SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14D-1
Tender Offer Statement Pursuant to Section 14(d)(1)
of the Securities Exchange Act of 1934
(Amendment No. 1)*
MASCOTT CORPORATION
(Name of Subject Company)
DINE, LLC
(Bidder)
Common Stock, no par value
(Title of Class of Securities)
574672-30-9
(CUSIP Number of Class of Securities)
Scott M. Gillman, Chairman Robert G. Minion, Esq.
DINE, LLC Lowenstein, Sandler, Kohl,
5N Regent Street Fisher & Boylan, P.C.
Suite 508B 65 Livingston Avenue
Livingston, NJ 07039 Roseland, NJ 07068
(201) 535-1000 (201) 992-8700
(Name, Address and Telephone Number of Persons Authorized to Receive
Notices and Communications on Behalf of Bidder)
Calculation of Filing Fee
Transaction valuation Amount of filing fee
$ 672,908* $ 135.00
* For purposes of calculating filing fee only. This amount assumes
the purchase of 434,134 shares of Common Stock of Mascott
Corporation at $1.55 in cash per share. The amount of the
filing fee, calculated in accordance with Regulation 240.0-11
of the Securities Exchange Act of 1934, as amended, equals
1/50 of one percentum of the value of the shares to be
purchased.
[x] Check box if any part of the fee is offset as provided by Rule
0-11(a)(2) and identify the filing with which the offsetting
fee was previously paid. Identify the previous filing by
registration statement number, or the Form or Schedule and the
date of its filing.
Amount Previously Paid: $135.00
Form of Registration No.: Schedule 13E-3, Rule 13e-3
Transaction Statement
Filing Party: DINE, LLC
Date Filed: April 13, 1995
Introduction
This Amendment No. 1 to the Schedule 14D-1 filed on April
13, 1995 by DINE, LLC, a New Jersey limited liability company
(the "Purchaser"), relating to the offer by the Purchaser to
purchase any and all outstanding shares of Common Stock, no par
value (the "Shares"), of Mascott Corporation, a New Jersey
corporation ( the "Company"), at a price of $1.55 per Share, net
to the seller in cash, amends and supplements such Schedule 14D-
1. The offer is being made upon the terms and subject to the
conditions set forth in the Offer to Purchase, dated April 13,
1995 and as amended May 3, 1995 (the "Offer to Purchase"), and in
the related Letter of Transmittal (which along with the Offer to
Purchase constitute the "Offer"). Copies of the Offer to
Purchase and Letter of Transmittal, each dated April 13, 1995,
are attached as Exhibits (a)(1) and (a)(2), respectively, to the
Schedule 14D-1 filed on April 13, 1995 and a copy of the amended
Offer to Purchase is attached as Exhibit (a)(8) hereto.
Item 4. Source and Amount of Funds or Other Consideration
The response to Item 4(a) is hereby amended by
incorporating herein by reference the information set forth under
the caption "SPECIAL FACTORS - Source and Amount of Funds" of the
Offer to Purchase, as amended.
Item 10. Additional Information
(f) The response to Item 10(f) is hereby amended by
incorporating herein by reference the information set forth in
the Offer to Purchase, as amended, a copy of which is attached as
Exhibit (a)(8) hereto, and which is incorporated in its entirety
herein by reference.
Item 11. Material to be Filed as Exhibits
The response to Item 11 is hereby amended by adding the
following new exhibit which is filed herewith:
(a)(8) Offer to Purchase, as amended, dated May 3,
1995
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.
Dated: May 3, 1995 DINE, LLC
By: /s/Scott M. Gillman
Scott M. Gillman, Chairman
EXHIBIT INDEX
Exhibit No. Page
No.
(a)(8) Offer to Purchase, as amended, dated May 3, 1995
AMENDED OFFER TO PURCHASE FOR CASH
ANY AND ALL OF THE OUTSTANDING SHARES OF COMMON STOCK
OF
MASCOTT CORPORATION
AT $1.55 NET PER SHARE
BY
DINE, LLC
THE OFFER AND WITHDRAWAL RIGHTS
EXPIRE AT 5:00 P.M. EASTERN DAYLIGHT
TIME, ON MAY 15, 1995, UNLESS EXTENDED
THIS OFFER IS NOT CONDITIONED ON ANY MINIMUM NUMBER OF SHARES
BEING TENDERED.
THIS TRANSACTION HAS NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED
UPON THE FAIRNESS OR MERITS OF SUCH TRANSACTION NOR UPON THE
ACCURACY OR ADEQUACY OF THE INFORMATION CONTAINED IN THIS
DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
NEITHER MASCOTT CORPORATION NOR ITS INDEPENDENT DIRECTORS MAKES
ANY RECOMMENDATION TO ANY STOCKHOLDER AS TO WHETHER TO TENDER OR
TO REFRAIN FROM TENDERING SHARES. EACH STOCKHOLDER MUST MAKE HIS
OWN DECISION WHETHER TO TENDER SHARES.
IMPORTANT
Any stockholder desiring to tender all or any portion of his
Shares (as defined below) should either (i) complete and sign the
Letter of Transmittal or a facsimile copy thereof in accordance
with the instructions in the 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 his stock certificates for such Shares to the Depositary
or follow the procedure for book-entry delivery set forth in "THE
TENDER OFFER - Procedure For Tendering Shares" or (ii) request
his broker, dealer, commercial bank, trust company or other
nominee to effect the transaction for him. A stockholder having
Shares registered in the name of a broker, dealer, commercial
bank, trust company or other nominee must contact that broker,
dealer, commercial bank, trust company or other nominee if such
stockholder desires to tender such Shares.
Stockholders who desire to tender Shares and whose
certificates for such Shares are not immediately available or who
cannot comply with the procedure for book entry transfer by the
expiration of the Offer must tender such Shares by following the
procedures for guaranteed delivery set forth in "THE TENDER OFFER
- - Procedure for Tendering Shares."
Questions and 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 DINE, LLC,
Attn: Secretary, at (201) 535-1000.
________________________________
May 3, 1995
TABLE OF CONTENTS
Page
INTRODUCTION 1
SPECIAL FACTORS 2
Background of the Company and the Offer 2
Purpose of the Offer and the Merger 5
The Merger 7
Fairness of the Offer and the Merger; Recommendation
of the Board of Directors 7
Opinion of Financial Advisor 10
Interests of Certain Persons in the Offer and the Merger;
Potential Conflicts of Interest 14
Plans for the Company After the Offer and the Merger 14
Notice of Plan of Merger; Dissenters' Rights 15
Federal Tax Consequences 18
Source and Amount of Funds 19
THE TENDER OFFER 19
Terms of the Offer 19
Procedure for Tendering Shares 20
Withdrawal Rights 21
Acceptance for Payment and Payment of Purchase Price 23
Certain Conditions of the Offer 23
Price Range of the Shares; Dividend Information 24
Summary Historical Financial Information;
Public Filings 24
Certain Information Concerning the Company and
the Purchaser 25
Effect of the Offer on the Market for Shares;
Registration Under the Exchange Act and
SmallCap Market Listing 26
Certain Legal Matters 27
Fees and Expenses 27
MISCELLANEOUS 27
SCHEDULE I - Certain Information Regarding the Purchaser, the
Principals of the Purchaser and Executive Officers and the
Directors of the Company
SCHEDULE II - Certain Financial Statements of the Company
SCHEDULE III - Opinion of Financial Advisor
SCHEDULE IV - Plan of Merger
INTRODUCTION
DINE, LLC, a New Jersey limited liability company (the
"Purchaser"), hereby offers to purchase any and all of the
outstanding shares of common stock, no par value (the "Shares"),
of Mascott Corporation, a New Jersey corporation (the "Company"),
at a price of $1.55 per Share, to be paid net to the seller in
cash (the "Purchase Price"), as set forth in this Offer to
Purchase and in the related Letter of Transmittal (which together
constitute the "Offer").
The Purchaser was organized in April 1995 by Scott M.
Gillman, the Chairman of the Board and Chief Executive Officer of
the Company, Marc A. Gillman, the President and Chief Operating
Officer of the Company and Richard Gillman, the former Chairman
of the Board of the Company and the father of Scott M. Gillman
and Marc A. Gillman. Each of Scott M. Gillman, Marc A. Gillman
and Richard Gillman own approximately one-third of the equity of
the Purchaser. On April 13, 1995, Scott M. Gillman, Marc A.
Gillman and Richard Gillman contributed the 435,149, 435,149 and
435,148 Shares owned by each of them, respectively (collectively,
the "Gillman Shares"), to the Purchaser. See "SPECIAL FACTORS -
Interests of Certain Persons in the Offer and Merger; Potential
Conflicts of Interest," "THE TENDER OFFER - Certain Information
Concerning the Company and the Purchaser" and Schedule I.
If, following the consummation of the Offer, the
Purchaser owns 90% or more of the outstanding Shares, the
Purchaser intends to contribute all of the Shares owned by it
(including the Gillman Shares) to DINE Acquisition Corp., a New
Jersey corporation (the "Acquisition Subsidiary") and effect a
merger between the Acquisition Subsidiary and the Company
pursuant to Section 14A:10-5.1 of the New Jersey Business
Corporation Act (the "BCA") whereby the Company would be the
surviving corporation and all remaining Shares owned by
stockholders other than the Acquisition Subsidiary automatically
will be converted into the right to receive $1.55 per Share in
cash (the "Merger"). See "SPECIAL FACTORS - The Merger" and "THE
TENDER OFFER - Certain Information Concerning the Company and the
Purchaser." The Purchaser currently owns 1,305,446 Shares
(consisting entirely of the Gillman Shares contributed to it),
representing approximately 75% of the currently issued and
outstanding Shares. Currently, 434,134 Shares are owned by
stockholders other than the Purchaser. If more than 260,175
Shares are tendered and purchased pursuant to this Offer, the
Purchaser intends to consummate the Merger as soon as practicable
thereafter. In addition, as set forth on Schedule I hereto, the
Purchaser and its members have the right, through the exercise of
currently exercisable options, warrants and other convertible
securities (the "Convertible Securities"), to acquire 1,052,500
Shares in the aggregate. Should the Purchaser and its members
exercise all such Convertible Securities, the Purchaser and its
members would then own 2,357,946 Shares of what would then be
2,792,080 Shares outstanding. In such case, the Purchaser and
its members would own approximately 84.5% of the issued and
outstanding shares in the aggregate and if more than 154,925
Shares are tendered and purchased pursuant to the Offer, would
own 90% or more of the Shares and would consummate the Merger.
See "SPECIAL FACTORS - Interests of Certain Persons in the Offer
and the Merger; Potential Conflicts of Interest," "-- Notice of
Plan of Merger; Dissenters' Rights" and Schedule I.
The Board of Directors of the Company (the "Board"),
based on the recommendation of a special committee of the Board
(the "Independent Committee") consisting of 2 of the independent
directors, has determined that the Offer and the Merger are fair
and reflect the best price available to the unaffiliated
stockholders of the Company. The Independent Committee was
formed to review the Offer and the Merger with the purpose of
representing the interests of the unaffiliated stockholders. The
Independent Committee retained a financial advisor to advise the
Independent Committee on the fairness, from a financial point of
view, of the consideration to be received by the unaffiliated
stockholders of the Company in the Offer and the Merger and the
determination made by the Independent Committee was based upon
many factors, including the opinion from its financial advisor.
See "SPECIAL FACTORS - Fairness of the Offer and the Merger;
Recommendation of the Board of Directors" and "-- Opinion of
Financial Advisor."
The Offer is not conditioned on any minimum number of
Shares being tendered or on availability of financing or any
other condition not described herein. See "THE TENDER OFFER -
Certain Conditions of the Offer."
No tendered Shares will be accepted for payment unless
such Shares are properly tendered and the holder of such Shares
has duly executed a Letter of Transmittal.
Tendering stockholders will not be obligated to pay
brokerage commissions, solicitation fees or, subject to
Instruction 7 of the Letter of Transmittal, stock transfer taxes
on the Purchaser's purchase of Shares. In addition, the
Purchaser will pay all fees and expenses of the Depositary in
connection with the Offer. See "THE TENDER OFFER - Fees and
Expenses."
As of April 12, 1995, there were 1,739,580 Shares
outstanding and 352 holders of record. This Offer to Purchase,
along with the Letter of Transmittal and related documents, is
being mailed to all holders of record as of April 12, 1995. Such
materials are also being furnished to all participants named on
the most recent security position listing available to the
Company of all clearing agencies holding Shares of record for
transmittal to the beneficial owners of the Shares held by such
participants.
NEITHER THE COMPANY NOR ITS BOARD OF DIRECTORS MAKES
ANY RECOMMENDATION TO ANY STOCKHOLDER AS TO WHETHER TO TENDER OR
REFRAIN FROM TENDERING SHARES. EACH STOCKHOLDER MUST MAKE HIS
OWN DECISION WHETHER TO TENDER SHARES AND, IF SO, HOW MANY SHARES
TO TENDER.
SPECIAL FACTORS
Background of the Company and the Offer
Since the Company's initial public offering in 1989, it
has experienced consistent and substantial net losses. The net
worth of the Company at February 28, 1990 was $5,972,000, by
February 27, 1994, the Company's net worth was $1,283,000 and at
November 27, 1994, the Company's net worth was $1,010,000. The
Company incurred a net loss of $592,000 and $334,000,
respectively, for the fiscal year ended February 27, 1994 and the
nine months ended November 27, 1994. The Company's accumulated
deficit at November 27, 1994 was $5,840,000. The Company
anticipates that it will achieve a net profit of approximately
$255,000 (of which approximately $150,000 will represent non-
recurring, non-operating income relating to the settlement of
certain lease obligations of the Company (the "Leases
Adjustment")) for the fourth quarter ended February 26, 1995 and
a net loss of approximately $225,000 (without giving effect to
the Leases Adjustment) for the fiscal year ended February 26,
1995. The anticipated results for the fourth quarter of the
fiscal year ended February 26, 1995 are comparable to the net
income of $106,000 achieved by the Company for the fourth quarter
of the fiscal year ended February 27, 1994.
The Company was originally organized to own and operate
full-service restaurants under the trade name "Markers."
Although the Company operated two such Markers restaurants,
neither was very successful and the Company closed one such
Markers restaurant in 1994. The other Markers restaurant,
located in Jersey City, New Jersey, incurred substantial net
operating losses in each fiscal year from its opening in 1989
through the Company's fiscal year ended February 28, 1993 and the
Company wrote-off the $1,607,000 value of this restaurant's
assets in February 1992. After continued efforts to increase
revenues and decrease expenses at such restaurant, such
restaurant recently has achieved modest net operating income.
For the fiscal year ended February 27, 1994 and the nine month
period ended November 27, 1994, it had operating income of
approximately $85,000 and $117,000, respectively, before the
allocation to such restaurant of any corporate level general,
administrative and other expenses, including depreciation,
amortization, interest and taxes, incurred by the Company
(collectively, the "Corporate G/A Expenses"). However, a new
restaurant is expected to open in the financial complex where the
Company's Markers restaurant is located, which the Company
believes will substantially negatively impact its Markers
restaurant. Also, this Markers restaurant incurred a substantial
rent increase in December 1994, which likely will further
negatively impact its net operating income, if any, in future
periods.
The Company has opened a total of 14 Cinnabon* (*Cinnabon
is a registered-trademark of Cinnabon, Inc.) bakeries in
regional shopping malls pursuant to territory and franchise
agreements with Cinnabon, Inc. These Cinnabon bakeries generally
vary widely in their performance. The Company's Cinnabon
bakeries located in New Jersey generally are successful and
provide the bulk of the operating income of the Company. For
example, the Company's New Jersey Cinnabon bakeries achieved
operating income, after allocating to such locations
administrative expenses of the Company directly attributable to
such locations, but exclusive of Corporate G/A Expenses (such
income (or loss), the "Net Operating Income" or "Net Operating
Loss") of $742,000 and $513,000, respectively, for the fiscal
year ended February 27, 1994 and the nine months ended November
27, 1994. On the other hand, the Company's Cinnabon bakeries
located in New England generally are not successful. For
example, the New England Cinnabon bakeries incurred a Net
Operating Loss of $120,000 and $86,000, respectively, for the
fiscal year ended February 27, 1994 and the nine months ended
November 27, 1994. The Company closed 1 such location in August,
1993 due to poor operating results. Although, overall, the
Company's Cinnabon bakeries produce Net Operating Income for the
Company, the amount of Net Operating Income generally has not
resulted in significant net income for the Company after the
allocation of Corporate G/A Expenses. If the Company had
sufficient financing available, it likely would attempt to open
additional Cinnabon bakery franchises in regional shopping malls
in New Jersey. However, the Company believes that there are very
limited opportunities to do so because, among the regional
shopping malls which have the necessary high customer traffic
volume, there are only a limited number of stores which offer a
suitable location and store size for the successful operation of
a Cinnabon bakery franchise. Although the Company believes there
exist expansion opportunities which would enable the Company to
open additional Cinnabon bakeries in New England, given the
performance of its existing Cinnabon bakeries in New England, the
Company believes there are a very limited number of locations in
the regional shopping malls in that region that would prove
successful for the operation of an additional Cinnabon bakery.
The Company also opened a total of 3 Willie Mays
Chicken locations in regional shopping malls in 1991 and 1992.
Since opening, such locations generally have not been profitable
and the Company closed 1 such location in 1994 due to poor
operating results. The Company's remaining 2 Willie Mays Chicken
locations in regional shopping malls achieved Net Operating
Income of $4,000 and incurred a Net Operating Loss of $18,000,
respectively, for the fiscal year ended February 27, 1994 and the
nine months ended November 27, 1994.
In 1994, the Company through one of its wholly-owned
subsidiaries, formed a limited partnership with private investors
(the "WMCC Partnership") and opened a quick-service Willie Mays
Country Chicken restaurant in a strip-shopping center in
Livingston, New Jersey in May 1994. This restaurant, which cost
approximately $650,000 to open, has been operating at a net loss
since opening.
Because of its poor financial performance, the Company
has borrowed substantial sums from Richard Gillman. The Company
has issued to Richard Gillman a $1.5 million Secured Convertible
Debenture which bears interest at the prime rate as published by
The Wall Street Journal plus 1%. Interest on the Secured
Convertible Debenture is payable either in cash, or at the option
of the Company, in Shares or in shares of the Company's Class A
Preferred Stock (the "Preferred Stock"). As interest payments
thereon, the Company has to date issued to Richard Gillman 20,271
shares of Preferred Stock (each of which was converted in
accordance with its terms into one Share by Richard Gillman on
April 7, 1995) and currently there is outstanding approximately
$96,000 of accrued but unpaid interest on the Secured Convertible
Debenture. In addition, in December 1993, the Company issued to
Richard Gillman Shares at market value in exchange for his
forgiving $314,543 of what was then $1,814,543 of indebtedness of
the Company. The Secured Convertible Debenture is convertible
into 960,000 Shares at any time, in whole or in part, prior to
December 31, 1996. On April 7, 1995, each of Scott M. Gillman
and Marc A. Gillman purchased one-third of the Secured
Convertible Debenture (including accrued interest thereon) from
Richard Gillman and on April 13, 1995, each of Scott M. Gillman,
Marc A. Gillman and Richard Gillman contributed their interests
in the Secured Convertible Debenture to the Purchaser. The
Secured Convertible Debenture is secured by a pledge to the
holder thereof of the stock of the Company's subsidiaries which
own and operate Cinnabon bakeries. The Purchaser may not demand
payment under the Secured Convertible Debenture until December
31, 1995 but, may demand payment at that date or any time
thereafter. To the extent that the Purchaser does not demand
repayment of the Secured Convertible Debenture, the Company will
continue to have to pay interest thereon, resulting in either (i)
if interest is paid in cash, the further depletion of the cash
available to the Company, and (ii) if interest is paid in Shares
or shares of the Preferred Stock (which are convertible into
Shares), the substantial further dilution of the percentage
ownership of the Company by shareholders other than the
Purchaser.
Given these events and the Company's financial
condition, the primary business plan of the Company in recent
years has been to attempt to reduce its losses and maintain or
increase value for its stockholders. Management's efforts to
maintain or increase shareholder value included continuing its
efforts to increase revenues and reduce expenses at each of the
Company's existing locations, closing 3 of the Company's
underperforming locations, forming the WMCC Partnership and
opening the WMCC Partnership's Willie Mays Country Chicken
restaurant in an attempt to develop the Willie Mays Country
Chicken concept into a profitable operation, and attempting to
raise capital from third parties, including in the public market.
Although these efforts stabilized the Company's financial
condition, the Company's efforts to attract financing were
unsuccessful. Given its inability to generate substantial net
income, its existing indebtedness and its current financial
condition, the Company is unable to generate the external
financing necessary for expansion and, therefore, the Purchaser
believes it is unlikely that the Company will be able to
substantially increase the value of the Company into the
foreseeable future.
On March 27, 1995, Scott M. Gillman and Marc A. Gillman
initiated discussions with the Company regarding the possibility
and terms of the Offer and Merger. On March 28, 1995, at a
meeting of the board of directors of the Company, Scott M.
Gillman announced to the board of directors that the Purchaser
intended to effect a going-private transaction with the Company
by completing the Offer and the Merger. In response, the board
of directors of the Company designated an Independent Committee
composed of Richard Levy and Alan Cohen, the two directors of the
Company who are not shareholders or employees of the Company, to
consider (i) the Company's response to any proposal that may be
made regarding taking the Company private and (ii) the terms of
any proposed transaction, with the purpose of representing the
interests of the unaffiliated stockholders of the Company. The
Independent Committee hired independent counsel and retained the
services of American Appraisal Associates, Inc. ("American
Appraisal") as its financial advisor (the "Financial Advisor") to
advise the Independent Committee in connection with the Offer and
the Merger. See "SPECIAL FACTORS - Fairness of the Offer and the
Merger; Recommendation of the Board of Directors" and "-- Opinion
of Financial Advisor."
Discussions between the Purchaser (which at that time
was in the process of being formed) and the Independent
Committee, with Scott M. Gillman serving as the representative of
the Purchaser, involved a number of meetings prior to the
Purchaser making a definitive proposal regarding the Offer and
the Merger. After the Independent Committee had hired counsel
and the Financial Advisor, a meeting took place on March 30, 1995
among the Purchaser and the Independent Committee. The
Independent Committee, among other things, advised the Purchaser
that it had engaged independent counsel and the Financial Advisor
to assist it in evaluating any proposal that might be made by the
Purchaser and determining whether the consideration payable
pursuant to the Purchaser's proposal was fair, from a financial
point of view, to stockholders of the Company other than the
Purchaser and its affiliates. At that meeting, the Independent
Committee also advised the Purchaser of its concern that no
transaction proceed unless the Independent Committee was
satisfied that such transaction represented the best possible
price for unaffiliated stockholders, that a second-step merger
would provide the same amount and form of consideration to
remaining unaffiliated stockholders and that, in light of all the
circumstances, the Offer and Merger were fair and represented the
best price available to the unaffiliated stockholders. During
the days that followed, many meetings were held among the
Purchaser, the members of the Independent Committee, the counsel
to the Independent Committee and the Financial Advisor and many
discussions relating to the Offer and the Merger ensued, with the
Independent Committee seeking what it believed would be the most
favorable terms to the unaffiliated stockholders. During these
meetings, Scott M. Gillman, on behalf of the Purchaser, informed
the Independent Committee that the cash price the Purchaser
believed was fair and would offer to the unaffiliated
stockholders of the Company was $1.50 per Share.
On April 10, 1995, the Independent Committee met with
its independent counsel and with the Purchaser in order to
further discuss structural, pricing, and timing issues of the
proposal. The Purchaser confirmed that financing for the
transaction would not be a condition and that the Purchaser would
verify availability of funds prior to commencement of a going
private transaction. The Independent Committee articulated that
it would not approve the proposed transaction unless, in its
judgment, the offered price reflected or exceeded the fair value
for the current assets and business of the Company and which
would give any stockholder who wished to sell his or her shares
an opportunity to do so in an otherwise relatively illiquid
market, at a premium to that market.
On April 11, 1995, after a discussion regarding the
Independent Committee's judgment as to the value of the Company
and a price that would be fair to, and the best price obtainable
by, the unaffiliated stockholders, the Independent Committee
informed the Purchaser that, subject to the receipt of the
fairness opinion from the Financial Advisor, it believed the
proposal at $1.50 per Share was within the range of what was fair
from a financial point of view to the stockholders of the Company
other than the Purchaser and its affiliates.
At a meeting held on April 12, 1995, the Independent
Committee, after (i) extensive discussions both with the
Purchaser and with the Financial Advisor, (ii) its further review
of the proposed Offer and Merger and (iii) the receipt of the
written opinion regarding the fairness of the proposed Offer and
Merger from the Financial Advisor, determined that, although the
offered price of $1.50 per Share was fair, it believed that the
Purchaser should offer a small premium even to that price and
recommended to the Purchaser that it raise the price to $1.55 per
Share. After extensive further discussions, the Purchaser agreed
to raise the price of the Offer to $1.55 per Share. Based upon a
price of $1.55 per Share, the Independent Committee approved the
Offer and the Merger and unanimously determined to recommend that
the Board approve the Offer and the Merger. At a meeting of the
Board attended in person by Alan Cohen, Richard Levy and Ronald
Winarick held on April 12, 1995, the Board, with Ronald Winarick
abstaining, approved the Offer and the Merger and determined that
the Offer and the Merger are fair from a financial point of view
and reflect the best price available to the unaffiliated
stockholders of the Company. See "SPECIAL FACTORS - Fairness of
the Offer and the Merger; Recommendation of the Board of
Directors" and "-- Opinion of Financial Advisor."
Purpose of the Offer and the Merger
The primary purpose of the Offer and the Merger is to
take the Company private. There are four principal reasons for
taking the Company private, as described below.
First, there are substantial costs of being a public
company, including but not limited to securities laws compliance,
shareholder communications (including proxy statements, annual
reports and other matters), transfer agent fees, independent
auditors fees and expenses, legal fees and expenses, NASDAQ
listing fees and expenses and similar items. The annual costs
incurred by the Company in connection therewith are approximately
$125,000 per year. In addition, there are other costs of being a
public company, including administrative costs and substantial
time demands on management. The Purchaser believes that, for the
Company in its present financial condition, these costs are not
justified, since they do not assist in providing any additional
capital or financing to the Company. Being a private company
will substantially reduce or eliminate these costs.
Second, due to the financial performance and the
current financial condition of the Company, the Company does not
possess the prospects for growth or expansion required for a
public company. It is the Purchaser's belief that the Company's
future growth will require substantial additional capital, which
the Company is currently unable to obtain. The Company has been
unsuccessful during the last several years in its attempts to
secure external financing from unaffiliated parties, and it has
relied on capital provided by Richard Gillman for working capital
and expansion. $1.5 million, plus accrued interest of
approximately $96,000, is due and payable on the Secured
Convertible Debenture held by the Purchaser upon demand at any
time after December 31, 1995. There can be no assurance that the
Purchaser will not demand payment at such time and Richard
Gillman has made no commitment to extend any additional capital
to the Company. Given the Company's financial condition and its
reasonably expected future prospects, the Company has very
limited capacity to repay its existing indebtedness at any time
in the reasonably foreseeable future. Any future advances by
Richard Gillman would have to be based upon a reasonable
likelihood of repayment. Given the Company's inability to repay
its existing indebtedness, there is no such basis for any
additional advances. Moreover, interest continues to accrue on
the Company's indebtedness to the Purchaser pursuant to the
Secured Convertible Debenture. Even if the Purchaser does not
demand repayment of the Secured Convertible Debenture, interest
thereon still must be paid by the Company, resulting in a further
depletion of the cash of the Company (if such interest is paid in
cash) or a substantial further dilution of the percentage
ownership of the Company by shareholders other than the Purchaser
(if such interest is paid in Shares or shares of the Preferred
Stock).
Third, as described below, after the Merger, the
Purchaser may substantially restructure and/or alter the business
plan of the Company. In doing so, the Purchaser may contribute
other assets which may be owned or acquired by it to the Company.
While these assets could be contributed to the Company if the
Company remained public, the costs, complexities and difficulties
of valuing these entities would be extremely burdensome, apart
from the complications of ensuring fairness to unaffiliated
stockholders. Moreover, such restructuring or alteration, if
any, may not necessarily be appropriate for a public company of
the Company's size and financial condition and may involve risks
not appropriate for a public company. Also, any such
restructuring likely would only be of value to the Company if it
were able to attract substantial additional financing, which the
Company is unable to do in its current and anticipated future
condition. See "SPECIAL FACTORS - Plans for the Company After
the Offer and the Merger."
Fourth, the Offer and Merger will provide the existing
stockholders with a means to liquidate their Shares at a
substantial premium above the price available in the limited
market that exists. The bid price for the Shares was as low as
$1.00 per share in 1994 and during the Bulletin Board Period (as
defined below), there was often no active market in the Shares.
As recently as April 12, 1995, the bid price was as low as $.87
per Share and the last reported transaction in the Shares prior
to the date hereof was at $.87 per Share. Also, the relative
lack of liquidity in the market and the cost of brokers'
commissions make it difficult for Shares to be sold in the market
on an efficient basis by most of the Company's stockholders.
Additionally, because the bid price for the Shares is below the
minimum bid price of $1.00 required for continued listing on the
NASDAQ SmallCap Market, the Shares likely will be deleted from
the NASDAQ SmallCap Market in the future, which will result in
further significant impairment in the ability to buy and sell
Shares. See "THE TENDER OFFER - Price Range of the Shares;
Dividend Information."
The purpose of preceding the Merger by the Offer is to
acquire sufficient Shares to allow the Acquisition Subsidiary to
effect the Merger under Section 14A:10-5.1 of the BCA. The
Acquisition Subsidiary may effect the Merger without any action
of the Company pursuant to Section 14A:10-5.1 of the BCA if,
following the Offer and a subsequent contribution of Shares to
the Acquisition Subsidiary, the Acquisition Subsidiary owns at
least 90% of the outstanding Shares. If the Acquisition
Subsidiary does not own 90% of the outstanding Shares, the
Acquisition Subsidiary would not be able to effect a merger of
the Acquisition Subsidiary and the Company under Section 14A:10-
5.1 of the BCA. In such case, the Purchaser may, subject to
numerous factors, including the number of Shares, if any,
purchased pursuant to the Offer, the availability of Shares at
prices acceptable to the Purchaser, the business condition and
prospects of the Company, and general economic and market
conditions, acquire additional Shares through the conversion of
all or a portion of the Convertible Securities, privately
negotiated or open market purchases, subsequent tender or
exchange offers, or by any other means the Purchaser deems
advisable on such terms and at such prices as it determines
(which may be more or less than the price of the Offer) to bring
the ownership of the Purchaser (and, in turn, the Acquisition
Subsidiary) to at least 90% of the outstanding Shares.
Thereafter, the Acquisition Subsidiary could effect a merger
under Section 14A:10-5.1 of the BCA without a vote or consent of
the Company's stockholders and without action by the Company's
board of directors. In such a case, such merger would be
effected on such terms and at such prices as the Purchaser may
determine (which may be more or less than the price being paid
per Share in the Offer).
Upon consummation of the Offer, the Shares likely will
be held of record by fewer than 300 persons. Therefore, the
Purchaser may cause the Company to apply for termination of
registration of the Shares under the Securities Exchange Act of
1934, as amended (the "Exchange Act"). In addition, because the
current bid price for the Shares is less than the minimum
required for continued listing on the NASDAQ SmallCap Market,
the Company expects that the Shares likely will be deleted from
the SmallCap Market in the future. If the Purchaser does not own
at least 90% of the Shares, the Purchaser may elect not to
proceed with a merger or other transaction that would cash out
non-tendering unaffiliated stockholders following the Offer.
Thus, following the consummation of the Offer, certain
unaffiliated persons may remain stockholders of the Company,
likely resulting in certain adverse effects to such persons,
including an inability to subsequently liquidate their Shares.
See "THE TENDER OFFER - Effect of the Offer on the Market for
Shares; Registration Under the Exchange Act and SmallCap Market
Listing."
The Purchaser is offering to buy any and all of the
outstanding Shares. Approximately 75% of the Shares (84.5% of
the Shares after giving effect to the conversion of the
Convertible Securities held by the Purchaser or its members) are
beneficially owned by the Purchaser and will not be tendered.
The Merger
If, following consummation of the Offer, the
Acquisition Subsidiary owns at least 90% of the outstanding
Shares, the Purchaser intends, subject to certain conditions, to
effect the Merger. The Company will be the surviving corporation
of the Merger (the "Surviving Corporation"). At the effective
time of the Merger (the "Effective Date"), each Share other than
those owned by the Acquisition Subsidiary or the Company will be
converted into and represent the right to receive $1.55 net in
cash. Each Share held by the Acquisition Subsidiary and each
Share held by the Company will be cancelled and retired without
payment. The Shares of the Acquisition Subsidiary (all of which
are owned by the Purchaser) will be converted into 100 shares of
the Surviving Corporation in the aggregate. In order to
consummate the Merger, the Purchaser (and, in turn, the
Acquisition Subsidiary) must own at least 90% of the outstanding
Shares. All stockholders, whether tendering their Shares or as a
result of receiving cash in the Merger, shall receive the same
amount of consideration per Share, except stockholders who
exercise their dissenters' rights provided hereby. See "SPECIAL
FACTORS - Notice of Plan of Merger; Dissenters' Rights."
Fairness of the Offer and the Merger; Recommendation of the Board
of Directors
At a meeting held on April 12, 1995, the Independent
Committee unanimously determined to recommend that the Board
approve the Offer and the Merger. At a meeting held on April 12,
1995, the Board, based on the recommendation of the Independent
Committee, approved the Offer and the Merger and determined that
the Offer and the Merger are fair, from a financial point of
view, and reflect the best price available to the unaffiliated
stockholders of the Company (other than the Purchaser and any
affiliate thereof).
In reaching its conclusions, the Independent Committee
considered a number of factors, including but not limited to the
following:
(i) the Company's financial condition and results of
operations, including its consistent and
substantial net losses since its initial public
offering in 1989. As described above, the Company
has experienced a substantial decline in its net
worth (from $5,972,000 at February 27, 1990 to
$1,283,000 at November 27, 1994) and the Company's
accumulated deficit at November 27, 1994 was
$5,840,000. The Company anticipates that it will
incur a net loss of approximately $225,000
(without giving effect to the Leases Adjustment)
for the fiscal year ended February 26, 1995. See
"SPECIAL FACTORS - Background of the Company and
the Offer;"
(ii) the Company's current business and future
prospects; including that such businesses
generally do not lend themselves to the Company
remaining a public company. As described above,
although the Company's Cinnabon bakery franchises
located in New Jersey generally are successful and
provide the bulk of the operating income of the
Company, the Company believes there are very
limited opportunities to open additional Cinnabon
bakery franchises in regional shopping malls in
New Jersey because there are a limited number of
such malls that have the necessary high customer
traffic volume to support a successful Cinnabon
bakery franchise and, in such regional malls that
do have the necessary high customer traffic
volume, there are only a limited number of stores
which offer suitable location and store size for a
Cinnabon bakery. Also, as described above, the
Company's other business -- its Markers
restaurant, Willie Mays Chicken locations and New
England Cinnabon bakery-franchises -- generally do
not generate the revenues necessary which would
make such business appropriate for expansion. See
"SPECIAL FACTORS - Background of the Company and
the Offer;"
(iii) that the purchase price represents a
substantial premium over recent market prices and
recent trading activity of the Shares and that the
Offer and the Merger will enable the Company's
stockholders to sell their Shares at a premium in
an otherwise relatively illiquid market See
"SPECIAL FACTORS - Purpose of the Offer and the
Merger" and "THE TENDER OFFER - Price Range of
Shares; Dividend Information;"
(iv) that the purchase price represents a substantial
premium to the net book value of the Shares (which
as of November 27, 1994 and February 27, 1994 was
$.59 and $.75 per Share, respectively) and
liquidation value of the Company, and the
potential value to the stockholders from an
orderly sale of the Company's assets, including
that a sale of the Company's assets would be
difficult because, (i) with respect to the Willie
Mays Chicken locations, those entities are
generally not profitable and any such sale would
require the consent of Willie Mays, which may not
be granted; (ii) with respect to the Company's
Markers restaurant, the such restaurant does not
generate substantial net income and a competing
restaurant is expected to open in the financial
complex where such restaurant is located; and
(iii) with respect to the Company's Cinnabon
bakery franchises, there are substantial
limitations imposed by the franchisor with respect
to any such transfer and the limited opportunities
for expansion thereof. See "SPECIAL FACTORS -
Opinion of Financial Advisor;"
(v) possible alternatives to the Offer and the Merger,
including the Company's going concern value and
its continuing to operate as a public entity. See
SPECIAL FACTORS - Purpose of the Offer and the
Merger;"
(vi) the terms and conditions of the Offer and the
Merger, including a purchase price higher than the
recent market price for the Shares, the lack of
financing as a condition of either the Offer or
the Merger, and that all unaffiliated stockholders
will receive the same price and form of
consideration for their Shares, whether in the
Offer or the Merger;
(vii) the oral presentations made by the Financial
Advisor to the Independent Committee at a meeting
held on April 12, 1995 as to various financial and
other considerations deemed relevant to the
evaluation of the Offer and the Merger;
(viii) the written opinion of the Financial Advisor,
a copy of which is attached hereto as Schedule
III, that the Offer and Merger are fair, from a
financial point of view, to the unaffiliated
stockholders; and
(ix) the belief on the part of members of the
Independent Committee, based upon their
familiarity with and investigation regarding the
Company's business, its current financial
condition and results of operations, and its
future prospects, that the cash consideration to
be paid in the Offer and the Merger fairly
reflects the Company's value and represents, in
their belief, the highest value that could be
obtained by the stockholders of the Company in a
sale of the Company and that the receipt of a
higher bid, either from the Purchaser or a third
party, was not a realistic possibility.
In view of the wide variety of factors considered in
connection with this evaluation, the Independent Committee did
not find it practicable to, and did not, quantify or otherwise
assign relative weights to the factors considered in making its
determination.
While the Board believes that the Offer is fair, from a
financial point of view, the Board determined that it would make
no recommendation to the stockholders of the Company regarding
their respective decisions to tender or refrain from tendering
Shares pursuant to the Offer. The Company is unable to take a
position with respect to a recommendation of the Offer because
the Company believes that each stockholder should evaluate the
Offer in light of his individual circumstances and should make
his own decision whether to tender Shares pursuant to the Offer
based on the tax and other consequences of the Offer which may be
unique to each individual stockholder.
The Purchaser, including each of its principals,
believes that the Offer and Merger are fair to unaffiliated
stockholders. This conclusion is based upon factors
substantially similar to those considered by the Independent
Committee set forth as (i) through (ix) above, including an
independent evaluation by the Purchaser and its principals of,
among other things, the following factors:
(a) the Company's financial condition and results of
operations, including its consistent and
substantial net losses since its initial public
offering in 1989. As described above, the Company
has experienced a substantial decline in its net
worth (from $5,972,000 at February 27, 1990 to
$1,283,000 at November 27, 1994) and the Company's
accumulated deficit at November 27, 1994 was
$5,840,000. The Company anticipates that it will
incur a net loss of approximately $225,000
(without giving effect to the Leases Adjustment)
for the fiscal year ended February 26, 1995. See
"SPECIAL FACTORS - Background of the Company and
the Offer;"
(b) the Company's current business and future
prospects; including that such businesses
generally do not lend themselves to the Company
remaining a public company. As described above,
although the Company's Cinnabon bakery franchises
located in New Jersey generally are successful and
provide the bulk of the operating income of the
Company, the Company believes there are very
limited opportunities to open additional Cinnabon
bakery franchises in regional shopping malls in
New Jersey because there are a limited number of
such malls that have the necessary high customer
traffic volume to support a successful Cinnabon
bakery franchise and, in such regional malls that
do have the necessary high customer traffic
volume, there are only a limited number of stores
which offer suitable location and store size for a
Cinnabon bakery. Also, as described above, the
Company's other business -- its Markers
restaurant, Willie Mays Chicken locations and New
England Cinnabon bakery-franchises -- generally do
not generate the revenues necessary which would
make such business appropriate for expansion. See
"SPECIAL FACTORS - Background of the Company and
the Offer;"
(c) that the purchase price represents a substantial
premium over recent market prices and recent
trading activity of the Shares and that the Offer
and the Merger will enable the Company's
stockholders to sell their Shares at a premium in
an otherwise relatively illiquid market See
"SPECIAL FACTORS - Purpose of the Offer and the
Merger" and "THE TENDER OFFER - Price Range of
Shares; Dividend Information;"
(d) that the purchase price represents a substantial
premium to the net book value of the Shares (which
as of November 27, 1994 and February 27, 1994 was
$.59 and $.75 per Share, respectively) and
liquidation value of the Company, and the
potential value to the stockholders from an
orderly sale of the Company's assets, including
that a sale of the Company's assets would be
difficult because, (i) with respect to the Willie
Mays Chicken locations, those entities are
generally not profitable and any such sale would
require the consent of Willie Mays, which may not
be granted; (ii) with respect to the Company's
Markers restaurant, the such restaurant does not
generate substantial net income and a competing
restaurant is expected to open in the financial
complex where such restaurant is located; and
(iii) with respect to the Company's Cinnabon
bakery franchises, there are substantial
limitations imposed by the franchisor with respect
to any such transfer and the limited opportunities
for expansion thereof. See "SPECIAL FACTORS -
Opinion of Financial Advisor;"
(e) the possible alternatives to the Offer and the
Merger, including the Company's going concern
value and its continuing to operate as a public
entity See "SPECIAL FACTORS - Background of the
Company and the Offer" and "--Purpose of the Offer
and the Merger;"
(f) the terms and conditions of the Offer and the
Merger, including a purchase price higher than the
recent market price for the Shares, the lack of
financing as a condition of either the Offer or
the Merger, and that all unaffiliated stockholders
will receive the same price and form of
consideration for their Shares, whether in the
Offer or the Merger;
(g) the written opinion of the Financial Advisor, a
copy of which is attached hereto as Schedule III,
that the Offer and Merger are fair, from a
financial point of view, to the unaffiliated
stockholders; and
(h) the belief on the part of the Purchaser and its
principals, based upon their familiarity with the
Company's business, its current financial
condition and results of operations, and its
future prospects, that the cash consideration to
be paid in the Offer and the Merger fairly
reflects the Company's value and represents, in
its belief, the highest value that could be
obtained by the stockholders of the Company in a
sale of the Company and that the receipt of a
higher bid from a third party was not a realistic
possibility. See "SPECIAL FACTORS - Background of
the Company and the Offer."
In the view of the Purchaser and its principals, the
consideration to be paid to unaffiliated stockholders in the
Offer and the Merger is equal to or higher than a valuation of
the Shares using any reasonable methodology or set of
assumptions. However, the Purchaser and its principals did not
specifically determine the liquidation or value or value from an
orderly sale of the Company's assets.
Although (i) the Offer and the Merger do not require
the approval of at least a majority of the unaffiliated
stockholders and (ii) the Independent Committee did not retain an
unaffiliated representative to negotiate the terms of the Offer
and the Merger with the Purchaser on behalf of the unaffiliated
stockholders, the Purchaser and its principals believe the Offer
and the Merger are fair to unaffiliated stockholders. The basis
for this determination are that the terms of the Offer and the
Merger were negotiated on behalf of the unaffiliated stockholders
of the Company by the Independent Committee, which retained the
services of the Financial Advisor to advise it with respect to
the fairness of the Offer and the Merger and which Independent
Committee was represented by independent counsel who met with
representatives of the Purchaser, and in consultation with the
Financial Advisor, advised the Independent Committee on issues of
valuation and fairness with respect to the Offer and the Merger.
In addition, the members of the Independent Committee, along with
their independent counsel and the Financial Advisor, conducted a
detailed and thorough investigation and analysis of all factors
they deemed relevant to determine the fairness, from a financial
point of view, of the terms of the Offer and the Merger.
Opinion of Financial Advisor
At its meeting on April 12, 1995 to consider the Offer
and Merger, the Independent Committee received the opinion of
American Appraisal that, as of such date, the cash consideration
of $1.55 per Share to be received by stockholders of the Company
pursuant to the terms of the Offer and Merger, is fair to the
stockholders of the Company (other than the Purchaser) from a
financial point of view. American Appraisal analyzed the amount
of consideration offered by the Purchaser, and did not come up
with the amount independently. American Appraisal's opinion
related only to the consideration to be paid by the Purchaser
pursuant to the Offer and Merger. The full text of American
Appraisal's written opinion, which summarizes the assumptions
made, procedures followed and matters considered in connection
with such opinion, is attached as Schedule III to this Offer to
Purchase and is incorporated herein by reference. In addition to
being attached as Schedule III, a copy of American Appraisal's
written opinion is available for inspection and copying at the
principal offices of the Purchaser and the Company during normal
business hours. Stockholders of the Company are urged to read
the opinion in its entirety, especially with regard to the
assumptions made and matters considered by American Appraisal.
In connection with its opinion, American Appraisal
reviewed, among other things, a draft dated April 11, 1995 of
each of the Schedule 14D-1 and Schedule 13E-3 to be filed by the
Purchaser, as well as each of the Company's publicly filed
reports, with the Securities and Exchange Commission (the
"Commission") and certain internal financial analyses and
calendar year 1995 forecasts for the Company prepared by its
management. The calendar year 1995 forecasts consisted of
budgets internally prepared by management of the Company during
1994 which indicated that the Company's Markers restaurant,
Willlie Mays Chicken locations and Cinnabon bakery franchises
would achieve Net Operating Income of approximately $176,000,
$100,000 and $1,029,000, respectively, for calendar year 1995 and
approximately $42,000, $11,500 and $186,000, respectively, for
the calendar quarter ended March 31, 1995 (the "First Quarter").
The actual results for such businesses for the First Quarter was
that the Company's Markers restaurant, Willlie Mays Chicken
locations and Cinnabon bakery franchises achieved Net Operating
Income of approximately $26,000, $6,500 and $200,000,
respectively. The Company anticipates that the results of
operations of its Willie Mays Chicken locations and its Cinnabon
bakery franchises for the remainder of calendar year 1995 will be
consistent with the calendar year 1995 forecasts but that the
results of operations for its Markers restaurant for calendar
year 1995 will result in substantially less Net Operating Income
then projected in the calendar year 1995 forecasts. However,
American Appraisal did not take such anticipated negative results
into consideration in completing its evaluation. No special
assumptions were made in connection with such projections other
than that such businesses would continue to operate consistent
with existing practices and there would be no material change to
the consumer demand for such businesses, whether due to a change
in general economic conditions in the regions such businesses are
located or otherwise.
American Appraisal also held discussions with members
of the senior management of the Company (who generally are the
members of the Purchaser) regarding the Company's assets and
liabilities, past and current business operations, financial
condition and future prospects. In addition, American Appraisal
reviewed the reported price and trading activity for the Shares,
compared certain financial and stock market information for the
Company with similar information for certain other companies and
performed such other analyses and studies as American Appraisal
deemed appropriate.
American Appraisal relied without independent
verification upon the accuracy and completeness of all of the
financial and other information reviewed by it for purposes of
its opinion and assumed that the financial forecasts for calendar
year 1995 provided to it were reasonably prepared on a basis
reflecting the best currently available estimates and judgments
of the management of the Company (who generally are the members
of the Purchaser) as to its expected future financial performance
as currently configured and after giving effect to the Merger.
In addition, American Appraisal has not made an independent
evaluation or appraisal of the fixed and intangible assets of the
Company or any of its respective subsidiaries and American
Appraisal has not been furnished with any such evaluation or
appraisal.
The following is a summary of certain financial
analyses performed by American Appraisal in connection with
providing its written opinion, dated April 12, 1995, to the
Independent Committee. American Appraisal reviewed these
financial analyses with the Independent Committee at a meeting on
April 12, 1995.
American Appraisal reviewed information regarding
recently announced and completed mergers and acquisitions of
public and privately held companies that were engaged in the
restaurant and fast food industries. The terms and conditions of
these transactions, including the consideration offered, were
analyzed for the purpose of measuring the prices paid for the
transactions in relation to the sales revenues and earnings
before depreciation, interest, taxes and amortization ("EBDITA")
reported by the acquired companies prior to the date of their
respective transactions. While several mergers and acquisitions
of restaurant and fast food company franchisee operations were
reported during this period, there were no transactions that
involved businesses considered adequately comparable to the
Company in terms of mix of restaurant businesses, size, regional
market scope, operating history and growth expectations.
Accordingly, American Appraisal did not believe it appropriate to
formulate an opinion of value for the Shares from this analysis.
For the purpose of evaluating the current market price
quotations of the Shares, American Appraisal searched for
publicly held restaurant companies in order to (i) evaluate their
stock market valuations and their relationship to the companies'
operating performance and (ii) correlate these market
valuation/operating performance relationships to the business and
operating performance of the Company. The search focused on
publicly held restaurant and fast food franchisee-based companies
comparable to the Company in terms of (i) revenue size and
operating history, (ii) regional market scope, (iii) financial
condition and (iv) growth expectations. While several public
companies were primarily franchisee operators of fast food
restaurants, none were found that were comparable to the Company
in terms of size, nature of franchise operations, operating
history and growth expectations. Accordingly, American Appraisal
did not believe it to be appropriate to formulate an opinion as
to a value for the Shares from this analysis.
To arrive at its opinion with regard to the Shares,
American Appraisal relied primarily upon estimates of current
market values for the Company's underlying restaurant and
Cinnabon bakery business, assuming (i) a hypothetical orderly
sale of such businesses (individually to different buyers or in
the aggregate to one buyer), (ii) that only the Cinnabon bakery
franchises would achieve their calendar year 1995 projections,
(iii) that there would be certain costs associated with the sale
of such businesses, (iv) that a buyer would be willing to pay a
multiple of EBDITA for such businesses of up to 4.5 times EBDITA
and (v) no capital gain taxes would be paid by the Company on any
such sale. American Appraisal also assumed that there would be
no material change to the consumer demand for such businesses,
whether due to a change in general economic conditions in the
regions such businesses are located or otherwise. For this
purpose, American Appraisal developed estimates of the current
sale value of (i) the total chain of Cinnabon bakeries, (ii) the
2 Willie Mays fast food restaurants, (iii) the Markers restaurant
and (iv) the Company's general partnership interest in the WMCC
Partnership. In doing so, American Appraisal prepared a report
for the Independent Committee summarizing its methodology of
calculating such current sale values. Such report took the
estimated calendar year 1995 gross revenues for such businesses
(which were $6,150,000, $1,085,000 and $1,660,000, respectively,
for the Company's Cinnabon bakery franchises, Willie Mays Chicken
locations and Markers restaurant (and which, as noted above, have
not been achieved by the Markers restaurant and Willie Mays
Chicken locations for the First Quarter)) and derived therefrom
an estimated EBDITA. American Appraisal then subtracted from the
EBDITA for such businesses an assumed overhead factor of 5% of
the estimated calendar year 1995 gross revenues of the Cinnabon
bakery franchises and 4% of the estimated calendar year 1995
gross revenues of the Willie Mays Chicken locations and the
Markers restaurant, resulting in an adjusted EBDITA of $721,500,
$56,600 and $108,600, respectively, for the Company's Cinnabon
bakery franchises, Willie Mays Chicken locations and Markers
restaurant (the "Adjusted EBDITA"). The Adjusted EBDITA for each
such business was then multiplied by a low and high acquisition
multiple of 4 and 4.5, 3 and 3.5 and 2.5 and 3, respectively, for
the Company's Cinnabon bakery franchises, Willie Mays Chicken
locations and Markers restaurant, resulting in an orderly sale
value range of $2,890,000 to $3,250,000, $170,000 to $200,000 and
$270,000 to $330,000, respectively, for the Company's Cinnabon
bakery franchises, Willie Mays Chicken locations and Markers
restaurant. The current sale value of the Company's interest in
the WMCC Partnership was valued at $30,000. Added to these
values was the current book value of the Company's consolidated
working capital and other investments assets as of February 27,
1995, resulting in a gross sale value of the Company's operating
businesses, working capital and investment assets. Subtraction
of the face value of the Secured Convertible Debenture from this
amount resulted in an estimate of the consolidated net asset
value of the Company's total stockholder's equity. After
subtraction from net asset value of probable selling and other
transaction costs (estimated to be 3% of the total sale value of
the businesses), American Appraisal estimated that the net asset
value of total stockholders' equity, based on the orderly sale of
its business premise, ranged from $1.32 to $1.57 per Share.
American Appraisal also believed that additional value
to the Shares was attributed to the Company's current net
operating loss carryforwards ("NOLs"), estimated to be
approximately $4 million. The potential use of these NOLs by the
Company and/or the Surviving Corporation is dependent on the
extent that they will report taxable income for federal tax
purposes over the eligibility period of the NOLs. The difficulty
to estimate future operating results, including taxable income,
precludes accurate measurement of the use of the NOLs by the
Company or the Surviving Corporation. However, guided by certain
broad assumptions as the probable taxable income projected by the
Company over the eligibility period of the NOLs, American
Appraisal concluded that the value attributable to NOLs was
approximately $.10 per Share. American Appraisal recognized that
there is no assurance that the NOLs will be utilized by the
Company and/or the Surviving Corporation.
American Appraisal did not perform a discounted cash
flow analysis with respect to the Company's future operations
because financial estimates of prospective operations beyond the
year ended December 31, 1995 were not readily ascertainable by
the Company's management. However, in view of the foregoing
analyses, American Appraisal believed such analysis was not
necessary for purposes of determining the fairness of the Offer
and Merger. In addition, American Appraisal did not consider the
tax consequences of the Offer and Merger as part of its fairness
determination.
The preparation of a fairness opinion is a complex
process and is not necessarily susceptible to partial analysis or
summary description. While American Appraisal considered many
factors, none were dispositive and none were given any particular
weight in rendering its fairness opinion. Selecting portions of
the analyses or of the summary set forth above, without
considering the analyses as a whole, could create an incomplete
view of the processes underlying American Appraisal's opinion.
In arriving at its fairness determination, American Appraisal
considered the results of all such analyses. No company or
transaction used in the above analyses as a comparison is very
comparable to the Company or the contemplated transaction. The
analyses were prepared solely for purposes of American Appraisal
providing its opinion to the Independent Committee as to the
fairness of the consideration to the holders of the Shares and do
not purport to be appraisals or necessarily reflect the prices at
which businesses or securities actually may be sold. Analyses
based upon forecasts of future results for calendar year 1995 are
not necessarily indicative of actual future results, which may be
significantly more or less favorable than suggested by such
analyses. Because such analyses are inherently subject to
uncertainty, being based upon numerous factors or events beyond
the control of the parties or their respective advisors, none of
the Company, American Appraisal or any other person assumes
responsibility if future results are materially different from
those forecasts. As described above, American Appraisal's
opinion and presentation to the Independent Committee was one of
many factors taken into consideration by the Board in making its
determination. The foregoing summary does not purport to be a
complete description of the analyses performed by American
Appraisal and is qualified by reference to the written opinion of
American Appraisal set forth in Schedule III to this Offer to
Purchase.
American Appraisal, a worldwide valuation consulting
firm, as part of its business, is continually engaged in the
valuation of businesses and their securities in connection with
mergers and acquisitions, competitive biddings, private
placements and valuations for estate, corporate and other
purposes. The Independent Committee selected American Appraisal
as its financial advisor because American Appraisal is an
internationally recognized appraisal and valuation firm that has
experience in transactions similar to the Offer and the Merger.
American Appraisal does not effect transactions or hold
positions in the securities of the Company.
The Purchaser and its principals, although not
expressly adopting the valuation determined by the Financial
Advisor, believe that the range of values of $1.32 to $1.57 per
Share (without giving effect to the approximately $4 million of
NOLs) is appropriate and that the Purchase Price of $1.55 per
Share is at the very high end of such range. Also, even after
giving effect to the Financial Advisor's valuation of the NOLs
(which the Financial Advisor describes above as "precluding
accurate measurement of their use" and being based on "certain
broad assumptions"), the Purchase Price of $1.55 per Share is
above the mid-point of the range of values determined by the
Financial Advisor.
Interests of Certain Persons in the Offer and the Merger;
Potential Conflicts of Interest
In considering the recommendation of the Independent
Committee and the approval of the board of directors as to the
fairness of the Offer and the Merger, stockholders should be
aware that the Purchaser and certain members of management and of
the board of directors have interests described below which
present them with inherent conflicts of interest with respect to
the Offer and the Merger. In particular, Scott M. Gillman, the
Chairman of the Board, Chief Executive Officer and Principal
Financial and Accounting Officer of the Company, is one of the
three members of the Purchaser and owns an approximate one-third
equity interest in the Purchaser. Marc A. Gillman, the President
and Chief Operating Officer of the Company and the brother of
Scott M. Gillman, is one of the three members of the Purchaser
and owns an approximate one-third equity interest in the
Purchaser. Richard Gillman, the former Chairman of the Board of
the Company and the father of Scott M. Gillman and Marc A.
Gillman, is one of the three members of the Purchaser and owns an
approximate one-third equity interest in the Purchaser. See "THE
TENDER OFFER - Certain Information Concerning the Company and the
Purchaser" and Schedule I.
The table set forth on Schedule I attached hereto and
incorporated herein by reference lists the Share ownership in the
Company of all directors and officers of the Company. Neither
the Purchaser or any of the Gillmans will be tendering their
Shares. The Purchaser has been advised by Ronald Winarick, the
only other officer or director of the Company that owns Shares,
that he will be tendering the 35,000 Shares owned by him.
Pursuant to the Company's Restated Certificate of
Incorporation, the Company has limited the personal liability of
its directors and officers to the Company and its stockholders
for damages to the maximum extent permitted by New Jersey law.
In addition, the Company's Restated Certificate of Incorporation
provides for the exculpation of directors and officers of the
Company for acts and omissions in violation of their fiduciary
duties. Under current New Jersey law, however, liability is not
limited in the case of a breach of a directors or officer's duty
of loyalty to the Company or its stockholders, the failure to act
in good faith, the knowing violation of law or the obtainment of
an improper personal benefit. The effect of these provisions of
the Company's Restated Certificate of Incorporation may be to
limit possible claims which otherwise may be made against the
directors and officers of the Company.
Except for stock options the exercise price of which is
less than the Purchase Price and which will be terminated without
consideration in connection with the Merger, neither member of
the Independent Committee has any financial, ownership or other
interest in the Purchaser.
The board of directors and the members of the
Independent Committee were aware of the conflicts of interest
mentioned above and considered them among the other matters
described in "SPECIAL FACTORS - Fairness of the Offer and the
Merger; Recommendation of the Board of Directors."
Plans for the Company After the Offer and the Merger
Following the Offer and Merger, the board of directors
and management of the Surviving Corporation likely will consist
of Scott M. Gillman, Marc A. Gillman and Ronald Winarick.
As a future business plan for the Surviving
Corporation, the Purchaser intends not only to continue the
efforts of survival and stabilization, but to also take a number
of new actions in an effort to find profitable areas, and areas
appropriate for expansion. Following the consummation of the
Offer and the Merger, the Purchaser intends to conduct a detailed
review of the Surviving Corporation, including its assets,
corporate structure, capitalization, operations, properties,
policies, management and personnel and to consider what, if any,
changes would be desirable in light of the circumstances which
then exist. After such review, changes could include the
acquisition or disposition of assets or other changes in the
Surviving Corporation's capitalization, corporate structure or
business.
Specifically, the Purchaser contemplates that it likely
will focus substantial further attention on developing the
Surviving Corporation's Willie Mays Country Chicken concept. In
connection with such development, the Purchaser expects that it
may have to substantially modify such concept and anticipates
that it may have to contribute significant additional capital to
the Surviving Corporation. If the Purchaser believes the further
development of the Willie Mays Country Chicken concept proves or
may prove successful, it may seek external financing in
connection therewith, and believes it may be able to obtain such
financing, especially to the extent that the Purchaser invests
substantial additional capital therein. If the Purchaser is able
to attract such external financing, the Purchaser anticipates
that it may pursue public market financing for the further
development and expansion of the Willie Mays Country Chicken
concept, either alone or in combination with one or more other
business concepts.
With respect to the Cinnabon bakery franchises, the
Purchaser currently intends that it will continue to operate the
Cinnabon locations consistent with current practices and may
pursue the limited number of viable expansion possibilities for
additional Cinnabon bakeries. In order to do so, the Purchaser
anticipates that it may have to contribute additional capital to
the Surviving Corporation.
With respect to the Company's existing Markers
Restaurant, the Purchaser currently intends that it will continue
to operate such restaurant consistent with current practices, at
least for the remaining 4 years of such restaurant's existing
lease term.
The foregoing is only a general description of the
Purchaser's preliminary thoughts with respect to its future plans
for the Surviving Corporation upon the consummation of the Offer
and the Merger. Except for the general business concepts
described above, some or all of which may not be able to be
pursued or completed by the Purchaser, the Purchaser has no
present plans or proposals that would result in an extraordinary
corporate transactions such as the merger, reorganization,
liquidation or sale or transfer of a material amount of assets
involving the Company or any of its subsidiaries, or any material
changes to the Company's capitalization, dividend policy,
corporate structure or businesses. In addition, given the
existing financial condition of the Company and the limited
possibilities presented by it, it is conceivable that the
Purchaser may substantially revise some or all of the plans
generally described herein, or may pursue plans fundamentally
different than those described herein. However, the Purchaser is
not currently aware of any such specific revisions or changes.
As described above, as of February 26, 1995, the
Company had approximately $4 million of NOLs which may be used by
the Company (or the Surviving Corporation) to offset taxable
income for federal income tax purposes in future years. To the
extent the Company (or the Surviving Corporation) otherwise may
have taxable income in future years, such taxable income would be
reduced by the NOLs. However, under Section 382 of the Internal
Revenue Code, the deductibility of these NOLs would be
substantially limited if there were a change of 50% or more of
the stock ownership of the Company (or the Surviving Corporation)
occurring within a 2-year period. The limitation imposed by
Section 382 of the Internal Revenue Code will not apply to the
Offer or the Merger, but such limitation effectively limits the
use of such NOLs by any entity other than one in which Scott M.
Gillman, Marc A. Gillman and/or Richard Gillman own a substantial
percentage of the outstanding shares. See "SPECIAL FACTORS -
Opinion of Financial Advisor."
If the Purchaser, either through the contribution by it
of substantial additional capital to the Surviving Corporation,
the securing of third party financing, the contribution to the
Surviving Corporation of substantial other assets owned by or
acquired by the Purchaser, the change in business plan or change
in performance of the Surviving Corporation's operations, or one
or more of the foregoing in any combination, is able to attract
the interest of the public markets in the Surviving Corporation
(or any successor entity which may at that time include assets
now or hereafter owned by the Purchaser or the Surviving
Corporation), the Purchaser anticipates that it may seek to
complete a public offering of equity in the Surviving Corporation
(or any successor entity). The Purchaser currently has no
definitive plans to do so and there can be no assurance that the
Purchaser ever will be able to attract such public market
financing.
Notice of Plan of Merger; Dissenters' Rights
This Offer to Purchase shall serve as notice to all
stockholders that the board of directors of the Acquisition
Subsidiary has, contingent upon the Acquisition Subsidiary
obtaining at least 90% of the Shares, authorized the merger of
the Acquisition Subsidiary with and into the Company pursuant to
the plan of merger attached as Schedule IV (the "Plan of Merger")
adopted by the board of directors of the Acquisition Subsidiary.
The Plan of Merger provides that the holders of Shares not owned
by the Acquisition Subsidiary or the Company will be entitled to
receive $1.55 in cash per Share.
Under New Jersey law, Section 14:11-1 of the BCA,
stockholders who receive cash in exchange for their Shares as a
result of the Offer and the Merger will not have dissenters'
rights. However, the Purchaser nonetheless will grant
dissenters' rights to record holders of Shares as provided
herein. The following is a description of the dissenters' rights
that will be made available by the Purchaser. Any stockholder
who contemplates the assertion of the dissenters' rights as
provided herein is urged to consult his own counsel. A
stockholder who exercises the dissenters' rights as provided
herein will cease to have any rights as a stockholder, and any
dissenters' rights will be limited to those expressly provided
herein.
Record holders of Shares who desire to exercise their
dissenters' rights must satisfy all of the following conditions.
Any such holder of Shares must be a stockholder of record of the
Company from the date he makes a written demand for dissenters'
rights through the date the Merger is effective and must
continuously hold his Shares throughout the period between such
dates.
Stockholders who desire to exercise their dissenters'
rights must not tender their Shares. If, as is anticipated, the
Acquisition Subsidiary is able to effect the Merger under BCA
Section 14A:10-5.1 without taking a vote of the stockholder's of
the Company, a stockholder of the Company will have the right to
make a demand for the payment of the fair value of his shares
within 30 days (the "Demand Time") after the date this Offer to
Purchase, which includes a copy of the Plan of Merger as Schedule
IV, is mailed to such stockholder.
A demand for payment of fair value should be executed
by or for the stockholder of record fully and correctly, exactly
as such stockholder's name appears on the certificate or
certificates representing his Shares. If the Shares are owned of
record by more than one person, as in a joint tenancy or tenancy
in common, such demand must be executed by all joint owners. An
authorized agent, including an agent for two or more joint
owners, may execute the demand for a stockholder of record;
however, the agent must identify the record owners and expressly
disclose the fact that, in exercising the demand, such person is
acting as agent for the record owner. If a stockholder holds
Shares through a broker who in turn holds the shares through a
central securities depositary nominee such as Cede & Co., a
demand for dissenters' rights for such Shares must be made by or
on behalf of the depositary nominee and must identify the
depositary nominee as the holder of record.
A record owner, such as a broker, who holds Shares as a
nominee for others, may exercise dissenters' rights with respect
to the Shares held for all or less than all beneficial owners of
Shares as to which such person is the record owner. In such
case, the written demand must set forth the number of Shares
covered by such demand.
A stockholder who elects to exercise dissenters' rights
must mail or deliver his written demand within the Demand Time to
the Purchaser, Suite 508B, 5N Regent Street, Livingston, New
Jersey 07039 Attention: Secretary. The written demand for
payment of the fair value of Shares must specify the
stockholder's name and mailing address, the number of Shares
owned, and a statement that the stockholder is thereby demanding
appraisal of his Shares. Not later than 20 days after demanding
payment for his Shares, a stockholder must submit the certificate
or certificates representing his Shares to the Purchaser for
notation thereon of such demand, whereupon such certificate or
certificates shall be returned to such stockholder. Within 20
days after the Effective Date, the Company will provide notice of
the Effective Date to all stockholders who have complied with
these requirements and have not tendered their Shares. Upon
written request, the Surviving Corporation shall furnish each
stockholder who has complied with these requirements a statement
setting forth the aggregate number of Shares with respect to
which demands for appraisals have been received and the aggregate
number of holders of such Shares. The Surviving Corporation will
not provide a dissenting stockholder with any financial
statements other than those being provided as Exhibit II to this
Offer.
If after 40 days from the expiration of the Demand
Time, the Surviving Corporation and the stockholder do not agree
upon fair value, a stockholder that has properly exercised his
dissenters' rights can make a written demand upon the Surviving
Corporation that it commence an action in Superior Court of New
Jersey (the "Court") for a determination of fair value of the
Shares. Such written demand by the stockholder must be made on
the Surviving Corporation within 10 days after the expiration of
such 40-day period. If the stockholder makes a timely demand
upon the Surviving Corporation, but the Surviving Corporation has
not commenced an action within 10 days of such demand, the
stockholder may commence such action on behalf of the Surviving
Corporation. A stockholder will then have 10 days to commence
such an action on behalf of the Surviving Corporation. If no
petition is filed within this time period, all dissenting
stockholders lose their right to an appraisal and have the right
to receive $1.55 per Share.
If a petition for an appraisal is timely filed, all
stockholders who have complied herewith shall become entitled to
such a determination. The Court likely will hold a hearing on
such petition through which it will determine the fair value of
the Shares owned by such stockholders. The appraisal will be
based upon the Court's determination of the fair value of such
shares, exclusive of any appreciation or depreciation of value
arising from the accomplishment or expectation of the Merger. In
determining fair value, the Court likely will take into account
all relevant factors. Generally, proof of value by any
techniques or methods which are generally considered acceptable
in the financial community and otherwise admissible in court
likely will be considered by the Court. The Court in its
discretion may appoint an appraiser to receive evidence and
report to the Court on the question of fair value.
The fair value of the Shares determined by the Court
could be more than, the same as or less than the consideration
the stockholders are to receive pursuant to the Offer and the
Merger if they do not seek appraisal of the Shares. Opinions of
investment banking firms as to fairness, from a financial point
of view, are not binding on the Court. The cost of the appraisal
proceeding will be determined by the Court and levied against the
parties as the Court deems equitable under the circumstances.
Upon application of a dissenting stockholder, and if it is
determined that an offer of payment made by the Surviving
Corporation was not made in good faith, the Court may order that
all or a portion of the expenses incurred by any dissenting
stockholder in connection with the appraisal proceeding,
including without limitation reasonable attorneys' fees and fees
and expenses of experts, be charged to the Surviving Corporation.
In the absence of such a determination or assessment, each party
bears its own attorneys' fees and fees and expenses of experts.
In addition, the Court may award interest on the fair value at an
interest rate the Court finds to be equitable. However, if the
Court finds that refusal of any dissenting stockholder to accept
an offer of payment made by the Surviving Corporation in good
faith was arbitrary or otherwise not in good faith, interest
likely will not be awarded.
Any stockholder who has duly demanded appraisal in
compliance herewith will not, after the Effective Date, be
entitled to vote his Shares for any purpose or to receive payment
of dividends or other distributions on such Shares, except for
dividends or distributions payable to stockholders of record at a
date prior to the Effective Date. Such stockholder shall cease
to have any rights of a shareholder except the right to be paid
the fair value of his Shares.
A stockholder may withdraw his demand for appraisal
only with the consent of the Surviving Corporation. If a
stockholder does not comply with the requirements detailed above,
the stockholder's rights to appraisal shall cease, and such
stockholder shall be entitled to receive only the consideration
provided in the Merger.
Notwithstanding the foregoing, because the stockholders
are not entitled to and do not have dissenters' rights under New
Jersey law or the Company's Certificate of Incorporation, the
Purchaser can give no assurance that the Court will recognize the
dissenters' rights provided by the Purchaser herein or be willing
to adjudicate the issue of the fair value of the Shares. In such
a case, the Surviving Corporation will pay $1.55 in cash per
Share for all Shares held by stockholders who otherwise wished to
exercise the dissenter's rights set forth herein.
Federal Tax Consequences
The following description of the federal tax
consequences of the Offer and the Merger is for general
information only. The tax consequences for a particular
stockholder will depend upon his particular circumstances. All
stockholders should consult their personal tax advisors in
determining the tax consequences to them arising from the Offer
and the Merger, including the applicability and effect of state,
local and foreign tax laws and possible changes in tax law.
The following description is based upon federal income
tax law in effect at this time. However, the federal income tax
consequences of the Offer and the Merger will be governed by
federal income tax law in effect at the time of the stockholder's
recognition of income.
In general, the receipt of cash by holders in exchange
for shares tendered by stockholders pursuant to the Offer or
surrendered pursuant to the Merger will be a taxable sale or
exchange for federal income tax purposes. The receipt of cash
may be subject to "backup" withholding of 31% of such case unless
the stockholder either provides a correct taxpayer identification
number on the Substitute Form W-9 which is included in the Letter
of Transmittal with this Offer to Purchase, or is eligible for an
exemption from this requirement. Exempt stockholders (including
among others all corporations) are not subject to backup
withholding and should indicate their exempt status on the
Substitute Form W-9. A foreign stockholder may be required to
certify its exempt status on Form W-8 to avoid backup
withholding.
Under present law, the federal income tax consequences
to a stockholder all of whose Shares are tendered or surrendered
and who is a citizen or resident of the United States generally
will be as follows:
(i) Assuming the Shares are a capital asset in the
hands of the stockholder, the stockholder will, most likely,
recognize a capital gain or loss as a result of the purchase
pursuant to the Offer or the Merger. The capital gain or loss
will be long term with respect to Shares held for more than one
year and short-term with respect to Shares held for a shorter
period. The amount of gain or loss recognized by a stockholder
will be measured by the difference, if any, between (i) the
amount of cash received pursuant to the Offer or the Merger and
(ii) the cost or other tax basis of the tendered or surrendered
Shares to such stockholder.
(ii) In the case of a stockholder who is not a
corporation, the excess, if any, of the stockholder's net long-
term capital gains over net short-term capital losses recognized
during 1995, including in the computation for that purpose the
capital gain or loss, if any, on the Shares tendered, is subject
to tax at rates of up to 28%. The excess, if any, of the
stockholder's net short-term capital gains over net long-term
capital losses is taxable at the rates applicable to ordinary
income, for which there is a maximum rate of 39.6% in 1995.
Capital losses offset capital gains to the extent thereof, and
any excess capital loss can be used to offset up to $3,000 of
other taxable income.
(iii) In the case of a stockholder that is a
corporation, the excess of the corporation's net long term gains
over the corporation's net short term losses, including in the
computation for that purpose the capital gain or loss, if any, on
the Shares tendered, is taxed at the ordinary income tax rate of
the corporation. Capital losses may be deducted only to the
extent of capital gains.
However, capital gain treatment with respect to the
Shares tendered may not be applicable to a stockholder who is
deemed to own constructively (pursuant to Section 318 of the
Internal Revenue Code) Shares of any other stockholder whose
Shares are not redeemed in the same transaction. Under Section
318 of the Internal Revenue Code, a stockholder may be deemed to
own constructively Shares owned or constructively owned by
related individuals (including the stockholder's spouse,
children, grandchildren and parents) or related entities
(including certain controlled corporations, partnerships, trusts
and estates). Any stockholder with respect to whom related
individuals or entities continue to own Shares after the
transaction should consult his or her tax advisor to determine
whether capital gain treatment is applicable and if not whether
all of the proceeds of the sale should be treated as a dividend
under Section 302 of the Internal Revenue Code.
Under many tax treaties between foreign countries and
the United States, the character of a distribution under tax law
of the country from which the distribution is made often controls
treatment of the distribution for purposes of the treaty. As a
result, a transaction of a particular non-U.S. stockholder will
be treated as a dividend under the United States tax rules
outlined above, and it may also be treated as a dividend under
many treaties. As such, the transaction may be subject to
withholding as a dividend under the terms of a particular treaty,
even if the transaction is otherwise characterized under the tax
laws of the recipient's country or residence.
No gain or loss will be recognized by the Company or
the Purchaser and neither the Company nor the Purchaser will
experience investment tax credit recapture as a result of the
purchase pursuant to the Offer of cash payments pursuant to the
Merger.
If the Merger is not consummated, stockholders who do
not tender Shares pursuant to the Offer will recognize no taxable
gain or loss as a result of the consummation of the Offer.
THE FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS
INCLUDED FOR GENERAL INFORMATION ONLY. EACH STOCKHOLDER IS URGED
TO CONSULT SUCH STOCKHOLDER'S OWN TAX ADVISOR TO DETERMINE THE
PARTICULAR TAX CONSEQUENCES TO SUCH STOCKHOLDER OF THE
DISPOSITION OF SHARES PURSUANT TO THE OFFER.
Source and Amount of Funds
The Purchaser expects the maximum aggregate cost of
acquiring all outstanding shares not owned by the Purchaser,
including all fees and expenses applicable to the Offer and the
Merger, to be approximately $800,000. See "THE TENDER OFFER -
Fees and Expenses." All funds required to consummate the Offer
will be obtained from available cash on hand of the Purchaser.
In addition, the funds to be used to consummate the Merger will
come from cash on hand of the Purchaser. Moreover, each of the
principals of the Purchaser has sufficient net worth to fund the
purchase of the Shares pursuant to the Offer and the Merger.
THE TENDER OFFER
Terms of the Offer
Upon the terms and subject to the condition of the
Offer, the Purchaser will accept for payment and thereby purchase
any and all outstanding Shares validly tendered on or prior to
the Expiration Date and not withdrawn in accordance with "THE
TENDER OFFER - Withdrawal Rights." The term "Expiration Date"
means 5:00 p.m., Eastern Daylight Time, on May 15, 1995, unless
the Purchaser, in its sole discretion, has extended the period of
time for which the Offer is open, in which event the term
"Expiration Date" will mean the latest time and date on which the
Offer, as so extended by the Purchaser expires.
The Purchaser also expressly reserves the right (i) to
terminate the Offer and not accept for payment or pay for any
Shares not theretofore accepted for payment or paid for, upon the
occurrence of any of the conditions specified under "THE TENDER
OFFER - Certain Conditions of the Offer" by giving oral or
written notice of such delay in payment or termination to the
Depositary and (ii) at any time or from time to time, to amend
the Offer in any respect. The Purchaser expressly reserves the
right in its sole discretion, any time or from time to time, to
extend the period during which the Offer is open and thereby
delay acceptance for payment of, and the payment for, any Shares,
by giving oral or written notice of such extension to the
Depositary. Any extension, delay in payment, termination or
amendment will be followed as promptly as practicable by public
announcement thereof, such announcement in the case of an
extension to be issued no later than 9:00 a.m., Eastern Daylight
Time, of the next business day after the previously scheduled
Expiration Date. The reservation by the Purchaser of the right
to delay acceptance for payment or the purchase of Shares is
subject to the provisions of applicable law, which require that
the Purchaser pay the consideration offered or return the Shares
deposited by or on behalf of stockholders promptly after the
termination or withdrawal of the Offer.
All Shares not purchased pursuant to the Offer will be
returned to the tendering stockholder at the Purchaser's expense
as promptly as practicable following the Expiration Date.
Procedure for Tendering Shares
Proper Tender of Shares. For Shares to be properly
tendered pursuant to the Offer:
(a) the certificate of such Shares (or confirmation of
receipt of such shares pursuant to the procedures for book-entry
transfer set forth below), together with a properly completed and
duly executed Letter of Transmittal (or facsimile thereof) with
any required signature guaranteed, and any other documents
required by the Letter of Transmittal, must be received on or
before the Expiration Date by the Depositary at one of its
addresses set forth in this Offer to Purchase; or
(b) the tendering stockholder must comply with the
guaranteed delivery procedure set forth below.
The acceptance of Shares by the Purchaser for payment
will constitute a binding agreement between the then tendering
stockholder and the Purchaser upon the terms and subject to the
conditions of the Offer, including the tendering stockholder's
representation that (i) such stockholder has full power and
authority to tender, sell, assign and transfer such Shares, and
(ii) when the same are accepted for payment by the Purchaser, the
Purchaser will acquire good, marketable and unencumbered title
thereto, free and clear of all liens, restrictions, charges and
encumbrances and will not be subject to any adverse claim.
Signature Guarantees and Method Delivery. No signature
guarantee is required on the Letter of Transmittal if the Letter
of Transmittal is signed by the registered holder of the Shares
(which term, for purposes of this Section, includes any
participation in the Depository Trust Company ("DTC") or a
similar book-entry transfer facility (collectively, the "Book-
Entry Transfer Facilities") whose name appears on a security
position listing as the holder of the Shares tendered therewith,
and payment is to be made directly to such registered holder, or
if Shares are tendered for the account of a member firm on 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. In all other cases, all signatures on the Letter of
Transmittal must be guaranteed by an eligible guarantor
institution (bank, stockbroker, savings and loan association or
credit union with membership in an approved signature guarantee
program), pursuant to Rule 17 Ad-15 promulgated under the
Exchange Act (an "Eligible Institution"). See Instruction 2 of
the Letter of Transmittal. If a certificate representing Shares
is registered in the name of a person other than the signer of a
Letter of Transmittal, or if payment is to be made, or Shares not
purchased or tendered are to be issued, to a person other than
the registered holder, the certificate must be endorsed or
accompanied by an appropriate stock power, in either case signed
exactly as the name of the registered holder appears on the
certificate, with the signature on the certificate or stock power
guaranteed by an Eligible Institution.
In all cases, payment for Shares tendered and accepted
for payment pursuant to the Offer will be made only after timely
receipt by the Depositary of certificates for such Shares (or a
timely confirmation of a book-entry transfer of such Shares into
the Depository's account at one of the Book-Entry Transfer
Facilities), a properly completed and duly executed Letter of
Transmittal (or facsimile thereof) and any other documents
required by the Letter of Transmittal. The method or 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 stockholder. If delivery is by mail,
registered mail with return receipt requested, properly insured,
is recommended.
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 stockholder who does not
otherwise establish an exemption for withholding must notify the
Depositary of such stockholder's correct taxpayer identification
number (or certify that such taxpayer is awaiting a taxpayer
identification number) and provide certain other information by
completing the Substitute Form W-9 included in the Letter of
Transmittal. Certain stockholders, including corporations, are
not subject to the withholding and reporting requirements.
Foreign stockholders who are individuals must submit Form W-9 in
order to avoid back-up withholding. The Depositary will withhold
31% of the gross payments payable to a foreign stockholder unless
the Depositary determines that a reduced rate of withholding or
an exemption from withholding is applicable.
For a discussion of certain other federal income tax
consequences to tendering stockholders, see "SPECIAL FACTORS -
Federal Tax Consequences."
Book-Entry Delivery. The Depositary will establish an
account with respect to the Shares at each of the Book-Entry
Transfer Facilities for purposes of the Offer within two business
days after the date of this Offer to Purchase. Any financial
institution that is a participant in the Book-Entry Transfer
Facility's system may make book-entry delivery of the Shares by
causing such facility to transfer such Shares into the
Depository'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 Depository's
account at one of the Book-Entry Transfer Facilities, a properly
completed and duly executed Letter of Transmittal (or facsimile
thereof), with any required signature guarantees and other
required documents must, in any case, be transmitted to and
received by the Depositary at one of its addresses prior to the
Expiration Date, or the guaranteed delivery procedure set forth
below must be followed. Delivery of the Letter of Transmittal
and any other required documents to one of the Book-Entry
Transfer Facilities does not constitute delivery to the
Depositary.
Guaranteed Delivery. If a stockholder desires to
tender Shares pursuant to the Offer and such stockholder's
certificates are not immediately available (or the procedures for
book-entry transfer cannot be completed on a timely basis) or
time will not permit all required documents to reach the
Depositary before 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,
telegram or facsimile transmission), on or prior to the
Expiration Date, a properly completed and duly executed Notice of
Guaranteed Delivery substantially in the form the Purchaser has
provided with this Offer to Purchase (indicating the price at
which the Shares are being tendered); and
(c) the certificates for all tendered Shares in
proper form for transfer (or confirmation of book-entry transfer
of such Shares into the Depository's account at one of the Book-
Entry Transfer Facilities), 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 business days after
the date the Depositary receives such Notice of Guaranteed
Delivery.
Determinations 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
validity for eligibility (including the time of receipt) and
acceptance for payment of any tender of Shares will be determined
by the Purchaser, in its sole discretion, which determination
shall be final and binding on all parties. The Purchaser
reserves the absolute right to reject any or all tenders it
determines not to be in proper form or the acceptance of or
payment for which may, in the opinion of the Purchaser's counsel,
be unlawful. The Purchaser also reserves the absolute right to
waive any of the conditions of the Offer and 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
Purchaser nor the Depositary or any other person is or will be
obligated to give notice of any defects or irregularities in
tenders, and none of them will incur any liability for failure to
give such notice.
Withdrawal Rights
Except as otherwise provided in this Section, the
tender of Shares pursuant to the Offer is irrevocable. Shares
tendered pursuant to the Offer may be withdrawn at any time
before the Expiration Date and, unless theretofore accepted for
payment and paid for by the Purchaser, may also be withdrawn at
any time after June 16, 1995.
For a withdrawal to be effective, the Depositary must
timely receive (at one of its addresses set forth in this Offer
to Purchase) a written, telegraphic or facsimile transmission
notice of withdrawal. Such notice of withdrawal must specify the
name of the person having deposited the Shares to be withdrawn,
the number of Shares to be withdrawn and the name of the
registered holder, if different from that of the person who
tendered such Shares. If the certificates have been delivered or
otherwise identified to the Depositary, then, prior to the
release of such certificates, the tendering stockholder must also
submit the serial numbers shown on the particular certificates
evidencing the shares and the signature on the notice of
withdrawal must be guaranteed by an Eligible Institution (except
in the case of Shares tendered by an Eligible Institution). If
Shares have been tendered pursuant to the procedure of book-entry
transfer set forth in "THE TENDER OFFER - Procedure for Tendering
Shares," the notice of withdrawal must specify the name and the
number of the account 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 Purchaser, in its sole
discretion, which determination shall be final and binding on all
parties. Neither the Purchaser nor the Depositary or any other
person is or will be obligated to give any notice of any defects
or irregularities in any notice of withdrawal, and none of them
will incur any liability for failure to give any such notice.
Any Shares properly withdrawn will thereafter be deemed not
tendered for purposes of the Offer. Withdrawn Shares may,
however, be tendered before the Expiration Date by again
following any of the procedures described in "THE TENDER OFFER -
Procedure of Tendering Shares."
Acceptance For Payment and Payment of Purchase Price
Upon the terms and subject to the conditions of the
Offer (including if the Offer is extended or amended, the terms
and conditions of any such extension of amendment), the Purchaser
will accept for payment, and thereby purchase, and will pay for
all Shares validly tendered prior to the Expiration Date (and not
properly withdrawn in the manner described in "THE TENDER OFFER -
Withdrawal Rights") as soon as practical after the Expiration
Date.
Payment for Shares purchased pursuant to the Offer will
be made by depositing the aggregate Purchase Price therefor with
the Depositary, which will act as agent for tendering
stockholders for the purpose of receiving payment from the
Purchaser and transmitting payment to the tendering stockholders.
For purposes of the Offer, ownership of tendered Shares will pass
to the Purchaser, and the Purchaser will be deemed to have
accepted for payment, and thereby purchased, tendered Shares, if,
as and when the Purchaser gives oral or written notice to the
Depositary of its acceptance of such Shares for payment.
If any tendered Shares are not accepted for payment
pursuant to the terms and conditions to the Offer for any reason,
or if certificates representing more Shares than are tendered are
submitted to the Depositary, certificates for such unpurchased or
untendered Shares wil be returned, without expense to the tendering
stockholder (or, in the case of Shares tendered by book-entry transfer
of such Shares into the Depository's account at a Book-Entry Transfer
Facility in accordance with the procedures set forth in "THE TENDER
OFFER - Procedure for Tendering Shares," Shares will be credited
to an account maintained within such Book-Entry Transfer Facility),
as promptly as practicable following the expiration, termination
or withdrawal of the Offer.
If, prior to the Expiration Date or prior to the Merger, the
Purchaser increases the consideration offered to stockholders pursuant
to the Offer or payable pursuant to the Merger, such increased
consideration will be paid to all stockholders whose Shares are
purchased pursuant to the Offer whether or not such Shares have
been tendered prior to such increase in consideration.
The Purchaser will pay all stock transfer taxes, if any,
payable on the transfer to it of Shares purchased pursuant to the Offer,
provided, however, if payment of the Purchase Price is made to any person
other than the registered owner, or if tendered certificates are
registered in the name of any person other than the person signing
the Letter of Transmittal, the amount of all stock transfer taxes,
if any (whether imposed on the registered owner or such other person),
payable on account of the transfer to such person will be deducted
from the Purchase Price unless evidence satisfactory to the Purchaser
of the payment of such taxes or exemption therefrom is submitted. See
Instruction 7 of the Letter of Transmittal.
ANY TENDERING STOCKHOLDER OR OTHER PAYEE WHO FAILS TO COMPLETE
FULLY AND SIGN THE SUBSTITUTE FORM W-9 INCLUDED IN THE LETTER OF
TRANSMITTAL MAY BE SUBJECT TO THE REQUIRED FEDERAL INCOME TAX WITHHOLDING
OF 31% OF THE GROSS PROCEEDS PAID TO SUCH STOCKHOLDER OR OTHER PAYEE
PURSUANT TO THE OFFER. SEE "THE TENDER OFFER - Procedure For
Tendering Shares."
Certain Conditions of the Offer
Notwithstanding any other provision of the Offer, the Purchaser
shall not be required to accept for payment, purchase or pay for any
Shares tendered, any may terminate or amend the Offer or may postpone
the acceptance for payment of, or the payment for, Shares tendered,
if any time before the time of purchase of, or payment for, any
such Shares, any of the following events shall have occurred:
(a) there shall have been threatened, instituted or pending any
action or proceeding by any government or governmental, regulatory or
administrative agency or authority or tribunal or any other person, domestic
or foreign, or before any court or governmental, regulatory or administrative
authority or agency or tribunal, domestic or foreign, which (i) challenges
the making of the Offer, or the acquisition of Shares pursuant to the Offer
or the Merger or otherwise related in any manner to the Offer or the
Merger; or (ii) could materially affect the business, condition
(financial or other), income, operation or prospects of the Company;
(b) there shall have been any action threatened, pending or taken,
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 Merger
or any court or any government or governmental, regulatory or administrative
authority or agency or tribunal, domestic or foreign, could: (i) 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 or the Merger;
or (ii) delay or restrict the ability of the Purchaser, or render the
Purchaser unable, to accept for payment or pay for some or all of the
Shares; or (iii) materially affect the business, condition (financial or
other), income, operations or prospects of the Company or otherwise
materially impair in any way the contemplated future conduct of the business
of the Company;
(c) any material change shall occur or be threatened to the
business, condition (financial or other), income, operations, Share
ownership or prospects of the Company which is material to the Company
or its stockholders;
(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, shall have been proposed,
announced or made by any person;
(e) any entity, "group" (as that term is used in Section 13(d)(3
of the Exchange Act) or person shall have acquired, or proposed to acquire,
beneficial ownership of Shares constituting more than 5% of the
outstanding Shares; or
(f) the Company shall have withdrawn or modified in a manner adverse
to the Purchaser its approval of the Offer or the Merger.
A number of states, including New Jersey, have adopted "shareholder
protection" or "takeover" statutes and regulations which purport to varying
degrees to be applicable to attempts to acquire securities of corporations
which are incorporated or have substantial assets, stockholders, principal
executive offices or principal place of business in such states. The
Purchaser does not believe that the Offer or Merger is in violation of
any such statutes. Should any person seek to apply any state takeover
statute to the Offer or the Merger, the Purchaser would take such action as
then appears desirable, and currently expects that it would contest
the validity and application of any such statute in appropriate court
proceedings.
The foregoing conditions are for the Purchaser regardless of the
circumstances giving rise to any such condition (including any action or
inaction by the Purchaser) or may be waived by the Purchaser in whole or
in part. The Purchaser's failure 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.
Price Range of the Shares; Dividends Information
The Shares are traded in the over-the-counter market and are quoted
on the National Association of Securities Dealers Automated Quotation
System ("NASDAQ") under the trading symbol "DINE". From January
28, 1994 through May 17, 1994 (the "Bulletin Board Period"), the Shares
traded in the over-the-counter market and were quoted on the OTC
Bulletin Board. The following table sets forth the high and low bids
for the prices for the Shares for the periods indicated below. All prices
set forth below were obtained from NASDAQ.
Bid Price
Fiscal 1993* Low High
Quarter ended May 30, 1993 $ 5.00 $7.50
Quarter ended August 29, 1993 4.37 6.25
Quarter ended November 28, 1993 1.25 4.37
Quarter ended February 27, 1994 1.12 2.81
Fiscal 1994*
Quarter ended May 29, 1994 1.00 4.00
Quarter ended August 28, 1994 1.00 4.00
Quarter ended November 27, 1994 1.24 2.24
Quarter ended February 26, 1995 1.00 1.24
* All prices for dates prior to February 4, 1994 are reflected as adjusted
to give effect to the 1:5 combination of the Shares on February 4, 1994.
All prices for dates other than during the Bulletin Board Period reflect
quotations of the Shares on the NASDAQ SmallCap Market and all prices during
the Bulletin Board Period reflect quotations of the Shares on the
OTC Bulletin Board.
The price quotations set forth above represent prices between
dealers, do not include retail markups, mark-downs or commissions
and may not necessarily represent actual transactions.
On April 12, 1995, the last trading day prior to any public
announcement of the proprosal by the Purchaser to acquire Shares, the
closing bid price was $.87.
The Company has not paid any dividends, whether in cash or in stock,
on the Shares since its organization and has no plans to do so in the
foreseeable future.
Summary Historical Financial Information; Public Filings
Set forth below is a summary of certain consolidated financial
information with respect to the Company excerpted or derived from the
information contained in the Company's Annual Report on Form 10-K
for the Year Ended February 27, 1994 (the "Company's 1993 10-K")
and the Company's Quarterly Report on Form 10-Q for the Nine
Months ended November 27, 1994 (the "Company's 10-Q"). A copy of the
financial statements set forth in the Company's 1993 10-K and the
Company's 10-Q are reproduced as part of Schedule II hereto. More
comprehensive financial information is in such reports and other
documents filed by the Company with the Commission, and the following
summary is qualified in its entirety by reference to such reports
and other documents and all of the financial information and notes
contained therein. Such reports and other documents may be inspected
and copies may be obtained from the offices of the Commission in the
manner set forth below.
Selected Operating Data:
Fiscal Year Ended Nine Months Ended
_________________ __________________
(dollars in thousands, except per share amounts)
Feb. 27 Feb. 28 November 27, November 28,
1994 1993 1994 1993
(unaudited) (unaudited)
Net sales............. $ 9,795 9,346 $ 6,065 $ 7,409
Net loss.............. (592) (1,676)(1) (334) (697)
Per share of Common Stock
Net loss(2)........ (.40) 1.21) (.19) (.50)
Selected Balance Sheet Data: Fiscal Year Ended Nine Months Ended
_________________ _________________
(dollars in thousands)
Feb. 27 Feb. 28 November 27, November 28,
1994 1993 1994 1993
(unaudited) (unaudited)
Working Capital
(deficiency)........... $ 378 $ (1,425) 195 (147)
Total assets............. 3,546 3,718 3,458 3,548
Long-term debt,
less current
maturities ............ 1,500 -- 1,500 1,700
Total liabilities........ 2,263 2,357 2,448 2,884
Stockholders' equity..... 1,283 1,361 1,010 664
______________
(1) Includes the write-off $945,000 of value of capital assets of the
Company.
(2) Reflective of the weighted average of shares outstanding after giving
effect to the 1:5 combination of the Common Stock effective February 4,
1994 and the issuance of additional shares during the fiscal year ended
February 27, 1994.
The Company is subject to the information and reporting
requirements of the Exchange Act and, in accordance therewith, is obligated
to file reports and other information with the Commission relating to its
business, financial condition and other matters. Information as of
particular dates concerning the Company's directors and officers, their
remuneration, stock options granted to them, the principal holders of the
Company's securities, any material interests of such persons in transactions
with the Company and other matters is disclosed in proxy statements and annual
reports distributed to the Company's stockholders and filed with the
Commission. Such reports, proxy statements and other information may be
inspected at the Commission's office in Room 1024, 450 Fifth Street, N.W.
Judiciary Plaza, Washington, D.C. 20549, and should be available for
inspection at the following regional offices of the Commission:
Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661 and 7 World Trade Center, 13th Floor, New York, New York
10048. Copies may be obtained, by mail upon payment of the Commission's
customary charges, by writing to its principal office at 450 Fifth
Street, N.W. Judiciary Plaza, Washington, D.C. 20549.
Certain Information Concerning the Company and the Purchaser
The Purchaser is a limited liability company organized under
the laws of the State of New Jersey in April 1995. Its principal
executive offices are located at 5N Regent Street, Suite 508B,
Livingston, New Jersey 07039. To date the Purchaser has engaged in no
activities other than those related to its formation and the Offer and the
Merger. Set forth as Schedule I hereto is certain information with
respect to each member of the Purchaser.
Except as set forth in this Offer to Purchaser, there have been no
contacts, negotiations or transactions between the Purchaser or its
members on the one hand and the Company or its affiliates on the other
hand, concerning a merger, consolidation or acquisition; a tender offer or
other acquisition of securities; an election of directors, other than
the annual solicitation of proxies of stockholders; or a sale or other transfer
of a material amount of assets. See "SPECIAL FACTORS - Background of the
Company and the Offer."
Except for (i) the open market purchase in an ordinary brokerage
transaction of 16,711 Shares by Richard Gillman on February 21, 1995 at a
purchase price of $1.05 per Share, (ii) the private sale by Richard Gillman
of 90,682 and 98,682 Shares, respectively, to Scott M. Gillman and Marc A.
Gillman at a sale price of $1.00 per Share on March 20, 1995 and (iii) the
contribution of the Gillman Shares to the Purchaser as described above,
neither the Purchaser nor any of its members, nor, to the best of the
Purchaser's knowledge, any of the other executive officers and directors
of the Company, has effected any transaction in the Shares during
the past 60 days.
Effect of the Offer on the Market for Shares, Registration Under the
Exchange Act and SmallCap Market Listing
As a result of the Offer, the Purchaser's percentage interest in
the Company, including its net book value and net earnings, will increase
in proportion to the number of Shares acquired in the Offer. If the
Merger is consummated, the Purchaser's interest in the Company, including
its net book value and net earnings, will be 100%. Upon consummation
of the Merger, the Purchaser will own 100% of the equity interest in the
Company and will be entitled to all the benefits resulting from those
interests, including all income generated by the Company's operations
and any future increase in the Company's value. Similarly, the Purchaser
will be subject to 100% of the risk of any decrease in value of the
Company.
The purchase of Shares pursuant to the Offer will reduce the
number of Shares that might otherwise trade publicly and the number of
holders of the Shares and, if the Merger is not consummated, would likely
adversely affect the liquidity and market value of the remaining Shares
held by the public.
The Shares are currently registered under the Exchange Act.
However, the Purchaser intends to cause the Company to apply for
termination of registration of the Shares under the Exchange Act following
consummation of the Offer. The termination of registration of the Shares
would render inapplicable certain provisions of the Exchange Act, including
requirements that the Company file periodic reports and furnish stockholders
with proxy materials regarding meetings of stockholders of the Company,
requirements that the Company's officers, directors and ten-percent
stockholders file certain reports concerning ownership of the
Company's securities and provisions that any profit by such officers,
directors and stockholders through purchases and sales of the Company's
equity securities within any six-month period may be recaptured by the
Company. In addition, if the Company were no longer required to make
such periodic filings because of the deregistration of the Shares under
the Exchange Act, affiliates and any other holders of "restricted securities"
of the Company would be deprived of their ability to dispose of Shares
pursuant to Rule 144 promulgated under the Securities Act of 1933, as amended.
In addition, the Purchaser intends to terminate the listing of the
Shares on the NASDAQ SmallCap Market upon consummation of the Offer. The
effect of the termination of such listing, along with the deregistration
of the Shares under the Exchange Act, will be to effectively eliminate
the public transferability of the Shares.
Certain Legal Matters
The Purchaser is not aware of any license or permit which is
material to the Company's business which might be adversely affected by
the Purchaser's acquisition of Shares pursuant to the Offer or the
Merger or of any approval or other action by any governmental or
administrative agency that would be required prior to the acquisition
of Shares pursuant to the Offer or the Merger. Should any such approval
be required, it is Purchaser's present intention that such approval or
action would be sought. There is, however, no present intent to delay
the purchase of Shares tendered pursuant to the Offer pending the outcome
of any such action or receipt of such approval (subject to the Purchaser's
right to decline to purchase Shares as described in "THE TENDER OFFER -
Certain Conditions of the Offer"). There can be no assurance that any such
approval or action, if needed, would be obtained, or, if obtained, that
it will be obtained without substantial conditions, or that adverse
consequences might not result to the Company's business in order to obtain
such approval or other action. The Purchaser's obligation to purchase
and pay for Shares is subject to certain other conditions. See "THE
TENDER OFFER - Certain Condition of the Offer."
Fees and Expenses
The Purchaser has retained American Stock Transfer & Trust
Company to serve as Depositary in connection with the Offer and
disbursing agent in connection with the Merger. American Stock Transfer &
Trust Company will receive reasonable and customary compensation for its
services in connection with the Offer and the Merger from the Purchaser,
will be reimbursed for its reasonable out-of-pocket expenses by the
Purchaser, and will be indemnified against certain liabilities and
expenses in connectin with the Offer and the Merger by the Purchaser.
The Purchaser will reimburse brokers, dealers, commercial banks
and trust companies for customary handling and mailing expenses
incurred in forwarding this Offer to Purchase to their customers.
No officers or employees of the Company other than Scott M.
Gillman and Marc A. Gillman have assisted the Purchaser in preparing
this Offer to Purchase. The Purchaser will reimburse the Company for
the costs to the Company of such assistance if the Merger is not
consummated.
It is estimated that the following expenses will be incurred by
the Purchaser and the Company in connection with the consummation or the
Offer and the Merger. The Purchaser will pay all costs except for the
Financial Advisor's fees and fees of counsel to the Independent Committee.
Depositary fees and expenses ................... $ 7,500
Printing and mailing expenses ................... 5,000
Financial Advisor's fees ........................ 15,000
Independent Committee counsel fees .............. 5,000
Purchaser's legal fees and expenses ............. 45,000
Filing fees ..................................... 500
Accounting fees ................................. 1,000
Miscellaneous ................................... 5,000
______
Total .................................. $84,000
MISCELLANEOUS
The Offer is not being made to, nor will tenders be
accepted from or on behalf of, holders of Shares in any jurisdiction
in which the making or acceptance thereof would not be in compliance with
with the securities, blue sky or other laws of such jurisdiction.
Except where otherwise stated, the information concerning the
Company contained in this Offer to Purchase has been furnished by the
Company or has been taken from or based upon publicly available documents
and records on file with the Commission and other public sources and the
information concerning the Purchaser has been furnished by the Purchaser.
Although the Purchaser has no knowledge that would indicate that any
statements contained herein based on such documents are untrue, the
Purchaser takes no responsibility for the accuracy or completeness of the
information furnished by the Company or contained in such documents and
records or for the failure of the Company to disclose events which may
have occurred or may effect the significance or accuracy of any such
information. Although the Company has stated that it does not have any
knowledge that would indicate that any statement contained herein based
on information furnished by the Purchaser is inaccurate or incomplete, the
Company has informed the Purchaser it takes no responsibility for the
accuracy or completeness of the information furnished by the Purchser
or for any such persons to disclose events which may have occurred or
may affect the significance or accuracy of such information.
The Purchaser has filed with the Commission a Tender Offer
Statement on Schedule 14D-1, with exhibits thereto, pursuant to Rule 14D-3,
and the Purchaser has filed a Schedule 13E-3 pursuant to Rule 13e-3, of
the General Rules and Regulations under the Exchange Act, each of which
furnish certain additional information with respect to the Offer and the
Merger, and the Company has filed a Solicitation Recommendation Statement
on Schedule 14D-9 pursuant to Section 14(d)(4) of the Exchange Act and
both may file amendments thereto. Such Schedules and any amendments
thereto, including exhibits, may be examined and copies may be obtained
from the principal office of the Commission in Washington, D.C. in the
same manner as set forth in "Summary Historical Financial Information;
Public Filings."
No person has been authorized to give any information or make
any representation on behalf of the Purchaser not contained in this
Offer to Purchase or in the Letter of Transmittal and, if given or
made, such information or representation must not be relied upon as
having been authorized.
SCHEDULES HAVE BEEN INTENTIONALLY OMITTED FROM THIS AMENDED OFFER TO
PURCHASE AS NO CHANGES WERE MADE THERETO FROM THE SCHEDULES SET FORTH IN
THE OFFER TO PURCHASE, DATED APRIL 13, 1995.
