Delivery
by or through a broker or dealer which is a member firm of a registered national
securities exchange or a member of the National Association of Securities
Dealers, Inc. or a commercial bank or trust company having an office, branch or
agency in the United States. Certificates for Shares so tendered (or
confirmation of book-entry transfer), together with a properly completed and
duly executed Letter of Transmittal and any other documents required by the
Letter of Transmittal, must be received by the Depositary within five trading
days after receipt by the Depositary of a properly completed and duly executed
Notice of Guaranteed Delivery.
Additional copies of the enclosed material may be obtained from the
Information Agent at the addresses and telephone numbers set forth on the Offer
to Purchase. Any questions you may have with respect to the Offer should be
directed to the Information Agent, D.F. King & Co., Inc., at 1-800-347-4750.
Very truly yours,
NITCHES, INC.
By:
--------------------------------------
Chief Executive Officer
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU OR
ANY OTHER PERSON THE AGENT OF THE COMPANY, THE INFORMATION AGENT OR THE
DEPOSITARY OR AUTHORIZE YOU OR ANY OTHER PERSON TO MAKE ANY MATERIAL ON THEIR
BEHALF WITH RESPECT TO THE OFFER, OTHER THAN THE MATERIAL ENCLOSED HEREWITH AND
THE STATEMENTS SPECIFICALLY SET FORTH IN SUCH MATERIAL.
2
<PAGE> 1
EXHIBIT 99.(a)5
NITCHES, INC.
Offer to Purchase for Cash
Up to 1,000,000 Shares of its Common Stock
at a Purchase Price of
$4.00 per Share
August 18, 1998
To our Clients:
Enclosed for your consideration are the Offer to Purchase dated
August 18, 1998 (the "Offer to Purchase") and the related Letter of Transmittal
(which together constitute the "Offer") distributed in connection with the offer
by Nitches, Inc., a California corporation (the "Company"), to purchase for cash
up to 1,000,000 shares of its Common Stock (the "Shares"), at a price of $4.00
per Share, upon the terms and subject to the conditions of the Offer.
All Shares properly tendered and not withdrawn prior to the
expiration of the Offer will be purchased at the Purchase Price, net to the
seller in cash, upon the terms and subject to the conditions of the Offer,
including the proration terms thereof. The Company will return all Shares not
subject to the conditions of the Offer, including Shares not purchased because
of proration. See Section 4 of the Offer to Purchase.
We are (or our nominee is) the record holder of Shares held for your
account. As such, we are the only ones who can tender those Shares, and then
only pursuant to your instructions. We are sending you the enclosed Letter of
Transmittal for your information only.
Please instruct us as to whether you wish us to tender any or all of
the Shares we hold for your account upon the terms and subject to the conditions
of the Offer.
We call your attention to the following:
1. The Offer is not conditioned on any minimum number of Shares
being tendered.
2. The Offer, proration period and withdrawal rights expire at 5:00
p.m., New York City time, on Wednesday, September 16, 1998, unless the Offer is
extended.
3. The Offer is for up to 1,000,000 Shares, constituting
approximately 49.70% of the Shares outstanding as of August 18, 1998.
4. Tendering shareholders will not be obligated to pay brokerage
commission solicitation fees or, subject to Instruction 6 of the Letter of
Transmittal, stock transfer taxes in connection with the Company's purchase of
Shares pursuant to the Offer.
If you want us to tender any or all of your Shares (held by us for
you), please so instruct us by completing, executing and returning to us the
attached instruction form. An envelope to return your instructions to us is
enclosed. If you authorize us to tender those Shares, we will tender all such
Shares unless you specify otherwise on the attached instruction form.
YOUR INSTRUCTIONS SHOULD BE FORWARDED TO US IN AMPLE TIME TO PERMIT
US TO SUBMIT A TENDER ON YOUR BEHALF PRIOR TO THE EXPIRATION OF THE OFFER. THE
OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS EXPIRE AT 5:00 P.M., NEW YORK CITY
TIME, ON SEPTEMBER 16, 1998, UNLESS THE OFFER IS EXTENDED.
<PAGE> 2
As described in Section 1 of the Offer to Purchase, in the event
that prior to the expiration of the Offer a greater number of Shares than
1,000,000 Shares are properly tendered and not withdrawn, the Company will
accept all Shares properly tendered and not withdrawn prior to the expiration of
the Offer on a pro rata basis (with adjustments to avoid purchases of fractional
Shares) based upon the number of such Shares.
The Company is not aware of any jurisdiction where the making of the
Offer is not in compliance with applicable law. If the Company becomes aware of
any jurisdiction where the making of the Offer is not in compliance with any
valid applicable law, the Company will make a good faith effort to comply with
such law. If, after such good faith effort, the Company cannot comply with such
law, the Offer will not be made to (nor will tender be accepted from or on
behalf of) the holders of Shares residing in such jurisdiction. In any
jurisdiction the securities or blue sky laws of which require the Offer to be
made by a licensed broker or dealer, the Offer is being made on the Company's
behalf by a registered broker or dealer licensed under the laws of such
jurisdiction.
2
<PAGE> 1
EXHIBIT 99.(a)-6
[NITCHES LETTERHEAD]
FOR IMMEDIATE RELEASE
Subject: Nitches, Inc. today announced its offer to purchase up to 1,000,000
shares of its outstanding common stock at a price of $4.00 per share.
Contact: Steven P. Wyandt (619) 625-2633
- --------------------------------------------------------------------------------
SAN DIEGO, California, August 11, 1998--Nitches, Inc. (NASDAQ-NICH)
announced today that it will make a tender offer for up to 1,000,000 shares of
its outstanding common stock at a price of $4.00 per share. The offering period
will commence on August 18, 1998 and will remain open until 5:00 p.m. E.S.T.
on September 16, 1998.
<PAGE> 1
EXHIBIT 99.(a)7
[NITCHES INC. LETTERHEAD]
August 18, 1998
To Our Shareholders:
Nitches, Inc. is offering to purchase up to 1,000,000 shares of its common
stock (representing approximately 50% of the currently outstanding shares) from
its shareholders through a tender offer at $4.00 per share.
All of the shares that are properly tendered (and which have not been
withdrawn prior to the expiration of the offer) will, subject to possible
proration, be purchased. All shares that have been tendered and not purchased
will be returned promptly to the shareholders. The tender offer is not
conditioned on any minimum number of shares being tendered.
The tender offer is explained in detail in the enclosed Offer to Purchase
and Letter of Transmittal. If you wish to tender your shares, detailed
instructions on how to tender shares are also in the enclosed materials. I
encouraged you to read these materials carefully before making any decision with
respect to the tender offer. Please note that the tender offer is scheduled to
expires at 5:00 P.M., New York City time, on Wednesday, September 16, 1998
unless extended by the Company.
Sincerely,
Nitches, Inc.
Steven P. Wyandt
President
<PAGE> 1
EXHIBIT 99.(h)
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Schedule 13E-4 filed in
connection with the Offer to Purchase of Nitches, Inc. of our report dated
October 10, 1997, appearing in the Annual Report on Form 10-K of Nitches, Inc.
for the year ended August 31, 1997.
Moss Adams LLP
Los Angeles, California
August 18, 1998
