FAST FOOD SYSTEMS, INC.
42-40 BELL BOULEVARD, SUITE 200
BAYSIDE, NEW YORK 11361
(718) 229-1113
September ___, 1997
To Our Stockholders:
You are cordially invited to attend a Special Meeting of the
stockholders of Fast Food Systems, Inc. (the "Company"), to be
held on October __, 1997 at 10:00 a.m. local time, at the
Company's offices at 42-40 Bell Boulevard, Suite 200, Bayside,
New York 11361.
At the Special Meeting, the holders of the Company's common
stock, par value $.01 per share (the "Common Stock") will be
asked to consider and vote upon a proposal to approve and adopt
Articles of Amendment to the Company's Articles of Incorporation
("Articles of Amendment") providing (a) for the reduction of the
number of authorized shares of Common Stock from 5,000,000 to
5,000 with $10.00 par value (such new shares of Common Stock to
be referred to herein as the "New Common Stock"), (b) for a 1,000
to one reverse stock split of the Company's Common Stock, and (c)
for a cash payment of 45 cents per share (the "Cash
Consideration") for the currently outstanding Common Stock in
lieu of the issuance of any resulting fractional shares of the
New Common Stock to any stockholders who, after the Reverse Stock
Split, own a fractional share of New Common Stock (items (a),
(b), and (c) will be considered one proposal and referred to
herein as the "Reverse Stock Split").
The text of the proposed Articles of Amendment is set forth
in Annex A to the accompanying Proxy Statement. If the proposed
Reverse Stock Split is approved, the stockholders of the Company
who own less than one (1) share of New Common Stock will cease to
be stockholders of the Company or to have any equity interest in
the Company. Such stockholders will receive the Cash
Consideration for each share of Common Stock of which they are
the owners (as will the owners of more than one share of New
Common Stock who also own fractional shares of New Common Stock)
and the Company will elect to cease filing any reports with the
Securities and Exchange Commission.
If the proposed Reverse Stock Split is approved, a
stockholder who strictly complies with the requirements of
Section 262 of the Delaware General Corporation Law (the "DGCL")
may dissent from the proposed Reverse Stock Split and, in lieu of
the payment of the Cash Consideration, obtain payment in cash of
the "fair value" of such stockholder's shares of Common Stock as
determined under Section 262 of the DGCL. A stockholder who
wishes to assert such dissenter's rights must deliver to the
Company a written notice before the vote on the Reverse Stock
Split at the Special Meeting of such stockholder's intent to
demand payment for such stockholder's shares of Common Stock if
the Reverse Stock Split is effectuated. A stockholder who wishes
to assert such dissenter's rights also may not vote any of the
stockholder's shares of Common Stock for the Reverse Stock Split.
See "The Reverse Stock Split - Dissenting Stockholders' Rights"
in the accompanying Proxy Statement for a statement of the rights
of dissenting stockholders and a description of the procedures
required to be followed to obtain the fair value of the shares of
Common Stock. A copy of Section 262 of the DGCL is attached as
Annex B to the accompanying Proxy Statement. Details of the
proposed Reverse Stock Split are set forth in the enclosed Proxy
Statement, which you are urged to read carefully.
Your Board of Directors believes that the proposed Reverse
Stock Split is in the best interests of the Company and its
stockholders. In arriving at its decision to recommend the
proposed Reverse Stock Split, the Board carefully reviewed and
considered the terms and conditions of the proposed Reverse Stock
Split and the factors described in the enclosed Proxy Statement.
Approval of the proposed Reverse Stock Split requires the
affirmative vote of the holders of a majority of the Company's
issued and outstanding shares of Common Stock. Consummation of
the proposed Reverse Stock Split will result in the Company
terminating the Registration of the Company's Common Stock and
ceasing to file reports with the Securities and Exchange
Commission.
If you are a holder of the Company's Common Stock, whether
or not you plan to attend the meeting, please fill in the
appropriate blanks, sign and date the enclosed proxy and return
it in the envelope provided for that purpose. If you attend the
meeting and wish to vote in person, you may do so by withdrawing
your proxy prior to the meeting. Under Delaware law, if you
abstain from voting, your abstention will be treated as a "no"
vote for purposes of determining whether approval of the proposed
Reverse Stock Split has been obtained.
Sincerely,
LEWIS E. TOPPER
Lewis E. Topper, President,
Director and Chief
Executive Officer
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.<PAGE>
FAST FOOD SYSTEMS, INC.
42-40 BELL BOULEVARD, SUITE 200
BAYSIDE, NEW YORK 11361
(718) 229-1113
----------------------
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON October __, 1997
----------------------
Notice is hereby given that a Special Meeting of the
stockholders (the "Special Meeting") of Fast Food Systems, Inc.,
a Delaware corporation (the "Company"), will be held on October
___, 1997 at 10:00 a.m. local time, at the Company's offices at
42-40 Bell Boulevard, Suite 200, Bayside, New York 11361, for
the purpose of considering and voting upon the following matters:
1. To consider and vote upon a proposal to approve and
adopt Articles of Amendment to the Company's Articles of
Incorporation providing (a) for a reduction of the number of
authorized shares of common stock (the "Common Stock") from
5,000,000 shares to 5,000 shares with $10.00 par value (such
new shares of Common Stock to be referred to herein as the
"New Common Stock"); (b) for a 1,000 to one reverse stock
split of the Company's Common Stock; and (c) for a cash
payment in the amount of 45 cents per share (the "Cash
Consideration") for the currently outstanding Common Stock
in lieu of the issuance of any resulting fractional shares
of the New Common Stock to stockholders who, after the
reverse stock split, own a fractional share of the New
Common Stock (items (a), (b), and (c) will be considered one
proposal and will be referred to herein as the "Reverse
Stock Split"), all as described more fully in the
accompanying Proxy Statement; and
2. Such other business as may properly come before the
Special Meeting and any adjournment thereof.
Holders of record of the Company's common stock, par value
$.01 per share (the "Common Stock"), at the close of business on
August 25, 1997 (the "Record Date"), are entitled to notice of,
and to vote at, the Special Meeting and any adjournment thereof.
The text of the proposed Articles of Amendment is set forth
in Annex A to the accompanying Proxy Statement. If the proposed
Reverse Stock Split is approved, the stockholders of the Company
who own less than one (1) share of New Common Stock will cease to
be stockholders of the Company or to have any equity interest in
the Company. Such stockholders will receive the Cash
Consideration for each share of Common Stock of which they are
the owners (as will the owners of more than one share of New
Common Stock who also own fractional shares of New Common Stock)
and the Company will elect to cease filing any reports with the
Securities and Exchange Commission.
If the proposed Reverse Stock Split is approved, a
stockholder who strictly complies with the requirements of
Section 262 of the Delaware General Corporation Law (the "DGCL")
may dissent from the proposed Reverse Stock Split and, in lieu of
the payment of the Cash Consideration, obtain payment in cash of
the "fair value" of such stockholder's shares of Common Stock as
determined under Section 262 of the DGCL. A stockholder who
wishes to assert such dissenter's rights must deliver to the
Company a written notice before the vote on the Reverse Stock
Split at the Special Meeting of such stockholder's intent to
demand payment for such stockholder's shares of Common Stock if
the Reverse Stock Split is effectuated. A stockholder who wishes
to assert such dissenter's rights also may not vote any of the
stockholder's shares of Common Stock for the Reverse Stock Split.
See "The Reverse Stock Split - Dissenting Stockholders' Rights"
in the accompanying Proxy Statement for a statement of the rights
of dissenting stockholders and a description of the procedures
required to be followed to obtain the fair value of the shares of
Common Stock. A copy of Section 262 of the DGCL is attached as
Annex B to the accompanying Proxy Statement. Details of the
proposed Reverse Stock Split are set forth in the enclosed Proxy
Statement, which you are urged to read carefully.
YOUR VOTE IS IMPORTANT REGARDLESS OF THE NUMBER OF SHARES OF
COMMON STOCK YOU OWN. WHETHER OR NOT YOU PLAN TO ATTEND THE
SPECIAL MEETING, PLEASE COMPLETE, SIGN, DATE, AND RETURN THE
ENCLOSED PROXY CARD WITHOUT DELAY. ANY STOCKHOLDER PRESENT AT
THE SPECIAL MEETING MAY VOTE PERSONALLY ON EACH MATTER BROUGHT
BEFORE THE SPECIAL MEETING AND ANY PROXY GIVEN BY A STOCKHOLDER
MAY BE REVOKED AT ANY TIME BEFORE IT IS EXERCISED.
By the order of the Board of Directors,
DANIEL A. POGANSKI
Daniel A. Poganski
Secretary
September __, 1997
PLEASE DO NOT SEND ANY CERTIFICATES FOR YOUR SHARES AT THIS TIME
FAST FOOD SYSTEMS, INC.
42-40 BELL BOULEVARD
BAYSIDE, NEW YORK 11361
(718) 229-1113
---------------------
PROXY STATEMENT
FOR
SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON October __, 1997
-------------------------
This Proxy Statement is being furnished to the holders as of
the Record Date (as defined below) of common stock, par value
$.01 per share (the "Common Stock"), of Fast Food Systems, Inc.,
a Delaware corporation (the "Company"), in connection with the
solicitation of proxies by the Company's Board of Directors (the
"Board" or the "Board of Directors"), for use at a Special
Meeting of stockholders of the Company (the "Special Meeting") to
be held on October __, 1997 at 10:00 a.m. local time at the
Company's offices at 42-40 Bell Boulevard, Suite 200, Bayside,
New York 11361. This Proxy Statement and the accompanying Proxy
are first being mailed to stockholders of the Company on or about
September __, 1997.
At the Special Meeting, the holders of the Company's common
stock, par value $.01 per share (the "Common Stock") will be
asked to consider and vote upon a proposal to approve and adopt
Articles of Amendment to the Company's Articles of Incorporation
("Articles of Amendment") providing (a) for the reduction of the
number of authorized shares of Common Stock from 5,000,000 to
5,000 with $10.00 par value (such new shares of Common Stock to
be referred to herein as the "New Common Stock"), (b) for a 1,000
to one reverse stock split of the Company's Common Stock, and (c)
for a cash payment of 45 cents per share (the "Cash
Consideration") for the currently outstanding Common Stock in
lieu of the issuance of any resulting fractional shares of the
New Common Stock to any stockholders who, after the Reverse Stock
Split, own a fractional share of New Common Stock (items (a),
(b), and (c) will be considered one proposal and referred to
herein as the "Reverse Stock Split").
Pursuant to the Delaware General Corporation Law, the
affirmative vote of the holders of a majority of the outstanding
shares of Common Stock is required to approve the proposed
Reverse Stock Split. Mr. Lewis Topper, Chairman of the Board of
Directors, Chief Executive Officer, and President of the Company
has advised the Company that he intends to vote his shares,
representing approximately 42.36 percent of the outstanding
shares of Common Stock, in favor of the Reverse Stock Split.
The text of the proposed Articles of Amendment is set forth
in Annex A to the accompanying Proxy Statement. If the proposed
Reverse Stock Split is approved, the stockholders of the Company
who own less than one (1) share of New Common Stock will cease to
be stockholders of the Company or to have any equity interest in
the Company. Such stockholders will receive the Cash
Consideration for each share of Common Stock of which they are
the owners (as will the owners of more than one share of New
Common Stock who also own fractional shares of New Common Stock)
and the Company will elect to cease filing any reports with the
Securities and Exchange Commission.
STOCKHOLDERS ARE ENCOURAGED TO READ AND REVIEW CAREFULLY
THIS PROXY STATEMENT AND THE FINANCIAL INFORMATION AND ANNEXES
INCLUDED HEREWITH.
NO PERSONS HAVE BEEN AUTHORIZED TO GIVE ANY INFORMATION OR
TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROXY STATEMENT IN CONNECTION WITH THE SOLICITATION OF PROXIES
MADE HEREBY, AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY OR ANY OTHER PERSON.
-------------------------
The date of this Proxy Statement is September ____, 1997.
<PAGE>
TABLE OF CONTENTS
PAGE
SUMMARY
The Special Meeting
Special Factors
Other Risk Factors
Terms of the Reverse Stock Split
SPECIAL FACTORS
Background and Reasons for the Reverse Stock Split
Purpose of the Reverse Stock Split
Recommendations of the Board of Directors; Fairness of the
Reverse Stock Split
Interest of Certain Persons in the Reverse Stock Split;
Conflicts of Interest
Lack of Opinions, Appraisals, and Reports
Plans for the Company after the Reverse Stock Split
Certain Effects of the Reverse Stock Split
Termination of Exchange Act Registration
Certain Federal Income Tax Consequences
Source and Amounts of Funds for and Expenses of the
Reverse Stock Split
THE REVERSE STOCK SPLIT
Amendment of the Articles of Incorporation to Effect the
Reverse Stock Split
Exchange of Shares and Payment in Lieu of Issuance of
Fractional Shares
Voting; Vote Required
Dissenting Stockholders' Rights
MARKET PRICES OF SHARES OF COMMON STOCK; DIVIDENDS
DIRECTORS AND EXECUTIVE OFFICERS
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
PRO FORMA CONSOLIDATED FINANCIAL INFORMATION OF THE COMPANY
INDEPENDENT PUBLIC ACCOUNTANTS
HISTORICAL CONSOLIDATED FINANCIAL INFORMATION OF THE COMPANY
ADDITIONAL INFORMATION
ANNEXES:
A -- Form of Proposed Articles of Amendment to Restated
Articles of Incorporation
B -- Section 262 of the Delaware General Business
Corporation Law
SUMMARY
The following is a brief summary of certain information
contained elsewhere in this Proxy Statement (the "Proxy
Statement"). This summary is not intended to be a complete
description of the matters covered in this Proxy Statement and is
subject to and qualified in its entirety by reference to the more
detailed information contained elsewhere in this Proxy Statement,
including the Annexes hereto and the documents incorporated by
reference herein.
THE SPECIAL MEETING
Time, Date, and Place of Special Meeting
- ----------------------------------------
A Special Meeting of stockholders of the Company (the
"Special Meeting") will be held on October __, 1997 at 10:00 a.m.
local time at the Company's offices at 42-40 Bell Boulevard,
Suite 200, Bayside, New York 11361.
Purpose of the Special Meeting
- ------------------------------
At the Special Meeting, holders of shares of Common Stock
will consider and vote upon a proposal to approve and adopt
Articles of Amendment to the Company's Articles of Incorporation
(the "Articles of Amendment") providing (a) for a reduction in
the number of authorized shares of Common Stock from 5,000,000
shares to 5,000 shares with $10.00 par value (the "New Common
Stock"), (b) for a 1,000 to one reverse stock split of the
Company's Common Stock, and (c) for a cash payment of 45 cents
per share (the "Cash Consideration") for the currently
outstanding Common Stock in lieu of the issuance of any resulting
shares of the New Common Stock to stockholders who, after the
reverse stock split, own a fractional share of the New Common
Stock (the "Fractional Stockholders") (items (a), (b), and (c)
are considered one proposal and will be referred to herein as the
"Reverse Stock Split"). The Board of Directors has unanimously
approved the Reverse Stock Split. The Board of Directors
unanimously recommends that the stockholders vote FOR the Reverse
Stock Split.
Record Date; Quorum
- -------------------
The close of business on August 25, 1997 (the "Record Date")
has been fixed as the record date for determining holders of
shares of Common Stock entitled to vote at the Special Meeting.
Each share of Common Stock outstanding on such date is entitled
to one vote at the Special Meeting. As of the Record Date,
2,214,400 shares of Common Stock were outstanding and held of
record by 338 holders. The presence, in person or by proxy, of
the holders of a majority of the outstanding shares of Common
Stock entitled to vote at the Special Meeting is necessary to
constitute a quorum for the transaction of business at the
Special Meeting.
Required Vote
- -------------
Pursuant to the Delaware General Corporation Law, the
affirmative vote of the holders of a majority of the shares of
Common Stock is required to approve the Reverse Stock Split.
Abstentions and broker non-votes are counted for purposes of
determining whether a quorum exists for the transaction of
business at the Special Meeting but are not counted for purposes
of determining whether the holders of a majority of the shares of
Common Stock present in person or by proxy at the Special Meeting
voted in favor of the Reverse Stock Split. Mr. Lewis Topper,
Chairman of the Board of Directors and President of the Company,
owns approximately 42.36 percent of the outstanding shares of
Common Stock. Mr. Topper has indicated that he intends to vote
in favor of the Reverse Stock Split.
Proxies
- -------
Shares of Common Stock represented by properly executed
proxies received at or prior to the Special Meeting and which
have not been revoked will be voted in accordance with the
instructions indicated thereon. If no instructions are indicated
on a properly executed proxy, such proxies will be voted FOR the
Reverse Stock Split. A stockholder who has given a proxy may
revoke such proxy at any time prior to its exercise at the
Special Meeting by (i) giving written notice of revocation to the
Secretary of the Company, (ii) properly submitting to the Company
a duly executed proxy bearing a later date, or (iii) attending
the Special Meeting and voting in person. Attendance at the
Special Meeting will not in and of itself revoke a proxy. All
written notices of revocation and other communications with
respect to revocation of proxies should be addressed as follows:
Daniel A. Poganski, Secretary, No.1 Commercial Drive, Area E,
Florida, New York 10921,.
If the Special Meeting is adjourned or postponed for any
purpose, at any subsequent reconvening of the Special Meeting,
all proxies will be voted in the same manner as such proxies
would have been voted at the original convening of the meeting
(except for any proxies which have theretofore effectively been
revoked or withdrawn), notwithstanding that they may have been
effectively voted on the same or any other matter at a previous
meeting.
STOCKHOLDERS SHOULD NOT SEND ANY STOCK CERTIFICATES WITH
THEIR PROXY CARDS. IF THE REVERSE STOCK SPLIT IS CONSUMMATED,
THE PROCEDURE FOR THE EXCHANGE OF CERTIFICATES REPRESENTING
SHARES OF COMMON STOCK WILL BE AS SET FORTH IN THIS PROXY
STATEMENT. SEE "THE REVERSE STOCK SPLIT --EXCHANGE OF SHARES AND
PAYMENT IN LIEU OF ISSUANCE OF FRACTIONAL SHARES."
Solicitation of Proxies
- -----------------------
The cost of solicitation of the stockholders of the Company
will be paid by the Company. Such cost will include the
reimbursement of banks, brokerage firms, nominees, fiduciaries,
and custodians for the expenses of forwarding solicitation
material to beneficial owners of shares. In addition to the
solicitation of proxies by use of mail, the directors, officers,
and employees of the Company may solicit proxies personally or by
telephone, telegraph, or facsimile transmission. Such directors,
officers, and employees will be not be additionally compensated
for such solicitation but may be reimbursed for out-of-pocket
expenses incurred in connection therewith.
SPECIAL FACTORS
Background and Reasons for the Reverse Stock Split
- --------------------------------------------------
Since commencing its strategic downsizing in fiscal 1995
(and its subsequent decision, approved by shareholders in fiscal
1996, to sell substantially all of its assets), the Company has
made return of capital distributions to shareholders in amounts
totaling $1.35 per share, or $2,989,440 in the aggregate. The
Company's remaining activities are the collection of its notes
receivable and the management of FFO and Wendtwo. The Company
has also substantially reduced its overhead costs. One expense
area the Company has not been able to reduce is the cost of
complying with the quarterly and annual reporting required of a
public company pursuant to the Securities Exchange Act of 1934
(the "Exchange Act") estimated to approximate $45,000 annually.
In addition, during fiscal year 1997 the Board of Directors and
Mr. Topper have increasingly recognized (a) that significant
financial and operational constraints have prevented and will
continue to prevent the Company's stockholders from enjoying the
benefits which usually flow from being a public company,
including the payment of dividends from operating revenues
(rather than a return of capital as the Company has done) and any
meaningful appreciation of the value of their shares of Common
Stock; and (b) there has never developed and will likely not
develop in the foreseeable future any significant trading market
for shares of its Common Stock.
In June 1997, since neither the Company nor its stockholders
had derived any material benefit from the registration of the
Common Stock under the Exchange Act, Mr. Topper proposed that it
was both appropriate and desirable to convert the Company to
private ownership. Accordingly, Mr. Topper prepared a proposal
to convert the Company to private ownership.
Mr. Topper, in submitting the proposal to convert the
Company to private ownership to the Board of Directors at that
time, contemplated that the Board of Directors could utilize the
book value of the net assets of the Company, which exceeds
current market value of the Common Stock, in determining the
amount of the Cash Consideration to pay the Fractional
Stockholders which could prevent the Company from having to incur
the substantial additional expense of obtaining an appraisal.
The Board of Directors at its meeting on July 10, 1997,
considered and voted on Mr. Topper's proposal to convert the
Company to private ownership. It unanimously approved at these
meetings the Reverse Stock Split, including the payment of the
Cash Consideration to Fractional Stockholders. The Board of
Directors also directed that the Reverse Stock Split be placed on
the agenda for consideration of the stockholders at the Special
Meeting.
Purpose of the Reverse Stock Split
- ----------------------------------
The purpose of the Reverse Stock Split is to cause the
Company to become a privately owned corporation and to afford the
Fractional Stockholders a one time opportunity to receive, in the
reasonable judgment of the Board of Directors, a fair price for
their shares without the Fractional Stockholders incurring the
attendant costs of sale. See "Special Factors; Fairness of the
Reverse Stock Split.
The Board of Directors concluded that the Reverse Stock
Split is fair to, and in the best interest of, the Company and
its stockholders (including the Fractional Stockholders).
Accordingly, the Board of Directors has unanimously approved the
Reverse Stock Split and recommends a vote FOR the Reverse Stock
Split. See "Special Factors - Recommendations of the Board of
Directors of the Company; Fairness of the Reverse Stock Split"
and "Termination of Exchange Act Registration."
Certain Federal Income Tax Consequences
- ---------------------------------------
The receipt by each Fractional Stockholder of cash in lieu
of fractional shares of New Common Stock pursuant to the Reverse
Stock Split will be a taxable transaction for federal income tax
purposes. See "Special Factors - Certain Federal Income Tax
Consequences."
OTHER RISK FACTORS
Certain Effects of the Reverse Stock Split
- ------------------------------------------
Upon the effectiveness of the Reverse Stock Split, the
stockholders of the Company, other than the remaining
shareholders who prior to effectiveness of the Reverse Stock
Split own 1,000 or more shares of Common Stock, will no longer
have any continuing interest as stockholders of the Company, no
market will exist for the Company's shares of Common Stock, and
the Company will elect to suspend the filing of reports under,
and will apply for termination of the registration of its shares
of New Common Stock pursuant to the Exchange Act. See "Special
Factors - Certain Effects of the Reverse Stock Split." and
"Termination of Exchange Act Registration."
Lack of Reports, Opinions, and Appraisals
- -----------------------------------------
Neither the Company nor the Board of Directors received any
report, opinion, or appraisal from an outside party with respect
to the Reverse Stock Split generally or with respect to its
fairness. See "Special Factors - Recommendations of the Board of
Directors; Fairness of the Reverse Stock Split," and "Special
Factors - Lack of Opinions, Appraisals, and Reports."
Conflicts of Interest
- ---------------------
Mr. Topper is the principal stockholder, a member of the
Board of Directors, and one of two executive officers of the
Company. He will continue to be an officer and director of the
Company and its primary stockholder after the consummation of the
Reverse Stock Split. Mr. Topper owns, as of the date of this
Proxy Statement, 937,914 shares of the Common Stock, representing
approximately 42.36 percent of the Company's issued and
outstanding shares of the Common Stock. If the Reverse Stock
Split is effectuated, Mr. Topper will then own 937 shares of the
Common Stock, representing approximately 47.47 percent of the
Company's issued and outstanding shares of Common Stock. Mr.
Topper's ownership in the Company will effectively increase. Mr.
Topper was present and voted at the meetings of the Board of
Directors at which the Reverse Stock Split was considered and
approved. The Board of Directors was aware of these potential
and actual conflicts of interest but concluded that, despite
these conflicts, the Reverse Stock Split is, fair to the Company
and its stockholders. See "Special Factors - Interest of Certain
Persons in the Reverse Stock Split; Conflict of Interest."
TERMS OF THE REVERSE STOCK SPLIT
Terms of the Reverse Stock Split
- --------------------------------
The proposed Articles of Amendment provide (a) for a reduction of
the authorized shares of Common Stock of the Company from
5,000,000 shares of Common Stock to 5,000 shares with $10.00 par
value (the "New Common Stock"), (b) for a 1,000 to one reverse
stock split of the Company's Common Stock, and (c) for a cash
payment in the amount of 45 cents per share (the "Cash
Consideration") for the currently outstanding Common Stock in
lieu of the issuance of any resulting fractional shares of the
New Common Stock to stockholders who, after the Reverse Stock
Split, own a fractional share of the New Common Stock (the
"Fractional Stockholders"). Immediately upon the filing of the
Articles of Amendment with the Secretary of State of the State of
Delaware, every 1,000 shares of the Company's Common Stock issued
on the date of the filing of the Articles of Amendment will be
automatically converted into one share of the Company's New
Common Stock. The Company will then acquire from the Fractional
Stockholders for cash all resulting fractional shares of New
Common Stock at a per share price equal to the Cash
Consideration. The Company will pay for such fractional shares
upon the physical surrender by the Fractional Stockholders of
their share certificates pursuant to the transmittal instructions
to be mailed by the Company to the Fractional Stockholders. See
"The Reverse Stock Split - Amendment of Articles of Incorporation
to Effect the Reverse Stock Split" and "The Reverse Stock Split -
Exchange of Shares and Payment in Lieu of Issuance of Fractional
Shares of New Common Stock." As a result of the Reverse Stock
Split, the number of shareholders of the Company will be reduced
below 300 and the Company will elect to no longer be subject to
the reporting requirements of the Exchange Act. See "Special
Factors - Certain Effects of the Reverse Stock Split," "The
Reverse Stock Split - Amendment of Articles of Incorporation to
Effect the Reverse Stock Split," and "The Reverse Stock Split - -
Exchange of Shares and Payment in Lieu of Issuance of Fractional
Shares." and "Termination of Exchange Act Registration."
Dissenting Stockholders' Rights
- -------------------------------
If the proposed Reverse Stock Split is approved, a
stockholder who strictly complies with the requirements of
Section 262 of the Delaware General Corporation Law (the "DGCL")
may dissent from the proposed Reverse Stock Split and, in lieu of
the payment of the Cash Consideration, obtain payment in cash of
the "fair value" of such stockholder's shares of Common Stock as
determined under Section 262 of the DGCL. A stockholder who
wishes to assert such dissenter's rights must deliver to the
Company a written notice before the vote on the Reverse Stock
Split at the Special Meeting of such stockholder's intent to
demand payment for such stockholder's shares of Common Stock if
the Reverse Stock Split is effectuated. A stockholder who wishes
to assert such dissenter's rights also may not vote any of the
stockholder's shares of Common Stock for the Reverse Stock Split
and will not be included for purposes of a quorum. See "The
Reverse Stock Split - Dissenting Stockholders' Rights" for a
statement of the rights of dissenting stockholders and a
description of the procedures required to be followed to obtain
the fair value of the shares of Common Stock. A copy of Section
262 of the DGCL is attached as Annex B hereto.
SPECIAL FACTORS
BACKGROUND AND REASONS FOR REVERSE STOCK SPLIT
Fast Food Systems, Inc. (the "Company") was incorporated in
Delaware on February 1, 1990. The Company was formed to
consolidate the businesses, assets, liabilities and operations of
Integrated Food Systems, Inc., a New Jersey corporation ("IFS"),
with the businesses, assets, liabilities and operations of up to
eighteen Wendy's Old Fashioned Hamburgers Restaurants (the
"Wendy's Restaurants") operated for the benefit of fourteen
limited partnerships. The Company offered to exchange shares of
its common stock, $.01 par value per share (the "Common Stock"),
for all of the issued and outstanding common stock of IFS, which
was a wholly-owned subsidiary of Integrated Resources, Inc.
("IR"). In addition, the Company offered to exchange shares of
its Common Stock and promissory notes for the businesses, assets,
liabilities and operations of the Wendy's Restaurants owned by
the limited partnerships. IFS owned general partner interests in
and managed the Wendy's Restaurant operations of each of the
limited partnerships. Twelve of the fourteen limited partnerships
(encompassing fifteen Wendy's Restaurants) and IR consented to
the Exchange Offer and Consolidation. On November 26, 1990 the
exchange offers were consummated, with an aggregate of 2,178,400
shares of Common Stock and promissory notes in an aggregate
principal amount of $2,005,000 being issued. The assets involved
in the exchange included twenty (fifteen partnership and five
IFS) Wendy's Restaurants, related real estate, restaurant
equipment, and other assets and liabilities.
Upon the consummation of the exchange offers, the Company
continued to use the assets acquired in the same manner as
formerly used by the partnerships and IFS. However, during
calendar year 1995 the Company began implementing a course of
strategic downsizing pursuant to which it (i) sold nine New
Jersey Restaurants, (ii) closed the Harlem Restaurant, and (iii)
agreed, subject to stockholder approval, to sell eight Brooklyn
and Manhattan Restaurants to an affiliated party. The Company
filed a proxy statement with the Securities and Exchange
Commission which was mailed to its stockholders on January 4,
1996. The sale of the eight restaurants to Wendnew, LLC., which
had closed in escrow on October 9, 1995, was approved by the
stockholders on January 26, 1996. Subsequently on March 18,
1996, the Company closed its last operating location, the
consistently unprofitable Wendchester restaurant. As a result of
the Company's selling seventeen restaurants and closing two
others, the only operations that remain are its management
activities. IFS continues to manage two Wendy's Restaurants for
Wendtwo Limited Partnership as well as five Popeye's Famous Fried
Chicken and Biscuits restaurants for Fast Food Operators, Inc., a
publicly-traded company. Both of the Wendy's Restaurants and one
of the Popeye's restaurants are subject to subcontracting
agreements with others. The two managed Wendy's Restaurants are
operated under franchise agreements granted to an IFS subsidiary
by Wendy's International, Inc. ("Wendy's"). This subsidiary of
IFS serves as the general partner of Wendtwo managing the assets
of the partnership with IFS managing the Restaurants on behalf of
the partnership. In addition to its management operations,
interest income and note principal are received by the Company
through the payment of the notes outstanding on its restaurant
sales to third parties. The Company has two notes outstanding,
one equal to $319,827 in principal amount at June 29, 1997 and
the second equal to $389,151 in principal amount at June 29,
1997.
Currently, the Board of Directors increasingly has
recognized that neither the Company nor its stockholders derive
any material benefit from the continued registration of the
Common Stock under the Exchange Act. Operating losses in
previous years followed by significant recent financial and
operational downsizing have prevented the Company and its
stockholders from enjoying the benefits which traditionally flow
from being a public company. This constraint, together with the
substantial legal, auditing and other costs incurred as a result
of the periodic reporting required of a public company, has
prevented and will continue to prevent for the foreseeable future
the payment of any dividends to its stockholders other than the
return of capital distributions attributable to the repayment of
outstanding notes due the Company which arose form certain recent
asset sales. These will continue to prevent any meaningful
appreciation in the value of the Company's shares of Common
Stock.
Second, there has never developed and will likely not
develop in the foreseeable future any significant trading market
for the shares of the Company's Common Stock. The Common Stock
has never traded in any established market and transactions occur
infrequently and sporadically. The Company also has never
qualified and will not likely qualify in the foreseeable future
its Common Stock for listing on any national securities exchange
or for quotation on an inter-dealer quotation system of a
registered national securities association (such as NASDAQ). For
the fiscal years ended September 24, 1995 and September 29, 1996,
the Company's market maker, Continuum Capital Inc., effected only
___ purchases and sales of the shares of Common Stock. See
"Market Prices for Shares of Common Stock; Dividends."
Moreover, a significant number of the Company's stockholders
hold less than 500 shares. Of approximately 338 stockholders of
record, 40 (approximately 11.8 percent of the Company's
stockholders) hold 500 or fewer shares of Common Stock. Thus, if
for any reason a trading market developed for the Company's
Common Stock, stockholders holding less than 500 shares would
nonetheless have limited opportunities to realize any value for
their shares since the sales of their shares would ordinarily
involve disproportionately high brokerage commissions.
Third, the Company has incurred and will continue to incur
substantial costs as a result of its status as a public company
under the Exchange Act (estimated to approximate $45,000
annually). It incurs costs, including legal, auditing, and
printing fees, to prepare annual reports on Form 10-KSB,
quarterly reports on Form 10-QSB, current reports on Form 8-K,
reports and schedules required to be filed by the Company's
officers and directors, and proxy solicitation materials. The
Company's management is also required to devote substantial time
and attention to the preparation and review of these filings, the
furnishing of information to stockholders, and to other
stockholder matters.
In July 1997, since neither the Company nor its stockholders
had derived any material benefit from the registration of the
Common Stock under the Exchange Act, Mr. Topper determined that
it was both appropriate and desirable to convert the Company to
private ownership. Accordingly, Mr. Topper prepared a proposal
to convert the Company to private ownership.
Mr. Topper presented his proposal to convert the Company to
private ownership, and the Board of Directors first considered
and voted on such proposal, at its meeting on June 9, 1997, at
which all of the Company's directors were present. The terms of
Mr. Topper's proposal were outlined at this meeting. It was
proposed that the Board of Directors approve Articles of
Amendment to the Company's Articles of Incorporation providing
for a reduction of the number of authorized shares of common
stock from 5,000,000 shares of common stock, $.01 par value (the
"Common Stock") to 5,000 shares of common stock, with $10.00 par
value (the "New Common Stock"), and for a 1,000 to one reverse
stock split of the Company's Common Stock (the "Reverse Stock
Split") and that such Articles of Amendment be placed on the
agenda for consideration of the stockholders at a special
meeting. If the stockholders approved this proposal, then every
1,000 shares of Common Stock would automatically be converted
into one share of New Common Stock; no fractional shares of New
Common Stock would be issued in the Reverse Stock Split and
consequently any stockholder whose ownership would include or
consist of less than one share of New Common Stock (the
"Fractional Stockholders") would instead receive cash in lieu of
the issuance of one share of New Common Stock. On the
effectiveness of the Reserve Stock Split, the Fractional
Stockholders whose ownership prior to the Reverse Stock Split
constituted less than 1,000 shares of Common Stock would no
longer have any continuing interest as stockholders in the
Company; pursuant to Section 15(d) of the Exchange Act the
Company's obligation to file reports would be suspended and the
registration of the shares of Common Stock would be eligible for
termination under Section 12(g)(4) of the Exchange Act.
It was explained that Mr. Topper believed that neither the
Company nor its stockholders derive any material benefit from the
continued registration of the Common Stock under the Exchange Act
and that the monetary expense and burden on management of
continued registration significantly outweighed any material
benefit that the Company or its stockholders may receive from
such registration. Mr. Topper provided the following reasons for
the proposed Reverse Stock Split: That significant financial and
operational constraints to which the Company is subject have
prevented and will continue to prevent the Company and its
stockholders from enjoying the benefits which traditionally flow
from being a public company; that there has never developed and
will likely not develop in the foreseeable future any significant
trading market for the shares of the Company's Common Stock; and
that the Company incurs substantial general and administrative
expense to comply with the Exchange Act.
The fairness of the proposed Reverse Stock Split, as set
forth in Mr. Topper's proposal, was then outlined. It was
explained that Mr. Topper believed that the Reverse Stock Split
would be fair both to the Company and to its stockholders. From
a procedural point of view, the Reverse Stock Split would provide
an opportunity for the stockholders to receive, in his view, fair
value for their shares without incurring any brokerage costs and
the stockholders would have appraisal rights under the Delaware
General Corporation Law. Mr. Topper advised the Board of
Directors that SEC Regulations provided the Company with another
means of suspending its reporting obligations under the Exchange
Act. At the end of the current fiscal year on September 28,
1997, the Company in all probability, will have, as it does now,
fewer than 500 stockholders and will also have, as of the end of
its last three fiscal years, less than $10,000,000 in total
assets. Under such conditions, the SEC Regulations also allow
for the termination of registration and suspension of reporting.
This alternative would not involve a Reverse Stock Split and also
would avoid the costs of a Proxy preparation, mailing and
solicitation. However, if this option were followed, there would
not be any payments to stockholders and the Company, although no
longer reporting and technically "private," would still have in
excess of 400 individual stockholders, none of whom would hold a
majority of the Company's Common Stock, which would likely prove
unwieldy for corporate governance matters. Moreover,
stockholders who presently have the right to sell their shares in
the open market, would lose such right and receive nothing in
return. Accordingly, the Reverse Stock Split would constitute
the most expeditious, efficient, cost effective and fairest
method (both to the Company and its stockholders) of converting
the Company from a reporting company to a privately-held, non-reporting
company in comparison to other alternatives considered
by him and explained to the Board of Directors. See "Termination
of Exchange Act Registration."
From a financial point of view, Mr. Topper also believed
that the amount he proposed that the Company pay to the
Fractional Stockholders for their fractional shares of New Common
Stock (the "Cash Consideration") would be fair to the
stockholders. Mr. Topper preliminarily suggested that the Cash
Consideration equal 45 cents per share. First, Mr. Topper
explained that he believed that a Cash Consideration equal to
such amount would approximate both the book value of the net
assets of the Company and the current market price of the shares
of Common Stock, which are substantially similar, and that as a
result he preliminarily concluded the Cash Consideration and the
Reverse Stock Split would be fair to the Company and the
stockholders. See "Special Factors - Fairness of the Reverse
Stock Split; Recommendation of the Board of Directors." It was
explained that Mr. Topper believed such asset and market value to
be the best and most realistic and reliable indication of the
fair market value of the Company's shares of Common Stock.
Second, Mr. Topper presented an analysis of the net book and
going concern values of the Company on the basis of his
understanding of the Company's financial statements.
The Board of Directors then discussed each of the aspects of
Mr. Topper's proposal. The Board of Directors concurred with Mr.
Topper's proposal that the Company consider going private at this
time and the reasons for such proposal. It also concurred with
his preliminary conclusions with respect to the fairness of the
Reverse Stock Split from a procedural and financial point of
view. The Board of Directors also concurred that simply electing
to terminate registration and cease reporting with neither
reduction in the number of, nor payments to stockholders would
not be fair to either the Company or the stockholders.
The Board of Directors, notwithstanding it preliminarily
concurred with Mr. Topper's proposal, decided to review Mr.
Topper's proposal in more detail, to make such additional
inquiries as each of the directors deemed necessary to evaluate
his proposal, and then to consider again the proposed Reverse
Stock Split at a subsequent meeting of the Board of Directors to
be scheduled at a mutually agreeable date and time after such
review and inquiries. It also determined to hold in abeyance
determining the proposed Cash Consideration for the same reasons.
The Board of Directors at that meeting approved unanimously
the proposed amendment to the Company's Articles of Incorporation
in the manner described by Mr. Topper in his proposal and that
such amendment be placed on the agenda for consideration of the
stockholders at a special meeting, subject to the following terms
and conditions.
1. That the Cash Consideration to be paid to the Fractional
Stockholders in lieu of the issuance of fractional shares of New
Common Stock be agreed upon at the next scheduled meeting of the
Board of Directors.
2. That Mr. Topper's proposal be ratified at such meeting,
with such changes therein as the Board of Directors approve at
such meeting.
The Board of Directors at a special meeting thereof on July
10, 1997 at which all of the directors were present, again
considered the proposed Reverse Stock Split. The Board of
Directors first reiterated that it concurred with Mr. Topper's
proposal, his reasons for it, and his conclusions with respect to
its fairness to the Company and the stockholders.
It next discussed the amount to pay to the Fractional
Stockholders for their shares. It determined that, on the basis
of the book value of the net assets of the Company (which value
exceeds the current market price of the Common Stock) and the
current and historical market price of Common Stock, the fair
market value of each of the shares of Common Stock of the Company
equaled 45 cents and, therefore, the amount of the Cash
Consideration to pay to the Fractional Stockholders should equal
45 cents per share. The Board of Directors otherwise concurred
with Mr. Topper's conclusions with respect to the fairness of the
Reverse Stock Split.
The Board of Directors at this meeting unanimously concluded
that the Reverse Stock Split, both from a procedural and
financial point of view, is fair to the Company and its
stockholders. It unanimously approved the Reverse Stock Split,
directed that it be placed on the agenda of a special meeting of
the stockholders for their consideration, and recommended that
the stockholders vote for the Reverse Stock Split at such
meeting.
Other than as set forth in this Proxy Statement, the Company
and Mr. Topper do not have any reason for proposing the Reverse
Stock Split at this particular time and are not aware of any
material development affecting the future value of the Company or
the Common Stock which has not been discussed in this Proxy
Statement.
PURPOSE OF THE REVERSE STOCK SPLIT
The purpose of the proposed Reverse Stock Split, from the
standpoint of the Company, is to cause the Company to become a
privately-owned corporation in a manner that is fair both to the
Company and its stockholders. The Company and its stockholders
do not derive significant benefit from the Company's status as a
public company, including the development of a market of
consequence for its shares of Common Stock, the appreciation in
value of such shares of Common Stock, and the payment of
dividends from revenue sources rather than the repayment of
outstanding notes due to the Company. On the other hand, the
conversion of the Company from a reporting company to a private,
non-reporting company will result in substantial benefits to the
Company, including the elimination of the substantial costs it
incurs each year as a result of its reporting obligations. It is
also intended to afford the Fractional Stockholders a one time
opportunity to receive, in the reasonable belief of the Board of
Directors, a fair price for their shares without the Fractional
Stockholders incurring the attendant costs of sale. There is not
now and will not likely in the future develop a market of
consequence for its shares of Common Stock to permit any
significant trading of them and its operational and financial
constraints now prevent and likely in the foreseeable future will
prevent the payment of any dividends from operating earnings of
the Company to the stockholders or any substantial appreciation
in the value of their shares.
The Company structured the transaction as a Reverse Stock
Split in order for the Company to become a privately-owned
corporation in the most expeditious, efficient, cost effective
and fairest manner. They concluded that the other possible
alternatives would either (i) not permit the Company to become a
privately-owned corporation or, (ii) although would result in the
suspension of the Company's reporting obligations, would deprive
the stockholders of any market for the Company's Common Stock
without giving them anything in return.
RECOMMENDATIONS OF THE BOARD OF DIRECTORS; FAIRNESS OF THE
REVERSE STOCK SPLIT
General
- -------
The Board of Directors, at the meetings of the Board of
Directors on June 9, 1997, and July 10, 1997, considered the
fairness of the proposed 1,000 to one Reverse Stock Split of the
Company's Common Stock. The Board of Directors unanimously
concluded that the Reverse Stock Split, both from a financial and
procedural point of view, is fair to, and in the best interests
of, both the Company and the stockholders including the
Fractional Stockholders. At such meetings, they unanimously
resolved to recommend to the Company's stockholders to approve
the Reverse Stock Split.
The Board of Directors did not structure the Reverse Stock
Split to require the approval of at least a majority of the
unaffiliated security holders. They concluded, despite not
structuring the Reverse Stock Split in such manner, that the
Reverse Stock Split is fair to the Company's unaffiliated
stockholders.
The Board of Directors of the Company did not retain an
unaffiliated representative to act solely on behalf of
unaffiliated stockholders for purposes of negotiating the terms
of the Reverse Stock Split or preparing a report with respect to
the fairness of the Reverse Stock Split. The Company and Board
of Directors also did not obtain any report, opinion, or
appraisal from an outside party with respect to the Reverse Stock
Split, including any report, opinion, or appraisal with respect
to the fairness of the Reverse Stock Split from a financial or
procedural point of view to the Company, to any affiliate of the
Company, or to any unaffiliated stockholders of the Company. The
Board of Directors determined that the cost and expense to retain
such representative or to prepare such report, opinion, or
appraisal were not warranted in light of (i) the expected Cash
Consideration to be paid to the Fractional Stockholders pursuant
to the Reverse Stock Split, (ii) the relatively high cost and
expense required to obtain such report, opinion or appraisal when
compared to the low value of the Company's net assets, and (iii)
the right of each of the Fractional Stockholders to dissent from
the Reverse Stock Split under the Delaware General Business Law.
The Board of Directors was aware that the Reverse Stock
Split presented potential or actual conflicts of interest between
the Company and Mr. Topper. The Board of Directors, despite such
effect and conflicts of interest, concluded that the Reverse
Stock Split is fair to the Company and the unaffiliated
stockholders.
Fairness of the Reverse Stock Split
- -----------------------------------
The Board of Directors, as a part of their determination of
the Cash Consideration and the fairness of the Reverse Stock
Split considered certain specified factors. They considered the
current book value of the net assets of the Company, the
historical and current market prices for the shares of Common
Stock, the Company's going concern value and the trading volume
of the shares of Common Stock of the Company during the fiscal
years ended September 24, 1995 and September 29, 1996.
The Board of Directors considered that the book value of the
Company's net assets and the historical and current market
prices for the shares of Common Stock, which values were
similar, were the best and most realistic and reliable
indications of the fair market value of the Company's shares of
Common Stock for purposes of their determination of the amount of
the proposed Cash Consideration and their analysis of the
fairness of the Reverse Stock Split to the Fractional
Stockholders.
The Board of Directors concluded on the basis of all of the
factors considered that the Cash Consideration reflects the
Company's fair value and, for this reason, that the Reverse Stock
Split is fair to the Fractional Stockholders from a financial
point of view.
The Board of Directors likewise concluded that the Reverse
Stock Split is fair to the Fractional Stockholders from a
procedural point of view. They reiterated that, in the
determination of the amount of the Cash Consideration and in
their evaluation of the fairness of the Reverse Stock Split from
a financial point of view. Second, they noted that the Reverse
Stock Split, given the lack of a market of consequence for the
Company's shares of Common Stock, afforded stockholders a one
time opportunity to receive, in the view of the Board of
Directors, fair value for their shares. Third, the Reverse Stock
Split constituted the most expeditious, efficient, cost effective
and fairest method to convert the Company from a reporting
company to a privately held non-reporting company in comparison
to other alternatives considered by them. Fourth, they noted
that a stockholder may dissent from the proposed Reverse Stock
Split and, in lieu of the payment of the Cash Consideration,
obtain payment in cash of the "fair value" of such stockholder's
shares of Common Stock under the Delaware General Company Law.
The Board of Directors either did not assign any weight to a
specified factor if, in their view, such factor did not assist
them in their determination either of the Cash Consideration or
the fairness of the Reverse Stock Split. If any factor assisted
them in their determination, they also did not assign a relative
weight to such factor and did not make a determination as to why
any particular factor, as a result of the deliberations by them,
should be assigned any weight. However, the Board of Directors
considered the following factors as most important: the current
market for the Company's shares of Common Stock, and the
Fractional Stockholders' dissenting stockholders' rights under
the Delaware General Corporation Law.
Consideration of Alternatives
- -----------------------------
The Board of Directors considered the merits of various
other alternatives to the Reverse Stock Split. They determined
that the first alternative considered, of privately negotiated or
open market purchases, would not be feasible because in all
likelihood, it would not be possible, in any reasonable period of
time, to purchase a significant number of the shares of the
Company's Common Stock to ensure the reduction of the number of
the holders of the shares of its Common Stock to less than 300.
Finally, they determined that the legal and other transaction
costs to implement this alternative would be substantially
greater than the costs to implement the Reverse Stock Split.
Similarly, they determined that either the Company or Mr.
Topper commencing a tender offer would not be feasible for the
same reasons that the alternative of privately negotiated or open
market purchases would not be feasible.
Third, the Board of Directors determined that the sale of
the Company (involving the sale of all or substantially all of
its remaining assets, the merger of the Company into or with
another corporation, or other form of business combination) would
not be a feasible alternative. No acceptable third party had
expressed any interest in purchasing any of the remaining assets
of the Company, in merging with the Company, or otherwise in
entering into a business combination with the Company. The Board
of Directors likewise determined that it would not be a feasible
alternative to locate a third party to purchase the Company.
They reiterated, on the basis of informal discussions which Mr.
Topper has had with prospective purchasers in the past, that no
acceptable third party had expressed any interest in pursuing
formal negotiations for the purchase of the Company.
Fourth, the Board of Directors considered the alternative of
additional public or private financing. It concluded that this
alternative would not be feasible. The Company would be required
to sell a substantial number of additional shares of its Common
Stock in order to raise any significant amount of capital, given
the current value of such shares, resulting in the dilution of
all of the stockholders' interest in the Company. They
reiterated that, on the basis of informal discussions which Mr.
Topper has had with prospective financing sources in the past, no
acceptable third party had expressed any interest in pursuing
formal negotiations to provide any financing to the Company in
light of the Company's existing financial status. The Company
would also remain subject to the regulatory and reporting
requirements of the Exchange Act without in all likelihood the
development of any significant trading market for the Common
Stock.
Lastly, the Board of Directors considered the alternative of
electing to terminated registration and/or suspend reporting
requirements under Rules 12g-4(a)(1)ii and 12h-3(b)(1)ii of the
Exchange Act. Generally, Rules 12g-4(a)(1)ii and 12h-3(b)(1)ii
of the Exchange Act provide for a termination from registration
of an issuer's stock when such stock is held by less than 500
persons and the total assets of the issuer have not exceeded
$10,000,000 for the three most recent fiscal years. However,
this alternative was rejected as it would deprive the
stockholders of any market for their shares and give them nothing
in return. Also, with in excess of 400 stockholders, none owning
a majority, corporate governance could prove unwieldy.
Recommendations of the Board of Directors
- -----------------------------------------
The Board of Directors unanimously concluded that, on the
basis of these factors, the Reverse Stock Split, both from a
procedural and financial point of view, is fair to the Company,
the Fractional Stockholders, and the New Common shareholders.
For these reasons and the reasons described in "Special Factors -
Background and Reasons for the Reverse Stock Split" and "Special
Factors - Purpose of the Reverse Stock Split," the Board of
Directors, including the only director who is not an employee of
the Company, unanimously approved the Reverse Stock Split and
recommended that the stockholders vote FOR the Reverse Stock
Split.
INTEREST OF CERTAIN PERSONS IN THE REVERSE STOCK SPLIT; CONFLICTS
OF INTEREST
Mr. Topper is the principal stockholder, a member of the
Board of Directors, and one of two executive officers of the
Company. He will continue to be an officer and director of the
Company and its primary stockholder after the consummation of the
Reverse Stock Split. Mr. Topper owns, as of the date of this
Proxy Statement, 937,914 shares of the Common Stock, representing
approximately 42.36 percent of the Company's issued and
outstanding shares of Common Stock. If the Reverse Stock Split is
effectuated, Mr. Topper will then own 937 shares of the Common
Stock, representing approximately 47.47 percent of the Company's
issued and outstanding shares of Common Stock. Mr. Topper's
ownership in the Company will effectively increase. Mr. Topper
was present and voted at the meetings of the Board of Directors
at which the Reverse Stock Split was considered and approved.
The Board of Directors was aware of these potential and actual
conflicts of interest but concluded that, despite these
conflicts, the Reverse Stock Split is, fair to the Company and
its stockholders.
The Board of Directors of the Company did not retain an
unaffiliated representative to act solely on behalf of
unaffiliated stockholders for the purpose of negotiating the
terms of the Reverse Stock Split or for the purpose of preparing
a report with respect to the fairness of the Reverse Stock Split.
The Board of Directors determined that the cost and expense to
retain such representative or to prepare such report were not
warranted in light of (i) the expected Cash Consideration to be
paid to the Fractional Stockholders pursuant to the Reverse Stock
Split, (ii) the relatively low value of the Company's net assets
when compared to the cost and expense required to obtain such
report, opinion or appraisal, and (iii) the right of each of the
Fractional Stockholders to dissent from the Reverse Stock Split
under the Delaware General Business Law. The Board of Directors
also did not appoint an independent committee of the Board of
Directors to review the fairness of the Reverse Stock Split for
the same reasons.
LACK OF OPINIONS, APPRAISALS, AND REPORTS
Neither the Company nor the Board of Directors received any
report, opinion, or appraisal from an outside party with respect
to the Reverse Stock Split, including, but not limited to, any
report, opinion, or appraisal with respect to the fairness of the
Reverse Stock Split to the Company, any affiliates of the
Company, or any unaffiliated stockholders of the Company. The
Board of Directors determined that the cost and expense to obtain
such report, opinion or appraisal were not warranted in light of
(i) the expected Cash Consideration to be paid to the Fractional
Stockholders pursuant to the Reverse Stock Split, (ii) the
relatively high cost and expense required to obtain such report,
opinion or appraisal when compared to the low value of the
Company's net assets, and (iii) the right of each of the
Fractional Stockholders to dissent from the Reverse Stock Split
under the Delaware General Business Law.
PLANS FOR THE COMPANY AFTER THE REVERSE STOCK SPLIT
Except as indicated in this Proxy Statement after the
consummation of the Reverse Stock Split, the Company does not
have any present plans or proposals which relate to or would
result in an extraordinary corporate transaction, such as a
merger, reorganization, or liquidation, involving the Company or
any of its subsidiaries; a sale or transfer of a material amount
of assets of the Company or any of its subsidiaries; any change
in the present Board of Directors or management of the Company
including, but not limited to, any plan or proposal to change the
number or term of directors, to fill any existing vacancy on the
Board of Directors or to change any material term of the
employment contract of any executive officer; or any material
change in the present dividend rate or policy or indebtedness or
capitalization of the Company. Upon consummation of the Reverse
Stock Split, the assets, business, and operations of the Company
will be continued substantially as they are currently being
conducted. The Company does expect to sell one of its existing
notes in order to fund the cost and expenses of the Reverse Stock
Split. See "Special Factors - Source and Amount of Funds for and
Expenses of the Reverse Stock Split."
CERTAIN EFFECTS OF THE REVERSE STOCK SPLIT
General Effects
- ---------------
If the Reverse Stock Split is approved by the vote of a
majority of the outstanding shares of Common Stock, the number of
authorized shares of Common Stock will be decreased from
5,000,000 to 5,000. The interest of shareholders of New Common
Stock in terms of both dollar amounts and percentages will
change. Each share of Common Stock owned by the Fractional
Stockholders which would upon conversion represent a fractional
share of New Common Stock will be automatically converted into
the right to receive from the Company, in lieu of fractional
shares of New Common Stock, cash in the amount of 45 cents for
each share of Common Stock. The Fractional Stockholders owning
less than 1,000 shares of Common Stock will cease to be
stockholders or to have any equity interest in the Company and,
therefore, will not share in its future earnings and growth, if
any, and will not have any right to vote on any corporate matter.
Termination of Exchange Act Registration
- ----------------------------------------
The shares of Common Stock are currently registered under
the Exchange Act. Such registration may be terminated upon
application of the Company to the SEC if the Company has fewer
than 300 record holders of the shares or fewer than 500
stockholders and less than $10,000,000 in assets as of the end of
three consecutive fiscal years. The Company currently intends to
make an application for termination of registration of the shares
of New Common Stock as promptly as possible after filing the
Articles of Amendment. Termination of registration of the shares
of New Common Stock under the Exchange Act would substantially
reduce the information required to be furnished by the Company to
its stockholders and to the SEC and would make certain provisions
of the Exchange Act, such as the short-swing profit recovery
provisions of Section 16(b) of the Exchange Act, the requirement
of furnishing a proxy or information statement in connection with
stockholder meetings pursuant to Section 14(a) of the Exchange
Act, and the requirements of Rule 13e-3 promulgated by the SEC
under the Exchange Act with respect to "going private"
transactions, no longer applicable to the Company. Termination
of the registration of the shares of the New Common Stock would
also deprive "affiliates" of the Company and persons holding
"restricted securities" of the Company of the ability to dispose
of such securities pursuant to Rule 144 promulgated under the
Securities Act of 1933, as amended. Such termination of
registration shall cause all shares of New Common Stock to be
restricted.
Effect on Market for Shares
- ---------------------------
If the Reverse Stock Split is approved and, as contemplated,
the shares of New Common Stock are deregistered under the
Exchange Act, there will not be any market for the Company's
shares of New Common Stock.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The receipt by each Fractional Stockholder of cash in lieu
of fractional shares of New Common Stock pursuant to the Reverse
Stock Split will be a taxable transaction for federal income tax
purposes under the Internal Revenue Code of 1986, as amended (the
"Code").
Under Section 302 of the Code, a Fractional Stockholder will
recognize gain or loss upon receiving cash in lieu of fractional
shares of New Common Stock if (i) the Reverse Stock Split results
in a "complete redemption" of all of the Fractional Stockholder's
shares of Common Stock, (ii) the receipt of cash is
"substantially disproportionate" with respect to the Fractional
Stockholder, or (iii) the receipt of cash is "not essentially
equivalent to a dividend" with respect to the Fractional
Stockholder. These three tests are applied by taking into
account not only shares that a Fractional Stockholder actually
owns, but also shares that a Fractional Stockholder
constructively owns pursuant to Section 318 of the Code,
described below.
If any one of these three tests is satisfied, the Fractional
Stockholder will recognize gain or loss equal to the difference
between the amount of cash received by the Fractional Stockholder
pursuant to the Reverse Stock Split and the tax basis in the
existing shares of Common Stock held by the Fractional
Stockholder. Provided that the shares of Common Stock constitute
a capital asset in the hands of the Fractional Stockholder, this
gain or loss will be long-term capital gain or loss if the shares
of Common Stock are held for more than one year and will be
short-term capital gain or loss if the shares of Common Stock are
held for one year or less.
Pursuant to the constructive ownership rules of Section 318
of the Code, a stockholder is deemed to constructively own shares
owned by certain related individuals and entities in addition to
shares actually owned by the stockholder. For instance, an
individual stockholder is considered to own shares owned by or
for his or her spouse and his or her children, grandchildren, and
parents ("family attribution"). A stockholder is also considered
to own a proportionate number of shares owned by estates or
certain trusts in which the stockholder has a beneficial
interest, by partnerships in which the stockholder is a partner,
and by corporations in which 50 percent or more of the value of
the stock is owned directly or indirectly by or for such
stockholder. Similarly, shares directly or indirectly owned by
beneficiaries of estates of certain trusts, by partners of
partnerships and, under certain circumstances, by stockholders of
corporations may be considered owned by these entities ("entity
attribution"). A stockholder is also deemed to own shares which
the stockholder has the right to acquire by exercise of an
option.
The receipt of cash by a Fractional Stockholder pursuant to
the Reverse Stock Split will result in a "complete redemption" of
all of the Fractional Stockholder's shares of Common Stock, so
long as the Fractional Stockholder does not receive nor
constructively own any shares of New Common Stock as a result of
the Reverse Stock Split. However, a Fractional Stockholder who
does not receive any shares of New Common Stock as a result of
the Reverse Stock Split may qualify for gain or loss treatment
under the "complete redemption" test even though such Fractional
Stockholder constructively owns shares of New Common Stock
provided that (i) the Fractional Stockholder constructively owns
shares of New Common Stock as a result of the family attribution
rules (or, in some cases, as a result of a combination of the
family and entity attribution rules), and (ii) the Fractional
Stockholder qualifies for a waiver of the family attribution
rules (such waiver being subject to several conditions, one of
which is that the Fractional Stockholder has no interest in the
Company immediately after the Reverse Stock Split (including as
an officer, director, or employee), other than an interest as a
creditor).
It is anticipated that Fractional Stockholders who do not
receive any shares of New Common Stock as a result of the Reverse
Stock Split will qualify for capital gain or loss treatment as a
result of satisfying the "complete redemption" requirements.
However, if the constructive ownership rules prevent compliance
with these requirements, a Fractional Stockholder may
nevertheless qualify for capital gain or loss treatment by
satisfying either the "substantially disproportionate" or the
"not essentially equivalent to a dividend" requirements. In
general, the receipt of cash pursuant to the Reverse Stock Split
will be "substantially disproportionate" with respect to the
Fractional Stockholder if the percentage of shares of New Common
Stock constructively owned by the Fractional Stockholder
immediately after the Reverse Stock Split is less than 80 percent
of the percentage of existing shares of Common Stock actually and
constructively owned by the Fractional Stockholder immediately
before the Reverse Stock Split. Alternatively, the receipt of
cash pursuant to the Reverse Stock Split will, in general, be
"not essentially equivalent to a dividend" if the Reverse Stock
Split results in a "meaningful reduction" in the Fractional
Stockholder's proportionate interest in the Company.
If none of the three tests described above is satisfied, a
Fractional Stockholder who does not receive any shares of New
Common Stock as a result of the Reverse Stock Split will be
treated under the distribution rules of Section 301 of the Code.
Generally, pursuant to Section 301 of the Code, a distribution of
cash by a corporation to its shareholders is considered a taxable
dividend in an amount equal to the entire amount of cash received
by such shareholder to the extent of the earnings and profits,
both current and accumulated, of such corporation. The Company
does not have any current or accumulated earnings and profits.
Accordingly, a Fractional Stockholder who does not qualify for
capital gain or loss treatment under the above described Section
302 rules will nonetheless qualify for capital gain or loss
treatment under the distribution rules of Section 301.
The receipt of shares of New Common Stock in the Reverse
Stock Split by stockholders of the Company who are not Fractional
Stockholders will be a non-taxable transaction for federal income
tax purposes. However, it is anticipated that a Fractional
Stockholder who receives any shares of New Common Stock as a
result of the Reverse Stock Split will be treated as having
received a capital gain or loss in an amount equal to the
difference between the amount of cash received by the Fractional
Stockholder pursuant to the Reverse Stock Split and the tax basis
in the fractional shares of Common Stock held by the Fractional
Stockholder for which cash was received by the Fractional
Stockholder in lieu of New Common Stock. Consequently, a
stockholder of the Company receiving only shares of New Common
Stock will not recognize gain or loss, or dividend income, as a
result of the Reverse Stock Split with respect to the shares of
New Common Stock received. In addition, the basis and holding
period attributed to the shares of New Common Stock of the
stockholders who receive only New Common Stock and the Fractional
Stockholders who receive shares of New Common Stock as a result
of the Reverse Stock Split will carry over as the basis and
holding period of such stockholder's shares of New Common Stock.
Various legislative proposals have been introduced in
Congress that would reduce the rate of federal income taxation of
certain capital gains. Such legislation, if enacted, might apply
only to gain realized on transactions occurring after a date
specified in the legislation. It cannot be predicted whether any
such legislation ultimately will be enacted and, if enacted, what
its effective date will be.
THE FOREGOING IS ONLY A GENERAL DESCRIPTION OF CERTAIN OF
THE FEDERAL INCOME TAX CONSEQUENCES OF THE REVERSE STOCK SPLIT TO
THE STOCKHOLDERS WITHOUT REFERENCE TO THE PARTICULAR FACTS AND
CIRCUMSTANCES OF ANY PARTICULAR STOCKHOLDER. EACH STOCKHOLDER IS
URGED TO CONSULT HIS OR HER OWN TAX ADVISOR TO DETERMINE THE
PARTICULAR TAX CONSEQUENCES TO SUCH STOCKHOLDER OF THE REVERSE
STOCK SPLIT (INCLUDING THE APPLICATION AND EFFECT OF STATE AND
LOCAL INCOME AND OTHER TAX LAWS).
SOURCE AND AMOUNT OF FUNDS FOR AND EXPENSES OF THE REVERSE STOCK
SPLIT
Estimated fees and expenses incurred or to be incurred by
the Company in connection with the Reverse Stock Split are
approximately as follows:
Approximate
Item Amount
- ----------------------------- -----------
Payment of Cash Consideration $108,180
Legal Fees 15,000
Accounting Fees 7,500
Cost of New Stock Certificates 1,000
Commission Filing Fees 125
Printing and Mailing Expenses 6,000
Miscellaneous Expenses 2,195
--------
Total $140,000
========
The Company has paid or will be responsible for paying all
of such expenses. It will pay such expenses (including the Cash
Consideration payments) from the proceeds generated by the sale
of one of the outstanding promissory notes payable to the
Company. It will not borrow any part of such funds to pay these
expenses.
THE REVERSE STOCK SPLIT
AMENDMENT OF RESTATED ARTICLES OF INCORPORATION TO EFFECT THE
REVERSE STOCK SPLIT
Pursuant to the terms of the Articles of Amendment, if
approved, the authorized shares of Common Stock will be reduced
from 5,000,000 to 5,000, each 1,000 shares of the Company's $.01
par value Common Stock then issued will be automatically
converted into one share of the Company's $10.00 par value New
Common Stock, and a cash payment of 45 cents per share for the
currently outstanding Common Stock will be made in lieu of the
issuance of any resulting fractional shares of the New Common
Stock to any stockholders who, after the Reverse Stock Split, own
a fractional share of New Common Stock. The form of the Articles
of Amendment is attached as Annex A to this Proxy Statement. If
the Reverse Stock Split is approved at the Special Meeting by the
holders of a majority of the currently issued and outstanding
Common Stock the Company expects to file the Articles of
Amendment to the Articles of Incorporation with the Secretary of
State of the State of Delaware on October __, 1997, immediately
following the Special Meeting, or as soon as practicable
thereafter (the "Effective Date").
EXCHANGE OF SHARES AND PAYMENT IN LIEU OF ISSUANCE OF FRACTIONAL
SHARES
Within 10 days after the Effective Date, the Company will
mail to the Fractional Stockholders a notice of the filing of the
Articles of Amendment (the "Notice of Filing") and a letter of
transmittal (the "Letter of Transmittal") containing instructions
with respect to the submission of shares of Common Stock to the
Company. Fractional Stockholders will be entitled to receive,
and the Company will be obligated to make payment of, cash in
lieu of fractional shares of New Common Stock only by
transmitting stock certificate(s) for shares of Common Stock to
the Company, together with the properly executed and completed
Letter of Transmittal and such evidence of ownership of such
shares as the Company may require.
VOTING; VOTE REQUIRED
The proposed Reverse Stock Split must be approved by a vote
of not less than a majority of the shares of Common Stock. Each
share of Common Stock is entitled to one vote on each matter
submitted to a vote at the Special Meeting. The Board of
Directors has been informed that the executive officers and
directors of the Company will vote in favor of that Reverse Stock
Split. There are no contracts, arrangements, understandings, or
relationships in connection with the Reverse Stock Split between
the Company (including its officers or its directors) and any
other person with respect to any securities of the Company.
THE NOTICE OF FILING AND THE LETTER OF TRANSMITTAL WILL BE
TRANSMITTED BY THE CORPORATION TO STOCKHOLDERS AT A DATE
SUBSEQUENT TO THE EFFECTIVE DATE. STOCKHOLDERS SHOULD NOT SEND
IN THEIR CERTIFICATES UNTIL THE NOTICE OF FILING AND LETTER OF
TRANSMITTAL ARE RECEIVED AND SHOULD SURRENDER THEIR CERTIFICATES
ONLY WITH SUCH LETTER OF TRANSMITTAL.
There will be no service charges payable by the Fractional
Stockholders in connection with the payment of cash in lieu of
the issuance of fractional shares of New Common Stock. These
costs will be borne by the Company.
DISSENTING STOCKHOLDERS' RIGHTS
Stockholders who do not vote in favor of the approval of the
Reverse Stock Split have the right, in lieu of the payment of the
Cash Consideration, to seek payment in cash of the fair value of
their shares of Common Stock by strictly complying with the
requirements of Section 262 of the Delaware General Corporation
Law (the "DGCL"). Failure of a stockholder to strictly adhere to
the requirements of Section 262 of the DGCL may result in the
loss of such stockholder's dissenter's rights.
If a holder of Common Stock elects to exercise his right
under Section 262, he must satisfy each of the following
conditions:
(i) he must file with the Company a written demand for
appraisal of his shares at any time before the taking of the vote
with respect to the Reverse Stock Split, which demand must
reasonably inform the Company of the identity of the stockholder
and that the stockholder intends thereby to demand the appraisal
of his shares; and
(ii) he must not vote in favor of the Reverse Stock
Split (a failure to vote or an abstention will satisfy this
condition, but delivering a proxy in favor of or voting in favor
of the Reverse Stock Split will constitute a waiver of such
stockholder's right of appraisal and will nullify any previously
filed written demand for appraisal).
Neither voting against the Reverse Stock Split nor
delivering a proxy to that effect nor failure to vote for the
Reverse Stock Split will constitute a written demand for
appraisal within the meaning of Section 262.
All written demands for appraisal should be directed to
Daniel A. Poganski, Secretary, No. 1 Commercial Drive, Florida,
New York 10921 and should be executed by, or on behalf of, the
holder of record. To be effective, the demand must be made by or
for the registered stockholder, fully and correctly, in such
stockholder's name as it appears on his stock certificates and
cannot be made by the beneficial owner if he does not also hold
the shares of record. The beneficial owner must in such cases
have the registered owner submit the required demand in respect
of such shares.
If Common Stock is owned of record in a fiduciary capacity,
such as by a trustee, guardian or custodian, execution of a
demand for appraisal should be made in such capacity, and if the
stock is owned of record by more than one person, as in a joint
tenancy or tenancy in common, such demand should be executed by
or for all joint owners. An authorized agent, including one or
more joint owners, may execute the demand for appraisal for a
stockholder of record; however, the agent must identify the
record owner or owners and expressly disclose the fact that, in
executing the demand, it is acting as agent for the record owner.
A record owner, such as a broker, who holds Common Stock as a
nominee for others, may exercise his right of appraisal with
respect to the shares held for one or more beneficial owners,
while not exercising such right for other beneficial owners. In
such case, the written demand should set forth the number of
shares as to which appraisal is sought. When no number of shares
is expressly mentioned, the demand will be presumed to cover all
shares held in the name of such record owner.
If the Reverse Stock Split is approved, within ten days
after the effective date of the Reverse Stock Split, the Company
will notify each stockholder who has complied with the foregoing
provisions of the date the Reverse Stock Split has become
effective. Within 120 days after the effective date of the
Reverse Stock Split, the Company or any stockholder who has
complied with the foregoing provisions may file a petition in the
Delaware Court of Chancery demanding a determination of the fair
value of the shares of Common Stock of all such stockholders.
Since the Company at this time has not decided whether it will
file such a petition, any stockholder who desires that such a
petition be filed is advised to file same on a timely basis
unless he has received notice from the office of the Register in
Chancery that such a petition has been filed by the Company or
another stockholder.
If a petition for appraisal described above is duly filed by
a stockholder and a copy thereof is delivered to the Company, the
Company will then be obligated within twenty days to provide the
office of the Register in Chancery with a duly verified list
containing the names and addresses of all stockholders who have
demanded payment for their shares and with whom agreements as to
the value of their shares have not been reached by the Company.
Within 120 days after the effective date of the Reverse Stock
Split, any stockholder who has complied with the foregoing
provisions shall, upon written request, be entitled to receive
from the Company a statement setting forth the aggregate number
of shares not voted in favor of the Reverse Stock Split and with
respect to which demands for appraisal have been received and the
aggregate number of holders of such shares. The Court may
require those stockholders who demanded payment for their shares
to submit their certificates of stock to the Register in Chancery
for notation thereon of the pendency of the appraisal
proceedings; and if any stockholder fails to comply with such
direction, the Court may dismiss the proceedings as to such
stockholder.
After the hearing on such petition, the Court will determine
the stockholders who have complied with the foregoing provisions
and who have thereby become entitled to appraisal rights and will
appraise the shares of Common Stock, determining the fair value
exclusive of any element of value arising from the accomplishment
or expectation of value arising from the accomplishment or
expectation of the Reverse Stock Split. When the value is so
determined, the Court will direct the Company to pay such value,
with a "fair rate" of interest thereon, if any, as the Court
determines, to the stockholders entitled to receive same upon
surrender to the Company by such stockholder of the certificates
representing such shares of Common Stock.
The costs of the proceeding may be determined by the Court
and taxed upon the parties as the Court deems equitable in the
circumstances. Upon application of a stockholder, the Court may
order all or a portion of the expenses incurred by such
stockholder in connection with the appraisal proceeding,
including, without limitation, reasonable attorney's fees and the
fees and expenses of experts, to be charged pro rata against the
value of all the shares of Common Stock entitled to an appraisal.
Notwithstanding the foregoing, at any time within 60 days
after the effective date of the Reverse Stock Split, any
stockholder has the right to withdraw his demand for appraisal
and to accept the terms offered upon the Reverse Stock Split. In
addition, any stockholder who receives the written approval of
the Company may withdraw his demand for appraisal and accept the
terms offered upon the Reverse Stock Split more than 60 days
after the effective date of the Reverse Stock Split.
<PAGE>
Any stockholder who has demanded his appraisal rights as
provided herein will thereafter neither be entitled to vote his
shares of Common Stock for any purpose nor be entitled to the
payment of dividends or other distributions on the Common Stock
(except dividends or other distributions payable to stockholders
of record at a date which is prior to the effective date of the
Reverse Stock Split); provided, however, that if no petition for
an appraisal is filed within the time provided, or if such
stockholder delivers to the Company a written withdrawal of his
demand for an appraisal and an acceptance of the Reverse Stock
Split, either within sixty days after the effective date of the
Reverse Stock Split or thereafter with the written approval of
the Company, then the right of such stockholder to appraisal will
cease.
The foregoing does not purport to be a complete statement of
the provisions of Section 262 of the DGCL and is qualified in its
entirety by reference to such sections, which are reproduced in
full as Annex B to this Proxy Statement.
THE PROVISIONS OF SECTION 262 OF THE DGCL ARE COMPLEX AND
TECHNICAL IN NATURE. STOCKHOLDERS DESIRING TO EXERCISE
DISSENTERS' RIGHTS MAY WISH TO CONSULT COUNSEL, SINCE THE FAILURE
TO COMPLY STRICTLY WITH THESE PROVISIONS WILL RESULT IN THE LOSS
OF THEIR DISSENTERS' RIGHTS.
MARKET PRICES FOR SHARES OF COMMON STOCK; DIVIDENDS
COMMON STOCK INFORMATION
The Company's Common Stock is traded in the over-the-counter
market. The following table sets forth, for the periods
indicated, the range of high and low respective bids for the
Company's Common Stock. These quotes reflect inter-dealer prices
without retail markup, markdown or commission and may not
necessarily represent actual transactions. Although the Company's
Common Stock has been listed on the NQB Pink Sheets since April
1992, the Company's market makers have not published any quotes
in the Pink Sheets. The Company's Common Stock is also listed on
NASD's OTC Bulletin Board, but is not active.
Quarter Ended Low High
September 25, 1994 $.50 $ .9375
December 25, 1994 $.50 $ .9375
March 26, 1995 $.50 $ .875
June 25, 1995 $.50 $ .9375
September 24, 1995 $.50 $1.00
December 31, 1995 $.125 $.375
March 31, 1996 $.125 $.375
June 30, 1996 $.125 $.375
September 29, 1996 $.125 $.375
December 29, 1996 $.125 $.25
March 30, 1997 $.125 $.25
June 29, 1997 $.125 $.25
As of July 31, 1997, the aggregate number of holders of
record of the Company's Common Stock was approximately 338.
DIVIDENDS AND DISTRIBUTIONS
In May, 1995, the Company paid its stockholders of record on
May 22, 1995, a return of capital distribution of $.30 per share.
In July of 1995, the Company paid its stockholders of record on
July 7, 1995, a return of capital distribution of $.20 per share.
On November 13, 1995, the Board of Directors declared a return of
capital dividend in an amount of $.20 per share of common stock,
payable to shareholders of record on November 24, 1995, which was
paid by the Company on November 28, 1995. On January 26, 1996,
the Company declared a $.30 per share return of capital
distribution, payable to shareholders of record as of February
12, 1996. The distribution was paid on February 16, 1996. On
January 31, 1997, the Company declared a return of capital
distribution at the rate of $.35 per share. Such distribution
was paid on February 20, 1997 to shareholders of record as of
February 13, 1997.
DIRECTORS AND EXECUTIVE OFFICERS
As of July 31, 1997 the directors and officers of the
Company were:
Term to
Name Age Position(s) Expire
- ----- ----- ----------- -------
Lewis E. Topper 47 Chairman of the Board,
Chief Executive Officer,
President, Chief Financial
Officer, Chief Accounting
Officer, Treasurer and
Director 1999
Daniel A. Poganski 36 Secretary, Assistant Vice
President and Director 1998
Lewis E. Topper has been the Chairman of the Board, Chief
Executive Officer, President, Chief Financial Officer, Chief
Accounting Officer, Treasurer and a director of the Company since
its inception in February 1990. He has been the President of IFS,
currently a wholly-owned subsidiary of the Company, since
December 1985. He is a past President of the Wendy's New York
Advertising Cooperative. He has been a Certified Public
Accountant since 1977 and is a graduate of Baruch College. Mr.
Topper is also the Chairman of the Board, President, Chief
Executive Officer, Treasurer and Director of FFO. IFS provides
management services to FFO. Mr. Topper receives no compensation
from FFO. Mr. Topper is also Chairman of the Board or Secretary
of 30 companies that operate 148 Wendy's restaurants. Mr. Topper
holds a minority stockholder interest in each of these companies
and is a co-franchise owner under their respective franchise
agreements. Mr. Topper also receives consulting fees from each of
these companies. These management fees were assigned to IFS by
Mr. Topper until November 1, 1995, on which date his employment
agreement was amended. In the future, Mr. Topper may become
involved with additional Wendy's operations.
Daniel A. Poganski has been the Assistant Vice President and
Secretary of the Company since its inception in February 1990,
and served as a director of the Company from its inception until
November 26, 1990. On December 18, 1991. Mr. Poganski was again
elected to the Board of Directors. Mr. Poganski joined IFS in
1989 and has been the Secretary and Controller of IFS since April
1989. In January of 1997, in connection with the Company's
reorganization of its administrative offices, Mr. Poganski
resigned as a full-time employee of the Company. He retained his
positions as officer and director and now provides virtually all
management accounting and administrative services through his own
service company, A & B Accounting Services, at an annual fee to
the Company of $48,000. Mr. Poganski has also served as the
Controller of FFO since 1988 and as the Secretary of FFO since
October 1989. He is a graduate of Moorhead State University and
is a Certified Public Accountant.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The following table sets forth certain information regarding
ownership of the Company's Common Stock as of July 31, 1997 by
each person who is known by the Company to beneficially own more
than 5% of its Common Stock.
Amount of Common Stock Percent
Name and Address Beneficially Owned of Class
- ---------------- ---------------------- --------
Lewis E. Topper 958,914 42.90%
Fast Food Systems. Inc.
42-40 Bell Boulevard
Bayside, New York 11361
The following table sets forth certain information regarding
beneficial ownership of the Company's Common Stock as of July 31,
1997 by each director of the Company and the directors and
executive officers as a group:
Amount of Common Stock Percent
Name and Address Beneficially Owned of Class
- ---------------- ---------------------- ---------
Lewis E. Topper 958,914(1) 42.90%
Fast Food Systems. Inc.
42-40 Bell Boulevard
Bayside, New York 11361
Daniel A. Poganski 10,000 0.45%
A & B Accounting Services
No. 1 Commercial Drive
Florida, NY 10921
All Executive Officers
and Directors as a Group
(2 Persons) 968,914 (1) 43.34%
- -----------------------------------------------
(1) Includes shares issuable upon exercise of vested options
issued under the Plan to purchase 21,000 shares of Common Stock.
PRO FORMA CONSOLIDATED FINANCIAL INFORMATION OF THE COMPANY
The following pro forma consolidated financial information
of the Company is based on and should be read in conjunction with
the consolidated financial statements of the Company as of and
for the year ended September 29, 1996 and as of and for the nine
months ended June 29, 1997, both incorporated by reference (from
the Company's 1996 Form 10-KSB and the June 29, 1997 Form 10-QSB,
respectively) in this Proxy Statement. (The consolidated
financial statements of the Company as of and for the nine months
ended June 29, 1997 are also included elsewhere in this Proxy
Statement for the convenience of the reader). The pro forma
balance sheets as of September 29, 1996 and June 29, 1997 give
effect to the going-private transaction, the reverse stock split
and the sale of a note receivable as if they had been consummated
at each balance sheet date, respectively. The pro forma
consolidated statements of operations for the year ended
September 29, 1996 and for the nine months ended June 29, 1997
give effect to the going private transaction and the reverse
stock split as if they had been consummated on the first day of
each period and also reflect (i) the reduction in interest income
attributable to the assumed sale of the note receivable at the
beginning of the period; and (ii) the interest income that would
have been earned had the excess of the proceeds from the sale of
the note receivable over the cost of the going-private
transaction been invested at six percent simple interest for the
period.
The pro forma adjustments are based upon available
information and certain assumptions that management believes are
reasonable in the circumstances. The pro forma consolidated
financial information purports neither to represent what the
Company's results of operations would actually have been if the
Reverse Stock Split and going private transaction had occurred on
September 25, 1995 and September 30, 1996, respectively, nor to
project the Company's financial position or results of operations
for any future date or period.
Fast Food Systems, Inc.and Subsidiaries
Pro-Forma Consolidated Balance Sheet
September 29, September 29,
1996 Pro-Forma 1996
Historical Adjustments Pro-Forma
------------- ----------- -------------
ASSETS
Current assets:
Cash $ 59,162 $ 199,607 (1) $ 258,769
Notes receivable 149,283 ( 26,709)(2) 122,574
Due from managed entities 29,589 - 29,589
Other current assets 29,306 - 29,306
----------- ----------- -----------
Total current assets 267,340 172,898 440,238
----------- ----------- -----------
Property and equipment, net 46,456 - 46,456
----------- ----------- -----------
Other assets:
Notes receivable, less current
maturities 1,273,333 ( 312,898)(2) 960,435
Interests in managed entities 230,084 - 230,084
Security deposits 1,242 - 1,242
----------- ----------- -----------
Total other assets 1,504,659 ( 312,898) 1,191,761
----------- ----------- -----------
TOTAL ASSETS $ 1,818,455 $( 140,000) $ 1,678,455
=========== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 37,548 $ - $ 37,548
----------- ----------- -----------
Total liabilities 37,548 - 37,548
----------- ----------- -----------
Stockholders' equity:
Common stock 22,144 ( 2,404)(3) 19,740
Additional paid-in capital 7,306,481 ( 137,596)(4) 7,168,885
Accumulated deficit (5,547,718) - (5,547,718)
----------- ----------- -----------
Total stockholders' equity 1,780,907 ( 140,000) 1,640,907
----------- ----------- -----------
Total liabilities and stockholders'
equity $ 1,818,455 $( 140,000) $ 1,678,455
=========== =========== ===========
( 240,400)(5)
Shares outstanding 2,214,400 (1,972,026)(6) 1,974
=========== =========== ===========
Book value per share $ .80 $ 831.26*
=========== ===========
*If the effect of the reverse stock split is ignored in computing book value per
share, the 1,974,000 shares remaining after the buy-back would each have a book
value per share of $.83. Such per share value does not reflect the effect of the
$.35 per share return of capital distribution paid on February 20, 1997.
Fast Food Systems, Inc. and Subsidiaries
Pro-Forma Consolidated Balance Sheet
June 29, June 29,
1997 Pro-Forma 1997
Historical Adjustments Pro-Forma
---------- ----------- ----------
ASSETS
Current assets:
Cash $ 39,776 $ 179,827 (1) $ 219,603
Notes receivable 79,554 ( 28,780)(2) 50,774
Due from managed entities 28,606 - 28,606
Other current assets 27,432 - 27,432
----------- ----------- -----------
Total current assets 175,368 151,047 326,415
----------- ----------- -----------
Property and equipment, net 37,889 - 37,889
----------- ----------- -----------
Other assets:
Notes receivable, less current
maturities 629,424 ( 291,047)(2) 338,377
Interests in managed entities 171,304 - 171,304
Security deposits 1,242 - 1,242
----------- ----------- -----------
Total other assets 801,970 ( 291,047) 510,923
----------- ----------- -----------
TOTAL ASSETS $ 1,015,227 $( 140,000) $ 875,227
=========== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and
accrued expenses $ 26,665 $ - $ 26,665
----------- ----------- -----------
Total liabilities 26,665 - 26,665
----------- ----------- -----------
Stockholders' equity:
Common stock 22,144 ( 2,404)(3) 19,740
Additional paid-in capital 6,531,441 ( 137,596)(4) 6,393,845
Accumulated deficit (5,565,023) - (5,565,023)
----------- ----------- -----------
Total stockholders' equity 988,562 ( 140,000) 848,562
----------- ----------- -----------
Total liabilities and stockholders'
equity $ 1,015,227 $( 140,000) $ 875,227
=========== =========== ===========
( 240,400)(5)
Shares outstanding 2,214,400 (1,972,026)(6) 1,974
=========== =========== ===========
Book value per share $ .45 $ 429.87*
=========== ===========
*If the effect of the reverse stock split is ignored in computing book value per
share, the 1,974,000 shares remaining after the buy-back would each have a book
value per share of $.43.
Fast Food Systems, Inc. and Subsidiaries
Pro-Forma Consolidated Statement of Operations
For the Year Ended September 29, 1996
Year Ended Year Ended
September 29, September 29,
1996 Pro-Forma 1996
Historical Adjustments Pro-Forma
------------ ----------- ------------
Continuing operations:
Revenues:
Management fees $ 167,733 $ - $ 167,733
Interest income 181,645 ( 35,294)(1) 158,327
11,976 (2)
Other income 15,079 - 15,079
----------- ----------- -----------
364,457 ( 23,318) 341,139
----------- ----------- -----------
Expenses:
General and administrative
expenses 572,371 - 572,371
Interest expenses 5,056 - 5,056
Other expenses 33,782 - 33,782
----------- ----------- -----------
611,209 - 611,209
----------- ----------- -----------
Loss from continuing operations $( 246,752) $( 23,318) $( 270,070)
=========== =========== ===========
Weighted average number of
shares outstanding 2,214,400 (2,212,426)* 1,974
=========== =========== ===========
Loss from continuing
operations per share $ (.11) $ (136.81)
=========== ===========
*Reflects the effect of the 1,000 to 1 reverse stock split and the purchase of
the resulting fractional shares in the going-private transaction.
Fast Food Systems, Inc. and Subsidiaries
Pro-Forma Consolidated Statement of Operations
Nine Months Ended June 29, 1997
Nine Months Nine Months
Ended Ended
June 29, 1997 Pro-Forma June 29, 1997
Historical Adjustments Pro-Forma
------------- ----------- -------------
Continuing operations:
Revenues:
Management fees $ 126,682 $ - $ 126,682
Interest income 80,988 ( 24,824)(1) 64,256
8,092 (2)
----------- ----------- -----------
207,670 ( 16,732) 190,938
----------- ----------- -----------
Expenses:
General and administrative
expenses 197,598 - 197,598
Loss attributable to equity
investments 27,377 - 27,377
----------- ----------- -----------
224,975 - 224,975
----------- ----------- -----------
Net loss $( 17,305) $( 16,732) $( 34,037)
=========== =========== ===========
Weighted average number of
shares outstanding 2,214,400 (2,212,426)* 1,974
=========== =========== ===========
Net loss per share $ (.01) $ (17.24)
=========== ===========
*Reflects the effect of the 1,000 to 1 reverse stock split and the purchase of
the resulting fractional shares in the going-private transaction.
NOTES TO PRO-FORMA FINANCIAL STATEMENTS
Notes to Pro-Forma Consolidated Balance Sheets
- ----------------------------------------------
(1) Reflects the excess of the proveeds from the sale of the
Wendtrip note receivable at September 29, 1996 and June 29,
1997 over the aggregate cost of the going-proviate
transaction. Such costs are estimated as follows:
Payment of cash consideration $108,180
Legal fees 15,000
Accounting fees 7,500
Printing and mailing expenses 6,000
Cost of new stock certificates 1,000
Commission filing fees 125
Miscellaneous expenses 2,195
--------
Total: $140,000
========
(2) Reflects the sale of the Wentrip note receivable, including
the current and non-current maturities at September 29, 1996
and June 29, 1997.
(3) Reflects the reduction in the aggregate par value of common
stock from 2,214,400 shares of $.01 par value to an
estimated 1,974 shares of $10.00 par value after the going-private
transaction and the reverse stock split of 1,000 to 1.
(4) Reflects the reduction in additional paid-in capital after
subtracting the reduction in aggregate par value from the
total cost of the going-private transaction.
(5) Reflects the equivalent number of pre-reverse split shares
of common stock bought back by the Company in the going-private
transaction.
(6) Reflects the effect of the 1,000 to 1 reverse stock split,
reducing the 1,974,000 shares which did not result in
fractional shares after such reverse split and which
accordingly were not purchased by the Company in accordance
with the terms of the going-private transaction.
Notes to Pro-Forma Consolidated Statements of Operations
- --------------------------------------------------------
(1) Reflects the reduction in interest income attributable to
the assumed sale of the Wendtrip note at the beginning of
the period.
(2) Reflects the interest income that would have been earned had
the excess of the proceeds from the sale of the Wendtrip
note over the cost of the going-private transaction been
invested at six percent simple interest for the period.
INDEPENDENT PUBLIC ACCOUNTANTS
The consolidated financial statements included in the
Company's Annual Report on Form 10-KSB for the fiscal year ended
September 29, 1996 (the "1996 10-KSB"), incorporated by reference
in this Proxy Statement, have been audited by Eric L. Weston,
C.P.A., independent public accountant, as stated in his report
with respect thereto. It is expected that Mr. Weston will be
present at the Special Meeting, to respond to appropriate
questions of stockholders of the Company.
HISTORICAL CONSOLIDATED FINANCIAL INFORMATION OF THE COMPANY
The Company hereby incorporates by reference the financial
information contained in Part II, Item 7, of the 1996 10-KSB, the
report of the independent accountants thereon contained in Part
II, Item 7, of the 1996 10-KSB, and Management's Discussion and
Analysis of Financial Condition and Results of Operations
contained in Part II, Item 6 of the 1996 10-KSB.
The Company hereby incorporates by reference, the financial
information contained in Part I, Item 1, of the Company's
Quarterly Report on Form 10-QSB for the quarter ended June 29,
1997 (the "June 1997 10-QSB"), and Management's Discussion and
Analysis of Financial Condition and Results of Operations
contained in Part 1, Item 2, of the June 1997 10-QSB.
For the convenience of the reader the Company's condensed
consolidated balance sheet as of June 29, 1997 and the Company's
condensed consolidated statement of operations and cash flows for
the nine months ended June 29, 1997 and June 30, 1996 and the
notes thereto included in the June 1997 10-QSB are presented on
the following pages.
FAST FOOD SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
JUNE 29, 1997
Assets
------
Current assets:
Cash $ 39,776
Notes receivable 79,554
Due from managed entities 28,606
Other current assets 27,432
-----------
Total current assets 175,368
-----------
Property and equipment, net 37,889
-----------
Other assets:
Notes receivable, less current maturities 629,424
Interests in managed entities 171,304
Security deposits 1,242
-----------
Total other assets 801,970
-----------
Total assets $ 1,015,227
===========
Liabilities and Shareholders' Equity
------------------------------------
Current liabilities:
Accounts payable and accrued expenses $ 26,665
-----------
Total liabilities 26,665
-----------
Shareholders' equity:
Common stock 22,144
Additional paid-in capital 6,531,441
Accumulated deficit (5,565,023)
-----------
Total shareholders' equity 988,562
-----------
Total liabilities and shareholders' equity $ 1,015,227
===========
FAST FOOD SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
NINE MONTHS ENDED JUNE 30, 1997 AND JUNE 30, 1996
1997 1996
---------- ----------
Continuing operations:
Revenues:
Management fees $ 126,682 $ 123,240
Interest income 80,988 146,276
Consulting income - 13,575
---------- ----------
207,670 283,091
---------- ----------
Expenses:
General and administrative expenses 197,598 515,831
Interest expense - 2,642
Loss attributable to equity investments 27,377 23,610
---------- ----------
224,975 542,083
---------- ----------
Loss from continuing operations ( 17,305) (258,992)
Loss from discontinued operations,
including loss on sale of assets
of $40,351 - ( 95,146)
---------- ----------
Net loss $ ( 17,305) $ (354,138)
========== ==========
Per share data:
Loss from continuing operations $ (.01) $ (.12)
Loss from discontinued operations
including loss on sale of assets
of $(.02) - (.04)
---------- ----------
Net loss $ (.01) $ ( .16)
========== ==========
FAST FOOD SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED JUNE 29, 1997 AND JUNE 30, 1996
1997 1996
----------- ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ ( 17,305) $ ( 354,138)
----------- ------------
Adjustments to reconcile net loss to
net cash provided (required) by
operating activities:
Depreciation and amortization 14,058 16,814
Deferred credits applied - ( 76,812)
Net loss on asset dispositions - 40,351
Loss attributable to equity investments 27,377 23,610
Change in due to/from managed entities 983 ( 147,458)
Decrease in inventory - 31,167
Increase (decrease) in other current
assets 1,874 ( 12,045)
Decrease in accounts payable, accrued
expenses and other liabilities ( 10,883) ( 729,975)
----------- -----------
Total adjustments 33,409 ( 854,348)
----------- -----------
Net cash provided (required) by
operating activities 16,104 (1,208,486)
----------- -----------
Cash flows from investing activities:
Proceeds of asset dispositions - 1,626,633
Acquisition of tangible assets ( 5,491) ( 3,910)
Collections on notes receivable 713,638 563,513
Distributions from managed entities 31,403 76,403
Cash paid on lease termination - ( 18,000)
Increase in security deposits and other - ( 23,900)
----------- -----------
Net cash provided by investing activities 739,550 2,220,739
----------- -----------
Cash flows from financing activities:
Return of capital distributions paid ( 775,040) (1,107,200)
----------- -----------
Net decrease in cash ( 19,386) ( 94,947)
Cash, beginning of period 59,162 150,945
----------- -----------
Cash, end of period $ 39,776 $ 55,998
=========== ===========
FAST FOOD SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED JUNE 29, 1997 AND JUNE 30, 1996
1997 1996
----------- -----------
Additional Cash Flow Information:
Interest expense paid during the period $ - $ 2,642
=========== ===========
Non-cash investing and financing activities:
Notes and escrow receivables arising
from asset sales $ - $ 1,833,566
=========== ===========
Net book value of property and equipment
sold $ - $ 2,854,929
=========== ===========
Capitalized value of sale/leaseback
debt extinguished $ - $ 395,570
=========== ===========
Security deposits and accrued interest
thereon surrendered to obtain assigned
lease extension $ - $ 21,760
=========== ===========
Other restaurant assets sold:
Inventory $ - $ 68,346
=========== ===========
Prepayments $ - $ 101,954
=========== ===========
Security deposits $ - $ 47,133
=========== ===========
Liabilities/credits assumed by purchasers:
Accrued expenses $ - $ 81,334
=========== ===========
Deferred credits $ - $ 108,559
=========== ===========
FAST FOOD SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. In the opinion of the Company, the accompanying unaudited
condensed consolidated financial statements contain all
adjustments (consisting of only normal recurring accruals)
necessary to present fairly the financial position as of
June 29, 1997, and the results of operations and cash flows
for the nine months ended June 29, 1997 and June 30, 1996,
respectively.
2. The condensed consolidated results of operations for the
nine months ended June 29, 1997, are not necessarily
indicative of the results to be expected for the full year.
3. On December 19, 1996, the Company received a return of
capital distribution from its managed investee, Fast Food
Operators, Inc.,(FFO). The distribution, at the rate of $.01
per share, aggregated $30,000 and was credited to the
Company's investment in FFO.
4. Notes receivable including their current maturities as of
June 29, 1997 consist of the following:
Total Current
Arising from the Sale of Receivable Maturities
------------------------ ---------- ----------
Wendway $ 389,151 $ 50,774
Wendtrip 319,827 28,780
---------- ----------
Totals: $ 708,978 $ 79,554
Less: Current maturities 79,554 ==========
----------
Long-term maturities $ 629,424
==========
In January of 1997, the Company arranged for the sale of one
of the two 10% notes received in the sale of the Wendway and
Wendwick Restaurants. The Wendwick note was sold to a third
party for a total of $274,845 consisting of its outstanding
principal balance of $272,573 plus accrued interest of
$2,272. The Company realized neither gain nor loss on the
sale, the proceeds of which were received on February 10,
1997.
In February of 1997, Wendnew prepaid the balance of its 10%
note at par. The payment totalled $359,426 including
accrued interest of $982. The prepayment resulted in
neither gain nor loss to the Company.
5. On January 31, 1997, the Company declared a return of
capital distribution at the rate of $.35 per share. Such
distribution aggregated $775,040 and was paid on February
20, 1997 to shareholders of record as of February 13, 1997.
6. The Company has determined to undertake a going-private
transaction and related proxy solicitation of shareholders.
See Management's Discussion and Analysis of Financial
Condition and Results of Operations - Liquidity and Capital
Resources.
7. Per share data is based upon the income (loss) for the
period divided by the weighted average number of common
shares outstanding during the period. The Company has no
significant potentially dilutive securities outstanding.
Accordingly, it is not anticipated that the Company's per
share data will be affected by application of Statement of
Financial Accounting Standards No. 128, "Earnings Per
Share," issued in February, 1997 and effective for annual
and interim periods ending after December 15, 1997.
ADDITIONAL INFORMATION
The Company is subject to the informational requirements of
the Exchange Act and in accordance therewith files reports, proxy
statements, and other information with the SEC. Such reports,
proxy statements, and other information can be inspected and
copied at the public reference facilities of the SEC at Room
1024, 450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C.
20549 and at the regional offices of the SEC located at 7 World
Trade Center, 13th Floor, Suite 1300, New York, New York 10048
and Suite 1400, Citicorp Center, 14th Floor, 500 West Madison
Street, Chicago, Illinois 60661. Copies of such materials can
also be obtained at prescribed rates by writing to the Public
Reference Section of the SEC at 450 Fifth Street, N.W., Judiciary
Plaza, Washington, D.C. 20549.
This Proxy Statement includes information required by the
SEC to be disclosed pursuant to Rule 13e-3 under the Exchange
Act, which governs so- called "going private" transactions by
certain issuers or their affiliates. In accordance with that
rule, the Company has filed with the SEC, under the Exchange Act,
a Rule 13E-3 Transaction Statement with respect to the Reverse
Stock Split. This Proxy Statement does not contain all of the
information set forth in the Rule 13E-3 Transaction Statement,
parts of which are omitted in accordance with the regulations of
the SEC. The Rule 13E-3 Transaction Statement, and any
amendments thereto, including exhibits filed as a part thereof,
will be available for inspection and copying at the offices of
the SEC as set forth above.
By the order of the Board of Directors,
LEWIS E. TOPPER
--------------------------
Lewis E. Topper, President,
Chairman of the Board and
Chief Executive Officer
September 3, 1997
ANNEX A
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
FAST FOOD SYSTEMS, INC.
FAST FOOD SYSTEMS, INC., a corporation organized and
existing under and by virtue of the General Corporation Law of
the State of Delaware (the "Company"), hereby certifies as
follows:
1. That at a meeting of the Board of Directors of the
Company, resolutions were duly adopted setting forth a
proposed amendment to the Certificate of Incorporation
of the Company, declaring said amendment to be
advisable and calling a meeting of the stockholders of
the Company for consideration thereof.
2. That thereafter, pursuant to resolution of the Board of
Directors of the Company, a special meeting of the
stockholders of the Company was duly called and held,
upon notice in accordance with Section 222 of the
General Corporation Law of the State of Delaware, at
which meeting the necessary number of shares as
required by statute were voted in favor of the
amendment.
3. Article FOURTH, Section I of the Certificate of
Incorporation is hereby deleted and the following
substituted therefor, for the purposes of (a)
increasing the par value per share of the authorized
shares of the Company, and (b) decreasing the issued
and unissued authorized shares of the Company:
FOURTH: I. The total number of shares of stock which
the Company shall have the authority to issue is 5,000
shares, par value $10.00 per share, of "Common Stock".
4. At 5:00 p.m. on the date of filing this Certificate of
Amendment, all issued shares of Common Stock shall be
automatically combined at the rate of one-for-one
thousand and the par value per share thereof shall
automatically be increased from $.01 per share to
$10.00 per share, without further action on the part
of the holders thereof or this Company. No fractional
shares will be issued.
5. The foregoing amendment was duly adopted in accordance
with the provisions of Section 242 of the General
Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, the Company has caused this
Certificate to be signed by Lewis E. Topper, its President, and
attested to by Daniel A. Poganski, its Secretary, this _____ day
of ________________, 1997.
FAST FOOD SYSTEMS, INC.
By:__________________________
Lewis E. Topper, President
Attest:
_____________________________
Daniel A. Poganski, Secretary
ANNEX B
DELAWARE GENERAL CORPORATION LAW SECTION 262
262 APPRAISAL RIGHTS.---(a) Any stockholder of a
corporation of this State who holds shares of stock on the date
of the making of a demand pursuant to subsection (d) of this
section with respect to such shares, who continuously holds such
shares through the effective date of the merger or consolidation,
who has otherwise complied with subsection (d) of this section
and who has neither voted in favor of the merger or consolidation
nor consented thereto in writing pursuant to Section 228 of this
title shall be entitled to an appraisal by the Court of Chancery
of the fair value of his shares of stock under the circumstances
described in subsections (b) and (c) of this section. As used in
this section, the word "stockholder" means a holder of record of
stock in a stock corporation and also a member of record of a
nonstock corporation; the words "stock" and "share" mean and
include what is ordinarily meant by those words and also
membership or membership interest of a member of a nonstock
corporation; and the words "depository receipt" mean a receipt or
other instrument issued by a depository representing an interest
in one or more shares, or fractions thereof, solely of stock of a
corporation, which stock is deposited with the depository.
(b) Appraisal rights shall be available for the shares of
any class or series of stock of a constituent corporation in a
merger or consolidation to be effected pursuant to Sections 251,
252, 254, 257, 258, 263 or 264 of this title:
(1) Provided, however, that no appraisal rights under this
section shall be available for the shares of any class or series
of stock, which stock, or depository receipts in respect thereof,
at the record date fixed to determine the stockholders entitled
to receive notice of and to vote at the meeting of stockholders
to act upon the agreement of merger or consolidation, were either
(i) listed on a national securities exchange or designated as a
national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc. or
(ii) held of record by more than 2,000 holders; and further
provided that no appraisal rights shall be available for any
shares of stock of the constituent corporation surviving a merger
if the merger did not require for its approval the vote of the
holders of the surviving corporation as provided in subsection
(f) of Section 251 of this title.
(2) Notwithstanding paragraph (1) of this subsection,
appraisal rights under this section shall be available for the
shares of any class or series of stock of a constituent
corporation if the holders thereof are required by the terms of
an agreement of merger or consolidation pursuant to Sections 251,
252, 254, 257, 258, 263 and 264 of this title to accept for such
stock anything except:
a. Shares of stock of the corporation surviving or
resulting from such merger or consolidation, or depository
receipts in respect thereof;
b. Shares of stock of any other corporation, or depository
receipts in respect thereof, which shares of stock or depository
receipts at the effective date of the merger or consolidation
will be either listed on a national securities exchange or
designated as a national market system security on an interdealer
quotation system by the National Association of Securities
Dealers, Inc. or held of record by more than 2,000 holders;
c. Cash in lieu of fractional shares or fractional
depository receipts described in the foregoing subparagraphs a.
and b. of this paragraph; or
d. Any combination of the shares of stock, depository
receipts and cash in lieu of fractional shares or fractional
depository receipts described in the foregoing subparagraphs a.,
b. and c. of this paragraph.
(3) In the event all of the stock of a subsidiary Delaware
corporation party to a merger effected under Section 253 of this
title is not owned by the parent corporation immediately prior to
the merger, appraisal rights shall be available for the shares of
the subsidiary Delaware corporation.
(c) Any corporation may provide in its certificate of
incorporation that appraisal rights under this section shall be
available for the shares of any class or series of its stock as a
result of an amendment to its certificate of incorporation, any
merger or consolidation in which the corporation is a constituent
corporation or the sale of all or substantially all of the assets
of the corporation. If the certificate of incorporation contains
such a provision, the procedures of this section, including those
set forth in subsections (d) and (e) of this section, shall apply
as nearly as is practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which
appraisal rights are provided under this section is to be
submitted for approval at a meeting of stockholders, the
corporation, not less than 20 days prior to the meeting, shall
notify each of its stockholders who was such on the record date
for such meeting with respect to shares for which appraisal
rights are available pursuant to subsections (b) or (c) hereof
that appraisal rights are available for any or all of the shares
of the constituent corporations, and shall include in such notice
a copy of this section. Each stockholder electing to demand the
appraisal of his shares shall deliver to the corporation, before
the taking of the vote on the merger or consolidation, a written
demand for appraisal of his shares. Such demand will be
sufficient if it reasonably informs the corporation of the
identity of the stockholder and that the stockholder intends
thereby to demand the appraisal of his shares. A proxy or vote
against the merger or consolidation shall not constitute such a
demand. A stockholder electing to take such action must do so by
a separate written demand as herein provided. Within 10 days
after the effective date of such merger or consolidation, the
surviving or resulting corporation shall notify each stockholder
of each constituent corporation who has complied with this
subsection and has not voted in favor of or consented to the
merger or consolidation of the date that the merger or
consolidation has become effective; or
(2) If the merger or consolidation was approved pursuant
to Section 228 or 253 of this title, the surviving or resulting
corporation, either before the effective date of the merger or
consolidation or within 10 days thereafter, shall notify each of
the stockholders entitled to appraisal rights of the effective
date of the merger or consolidation and that appraisal rights are
available for any or all of the shares of the constituent
corporation, and shall include in such notice a copy of this
section. The notice shall be sent by certified or registered
mail, return receipt requested, addressed to the stockholder at
his address as it appears in the records of the corporation. Any
stockholder entitled to appraisal rights may, within 20 days
after the date of mailing of the notice, demand in writing from
the surviving or resulting corporation the appraisal of his
shares. Such demand will be sufficient if it reasonably informs
the corporation of the identity of the stockholder and that the
stockholder intends thereby to demand the appraisal of his
shares.
(e) Within 120 days after the effective date of the merger
or consolidation, the surviving or resulting corporation or any
stockholder who has complied with subsections (a) and (d) hereof
and who is otherwise entitled to appraisal rights, may file a
petition in the Court of Chancery demanding a determination of
the value of the stock of all such stockholders. Notwithstanding
the foregoing, at any time within 60 days after the effective
date of the merger or consolidation, any stockholder shall have
the right to withdraw his demand for appraisal and to accept the
terms offered upon the merger or consolidation. Within 120 days
after the effective date of the merger or consolidation, any
stockholder who has complied with the requirements of subsections
(a) and (d) hereof, upon written request, shall be entitled to
receive from the corporation surviving the merger or resulting
from the consolidation a statement setting forth the aggregate
number of shares not voted in favor of the merger or
consolidation and with respect to which demands for appraisal
have been received and the aggregate number of holders of such
shares. Such written statement shall be mailed to the
stockholder within 10 days after his written request for such a
statement is received by the surviving or resulting corporation
or within 10 days after expiration of the period for delivery of
demands for appraisal under subsection (d) hereof, whichever is
later.
(f) Upon the filing of any such petition by a stockholder,
service of a copy thereof shall be made upon the surviving or
resulting corporation, which shall within 20 days after such
service file in the office of the Register in Chancery in which
the petition was filed a duly verified list containing the names
and addresses of all stockholders who have demanded payment for
their shares and with whom agreements as to the value of their
shares have not been reached by the surviving or resulting
corporation. If the petition shall be filed by the surviving or
resulting corporation, the petition shall be accompanied by such
a duly verified list. The Register in Chancery, if so ordered by
the Court, shall give notice of the time and place fixed for the
hearing of such petition by registered or certified mail to the
surviving or resulting corporation and to the stockholders shown
on the list at the addresses therein stated. Such notice shall
also be given by 1 or more publications at least 1 week before
the day of the hearing, in a newspaper of general circulation
published in the City of Wilmington, Delaware or such publication
as the Court deems advisable. The forms of the notices by mail
and by publication shall be approved by the Court, and the costs
thereof shall be borne by the surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall
determine the stockholders who have complied with this section
and who have become entitled to appraisal rights. The Court may
require the stockholders who have demanded an appraisal for their
shares and who hold stock represented by certificates to submit
their certificates of stock to the Register in Chancery for
notation thereon of the pendency of the appraisal proceedings;
and if any stockholder fails to comply with such direction, the
Court may dismiss the proceedings as to such stockholder.
(h) After determining the stockholders entitled to an
appraisal, the Court shall appraise the shares, determining their
fair value exclusive of any element of value arising from the
accomplishment or expectation of the merger or consolidation,
together with a fair rate of interest, if any, to be paid upon
the amount determined to be the fair value. In determining such
fair value, the Court shall take into account all relevant
factors. In determining the fair rate of interest, the Court may
consider all relevant factors, including the rate of interest
which the surviving or resulting corporation would have had to
pay to borrow money during the pendency of the proceeding. Upon
application by the surviving or resulting corporation or by any
stockholder entitled to participate in the appraisal proceeding,
the Court may, in its discretion, permit discovery or other
pretrial proceedings and may proceed to trial upon the appraisal
prior to the final determination of the stockholder entitled to
an appraisal. Any stockholder whose name appears on the list
filed by the surviving or resulting corporation pursuant to
subsection (f) of this section and who has submitted his
certificates of stock to the Register in Chancery, if such is
required, may participate fully in all proceedings until it is
finally determined that he is not entitled to appraisal rights
under this section.
(i) The Court shall direct the payment of the fair value
of the shares, together with interest, if any, by the surviving
or resulting corporation to the stockholders entitled thereto.
Interest may be simple or compound, as the Court may direct.
Payment shall be so made to each such stockholder, in the case of
holders of uncertificated stock forthwith, and the case of
holders of shares represented by certificates upon the surrender
to the corporation of the certificates representing such stock.
The Court's decree may be enforced as other decrees in the Court
of Chancery may be enforced, whether such surviving or resulting
corporation be a corporation of this State or of any state.
(j) The costs of the proceeding may be determined by the
Court and taxed upon the parties as the Court deems equitable in
the circumstances. Upon application of a stockholder, the Court
may order all or a portion of the expenses incurred by any
stockholder in connection with the appraisal proceeding,
including, without limitation, reasonable attorney's fees and the
fees and expenses of experts, to be charged pro rata against the
value of all the shares entitled to an appraisal.
(k) From and after the effective date of the merger or
consolidation, no stockholder who has demanded his appraisal
rights as provided in subsection (d) of this section shall be
entitled to vote such stock for any purpose or to receive payment
of dividends or other distributions on the stock (except
dividends or other distributions payable to stockholders of
record at a date which is prior to the effective date of the
merger or consolidation); provided, however, that if no petition
for an appraisal shall be filed within the time provided in
subsection (e) of this section, or if such stockholder shall
deliver to the surviving or resulting corporation a written
withdrawal of his demand for an appraisal and an acceptance of
the merger or corporation, either within 60 days after the
effective date of the merger or consolidation as provided in
subsection (e) of this section or thereafter with the written
approval of the corporation, then the right of such stockholder
to an appraisal shall cease. Notwithstanding the foregoing, no
appraisal proceeding in the Court of Chancery shall be dismissed
as to any stockholder without the approval of the Court, and such
approval may be conditioned upon such terms as the Court deems
just.
(l) The shares of the surviving or resulting corporation
to which the shares of such objecting stockholders would have
been converted had they assented to the merger or consolidation
shall have the status of authorized and unissued shares of the
surviving or resulting corporation.
Exhibit (d)(2)
FAST FOOD SYSTEMS, INC.
42-40 BELL BOULEVARD, SUITE 200
BAYSIDE, NEW YORK 11361
(718) 229-1113
PROXY SOLICITED BY MANAGEMENT OF THE COMPANY
The undersigned hereby constitutes and appoints Lewis E. Topper,
whom failing, Daniel A. Poganski, or either of them acting in the
absence of the other, with full power of substitution, to be the
true and lawful attorneys and proxies for the undersigned to vote
at the Special Meeting of Shareholders of Fast Food Systems,
Inc., (the "Company") to be held at the Company's offices at 42-40
Bell Boulevard, Suite 200, Bayside, New York 11361 on October
__, 1997 at 10:00 a.m., local time, or at any adjournment
thereof, notice of which meeting together with a Proxy Statement
has been received.
Said proxies are directed to vote the shares the undersigned
would be entitled to vote if personally present upon the
following matters, all more fully described in the Proxy
Statement.
The Board of Directors favors a vote FOR the following proposal:
1. That the Company approve and adopt the following
proposal:
TO APPROVE AND ADOPT THE ARTICLES OF
AMENDMENT (as the same is described in FAST
FOOD SYSTEMS, INC.'s Proxy Statement dated
September __, 1997.
_______ _______ _______
_______ FOR _______ AGAINST _______ ABSTAIN
2. In accordance with their best judgment with respect to
any other business that may properly come before the
meeting.
The shares represented by this Proxy will be voted and in the
event instructions are given in the space provided, they will be
voted in accordance therewith; if instructions are not given,
they will be voted as recommended by the Directors with regard to
the proposals.
The undersigned hereby acknowledges receipt of a copy of the
accompanying Notice of Meeting and Proxy Statement.
Number of Shares: ______________ Dated:_______________________
_______________________________
Signature (must correspond with
the name as printed in the space
beside)
