Registration No. 333-
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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LINDA'S DIVERSIFIED HOLDINGS INC.
(Exact name of registrant as specified in charter)
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Delaware 22-3280395
(State or other jurisdiction (I.R.S. employer
of incorporation or organization) identification number)
11 Commerce Drive
Cranford, New Jersey 07016
(908) 276-2080
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
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PETER WEISSBROD
President and Chief Executive Officer
LINDA'S DIVERSIFIED HOLDINGS INC.
11 Commerce Drive
Cranford, New Jersey 07016
(908) 276-2080
(Name, Address, including zip code, and telephone number,
including area code, of agent for service)
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Copies to:
JOSEPH L. CANNELLA, ESQ.
JOSEPH D. ALPERIN, ESQ.
Fischbein Badillo Wagner Harding
909 Third Avenue
New York, New York 10022
(212) 826-2000
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Approximate date of commencement of proposed sale to the public: From time
to time after the effective date of this Registration Statement, as determined
by market considerations.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest or interest reinvestment plans, please check
the following box. |_|
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, as amended (the "Act"), other than securities offered only in connection
with dividend or interest reinvestment plans, please check the following box.|X|
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering.|_|
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. |_|
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. |_|
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<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
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Proposed Maximum Proposed Maximum Amount of
Title of Each Class Amount to be Offering Price Aggregate Registration
of Securities to be Registered Registered Per Share(1) Offering Price(1) Fee
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<S> <C> <C> <C> <C>
Class A Common Stock, $.001 par value.......... 1,080,000 $5.875 $6,345,000 $2,188
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Redeemable Class C Warrants.................... 1,080,000 N/A N/A N/A
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Class A Common Stock, $.001 par value(2)....... 1,080,000 $5.875 $6,345,000 $2,188
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Total.......................................... $4,376
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</TABLE>
(1) Estimated solely for the purpose of determining the registration fee
pursuant to Rule 457 under the Securities Act of 1933.
(2) Shares underlying Redeemable Class C Warrants.
The registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the registrant shall
file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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PROSPECTUS
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SUBJECT TO COMPLETION, Dated July 24, 1996
LINDA'S DIVERSIFIED HOLDINGS INC.
2,160,000 Shares of Class A Common Stock
1,080,000 Redeemable Class C Warrants
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Up to 2,160,000 shares of Class A Common Stock, par value $.001 ("Class A
Common Stock"), of Linda's Diversified Holdings Inc. (the "Company"), a Delaware
corporation (including up to 1,080,000 shares of Class A Common Stock issuable
upon exercise of Redeemable Class C Warrants ("Class C Warrants")), and up to
1,080,000 Class C Warrants may be offered from time to time by the selling
securityholders ("Selling Securityholders"). The 2,160,000 shares of Class A
Common Stock and 1,080,000 Class C Warrants offered hereby relate to a private
offering to accredited investors ("Private Placement") of units consisting of
Class A Common Stock and Class C Warrants completed between April 11, 1996 and
May 7, 1996 and consist of (i) 800,000 shares of Class A Common Stock, 800,000
Class C Warrants and 800,000 shares of Class A Common Stock issuable upon
exercise of such warrants, which constitute all of the securities underlying the
40 units ("Private Units") sold in the Private Placement for $50,000 per Private
Unit; and (ii) 280,000 shares of Class A Common Stock, 280,000 Class C Warrants
and 280,000 shares of Class A Common Stock issuable upon exercise of such
warrants, which constitute all of the securities underlying the 14 additional
Private Units which may be purchased upon exercise of the unit purchase options
("Private Unit Purchase Options") granted by the Company for nominal
consideration in connection with the Private Placement to D.H. Blair Investment
Banking Corp. ("Blair"), the placement agent of the Private Placement, and its
designees. The components of the Private Units have been separately transferable
since their issuance. Each Class C Warrant entitles the holder thereof to
purchase one share of Class A Common Stock at an exercise price of $5.25,
subject to adjustment, from the date of issuance through the earlier of ten
years after the date of issuance or five years from the effective date of the
Registration Statement of which this Prospectus is a part. One year after such
effective date, the Class C Warrants (other than the Class C Warrants underlying
the Private Unit Purchase Options) will be subject to redemption by the Company
at a redemption price of $.05 per Warrant on 30 days' prior written notice if
the average closing bid prices of the Class A Common Stock exceed $7.35 per
share, subject to adjustment, for 30 consecutive business days ending within 15
days of the notice of redemption. Each Private Unit consists of 20,000 shares of
Class A Common Stock and 20,000 Class C Warrants. The holders of the Private
Units are not permitted to sell any of the securities underlying their Private
Units until October 11, 1996, may sell up to one-third of such securities from
October 11, 1996 through January 11, 1997, may sell an additional one-third of
such securities from January 11, 1997 through April 11, 1997, and may sell the
remainder of such securities after April 11, 1997. Each Private Unit Purchase
Option currently entitles the holder thereof to purchase from the Company one
Private Unit for $50,000, subject to adjustment, until May 7, 2001.
To the extent the Class C Warrants are exercised by the Selling
Securityholders, the shares of Class A Common Stock issuable upon the exercise
of such warrants may be re-sold by the Selling Securityholders pursuant to this
Prospectus. To the extent the Class C Warrants are exercised by holders other
than the Selling Securityholders, the shares of Class A Common Stock issuable
upon the exercise of such warrants will be deemed to have been sold by the
Company pursuant to this Prospectus.
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THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK. SEE "RISK
FACTORS" BEGINNING ON PAGE EIGHT OF THIS PROSPECTUS.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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<PAGE>
The securities to which this Prospectus relates may be offered by the
Selling Securityholders from time to time through ordinary brokerage
transactions pursuant to this Prospectus in the over-the-counter markets, in
negotiated transactions or otherwise, at market prices prevailing at the time of
sale or at negotiated prices. Usual and customary or specifically negotiated
brokerage fees or commissions may be paid by the Selling Securityholders. The
Selling Securityholders and intermediaries through whom such securities are sold
may be deemed "underwriters" within the meaning of the Securities Act of 1933,
as amended (the "Act"), with respect to the securities offered, and any profits
realized or commissions received may be deemed underwriting compensation. The
Company has agreed to indemnify the Selling Securityholders against certain
liabilities, including liabilities under the Act. The Company will not receive
any of the proceeds from the sale of securities by the Selling Securityholders.
Sales of the Company's securities by Selling Securityholders, or even the
potential of such sales at any time, may have an adverse effect on the market
prices of the securities offered hereby. The securities offered by the Selling
Securityholders may be sold in New Jersey only through a registered
broker-dealer or in reliance upon an exemption from registration. See "Selling
Securityholders."
In connection with its initial public offering that commenced May 25, 1994
(the "IPO"), the Company issued 1,265,000 units of the Company's securities
("IPO Units") at $5.00 per IPO Unit, each IPO Unit consisting of one share of
Class A Common Stock, one redeemable Class A Warrant ("Class A Warrant") and one
redeemable Class B Warrant ("Class B Warrant") (the Class A, Class B and Class C
Warrants are collectively referred to herein as the "Warrants"). Each Class A
Warrant entitles the holder to purchase for $6.25, subject to adjustment, one
share of Class A Common Stock and one Class B Warrant. Each Class B Warrant
entitles the holder to purchase for $8.50, subject to adjustment, one share of
Class A Common Stock. Also in connection with the IPO, the Company issued to
Blair and its designees and to a finder, for nominal consideration, unit
purchase options (the "IPO Unit Purchase Options") to purchase up to 90,000 IPO
Units and 20,000 IPO Units, respectively, at $6.00 per IPO Unit, subject to
adjustment. In February 1996, the Company registered under the Act (Registration
No. 33-76422) 4,725,000 shares of Class A Common Stock issuable upon exercise of
the Class A Warrants and Class B Warrants including the warrants underlying the
IPO Unit Purchase Options, 200,000 Class A Warrants issued to investors in
connection with a private placement by the Company on March 9, 1994, 1,675,000
Class B Warrants issuable upon the exercise of the Class A Warrants and 110,000
IPO Units issuable upon exercise of the IPO Unit Purchase Options. See
"Description of Securities."
The Company's IPO Units, Class A Common Stock, Class A Warrants and Class B
Warrants have been traded separately on The Nasdaq SmallCap Market under the
symbols LINCU, LINCA, LINCW and LINCZ, respectively. On July 17, 1996, the
closing bid prices of the IPO Units, Class A Common Stock, Class A Warrants, and
Class B Warrants were $8-1/4%, 5-1/4%, $1-1/2% and $7/8, respectively.
The date of this Prospectus is , 1996.
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AVAILABLE INFORMATION
Linda's Diversified Holdings Inc. (the "Company") is subject to the
informational requirements of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), and in accordance therewith files reports, proxy
statements and other information with the Securities and Exchange Commission
(the "Commission"). Such reports, proxy statements and other information
concerning the Company can be inspected and copied at the public reference
facilities maintained by the Commission at Room 1024, Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549, and at the Regional Offices of the
Commission at Suite 1300, 7 World Trade Center, New York, New York 10048, and
Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60621-2511. Copies of such material can be obtained by mail from the
Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549 at prescribed rates. Such reports, proxy statements and
other information can also be inspected at the offices of the National
Association of Securities Dealers, Inc. NASDAQ Reports Section, 1735 K Street,
N.W., Washington, D.C.
This Prospectus constitutes a part of a registration statement on Form S-3
filed by the Company with the Commission under the Act with respect to the
securities offered hereby. This Prospectus omits certain of the information
contained in the registration statement, and reference is hereby made to the
registration statement and related exhibits filed as a part thereof and
otherwise incorporated therein for further information with respect to the
Company and the securities offered hereby. Any statements contained herein
concerning the provisions of any document are not necessarily complete, and, in
each instance, reference is made to the copy of each document filed as an
exhibit to the registration statement or otherwise filed with the Commission.
Each such statement is qualified in its entirety by such reference. Copies of
the registration statement and the exhibits may be inspected without charge at
the offices of the Commission or obtained at prescribed rates from the Public
Reference Section of the Commission at the address set forth above.
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The Company intends to furnish its stockholders and holders of Warrants
with annual reports containing audited financial statements examined by its
independent accountants and such other periodic reports as it may determine to
furnish or as may be required by law, including Sections 13(a) and 15(d) of the
Exchange Act.
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INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission are
incorporated herein by reference:
(a) Annual Report on Form 10-KSB for the fiscal year ended December 31,
1995;
(b) Quarterly Report on Form 10-QSB for the quarterly period ended March
31, 1996;
(c) The description of the Company's Class A Common Stock contained in its
Registration Statement on Form 8-A filed pursuant to Section 12 of the Exchange
Act and declared effective on May 25, 1994, and any amendment or report filed
for the purpose of updating such description.
All documents subsequently filed by the Company pursuant to Sections 13(a),
13(c), 14 or 15(d) of the Exchange Act prior to the termination of the offering
of securities hereby shall be deemed to be incorporated herein by reference and
shall be a part hereof from the date of the filing of such documents. Any
statements contained in a document incorporated or deemed to be incorporated by
reference herein shall be deemed to be modified or replaced for purposes of this
Prospectus to the extent that a statement contained herein or in any other
subsequently filed document which also is or is deemed to modify or replace such
statement. Any such statement so modified or replaced shall not be deemed,
except as so modified or replaced, to constitute a part of this Prospectus.
The Company will provide without charge to each person to whom this
Prospectus is delivered, including any beneficial owner, upon written or oral
request of such person, a copy of the documents incorporated by reference
herein, other than exhibits to such documents not specifically incorporated by
reference. Such requests should be directed to Peter Weissbrod, 11 Commerce
Drive, Cranford, New Jersey 07016, telephone number (908) 276-2080.
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PROSPECTUS SUMMARY
The following summary is qualified in its entirety by reference to the more
detailed information and financial statements, including the notes thereto,
appearing elsewhere in or incorporated into this Prospectus. Each prospective
investor is urged to read this Prospectus in its entirety. Unless the context
otherwise requires, references in this Prospectus to the Company include Linda's
Diversified Holdings Inc. and its subsidiaries.
The Company
The Company currently owns and operates, and is offering franchises to
operate, quick-service restaurants that specialize in preparing and serving
complete meals featuring marinated flame roasted rotisserie chicken and a
variety of side dishes. Each restaurant serves freshly prepared, flavorful,
homestyle meals while offering the convenience and value of fast food. Side
dishes include hot items such as "smashed" potatoes, herbed stuffing, sweet
potatoes, steamed vegetables, warm applesauce and creamed spinach, as well as
cold items such as cole slaw, fat-free potato salad, Mediterranean pasta salad
and cranberry relish. The Company's menu also offers oven-roasted turkey, turkey
specials such as meatloaf, stew and chili, pot pies, sandwiches, soups, salads,
cornbread, desserts and beverages. While the Company's menu is standardized,
certain items are rotated on a daily basis and daily and seasonal specials are
also available.
The Company's restaurants are currently located in strip shopping centers
and central business districts and range in size from approximately 1,400 to
2,900 square feet. The decor of each restaurant incorporates pastel colors,
light woods, and colorful pictures in order to provide a casual atmosphere
appealing to a broad base of customers. The Company's restaurant design is
intended to be sufficiently flexible to accommodate a variety of available sites
as well as a high volume of customer traffic. In addition, the Company's open
rotisserie ovens, with their roasting chickens, can be seen through each
restaurant's glass front windows to attract walk-in traffic.
The Company has opened five Company-owned restaurants, of which two have
been closed and one has been converted to a franchise. The first Company-owned
restaurant opened in West Caldwell, New Jersey, in October 1991 and the second
and third restaurants opened in Colonia and in Edison, New Jersey in August and
December 1992, respectively. The fourth and fifth Company-owned restaurants
opened in Livingston and in Summit, New Jersey in January and May 1995,
respectively. The Edison, New Jersey restaurant was closed October 1, 1995 and
the Livingston, New Jersey restaurant was closed June 29, 1996. In December
1995, the Colonia restaurant was converted to a franchise. The Company's
restaurants incorporate a new design featuring a carving station for chicken and
turkey and utilize an advanced point-of-sale computer system. Each of the
Company's restaurants provides both dine-in and take-out services. See "Recent
Developments."
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<PAGE>
The Company is currently offering franchises to qualified candidates and,
between June 1995 and July 1996, the Company granted franchises for seven
restaurants. The first franchised restaurant was converted from the Company's
existing Colonia restaurant in December 1995; the second, at a site in Westwood,
New Jersey, opened in April 1996 and the remaining five, at sites in Oakland,
South Orange, Flemington and Belleville, New Jersey and in Dutchess County, New
York, are expected to open later in 1996. An agreement for an eighth franchise
was cancelled in February 1996 and $10,000 of the $25,000 franchise fee paid to
the Company was refunded. The Flemington and Dutchess County locations are being
developed pursuant to an area development agreement, entered into in March 1996,
for up to 18 restaurants at selected shopping centers throughout the country by
specified dates. The Company's other franchised locations are single franchises
granted to individual franchisees. The Company currently intends to limit its
expansion activities almost entirely to franchising because of its limited cash
resources and the significant investment required to open Company-owned
restaurants. The success of the Company's franchising efforts depends on the
Company's ability to reduce expenses and increase sales at its existing stores.
There can, however, be no assurances as to when, if ever, certain of the
Company's franchisees will open franchised restaurants or that the Company will
be able to sell any additional franchises. See "Recent Developments."
The Company completed the IPO in July 1994 of 1,265,000 IPO Units
(including 165,000 IPO Units sold upon the exercise of the underwriter's
over-allotment option), generating approximately $5,064,000 in net proceeds, the
remaining balance of which was approximately $950,000 on March 31, 1996. In view
of its continuing losses, the Company is currently attempting to implement
strategies to reduce expenses and diversify its operations. In this connection,
the Company had advanced $500,000 of the remaining IPO proceeds to a recently
formed wholly-owned subsidiary, National Home Guaranty Inc. ("NHG"), that
provides federally-guaranteed financing to homeowners and lead-generation
services for contractors providing home-improvement services in the
low-to-moderate income markets. Between April 11, 1996 and May 7, 1996, the
Company obtained additional equity financing for NHG through the Private
Placement of 40 Private Units, each Private Unit consisting of 20,000 shares of
Class A Common Stock and 20,000 warrants to purchase Class A Common Stock, for
an aggregate gross offering price of $2,000,000. The Company's $500,000 advance
to NHG was repaid in May 1996 with a portion of the proceeds from the Private
Placement. See "Recent Developments."
The Company was formed as a Delaware Corporation in February 1994 to
acquire all of the outstanding capital stock of four New Jersey corporations,
formed at various times in 1991 and 1992. Prior to July 1996, the Company's name
was Linda's Flame Roasted Chicken Incorporated. The Company's principal
executive offices are located at 11 Commerce Drive, Cranford, New Jersey 07016
and its telephone number is (908) 276-2080.
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<PAGE>
The Offering
Securities offered................... Up to 1,080,000 shares of Class A Common
Stock, 1,080,000 Class C Warrants and
1,080,000 shares of Class A Common Stock
issuable upon exercise of the Class C
Warrants.
Common Stock outstanding
prior to this offering:
Class A Common Stock................ 2,065,000 shares
Class B Common Stock (1)............ 800,000 shares
Common Stock outstanding
after this offering
Class A Common Stock (2).......... 8,260,000 shares
Class B Common Stock ............. 800,000 shares
Use of Proceeds....................... Any proceeds received by the Company from
time to time upon exercise of the Class C
Warrants or the uncommitted funds and may
be used for, among for, among other
things, working capital, expansion,
improvements, compensation and general
corporate purposes. The Company will not
receive any proceeds from any sales of
Class A Common Stock or Class C Warrants
by the Selling Securityholders.
Risk Factors.......................... The securities offered hereby involve a
high degree of risk. See "Risk Factors."
NASDAQ Symbols........................ Class A Common Stock LINCA
Class A Warrants LINCW
Class B Warrants LINCZ
IPO Units LINCU
Proposed NASDAQ Symbol................ Class C Warrants LINCX
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(1) For a description of the voting and other rights of the Class A Common
Stock and Class B Common Stock, see "Description of Securities - Common
Stock." Of the Company's 800,000 shares of outstanding Class B Common
Stock, 450,000 such shares are being held in escrow, subject to
contribution to the Company, without consideration, if the Company does not
attain certain earnings levels or the market price of the Class A Common
Stock does not achieve certain targets by December 31, 1997.
(2) Assumes the exercise of the IPO Unit Purchase Options, Private Unit
Purchase Options and all of the Warrants but no other outstanding options
or warrants.
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<PAGE>
RISK FACTORS
The following factors should be considered, together with other information
set forth in this Prospectus or incorporated by reference herein, in evaluating
an investment in the Company.
Losses to Date; Accumulated Deficit; Continuing Losses. The Company operates two
Company-owned restaurants, the first of which opened in October 1991. See
"Recent Developments." During the years ended December 31, 1992, 1993, 1994 and
1995 the Company's revenues were approximately $1,077,000, $1,859,000,
$1,856,000 and $2,387,000, respectively, and it incurred net losses of
approximately $(167,000), $(147,000), $(1,203,000) and $(2,070,000),
respectively. During the three months ended March 31, 1995 and 1996, the
Company's revenues were approximately $590,000 and $296,000, respectively, and
it incurred net losses of approximately $(485,000) and $(385,000), respectively.
The Company had an accumulated deficit of approximately $(3,568,000) at March
31, 1996. There can be no assurance that the Company will ever achieve
profitable operations. The Company's prospects must be considered in light of
the risks and difficulties frequently encountered in the highly competitive
restaurant business, which is characterized by a high failure rate. In view of
the Company's continuing losses, the Company is attempting to implement
strategies that include reducing expenses, acquiring existing profitable
operations in the same or similar business and diversifying its business through
a wholly-owned subsidiary, National Home Guaranty Inc. ("NHG"), that provides
federally-guaranteed financing to homeowners and lead-generation services for
contractors providing home-improvement services in the low-to-moderate income
markets. There is no assurance the Company will be able to implement any of
these strategies or stop the continuing losses.
Need for Additional Financing. The Company currently is dependent upon, and for
the near future expects to continue to be dependent upon, the proceeds of the
IPO and the Private Placement to operate its business. At March 31, 1996, the
Company had approximately $950,000 in proceeds remaining from the approximately
$5,064,000 in net proceeds it received from the IPO. The Company obtained equity
financing for NHG through the Private Placement for an aggregate gross offering
price of $2,000,000 and a portion of the net proceeds was used to repay the
$500,000 which had been advanced by the Company to NHG. The Company currently
anticipates that the remaining proceeds of the IPO, in conjunction with proceeds
received from the Private Placement, will be sufficient to fund the Company's
present operations and its planned diversification during the twelve months
following the date of this Prospectus. However, the Company may require
additional financing within such twelve months or thereafter and there can be no
assurance that additional financing will be available on acceptable terms or at
all. The Company has no definitive commitments for additional financing.
General Risks of Restaurant Expansion. The Company currently intends to pursue a
strategy of expansion of its restaurant operations, internally through its
franchising program, and by acquiring existing profitable operations in the same
or similar restaurant business. However, there can be no assurance that any of
these strategies will be successfully implemented. The success of the Company's
restaurant expansion will depend upon a number of factors not within the
Company's or a franchisee's control, including, among others, the cost and
availability of suitable locations and the negotiation of acceptable leases, the
ability to meet development and construction schedules, the securing of required
government permits and other regulatory approvals, the hiring and training of
management and other personnel, the terms and availability of financing and
other general economic and business conditions. Any problems or delays
encountered in any one of these areas can result in substantial increases in
costs to the Company as well as delays in the opening of new restaurants. The
Company estimates that, from the time a restaurant site is selected, it may take
up to nine months before a restaurant opens and several additional months before
the restaurant attains normal sales levels. The Company and its franchises have
only opened six restaurants (of which two have been closed) to date and,
accordingly, because of its lack of experience, its cost and timing estimates
may be inaccurate and additional unanticipated problems may arise. Additionally,
in light of the Company's limited number of restaurants, the failure of any one
of its restaurants will have a disproportionate effect on the financial results
of operations of the Company as a whole. Moreover, a strategy of expansion
through acquisition is dependent upon the ability of the Company to identify
suitable candidates for acquisition and to obtain additional financing. The
Company has no current commitments or arrangements for additional financing and
there can be no assurance that additional financing will be available on
acceptable terms or at all.
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<PAGE>
Risks of Franchising. While the Company is currently offering franchises, only
seven franchises, of which two have resulted in the opening of a restaurant,
have been sold as of the date of this Prospectus. The Company intends to
increase its focus on franchising activities because of its limited cash
resources and the significant investment required to open Company-owned
restaurants. The success of a franchising program will depend on numerous
factors, including, but not limited to, the Company's ability to comply with
regulatory requirements and to attract and retain qualified franchisees (which
in turn will depend upon the Company's ability to successfully market and
promote the Company concept). Although the Company provided interim construction
financing to its first franchisee, the Company does not have the resources to
offer significant financing assistance to franchisees and, as a result, may be
at a competitive disadvantage relative to other franchisors. Compliance with
Federal and state franchise sales laws and state franchise relationship laws is
costly and time consuming and there can be no assurance that the Company will
not encounter difficulties or delays in this area. There can be no assurance
that the Company will be successful in its efforts to expand through franchising
or that future franchisees, if any, will be able to operate Linda's Flame
Roasted Chicken restaurants in a manner consistent with the Company's methods,
standards and specifications.
Restaurant Industry and Competition. The restaurant industry is affected by
changes in consumer tastes, national, regional, and local economic conditions,
demographic trends and publicity. The Company's revenues are derived primarily
from the preparation and sale of cooked chicken and, accordingly, a change in
preferences for, or adverse publicity associated with, chicken could adversely
affect the Company's business. Multi-unit food service chains can also be
substantially adversely affected by publicity resulting from food quality,
illness, injury, or other health concerns or operating issues stemming from just
one store or only a limited number of stores. Restaurants can also be affected
by changes in traffic patterns, demographics and the type, number and location
of competing restaurants. The quick-service restaurant industry is extremely
competitive with respect to price, service, restaurant location and food
quality. The Company competes with a variety of other restaurants, including
those that serve rotisserie style, fried, grilled and other chicken products.
These competitors include national and regional chains, franchisees of other
restaurant chains and local owner-operated restaurants. Furthermore, the number
of rotisserie roasted chicken take-out restaurants has increased substantially
in the last few years. Many competitors have been in existence longer, have more
established market presence and have substantially greater financial, marketing
and other resources than the Company. In addition to other restaurant companies,
the Company also competes with numerous other businesses for suitable locations
for its restaurants and competes with other franchisors for qualified
franchisees.
Geographic Concentration; Seasonality. The Company's existing restaurants are
all located in central and northern New Jersey and the Company currently plans
to cluster its new restaurants within the Northeast and Mid-Atlantic states.
Consequently, the Company's operating results will be affected by adverse
economic, weather or other conditions in these regions that are beyond the
Company's control. To date, the Company has experienced lower revenues in the
months of December, January, February and March due to the effects of the
holiday season and inclement weather. Moreover, adverse publicity, if any,
regarding any Linda's Flame Roasted Chicken restaurant could have a more severe
impact on the Company's revenue than might be the case if the Company's
restaurants were more broadly dispersed.
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<PAGE>
Increases in Operating and Food Costs; Availability of Supplies. Increases in
the cost of chicken and fresh produce could have a direct and immediate effect
on the Company's results of operations. A substantial portion of the Company's
revenues and food costs are derived from the sale and purchase of chicken. The
cost of fresh chicken fluctuates from time to time depending on a variety of
factors beyond the control of the Company, such as weather conditions and
seasonal demand. Dependence on frequent deliveries of chicken and fresh produce
also subjects food service businesses to the risk that shortages or
interruptions in supply, caused by adverse weather or other conditions, could
adversely affect the availability, quality, and cost of ingredients.
Furthermore, any delays or stoppages in such deliveries could subject the
Company's restaurants to shortages or interruptions which could adversely affect
restaurant sales. Additional factors such as inflation, increased utility, labor
and employee benefit costs and the availability of qualified management and
hourly employees are beyond the Company's control and may in the future affect
the restaurant industry in general and the Company's restaurants in particular.
No Operating History of NHG; New Business Strategy. NHG is a newly formed
wholly-owned subsidiary of the Company with no operating history and the
operations of NHG are totally unrelated to the Company's restaurant business.
Accordingly, NHG is subject to all of the risks associated with start-up
businesses including those associated with the highly competitive home finance
business, which is dominated by large institutions. Further, the implementation
of the Company's new business strategy is likely to impact the Company's
attention to its current business and will require a substantial commitment of
time and resources. There can be no assurance that profitability will be
achieved by NHG, or if achieved, that it will ever be sustained.
Need for Third-Party Purchasers for Loan Contracts. NHG sells its loan
contracts to third party lenders prior to its purchase of such loan contracts
from a participating contractor upon completion of a job. Therefore, NHG's
ability to originate loans on an ongoing basis is dependent upon its ability to
sell the loan contracts to such third-party lenders, primarily commercial banks,
savings and loan associations and other large credit companies, on a timely
basis and upon terms acceptable to NHG. There can be no assurance that there
will be a sufficient market for NHG's loan contracts or that NHG will be able to
sell the loan contracts on a timely basis, on acceptable terms, or at all. NHG's
inability to sell such loan contracts would have a material adverse effect on
the business and operations of NHG.
Need for Qualified Contractors. A key component of the proposed business of
NHG will involve providing low-to-moderate income homeowners with access to
qualified contractors who can perform the needed improvement work on acceptable
terms. There can be no assurance that NHG will be able to develop and a maintain
a network of qualified contractors willing and qualified to perform home
improvement work for such homeowners.
Competition. NHG will face competition from home mortgage lenders that offer
Title I home renovation loans. Many of these competitors have substantially
greater financial, marketing and other resources than the Company. In addition,
homeowners may finance renovations by obtaining home equity loans, home
improvement loans and second mortgages through banks, savings institutions and
mortgage companies. There can be no assurance that NHG will be able to compete
favorably against services offered by its competitors in the future.
Potential Liability for Contractor Work. NHG may be subject to claims by
prospective customers that a participating contractor referred by NHG did not
perform his work as agreed. Although NHG will require all participating
contractors to guaranty their work for a reasonable period of time and to
indemnify NHG against any claims raised by a customer referred by NHG that
relate to the quality of workmanship and/or materials used by the participating
contractor, there can be no assurance that a participating contractor will
honor, or that NHG will be able to enforce without undue expense, any guarantees
or indemnifications.
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Marketing; Limited Marketing Capabilities. The growth of the Company's current
restaurants and the success of new Linda's Flame Roasted Chicken restaurants, if
any, will depend, to a large extent, upon marketing efforts that require
substantial expenditures by the Company. Since the Company's initial public
offering, it has spent approximately $500,000 for marketing and promotion, the
results of which have been disappointing. There can be no assurance that the
Company's marketing efforts will be more successful in the future, that its
restaurants will ever achieve significant market acceptance or that the Company
will have the necessary funds for marketing activities.
The success of NHG will depend, to a large extent, upon marketing efforts
that will require substantial expenditures by the Company, primarily for the
production and placement of radio and television advertising. There can be no
assurance that the Company will have the necessary funds for a sustained
marketing campaign or that the Company will be able to develop a successful
marketing strategy for NHG. Moreover, NHG will be targeting a non-traditional
homeowner market and it may not be able to gain acceptance in such market.
Although NHG has retained the services of marketing specialists, there can be no
assurance that their efforts on behalf of the Company will be successful.
Government Regulation. The Company's business is subject to numerous federal,
state and local laws and regulations, including those relating to the
preparation and sale of food, zoning, land use, construction and the
environment. The Company is also subject to federal and state laws and
regulations governing employer-employee relations, including those related to
minimum wage requirements, overtime, working and safety conditions and immigrant
status. Any difficulties or failures in obtaining required licenses or approvals
could delay or prevent the opening of a new restaurant. The failure to obtain or
retain food or other licenses or increases in the minimum wage rate, employee
benefits (including costs associated with mandated health insurance coverage) or
other costs relating to employees could have an adverse effect on the Company's
business. The Company also is subject to compliance with federal and state
franchise sales laws and state franchise relationship laws. Compliance with such
franchise laws can be time consuming and costly and the Company's inability to
comply with existing or future franchise laws may have a material adverse effect
on the Company's business and prospects.
The business of NHG is also subject to compliance with federal laws and
regulations relating to Title I Loans, including minimum net worth and credit
maintenance requirements, compliance with the Equal Credit Opportunity Act, the
Consumer Credit Protection Act, the Real Estate Settlement Procedures Act and
other federal laws and regulations relating to consumer lending activities. U.S.
Department of Housing and Urban Development ("HUD") regulations also require
that NHG maintain at least a $500,000 warehouse line of credit in order to
originate Title I Loans. Although NHG has obtained a $3,000,000 line of credit,
there can be no assurance that NHG will be able to maintain such line of credit
or that it will be sufficient to meet its future needs. In addition, NHG is
subject to various state laws applicable to licensed and unlicensed home
improvement financing agencies and sales finance companies as well as periodic
examinations by HUD and various state licensing agencies.
Dependence Upon Key and Other Personnel; Potential Liability Under
Indemnification Agreements. Most of the Company's management is young and
relatively inexperienced in the restaurant business and has no experience in
franchising. The competition for qualified restaurant and franchising personnel
in the quick-service restaurant segment is intense and there is no assurance
that the Company will be able to hire necessary additional personnel. The
Company's success will depend upon its ability to attract and retain additional
skilled personnel to serve as managers of individual restaurants. To date,
turnover of management and other personnel in the Company's restaurants has had
an adverse effect on restaurant operations. The Company believes that its
success will be largely dependent on the efforts of certain key personnel of the
Company, including Peter Weissbrod, its President and Chief Executive Officer,
Stuart Fuchsman, its Vice President and Chief Operating Officer, and Richard
Goldberger, its Chairman. The loss of the services of any of such individuals
could have a material adverse effect on the Company if the Company is unable to
find a qualified replacement.
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<PAGE>
The success of NHG will depend in large part on the efforts of Angelo
Maione, who commenced employment in January 1996. In addition, Richard
Goldberger, Chairman of the Company, has substantial experience in the home
improvement industry and will serve as a consultant to NHG. NHG will need to
attract and retain additional qualified personnel, particularly sales and
marketing experts and installment lending officers and there is no assurance
that NHG can retain the service of such individuals on acceptable terms, or at
all. The loss of the services of any of Messrs. Maione or Goldberger could have
material adverse effect on NHG.
Claims, Litigation and Lack of Adequate Insurance. Companies in the food
services industry are from time to time the subject of complaints, claims,
litigation from customers alleging illness or injury or otherwise relating to
food quality, health or other operational complaints. Adverse publicity
resulting from such allegations may materially and adversely affect the Company
and the Linda's Flame Roasted Chicken restaurants, regardless of whether such
allegations are valid or whether the Company is liable. Further, activities of
the Company's franchisees, if any, over which the Company will have no control,
could expose the Company to litigation. There can be no assurance that the
Company's liability insurance coverage is adequate or maintainable by the
Company on acceptable terms or that the Company will be able to increase
coverage, on acceptable terms, as new Linda's Flame Roasted Chicken restaurants
are opened and additional insurance is warranted. The Company requires all of
the franchisees to maintain certain insurance policies and to have the Company
named as an additional insured on all such policies. However, a partially or
completely uninsured successful claim against the Company or a franchisee could
have a material adverse effect on the Company's business and operations.
Potential Adverse Effect of Redemption of Warrants. The Class C Warrants (other
than the Class C Warrants issuable upon exercise of the Private Unit Purchase
Options) may be redeemed by the Company at a redemption price of $.05 per
warrant upon 30 days' notice if the average closing bid price of the Class A
Common Stock exceeds $7.35 per share (subject to adjustment) for 30 consecutive
business days ending within 15 days of the notice of redemption. Redemption of
the Class C Warrants could force the holders to exercise the warrants and pay
the exercise price at a time when it may be disadvantageous for the holders to
do so, to sell the warrants at the then current market price when they might
otherwise wish to hold the warrants, or to accept the redemption price, which,
at the time the warrants are called for redemption, is likely to be
substantially less than the market value of the Class C Warrants. See
"Description of Securities - Redemption."
Current Prospectus and State Registration Required to Exercise Warrants.
Purchasers of the Class C Warrants will only be able to exercise such warrants
if (i) a current prospectus under the Act relating to the securities underlying
the Class C Warrants is then in effect and (ii) such securities are qualified
for sale or exempt from qualification under the applicable securities laws of
the states in which the various holders of Class C Warrants reside. Although the
Company has undertaken to use its best efforts to maintain the effectiveness of
a current prospectus covering the securities underlying the Class C Warrants,
there can be no assurance that the Company will be able to do so. The value of
the Class C Warrants may be greatly reduced if a current prospectus, covering
the securities issuable upon the exercise of the Class C Warrants, is not kept
effective or if such securities are not qualified, or exempt from qualification,
in the states in which the holders of the Class C Warrants reside. See
"Description of Securities - Redeemable Warrants."
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Influence by Management and Principal Stockholders; Possible Depressive Effect
on the Company's Securities. As of July 19, 1996, current officers, directors
and stockholders who are beneficial owners of 5% or more of the Company's
outstanding capital stock, own approximately 27.5% of the issued and outstanding
capital stock of the Company and 68.3% of the total voting power thereof, which
calculation includes 787,000 shares of the 800,000 shares of Company's
outstanding Class B Common Stock, par value $.001 per share ("Class B Common
Stock"), owned by such persons. The Class A Common Stock and the Class B Common
Stock are essentially identical, except that the Class B Common Stock has six
votes per share and the Class A Common Stock has one vote per share on all
matters upon which stockholders may vote. Subject to certain limitations, each
share of Class B Common Stock is convertible into one share of Class A Common
Stock automatically upon any sale or transfer thereof at any time at the option
of the holder. As a result, the current officers, directors and stockholders
owning 5% or more of the Company's outstanding capital stock will be able to
elect all of the Company's directors and otherwise control the Company's
operations. Furthermore, the disproportionate vote afforded the Class B Common
Stock could also serve to impede or prevent a change of control of the Company.
As a result, potential acquirers may be discouraged from seeking to acquire
control of the Company through the purchase of Class A Common Stock, which could
have a depressive effect on the price of the Company's securities. See
"Description of Securities - Common Stock."
Charge to Income in the Event of Release of Escrow Shares. In connection with
the IPO, 450,000 shares (the "Escrow Shares") of the 800,000 shares of Company's
outstanding Class B Common Stock are being held in escrow and subject to
contribution to the Company, without consideration, if the Company does not
attain certain earnings levels or the market price of the Company's Class A
Common Stock does not achieve certain targets by December 31, 1997. The
Securities and Exchange Commission (the "Commission") has adopted a position
with respect to arrangements such as the one entered into among the Company and
the current stockholders of the Company. This position provides that, in the
event any shares are released from escrow to stockholders of the Company who are
officers, directors or employees of, or consultants to the Company, compensation
expense will be recorded for financial reporting purposes. Therefore, in the
event the Company attains any of the earnings thresholds or the Class A Common
Stock meets certain minimum bid prices required for the release of the Escrow
Shares, such release will be deemed an additional compensation expense of the
Company. Accordingly, the Company will, in the event of the release of the
Escrow Shares from escrow, recognize during the periods in which the earnings
thresholds are met or probable of being met or such minimum bid prices are
attained, what will likely be a substantial charge which would have the effect
of substantially increasing the Company's loss or reducing or eliminating
earnings, if any, at such time. Although the amount of compensation expense
recognized by the Company will not affect the Company's total stockholders'
equity, it may have a depressive effect on the market price of the Company's
securities. See "Description of Securities - General."
Possible Depressive Effect of Future Sales of Common Stock. All of the Company's
shares of Class B Common Stock currently outstanding are "restricted securities"
as that term is defined in Rule 144 promulgated under the Act which are
currently eligible for sale in the public market in the form of an equal number
of shares of Class A Common Stock, subject to the requirements of Rule 144 and
the provisions of the escrow relating to the Escrow Shares. In addition, 345,200
shares of Class A Common Stock issuable upon the exercise of the Company's
currently outstanding options will be "restricted securities" and may, under
certain circumstances, be sold without registration pursuant to Rule 144, or,
pursuant to a future registration statement. 1,265,000 shares of the 2,065,000
shares of Class A Common Stock currently outstanding are eligible for sale under
the Act, and 4,395,000 shares of Class A Common Stock, which may be issued upon
exercise of the Company's Class A Warrants and Class B Warrants, will be
eligible for sale under the Act upon issuance, and are not "restricted
securities" absent an express agreement to the contrary; 440,000 shares of Class
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<PAGE>
A Common Stock underlying the IPO Unit Purchase Options are subject to
restrictions on transferability until May 25, 1996. Of the 2,160,000 shares of
Class A Common Stock and 1,080,000 Class C Warrants underlying the Private Units
and the Private Unit Purchase Options, one-third of such securities may be sold
from October 11, 1996 to January 11, 1997, an additional one-third may be sold
from January 11, 1997 to April 11, 1997 and the remainder may be sold after
April 11, 1997. No prediction can be made as to the effect, if any, that sale of
these securities, including the securities offered hereby, or the availability
of such securities for sale will have on the market prices of the Company's
securities prevailing from time to time. Nevertheless, the possibility that
substantial amounts of securities may be sold in the public market may adversely
affect prevailing market prices for the Company's securities and could impair
the Company's ability to raise capital through the sale of its securities.
Effect of Outstanding Options and Warrants. For the terms of the Class C
Warrants, Class A Warrants, Class B Warrants, the Private Unit Purchase Options
and the IPO Unit Purchase Options and other outstanding options, the holders
thereof are given an opportunity to profit from a rise in the market price of
the Class A Common Stock with a resulting dilution in the interests of the other
stockholders. Further, the terms on which the Company may obtain additional
financing during that period may be adversely affected by the existence of such
options and warrants. The holders of the Class A, Class B and Class C Warrants
may exercise them at a time when the Company might be able to obtain additional
capital through a new offering of securities on terms more favorable than those
provided by such Warrants.
No Dividends Anticipated. The Company has never paid any cash dividends on its
Class A and Class B Common Stock and does not anticipate the payment of cash
dividends in the foreseeable future. See "Description of Securities - Dividend
Policy."
Authorization of Preferred Stock. The Company's Certificate of Incorporation
authorizes the issuance of up to 2,500,000 shares of preferred stock, par value
$.001 per share, with such designation, rights and preferences as may be
determined from time to time by the Board of Directors. Accordingly, the Board
of Directors is empowered, without stockholder approval, to issue preferred
stock with dividend, liquidation, conversion, voting or other rights which could
adversely affect the voting power or other rights of the holders of the
Company's Class A and Class B Common Stock. In the event of issuance, preferred
stock could be utilized, under certain circumstances, as a method of
discouraging, delaying or preventing a change in control of the Company. There
can be no assurance that the Company will not issue shares of preferred stock in
the future. See "Description of Securities - Preferred Stock."
Delaware Anti-Takeover Law. The Company, a Delaware corporation, is subject to
the General Corporation Law of the State of Delaware, including Section 203, an
anti-takeover law enacted in 1988. In general, the law prohibits a public
Delaware corporation from engaging in a "business combination" with an
"interested stockholder" for a period of three years after the date of the
transaction in which the person became an interested stockholder unless: (i)
prior to such date, the board of directors approved the business combination; or
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<PAGE>
(ii) upon becoming an interested stockholder, the stockholder then owns at least
85% of the voting securities, as defined in Section 203; or (iii) subsequent to
such date, the business combination is approved by both the board of directors
and the stockholders. "Business combination" is defined to include mergers,
asset sales and certain other transactions with an "interested stockholder." An
"interested stockholder" is defined as a person who, together with affiliates
and associates, owns (or, within the prior three years, did own) 15% or more of
a corporation's voting stock. Although Section 203 permits the Company to elect
not to be governed by its provisions, the Company to date has not made this
election. As a result of the application of Section 203, potential acquirers of
the Company may be discouraged from attempting to effect an acquisition
transaction with the Company, thereby possibly depriving holders of the
Company's securities of certain opportunities to sell or otherwise dispose of
such securities at above-market prices pursuant to such transactions.
Possible Restrictions on Market-Making Activities in the Company's Securities.
D.H. Blair & Co., Inc. ("Blair & Co.") is currently, and the Company believes
that it intends in the future to continue to be, a principal marketmaker in the
Company's securities. Rule 10b-6 under the Securities Exchange Act of 1934 (the
"Exchange Act") will prohibit Blair & Co. from engaging in any marketmaking
activities with regard to the Company's securities for the period from nine
business days (or such other applicable period as Rule 10b-6 may provide) prior
to any solicitation by D.H. Blair Investment Banking Corp. ("Blair") of the
exercise of Warrants until the later of the termination of such solicitation
activity or the termination (by waiver or otherwise) of any right that Blair may
have to receive a fee for the exercise of Warrants following such solicitation.
As a result, Blair & Co. may be unable to provide a market for the Company's
securities during certain periods while the Warrants are exercisable. Any
temporary cessation of such market-making activities could have an adverse
effect on the market prices of the Company's securities.
Possible Adverse Effect on Liquidity of the Company's Securities Due to
Investigation of a Principal Marketmaker by the Securities and Exchange
Commission. The Company has been advised that the Commission is conducting an
investigation concerning various business activities of Blair and Blair & Co.
The investigation appears to be broad in scope, involving numerous aspects of
Blair and Blair & Co.'s compliance with the federal securities laws and
compliance with the federal securities laws by issuers whose securities were
underwritten by the Blair or Blair & Co., or in which the Blair or Blair & Co.
made over-the-counter markets, and persons associated with Blair or Blair & Co.,
such issuers and other persons. The Company has been advised by Blair that the
investigation has been ongoing since at least 1989 and that it is cooperating
with the investigation. Neither the Company, Blair, nor Blair & Co. can predict
whether this investigation will ever result in any type of formal enforcement
action against Blair or Blair & Co. An unfavorable resolution of the
Commission's investigation could have the effect of limiting Blair & Co.'s
ability to make a market in the Company's securities, which could affect the
liquidity or price of such securities.
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RECENT DEVELOPMENTS
The Company remains committed to the operation of its current restaurant
business, though it currently intends to limit its restaurant expansion
activities almost entirely to franchising because of its limited cash resources
and the significant investment required to open Company-owned restaurants.
Furthermore, the Company believes that franchised restaurants will have a
greater potential for profitability because it expects that franchisees will be
more directly and closely involved in the day-to-day operations of their
restaurants than managers of Company-owned stores. In addition to limiting its
expansion to franchising, the Company is reducing expenses, both operationally,
through food and paper cost savings, and through reductions in overhead relating
to the Company's corporate office, primarily through elimination and
consolidation of corporate positions. In order to increase its prospects for
profits and positive cash flow, the Company has implemented the following
strategies: (1) diversification to operations outside of the restaurant industry
and (2) obtaining additional equity-based financing through a private offering.
Additionally, the Company may seek acquisitions of companies in the same or
similar restaurant business with profitable operations and positive unit-level
economics. The Company has no definitive arrangements for any additional equity
or other financing and there can be no assurance that the Company will be able
to obtain additional financing on acceptable terms, or at all.
In the second quarter of 1996, the Company completed the Private Placement
of 40 Private Units, each Private Unit consisting of 20,000 shares of the Class
A Common Stock and 20,000 warrants (Class C Warrants) to purchase Class A Common
Stock, for an aggregate price of $2,000,000 or $50,000 per Private Unit. In
connection with the Private Placement, the Company issued 14 Private Unit
Purchase Options to Blair and its designees to purchase Private Units for
$50,000 per Private Unit. This Prospectus relates to the securities underlying
the 40 Private Units sold, and the 14 Private Unit Purchase Options granted, in
the Private Placement. The net proceeds of the Private Placement were
contributed by the Company to capital of National Home Guaranty Inc. ("NHG") and
NHG repaid the $500,000 which had previously been advanced by the Company to
NHG. The Company believes that such net proceeds will be sufficient to fund the
initial operations of NHG.
NHG provides low-to-moderate income homeowners with a single source for
both federally guaranteed home improvement loans and qualified contractors. This
segment of the homeowner market has traditionally encountered difficulties in
obtaining affordable financing and securing the services of qualified
contractors for home improvements. In response to this need, the U.S. Department
of Housing and Urban Development ("HUD") substantially revised its Title I
Property Improvement Program in 1994 to increase the availability of federally
guaranteed home improvement loans ("Title I Loans") of up to $25,000 to
low-to-moderate income homeowners. NHG utilizes this program, along with its
contacts in the home-improvement and lending industries, to provide
low-to-moderate income homeowners with both the financing and contractors needed
for home renovations.
NHG derives its revenue primarily from administrative and referral fees
received from participating contractors and discounts on the sale of loan
contracts to third-party lenders. NHG requires participating contractors to pay
NHG a fee for each homeowner referred to them by NHG, regardless of whether or
not the contractor makes the sale, plus an administrative fee equal to a
percentage of the price of contracted work. NHG does not intend to service any
loan contracts itself, but rather intends to sell the loan contracts that it
originates to commercial banks, savings and loan associations and other large
credit companies. However, there can be no assurance that NHG will be able to
make or sustain any such arrangements with third-party lenders and/or qualified
contractors on acceptable terms.
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<PAGE>
NHG has hired personnel with lending experience and other experienced loan
personnel as well as sales and marketing specialists who can develop an
advertising and marketing program targeting low-to- moderate income homeowners.
Richard Goldberger, Chairman of the Company, serves as a consultant to NHG. From
1953 to 1989, Mr. Goldberger was the Chief Executive Officer of Garden State
Brickface and Stucco Company, a construction and home improvement company with
operations in 12 states. Mr. Goldberger has been a bank director for thirty
years, serving as both chairman of loan committees and of executive committees.
He currently serves as a director of United Jersey Bank, N.A. There can,
however, be no assurance that NHG will be able to hire and retain additional
qualified personnel or develop an effective marketing strategy.
NHG is targeting markets in New Jersey, Pennsylvania, Massachusetts and
Rhode Island. Although the Company has not conducted a formal needs analysis for
this region, limited focus-group surveys conducted on behalf of the Company in
New Jersey show homeowners to be receptive towards NHG's proposed services. NHG
is a licensed home improvement lender in New Jersey, Massachusetts and Rhode
Island (Pennsylvania has no such approval requirements).
In addition to the state licenses which it has received, NHG has obtained
designation by HUD as an approved Title I lender. As such, the business of NHG
will be subject to compliance with federal regulations relating to Title I
Loans, including minimum net worth and credit maintenance requirements,
compliance with the Equal Credit Opportunity Act and other federal laws relating
to consumer lending activities, and periodic examinations by HUD as well as
various state laws regulating licensed lenders.
The Company believes that it will be beneficial to the Company and its
stockholders to pursue the foregoing strategies as a basis for reducing expenses
and maximizing efficiencies of current operations as well as increasing
prospects for profitability through diversification. There can be no assurance,
however, that any of these strategies will be successfully implemented. In the
event the Company's restaurant operations continue to generate losses at
approximately the current rate, the Company believes that its existing cash and
investments will be sufficient to satisfy its cash requirements for the next 12
months.
Between June 1995 and June 1996, the Company granted franchises for seven
restaurants. The first franchised restaurant was converted from the Company's
existing Colonia restaurant in December 1995; the second, at a site in Westwood,
New Jersey, opened in April 1996 and the remaining five, at sites in Oakland,
South Orange, Flemington and Belleville, New Jersey and in Dutchess County, New
York, are expected to open later in 1996. An agreement for an eighth franchise
was cancelled in February 1996 and $10,000 of the $25,000 franchise fee paid to
the Company was refunded. The Flemington and Dutchess County locations are being
developed pursuant to an area development agreement, entered into in March 1996,
for up to 18 restaurants at selected shopping centers throughout the country by
specified dates. The Company's other franchised locations are single franchises
granted to individual franchises.
The Company's franchises are governed by a form of franchise agreement
developed for the Company which provides for, among other things, payment by the
franchisee of an initial franchise fee of $25,000 ($20,000 for Colonia) and a
royalty fee based on a percentage of the net sales of the restaurant. In
addition, a franchisee must pay a percentage of net sales to the Company's
advertising fund and spend an additional percentage of net sales for local
advertising. Each franchise agreement specifies a territory within which the
Company will not establish and operate, or grant other parties the right to
establish and operate, a Linda's Chicken restaurant for a specified period of
time. Each franchisee will be required to operate its Linda's Chicken restaurant
in accordance with the franchise agreement and with the methods, standards and
specifications set forth in the Company's confidential operating manual.
The Westwood, New Jersey franchise opened for business in April 1996. This
site was subleased to the franchisee for the same rent payable by the lessor, a
wholly-owned subsidiary of the Company, that entered into a 20-year lease for
the 3,100 sq. ft. space in October, 1994. The Company has guaranteed the
obligations of such subsidiary and the sublessor-franchisee under the lease for
five years following commencement of business. In addition to procuring the
lease, the Company provided $375,000 of construction financing to the franchisee
and arranged for permanent financing from a third party, for the franchisee, to
replace the construction loan. The Company may decide to provide some other form
of financial assistance and accommodations to its franchisees but has no formal
plans or policies with respect thereto.
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USE OF PROCEEDS
Holders of Class C Warrants and Private Unit Purchase Options are not
obligated to exercise their Class C Warrants and Private Unit Purchase Options
and there can be no assurance that any such holders will choose to exercise all
or any of the Class C Warrants or Private Unit Purchase Options. The Company
does not anticipate receiving any material amount of proceeds from the exercise
of the Class C Warrants and the Private Unit Purchase Options in the near
future.
In the event all of the shares of Class A Common Stock underlying the Class
C Warrants and the Private Unit Purchase Options are issued, the net proceeds to
the Company would be approximately $7,400,000, assuming that a solicitation fee
of 5% of the exercise price of each Class C Warrant is paid to Blair. The net
proceeds of such issuances will be treated as uncommitted funds and may be used
by the Company for, among other things, working capital, expansion,
improvements, compensation and general corporate purposes.
SELLING SECURITYHOLDERS
The securities offered hereby may be offered by the Selling Securityholders
from time to time in transactions (which may include block transactions by or
for the account of the Selling Securityholders) in the over-the-counter market
or in negotiated transactions, a combination of such methods of sale or
otherwise. Sales may be made at fixed prices which may be changed, at market
prices prevailing at the time of sale, or at negotiated prices. Such
broker-dealers, if any, may receive compensation in the form of discounts,
concessions or commissions from the Selling Securityholders and/or the purchaser
for whom such broker-dealers may act as agents or to whom they may sell as
principals or otherwise (which compensation as to a particular broker-dealer may
exceed customary commissions).
The Selling Securityholders and broker-dealers, if any, acting in
connection with such sales might be deemed to be "underwriters" within the
meaning of Section 2(11) of the Act and any commission received by them and any
profit on the resale of the securities offered hereby might be deemed to be
underwriting discounts and commissions under the Act.
The following table sets forth certain information, as of July 19, 1996,
with respect to each Selling Securityholder for whom the Company is registering
the securities offered hereby for resale to the public. The Company will not
receive any of the proceeds from the resale of the such securities. Unless noted
otherwise or unless additional securities of such classes are acquired by the
Selling Securityholders, the Selling Securityholders will own no Class A Common
Stock or Warrants upon completion of this Offering.
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Number of Shares
of Class A
Common Stock
Beneficially Owned
Selling Securityholder and Maximum Number
to be Sold(1)
- --------------------------------------------------------------------------------
Carmine Agnello...............................................60,000
James L. Alderman.............................................20,000
Amore Perpetuo, Inc...........................................80,000
Martin A. Bell (2)............................................29,600
Jonathan Brimfield............................................20,000
Robert D. Burke, M.D..........................................20,000
CLFS Equities, Ltd............................................20,000
Robert H. Cohen and Nanette C. Koryn, JTROS...................40,000
Scott Daiagi..................................................20,000
J. Morton Davis...............................................26,800
D.H. Blair Investment Banking Corp............................26,800
Scott Dorfman.................................................20,000
John E. Fetzer Memorial Trust Fund............................20,000
Bruce Fetzer and Darby Fetzer, JTROS..........................20,000
Andrew P. Geiss...............................................20,000
Samuel J. Holtzman Trust......................................80,000
David A. Jividen..............................................20,000
Craig Johnson.................................................20,000
Alda Levitt...................................................20,000
Charles T. McManus............................................20,000
Herbert Michitsch and Mary E. Michitsch, JTROS................10,000
Richard Molinsky.............................................112,800
Victor Molinsky and Janet Molinsky, JTROS.....................20,000
Ruth Morgan...................................................20,000
Patrick Morgan and Ruth Morgan, JTROS.........................20,000
Richard A. Nelson and Elaine M. Nelson, JTROS.................80,000
Veniamin Nilva................................................80,000
Iouri Ostanine................................................40,000
Ruby G. O'Steen and Grace T. O'Steen, TIC.....................40,000
William E. Ozzard (3).........................................10,000
Al Palagonia.................................................129,600
David S. Purvis...............................................20,000
Ruki Renov...................................................107,200
Jack W. Rosen.................................................20,000
Ronald Roth...................................................20,000
Meyer Sapoff..................................................20,000
Matthew C. Schilowitz.........................................80,000
R. Douglas Scheidt............................................40,000
SJG Management, Inc...........................................40,000
-19-
<PAGE>
Leonard A. Solomon............................................20,000
Esther Stahler...............................................107,200
Suan Investments..............................................80,000
Ivan K. Szathmary and Maria V. Szathmary, JTROS (3)..........20,000
Alice C. Tate.................................................40,000
George Wailand................................................20,000
Aaron Wolfson.................................................60,000
Abraham Wolfson...............................................40,000
Wolfson Equities.............................................240,000
Murray Zung...................................................20,000
Total......................................................2,160,000
- --------------------
(1) Represents the total number of shares of Class A Common Stock owned and
shares issuable upon exercise of the Class C Warrants, currently owned, or,
in the case of holders of Private Unit Purchase Options, represents the
total number of shares of Class A Common Stock, and shares issuable upon
exercise of Class C Warrants, constituting the Private Units. Selling
Securityholders may elect to sell their Class C Warrants instead of
exercising them and selling the underlying Class A Common Stock.
(2) Holder of Private Unit Purchase Options.
(3) Members of the Board of Directors of the Company; will continue to own
shares of Class A Common Stock upon completion of the Offering constituting
less than 1% of Class A Common Stock outstanding.
PLAN OF DISTRIBUTION
The securities offered hereby are being offered by the Selling
Securityholders pursuant to this Prospectus.
The Company has agreed not to solicit the exercise of any Class C Warrants
other than through Blair, provided, however that the Company may solicit
exercises on its own behalf, without the assistance of another broker-dealer.
The Company has agreed to pay Blair a solicitation fee of 5% of the aggregate
exercise price of the Class C Warrants which are exercised, if (i) the market
price of the Class A Common Stock is greater than the exercise price of the
Class C Warrants on the date of exercise; (ii) the exercise of the Class C
Warrant was solicited by a member of the National Association of Securities
Dealers, Inc.; (iii) the Class C Warrant is not held in a discretionary account;
(iv) the disclosure of compensation arrangements has been made in documents
provided to customers, both as part of the original offering and at the time of
exercise; and (v) the solicitation of the Class C Warrant was not in violation
of Rule 10b-6 promulgated under the Exchange Act.
-20-
<PAGE>
DESCRIPTION OF SECURITIES
General
The Company's authorized capital stock consists of 15,000,000 shares of
Class A Common Stock, par value $.001 per share, 800,000 shares of Class B
Common Stock, par value $.001 per share, and 2,500,000 shares of preferred
stock, par value $.001 per share (the "Preferred Stock"). There are currently
800,000 shares of Class B Common Stock outstanding held by eight stockholders.
In connection with the IPO, 450,000 shares of the 800,000 shares of Class B
Common Stock outstanding are held in escrow and subject to contribution to the
Company, without consideration, if the Company does not attain certain earnings
levels or the market price of the Company's Class A Common Stock does not
achieve certain targets by December 31, 1997.
Common Stock
The Class A and Class B Common Stock are substantially identical except
that holders of Class A Common Stock have the right to cast one vote for each
share held of record and holders of Class B Common Stock have the right to cast
six votes for each share held of record on all matters submitted to a vote of
holders of Common Stock. The Class A Common Stock and Class B Common Stock vote
together as a single class on all matters on which stockholders may vote,
including the election of directors, except when class voting is required by
applicable law.
Subject to certain exceptions, including transfer to members of a holder's
immediate family and any original holders of Class B Common Stock, (provided, in
both instances, one or more of the original holders of Class B Common Stock has
the power to vote the transferred shares following the transfer), shares of
Class B Common Stock are automatically convertible into an equivalent number of
fully-paid and non-assessable shares of Class A Common Stock upon the sale or
transfer of such shares of Class B Common Stock by the original record holder
thereof. Each share of Class B Common Stock also is convertible at any time at
the option of the holder into one share of Class A Common Stock.
Holders of the Class A Common Stock and Class B Common Stock have equal
ratable rights to dividends from funds legally available therefor, when, as and
if declared by the Board and are entitled to share ratably, as a single class,
in all of the assets of the Company available for distribution to holders of the
Company's common stock as part of a liquidation, dissolution or wind-up of the
affairs of the Company. Holders of Class A Common Stock or Class B Common Stock
do not have preemptive, subscription or conversion rights. There are no
redemption or sinking fund provisions for the benefit of the Class A Common
Stock or Class B Common Stock in the Company's Certificate of Incorporation. All
outstanding shares of Class A Common Stock and Class B Common Stock are, and
those shares of Class A Common Stock offered hereby will be, validly issued,
fully-paid and non-assessable.
Private Units
Each Private Unit consists of one share of Class A Common Stock and one
Class C Warrant. Each Class C Warrant entitles the holder thereof to purchase
one share of Class A Common Stock. The Class C Warrants included in the Private
Units are immediately exercisable and transferable separately.
-21-
<PAGE>
IPO Units
Each IPO Unit consists of one share of Class A Common Stock, one Class A
Warrant and one Class B Warrant. Each Class A Warrant entitles the holder
thereof to purchase one share of Class A Common Stock and one Class B Warrant,
and each Class B Warrant entitles the holder thereof to purchase one share of
Class A Common Stock. The Class A Warrants and Class B Warrants included in the
IPO Units are immediately exercisable and transferable separately.
Redeemable Warrants
Class A Warrants. The holder of each Class A Warrant is entitled, upon
payment of the exercise price of $6.25, to purchase one share of Class A Common
Stock and one Class B Warrant. Unless previously redeemed, the Class A Warrants
are exercisable at any time after issuance through the close of business on the
day immediately preceding the fifth anniversary of the date of such issuance
provided that at such time a current prospectus relating to the Class A Common
Stock and Class B Warrants is in effect and the Class A Common Stock and Class B
Warrants are qualified for sale or exempt from qualification under applicable
state securities laws. The Class A Warrants are separately transferable from the
Class A Common Stock and Class B Warrants issued with such Class A Warrants.
Class B Warrants. The holder of each Class B Warrant is entitled, upon
payment of the exercise price of $8.50, to purchase one share of Class A Common
Stock. Unless previously redeemed, the Class B Warrants are exercisable at any
time after issuance through the close of business on the day immediately
preceding the fifth anniversary of the date of such issuance provided that at
such time a current prospectus relating to the Class A Common Stock is in effect
and the Class A Common Stock is qualified for sale or exempt from qualification
under applicable state securities laws. The Class B Warrants are separately
transferable from the Class A Common Stock and Class A Warrants issued with such
Class B Warrants and the Class B Warrants underlying the Class A Warrants will
be transferred separately from the Class A Common Stock received upon exercise
of the Class A Warrants.
Class C Warrants. The holder of each Class C Warrant is entitled, upon
payment of the exercise price of $5.25, subject to adjustment, to purchase one
share of Class A Common Stock. Unless previously redeemed, the Class C Warrants
are exercisable at any time after issuance through the earlier of ten years
after the date of issuance or five years from the effective date of the
Registration Statement of which this Prospectus is a part, provided that at such
time a current prospectus relating to the Class A Common Stock is in effect and
the shares of Class A Common Stock are qualified for sale or exempt from
qualification under applicable state securities laws. The Class C Warrants are
separately transferable from the Class A Common Stock issued with such Class C
Warrants.
Redemption. The Warrants are subject to redemption by the Company, upon 30
days' written notice, at a price of $.05 per Warrant, if the average closing bid
price of the Class A Common Stock for any 30 consecutive trading days ending
within 15 days of the date on which the notice of redemption is given exceeds
$8.75 per share with respect to the Class A Warrants, $11.90 per share with
respect to the Class B Warrants and $7.35 per share with respect to the Class C
Warrants. Holders of Warrants will automatically forfeit their rights to
purchase the shares of Class A Common Stock (or Class B Warrants, if applicable)
issuable upon exercise of such Warrants unless the Warrants are exercised before
the close of business on the business day immediately prior to the date set for
redemption (the "Redemption Date"). All of the outstanding Warrants, except for
those underlying the Private or IPO Unit Purchase Options, must be redeemed if
any of that class are redeemed. The Warrants underlying the IPO or Private Unit
-22-
<PAGE>
Purchase Options are not subject to redemption by the Company except in certain
circumstances. A notice of redemption shall be mailed to each of the registered
holders of the Warrants by first class mail, postage prepaid, not earlier than
the 16th nor later than the 30th day before the Redemption Date. The notice of
redemption shall specify the redemption price, the Redemption Date, the place
where the Warrant certificates shall be delivered and the redemption price to be
paid, and that the right to exercise the Warrants shall terminate at 5:00 p.m.
(Eastern Standard time) on the business day immediately preceding Redemption
Date.
General. The Warrants may be exercised upon surrender of the certificate(s)
therefor on or prior to the expiration date (or to the close of business on the
business day immediately prior to the Redemption Date) at the offices of the
Company's warrant agent (the "Warrant Agent") with the "Subscription Form" on
the reverse side of the certificate(s) completed and executed as indicated,
accompanied by payment (in the form of certified or cashier's check payable to
the order of the Company) of the full exercise price for the number of Warrants
being exercised.
The Warrants contain provisions that protect the holders thereof against
dilution by adjustment of the exercise price per share and the number of shares
issuable upon exercise thereof upon the occurrence of certain events, including
issuances of Class A Common Stock (or securities convertible, exchangeable or
exercisable into Class A Common Stock) at less than market value, stock
dividends, stock splits, mergers, a sale of substantially all of the Company's
assets, and for other extraordinary events; provided, however, that no such
adjustment shall be made upon, among other things (i) the issuance or exercise
of options or other securities under the Company's 1994 Stock Option Plan, or
other employee benefit plans or (ii) the sale or exercise of the warrants
underlying the Private or IPO Unit Purchase Options or the Warrants offered
hereby.
The Company is not required to issue fractional shares of Class A Common
Stock and, in lieu thereof, will make a cash payment based upon the current
market value of such fractional shares. The holder of the Warrants will not
possess any rights as a stockholder of the Company unless and until he exercises
the Warrants.
Preferred Stock
The Preferred Stock may be issued in series, and shares of each series will
have such rights and preferences as are fixed by the Board in the resolutions
authorizing the issuance of that particular series. In designating any series of
Preferred Stock, the Board may, without further action by the holders of Common
Stock, fix the number of shares constituting that series and fix the dividend
rights, dividend rate, conversion rights, voting rights (which may be greater or
lesser than the voting rights of the Common Stock), rights and terms of
redemption (including any sinking fund provisions), and the liquidation
preferences of the series of Preferred Stock. It is to be expected that the
holders of any series of Preferred Stock, when and if issued, will have priority
claims to dividends and to any distributions upon liquidation of the Company,
and that they may have other preferences over the holders of the Common Stock.
-23-
<PAGE>
The Board may issue series of Preferred Stock without action of the
stockholders of the Company. Accordingly, the issuance of Preferred Stock may
adversely affect the rights of the holders of the Class A Common Stock. In
addition, the issuance of Preferred Stock may be used as an "anti-takeover"
device without further action on the part of the stockholders. The issuance of
Preferred Stock may dilute the voting power of holders of the Class A Common
Stock (such as by issuing Preferred Stock with super-voting rights) and may
render more difficult the removal of current management, even if such removal
may be in the best interests of the stockholders. The Company has no current
plans to issue any of the Preferred Stock.
Dividend Policy
The Company has never paid any cash dividends on its Class A and Class B
Common Stock. The Company anticipates that, in the future, earnings, if any,
will be retained for use in its business or for other corporate purposes, and it
is not anticipated that cash dividends in respect of the Class A or Class B
Common Stock will be paid.
Transfer and Warrant Agent
American Stock Transfer & Trust Company, New York, New York, will serve as
the Company's Transfer Agent for the Class A Common Stock and the Company's
Warrant Agent for the Class C Warrants.
LEGAL MATTERS
Certain matters relating to the validity of the securities offered hereby
were passed upon for the Company by Fischbein Badillo Wagner Harding, New York,
New York.
EXPERTS
The consolidated statements of financial condition of the Company and
subsidiaries incorporated by reference in this Prospectus have been audited by
Rothstein, Kass & Company, P.C., independent certified public accountants, to
the extent and for the periods set forth in their reports incorporated herein by
reference, and are incorporated herein in reliance upon such reports upon the
authority of said firm as experts in auditing and accounting.
-24-
<PAGE>
============================================ =================================
No dealer, salesman or other person
has been authorized to give any information
or to make any representations, other than
those contained in this Prospectus, and, if
given or made, such information or
representations must not be relied upon as LINDA'S DIVERSIFIED HOLDINGS INC.
having been authorized by the Company or
by the Underwriter. This Prospectus does
not constitute an offer to sell, or a
solicitation of an offer to buy, any securities
offered hereby by anyone in any jurisdiction
in which such offer or solicitation is not
qualified and to do so or to anyone to whom 2,160,000 Shares
it is unlawful to make such offer or of Class A Common Stock
solicitation.
---------------------- 1,080,000 Redeemable
Class C Warrants
TABLE OF CONTENTS
------------------------
Page
----
Prospectus Summary........................ PROSPECTUS
Risk Factors.............................. ------------------------
Recent Developments.......................
Use of Proceeds...........................
Selling Securityholders...................
Plan of Distribution......................
Description of Securities.................
Legal Matters.............................
Experts...................................
, 1996
============================================= ==============================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
Expenses payable in connection with the issuance and distribution of the
securities covered by this registration statement are as follows:
Legal Fees and Expenses*.................................................$7,500
Accountants' Fees and Expenses*..........................................$2,000
Total: .............................................................$9,500
- -----------------
* Estimated
The above fees will be paid by the Company.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Reference is made to Section 145 of the Delaware General Corporation Law
(the "DGCL"), Article Ninth of the Certificate of Incorporation of the Company.
The Registrant is a Delaware corporation. Section 145 of the DGCL generally
provides that a corporation is empowered to indemnify any person who is made a
party to any threatened, pending or completed action, suit or proceeding by
reason of the fact that he is or was a director, officer, employee or agent of
the corporation or is or was serving, at the request of the corporation, in any
of such capacities of another corporation or other enterprise, if such director,
officer, employee or agent acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interests of the corporation, and,
with respect to any criminal action or proceeding, had no reasonable cause to
believe his conduct was unlawful. This statute describes in detail the right of
the Company to indemnify any such person.
Pursuant to Article Ninth of the Company's Certificate of Incorporation,
the Company shall indemnify, to the fullest extent permitted by the DGCL, any
person, including officers and directors, with regard to any action or
proceeding.
In addition, the Company is currently a party to indemnity agreements with
each of its directors and executive officers.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933, as amended (the "Act"), may be permitted to directors, officers or
persons controlling the Company, pursuant to the foregoing provisions, the
Company has been informed that, in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy as expressed in the
Act and is, therefore, unenforceable. See "Undertakings."
II-1
<PAGE>
ITEM 16. LIST OF EXHIBITS
Exhibit
No. Description of Exhibit
- ------- ----------------------
2.1 Exchange of Shares Agreement, dated February 14, 1994 between Registrant
and Mildred Goldberger, Peter Weissbrod, Linda Weissbrod, Stuart
Fuchsman, Wendy Fuchsman, Lewis Levine, Caryl Levine, and Martha
Rivera.***
3.1 Certificate of Incorporation of the Registrant and all amendments,
thereof, if any.***
3.2 By-Laws of the Company.***
4.1 Form of Warrant Agreement.***
4.2 Form of Specimen Class A Common Stock Certificate.***
4.3 Form of Specimen Redeemable Class A Warrant Certificate.***
4.4 Form of Specimen Redeemable Class B Warrant Certificate.***
4.5 Class C Warrant Agreement****
4.6 Form of Specimen Redeemable Class C Warrant Certificate.****
5.1 Opinion of Fischbein Badillo Wagner Harding.*
10.1 1994 Stock Option Plan.***
10.2 Employment Agreement between the Registrant and Peter Weissbrod.***
10.3 Employment Agreement between the Registrant and Stuart Fuchsman.***
10.4 Lease, dated July 17, 1991, between M.S.M. Associates and Springfield
Rotisserie, Inc., of the premises at 771 Bloomfield Avenue, West
Caldwell, New Jersey.***
10.5 Lease, dated February 11, 1992, between Raritan Enterprises Partners and
Linda's Chicken of Woodbridge, Inc., of the premises at Bradlees Shopping
Center on 1555 St. George Avenue, Township of Woodbridge, New Jersey.***
10.6 Lease, dated September 23, 1992, between Leslie S. Turchin and Linda's
Chicken of Edison, Inc. of the premises at Tops Plaza Shopping Center,
Route 27, Edison, New Jersey.***
10.7 Form of Stock Escrow Agreement.***
10.8 Lease, dated December 5, 1994, between Eaton Corporation and the
Registrant, of the premises at 11 Commerce Drive, Cranford, New Jersey.**
10.9 Lease, dated December 17, 1994, between Bassett Associates and Linda's
Flame Roasted Chicken, Inc., of the premises at 63 Union Place, Summit,
New Jersey.**
II-2
<PAGE>
10.10 Lease, dated August 24, 1994, between The Prospect Realty Company and
Linda's Chicken of Livingston, Inc., of premises at 504 South Livingston
Avenue, Livingston, New Jersey.**
10.11 Lease, dated October 17, 1994, between Fremartin Realty, Inc. and Linda's
Chicken of Westwood, Inc., of the premises at 499 Broadway, Westwood, New
Jersey.**
10.13 Registrant's Information for Prospective Franchisees, dated August 19,
1994.**
10.14 Form of Indemnity Agreement, between the Registrant and each executive
officer and director of the Company.**
10.15 1995 Stock Option Plan.****
10.16 Agreement of Sale, dated December 20, 1995, between Linda's Chicken of
Woodbridge and Kareem International****
10.17 Form of Sublease Agreement between Linda's Chicken of Woodbridge and
Kareem International****
10.18 Sublease Agreement, dated August 29, 1995, between Linda's Chicken of
Westwood, Inc. and Rita's Enterprises, Inc. of the premises at 499
Broadway, Westwood, New Jersey****
11.1 Calculation of Loss Per Share of Common Stock. See Consolidated Financial
Statements.****
21.1 Subsidiaries of the Registrant (including state of incorporation).****
23.1 Consent of Rothstein, Kass & Company, P.C.*
23.2 Consent of Fischbein Badillo Wagner Harding (included in Exhibit 5.1).*
- ----------------------
* Filed herewith.
** Incorporated by reference to the Registrant's Annual Report on Form
10-KSB as amended on Form 10-KSB/A for the fiscal year ended December 31,
1994.
*** Incorporated by reference to the Registrant's registration statement on
Form SB-2 (Registration No. 33-76422), Part II, Item. 27, filed with the
SEC on May 25, 1994.
**** Incorporated by reference to Registrant's Annual Report on Form 10-KSB
for the fiscal year ended December 31, 1995.
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement to:
(i) include any prospectus required by Section 10(a)(3) of the Securities
Act of 1933, as amended (the "Act");
II-3
<PAGE>
(ii) reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in this
registration statement; and
(iii) include any material information with respect to the plan of
distribution not previously disclosed in this registration statement or any
material change to such information in this registration statement;
provided, however, that paragraphs (1)(i) and (1)(ii) do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the registrant pursuant to
Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") that are incorporated by reference in this registration
statement.
(2) That, for the purpose of determining any liability under the Act, each such
post-effective amendment shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide
offering thereof.
(3) To remove from registration by means of a post-effective amendment any of
the securities being registered which remain unsold at the termination of
the offering.
(4) That, for purposes of determining any liability under the Act, each filing
of the registrant's annual report pursuant to Section 13(a) or 15(d) of the
Exchange Act (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Exchange Act) that is
incorporated by reference in the registration statement shall be deemed to
be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(5) That, insofar as indemnification for liabilities arising under the Act may
be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as
expressed in the Act, and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment
by the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement on Form S-3 to be signed on its behalf by the undersigned, thereunto
duly authorized, in The City of New York, State of New York, on July 24, 1996.
LINDA'S DIVERSIFIED HOLDINGS INC.
(Registrant)
By: /s/Peter Weissbrod
------------------------------
Peter Weissbrod
President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement on Form S-3 has been signed below by the following
persons in the capacities and on the dates indicated.
Date: July 24, 1996 /s/Peter Weissbrod
---------------------------------------------------------
Peter Weissbrod, President, Chief Executive
Officer and Director (Principal Executive Officer)
Date: July 24, 1996 /s/Stuart Fuschman
---------------------------------------------------------
Stuart Fuchsman, Vice President, Chief Operating Officer
and Director
Date: July 24, 1996 /s/Richard Goldberger
---------------------------------------------------------
Richard Goldberger, Chairman of the Board of Directors
Date: July 24, 1996 /s/Gregory Finkelstein
---------------------------------------------------------
Gregory Finkelstein, Treasurer and Comptroller
(Principal Financial and Accounting Officer)
Date: July 24, 1996 /s/Lewis Levine
---------------------------------------------------------
Lewis Levine, Director
Date:
---------------------------------------------------------
Marc Roberts, Director
Date:
---------------------------------------------------------
William Ozzard, Director
Date:
---------------------------------------------------------
Ivan Szathmary, Director
II-5
<PAGE>
EXHIBIT INDEX
Exhibit No. Description of Exhibit
- ----------- ----------------------
5.1 Opinion of Fischbein Badillo Wagner Harding
23.1 Consent of Rothstein, Kass & Company, P.C.
23.2 Consent of Fischbein Badillo Wagner Harding (included in
Exhibit 5.1).
II-6
<PAGE>
EXHIBIT 5.1
July 24, 1996
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: Linda's Diversified Holdings Inc. (formerly Linda's
Flame Roasted Chicken Incorporated)
Registration Statement on Form S-3; File No. 333-
---------------------------------------------------
Dear Sirs:
As counsel to Linda's Diversified Holdings Inc., a Delaware corporation
(the "Company"), we have been requested to render this opinion for filing as
Exhibit 5.1 to the Company's Registration Statement on Form S-3 (the
"Registration Statement"). Each term used herein that is defined in the
Registration Statement and has not been otherwise defined herein, shall have the
meaning specified in the Registration Statement.
The Registration Statement covers the following securities being offered by
Selling Stockholders: 1,080,000 shares of Class A Common Stock, par value $.001
per share ("Shares"), 1,080,000 Redeemable Class C Warrants ("Warrants") and
1,080,000 shares ("Warrant Shares") underlying the Warrants.
We have examined the originals or photocopies or certified copies of such
records of the Company, certificates of officers of the Company and other
documents as we have deemed necessary or appropriate for the purpose of this
opinion. In such examination, we have assumed the genuineness of all signatures
on documents where we have not witnessed the execution thereof, the authenticity
of all documents submitted to us as originals, the conformity to the originals
of all documents submitted to us as certified copies or photocopies and the
authenticity of the originals of such latter documents.
Based on such examination and such other investigations as we have deemed
necessary, we are of the opinion that:
1. The Shares, Warrants and Warrant Shares have been duly authorized.
2. The Shares and Warrants are legally and validly issued, fully paid and
nonassessable.
3. The Warrant Shares have been duly reserved for issuance upon the
exercise of the Warrants and will be legally and validly issued, fully paid and
nonassessable when issued and paid for in accordance with the terms of the
Warrants.
We hereby consent to the filing of this opinion as Exhibit 5.1 to the
Registration Statement, and to the use of our name under the caption "Legal
Matters" in the Prospectus.
Very truly yours,
Fischbein Badillo Wagner Harding
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Linda's Diversified Holdings Inc.
Cranford, New Jersey
We hereby consent to the incorporation by reference in this Registration
Statement of Linda's Diversified Holdings Inc. (formerly known as Linda's Flame
Roasted Chicken Incorporated) on Form S-3 of our report dated February 15, 1996
(except for Note 13 thereof as to which the date is April 11, 1996) with respect
to the consolidated financial statements and schedules of Linda's Flame Roasted
Chicken Incorporated included in its Annual Report on Form 10-KSB.
ROTHSTEIN, KASS & COMPANY, P.C.
Roseland, New Jersey
July 22, 1996
