As filed with the Securities and Exchange Commission on August 7, 1996
Registration No. 33-_____________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------
Form S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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Silver Diner, Inc.
(Exact name of Registrant as specified in its charter)
Delaware 04-3234411
(State or other jurisdiction I.R.S. Employer
of incorporation or organization) Identification No.
11806 Rockville Pike
Rockville, Maryland 20852
(301) 770-0333
(Address and telephone number of Registrant's principal executive offices)
Robert T. Giaimo
President
11806 Rockville Pike
Rockville, Maryland 20852
(301) 770-0333
(Name, address and telephone number of agent for service)
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The Commission is requested to send copies of all
communications to:
Arnold R. Westerman, Esq.
Arent Fox Kintner Plotkin & Kahn
1050 Connecticut Avenue, N.W.
Washington, D.C. 20036
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Approximate date of commencement of proposed sale
to the public: As soon as practicable after this
Registration Statement becomes effective.
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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, 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. / /
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
Title of Shares | |Proposed Maximum | Proposed |
to be | Amount to be |Aggregate Price | Maximum Aggregate | Amount of
Registered | Registered |Per Unit (1) | Offering Price (1) | Registration Fee
- ----------------------------------------------------------------------------------------------
<S> <C>
Common Stock, | | | |
$.00074 par | | | |
value shares | 1,500,000 (2) | $5.75 | $8,625,000 (2) | $2,975(2)
- ----------------------------------------------------------------------------------------------
</TABLE>
(1) Estimated solely for the purpose of determining the registration fee
pursuant to Rule 457(c).
(2) The Prospectus included in this Registration Statement also covers,
pursuant to Rule 429, 40,880 shares of Common Stock covered by
Registrant's Form S-1 Registration Statement File No. 33-83118 and for
which the registration fee was previously paid.
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 this Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE>
PROSPECTUS
SILVER DINER, INC.
1,500,000 Shares of Common Stock
This Prospectus covers the public sale by certain holders (the "Selling
Stockholders") of 1,500,000 shares of common stock, par value $.00074 ("Common
Stock"), of Silver Diner, Inc. (the "Company") acquired by the Selling
Stockholders from the Company on July 11, 1996. See "Selling Stockholders." This
Prospectus also covers, pursuant to Rule 429 of the General Rules and
Regulations under the Securities Act of 1933 (the "Securities Act"), 40,880
shares of Common Stock issuable on the exercise of warrants ("IPO Warrants")
issued by the Company in its initial public offering in November, 1994.
See "Warrantholders."
The Common Stock is traded on the NASDAQ National Market System under the
symbol "SLVR." The last reported sale price of the Common Stock on the NASDAQ
National Market System on August __, 1996 was $______. See "Price Range of
Common Stock."
-------------------------------
See "Risk Factors" for certain information that should be considered by
prospective investors.
-------------------------------
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.
-------------------------------
The Common Stock may be sold from time to time by the Selling
Stockholders and Warrantholders through dealers, brokers or other agents at
market prices prevailing at the time of sale. The Company will bear
substantially all of the expenses incident to the registration of the Common
Stock, which are estimated to be approximately $46,600. The Selling Stockholders
and Warrantholders and any dealers, brokers or agents that participate with the
Selling Stockholders and Warrantholders in the distribution of the Common Stock
to which this Prospectus relates may be deemed to be "underwriters" within
the meaning of the Securities Act.
The date of this Prospectus is August __, 1996
<PAGE>
No person has been authorized to give any information or to make any
representation not contained in this Prospectus and, if given or made, such
information or representation must not be relied upon as having been authorized
by the Company. This Prospectus does not constitute an offer of any securities
other than the registered securities to which it relates or an offer to any
person in any jurisdiction where such offer would be unlawful. The delivery of
this Prospectus at any time does not imply that the information herein is
correct as of any time subsequent to its date.
TABLE OF CONTENTS
Page
Available Information 2
Documents Incorporated by Reference 3
The Company 4
Risk Factors 8
Price Range of Common Stock 11
Use of Proceeds 12
Capitalization 12
Summary Financial Data 13
Management's Discussion and Analysis of Financial 15
Condition and Results of Operations
Description of Capital Stock 24
Selling Stockholders 27
Warrantholders 27
Legal Matters 28
Experts 28
AVAILABLE INFORMATION
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 filed by the Company with the Commission,
including the Registration Statement on Form S-3 of which this Prospectus is a
part, may be inspected and copied at the public reference facilities maintained
by the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, Seven World
Trade Center, New York, New York 10048 and 500 West Madison Street, Chicago,
Illinois 60661. Copies of such material can also be obtained from the Public
Reference Section of the Commission at 450 Fifth Street, N.W., Washington, D.C.
20549, at prescribed rates. The Common Stock is traded in the over-the-counter
market and is quoted in the NASDAQ National Market System. Copies of the
Company's reports, proxy statements and other information filed with the
Commission can also be inspected at the offices of the National Association of
Securities Dealers, Inc. at 1735 K Street, N.W., Washington, D.C. 20006.
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<PAGE>
The Company has filed with the Commission a Registration Statement on
Form S-3 under the Securities Act of 1933, as amended (the "Securities Act"),
with respect to the Common Stock offered hereby. This Prospectus does not
contain all of the information set forth in the Registration Statement and the
exhibits thereto, certain parts of which are omitted as permitted by the rules
and regulations of the Commission. Statements contained in this Prospectus as to
the contents of any contract or other document are not necessarily complete, and
in each instance reference is made to the copy of such contract or other
document filed as an exhibit to the Registration Statement, each such statement
being qualified in all respects by such reference. For further information
regarding the Company and the securities offered hereby, reference is made to
the Registration Statement and to the exhibits thereto.
DOCUMENTS INCORPORATED BY REFERENCE
The following documents previously filed by the Company with the
Commission pursuant to the Exchange Act are incorporated herein by this
reference:
(1) The Company's Annual Report on Form 10-K for the year ended December
31, 1995.
(2) The Company's Quarterly Report on Form 10-Q for the period ended July
14, 1996.
(3) The Company's Definitive Proxy Statement dated February 14, 1996.
All documents filed by the Company pursuant to Section 13(a), 13(c), or
14 of the Exchange Act after the date of this Prospectus and prior to
termination of the offering of the Common Stock shall be deemed to be
incorporated by reference in this Prospectus and to be a part hereof from the
date any such document is filed. Any statement contained in a document
incorporated or deemed to be incorporated by reference herein shall be modified
or superseded for purposes of this Prospectus to the extent that a statement
contained herein or in any subsequently filed document which is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Prospectus.
The Company will provide without charge to each person to whom a copy of
this Prospectus is delivered, upon written or oral request, a copy of any and
all of the documents incorporated by reference herein, other than exhibits to
such documents unless such exhibits are specifically incorporated by reference
into such documents. Any such request may be directed to Silver Diner, Inc.,
Attention: David Oden, at the Company's principal executive offices, which are
located at 11806 Rockville Pike, Rockville, Maryland, 20852, telephone number
(301) 770-0333.
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<PAGE>
THE COMPANY
The Company was incorporated in Delaware in April 1994 under the name
Food Trends Acquisition Corporation ("FTAC"). In March 1996, FTAC (i) acquired
all of the capital stock of Silver Diner Development, Inc. and (ii) changed its
name to Silver Diner Development, Inc. ("SDDI"). In June 1996, SDDI changed its
name to Silver Diner, Inc. Unless the context otherwise requires, reference to
the Company includes FTAC, SDDI and its wholly owned subsidiaries. See "The
Company -- Recent Developments".
The Company's executive offices are located at 11806 Rockville Pike,
Rockville, Maryland 20852 and its telephone number is (301) 770-0333.
Business.
The Company operates six Silver Diner restaurants in the
Washington/Baltimore Metropolitan Area serving breakfast, lunch, dinner and late
night meals. The Company targets the growing number of customers tired of
traditional fast food whose need for a quick, high-quality, reasonably priced
meal is not being adequately served by existing family or casual theme
restaurants; the Company capitalizes on the timeless diner theme to uniquely
address this need. By attracting a broad range of customer segments, maintaining
extended operating hours, a diverse menu and convenient locations, the Company
is able to compete effectively in the fast food, family and casual dining
segments of the restaurant industry, contributing to the significant sales
volumes of its units. The Company is introducing the Silver Diner Market and
Bakery, which features a range of carryout options targeting the growing "home
meal replacement" market, as well as specialty coffee drinks and expanded bakery
selections.
The Silver Diner is open for four meal periods, allowing the Company to
generate significant volumes at each store and thus bid for the best locations.
The restaurants achieve rapid seating turnover through efficient menu and
kitchen engineering, incorporating a variation of "sous-vide" food production
technique enabling it to efficiently make a wide range of scratch-cooking
recipes with reduced labor hours, kitchen preparation and raw ingredient storage
area. Each Silver Diner is led by a "Managing Partner" who lives, and
participates, in the community and, through an incentive-based bonus system
which includes stock ownership, has a long-term commitment to that restaurant's
success.
The Company opened its first 5,000 square foot diner in Rockville,
Maryland in 1989, and then opened one restaurant per year for the next three
years. During 1993 and 1994, the Company began a series of engineering and
design refinements in order to lower building costs, increase layout
efficiencies and improve restaurant decor. In addition, the Company commissioned
several independent market studies and refocused its site selection process. In
April and December of 1995, the Company opened its fifth and sixth diners in
Fair Oaks, Virginia and Tyson's Corner, Virginia, respectively. These diners,
which will serve as the prototypes for future expansion, contain 37% more seats
per restaurant than the average of the original four units, but cost
approximately 40% less per seat to build. Weekly sales at Fair Oaks is currently
averaging approximately $50,000, which is consistent with average weekly sales
since Fair Oaks opened in April 1995 (excluding the first
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<PAGE>
12 "start-up" weeks). Weekly sales at Tyson's Corner are currently averaging
approximately $64,000, which is consistent with average weekly sales since its
opening in December 1995 (excluding the first 12 "start-up" weeks). Sales
for the first 12 weeks are excluded because both restaurant sales and expenses
are generally higher during this start-up period.
In June 1996, the Company announced the introduction of, on a limited
basis in certain existing restaurants, the Silver Diner Market & Bakery, which
features a range of carry-out options targeting the growing "home meal
replacement" market, as well as specialty coffee drinks and an expanded bakery
selection. The Company plans to incorporate a larger version of the Market &
Bakery in its new prototype for future restaurant locations. Also, as part of
the Company's ongoing process of menu innovation and development, a summer menu
was implemented, which includes an updated product line designed to enhance
customer frequency and gross profit.
Expansion Plans.
During 1996 and 1997 management plans to open six to eight Silver Diners,
which may include its first store opening in a second major metropolitan market.
The Company has executed leases for three new Silver Diners to be located in
Merrifield, Clarendon and Springfield, Virginia, has commenced construction of
the Clarendon Silver Diner and executed an agreement to purchase the property
for a fourth new Silver Diner in Reston, Virginia. Management intends to pursue
a sale leaseback strategy on the Reston property following the restaurant's
opening.
Management believes the greater Washington/Baltimore area can support
fifteen to twenty Silver Diners and it will continue to penetrate this market
area in order to take advantage of increased name recognition and economies of
scale in advertising, management and overhead. Management believes that there
are numerous other major metropolitan areas throughout the United States that
can support a similar concentration of Silver Diner restaurants and intends to
pursue expansion in these markets in a manner similar to Washington/Baltimore.
The Company is currently evaluating for future expansion several major
metropolitan areas, including Southern Florida, and the corridor between
Philadelphia and Northern New Jersey. The Company expects that the Silver Diners
opened in the next two years will continue to be company-owned, while subsequent
expansion in major metropolitan markets may include area joint-ventures or
franchises. There is no assurance that the Company's expansion plans will be
realized or that future Silver Diners will be favorably received.
Unit Economics.
The first four Silver Diners have produced profitable store level
operating results despite high occupancy and development costs. The Fair Oaks
and Tysons Corner diners, which will serve as the prototypes for future
expansion, have total building and equipment costs which were approximately 40%
less per seat than the average of the first four Silver Diners. This was the
result of a two-year value engineering and design refinement process principally
relating to building cost reductions, layout efficiencies and decor
improvements.
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<PAGE>
The following table presents pro forma unit economic results based on
actual operating results for the year ended December 31, 1995, adjusted for
occupancy, as well as building and equipment costs. Depreciation and
amortization is based upon the development costs for Fair Oaks and Tysons Corner
prototypes and estimated average site costs for future Silver Diners based on
the Silver Diner sites currently being evaluated. Occupancy costs are based on
Fair Oaks, Tysons Corner and commitments for the next four proposed locations.
Such costs are lower than those incurred for the first four Silver Diners.
The pro forma operating results are not necessarily indicative of the
results of operations for future periods.
Pro Forma Annual Unit Economics
Average Net Sales $2,711,600 100%
Cost of Sales 734,600 27.1
Labor 874,800 32.3
Operating Expenses 411,400 15.1
---------- ------
Restaurant Operating Income Before
Occupancy Costs and Depreciation and
Amortization 690,800 25.5
Occupancy Costs 213,000 7.9
Depreciation and Amortization 80,000 3.0
---------- -------
Restaurant Operating Income $ 397,800 14.6%
========== =======
Average Net Sales. The average annual net sales for the four Silver
Diners in operation during all of 1995 was approximately $2.7 million or $52,000
per week. These Silver Diners had an average of approximately 5,000 square feet,
an average of approximately 186 seats and generated average sales of
approximately $540 per square foot during 1995. Fair Oaks and Tysons Corner,
which are the prototypes for future expansion, opened in April and December
1995, respectively, and have 30% more seats than the average of the existing
four Silver Diners during 1995 for a total of 242 seats each and 5,675 square
feet each.
Cost of Sales, Labor and Operating Expenses. After cost of sales, labor
and operating expenses, the Silver Diners in operation during all of 1995
generated unit-level income of approximately $690,800 per unit, or 25.5% of
sales before occupancy costs and depreciation and amortization.
Occupancy Costs. Occupancy costs consist of annual rent, property and
real estate taxes and insurance. The occupancy costs in the foregoing table
reflect the average occupancy costs payable on a cash basis over the first five
years for Fair Oaks, Tyson's Corner and for the next four proposed
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<PAGE>
locations. Rent for certain of the original four Silver Diners includes amounts
attributable to build to suit arrangements with landlords or amounts
attributable to funds provided by the landlord for building and equipment costs.
Management does not expect that the next four proposed locations will involve
build to suit arrangements or advances by landlords for building and equipment
costs.
Depreciation and Amortization. The building and equipment costs for Fair
Oaks and Tysons Corner were approximately $1,345,000 and $1,432,000,
respectively, or approximately $5,600 and $5,900, respectively, per seat, for
242 seats, which is 40% less per seat, compared to the average building and
equipment costs for the first four Silver Diners of approximately $1,740,000, or
approximately $9,800 per seat, for an average of 177 seats. Management expects
that the building and equipment costs for the next four proposed locations will
be approximately $1,350,000. Depreciation and amortization have been adjusted on
a pro forma basis in the foregoing table since depreciation and amortization
charges in the Combined Financial Statements--Silver Diner Development, Inc.,
Silver Diner Limited Partnership and Silver Diner Potomac Mills, Inc. do not
include building and equipment costs paid by landlords and included in rent.
Site development costs, which are in addition to building and equipment costs,
can vary from approximately $75,000 to, in exceptional circumstances, $600,000.
Site development costs include site construction costs, offsite improvements,
utility fees, site feasibility and engineering costs. The pro forma depreciation
and amortization is based upon the Fair Oaks and Tysons Corner prototype
building and equipment costs and site development costs of $275,000, which
management believes will be the approximate average site costs for future Silver
Diners. Site costs for the next four locations are expected to average $340,000
due to anticipated higher cost for the Clarendon location.
Restaurant Operating Income. The pro forma Restaurant Operating Income
shown in the foregoing table is before pre-opening costs, which were
approximately $200,000 each for Fair Oaks and Tysons Corner, amortized over 12
months, and lease costs, which were approximately $20,000 for Fair Oaks and
$96,000 for Tysons Corner, amortized over the life of the lease. See Combined
Financial Statements--SDDI.
Recent Developments.
The Merger. In March 1996, a subsidiary of the Company merged with Silver
Diner Development, Inc., a Virginia corporation ("SDDI"). As a result of the
merger ("Merger"), SDDI became a wholly-owned subsidiary of the Company and the
Company changed its name from Food Trends Acquisition Corporation to Silver
Diner Development, Inc., and in June 1996, to Silver Diner, Inc. Prior to the
merger, the Company was a publicly traded 'blind pool' of $14.2 million in cash
which was raised essentially on the reputation of George Naddaff, the former
Chairman and Chief Executive Officer of Boston Chicken. This infusion of capital
resulted in a virtually debt-free balance sheet and cash for the Company to fund
growth over the next two years. See "Capitalization." The Company currently
trades on the Nasdaq National Market under the symbol "SLVR."
Acquisition of Silver Diner Limited Partnership. Silver Diner Limited
Partnership ("SDLP"), of which SDDI is the general partner, operates the first
three of the six Silver Diners. In June, 1996,
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<PAGE>
the Company acquired all of the limited partnership interests in SDLP held by
unaffiliated third parties for a purchase price of $2.472 million and 84,000
warrants ("New Warrants") to purchase shares of Common Stock at $8.00 per
share. The New Warrants are exercisable at any time on or before the
earlier of January 31, 1998 or 30 days following the first public offering
of Common Stock on or after June 30, 1997. As a result of this
transaction, the Company now owns, directly and indirectly, 100% of SDLP.
Private Placement. On July 11, 1996, the Company completed a private
placement of 1,500,000 shares of Common Stock to the Selling Stockholders for
$5.50 per share. The proceeds of the sale were used in part to replace funds
used for the acquisition of the SDLP partner interests and the remainder was
added to working capital to be used in large part to fund expansion. See "The
Company--Expansion Plans." In connection with the sale, the Selling Stockholders
and the Company entered into a Subscription Agreement which requires the Company
to register under the Securities Act, at the Company's expense, the shares of
Common Stock sold in the private placement. See "Selling Stockholders."
RISK FACTORS
The following risks should be carefully considered, in addition to the
other information contained herein, in evaluating the purchase of shares of the
Company's Common Stock.
History of Losses. SDDI has reported a net loss in each year since its
inception, including net losses, on a combined basis, of $1,474,364, $946,633,
and $1,322,730 in each of the fiscal years ended December 31, 1993, January 1,
1995, and December 31, 1995, respectively, and $946,228 for the 28 week period
ended July 14, 1996. Future operating results will depend upon many factors
including the Company's ability to generate adequate unit volumes in its
restaurants, effectively monitor and control operating costs and successfully
execute its expansion plans. There can be no assurance that profitability will
be achieved.
Expansion Risk/Ability to Manage Growth. The Company's continued growth depends,
to a significant degree, on its ability to open and operate new Silver Diners on
a profitable basis. The Company's expansion plans represent a significant
increase in both the number of restaurants and the rate of the Company's unit
expansion and will require the Company's management to operate a significantly
larger business over a broader geographical area. The Company's planned
expansion is dependant upon a number of factors including the availability of
sites on terms favorable to the Company and the availability of capital. There
can be no assurance that the Company will be able to achieve its unit expansion
goals, manage its growth effectively or operate its new units profitably.
Possible Volatility of Stock Price; Shares Eligible for Future Sale.
Approximately 46% of the outstanding shares of Common Stock, are subject to
lock-up agreements prohibiting their sale for periods expiring between December
22, 1996, and November 3, 1997. As the lock-up periods expire, the larger
number of shares of Common Stock available for resale could have an adverse
impact on the market price of the Common Stock. Additional factors such as
announcements by the Company of variations in its quarterly financial
results, changes in governmental regulations, competitive
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developments, sales of substantial blocks of the Common Stock of the Company by
the holders thereof, and the issuance of stock in connection with future
financing requirements, if any, among other things, could cause the market
price of the Common Stock of the Company to fluctuate significantly.
Concentration of Voting Control. Robert T. Giaimo beneficially owns
approximately 16.8% of the outstanding shares of the Company and holds proxies
to vote an additional 11.3% pursuant to certain voting and lock-up agreements.
Mr. Giaimo is also Chairman of the Company's Board of Directors ("Board"),
President and Chief Executive Officer and, pursuant to the terms of an
employment agreement with the Company, his employment in those positions is for
an initial term of five years commencing on March 27, 1996, and, starting on the
first anniversary of commencement, renewable for five years from each such
anniversary. If the Board does not renew, the agreement will expire five years
from such anniversary. As a result of the foregoing, Mr. Giaimo has significant
control over the direction and operation of the Company. Such concentration of
control may have an adverse effect on the market price of the Common Stock.
Dependence upon Key Personnel. The success of Silver Diner is highly dependent
upon two of its key executive officers, Robert T. Giaimo, President and CEO, and
Ype Hengst, V.P. of Culinary Operations. While the Company currently maintains
key man life insurance on Mr. Giaimo, the loss of his services could have a
material adverse effect on the Company. The Company also believe that its future
success will also depend on the ability to continue to attract and retain
qualified personnel to provide day-to-day management of the Silver Diners. There
can be no assurance that the Company will be successful in continuing to attract
and retain such personnel on acceptable terms.
Trends in Restaurant Business. The restaurant industry is one of the largest
industries in the United States in terms of volume of sales and number of
employees. It is also one of the most segmented industries, and the trends which
affect one or more segments, may, therefore, have minimal or no effect on
another segment. The success or failure of a particular restaurant concept is
often dependent upon changes in trends among consumers, changes in public taste,
general economic conditions, cost of food, traffic patterns and other factors
which cannot be predicted. In addition, the Silver Diners are dependent on
frequent delivery of fresh products. Consequently, the Company's business is
subject to the risk that shortages or interruptions in supply may develop as a
result of adverse weather or other conditions, and such interruptions could
adversely affect the availability, quality and cost of ingredients.
Competition. The restaurant industry is intensely competitive with respect to
price, service, location and food quality. With respect to quality and cost of
food, size of food portions, decor and quality service, the Silver Diners
compete with fast food and family style restaurants with ready to cook food and
take-out. Silver Diners are located in areas of high concentration of such
restaurants. There are many well established foodservice competitors with
substantially greater financial and other resources than the Company and with
substantially longer operating histories. These competitors will also compete
with the Company in obtaining premium locations for restaurants (e.g., shopping
malls and strip shopping centers) and in attracting and retaining employees. In
addition, one or more national foodservice chains or other companies could
introduce a multi-unit
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chain of foodservice establishments that use one or more foodservice concepts
which resemble one or more of the foodservice concepts used by the Company.
Government Regulation. Restaurant operations are subject to various federal,
state and local laws and regulations relating to health, sanitation, safety,
environmental, land use and building codes. Compliance with such laws and
regulations can impede the operations of a Silver Diner and can delay or
preclude construction and completion of a new Silver Diner. Additionally, Silver
Diner has obtained, and intends to continue to obtain, liquor licenses for each
Silver Diner, and is subject in certain states to 'dram-shop' statutes and other
regulations concerning the sale and consumption of alcoholic beverages. There
can be no assurance that such approvals and licenses for new Silver Diners will
be obtained and, if obtained, will be renewed or not revoked.
No Assurances of Trademarks. The Company believes that its trademarks and
service marks are valuable to the marketing of its restaurants. There can be no
assurance that the Company's marks, even as, and if, registered, do not or will
not violate the proprietary rights of others, that the marks will be upheld if
challenged, or that the Company will not be prevented from using the marks, any
of which could have a materially adverse effect on the Company. The Company's
policy is to pursue registration of its marks whenever possible and to oppose
vigorously any infringement of its marks, the success of which cannot be
assured.
Dividends Unlikely. The Company has not paid any dividends on its Common Shares
to date and it is unlikely that any dividends will be paid in the foreseeable
future. The payment of dividends is contingent upon the Company's revenues and
earnings, if any, capital requirements and general financial condition and is
subject to the discretion of the Board.
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PRICE RANGE OF COMMON STOCK
Since March 27, 1996, the Common Stock has been quoted on the NASDAQ
National Market System under the symbol SLVR. Prior thereto, the Common Stock
was quoted on the OTC Bulletin Board under the symbol FDTR. The following table
sets forth, for the periods indicated, the high and low closing sale prices of
the Common Stock:
Quarter High Low
1994 Fourth $4-1/4 $4-1/4
1995 First $4-3/8 $4-1/4
Second $4-1/2 $4-3/8
Third $4-15/16 $4-1/2
Fourth $5-1/16 $4-15/16
1996 First (to March 26) $6-11/16 $4-3/4
First (March 27 to March 31) $6-3/4 $6-1/8
Second $7-7/8 $5-5/8
Third (to August 2) $6 $5-1/2
Approximately 46% of the outstanding shares of Common Stock are subject
to lock-up agreements prohibiting their sale for periods expiring between
December 22, 1996, and November 3, 1997. As such lock-up agreements expire,
sales of substantial numbers of these shares could affect the market price. No
assurance can be given as to whether there will be a market for such shares or
the market price thereof. See "Risk Factors -- Possible Volatility of Stock
Price; Shares Eligible for Future Sale."
The last reported sale price of the Common Stock on the NASDAQ National
Market System on August __, 1996, was $______.
Since inception, no dividends have been paid on the Common Stock.
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USE OF PROCEEDS
The Common Stock offered hereby will be sold by the Selling Stockholders.
While the Company received $5.50 per share from the sale of 1.5 million shares
of Common Stock from the Private Placement, the Company will not receive any of
the funds from the sale by the Selling Stockholders. The net proceeds from the
Private Placement, aggregating approximately $7.6 million, will be used to
replace funds used for the acquisition of the SDLP limited partnership interests
and the remainder will be added to working capital to be used in large part
to fund expansion.
The Company will receive $5.00 per share from the IPO Warrantholders upon
the exercise of each IPO Warrant. The proceeds from the IPO Warrant exercise
price will be used by the Company for general corporate purposes.
CAPITALIZATION
The following table sets forth the capitalization of the Company at July
14, 1996. This table should be read in conjunction with the Company's financial
statements and notes thereto, appearing elsewhere in this Prospectus.
At July 14, 1996
(Unaudited)
Long-term Debt (including Current Portion $ 391,527
Stockholders Equity
Common Stock * 8,513
Paid-in Capital 30,232,863
Accumulated Deficit (7,881,855)
-----------
Total Stockholders Equity $22,359,521
-----------
Total Capitalization $22,751,048
===========
- ----------------
* The Company is authorized to issue 20,000,000 shares of Common Stock, par
value $.00074, of which 11,503,858 shares are outstanding. At July 14, 1996,
there were 706,215.703 shares of Common Stock subject to options,
295,079.153 of which are exercisable at 3/10 of $.01 or less per share and
the balance at a price of either $3.60 or $4.05 per share. Of the aggregate
options outstanding, 311,352.921 are incentive stock options. See Note 10 of
Notes to Combined Financial Statements -- SDDI.
- 12 -
<PAGE>
SUMMARY FINANCIAL DATA
The following tables set forth certain historical and pro forma
financial data for both the Company (formerly known as Food Trends Acquisition
Corporation) and Silver Diner Development, Inc. for periods prior, and
subsequent, to the Merger. The summary financial data presented herein should be
read in conjunction with the audited financial statements and other historical
and pro forma financial information for each of SDDI and FTAC and Management's
Discussion and Analysis of Financial Condition for each included elsewhere in
this Prospectus. For accounting and financial reporting purposes, the Merger was
treated as a recapitalization of SDDI and as an issuance of SDDI common stock
for monetary assets and liabilities. The unaudited combined pro forma
information, which gives effect to the Merger, is presented for illustrative
purposes only and is not necessarily indicative of the operating results or
financial position that would have occurred if the Merger had been consummated,
nor is it necessarily indicative of future operating results or financial
position.
<TABLE>
<CAPTION>
Pro Forma
Combined The Company
SDDI FTAC (unaudited) (unaudited)
28 Weeks Ended
Year Ended December 31, 1995 July 15, 1995 July 14, 1996
--------------------------------------------------------------- ------------- -------------
<S> <C>
Net sales $13,350,255 -0- $13,350,255 $6,679,832 $8,868,848
Restaurant costs and expenses
Cost of sales 3,655,254 -0- 3,655,254 1,839,017 2,448,791
Labor 4,452,134 -0- 4,452,134 2,211,178 2,997,133
Operating 2,015,668 -0- 2,015,668 1,002,188 1,348,026
Occupancy 1,588,527 -0- 1,588,527 798,782 1,037,131
Depreciation and amortization 715,426 715,426 334,221 514,178
------- ------- ------- -------
Total restaurant costs
and expenses 12,427,009 -0- 12,427,009 6,185,386 8,345,259
---------- --------- ---------- --------- ---------
Restaurant operating income 923,246 -0- 923,246 494,446 523,589
General and administrative 2,077,735 852,234 2,929,969 849,641 1,348,601
Interest expense 334,086 -0- 61,432 128,497 189,560
Investment (income) loss, net (83,021) (789,561) (872,582) (38,847) (138,645)
Depreciation and amortization 97,351 3,343 100,694 51,702 70,301
------ ----- ------- ------ ------
Loss before minority interest (1,502,905) (66,016) (1,296,267) (496,547) (946,228)
and income taxes
Minority interest in net loss 180,175 -0- 180,175 180,175 -0-
of SDLP ------- ------------- ------- ------- ---------
Loss before income taxes (1,322,730) (66,016) (1,116,092) (316,372) (946,228)
Income Taxes -0- 46,205 46,205 -0- -0-
-------------- ------ ------ --------- ---------
NET LOSS $(1,322,730) $(112,221) $(1,162,297) $(316,372) $(946,228)
============ ========== ============ ========== ==========
</TABLE>
- 13 -
<PAGE>
<TABLE>
<CAPTION>
Pro Forma
Combined The Company
SDDI FTAC (unaudited) (Unaudited)
As of December 31, 1995 As of July 14, 1996
-------------------------------------------------------------------------------------------
<S> <C>
Balance Sheet Data:
Total assets $10,794,469 $14,233,186 $21,819,492 $25,732,358
Long-term debt, including
current portion 5,403,136 -0- 584,942 391,527
Equity 1,234,274 11,346,436 17,085,779 22,359,521
Per Share Data:
Book value $8.18 $4.07 $1.67 $1.94
Net loss from continuous
operations ($8.80) ($.03) ($.11) ($.02)
Cash dividends -0- -0- -0- -0-
Weighted average common
shares outstanding 150,374 3,325,000 10,261,365 10,075,287
</TABLE>
- 14 -
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATION
General
The Company operates six Silver Diners in the Washington/Baltimore
Metropolitan Area. The first Silver Diner was opened in Rockville, Maryland in
February 1989. One additional Silver Diner was opened in each of 1990, 1991 and
1992. In April 1995, the Company opened its fifth Silver Diner in Fair Oaks,
Virginia, which will serve as the prototype for future expansion. The sixth
Silver Diner opened in Tysons Corner, Virginia, on December 5, 1995. The Company
plans to open six to eight additional Silver Diners by the end of 1997, which
may include openings in a second major metropolitan market. Longer term, the
Company plans to expand the Silver Diner chain nationwide, through additional
openings of Company owned restaurants and possibly through the development of
franchise or joint venture relationships.
During the first few months of operation, new Silver Diners typically
produce weekly sales volumes which are higher than expected annual averages.
Likewise, during this opening period, costs of sales and labor costs are
typically above annual averages. Preopening costs, including labor costs and
costs of hiring and training personnel and certain other costs relating to
opening new Silver Diners are capitalized and amortized over one year from date
of opening. While general and administrative expenses as a percentage of sales
are expected to continue to decline, the Company is expanding its corporate
staff in anticipation of its expansion program, which will result in higher
gross dollars spent on general and administrative expenses.
Effective January 1, 1994, SDDI adopted a 52 or 53-week fiscal year
which ends on the Sunday nearest December 31. The fiscal quarters for SDDI
consist of accounting periods of 16, 12, 12 and 12 or 13 weeks, respectively. As
a result of the change, the year ended January 1, 1995 was a 366-day year.
In October 1995, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standard No. 123, "Accounting for Stock-Based
Compensation" ("SFAS No. 123"). SFAS No. 123 is effective for financial
statements issued for fiscal years beginning after December 15, 1995. SFAS No.
123 addresses the accounting for awards of stock-based compensation to employees
and transactions in which an entity issues its equity instruments to acquire
goods and services from nonemployees. SFAS No. 123 allows an entity to continue
to measure compensation costs for awards of stock-based compensation to
employees using the intrinsic value based method of accounting prescribed by APB
Opinion No. 25. However, entities electing to remain with the accounting after
APB Option No. 25 must make pro forma disclosures of net income and earnings per
share, as if the fair value method of accounting defined within SFAS No. 123 had
been applied. Management anticipates electing to remain with the accounting
under APB Opinion No. 25 and providing the pro forma disclosures as required
under SFAS No. 123.
On March 27, 1996, the Company completed a merger with Food Trends
Acquisition Corporation. As a result of this merger, the pre-merger SDDI
stockholders now own approximately 57% of the stock of FTAC, which changed its
name to Silver Diner, Inc. Upon consummation of
- 15 -
<PAGE>
the merger, the pre-merger SDDI directors and officers became directors and
officers of FTAC. The common shares of FTAC are now traded on the Nasdaq
National Market under the symbol SLVR.
For accounting and financial reporting purposes, the merger was treated
as a recapitalization of SDDI and as an issuance of SDDI common shares for
monetary assets and liabilities. The surviving corporation will reflect, in its
consolidated financial statements, the assets and liabilities of SDDI at their
book values. Accordingly, the results of operations and financial position of
the resulting corporation for periods and dates prior to the merger will be the
historical results of operations and financial position of SDDI for such periods
and dates.
In connection with the Merger, on April 2, 1996, notes payable -
related party totalling $1,236,811 were repaid by the offset of amounts due from
affiliates of $355,023 and the net outstanding balance was paid in full by the
Company. On April 1, 1996, the Company terminated its capital lease obligation
with a related party by purchasing the leased equipment at the remaining lease
obligation balance of approximately $148,000. In addition, the Company repaid
certain bank notes of SDDI in the approximate amount of $904,000 on April 4,
1996.
In June 1996, the Company purchased all of the limited partnership
interests in SDLP from the original investors for $2,472,000 in cash and 84,000
warrants to purchase shares of Common Stock exercisable at $8.00 per share until
the earlier of 30 days following the first public offering on or after June 30,
1997 or January 31, 1998. SDLP operates three Silver Diners, including the
first Silver Diner in Rockville, Maryland. As a result of this transaction, the
Company now owns, directly or indirectly, 100% of SDLP. Because SDLP's financial
statements were previously combined with the Company's, the acquisition of the
minority interest did not result in any change in the Company's reported net
sales, restaurant costs and expenses or restaurant operating income. The
acquisition was accounted for under the purchase method and the entire cost of
the transaction, estimated to be $2.8 million, was recorded as goodwill and
is being amortized on a straight-line basis over 15 years.
All historical shares of common stock and per share amounts for periods
prior to the Merger have been retroactively adjusted to reflect the FTAC shares
issued to the SDDI stockholders at the time of the Merger.
On July 11, 1996, the Company sold in a private placement 1.5 million
shares of Common Stock at $5.50 per share for an aggregate sales price of
$8,250,000 ("Private Placement"). Approximately $2.5 million of the
approximately $7.6 million net proceeds of the sale was used to replace the
funds used for the acquisition of the minority interest in SDLP, and the
remainder will be used to fund expansion. In connection with the sale, the
Company agreed to register the shares with the Securities and Exchange
Commission.
- 16 -
<PAGE>
Results of Operations
The following table sets forth the percentage of net sales of items
included in the combined statements of operations for the periods indicated:
<TABLE>
<CAPTION>
Year Ended 28 weeks ended
December 31, January 1, December 31, July 16, 1995 July 14, 1996
1993 1995 1995 (unaudited) (unaudited)
<S> <C>
Net sales 100.0% 100.0% 100.0% 100.0% 100.0%
Restaurant costs and expenses
Cost of sales 28.2% 27.9% 27.4% 27.5% 27.6%
Labor 31.3% 32.4% 33.3% 33.1% 33.8%
Operating 14.8% 15.1% 15.1% 15.0% 15.2%
Occupancy 11.7% 11.8% 11.9% 12.0% 11.7%
Depreciation and
amortization 7.6% 3.4% 5.4% 5.0% 5.8%
------ ------- ------- ------ ------
Restaurant operating income 6.4% 9.4% 6.9% 7.4% 5.9%
General and administrative 10.5% 17.2% 15.6% 12.7% 15.2%
Interest expense 3.4% 2.4% 2.5% 1.9% 2.1%
Investment (income) loss, net -0.2% --- -0.6% -0.6% -1.5%
Depreciation and amortization 0.4% 0.6% 0.7% 0.8% 0.8%
Development and abandoned
site costs 6.6% 0.9% --- --- ---
------ ------- ------- ------ -----
Loss before minority interest
and income taxes -14.3% -11.7% -11.3% -7.4% -10.7%
Minority interest in net loss
of SDLP 1.2% 3.1% 1.4% 2.7% ---
------ ------- ------- ------- ------
Net loss -13.1% -8.6% -9.9% -4.7% -10.7%
====== ======= ======= ======= ========
</TABLE>
Unit Sales
The following table sets forth the net sales of each Silver Diner for
the periods indicated:
<TABLE>
<CAPTION>
Year Ended 28 weeks ended
------------------------------------------------
Date No. of December 31, January 1, December 31, July 16, 1995 July 14, 1996
Opened Seats 1993 1995 1995 (unaudited) (unaudited)
------ ------- ------ ------ ------ ----------- -----------
<S> <C>
Rockville 02/07/89 256 (1) $4,084,760 $3,934,177 $4,056,404 $2,176,494 $2,115,834
Laurel 09/18/90 153 2,207,264 2,208,454 2,171,527 1,160,704 1,192,312
Potomac Mills 10/15/91 164 2,443,333 2,199,551 2,238,982 1,169,148 1,163,988
Towson 09/08/92 194 2,521,950 2,554,500 2,379,458 1,242,929 1,243,407
Fair Oaks 04/25/95 242 -0- -0- 2,212,765 930,557 1,341,477
Tysons Corner 12/05/95 240 -0- -0- 291,119 -0- 1,811,830
----------- ----------- ----------- ---------- ----------
Total Net Sales $11,257,307 $10,896,682 $13,350,255 $6,679,832 $8,868,848
=========== =========== =========== ========== ==========
</TABLE>
- 17 -
<PAGE>
(1) Rockville seating capacity was increased from 198 to 256 in the
spring of 1995 to better accommodate demand during peak periods. The additional
seats became operational on weekends in March 1995 and were fully operational in
late May 1995.
See discussion of net sales under the captions "28 Weeks Ended July 14,
1996 Compared to the 28 Weeks Ended July 16, 1995," "Year Ended December 31,
1995 Compared to the Year Ended January 1, 1995" and "Year Ended January 1, 1995
Compared to the Year Ended December 31, 1993."
28 Weeks Ended July 14, 1996 Compared to the 28 Weeks Ended July 16, 1995
Net sales for the twenty-eight weeks ended July 14, 1996 (the "1996 YTD
Period") increased $2,189,016 to $8,868,848 compared to $6,679,832 for the
twenty-eight weeks ended July 16, 1995 ("1995 YTD Period"). New restaurants
opened during 1995 in Fair Oaks and Tysons Corner, Virginia were primarily
responsible for the increase, adding $2,222,750 to net sales for the 1996 YTD
Period.
Comparable Silver Diner sales (sales for Silver Diners open throughout
both periods being compared, excluding the initial 12 weeks of operations during
which sales were typically higher than normal) decreased 0.6% year-to-date.
Comparable Silver Diner sales were reduced by severe winter weather in the
Washington/Baltimore area in January 1996. Excluding January 1996 year-to-date
comparable Silver Diner sales increased 0.7%. Average net sales for Rockville
and Tysons Corner, the Company's highest volume stores, were $1,964,000 for the
1996 YTD Period, with the two stores aggregating approximately 44% of net sales.
Average net sales for the other four restaurants for the same period were
approximately $1,235,000.
In June 1996, the Company introduced on a test basis in certain
existing restaurants the Silver Diner Market & Bakery, which features a wide
range of carry-out options targeting the growing "home meal replacement" market,
as well as specialty coffee drinks and an expanded bakery selection. The Company
plans to incorporate an enlarged version of the Silver Diner Market & Bakery in
its new prototype for future restaurant locations.
Cost of sales was relatively unchanged for the 1996 YTD Period compared
to the same period in 1995, increasing 0.1% of net sales to 27.6%.
Labor increased 0.7% of net sales to 33.8% for the 1996 YTD Period,
compared to 33.1% for the 1995 YTD Period. The increase resulted primarily from
higher costs in the initial periods of operations at Tysons Corner, increased
management compensation and particularly severe winter weather in January 1996,
which reduced sales and increased labor as a percentage of net sales.
Legislation is currently pending in Congress which would increase the
minimum wage. Many of the Company's employees are paid hourly wages, and any
increase in the minimum wage would increase the Company's cost. However,
management believes that any such minimum wage increase would be likely to
result in industry-wide restaurant price increases and would, therefore, have an
adverse effect on the Company relative to its competitors. To the extent that
the foodservice
- 18 -
<PAGE>
industry is not able to pass along the higher labor costs to its customers, the
Company's operations could be affected.
Operating expenses increased 0.2% of net sales to 15.2% of net sales
for the 1996 YTD Period. Higher marketing costs were primarily responsible for
the increase. Although operating expenses are likely to continue to exceed
historical levels during the summer months due to cable television and direct
mail advertising campaigns supporting the introduction of the Silver Diner
Market & Bakery, management believes that sufficient additional gross profit
will be generated from these campaigns to offset the additional costs.
Occupancy increased $238,349 for the 1996 YTD Period compared to the
1995 YTD Period. Occupancy costs for the new restaurants in Fair Oaks and Tysons
Corner accounted for most of the increase.
Restaurant depreciation and amortization increased $179,957 for the
1996 YTD Period compared to the 1995 YTD period. This increase was primarily
associated with the new restaurant openings at Fair Oaks and Tysons Corner.
Depreciation and amortization also increased due to expansion of the Rockville
diner, but decreased overall in the first four diners due to a prospective
reduction in the estimated useful life of smallwares, which increased expense in
1995. The 1996 YTD Period include approximately $165,000 of preopening
amortization, compared to $45,000 for the 1995 YTD Period.
General and administrative expenses were $1,348,601 for the 1996 YTD
Period, an increase of $498,960 compared to the 1995 YTD Period. As a percentage
of net sales, general and administrative expenses increased from 12.7% in the
1995 YTD Period to 15.2% in the 1996 YTD Period. Increased corporate salary
costs, higher restaurant management and recruitment costs, new menu costs and
additional expenses related to being a public company were the primary factors
contributing to the increase. The Company's administrative overhead as a
percentage of net sales remains above the industry average primarily due to the
cost of building a corporate management team to support the Company's
intermediate and long-term growth plans. Also, during the 1996 YTD Period, the
Company began to incur expenses related to the recruitment and training of
restaurant management to support new Silver Diner openings in late 1996. During
the remainder of 1996, management anticipates that general and administrative
expenses will continue to exceed 1995 levels as a percentage of net sales due to
higher restaurant management recruitment and initial training costs in
preparation for new store growth. As revenues increase in 1997 with the addition
of new Silver Diners, general and administrative expenses are expected to
decrease as a percentage of sales.
In September 1995, the Company raised $2.5 million in a Private
Placement of subordinated notes and common stock warrants, and in October 1995
borrowed $750,000 from a bank. Investment income, interest expense and
amortization expense (related to deferred loan costs) all increased during the
1996 YTD Period compared to the 1996 YTD Period as a result of these borrowings.
Following consummation of the Merger with FTAC, the subordinated notes were
converted into common stock, the common stock warrants were cancelled and SDDI's
bank and
- 19 -
<PAGE>
affiliate debt was repaid. The bank debt of SDLP was subsequently repaid
in late July 1996 following acquisition of the SDLP minority interest. Interest
expense and amortization of deferred loan costs will decrease significantly for
the remainder of 1996 due to the repayment of debt. Interest income increased
significantly in the 1996 Second Quarter due to investment of the Merger
proceeds, and will be further increased through investment of the Private
Placement proceeds.
Depreciation and amortization for the 1996 YTD Period includes $14,200
for amortization of goodwill related to the acquisition of the SDLP minority
interest.
Year Ended December 31, 1995 Compared to the Year Ended January 1, 1995
Net sales for the year ended December 31, 1995 ("1995") increased
$2,453,573 to $13,350,255, compared to $10,896,682 for the year ended January 1,
1995 ("1994"). New restaurants opened during 1995 in Fair Oaks and Tysons
Corner, Virginia were primarily responsible for the increase, contributing
$2,503,884 to net sales. Comparable Silver Diner sales increased 0.8% after
adjustment for the additional two days in 1994 resulting from the change in
SDDI's fiscal year. Net sales improved in 1995 in Rockville due to expanded
seating capacity to better accommodate demand during peak periods. Net sales
declined in Towson because of lower mall customer traffic and competitive
restaurant openings.
Costs of sales, primarily food and beverage costs, decreased 0.5% of
net sales to 27.4% in 1995, compared to 27.9% for 1994. Fiscal 1995 reflected
the full benefit of a change in SDDI's primary supplier in the spring of 1994,
favorable poultry prices and ongoing menu refinements.
Labor, which consists of restaurant management and hourly employee
wages and bonuses, payroll taxes, workers' compensation insurance, group health
insurance and other benefits, was 33.3% of net sales for 1995, an increase of
0.9% of net sales compared to 1994. This increase resulted from higher initial
labor costs associated with the Fair Oaks and Tysons Corner openings, and, to a
lesser degree increased restaurant management bonuses due to better than
budgeted store level financial performance. Labor costs for existing
restaurants, excluding Fair Oaks and management bonuses in both years, decreased
0.4% of net sales.
Operating expenses, which consist of all restaurant operating costs
other than labor and occupancy, including supplies, utilities, repairs and
maintenance and advertising, were unchanged at 15.1% of net sales.
Occupancy, which is composed primarily of rent, property taxes and
property insurance, increased $294,685 for 1995 compared to 1994. The new
restaurants in Fair Oaks and Tysons Corner had total occupancy costs of
approximately $243,000. The remainder of the increase was primarily due to
consumer price index related rent increases and expansion of the Rockville
diner.
Restaurant depreciation and amortization increased $333,344 for 1995
compared to 1994. Of this increase, $199,722 is associated with Fair Oaks and
Tysons Corner, including $153,029 of preopening cost amortization. Depreciation
and amortization also increased due to expansion of the
- 20 -
<PAGE>
Rockville diner, improvements to other established Silver Diners and a
prospective reduction in the estimated useful life of smallwares.
General and administrative expenses include the cost of corporate
administrative personnel and functions, field supervision and restaurant
management recruitment and initial training. Such expenses increased $199,961 to
$2,077,735 in 1995. As a percentage of net sales, general and administrative
expenses fell from 17.2% in 1994 to 15.6% in 1995. SDDI's administrative
overhead as a percentage of net sales remains above the industry average,
primarily due to SDDI's commitments to, and subsequent cost of, building a
management team to support SDDI's intermediate and long-term growth plans. As
revenues increase with the addition of new Silver Diners, management anticipates
that general and administrative expenses will decrease as a percentage of net
sales.
In September, 1995, SDDI raised $2.5 million in a private placement of
subordinated notes and common stock warrants, and in October, 1995 borrowed
$750,000 from a bank. Investment income, interest expense and amortization
expense (related to deferred loan costs) all increased during 1995 as a result
of these borrowings. Following consummation of the merger with FTAC, the
subordinated notes were converted into common stock, the common stock warrants
were cancelled and SDDI's bank and affiliate debt was repaid.
During 1994, SDDI abandoned a proposed site due to a legal dispute and
recorded a charge to operations of $98,637. No sites were abandoned during 1995.
The limited partners' interest in the net loss of SDLP of $180,175 for
1995 depleted the remaining equity of the limited partners.
Year Ended January 1, 1995 Compared to the Year Ended December 31, 1993
Net sales for the year ended January 1, 1995 ("1994") decreased
$360,625 to $10,896,682 compared to $11,257,307 for the year ended December 31,
1993 ("1993"). Comparable Silver Diner sales decreased 3.2%. Multiple
competitive restaurant openings near the Potomac Mills and Rockville Silver
Diners were primarily responsible for the sales decrease.
Cost of sales improved slightly to 27.9% of net sales for 1994 compared
to 28.2% of sales for 1993. The improvement was due to a change in SDDI's
primary supplier in the spring of 1994, continued menu refinements and a stable
wholesale food cost environment.
Labor increased to 32.4% of net sales for 1994 compared to 31.3% of net
sales for 1993. Because a significant portion of labor costs are fixed, the
decline in comparable Silver Diner sales increased labor as a percentage of net
sales. SDDI also experienced increases in the cost of both group health and
workers' compensation insurance. These increases were partially offset by a
decrease in restaurant management bonuses.
- 21 -
<PAGE>
Operating expenses increased 0.3% of net sales for 1994 compared to
1993. Sharply higher paper prices beginning in the fall of 1994 increased supply
costs of the year.
Restaurant depreciation and amortization decreased $478,044 for 1994
compared to 1993. Fiscal 1993 included $447,632 of preopening cost amortization
for the Towson diner, which was opened in September, 1992.
General and administrative expenses increased $698,510 for 1994 to
17.2% of net sales, compared to 10.5% of net sales in 1993. During 1994, SDDI
dedicated significant resources to the refinement of the Silver Diner concept
and began recruiting and assembling the management team necessary to support
SDDI's expansion plans.
Interest expense decreased $127,481 for 1994 compared to 1993. In
December, 1993, SDDI completed a $5.0 million private placement of SDDI common
stock, a portion of the proceeds of which were used to reduce debt.
SDDI recorded a net investment loss for 1994 of $3,599, including a
loss of approximately $130,000 on investments in corporate and U.S. government
bond funds.
In connection with the development of the first three Silver Diners,
SDDI committed to pay Silver Diner Real Estate Limited Partnership ("SDRELP"),
an affiliate of SDDI, a development and prototype plan usage fee in the amount
of $90,000 for each diner subsequently opened by SDDI until such time as SDRELP
was made whole for the funds advanced and the risks taken in connection with
SDRELP's development activities and prototype plans. SDRELP later distributed
its rights under the commitment to certain of its shareholders.
During 1993, SDDI purchased these rights for $645,000, of which
$487,500 was paid in cash and the balance by the issuance of 1,311 SDDI Common
Shares. The cost of the acquisition of these rights was expensed as incurred,
along with approximately $35,000 in costs related to development of future
franchise operations.
During both 1994 and 1993, SDDI abandoned proposed sites, resulting in
charges to operations of $98,637 and $66,488, respectively. A site in Bailey's
Crossroads, Virginia was abandoned in 1994 due to a legal dispute, and several
potential sites were abandoned in 1993, including a site in Gaithersburg,
Maryland for which a charge of approximately $55,000 was recorded.
The minority interest in net loss of SDLP increased to $332,977 for
1994 compared to $137,224 for 1993 due to the increased losses of SDLP.
- 22 -
<PAGE>
Income Taxes
Prior to December 14, 1993, SDDI elected to be taxed under Subchapter S
of the Internal Revenue Code of 1954, as amended. As such, taxable income or
loss prior to such date passed through to, and is reportable by, the individual
shareholders. SDDI terminated its subchapter S status as of December 14, 1993.
Taxable income or loss reported by SDLP and SDPMI passes through to, and is
reportable by, its partners and shareholder, respectively.
No current or deferred income tax benefit has been provided in the
combined statements of operations for periods subsequent to December 14, 1993
due to SDDI's history of net operating losses for income tax purposes.
At December 31, 1995, SDDI has a net operating loss carryforward of
approximately $2.8 million for income tax purposes that expires in 2008 through
2010, which may be used to reduce future taxable income and tax liabilities.
Liquidity and Capital Resources
The Company's current financial position is strong as a result of the
consummation of the Merger and the Private Placement. At July 14, 1996, cash and
cash equivalents were $14.8 million, working capital was $12.7 million,
long-term debt (including current maturities) was $391,527 and stockholders'
equity was $22.4 million. Cash and cash equivalents increased $13.2 million
during the 1996 YTD Period, due primarily to net Merger proceeds of $12.2
million and net Private Placement proceeds of approximately $7.6 million, less
cash used to repay debt, finance the 1996 YTD Period operating cash flow
deficit, pay for purchases of property and equipment, including construction
payables associated with the Tysons Corner Silver Diner, which opened in
December 1995, and to acquire all of the limited partnership interests in SDLP.
Prior to the consummation of the merger with FTAC, SDDI financed its
working capital requirements for the development of the Silver Diner concept and
operations primarily through private placements of common stock and notes
payable, limited partnership funds, borrowings from banks and affiliates of
SDDI, deferred compensation and extended credit terms from suppliers. From
January 1, 1993 through December 31, 1995, SDDI used approximately $1.8 million
of cash in operating activities and approximately $3.7 million in investing
activities, including approximately $3.1 million for purchases of property,
equipment and improvements. Financing activities provided approximately $6.4
million during the same period, consisting primarily of proceeds from stock
sales of approximately $5.7 million, borrowings of $4.3 million, and net
repayments of debt.
The Company's principal future capital requirement is expected to be
the development of restaurants. The Company plans to open six to eight
Company-owned Silver Diners by the end of 1997. The typical building, equipment
(including smallwares) and site development cost of a new Silver Diner prototype
is expected to be approximately $1,625,000. Land generally will be leased. As of
July 31, 1996, ground leases have been signed for locations in Merrifield,
Clarendon and
- 23 -
<PAGE>
Springfield, Virginia, and a land purchase contract for a location in Reston,
Virginia has been executed. Due to above average site costs, these four
locations are expected to average approximately $1,690,000 for building,
equipment and site costs. The Reston land is expected to cost approximately
$1,425,000. Management intends to pursue a sale leaseback strategy on the Reston
property following the restaurant's opening. Construction has begun on the
Clarendon location.
Management believes that the Company's current capital resources will
be adequate to meet its planned capital requirements through 1997.
Seasonality and Quarterly Results
Although SDDI's limited operating history, geographic concentration and
small number of existing Silver Diners make future trends difficult to predict,
Silver Diners have generally experienced higher average weekly net sales in the
second and third quarters. The timing of new Silver Diner openings and extreme
weather, especially during the winter months, may also affect sales and
quarterly results. Accordingly, quarter-to-quarter comparisons of SDDI's results
of operations may not be meaningful and results for any quarter are not
necessarily indicative of the results that may be achieved for a full fiscal
year. The first fiscal quarter includes 16 weeks of operations as compared to
12, 12 and 12 or 13 weeks for each of the subsequent three quarters,
respectively. As a result, despite higher average weekly sales, net sales from
comparable Silver Diners can be expected to be lower in the second quarter as
compared to the first quarter of each year.
Impact of Inflation
SDDI does not believe that inflation has materially affected its
operating results. Substantial increases in costs and expenses, particularly
food, supplies, labor and operating expenses, could have a significant impact on
SDDI's operating results to the extent that such increases cannot be passed
along to customers.
DESCRIPTION OF CAPITAL STOCK
General
The Company is authorized to issue 20,000,000 shares of Common Stock,
par value $.00074 per share, and 1,000,000 shares of preferred stock ("Preferred
Stock"). As of July 14, 1996, there were outstanding 11,503,858 shares of Common
Stock, 40,880 IPO Warrants, 84,000 New Warrants and no shares of Preferred
Stock.
- 24 -
<PAGE>
Common Stock
The holders of Common Stock are entitled to one vote for each share
held of record on all matters to be voted on by stockholders. There is no
cumulative voting with respect to the election of directors, with the result
that the holders of more than 50% of the shares voted for the election of
directors can elect all of the directors then being elected. The holders of
Common Stock are entitled to receive dividends when, as and if declared by the
Board out of funds legally available therefor. In the event of a liquidation,
dissolution or winding up of the Company, the stockholders are entitled to share
ratably in all assets remaining available for distribution to them after payment
of liabilities and after provision has been made for each class of stock, if
any, having preference over the Common Stock. Holders of Common Stock, as such,
have no conversion, preemptive or other subscription rights, and there are no
redemption provisions applicable to the Common Stock. All of the outstanding
shares of Common Stock are fully paid and nonassessable.
Preferred Stock
The Company's Certificate of Incorporation authorizes the issuance of
1,000,000 shares of preferred stock ("Preferred Stock") with such designations,
rights and preferences as may be determined from time to time by the Board.
Accordingly, the Board 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 Common Stock. The Preferred Stock could be utilized, under certain
circumstances, as a method of discouraging, delaying or preventing a change in
control of the Company. The Company does not intend as of the date of this
Prospectus to issue any shares of Preferred Stock. However, there can be no
assurance that the Company will not do so in the future.
Warrants
Each outstanding IPO Warrant entitles the registered holder to purchase
one share of Common Stock at a price of $5.00 per share, subject to adjustment
in certain circumstances, commencing on March 27, 1996, and ending at 5:00 p.m.,
New York City time, on November 3, 2001, at which time the IPO Warrants will
expire. The Company may call the IPO Warrants for redemption, in whole and not
in part, with the consent of GKN Securities Corp. at a price of $.01 per IPO
Warrant at any time after they become exercisable upon not less than 30 days'
prior written notice to the holders thereof if the last sale price of the Common
Stock has been at least $8.50 per share ("Redemption Price") for the 20
consecutive trading days ending on the third day prior to the date on which the
notice of redemption is given. The warrantholders shall have exercise rights
until the close of business on the date fixed for redemption.
The IPO Warrants are issued in registered form under a Warrant
Agreement between the Company and Continental Stock Transfer & Trust Company, as
Warrant Agent.
The exercise price, number of shares of Common Stock issuable on
exercise of the IPO Warrants and Redemption Price are subject to adjustment in
certain circumstances, including a stock
- 25 -
<PAGE>
dividend, recapitalization, reorganization, merger or consolidation the Company.
The IPO Warrants, however, are not subject to adjustment for issuances of shares
of Common Stock at a price below the exercise price of the IPO Warrants.
Each outstanding New Warrant entitles the registered holder to purchase
one share of Common Stock at a price of $8.00 per share, subject to adjustment
in certain circumstances, at any time prior to the earlier of 5:00 p.m., New
York City time, on (i) January 31, 1998, or (ii) thirty days after the first
public offering of Common Stock occurring on or after June 30, 1997, at which
time all New Warrants will expire.
If at any time on or after June 30, 1997, the Company shall determine
to register under the Securities Act any of its Common Stock, for its own
account or for the account of others (other than the holders of the New
Warrants), other than a registration relating solely to employee benefit plans
or a registration relating solely to a Commission Rule 145 transaction or a
registration on any registration form which does not include substantially the
same information as would be required to be included in a registration statement
covering the sale of the shares issuable upon exercise of the New Warrant, the
Company will include in such registration (and any related qualification under
blue sky laws or other compliance), and in any underwriting involved therein,
all Common Stock held by a New Warrantholder upon exercise of New Warrants for
which the Company has received written notice from such New Warrantholder. If
the Company has not effected a registration pursuant to the preceding sentence
by June 30, 1998, then on or after such date the New Warrantholders holding a
majority of the Common Stock issued upon exercise thereof have the right to send
written notice to the Company requiring the Company to register the Common Stock
issued upon exercise of the New Warrants. Upon receipt of such written request,
the Company shall have 90 days to file with the Securities and Exchange
Commission a registration statement on Form S-3 for the registration of such
Common Stock. Once this right has been exercised, no New Warrantholder will have
any further registration rights.
The Company will pay the legal, accounting and other expenses
associated with including the Common Stock issuable upon exercise of the New
Warrants in any such registration statement.
No fractional shares of Common Stock will be issued upon exercise of
either IPO Warrants or New Warrants. Each holder of a fractional interest in the
Common Stock will be entitled to receive a cash payment in lieu if such
fractional amount, which amount shall be determined on the basis of the closing
price of the Common Stock on the Nasdaq National Market on the day preceding the
date of exercise of the warrant.
- 26 -
<PAGE>
SELLING STOCKHOLDERS
This Prospectus relates to the offering and resale of up to an
aggregate of 1,500,000 shares of Common Stock by the following Selling
Stockholders:
Name and Address Number of Shares
T. Rowe Price New Horizons Fund, Inc. 750,000
100 East Pratt Street
Baltimore, Maryland 21202
Oppenheimer Enterprise Fund 50,000
2 World Trade Center, 34th Floor
New York, New York 10048
Oppenheimer Discovery Fund 700,000
2 World Trade Center, 34th Floor
New York, New York 10048
The Selling Stockholders acquired their shares of Common Stock in a
private placement on July 11, 1996, for $5.50 per share. The Subscription
Agreement entered into among the Company and the Selling Stockholders obligates
the Company to register under the Securities Act, at the Company's expense, the
shares of Common Stock acquired by the Selling Stockholders. The Subscription
Agreement also contains an indemnification provision in which the Company agrees
to indemnify the Selling Stockholders and the placement agent against any
losses, claims, damages or liabilities to which such seller or placement agent
may become subject under the Securities Act or otherwise to the extent such
losses, claims, damages or liability arise out of or are based upon any untrue
statement or alleged untrue statement of any material fact contained in any
registration statement under which such shares of Common Stock are being
registered.
WARRANTHOLDERS
On December 31, 1995, there were 5,400,000 IPO Warrants issued and
outstanding. In February, 1996, the Company commenced an exchange offer in which
it offered the holders of the IPO Warrants one share of Special Convertible
Preferred Stock in exchange for 5.5 IPO Warrants. Upon consummation of the
Merger, each share of Special Convertible Preferred Stock converted
automatically into one share of Common Stock. Upon consummation of the Merger,
all but 40,880 of the IPO Warrants were exchanged. For additional information,
see "Description of Capital Stock -- Warrants".
This Prospectus covers the sale of Common Stock by the Company to IPO
Warrantholders upon exercise of the IPO Warrants.
- 27 -
<PAGE>
LEGAL MATTERS
The validity of the Common Stock offered hereby will be passed upon for
the Company by Arent Fox Kintner Plotkin & Kahn, Washington, D.C.
EXPERTS
The consolidated financial statements of the Company at December 31,
1994 and December 31, 1995, and for the year ended December 31, 1995 and the
period April 21, 1994 (Inception) to December 31, 1994 included in this
Prospectus have been audited by KPMG Peat Marwick LLP, independent certified
public accountants as set forth in its report thereon. The combined financial
statements of SDDI, SDLP and Silver Diner Potomac Mills, Inc. ("SDPMI") at
January 1, 1995 and December 31, 1995, and for each of the three years in the
period ended December 31, 1995 included in this Prospectus have been audited by
Reznick Fedder & Silverman, P.C., independent certified public accountants, as set
forth in its report thereon. Such consolidated financial statements of the
Company and combined financial statements of SDDI, SDLP and SDPMI are included
herein in reliance upon such reports given upon the authority of such firms as
experts in accounting and auditing.
- 28 -
<PAGE>
INDEX TO FINANCIAL STATEMENTS
The Company
<TABLE>
<S> <C>
Years ended December 31, 1994 and 1995
Report of KPMG Peat Marwick, LLP, Independent Auditor..................................................F-3
Consolidated Balance Sheet as of December 31, 1995 and 1994............................................F-4
Consolidated Statements of Operations for the year ended December 31, 1995 and
the period April 21, 1994 (Inception) to December 31, 1994................................F-5
Consolidated Statement of Stockholders' Equity for the year ended December 31, 1995
and the period April 21, 1994 (Inception) to December 31, 1994............................F-6
Consolidated Statement of Cash Flows for the year ended December 31, 1995 and
the period April 21, 1994 (Inception) to December 31, 1994................................F-7
Notes to Consolidated Financial Statements.............................................................F-8
Twenty-eight weeks ended July 14, 1996 and July 16, 1995
Consolidated Condensed Balance Sheets as of July 14, 1996
and December 31, 1995 (unaudited)............................................................F-14
Consolidated Condensed Statements of Operations for the Twenty-Eight Weeks ended
July 14, 1996 and July 16, 1995 (unaudited)..................................................F-15
Consolidated Condensed Statement of Equity for the Twenty Eight Weeks ended
July 14, 1996 (unaudited)....................................................................F-16
Consolidated Condensed Statements of Cash Flows for the Twenty-Eight Weeks ended
July 14, 1996 and July 16, 1995 (unaudited)..................................................F-17
Notes to Consolidated Condensed Financial Statements (unaudited)......................................F-18
Silver Diner Development, Inc., Silver Diner Limited Partnership and Silver Diner Potomac
Mills, Inc.
Years ended December 31, 1993, January 1, 1995 and December 31, 1995
Report of Reznick Fedder & Silverman, Independent Auditor.............................................F-21
Combined Balance Sheets at January 1, 1995 and December 31, 1995......................................F-22
Combined Statements of Operations for the years ended December 31, 1993,
January 1, 1995 and December 31, 1995........................................................F-23
Combined Statements of Stockholders' Equity And Partners' Deficit
for the years ended December 31, 1993, January 1, 1995 and
December 31, 1995............................................................................F-24
Combined Statements of Cash Flows for the years ended December 31, 1993
January 1, 1995 and December 31, 1995........................................................F-25
Notes to Combined Financial Statements................................................................F-27
Company and SDDI Pro Forma
Year ended December 31, 1995
Pro Forma Combined Balance Sheet at December 31, 1995 (Unaudited).....................................F-41
Pro Forma Combined Statement of Operations for the 52
weeks ended December 31, 1995 (Unaudited)....................................................F-42
Notes to Pro Forma Combined Financial Statements (Unaudited)..........................................F-43
</TABLE>
F-1
<PAGE>
FOOD TRENDS ACQUISITION CORPORATION
Consolidated Financial Statements
December 31, 1995 and 1994
(With Independent Auditors' Report Thereon)
F-2
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
Food Trends Acquisition Corporation:
We have audited the accompanying consolidated balance sheets of Food Trends
Acquisition Corporation and subsidiary as of December 31, 1995 and 1994, and the
related consolidated statements of operations, stockholders' equity and cash
flows for the year ended December 31, 1995 and the period April 21, 1994
(inception) to December 31, 1994. These consolidated financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Food Trends
Acquisition Corporation and subsidiary at December 31, 1995 and 1994 and the
results of its operations and its cash flows for the year ended December 31,
1995 and the period from April 21, 1994 (inception) to December 31, 1994 in
conformity with generally accepted accounting principles.
/s/ KPMG Peat Marwick LLP
Boston, Massachusetts
March 28, 1996
F-3
<PAGE>
FOOD TRENDS ACQUISITION CORPORATION
Consolidated Balance Sheets
December 31, 1995 and 1994
<TABLE>
<CAPTION>
Assets 1995 1994
------ ---- ----
<S> <C>
Current assets:
Cash $ 192,509 1,042,210
Prepaid expenses 31,813 101,667
------------ ------------
Total current assets 224,322 1,143,877
------------ -----------
U.S. Government securities, including accrued interest deposited
in Trust Fund of $226,372 and $63,669, respectively (note 2) 13,995,746 13,217,174
Computers and equipment, net of accumulated depreciation of $4,121
and $1,178, respectively 11,736 10,605
Organization costs, net of accumulated amortization of $618 and
$218, respectively 1,382 1,782
------------ --------------
$ 14,233,186 14,373,438
========== ==========
Liabilities and Stockholders' Equity
Current liabilities:
Accrued expenses $ 89,000 117,031
------------ ------------
Total current liabilities 89,000 117,031
------------ ------------
Common stock, subject to possible redemption, 539,730 shares at
redemption value (note 1) 2,797,750 2,642,113
----------- -----------
Stockholders' Equity (notes 1, 3, 6 and 7):
Preferred stock, $.001 par value; 1,000,000 shares authorized;
none issued - -
Common stock, $.00074 par value; 20,000,000 shares authorized;
2,785,270 shares issued and outstanding 2,062 2,062
Additional paid-in capital 11,529,796 11,685,433
Accumulated deficit (185,422) (73,201)
------------ -------------
Total stockholders' equity 11,346,436 11,614,294
---------- ----------
Commitments (note 5)
$ 14,233,186 14,373,438
========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE>
FOOD TRENDS ACQUISITION CORPORATION
Consolidated Statements Of Operations
Year ended December 31, 1995 and Period From April 21, 1994
(Inception) To December 31, 1994
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C>
Income:
Interest $ 789,561 95,174
Other - 250
--------- -----------
Total income 789,561 95,424
--------- -----------
Expenses:
General and administrative 412,627 60,922
Professional fees 439,607 59,019
Depreciation and amortization 3,343 30,396
Interest (Note 4) - 18,288
--------- -----------
Total expenses 855,577 168,625
--------- -----------
Loss before income taxes (66,016) (73,201)
Income taxes (note 5) 46,205 -
--------- -----------
Net loss $ (112,221) (73,201)
========= ===========
Net loss per share $ (0.03) (0.06)
========= ============
Weighted average common shares outstanding $3,325,000 1,165,000
========= ============
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE>
FOOD TRENDS ACQUISITION CORPORATION
Consolidated Statements Of Stockholders' Equity
Year ended December 31, 1995 and Period From April 21, 1994
(Inception) To December 31, 1994
<TABLE>
<CAPTION>
Preferred stock Common stock
Number Number
of shares Amount of shares Amount
--------- ------ --------- ------
<S> <C>
Balance, April 21, 1994 (inception) - $ - - $ -
Original issuance of common stock - - 625,000 463
Issuance of warrants to purchase
common stock - - - -
Sale of 2,700,000 units, net of $2,642,113
relating to common stock subject to redemp-
tion and $1,907,392 in underwriting discounts,
non-accountable expense allowance and
offering expenses - - 2,160,270 1,599
Net loss - - - -
--- --- ---- ---
Balance, December 31, 1994 - - 2,785,270 2,062
Adjustment to 539,730 shares common
stock outstanding subject to possible
redemption due to change in trust fund balance - - - -
Net loss - - - -
--- --- ---- ---
Balance, December 31, 1995 - $ - 2,785,270 $ 2,062
=== === ========= =====
</TABLE>
<TABLE>
<CAPTION>
Additional Total
paid-in Accumulated stockholders'
capital deficit equity
------- ------- ------
<S> <C>
Balance, April 21, 1994 (inception) $ - $ - $ -
Original issuance of common stock 24,537 - 25,000
Issuance of warrants to purchase
common stock 12,000 - 12,000
Sale of 2,700,000 units, net of $2,642,113
relating to common stock subject to redemp-
tion and $1,907,392 in underwriting discounts,
non-accountable expense allowance and
offering expenses 11,648,896 - 11,650,495
Net loss - (73,201) (73,201)
---- ------ ------------
Balance, December 31, 1994 11,685,433 (73,201) 11,614,294
Adjustment to 539,730 shares common
stock outstanding subject to possible
redemption due to change in trust fund balance (155,637) - (155,637)
Net loss - (112,221) (112,221)
---- ------- ------------
Balance, December 31, 1995 $ 11,529,796 $ (185,422) $ 11,346,436
========== ======= ==========
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE>
FOOD TRENDS ACQUISITION CORPORATION
Consolidated Statements Of Cash Flows
Year ended December 31, 1995 and Period From April 21, 1994
(Inception) To December 31, 1994
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C>
Cash flows from operating activities:
Net loss $ (112,221) (73,201)
------------ ------------
Adjustments to reconcile net loss to net cash used in
operating activities:
Amortization expense 400 29,218
Depreciation expense 2,943 1,178
Interest expense - 12,000
Decrease (increase) prepaid expenses 69,854 (101,667)
(Increase) in accrued interest income (162,703) (63,669)
(Decrease) increase accrued expenses (28,031) 117,031
------------ ------------
Net cash used in operating activities (229,758) (79,110)
------------ ------------
Cash flows from investing activities:
U.S. Government securities purchased (48,154,116) (26,271,969)
Proceeds from sale of U.S. Government securities 47,538,247 13,118,464
Capital expenditures (4,074) (11,783)
------------ ------------
Net cash used in investing activities (619,943) (13,165,288)
------------ ------------
Cash flows from financing activities:
Proceeds from long-term notes payable - 138,000
Proceeds from sale of warrants - 12,000
Payment of long-term notes payable - (150,000)
Proceeds from sale of 625,000 shares of common stock
to founding stockholders - 25,000
Proceeds of public offering relating to 539,730 shares of
common stock subject to redemption - 2,642,113
Proceeds of public offering, net of common stock subject to
redemption, underwriting discounts, non accountable expense
allowance and offering expenses - 11,650,495
Deferred financing costs - (29,000)
Organization and offering costs - (2,000)
------------- ------------
Net cash provided by financing activities - 14,286,608
------------- ------------
Net (decrease) increase in cash (849,701) 1,042,210
Cash, beginning of period 1,042,210 -
------------- -----------
Cash, end of period $ 192,509 1,042,210
============= ===========
Supplemental disclosure:
Income taxes paid 25,000 -
============= =============
Interest paid $ - 12,000
============= =============
</TABLE>
See accompanying notes to consolidated financial statements.
F-7
<PAGE>
FOOD TRENDS ACQUISITION CORPORATION
Notes to Consolidated Financial Statements
December 31, 1995 and 1994
(1) Organization and Business Operations
Food Trends Acquisition Corporation (the "Company") was incorporated in
Delaware on April 21, 1994 with the objective of acquiring a medium-size
operating business engaged in the retail food service industry. The
Company's founding stockholders purchased 625,000 shares of common stock,
$.00074 par value, on April 27, 1994. The Company has selected December
31st as its fiscal year-end.
The Company consummated an initial public offering ("Offering") on November
10, 1994 and raised net proceeds of $14,292,608 (note 3). The Company's
management has broad discretion with respect to the specific application of
the net proceeds of this offering, although substantially all of the net
proceeds of this offering are intended to be generally applied toward
consummating a business combination with an operating business engaged in
the commercial food service industry ("Business Combination"). Furthermore,
there is no assurance that the Company will be able to successfully effect
a Business Combination. Proceeds from the offering of $13,217,174 are being
held in an interest-bearing trust account ("Trust Fund") until the earlier
of (I) the consummation of a Business Combination or (ii) liquidation of
the Company. The Trust Fund indenture limits investments to U.S. Government
securities with maturities of 180 days or less. The remaining proceeds will
be used to pay for business, legal and accounting due diligence on
prospective acquisitions, and continuing general and administrative
expenses in addition to other expenses.
The Company, after signing a definitive agreement for the acquisition of a
target business, will submit such transaction for stockholder approval. All
of the Company's stockholders prior to the Offering, including all of the
officers and directors of the Company ("Initial Stockholders"), have agreed
to vote their shares of common stock owned by them as of the effective date
of the Offering in accordance with the vote of the majority in interest of
all other stockholders of the Company ("Public Stockholders") with respect
to any Business Combination. After consummation of the Company's first
Business Combination, this voting safeguard will no longer be applicable.
With respect to the first Business Combination which is approved and
consummated, any Public Stockholder who voted against the Business
Combination may demand that the Company convert his shares into cash. The
per-share conversion price will equal the amount in the Trust Fund as of
the record date of determination of stockholders entitled to vote on the
Business Combination divided by the number of common shares held by Public
Stockholders. The Company will not consummate a Business Combination if 20%
or more in interest of the Public Stockholders exercise their conversion
rights. Accordingly, Public Stockholders holding 19.99% of the aggregate
number of shares owned by all Public Stockholders may have their shares
converted to cash in the event of a Business Combination. Such Public
Stockholders are entitled to receive their per-share interest in the Trust
Fund computed as the amount in the Trust Fund as of the record date for
determination of stockholders entitled to vote on the Business Combination
(inclusive of any interest thereon) divided by the number of Public Shares.
(Continued)
F-8
<PAGE>
FOOD TRENDS ACQUISITION CORPORATION
Notes to Consolidated Financial Statements, Continued
The Company's Certificate of Incorporation provides for mandatory liquidation
of the Company, without stockholder approval, in the event that the Company
does not consummate a Business Combination within 18 months from the date
of the consummation of the Offering, or 24 months from the consummation of
the Proposed Offering if certain extension criteria have been satisfied.
The Initial Stockholders have agreed that, if the Company liquidates prior
to consummating a Business Combination, they will contribute an aggregate
of $25,000 to the Company. In the event of liquidation, it is likely that
the per-unit value of the residual assets remaining available for
distribution (including Trust Fund assets) will be less than the initial
public offering price per unit in the Offering.
During 1995, the Company acquired the common stock of FTAC Transition
Corporation ("Transition Corp.") for $100. Transition Corp. was
organized solely for the purpose of facilitating the proposed merger with
Silver Diner Development, Inc. ("SDDI") (note 8).
(2) Summary of Significant Accounting Policies
(a) Principles of Consolidation
The consolidated financial statements include the financial statements of
Food Trends Acquisition Corporation and its wholly-owned subsidiary,
Transition Corp. All significant intercompany balances and transactions
have been eliminated in consolidation. Transition Corp. was dormant during
1995.
(b) Cash equivalents
For purposes of the statement of cash flows, the Company considers all
highly liquid debt instruments purchased with an original maturity of
three months or less to be cash equivalents.
(c) Investments
The Company's investments in U.S. Government securities are carried at cost
plus accrued interest, which approximates fair value, and classified as
held to maturity. The Company has the ability and the intent to hold
these securities until maturity.
(d) Deferred financing costs
Costs incurred in connection with the Company's initial bridge financing
were amortized over 60 days, the expected term of the notes payable.
(e) Computers and equipment
Computers and equipment are stated at cost. Depreciation is calculated
using the straight line method over the estimated useful lives of the
assets, which range from three to five years.
(f) Organization and offering costs
Costs incurred in connection with the Company's establishment are
amortized over five years.
(g) Income taxes
The Company follows the asset and liability approach that requires the
recognition of deferred tax assets and liabilities for the expected
future tax consequences of events that have been recognized in the
Company's financial statements or tax returns.
F-9
<PAGE>
FOOD TRENDS ACQUISITION CORPORATION
Notes to Consolidated Financial Statements, Continued
(h) Stock split
In August 1994, 125,000 common shares were contributed back to the
Company, for no consideration. In October 1994, the Company's Board of
Directors authorized a 1.35-to-one stock split of its common stock. Also
in October 1994, 50,000 common shares were contributed back to the
Company, for no consideration. All references in the accompanying
financial statements to the number of shares of stock have been
retroactively restated to reflect this transaction.
(i) Net loss per share
Net loss per common share is computed on the basis of the weighted average
number of common shares outstanding during the period.
(j) Use of Estimates
Management of the Company has made a number of estimates and assumptions
relating to the reporting of assets and liabilities and the disclosure of
contingent assets and liabilities to prepare these financial statements
in conformity with generally accepted accounting principles. Actual
results could differ from those estimates.
(3) Public Offering
On November 10, 1994, the Company sold 2,700,000 units ("Units") at a
price of $6.00 per unit in the Offering. Each Unit consists of one share
of the Company's common stock, $.00074 par value, and two Redeemable
Common Stock Purchase Warrants ("Warrants"). Each Warrant entitles
the holder to purchase, during the period commencing on the later of the
consummation by the Company of its Business Combination or one year from
the effective date of the Offering and ending seven years from the
effective date of the Offering, from the Company one share of common
stock at an exercise price of $5.00. The Warrants will be redeemable at
the option of the Company at a price of $.01 per Warrant upon 30 days'
notice at any time, only in the event that the last sale price of the
common stock is at least $8.50 per share for 20 consecutive trading days
ending on the third day prior to date on which notice of redemption is
given.
(4) Long-term Notes Payable
The Company issued an aggregate of $150,000 of promissory notes to certain
accredited investors. These notes bore interest at the rate of 10% per
annum and were repaid on the consummation of the Company's initial public
offering with accrued interest thereon of $6,288. The discount of $12,000
was amortized to interest expense over 60 days. In addition, the investors
were issued 300,000 warrants (valued at $12,000) which are identical to the
Warrants discussed in note 3, except that they are not redeemable by the
Company until 90 days after the consummation of a Business Combination.
(5) Income Taxes
Income taxes attributable to loss before income taxes are:
Year ended December 31, 1995
Current:
Federal $ 33,455
State 12,750
------
Total $ 46,205
======
(Continued)
F-10
<PAGE>
FOOD TRENDS ACQUISITION CORPORATION
Notes to Consolidated Financial Statements, Continued
No income tax expense or benefit was incurred for the period of April 21,
1994 (inception) to December 31, 1994.
A reconciliation of income tax expense for the year ended December 31, 1995
to the expected US federal income tax rate is as follows:
Computed "expected" tax benefit $ (22,445)
Acquisition intangibles with no current tax benefit 103,700
Benefit of net operation loss carryforward (24,888)
State taxes, net of federal benefit 8,415
Benefit of surtax exemption (9,453)
Other, net (9,124)
---------
$ 46,205
The tax effects of temporary differences which give rise to deferred taxes at
December 31, 1995 are as follows:
Deferred tax asset:
Acquisition intangibles capitalizable for tax purposes 115,960
Valuation allowance (115,960)
-------
Net deferred income taxes $ -
==
The Company has future deductible acquisition tax intangibles. The tax
benefit of this future deductible amount has been offset by a valuation
allowance due to the uncertainty of their realization.
(6) Commitment
The Company presently occupies office space provided by Olde World Bakeries,
Ltd. ("OWB"), a former affiliate of the Company. Pursuant to an
administrative agreement with OWB, from the effective date of the offering
through acquisition of a target business by the Company, the Company will
pay OWB an administrative fee of $5,000 per month for providing office
space and certain office and secretarial services to the Company. This
agreement was assigned by OWB to another related party in December 1994.
(7) Stockholders' Equity
The Company is authorized to issue 1,000,000 shares of preferred stock with
such designations, voting and other rights and preferences as may be
determined from time to time by the Board of Directors.
The Company is authorized to issue 20,000,000 shares of common stock of which
3,325,000 of these shares have been issued and are outstanding as of
December 31, 1995 and 1994. 539,730 of these issued common shares have been
classified outside of stockholders' equity as they are redeemable by
certain stockholders as described in note 1.
At December 31, 1995 and 1994 there are 6,450,000 common shares reserved for
the exercise of warrants.
F-11
<PAGE>
FOOD TRENDS ACQUISITION CORPORATION
Notes to Consolidated Financial Statements, Continued
(8) Subsequent Events
On August 29, 1995 and as amended on January 25, 1996, the Company
entered into an agreement to merge with SDDI. As a result of the merger,
SDDI will merge with Transition Corp., the wholly-owned subsidiary of
the Company, following which SDDI will be the surviving corporation and a
wholly-owned subsidiary of the Company. SDDI operates five Silver Diner
restaurants in the Washington/Baltimore metropolitan area serving
breakfast, lunch, dinner, and late night meals. The proposed merger
will be accounted for under the purchase method of accounting. The
resulting corporation, subsequent to the merger taking place, will
reflect in consolidated financial statements the assets and
liabilities of SDDI at their book values, and the assets and liabilities
of the Company at their fair market value at the effective date of the
merger (which is anticipated to be in March, 1996), which will
approximate their book values. The results of operations and financial
position of the resulting corporation for periods and dates prior to the
merger will be the historical results of operations and financial
position for SDDI for such periods and dates. No financial amounts for
SDDI are included in the Company's balances at December 31, 1995 or
1994. In connection with the proposed merger, SDDI common stock is to be
converted to Food Trends Acquisition Corporation common shares, the Food
Trends Acquisition Corporation warrants held by directors and officers of
Food Trends Acquisition Corporation and Food Trends Acquisition
Corporation warrants held by public warrantholders will be exchanged for
common shares at an exchange rate of 5.5 warrants for one Food Trends
Acquisition Corporation common share ("Warrant Exchange Offer").
On February 23, 1996 the Board of Directors approved the formation of a
class of Food Trends Acquisition Corporation Special Preferred Stock, par
value $.0000001 ("Special Preferred Shares") at the exchange rate of 5.5
warrants for one Special Preferred Share and the conversion of each
Special Preferred Share into one Food Trends Acquisition Corporation
common share upon consummation of the Warrant Exchange Offer, a
condition to consummation of the merger. Each Special Preferred Share
will be converted automatically into (i) one Food Trends Acquisition
Corporation common share upon consummation of the merger or (ii) 5.5
warrants to purchase one Food Trends Acquisition Corporation common
share, if the merger is not consummated.
On March 27, 1996, the agreement to merge with SDDI became effective.
F-12
<PAGE>
UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
SILVER DINER, INC. AND SUBSIDIARIES
FOR THE TWENTY-EIGHT WEEKS ENDED
JULY 14, 1996 AND JULY 16, 1995
F-13
<PAGE>
SILVER DINER, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(UNAUDITED)
July 14, December 31,
1996 1995
------------ ------------
ASSETS
CURRENT ASSETS
Cash and cash equivalents $14,806,292 $1,584,716
Inventory 107,070 117,393
Prepaid and other current assets 203,239 72,152
------------ -----------
Total current assets 15,116,601 1,774,261
PROPERTY, EQUIPMENT AND IMPROVEMENTS
Building and leasehold improvements 5,721,493 5,661,681
Furniture, fixtures and equipment 3,468,193 3,322,656
Construction in progress 370,927 -
------------ -----------
Total 9,560,613 8,984,337
Less accumulated depreciation and amortization (2,525,455) (2,170,350)
------------ -----------
Net property, equipment and improvements 7,035,158 6,813,987
OTHER ASSETS
Deposits and other 298,090 304,689
Due from affiliates - 355,023
Preopening costs, net 75,184 239,750
Goodwill, other intangibles and deferred costs, net 3,207,325 1,306,759
------------- -----------
TOTAL ASSETS $ 25,732,358 $10,794,469
============= ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 2,354,191 $ 3,582,238
Current maturities of notes to related parties - 200,000
Current maturities of long-term debt 109,956 3,193,125
------------ ----------
Total current liabilities 2,464,147 6,975,363
OTHER LIABILITIES
Deferred rent liability 627,119 574,821
Notes to related parties, less current maturities - 1,036,811
Long-term debt, less current maturities 281,571 973,200
------------ ----------
Total liabilities 3,372,837 9,560,195
STOCKHOLDERS' EQUITY 22,359,521 1,234,274
------------ ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 25,732,358 $10,794,469
============ ==========
Accompanying notes are an integral part of these financial statements
F-14
<PAGE>
SILVER DINER, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Twenty Eight Weeks Ended
July 14, July 16,
1996 1995
---------- ------------
<S> <C>
Net sales $8,868,848 $6,679,832
Restaurant costs and expenses
Cost of sales 2,448,791 1,839,017
Labor 2,997,133 2,211,178
Operating 1,348,026 1,002,188
Occupancy 1,037,131 798,782
Depreciation and amortization 514,178 334,221
---------- ----------
Total restaurant costs and expenses 8,345,259 6,185,386
---------- ----------
Restaurant operating income 523,589 494,446
General and administrative expenses 1,348,601 849,641
Interest expense 189,560 128,497
Investment income (138,645) (38,847)
Depreciation and amortization 70,301 51,702
---------- ----------
Loss before minority interest and income taxes (946,228) (496,547)
Minority interest in net loss of SDLP - 180,175
---------- ----------
Loss before income taxes (946,228) (316,372)
Income taxes - -
---------- ----------
NET LOSS $ (946,228) $ (316,372)
========== ==========
Net loss per common share $ (0.12) $ (0.06)
========== ==========
Weighted average common shares outstanding 7,853,126 5,001,805
========== ==========
</TABLE>
Accompanying notes are an integral part of these financial statements
F-15
<PAGE>
SILVER DINER, INC AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENT OF STOCKHOLDERS' EQUITY
(UNAUDITED)
Twenty eight weeks ended July 14, 1996
<TABLE>
<CAPTION>
Additional Common
Common stock Paid-in Stock Options Accumulated
Shares Amount Capital Outstanding Deficit Total
------ ------ ---------- ------------- ------------ -----
<S> <C>
Balance at December 31, 1995 150,947 $15,095 $ 7,489,754 $665,052 $(6,935,627) $ 1,234,274
Common stock issued at Merger 9,227,911 (8,155) 11,966,120 -- -- 11,957,965
Conversion of convertible debt to equity 625,000 463 2,499,537 -- -- 2,500,000
Proceeds from issuance of stock 1,500,000 1,110 7,612,400 -- -- 7,613,510
Net loss -- -- -- -- (946,228) (946,228)
---------- ------ ----------- -------- ----------- -----------
Balance at July 14, 1996 11,503,858 $8,513 $29,567,811 $665,052 $(7,881,855) $22,359,521
========== ====== =========== ======== =========== ===========
</TABLE>
F-16
<PAGE>
SILVER DINER, INC. AND SUBSIDIARIES,
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Twenty Eight Weeks Ended
July 14, July 16,
1996 1995
------------ -----------
<S> <C>
Cash flows from operating activities
Net loss $ (946,228) $ (316,372)
Adjustments to reconcile net loss to net cash used in operations
Depreciation and amortization 584,479 385,923
Compensation expense - stock options and deferred compensation 35,907 54,526
Minority interest - (180,175)
Changes in operating assets and liabilities
Inventory 10,323 (11,264)
Prepaid expenses and other assets (131,087) 52,869
Preopening, other intangibles and deferred costs (23,324) (298,407)
Accounts payable and accrued expenses (1,142,634) 14,340
Lease and other deposits 6,599 (33,895)
Deferred rent liability 52,298 (25,503)
----------- ----------
Net cash used in operating activities (1,553,667) (357,958)
Cash flows from investing activities
Purchases of property and equipment (920,260) (956,310)
Maturities of short-term investments - 1,045,765
Payment of advances to affiliates - (31,431)
----------- ----------
Net cash provided by (used in) investing activities (920,260) 58,024
Cash flows from financing activities
Net proceeds from merger 12,166,964 -
Net proceeds from sale of stock 8,202,214 202,502
Acquisition of outstanding interest in Silver Diner Limited Partnership (2,517,089) -
Proceeds from notes payable - 270,000
Proceeds from notes payable - related party - 89,627
Payments on advances - affiliates - (13,000)
Payments of principal - notes payable (1,274,798) (382,555)
Payments of principal - notes payable - related party (881,788) -
----------- ----------
Net cash provided by financing activities 15,695,503 166,574
----------- ----------
Net increase (decrease) in cash and cash equivalents 13,221,576 (133,360)
Cash and cash equivalents at beginning of the period 1,584,716 281,463
----------- ----------
Cash and cash equivalents at end of the period $14,806,292 $ 148,103
=========== ==========
Supplemental disclosure of cash flow information:
Interest paid $ 130,711 $ 26,428
=========== ==========
Noncash investing and financing activities:
Construction payables included in accounts
and accrued expenses $ 12,500 $ 30,990
=========== ==========
Financing and acquisition costs included in accounts
payable and accrued expenses $ 845,474 $ -
=========== ==========
Repayment of notes payable - related party by
offset of amounts due from affiliates $ 355,023 $ -
=========== ==========
Conversion of senior subordinated convertible
promissory notes to 625,000 shares of common stock $ 2,500,000 $ -
=========== ==========
Issuance of 84,000 warrants in conjunction with SDLP purchase $ 141,960 $ -
=========== ==========
</TABLE>
Accompanying notes are an integral part of these financial statements
F-17
<PAGE>
SILVER DINER, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
FOR THE TWENTY EIGHT WEEKS ENDED JULY 14, 1996 AND JULY 16, 1995
(UNAUDITED)
1. Organization and Basis of Presentation
The accompanying unaudited consolidated condensed financial statements of Silver
Diner, Inc., a Delaware Corporation, and its wholly owned subsidiaries, Silver
Diner Development, Inc. and Silver Diner Limited Partnership ("SDLP"),
(collectively the "Company") have been prepared in accordance with generally
accepted accounting principles for interim financial information and with the
instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do
not include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. Operating results for the
twenty eight week period ended July 14, 1996 are not necessarily indicative of
the results that may be expected for the year ended December 29, 1996. All
significant intercompany balances and transactions have been eliminated in
consolidation. As a result of the Company's acquisition of the minority interest
in SDLP (See Note 3), the Company owns 100% of SDLP and as such is presenting
results on a consolidated basis. As SDLP's financial statements were previously
combined with the Company's, the change to a consolidated basis does not have a
substantive impact on the Company's financial statements. For further
information, refer to the audited combined financial statements of Silver Diner
Development, Inc., a Virginia Corporation, ("SDDI"), SDLP and Silver Diner
Potomac Mills, Inc. as of December 31, 1995 and January 1, 1995 and for each of
the three years in the period ended December 31, 1995 and footnotes thereto
included in the Company's Form 8-K filing dated March 27, 1996.
2. Merger
On March 27, 1996, FTAC Transition Corporation, a wholly owned subsidiary of
Food Trends Acquisition Corporation ("FTAC") merged (the "Merger") with and into
SDDI with SDDI surviving as a wholly owned subsidiary of FTAC. In connection
with the Merger, FTAC changed its name to Silver Diner Development, Inc., and in
June 1996, to Silver Diner, Inc. Pursuant to the Merger agreement, each
outstanding share of SDDI common stock converted into 33.339 shares of the
common stock of FTAC. Upon consummation of the Merger, the stockholders of SDDI
became the owners in the aggregate of approximately 57% of the outstanding
common stock of FTAC and the directors and officers of SDDI became directors and
officers of FTAC.
For accounting and financial reporting purposes, the Merger was treated as a
recapitalization of SDDI and as an issuance of SDDI common shares for monetary
assets and liabilities. The Company has reflected in its consolidated financial
statements the assets, liabilities and equity of the Company at their historical
book values. Accordingly, the consolidated results of operations and financial
position of the Company for periods and dates prior to the Merger are the
consolidated historical results of operations and financial position of the
Company for such periods and dates.
All historical shares of common stock and per share amounts for periods prior to
the Merger have been retroactively adjusted to reflect the FTAC shares issued to
the SDDI shareholders at the time of the Merger.
3. Acquisition of Minority Interest in Silver Diner Limited Partnership
On June 13, 1996 the Company completed its purchase of all of the limited
partnership interests in SDLP from the original investors for $2,472,000 in cash
and 84,000 warrants ("New Warrants") to purchase common stock exercisable at
$8.00 per share. The New Warrants are exercisable until the earlier of 30 days
following the first public offering of Common Stock on or after June 30, 1997
or January 31, 1998. The offer was unanimously accepted by all of the
limited partners. The acquisition was accounted for under the purchase method
and the entire cost of the transaction, totaling $2.8 million, has been
recorded as goodwill and is being amortized on a straight-line basis over 15
years.
F-18
<PAGE>
SILVER DINER, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS, CONTINUED
(UNAUDITED)
4. Sale of Stock
On July 11, 1996, the Company completed a $8,250,000 private placement of common
stock through the sale of 1.5 million shares at $5.50 per share ("Private
Placement"). Approximately $2.5 million of the approximately $7.6 million net
proceeds of the sale will be used to replace the funds used for the acquisition
of the minority interests in SDLP, and the remainder will be available to fund
expansion. In connection with the sale, the Company has agreed to register the
shares with the Securities and Exchange Commission.
5. Stockholders' Equity
The components of stockholders' equity as reflected in the accompanying
consolidated condensed balance sheets are as follows:
<TABLE>
<CAPTION>
July 14, December 31,
1996 1995
<S> <C> ----------- ------------
Silver Diner, Inc.
Common stock, at December 31, 1995, $.10 par value,
1,000,000 shares authorized, 150,947 pre-merger shares issued and
outstanding; at July 14, 1996, $.00074 par value, 20,000,000
shares authorized; 11,503,858 shares issued and outstanding $ 8,513 $ 15,095
Additional paid-in capital 29,567,811 7,489,754
Common stock options outstanding 665,052 665,052
Accumulated deficit (7,881,855) (6,935,627)
----------- -----------
$22,359,521 $ 1,234,274
=========== ===========
</TABLE>
F-19
<PAGE>
FINANCIAL STATEMENTS AND
INDEPENDENT AUDITORS' REPORT
SILVER DINER DEVELOPMENT, INC.,
SILVER DINER LIMITED PARTNERSHIP
AND
SILVER DINER POTOMAC MILLS, INC.
JANUARY 1, 1995 AND DECEMBER 31, 1995
F-20
<PAGE>
Reznick Fedder & Silverman
Certified Public Accountants (bullet) Business Consultants
A Professional Corporation
<TABLE>
<S> <C>
4520 East-West Highway (bullet) Suite 300 (bullet) Bethesda, MD 20814-3319 (bullet) (301) 652-9100 (bullet) Fax (301) 652-1848
</TABLE>
INDEPENDENT AUDITORS' REPORT
To the Stockholders and Partners
Silver Diner Development, Inc.,
Silver Diner Limited Partnership
and Silver Diner Potomac Mills, Inc.
We have audited the accompanying combined balance sheets of Silver Diner
Development, Inc., Silver Diner Limited Partnership and Silver Diner Potomac
Mills, Inc. as of December 31, 1995 and January 1, 1995, and the related
combined statements of operations, stockholders' equity and partners' deficit
and cash flows for each of the three years in the period ended December 31,
1995. These financial statements are the responsibility of the corporations' and
partnership's managements. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the combined financial statements referred to above
present fairly, in all material respects, the financial position of Silver Diner
Development, Inc., Silver Diner Limited Partnership and Silver Diner Potomac
Mills, Inc. as of December 31, 1995 and January 1, 1995, and the results of
their operations, their stockholders' equity and partners' deficit and their
cash flows for each of the three years in the period ended December 31, 1995, in
conformity with generally accepted accounting principles.
/s/ Reznick Fedder & Silverman
REZNICK FEDDER & SILVERMAN
Bethesda, Maryland
April 2, 1996
F-21
<PAGE>
SILVER DINER DEVELOPMENT, INC., SILVER DINER LIMITED PARTNERSHIP
AND SILVER DINER POTOMAC MILLS, INC.
COMBINED BALANCE SHEETS
January 1, December 31,
1995 1995
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 281,463 $ 1,584,716
Short-term investments 1,529,543 -
Inventory 69,591 117,393
Prepaid and other current assets 138,760 72,152
---------- ------------
Total current assets 2,019,357 1,774,261
PROPERTY, EQUIPMENT AND IMPROVEMENTS, net 4,361,912 6,813,987
OTHER ASSETS
Deposits and other 80,498 304,689
Due from affiliates 235,314 355,023
Preopening costs, net of accumulated amortization of
$153,029 at December 31, 1995 - 239,750
Other intangibles and deferred costs, net 381,598 1,306,759
---------- -----------
$7,078,679 $10,794,469
LIABILITIES AND STOCKHOLDERS' EQUITY AND PARTNERS' DEFICIT
CURRENT LIABILITIES
Current maturities of long-term debt $ 637,719 $ 3,193,125
Current maturities of notes payable - officer - 200,000
Accounts payable and accrued expenses 1,881,634 3,513,022
Sales and payroll taxes payable 47,976 69,216
Due to affiliate 13,000 -
----------- -----------
Total current liabilities 2,580,329 6,975,363
OTHER LIABILITIES
Long-term debt, net of current maturities 656,835 973,200
Deferred rent liability 488,049 574,821
Notes payable - officer, net of current maturities 1,060,811 1,036,811
--------- -----------
2,205,695 2,584,832
MINORITY INTEREST IN SDLP 180,175 -
COMMITMENTS - -
STOCKHOLDERS' EQUITY/ PARTNERS' DEFICIT 2,112,480 1,234,274
--------- -----------
$7,078,679 $10,794,469
See notes to combined financial statements
F-22
<PAGE>
SILVER DINER DEVELOPMENT, INC., SILVER DINER LIMITED PARTNERSHIP
AND SILVER DINER POTOMAC MILLS, INC.
COMBINED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Years Ended
---------------------------------------------
December 31, January 1, December 31,
1993 1995 1995
------------ ----------- ------------
<S> <C>
Net sales $11,257,307 $10,896,682 $13,350,255
Restaurant costs and expenses
Cost of sales 3,179,552 3,036,995 3,655,254
Labor 3,519,484 3,525,472 4,452,134
Operating 1,660,515 1,642,039 2,015,668
Occupancy 1,316,757 1,293,842 1,588,527
Depreciation and amortization 860,126 382,082 715,426
------------ ------------ ------------
Total restaurant costs and expenses 10,536,434 9,880,430 12,427,009
---------- ----------- ----------
Restaurant operating income 720,873 1,016,252 923,246
General and administrative expenses 1,179,264 1,877,774 2,077,735
Interest expense 382,291 254,810 334,086
Investment (income) loss, net (16,759) 3,599 (83,021)
Depreciation and amortization 41,639 61,042 97,351
Development and abandoned site costs 746,026 98,637 -
------------ -------------------------------
Loss before minority interest and income taxes (1,611,588) (1,279,610) (1,502,905)
Minority interest in net loss of SDLP 137,224 332,977 180,175
------------ ------------ -------------
Loss before income taxes (1,474,364) (946,633) (1,322,730)
Income taxes - - -
---------------------------------------------
NET LOSS $(1,474,364) $ (946,633) $ (1,322,730)
========== =========== ===========
Net loss per common share $ (13.09) $ (6.33) $ (8.80)
========== =========== ============
Weighted average common
shares outstanding 112,632 149,447 150,374
=========== =========== ============
</TABLE>
See notes to combined financial statements
F-23
<PAGE>
SILVER DINER DEVELOPMENT, INC., SILVER DINER LIMITED PARTNERSHIP
AND SILVER DINER POTOMAC MILLS, INC.
COMBINED STATEMENTS OF STOCKHOLDERS' EQUITY AND PARTNERS' DEFICIT
Years ended December 31, 1993, January 1, 1995 and December 31, 1995
<TABLE>
<CAPTION>
Stockholders' Equity
-----------------------------------------------------------------------------------
Additional Common
Common stock Paid-in Stock Options Accumulated
Shares Amount Capital Outstanding Deficit Total
------ ------ ----------- ------------- ------------ -----------
<S> <C>
Balance at December 31, 1992 109,149 $10,915 $2,254,630 $250,877 $(1,876,623) $ 639,799
Common stock issued 40,298 4,030 5,032,774 - - 5,036,804
Stock options issued - - - 54,702 - 54,702
Net loss - - - - (1,329,690) (1,329,690)
-------------------------------------------------------- ----------- ----------
Balance at December 31, 1993 149,447 14,945 7,287,404 305,579 (3,206,313) 4,401,615
Stock options issued - - - 117,449 - 117,449
Net loss - - - - (647,507) (647,507)
-------------------------------------------------------- ------------ -----------
Balance at January 1, 1995 149,447 14,945 7,287,404 423,028 (3,853,820) 3,871,557
Common stock issued 1,500 150 202,350 - - 202,500
Stock options issued - - - 242,024 - 242,024
Net loss - - - - (729,633) (729,633)
----------------------------------------- ------------- ----------- ----------
Balance at December 31, 1995 150,947 $15,095 $7,489,754 $665,052 $(4,583,453) $3,586,448
======= ====== ========= ======= ========== =========
</TABLE>
<TABLE>
<CAPTION>
Partners' Deficit
--------------------------------------------------------
Combined
Stockholders'
General Limited Equity/Partners'
Partner Partners Total Deficit
--------- ------------ ------------ ----------------
<S> <C>
Balance at December 31, 1992 $(27,975) $(1,287,302) $(1,315,277) $ (675,478)
Common stock issued - - - 5,036,804
Stock options issued - - - 54,702
Net loss (3,078) (141,596) (144,674) (1,474,364)
-------- ----------- ----------- ----------
Balance at December 31, 1993 (31,053) (1,428,898) (1,459,951) 2,941,664
Stock options issued - - - 117,449
Net loss (6,321) (292,805) (299,126) (946,633)
-------- ----------- ---------- ----------
Balance at January 1, 1995 (37,374) (1,721,703) (1,759,077) 2,112,480
Common stock issued - - - 202,500
Stock options issued - - - 242,024
Net loss (7,732) (585,365) (593,097) (1,322,730)
-------- ----------- ----------- ---------
Balance at December 31, 1995 $(45,106) $(2,307,068) $(2,352,174) $ 1,234,274
======= ========== ========== ==========
</TABLE>
See notes to combined financial statements
F-24
<PAGE>
SILVER DINER DEVELOPMENT, INC., SILVER
DINER LIMITED PARTNERSHIP AND
SILVER DINER POTOMAC MILLS, INC.
COMBINED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Years Ended
---------------------------------------------
December 31, January 1, December 31,
1993 1995 1995
------------- ------------- ------------
<S> <C>
Cash flows from operating activities
Net loss $(1,474,364) $ (946,633) $(1,322,730)
Adjustments to reconcile net loss to net cash
used in operating activities
Depreciation and amortization 901,765 443,124 812,777
Compensation expense - stock options
and deferred compensation 7,607 78,240 368,505
Minority interest (137,224) (332,977) (180,175)
Changes in operating assets and liabilities
Inventory 35,322 7,711 (47,802)
Prepaid expenses and other assets 32,940 54,453 41,294
Preopening, other intangibles and deferred costs (208,693) (24,519) ( 499,136)
Accounts payable, accrued expenses and long-
term payables (212,327) 239,239 607,558
Sales and payroll taxes payable (154,381) 1,612 21,240
Lease and other deposits 534 (8,867) (78,877)
Deferred rent liability 57,392 19,668 86,772
----------- -------------- -------------
Net cash used in operating activities (1,151,429) (468,949) (190,574)
---------- ------------ ------------
Cash flows from investing activities
Purchase of property and equipment (133,923) (247,406) (2,691,826)
Purchases of short-term investments - (2,760,805) (120,000)
Maturities of short-term investments - 1,231,262 1,529,543
Advances to affiliates (213,521) (472,083) (204,080)
Repayment of advances to affiliates 23,478 285,580 84,371
----------- ---------- -------------
Net cash used in investing activities (323,966) (1,963,452) (1,401,992)
----------- ---------- ----------
</TABLE>
(continued)
F-25
<PAGE>
SILVER DINER DEVELOPMENT, INC., SILVER
DINER LIMITED PARTNERSHIP AND
SILVER DINER POTOMAC MILLS, INC.
COMBINED STATEMENTS OF CASH FLOWS - CONTINUED
<TABLE>
<CAPTION>
Years Ended
--------------------------------------------------
December 31, January 1, December 31,
1993 1995 1995
------------ ------------- ------------
<S> <C>
Cash flows from financing activities
Proceeds from notes payable 696,275 - 3,620,000
Loan costs (44,548) (3,469) (26,439)
Recapitalization costs - - (167,764)
Payments on advances - affiliates (7,031) - (13,000)
Payments of principal - notes payable (624,844) (1,290,165) (641,106)
Payments of principal - capital leases (200,798) (168,547) (107,123)
Payments of principal - notes payable - officer (72,239) (55,604) -
Proceeds from stock sale 5,528,776 - 202,500
Proceeds from sale of stock options to employees - - 39,471
Repurchase of employee stock options - - (10,720)
Repayment of bank overdraft (215,232) - -
----------- ---------- -----------
Net cash provided by (used in)
financing activities 5,060,359 (1,517,785) 2,895,819
---------- --------- -----------
NET INCREASE (DECREASE) IN
CASH AND CASH EQUIVALENTS 3,584,964 (3,950,186) 1,303,253
Cash and cash equivalents, beginning 646,685 4,231,649 281,463
---------- --------- ------------
Cash and cash equivalents, end $4,231,649 $ 281,463 $ 1,584,716
========= ========== ===========
Supplemental disclosure of cash flow information:
Interest paid $227,658 $245,677 $334,086
======= ======= =======
Noncash investing and financing activities:
Construction payables included in accounts
payable and accrued expenses $ - $746,142 $301,702
=========== ====== =======
Recapitalization costs included in accounts payable
and accrued expenses $ - $ - $722,128
=========== =========== =======
</TABLE>
See notes to combined financial statements
F-26
<PAGE>
SILVER DINER DEVELOPMENT, INC., SILVER
DINER LIMITED PARTNERSHIP AND
SILVER DINER POTOMAC MILLS, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
December 31, 1995, January 1, 1995 and December 31, 1993
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Silver Diner Development, Inc. (SDDI) was organized under the laws of
the Commonwealth of Virginia and is primarily engaged in the development
and operation of the Silver Diner restaurant chain. Having developed the
"Silver Diner" restaurant concept, SDDI, Silver Diner Limited Partnership
(SDLP) and Silver Diner Potomac Mills, Inc. (SDPMI) own and/or manage and
operate six Silver Diner restaurants as of December 31, 1995. SDDI owns a
47% interest in and is the general partner of SDLP . SDLP owns two Silver
Diner restaurants managed and operated by SDDI and operates one Silver
Diner restaurant, owned by SDPMI, in exchange for rights to all SDPMI
profits and losses. The president of SDLP's general partner, SDDI,
nominally owns 100% of SDPMI.
Commencing January 1, 1994, SDDI, SDLP and SDPMI began operating on a
52-53 week year which ends on the Sunday nearest to December 31 each year.
The fiscal years ended January 1, 1995 and December 31, 1995 and the
calendar year ended December 31, 1993 each consist of 52 weeks.
Basis of Presentation
The combined financial statements include the accounts of SDDI, SDLP
and SDPMI, all of which are under common management control. Intercompany
transactions and balances have been eliminated in combination.
Cash and Cash Equivalents
For purposes of reporting cash flows, cash and cash equivalents include
cash on hand and investments which are readily convertible to cash with
maturities of three months or less when acquired, which approximates fair
value.
Short-Term Investments
Effective January 1, 1994, SDDI adopted Statement of Financial
Accounting Standards No. 115 ("SFAS No. 115"), "Accounting for Certain
Investments in Debt and Equity Securities." Securities are classified as
"trading securities" and reported at market value. At January 1, 1995,
short-term investments represent investments in mutual funds that invest
in corporate and U.S. government bonds: the aggregate historical cost and
fair market value of the funds were $1,662,536 and $1,529,543,
respectively.
Inventory
Inventory consists of food and supplies and is valued at the lower of
cost (first-in, first-out) or market.
Property, Equipment and Improvements
Property, equipment and improvements are stated at cost. The cost of
the Rockville diner building and leasehold improvements are depreciated
over the shorter of the estimated useful lives or respective anticipated
lease period, ranging from 20 to 30 years, with a provision for salvage
value for the Rockville diner building. Furniture and equipment are
depreciated over the estimated useful lives of the related assets, ranging
from 5 to 10 years. Depreciation is computed using accelerated and
straight-line methods and includes assets owned and those under capital
lease agreements.
F-27
<PAGE>
SILVER DINER DEVELOPMENT, INC., SILVER DINER
LIMITED PARTNERSHIP AND SILVER DINER
POTOMAC MILLS, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS - CONTINUED
December 31, 1995, January 1, 1995 and December 31, 1993
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Property, Equipment and Improvements (Continued)
Costs incurred in the construction of diners are capitalized and upon
opening are depreciated or amortized and charged to expense based upon their
property classification.
Intangibles
Preopening costs, including payroll, employee recruitment and advertising,
incurred in the restaurant start-up and training period prior to the opening of
each restaurant, are amortized on the straight-line basis over twelve months
from the date of opening.
Costs of acquiring/establishing leases and loans are capitalized and
amortized over the lives of the related loan or lease period using the
straight-line method.
Costs related to projected sites subsequently determined to be
unsatisfactory and general site selection costs which cannot be identified with
a specific diner are charged to current operations.
Costs associated with developing and obtaining a trademark are capitalized
and amortized over twenty years using the straight-line method.
Recapitalization costs incurred in connection with SDDI's merger with
Food Trends Acquisition Corporation (Note 11) are deferred and will be
offset against contributed capital upon consummation of the merger.
Deferred Rent
Deferred rent is recorded and amortized to the extent the total minimum
rental payments allocated to the current period on a straight-line basis exceed
or are less than the cash payments required.
Income Taxes
The provision for income taxes is based on earnings reported in the
financial statements. Deferred income taxes are provided for temporary
differences between financial assets and liabilities and those reported for
income tax purposes. Prior to December 14, 1993, SDDI elected to be taxed under
Subchapter S of the Internal Revenue Code of 1954, as amended. As such, taxable
income or loss prior to this date passed through to, and was reportable by, the
individual shareholders. SDDI terminated its Subchapter S status as of December
14, 1993. Taxable income or loss reported by SDLP and SDPMI passes through to,
and is reportable by, its partners and shareholder, respectively.
Net Loss Per Common Share
Net loss per share is computed based upon the weighted average number of
common shares outstanding during the period. Fully diluted and primary earnings
per common share calculations are antidilutive and, accordingly, are not
presented in the financial statements.
F-28
<PAGE>
SILVER DINER DEVELOPMENT, INC., SILVER DINER LIMITED PARTNERSHIP
AND SILVER DINER POTOMAC MILLS, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS - CONTINUED
December 31, 1995, January 1, 1995 and December 31, 1993
2. PROPERTY, EQUIPMENT AND IMPROVEMENTS
Property, equipment and improvements consists of the following:
January 1, December 31,
1995 1995
Leasehold Improvements $2,960,838 $5,661,681
Furniture and Fixtures 2,414,735 3,322,656
--------- ---------
5,375,573 8,984,337
Accumulated Depreciation (1,682,513) (2,170,350)
--------- ---------
3,693,060 6,813,987
Construction in Progress 668,852 -
---------- ---------
$4,361,912 $6,813,987
========= =========
3. OTHER INTANGIBLE ASSETS AND DEFERRED COSTS
Other intangible assets and deferred costs consist of the following:
January 1, December 31,
1995 1995
Lease costs $241,530 $ 352,686
Deferred site costs 47,611 42,813
Trademark 30,401 30,401
Menu engineering and training
manuals and other 150,355 150,357
Loan costs 48,020 74,455
Recapitalization costs - 907,373
---------- ----------
517,917 1,558,085
Accumulated Amortization (136,319) (251,326)
------- ----------
$381,598 $1,306,759
======= =========
F-29
<PAGE>
SILVER DINER DEVELOPMENT, INC., SILVER DINER
LIMITED PARTNERSHIP AND SILVER DINER
POTOMAC MILLS, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS - CONTINUED
December 31, 1995, January 1, 1995 and December 31, 1993
4. LONG-TERM DEBT
<TABLE>
<CAPTION>
January 1, December 31,
Notes Payable 1995 1995
------------- -----------------------------
<S> <C>
SDDI - Senior subordinated convertible promissory notes, bearing interest at
10%, payable in one installment of principal plus accrued interest on
December 31, 1996. Until March 31, 1996, SDDI reserved the right to repay,
in whole or in part, in cash, the principal amount of the notes plus accrued
interest at 30% per annum. The notes are unsecured and are subordinated to
bank loans and equipment lease financing. On March 27, 1996, the outstanding
promissory notes, plus accrued interest, were exchanged for 625,000 shares
of SDDI stock (representing 18,750 shares of SDDI stock at December 31,
1995).
$ - $2,500,000(1)
SDDI - bank note in the original amount of $750,000, bearing interest at the
prime rate plus 2% (10.5% at December 31, 1995), not to exceed 10% through
1998. The note is payable in monthly principal installments of $8,929 plus
accrued interest through maturity in October, 2002, and is secured by all
SDDI assets at the Fair Oaks diner.
- 732,143(2)
SDDI - bank note in the original amount of $600,000, bearing interest at the
prime rate plus 2% (10.5% at December 31, 1995), payable in monthly
principal and interest installments of approximately $15,000 payable until
the note's maturity on December 1, 1996, at which time the outstanding
principal balance plus accrued interest is due. The note is secured by the
Towson diner lease and SDDI's present and future furniture, fixtures,
equipment and supplies.
259,000 171,453(2)
SDDI and SDLP, jointly - bank note, bearing interest at the prime rate plus
2% (10.5% at December 31, 1995), payable in monthly interest payments
through April 1995, and monthly principal and interest payments of
approximately $6,500 from May 1995 through maturity in December 1999. The
loan is collateralized by a certificate of deposit in the original amount of
$120,000. The loan is secured by the Rockville and Towson diners and
leaseholds and is guaranteed by SDDI's president and a member of SDDI's
board of directors.
100,000 346,488(2)
SDDI and SDLP - quarterly revolving vendor notes payable, equal to the
outstanding payable balance to the vendor, bearing no interest. 143,991 -
</TABLE>
F-30
<PAGE>
SILVER DINER DEVELOPMENT, INC., SILVER
DINER LIMITED PARTNERSHIP AND SILVER
DINER POTOMAC MILLS, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS - CONTINUED
December 31, 1995, January 1, 1995 and December 31, 1993
4. LONG-TERM DEBT (Continued)
<TABLE>
<CAPTION>
January 1, December 31,
Notes Payable 1995 1995
------------- ----------------------------
<S> <C>
SDLP - two promissory notes with a bank, bearing interest at the prime
rate plus 1.5% (10% at December 31, 1995). The notes are guaranteed by SDDI,
SDDI's president and a member of SDDI's board of directors.
Original face amount of $1,650,000, payable in monthly principal and
interest payments of $16,915 through September 1996. The note is secured by
the Rockville diner building and land lease and SDLP's present and future
furniture, fixtures, equipment and supplies.
331,364 155,708(2)
Original face amount of $450,000, payable in monthly principal and
interest payments of $8,910 through September 1996. The note is
secured by SDLP's present and future furniture, fixtures, equipment and
supplies. 175,829 83,278(2)
---------- -----------
1,010,184 3,989,070
Capital lease obligations 284,370 177,255
---------- ----------
1,294,554 4,166,325
Less current maturities 637,719 3,193,125
---------- ---------
$ 656,835 $ 973,200
========== ===========
As of December 31, 1995, aggregate maturities of the notes payable and
capital lease obligations for each of the next five fiscal years are as follows:
1996 $3,193,125
1997 263,611
1998 299,982
1999 107,143
2000 107,143
(1) Management believes it is not practicable to estimate the fair value of
the convertible promissory notes as notes with similar characteristics
are not currently available to SDDI.
(2) The notes approximate fair value at December 31, 1995.
F-31
<PAGE>
SILVER DINER DEVELOPMENT, INC., SILVER DINER
LIMITED PARTNERSHIP AND SILVER DINER
POTOMAC MILLS, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS - CONTINUED
December 31, 1995, January 1, 1995 and December 31, 1993
4. LONG-TERM DEBT (Continued)
Capital Leases
Capital leases are recorded at the present value of the minimum
lease payments. Property and equipment includes equipment under capital leases
which expire in fiscal years 1996-1998.
At December 31, 1995, future minimum lease payments, and the net present
value thereof, under the capital leases for fiscal years 1996-1998, are
presented as follows:
1996 $113,121
1997 74,526
1998 870
-------
Total minimum lease payments 188,517
Less: Amount representing interest 11,262
-------
Present value of net minimum lease payments,
of which $102,966 is current at December 31, 1995 $177,255
=======
As of December 31, 1995 and January 1, 1995, property, equipment and
improvements includes $495,000 and $633,380, respectively, in capital
lease assets.
5. NOTES PAYABLE - OFFICER
Officer notes payable consist of the following unsecured notes payable of
SDDI to its president and chief executive officer:
</TABLE>
<TABLE>
<CAPTION>
January 1, December 31,
1995 1995
-------------- --------------
<S> <C>
Originally with Robert Giaimo Development, Inc. and subsequently assigned,
requiring interest only monthly installments, at prime plus 2% (10.5% at
December 31, 1995), until maturity in December 1998. The note's maturity may
accelerate in the event of a substantial equity infusion as determined and
approved by the Board of Directors.
$ 261,546 $ 261,546
Deferred salary note, payable in monthly interest only installments at the
rate of prime plus 2% (10.5% at December 31, 1995). Payable from cash flow
from operations as available and determined by the Board of Directors.
419,265 595,265
Note payable bearing interest, payable monthly, at the prime lending rate
plus 2% (10.5% at December 31, 1995). Beginning in 1996, the note requires
monthly principal installments at $16,666, until the note's maturity in
1997.
380,000 380,000
---------- ---------
$1,060,811 $1,236,811
</TABLE>
F-32
<PAGE>
SILVER DINER DEVELOPMENT, INC., SILVER
DINER LIMITED PARTNERSHIP AND SILVER
DINER POTOMAC MILLS, INC.
December 31, 1995, January 1, 1995 and December 31, 1993
NOTES TO COMBINED FINANCIAL STATEMENTS - CONTINUED
5. NOTES PAYABLE - OFFICER (Continued)
Interest charged to operations relating to the officer notes payable
amounted to $121,847, $105,242 and $106,670 in fiscal years 1995, 1994, and
1993, respectively. The aggregate maturities of the officer notes payable for
each of the next three fiscal years is estimated to be as follows:
1996 $200,000
1997 180,000
1998 856,811
The notes approximate fair market value at December 31, 1995.
6. STOCKHOLDERS' EQUITY/PARTNERS' DEFICIT
The components of stockholders' equity and partners' deficit as reflected in
the accompanying combined balance sheets is as follows:
<TABLE>
<CAPTION>
January 1, December 31,
1995 1995
------------ -------------
<S> <C>
Silver Diner Development, Inc.
Common stock, $.10 par value, 1,000,000 shares authorized;
shares issued and outstanding: 149,447 (January 1, 1995)
150,947 (December 31, 1995) $ 14,945 $ 15,095
Additional paid-in capital 7,287,404 7,489,754
Common stock options outstanding 423,028 665,052
Accumulated deficit (3,853,820) (4,583,453)
--------- ---------
3,871,557 3,586,448
--------- ---------
Silver Diner Limited Partnership
General Partner, 1% interest (37,374) (45,106)
Class A Limited Partners, 50% interest collectively - -
Class B Limited Partners, 49% interest collectively (1,721,703) (2,307,068)
--------- ---------
(1,759,077) (2,352,174)
Silver Diner Potomac Mills, Inc. --------- ---------
Common stock, $1 par value, 1,000 shares authorized, 100
shares issued and outstanding, net of $100 subscription receivable - -
--------- ---------
$2,112,480 $1,234,274
========= =========
</TABLE>
F-33
<PAGE>
SILVER DINER DEVELOPMENT, INC., SILVER DINER
LIMITED PARTNERSHIP AND SILVER DINER
POTOMAC MILLS, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS - CONTINUED
December 31, 1995, January 1, 1995 and December 31, 1993
7. RELATED PARTY TRANSACTIONS
Robert Giaimo Development, Inc.
SDPMI leases the diner at Potomac Mills from Robert Giaimo Development, Inc.
(RGDI), a corporation wholly-owned by the president of SDDI. The lease expires
October 14, 2011 and includes annual CPI adjustments to base rent and percentage
rent based on gross receipts. For the years ending December 31, 1995, January 1,
1995, and December 31, 1993, occupancy costs include $391,000 in rent and
related pass through costs associated with the RGDI lease.
Robert Giaimo Leasing, Inc.
SDDI leases the furniture and equipment at the Towson diner under terms of a
capital lease expiring in 1999 from Robert Giaimo Leasing, Inc. (RGLI), a
corporation established solely to purchase furniture and equipment which is to
be leased to SDDI. RGLI is wholly-owned by the president of SDDI.
At December 31, 1995 and January 1, 1995, property, equipment and
improvements includes $210,000 and $294,000, respectively, in capital leased
assets, net of accumulated depreciation, and long-term debt includes $177,000
and $261,000, respectively, in capital lease liability related to the lease with
RGLI. For the years ending December 31, 1995, January 1, 1995 and December 31,
1993, interest expense includes $22,000, $38,000 and $29,000, respectively, in
interest related to the lease with RGLI.
Due From/To Affiliates
Due from affiliates represents non-interest bearing amounts due on demand
from Silver Diner Real Estate Limited Partnership (SDRELP), an affiliate, RGLI
and RGDI, resulting from current and prior year cash advances, as follows:
January 1, December 31,
1995 1995
----------- ------------
RGDI $ 8,000 $183,217
RGLI 69,965 14,110
SDRELP 157,349 157,696
------- -------
$235,314 $355,023
======= =======
Since amounts due from affiliates are non-interest bearing advances with
no fixed repayment terms, it is not practicable to estimate the fair value of
these advances at December 31, 1995.
Due to affiliate represents non-interest bearing cash advances, due on
demand, as follows:
January 1, December 31,
1995 1995
------------ --------------
RGDI $13,000 $ -
------ -----------
$13,000 $ -
====== ===========
F-34
<PAGE>
SILVER DINER DEVELOPMENT, INC., SILVER DINER LIMITED PARTNERSHIP
AND SILVER DINER POTOMAC MILLS, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS - CONTINUED
December 31, 1995, January 1, 1995 and December 31, 1993
7. RELATED PARTY TRANSACTIONS (Continued)
Acquisition of Development and Prototype Plan Rights
SDDI committed to pay SDRELP a development and prototype plan usage fee in
the amount of $90,000 for each diner subsequently opened by SDDI until such time
as SDRELP was made whole for the funds advanced and risks taken in connection
with SDRELP's development activities and prototype plans. Subsequent to the
commitment, SDRELP distributed its right under the commitment to certain of its
shareholders.
During 1993, SDDI purchased these rights from the shareholders for
$645,000, consisting of $487,500 in cash and 1,312.5 shares of SDDI common
stock. Such costs have been charged to development and abandoned site costs in
1993.
Small Business Loan Guaranty
SDPMI, as a small business concern pursuant to Section 503 of the Small
Business Investment Act of 1958, has guaranteed a loan payable by RGDI to the
Virginia Asset Financing Corporation. The loan, $675,000 at December 31, 1995,
was used to finance the construction of the Potomac Mills diner.
In connection with a note payable by RGDI to a bank, SDPMI has provided the
bank with a security interest in equipment owned by SDPMI.
8. COMMITMENTS
Operating Leases
SDDI, SDLP and SDPMI lease restaurant facilities under operating leases with
terms expiring at various dates through 2012. Certain lease agreements contain
renewal options for a maximum of 15 years beyond the original term. Also,
certain leases have provisions for contingent rentals based on a percentage of
the excess of sales over stipulated minimum sales and other specified pass
through costs, and annual increases based on the consumer price index.
On September 14, 1995, SDDI entered into a ground lease agreement in
connection with a planned new restaurant facility in Merrifield, Virginia. The
lease begins on the restaurant opening date, anticipated to be late 1996, for a
15 year term, with renewal options for a maximum of 15 additional years.
Approximate future minimum aggregate lease payments as of December 31, 1995
are:
1996 $ 1,425,000
1997 1,566,000
1998 1,656,000
1999 1,704,000
2000 1,753,000
Thereafter 18,886,000
F-35
<PAGE>
SILVER DINER DEVELOPMENT, INC., SILVER DINER
LIMITED PARTNERSHIP AND SILVER DINER
POTOMAC MILLS, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS - CONTINUED
December 31, 1995, January 1, 1995 and December 31, 1993
8. COMMITMENTS (Continued)
Operating Leases (Continued)
Aggregate rent expense under the leases for fiscal 1995, 1994 and 1993 was
approximately $1,589,000, $1,294,000 and $1,288,000, respectively, inclusive
of contingent rent of $9,000 and $14,000 for fiscal 1995 and 1994, respectively.
Land Purchase Agreement
In December 1995, SDDI entered into a land purchase contract for a proposed
new restaurant location in Reston, Virginia. The purchase price, subject to
certain conditions, is estimated to be $1.4 to $1.5 million. The contract
enables SDDI to terminate the agreement during a site feasibility study period.
Letter of Credit
SDLP has an undrawn bank letter of credit, in the approximate amount of
$140,000, in connection with the Rockville land lease. The letter of credit
expires August 1, 1996.
Employment Continuity Agreements
SDDI has entered into employment continuity agreements with certain
executives. The agreements are generally three to five years in length and
provide for minimum salary levels, as adjusted for minimum percentage increases
and include incentive bonuses based on specified management goals. The aggregate
minimum commitment for future salaries, excluding bonuses, as of December 31,
1995 is approximately $1.5 million.
F-36
<PAGE>
SILVER DINER DEVELOPMENT, INC., SILVER DINER
LIMITED PARTNERSHIP AND SILVER DINER
POTOMAC MILLS, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS - CONTINUED
December 31, 1995, January 1, 1995 and December 31, 1993
9. INCOME TAXES
At December 31, 1995, SDDI has a net operating loss carryforward of
approximately $2.8 million for income tax purposes, that expires in 2008
through 2010, which may be used to reduce future taxable income and tax
liabilities.
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts reported for income tax purposes. Significant
components of SDDI's deferred tax assets and liabilities are as follows:
January 1, December 31,
1995 1995
Net operating tax loss carryforwards $189,306 $452,059
Tax over book depreciation/
amortization (73,356) (106,829)
Accrued deferred compensation 92,850 95,540
Deferred rent 48,670 36,707
-------- --------
257,470 477,477
Valuation allowance (257,470) (477,477)
------- -------
Net deferred tax asset $ - $ -
============= =============
As a result of SDDI's history of cumulative losses, a valuation
allowance equal to the calculated deferred tax benefit has been recorded at
December 31, 1995 and January 1, 1995.
10. COMMON STOCK OPTIONS AND WARRANTS
SDDI has stock option plans for officers, key employees and consultants
which provide for incentive stock options and non-qualified stock options. The
Board of Directors determines the option price (not to be less than fair market
value for incentive options) at the date of grant. The options generally expire
ten years from the date of grant and are exercisable over the period stated in
each option. As of January 1, 1995 and December 31, 1995, SDDI has reserved
10,000 and 20,000 shares of Common Stock for the "1991 Stock Option Plan."
Additionally, SDDI has an unlimited number shares of common stock reserved at
January 1, 1995 and has reserved 5,000 shares at December 31, 1995 for the "SDDI
Earned Ownership Plan."
F-37
<PAGE>
SILVER DINER DEVELOPMENT, INC., SILVER DINER
LIMITED PARTNERSHIP AND SILVER DINER
POTOMAC MILLS, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS - CONTINUED
December 31, 1995, January 1, 1995 and December 31, 1993
10. COMMON STOCK OPTIONS AND WARRANTS (Continued)
A summary of stock option activity follows:
<TABLE>
<CAPTION>
Number of
options Price range
<S> <C>
Options outstanding, December 31, 1992 4,093 $ 0.10 - 120.00
Granted 1,048 0.01 - 135.00
--------
Options outstanding, December 31, 1993 5,141 0.01 - 135.00
Granted 4,288 0.01 - 135.00
Canceled (1,000) 60.00
Reacquired (47) 0.01
---------
Options outstanding, January 1, 1995 8,382 0.01 - 135.00
Granted 16,895 0.01 - 135.00
Canceled (1,598) 120.00 - 135.00
Reacquired (134) 0.01
--------
Options outstanding, December 31, 1995 23,545 0.01 - 135.00
======
</TABLE>
Options granted in 1995 include accrued but unissued options for 826
shares. Non-qualified options of 7,444, 1,788, and 1,048 were granted in fiscal
years 1995, 1994, and 1993, respectively. All other options granted were
incentive options. At December 31, 1995, options for 8,530 shares were
exercisable.
Excluding the effect of the merger (Note 11), options under the "1991 Stock
Option Plan" are exercisable in full if SDDI executes a merger agreement or
consolidates with another company, if more than 50% of SDDI's voting stock is
acquired by another person or group in an other than capital stock transaction,
or if Robert T. Giaimo ceases to be President of SDDI.
11. SUBSEQUENT EVENTS
Merger
On March 27, 1996, SDDI completed a merger with Food Trends Acquisition
Corporation (FTAC), whereby the stockholders of SDDI exchanged their stock for
approximately 57% of the stock of FTAC. The acquisition will be treated as a
recapitalization of SDDI in 1996 and FTAC will change its name to Silver Diner
Development, Inc.
In connection with the merger, on April 2, 1996, note payable officer (Note
5) was repaid by the offset against amounts due from affiliates (Note 7) and the
net outstanding balance was repaid in full by SDDI. On April 1, 1996, SDDI
terminated its capital lease obligation with RGLI (Note 7) by purchasing the
leased equipment at the remaining lease obligation balance of approximately
$148,000. Additionally, in connection with SDDI's merger with FTAC, SDDI
received an option to buy out the Potomac Mills diner lease agreement with RGDI.
F-38
<PAGE>
SILVER DINER DEVELOPMENT, INC., SILVER DINER
LIMITED PARTNERSHIP AND SILVER DINER
POTOMAC MILLS, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS - CONTINUED
December 31, 1995, January 1, 1995 and December 31, 1993
11. SUBSEQUENT EVENTS (Continued)
Operating Leases
In February and March, 1996, SDDI entered into two ground lease agreements
in connection with planned new restaurants in Clarendon and Springfield,
Virginia. Approximate future minimum aggregate lease payments are:
1996 $ 235,000
1997 233,000
1998 260,000
1999 323,000
2000 352,000
Thereafter 3,697,000
F-39
<PAGE>
PRO FORMA FINANCIAL INFORMATION
F-40
<PAGE>
SURVIVING CORPORATION
PRO FORMA COMBINED BALANCE SHEET
DECEMBER 31, 1995
(Unaudited)
<TABLE>
<CAPTION>
Adjustments
SDDI FTAC ------------------------------ Pro Forma
Historical Historical DR CR Combined
------------ ----------- ----------- ------------ --------------
<S> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 1,584,716 $ 192,509 $ 1,777,225
Short-term investments -- -- $13,995,746(2f) $ 881,788(2c) 12,032,575
1,081,383(2b)
Inventory 117,393 -- 117,393
Prepaid and other current assets 72,152 31,813 103,965
------------ ------------- ---------- ----------- -------------
Total current assets 1,774,261 224,322 13,995,746 1,963,171 14,031,158
PROPERTY, EQUIPMENT AND
IMPROVEMENTS, net 6,813,987 11,736 6,825,723
OTHER ASSETS
Investments -- 13,995,746 13,995,746(2f) --
Deposits and other 304,689 -- 304,689
Due from affiliates 355,023 -- 355,023(2a) --
Preopening cost, net 239,750 -- 239,750
Intangibles and deferred costs, net 1,306,759 1,382 889,969(2d) 418,172
============ ============= =========== =========== =============
$ 10,794,469 $ 14,233,186 $13,995,746 $17,203,909 $ 21,819,492
============ ============= =========== =========== =============
LIABILITIES AND STOCKHOLDERS' EQUITY AND PARTNERS' DEFICIT
CURRENT LIABILITIES
Current maturities of long-term debt $ 3,193,125 -- $ 413,888(2b) $ 279,237
2,500,000(2g)
Current maturities of notes payable - officer 200,000 200,000(2c) --
Accounts payable and accrued expenses 3,513,022 $ 89,000 97,288(2g) 3,504,734
Sales and payroll taxes payable 69,216 -- 69,216
------------ ------------- ----------- ------------ -------------
Total current liabilities 6,975,363 89,000 3,211,176 -- 3,853,187
------------ ------------- ----------- ------------ -------------
OTHER LIABILITIES
Long-term debt, net of current maturities 973,200 -- 667,495(2b) 305,705
Deferred rent liability 574,821 -- 574,821
Notes payable-officer 1,036,811 -- 355,023(2a) --
681,788(2c)
------------ ------------- ----------- ------------ -------------
2,584,832 -- 1,704,306 -- 880,526
------------ ------------- ----------- ------------ -------------
MINORITY INTEREST -- -- --
COMMON STOCK SUBJECT TO
REDEMPTION -- 2,797,750 2,797,750(2e) --
STOCKHOLDERS' EQUITY AND
PARTNERS' DEFICIT
Common Stock 15,097 2,062 10,428(2d) $ 399(2e) 7,593
463(2g)
Additional paid-in capital 7,489,752 11,529,796 185,422(2d) 10,428(2d) 23,348,761
889,969(2d) 2,797,351(2e)
2,596,825(2g)
Common stock options outstanding 665,052 -- 665,052
Accumulated deficit (6,935,627) (185,422) 185,422(2d) (6,935,627)
------------ ------------- ----------- ------------ -------------
1,234,274 11,346,436 1,085,819 5,590,888 17,085,779
============ ============== =========== ============ =============
$ 10,794,469 $ 14,233,186 $ 8,799,051 $ 5,590,888 $ 21,819,492
============ ============== =========== ============ =============
</TABLE>
F-41
See notes to pro forma combined financial statements.
<PAGE>
SURVIVING CORPORATION
PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE 52 WEEKS ENDED DECEMBER 31, 1995
(Unaudited)
<TABLE>
<CAPTION>
Adjustments
SDDI FTAC ------------------------------ Pro Forma
Historical Historical DR CR Combined
------------ ----------- ----------- ------------ --------------
<S> <C>
Net sales $13,350,255 -- $ 13,350,255
Restaurant costs and expenses
Cost of sales 3,655,254 -- 3,655,254
Labor 4,452,134 -- 4,452,134
Operating 2,015,668 -- 2,015,668
Occupancy 1,588,527 -- 1,588,527
Depreciation and amortization 715,426 -- -- -- 715,426
----------- ------------ ---------- ------------- ---------------
Total restaurant costs and expenses 12,427,009 -- -- -- 12,427,009
----------- ------------ ---------- ------------- ---------------
Restaurant operating income 923,246 -- -- -- 923,246
General and administrative expenses 2,077,735 $ 852,234 2,929,969
Interest expense 334,086 -- $ 53,519(2b) 61,432
121,847(2c)
97,288(2g)
Investment income (83,021) (789,561) (872,582)
Depreciation and amortization 97,351 3,343 100,694
----------- ------------ ----------- ------------- -----------
Loss before minority interest
and income taxes (1,502,905 (66,016) -- (272,654) (1,296,267)
Minority interest in net loss of SDLP 180,175 -- 180,175
----------- ------------ ----------- ------------- -----------
Loss before income taxes (1,322,730) (66,016) -- (272,654) (1,116,092)
Income taxes -- 46,205 46,205
----------- ------------ ----------- ------------- -----------
NET LOSS $(1,322,730) $ (112,221) -- $ (272,654) $ (1,162,297)
=========== =========== ========== ============== ==============
Net loss per common share $ (8.80) $ (0.03) $ (0.11)
=========== =========== ==============
Weighted average common
shares outstanding 150,374 3,325,000 150,037 6,936,028 10,261,365
=========== =========== ========== ============== ==============
</TABLE>
F-42
See notes to pro forma combined financial statements.
<PAGE>
(SURVIVING CORPORATION)
DECEMBER 31, 1995
NOTES TO PRO FORMA COMBINED FINANCIAL STATEMENTS
(Unaudited)
1. Basis of Presentation
The unaudited pro forma condensed combined financial statements
assume consummation of the transaction described in the Food Trends Acquisition
Corporation ("FTAC") Proxy Statement, no FTAC Common Shares subject to
redemption are redeemed, the exchange of all Warrants for FTAC Common Shares,
all of the outstanding Silver Diner Development, Inc. ("SDDI") Common Shares
will be converted into FTAC Common Shares and all Subordinated Notes are
converted. Following the Merger, SDDI will continue operations as a wholly-owned
subsidiary of FTAC.
The unaudited pro forma combined balance sheet is based on the
individual balance sheets of FTAC and Silver Diner Development, Inc., Silver
Diner Limited Partnership and Silver Diner Potomac Mills, Inc. and has been
prepared to reflect the Merger as of December 31, 1995. The unaudited pro forma
condensed combined statement of operations is based on the individual statements
of operations of FTAC and Silver Diner Development, Inc., Silver Diner Limited
Partnership and Silver Diner Potomac Mills, Inc. and combines the results of
operations of FTAC for the year ended December 31, 1995 and of Silver Diner
Development, Inc., Silver Diner Limited Partnership and Silver Diner Potomac
Mills, Inc. for the 52-week period ended December 31, 1995, as if the
acquisition had occurred at the beginning of each respective period. The pro
forma combined financial data is intended for informational purposes only and is
not necessarily indicative of the financial position or future results of
operations of the combined company or of the financial position or the results
of operations of the combined company that would have actually occurred had the
Merger been in effect as of the date or for the periods presented.
2. Adjustments to Unaudited Pro Forma Combined Financial Statements as of
December 31, 1995 and for the 52 weeks then ended
(a) To record the netting of amounts due from affiliates with officer
notes payable. The amounts due from affiliates include:
Robert Giaimo Development Inc. $183,217
Silver Diner Real Estate Limited Partnership 157,696
Robert Giaimo Leasing Inc. 14,110
============
Total amount due from affiliates $355,023
============
(b) To record repayment of certain SDDI bank debt and the repayment of a
capital lease obligation to RGLI (which proceeds RGLI intends to use
to repay an equipment note payable to an unrelated third party and to
eliminate related interest paid).
(c) To record repayment of officer notes payable.
(d) To record conversion of SDDI Common Shares into FTAC Common Shares at
$.00074 par value and to eliminate deferred recapitalization costs
and the accumulated deficit of acquiree.
(e) Reclassification of redeemable FTAC Common Stock not redeemed.
(f) To reclassify investments as current assets to reflect the removal
of restrictions as a result of the merger.
(g) To record conversion of Subordinated Notes for FTAC Common Shares
and eliminate interest thereon.
F-43
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
Set forth below is an estimate of the approximate amount of the fees
and expenses payable by the Registrant.
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee ......................... $2,975
*Blue sky fees and expenses (including legal fees) .......................... 1,000
*Accounting fees and expenses ............................................... 20,000
*Legal fees and expenses .................................................... 20,000
*Printing and engraving ..................................................... 2,000
*Transfer agent and registrar fees .......................................... 100
*Miscellaneous .............................................................. 525
______
Total .............................................................. $46,600
</TABLE>
- ----------------
* Estimated
Item 15. Indemnification of Directors and Officers.
Section 145 of the Delaware General Corporation Law, as amended,
provides that a corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
proceeding, whether civil, criminal, administrative or investigative, 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 its request in such capacity in another
corporation or business association, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he 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.
Section 102(b)(7) of the Delaware General Corporation Law, as amended,
permits a corporation to provide in its certificate of incorporation that a
director of the corporation shall not
II - 1
<PAGE>
be personally liable to the corporation or its stockholders for monetary damages
for breach of fiduciary duty as a director, except for liability (i) for any
breach of the director's duty of loyalty to the corporation or its stockholders,
(ii) for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) under Section 174 of the
Delaware General Corporation Law, or (iv) for any transaction from which the
director derived an improper personal benefit.
Article Eighth of the Registrant's Certificate of Incorporation, as
amended, provides for the elimination of personal liability of a director for
breach of fiduciary duty as permitted by Section 102(b)(7) of the Delaware
General Corporation Law, and Article Eighth also provides that the Registrant
may indemnify its directors and officers to the full extent permitted by the
Delaware General Corporation Law.
The Registrant has in effect a directors and officers liability
insurance policy under which the directors and officers of the Registrant are
insured against loss arising from claims made against them due to wrongful acts
while acting in their individual and collective capacities as directors and
officers, subject to certain exclusions.
Item 16. Exhibits and Financial Statement Schedule.
Exhibits:
4.1 Certificate of Incorporation of the Registrant (incorporated
herein by reference to Exhibit 3(1) to the Registrant's Form
S-1 Registration Statement File No. 33-83118.
4.2 Form of Common Stock certificate (incorporated herein by
reference to Exhibit 3(b) to the Registrant's Current Report
on Form 8-K dated May 3, 1996).
4.3 Form of IPO Warrant Certificate (incorporated herein by
reference to the Registrant's Form S-1 Registration
Statement, file number 33-83118).
4.4 Form of New Warrant Certificate.
5 Opinion of Arent Fox Kintner Plotkin & Kahn concerning
legality of securities being registered.
23.1 Consent of Arent Fox Kintner Plotkin & Kahn.
23.2 Consent of Reznick Fedder & Silverman.
II - 2
<PAGE>
23.3 Consent of KPMG Peat Marwick.
24 Power of Attorney: included in Part II.
99.3 Form of Subscription Agreement dated July 11, 1996 covering
the sale of 1,500,000 shares of Common Stock.
Item 17. Undertakings
The undersigned Registrant hereby undertakes:
(a) (1) To file, during any period in which offers or sales
are being made, a post- effective amendment to this registration statement;
(iii) To include any material information with
respect to the plan of distribution not previously disclosed in the registration
statement or any material change to such information in the registration
statement;
(2) That, for the purpose of determining any liability under
the Securities Act of 1933, 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.
(b) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 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 the that time
shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to the directors, officers and controlling persons
of the Registrant pursuant to the provisions referred to in Item 15 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
II - 3
<PAGE>
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 to be signed on its behalf by the undersigned, thereunto duly
authorized in the City of Rockville, State of Maryland, on this 7th day of
August, 1996.
SILVER DINER, INC.
By: /s/ Robert T. Giaimo
-------------------------------------
Robert T. Giaimo, President and Chief
Executive Officer
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints
Robert T. Giaimo and David Oden his or her true and lawful attorney-in-fact and
agent, each acting alone, with full power or substitution and resubstitution,
for him or her and in his or her name, place and stead, in any and all
capacities, to sign any or all Amendments (including post-effective Amendments)
to this Registration Statement, and to file the same, with all exhibits thereto,
and other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, each acting alone,
full power and authority to do and perform each and every act and thing
appropriate or necessary to be done in and about the premises, as fully to all
intents and purposes as he or she might or could do in person, hereby ratifying
and confirming all that said attorneys-in-fact and agents, each acting alone, or
his or her substitute or substitutes, may lawfully do or cause to be done by
virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated:
Signature Title Date
/s/ Robert T. Giaimo President, Chief August 7, 1996
- --------------------------- Executive Officer
Robert T. Giaimo and Director
II - 5
<PAGE>
/s/ David Oden Vice President and Chief August 7, 1996
- --------------------------- Financial Officer
David Oden
/s/ George A. Naddaff Director August 7, 1996
- ---------------------------
George A. Naddaff
/s/ Douglas M. Suliman Director August 5, 1996
- ---------------------------
Douglas M. Suliman
/s/ Catherine Britton Director August 7, 1996
- ---------------------------
Catherine Britton
/s/ Clinton Clark Director August 1, 1996
- ---------------------------
Clinton Clark
/s/ Edward H. Kaplan Director August 7, 1996
- ---------------------------
Edward H. Kaplan
/s/ Ype Hengst Director August 7, 1996
- ---------------------------
Ype Hengst
/s/ Louis P. Neeb Director August 7, 1996
- ---------------------------
Louis P. Neeb
/s/ Charles Steiner Director August 7, 1996
- ---------------------------
Charles Steiner
II - 6
Exhibit 4.4
THIS COMMON STOCK PURCHASE WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE OF
THIS COMMON STOCK PURCHASE WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY APPLICABLE STATE
SECURITIES LAWS, AND MAY NOT BE TRANSFERRED, SOLD, ASSIGNED, PLEDGED,
HYPOTHECATED, OFFERED OR OTHERWISE DISPOSED OF UNLESS THEY HAVE BEEN REGISTERED
UNDER THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR UNLESS AN
EXEMPTION FROM REGISTRATION IS AVAILABLE.
No. WLP - ____
Certificate for ____________________ Common Stock Purchase Warrants
EXERCISABLE COMMENCING ON THE DATE OF ISSUANCE
HEREOF (JUNE ___, 1996) AND ENDING
AT THE EXPIRATION TIME
SILVER DINER DEVELOPMENT, INC.
a Delaware corporation
COMMON STOCK PURCHASE WARRANT CERTIFICATE
THIS CERTIFIES that whose address is
or registered
assigns is the registered holder (the "Warrantholder") of the number of common
stock purchase warrants (the "Warrants") set forth above, each of which
represents the right to purchase one fully paid and non-assessable share of
common stock, par value $.00074 per share (the "Common Shares"), of Silver
Diner Development, Inc., a Delaware corporation (the "Company"), at the
exercise price of $8.00 per share (the "Exercise Price"), at any time prior to
the Expiration Time hereinafter referred to, by surrendering this Warrant
Certificate, with the form of election to purchase set forth hereon duly
executed, at the Company's principal executive office (the "Office"), and by
paying in full the Exercise Price, plus transfer taxes, if any, in United States
currency by certified check, bank cashier's check or money order payable to
the order of the Company.
Section 1. Duration and Exercise of Warrants.
1.1. The Warrants represented by this Warrant Certificate
shall be immediately exercisable and shall expire at 5:00 p.m. New York City
time, on the earlier of (i) January 31, 1998 or (ii) the 30th day following
closing on the first public offering by the Company of shares of its Common
Stock covered by a Form S-1 Registration Statement filed with and declared
effective by the Securities and Exchange Commission occurring on or after June
30, 1997 (the "Expiration Time"). Any Warrant Certificate not surrendered to the
Company for exercise prior to the Expiration Time shall be void.
1.2. Subject to the provisions of this Warrant Certificate,
after the date of this Warrant Certificate and prior to the Expiration Time, the
Warrantholder shall have the right to purchase from the Company the number of
Common Shares specified above at the Exercise Price.
<PAGE>
In order to exercise such right, the Warrantholder shall surrender the Warrant
Certificate(s) evidencing such Warrants to the Company at the Office with the
form of Election to Purchase set forth hereon duly completed and signed, and
shall tender payment in full of the Exercise Price to the Company for the
Company's account, together with such taxes as are specified in Section 4
hereof, for each Common Share with respect to which such Warrants are being
exercised. Such Exercise Price and taxes shall be paid in full by certified
check, bank cashier's check or money order, payable in United States currency
to the order of the Company. In addition, if the Common Shares deliverable
upon exercise have not been registered pursuant to the Securities Act, the
Warrantholder shall deliver a duly executed certificate substantially in the
form of Exhibit A hereto.
1.3. The Warrants evidenced by this Warrant Certificate shall
be exercisable only in multiples of one (l) Warrant. If less than all of the
Warrants evidenced by this Warrant Certificate are exercised at any time prior
to the Expiration Time, a new Warrant Certificate(s) shall be issued to the
Warrantholder, or his duly authorized assigns, by the Company for the remaining
number of Warrants evidenced by the Warrant Certificate so surrendered.
1.4. The Warrants evidenced by this Warrant Certificate may
not be exercised if such exercise would constitute a violation of any applicable
Federal or state statute or regulation or if any required approval of a
governmental authority having jurisdiction shall not have been secured. The
Company shall be entitled to require as a condition to exercise that the
Warrantholder make such representations as are necessary to demonstrate
compliance with Federal and applicable state securities laws. If at any time on
or after June 30, 1997 the Company shall determine to register under the
Securities Act of 1933 any of its Common Shares for its own account or for the
account of others (other than the Warrantholders), other than a registration
relating solely to employee benefit plans or a registration relating solely to a
Commission Rule 145 transaction, or a registration on any registration form
which does not include substantially the same information as would be required
to be included in a registration statement covering the sale of the Common
Shares issuable upon exercise of the Warrants, the Company will include in such
registration (and any related qualification under blue sky laws or other
compliance), and in any underwriting involved therein, all Common Shares held by
a Warrantholder upon exercise of Warrants for which the Company has received
written notice from such Warrantholder. If the Company has not effected a
registration pursuant to the preceding sentence by June 30, 1998, then on or
after such date the Warrantholders holding a majority of the Common Shares
issued upon exercise thereof have the right to send written notice to the
Company requiring the Company to register the Common Shares issued upon exercise
of the Warrants. Upon receipt of such written request, the Company shall have 90
days to file with the Securities and Exchange Commission a registration
statement on Form S-3 for registration of such Common Shares. Once this right
has been exercised, no Warrantholder will have any further registration rights.
The Company will pay the legal, accounting and other fees and costs associated
with including the Common Shares issuable on exercise of the Warrants in any
such registration statements.
Section 2. Issuance of Share Certificates. Upon surrender of this
Warrant Certificate and payment of the Exercise Price, and, if the Common Shares
deliverable on exercise have not been registered under the Securities Act, upon
delivery of a certificate in the form of Exhibit A hereto, the Company shall
issue certificates representing Common Shares ("Share Certificates") for the
number of full Common Shares to which the holder of such Warrants is entitled,
registered in accordance with the instructions set forth in the Election to
Purchase. If such Common Shares have not been
- 2 -
<PAGE>
registered under the Securities Act, the Share Certificates shall bear a legend
substantially similar to the legend on this Warrant Certificate.
Section 3. Adjustment of Exercise Price and Number of Common Shares
Purchasable per Number of Warrants. The Exercise Price and the number of Common
Shares purchasable upon the exercise of each Warrant are subject to adjustment
from time to time upon the occurrence of the events specified in this Section 3:
3.1. If the Company at any time after the date of this Warrant
Certificate (i) declares a dividend or makes a distribution on the outstanding
Common Shares payable in Common Shares, (ii) subdivides or reclassifies the
outstanding Common Shares into a greater number of shares or (iii) combines or
reclassifies the outstanding Common Shares into a smaller number of Common
Shares, the Exercise Price in effect immediately after the record date for such
dividend or distribution or at the effective date of such subdivision,
combination or reclassification, shall be adjusted to equal the quotient
obtained by multiplying the Exercise Price in effect immediately prior to such
date by a fraction, the numerator of which shall be the number of Common Shares
outstanding immediately prior to such dividend, distribution, subdivision,
combination or reclassification, and the denominator of which shall be the
number of Common Shares outstanding immediately after such dividend,
distribution, subdivision, combination or reclassification. Such adjustment
shall be made successively whenever any event listed above shall occur.
3.2. If at any time, as a result of an adjustment made
pursuant to Subsections 3.1 and 3.4, the holder of any Warrant thereafter
exercised shall become entitled to receive any additional Common Shares (the
"New Shares"), thereafter the number of such New Shares so receivable upon
exercise of any Warrant shall be subject to adjustment from time to time in a
manner and on terms as nearly equivalent as practicable to the provisions with
respect to the Common Shares contained in subsection 3.1, and the provisions of
this Warrant Certificate with respect to the Common Shares shall apply on like
terms to any such New Shares.
3.3. All calculations of the Exercise Price under this Section
3 shall be made to the nearest one hundredth of a cent. No adjustment in the
Exercise Price in accordance with the provisions of subsection 3.1 hereof need
be made if such adjustment, together with other adjustments carried forward
pursuant to this subsection 3.3, would amount to a change in such Exercise Price
of less than 1%; provided, however, that the amount by which any adjustment is
not made by reason of this subsection 3.3 shall be carried forward and taken
into account at the time of any subsequent adjustment in the Exercise Price.
3.4. Unless the Company shall have exercised its election as
provided in subsection 3.5, upon each adjustment of the Exercise Price as a
result of the calculations made in subsection 3.1, each Warrant outstanding
immediately prior to the making of such adjustment shall thereafter evidence the
right to purchase, at the adjusted Exercise Price that number of Common Shares
obtained by (i) multiplying (A) the number of Common Shares purchasable upon
exercise of a Warrant immediately prior to such adjustment of the Exercise Price
by (B) the Exercise Price in effect immediately prior to such adjustment of the
Exercise Price and (ii) dividing the product so obtained by the Exercise Price
in effect immediately after such adjustment of the Exercise Price.
- 3 -
<PAGE>
3.5. The Company may elect, on or after the date of any
adjustment of the Exercise Price, to adjust the number of Warrants in
substitution for an adjustment in the number of Common Shares purchasable upon
the exercise of a Warrant as provided in subsection 3.4.
3.6. In case of any reorganization of the Company, or in case
of the consolidation or merger of the Company with or into any other legal
entity or of the sale of the properties and assets of the Company as, or
substantially as, an entirety to any other legal entity (collectively,
"Reorganizations"), each Warrant shall after such Reorganization be exercisable,
upon the terms and conditions specified in this Warrant Certificate, for the
stock or other securities or property (including cash) to which a holder of the
number of Common Shares purchasable (at the time of such Reorganization) upon
exercise of such Warrant would have been entitled upon such Reorganization if
such Warrant had been exercised in full immediately prior to such
Reorganization; and in any such case, if necessary, the provisions set forth in
this Section 3 with respect to the rights and interests thereafter of the
holders of the Warrants shall be appropriately adjusted so as to be applicable,
as nearly as may reasonably be, to any such stock or other securities or
property thereafter deliverable upon exercise of the Warrants. The Company shall
not effect any such Reorganization unless prior to or simultaneously with the
consummation thereof the successor (if other than the Company) resulting from
such Reorganization or the legal entity purchasing such assets shall assume, by
written instrument executed and delivered to the holder of each Warrant, the
obligation to deliver to the holder of each Warrant such stock, securities or
assets as, in accordance with the foregoing provisions, such holders may be
entitled to purchase, and the other obligations under this Warrant Certificate.
Section 3.7. Fractional Shares. Upon exercise of the Warrants
represented by this Warrant Certificate, no fractional Common Shares will be
issued. If all of the Warrants are exercised, each holder of a fractional
interest in Common Shares will be entitled to receive a cash payment in lieu of
such fractional amount based on the current market price of a Common Share. The
current market price shall be the last sale price of the Common Shares, as
reported on the Nasdaq National Market System, on the last business day prior to
the date of exercise or, if no such sale is made on such day, the average of the
closing bid and asked prices for such day. If the number of Warrants exercised
is less than all of the Warrants represented by this Warrant Certificate, the
number of Common Shares issued upon such exercise shall be rounded to the
nearest whole Common Share and a new Warrant Certificate representing the number
of Warrants remaining after such exercise shall be issued to the holder of this
Warrant Certificate or to such other person as such holder shall direct.
Section 4. Payment of Taxes. The Company will pay all taxes (other than
income taxes) and charges that may be imposed by the United States of America or
any state or territory thereof ("Taxes") attributable to the initial issuance of
Common Shares upon the exercise of Warrants prior to the Expiration Time;
provided, however, that the Company shall not be required to pay any Taxes which
may be payable in respect of any transfer involved in the issuance of any
Warrant Certificates or any Share Certificates in a name other than that of the
Warrantholder of record surrendered upon the exercise of a Warrant, and the
Company shall not be required to issue or deliver such Share Certificates unless
or until the person or persons requesting the issuance thereof shall have paid
to
- 4 -
<PAGE>
the Company the amount of such Taxes or shall have established to the
satisfaction of the Company that such Taxes have been paid.
Section 5. Registration.
5.1. This Warrant Certificate shall be registered in the name
of the record holder to whom it is distributed; and the Company shall maintain a
list showing the name, address and number of Warrants held by each of the
Warrantholders of record.
5.2. The Company may deem and treat the Warrantholder of
record as the absolute owner of this Warrant Certificate (notwithstanding any
notation of ownership or other writing thereon made by anyone) for the purpose
of any exercise thereof and any distribution to the holder thereof and for all
other purposes, and the Company shall not be affected by any notice to the
contrary.
Section 6. Registration of Transfers and Exchanges.
6.1. The Company shall register the transfer of this Warrant
Certificate upon the records to be maintained by it for that purpose, upon
surrender of this Warrant Certificate accompanied (if so required by the
Company) by (i) a written instrument or instruments of transfer in form
satisfactory to the Company, duly executed by the registered holder(s) thereof
or by the duly appointed legal representative thereof or by a duly authorized
attorney, and (ii) an opinion of counsel, reasonably satisfactory to the
Company, that such transfer is exempt from registration under the Securities
Act. Upon any such registration or transfer, a new Warrant Certificate shall be
issued to the transferee, and the surrendered Warrant Certificate shall be
cancelled by the Company.
6.2. This Warrant Certificate may be exchanged at the option
of the holder, when surrendered to the Company at the Office, for another
Warrant Certificate or other Warrant Certificates of like tenor and representing
in the aggregate a like number of Warrants. Warrant Certificates surrendered for
exchange, transfer or exercise shall be cancelled by the Company.
Section 7. Mutilated or Missing Warrant Certificates. In case this
Warrant Certificate shall be mutilated, lost, stolen or destroyed, the Company
shall issue and deliver, in exchange and substitution for and upon cancellation
of the mutilated Warrant Certificate, or in lieu of and substitution for any
Warrant Certificate lost, stolen or destroyed, a new Warrant Certificate of like
tenor and representing an equivalent number of Warrants, but only upon receipt
of evidence satisfactory to the Company of such loss, theft or destruction of
such Warrant Certificate and an indemnity or bond, if requested, also
satisfactory to the Company. Applicants for such substitute Warrant Certificate
shall also comply with such other reasonable charges as the Company may
prescribe.
Section 8. Notices.
8.1. Any notice or demand authorized by this Warrant
Certificate to be given or made by the Warrantholder to or on the Company shall
be in writing and shall be sufficiently given or made if personally delivered or
sent by mail or by telegram or telex confirmed by letter addressed (until
another address is given in writing by the Company) to the Office.
- 5 -
<PAGE>
8.2. Any notice pursuant to this Warrant Certificate to be
given by the Company to the Warrantholder shall be in writing and shall be
sufficiently given if personally delivered or sent by mail or telegram or telex
confirmed by letter, addressed (until another address is filed in writing by the
Warrantholder with the Company) to the address specified in the Warrant register
maintained by the Company.
Section 9. Rights of Warrantholders; Voting. Nothing contained in this
Warrant Certificate shall be construed as conferring upon the Warrantholder any
of the rights of a stockholder of the Company, including without limitation the
right to vote, to receive dividends and other distributions, to receive any
notice of, or to attend, meetings of stockholders or any other proceedings of
the Company.
Section 10. Supplements and Amendments. The Company may from time to
time supplement or amend this Warrant Certificate without the consent or
concurrence of the Warrantholder in order to cure any ambiguity, manifest error
or other mistake in this Warrant Certificate, or to make provision in regard to
any matters or questions arising hereunder which the Company may deem necessary
or desirable and which shall not adversely affect, alter or change the interests
of the Warrantholder.
Section 11. Warrant Agent. The Company may, by written notice to the
Warrantholder, appoint an agent for the purpose of issuing Common Shares on the
exercise of the Warrants, exchanging Warrants, replacing Warrants or any of the
foregoing, and thereafter any such issuance, exchange or replacement shall be
made at such office by such agent.
Section 12. Successors. All the representations, warranties, covenants
and provisions of this Warrant Certificate by or for the benefit of the Company
or the Warrantholder shall bind and inure to the benefit of their respective
successors and assigns hereunder.
Section 13. Governing Law. This Warrant Certificate shall be deemed to
be a contract made under the laws of the State of Delaware and for all purposes
shall be governed in accordance with the laws of said State, regardless of the
laws that might be applied under applicable principles of conflicts of laws.
Section 14. Benefits of This Warrant Certificate. Nothing in this
Warrant Certificate shall be construed to give to any person or entity other
than the Company and the Warrantholder any legal or equitable right, remedy or
claim under this Warrant Certificate, and this Warrant Certificate shall be for
the sole and exclusive benefit of the Company and the Warrantholder.
Section 15. Interpretation. The headings contained in this Warrant
Certificate are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Warrant Certificate.
Section 16. Invalidity of Provisions. If any provision of this Warrant
Certificate is or becomes invalid, illegal or unenforceable in any respect, such
provision shall be amended to the extent necessary to cause it to express the
intent of the parties and be valid, legal and enforceable. The amendment of such
provision shall not affect the validity, legality or enforceability of any other
provision hereof.
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<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to
be duly executed.
SILVER DINER DEVELOPMENT, INC.
Attest:
By:
, Secretary Name: Robert T. Giaimo
Title: President
- 7 -
<PAGE>
ELECTION TO PURCHASE
The undersigned hereby irrevocably elects to exercise
____________________ of the Warrants represented by this Warrant Certificate and
to purchase the Common Shares issuable upon the exercise of said Warrants, and
requests that Certificates for such shares be issued and delivered as follows:
ISSUE TO:
(Name)
(Address, Including Zip Code)
(Social Security or Tax Identification Number)
DELIVER TO:
(Name)
at
(Address, Including Zip Code)
If the number of Warrants hereby exercised is less than all the
Warrants represented by this Warrant Certificate, the undersigned requests that
a new Warrant Certificate representing the number of full Warrants not exercised
be issued and delivered as set forth above or otherwise as the undersigned shall
direct in writing.
- 8 -
<PAGE>
In full payment of the purchase price with respect to the Warrants
exercised and transfer taxes, if any, the undersigned hereby tenders payment of
$_______________ by certified check,
bank cashier's check or money order payable in United States currency to the
order of the Company.
Dated: ____________________, 19__
Signature
(Signature must conform in all respects to name of
holder as specified on the face of the Warrant
Certificate)
PLEASE INSERT SOCIAL SECURITY OR TAX
IDENTIFICATION NUMBER OF HOLDER
SIGNATURE GUARANTEE(S)
(See Instructions 1 and 2 below)
Authorized Signature
Name
(Please Print)
Name of Firm
Address
Area Code and Telephone No.
Dated: , 199
1. No signature guarantee on this Election to Purchase is required if
(i) this Election to Purchase is signed by the registered holder(s) (whose
name(s) appears on this Warrant Certificate) of the Warrants being exercised
hereby, unless such holder(s) have requested that the Common Shares issuable
pursuant to this exercise be issued in the name of a person or persons, other
than the name(s) of the registered holder(s) or be delivered to an address
different from that of the registered holder(s) appearing on this Warrant
Certificate or (ii) the Common Shares are to be issued for the account of a
bank, broker, dealer, credit union, savings association or other entity that is
a member in good standing of a recognized Medallion Program approved by The
Securities Transfer Association Inc. (an "Eligible Institution"). In all other
cases, all signatures on this Election to Purchase must be guaranteed by an
Eligible Institution.
- 9 -
<PAGE>
2. If a new Warrant Certificate is issued as a result of the exercise
of less than all of the Warrants represented by this Warrant Certificate, the
Company, in its discretion, may require that the registered holder(s) have the
signature(s) of such holder(s) guaranteed by an Eligible Institution on the
instrument requesting such issuance.
- 10 -
<PAGE>
THE SALE, TRANSFER OR ASSIGNMENT OF THE WARRANTS REPRESENTED BY
THE WITHIN CERTIFICATE IS RESTRICTED. SEE SECTION 6.1 OF THE WARRANT
CERTIFICATE.
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto the Assignee named below all of the rights of the undersigned represented
by the within Warrant Certificate, with respect to the number of Warrants set
forth below:
Name of Social Security No. No. of
Assignee or Tax I.D. Address Warrants
and does hereby irrevocably constitute and appoint
__________________________________ Attorney, to make such transfer on the books
of Silver Diner Development, Inc. maintained for that purpose, with full power
of substitution in the premises.
Dated: ____________________, 19__
Signature
(Signature must conform in all respects to name of
holder as specified on the face of the Warrant
Certificate)
- 11 -
<PAGE>
EXHIBIT A
FORM OF STOCKHOLDERS CERTIFICATE
The undersigned (the "Purchaser") is exercising the warrants (the
"Warrants") tendered with this certificate, and in connection with such
exercise, hereby certifies to Silver Diner Development, Inc. (the "Company")
that the Purchaser understands and agrees that:
1. The shares of common stock of the Company (the "Common Shares")
deliverable upon exercise of the Warrants are not registered pursuant to the
Securities Act of 1933, as amended (the "Securities Act"), and the offering and
sale of the Common Shares is intended to be exempt from registration under the
Securities Act;
2. The Common Shares to be acquired by the Purchaser pursuant to
exercise of the Warrants are being acquired for its own account and without a
view to the distribution of such Common Shares or any interest therein; provided
that (i) this representation shall not prejudice the Purchaser's right at all
times to sell or otherwise dispose of all or any part of the Common Shares so
acquired by the Purchaser pursuant to a registration under the Securities Act or
an exemption from such registration available under the Securities Act and (ii)
the disposition of the Purchaser's property shall be at all times within its
control;
3. The Purchaser (i) either alone or with such Purchaser's purchase
representative, has such knowledge and experience in financial and business
matters so as to be capable of evaluating the merits and risks of its investment
in the Common Shares, (ii) is capable of bearing the economic risks of such
investment, (iii) is able to bear a complete loss of its investment in the
Common Shares and (iv) has a net worth, less home, furnishings and automobiles,
equal to at least ten times the price paid by the Purchaser for the Common
Shares acquired pursuant to this exercise of Warrants;
4. The Purchaser represents and warrants that the Company has
made available to the Purchaser or its agents all documents and information
relating to an investment in Common Shares requested by or on behalf of the
Purchaser; and
5. All Common Shares issued on delivery of this certificate shall
bear the following legend:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY APPLICABLE
STATE SECURITIES LAWS, AND MAY NOT BE TRANSFERRED, SOLD, ASSIGNED, PLEDGED,
HYPOTHECATED, OFFERED OR OTHERWISE DISPOSED OF UNLESS THEY HAVE BEEN REGISTERED
UNDER THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR UNLESS AN
EXEMPTION FROM REGISTRATION IS AVAILABLE.
A-1
<PAGE>
In witness whereof, the Purchaser has caused this Certificate to be
duly executed on this ____ day of ____________, ____.
[Name of Purchaser]
By:
Name:
Title:
A-2
Exhibit 5
Arent Fox
1050 Connecticut Avenue, NW
Washington, DC 20036-5339
August 7, 1996
Silver Diner, Inc.
11806 Rockville Pike
Rockville, Maryland 20852
Ladies and Gentlemen:
In connection with the proposed public offering of up to 1,500,000
shares of Common Stock, par value $.00074 per share (the "Common Stock"), of
Silver Diner, Inc. (the "Company"), proposed to be sold by those persons
identified as Selling Stockholders in the Form S-3 Registration Statement filed
with the Securities and Exchange Commission on August 7, 1996, we, as counsel
for the Company, have examined such corporate records, certificates and other
documents as we considered necessary or appropriate for the purposes of this
opinion.
On the basis of such examination, we advise you that, in our opinion,
the 1,500,000 shares of Common Stock subject to the Registration Statement are
legally issued and fully paid and nonassessable.
We consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to our firm in the Prospectus which
forms a part of the Registration Statement.
Very truly yours,
Arnold R. Westerman
Arent Fox Kintner Plotkin & Kahn (bullet) Washington, DC
New York, NY (bullet) Vienna, VA (bullet) Bethesda, MD (bullet) Budapest,
Hungary (bullet) Jeddah, Kingdom of Saudi Arabia
ARW:jac
Exhibit 23.1
CONSENT OF COUNSEL
The undersigned hereby consent to references to our firm in the Form
S-3 Registration Statement under the heading "Legal Matters".
ARENT FOX KINTNER PLOTKIN & KAHN
Washington, D.C.
August 7, 1996
II - 7
Exhibit 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANT
We hereby consent to the use in the Prospectus constituting a part of
the Registration Statement on Form S-3 of our report dated April 2, 1996,
related to the combined financial statements of Silver Diner Development, Inc.,
Silver Diner Limited Partnership, and Silver Diner Potomac Mills, Inc., as
of December 31, 1995 which is contained therein. We also consent to all
references to our firm in the Prospectus, including the reference to our firm
under the heading "Experts" in the Prospectus.
REZNICK FEDDER & SILVERMAN
Bethesda, Maryland
August 6, 1996
II - 8
Exhibit 23.3
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the use of our report dated March 28, 1996 included in
the Prospectus constituting part of this Registration Statement on Form S-3 of
Silver Diner, Inc. and to the reference to our firm under the heading "Experts"
in the Prospectus.
KPMG PEAT MARWICK LLP
Boston, Massachusetts
August 7, 1996
II - 9
Exhibit 99.3
SUBSCRIPTION AGREEMENT
Silver Diner, Inc.
11806 Rockville Pike
Rockville, Maryland 20852
Gentlemen:
The undersigned hereby offers (the "Offer") to subscribe for and
purchase that number of shares of Common Stock, par value $0.00074 per share
(the "Shares"), in Silver Diner, Inc., a Delaware corporation (the "Company"),
at $5.50 per Share, as set forth on Appendix A attached hereto and incorporated
herein by reference thereto ("Appendix A"). The undersigned understands that
1,500,000 Shares are being offered at $5.50 per Share to a limited and select
group of qualified investors, including the undersigned, who are "accredited
investors" as that term is defined in Regulation D of the General Rules and
Regulations ("Regulation D") under the Securities Act of 1933, as amended (the
"Securities Act") and as more fully defined in Section 4(a)(iii) below, by
Janney Montgomery Scott Inc. ("JMS"), as placement agent for the Company, which
will receive a commission from the Company of $.38 per Share in connection with
the sale of each Share.
Subscriptions will be accepted as received and Shares will be issued
promptly on receipt of payment. The Offering will continue until the earlier of
sale of all of the Shares or July 12, 1996, unless mutually extended by the
Company and JMS to a date not later than July 31, 1996 (the "Termination Date").
The undersigned acknowledges that this Subscription Agreement amends
certain terms of the Offering as described in the Offering Memorandum (as
defined in Section 4(a) hereof) in that it establishes the price at which the
Shares will be sold at $5.50 per Share, specifies the JMS commission,
establishes the Termination Date as described in the immediately preceding
paragraph, clarifies the registration obligation and qualifies the financial and
other pro forma information relating to future periods.
Section 1. Subscription
At Closing (as defined below), the undersigned will execute and deliver
the Agreement and wire to an account designated by the Company immediately
available funds in the amount of the purchase price specified on Appendix A as
payment in full of the subscription price for the Shares. Concurrently with
payment, the Company will deliver to the undersigned or to an agent of the
undersigned a certificate evidencing the number of shares subscribed for
registered in such name or names provided in writing by the undersigned. The
shares are to be issued as specified
<PAGE>
on Appendix A. Closing shall take place on July 9, 1996 by facsimile
transmission of the required documents (the "Closing").
THE SHARES OF COMMON STOCK ACQUIRED PURSUANT TO THIS SUBSCRIPTION AGREEMENT ARE
BEING ACQUIRED IN A TRANSACTION NOT INVOLVING ANY PUBLIC OFFERING AND,
ACCORDINGLY, HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR THE
SECURITIES LAWS OF ANY STATE. NO PORTION OF SUCH SHARES MAY BE SOLD OR
TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION
THEREFROM.
Section 2. Acceptance and Rejection of Subscriptions
Once this Agreement is accepted by the Company, the funds will be added
to the Company's working capital and will be used in the manner provided in
Section 4 below. The undersigned understands that this subscription offer is
subject to acceptance or rejection in whole or in part by the Company in its
sole discretion at any time prior to the sale of the Shares. This Agreement
shall not entitle the undersigned to purchase any Shares unless and until it has
been accepted in writing by the Company. If this subscription offer or any part
hereof is rejected for any reason, the subscription payment, plus any interest
earned thereon, will be refunded promptly, without deduction.
Section 3. Shares
The Shares subscribed for hereby shall not be deemed issued to, or
owned by, the undersigned until the undersigned has tendered payment to the
Company, the Company has accepted this Subscription Agreement, and the Shares
have been issued.
Section 4. Subscriber's Representations and Warranties
(a) The undersigned represents, warrants, and agrees with the
Company and JMS that:
(i) The undersigned received a copy of the Private Offering
Memorandum, dated June 14, 1996 (the "Offering Memorandum"), the Company's
Current Report on Form 8-K as filed with the Securities and Exchange Commission
(the "Commission") on April 11, 1996, the Company's Quarterly Report on Form
10-Q for the period ended April 21, 1996, and the Proxy Statement dated February
14, 1996, for Food Trends Acquisition Corporation (now
- 2 -
<PAGE>
known as the Company) (all of which documents are herein referred to
collectively as the "Disclosure Documents") and that the undersigned had the
opportunity to ask questions of and to receive answers from the executive
officers of the Company concerning this Offer and the business, operations and
prospects of the Company and its financial position and to obtain any additional
information which the undersigned deemed necessary in connection with making an
investment decision regarding this subscription offer.
The undersigned acknowledges that the financial and other pro forma
information contained in the Offering Memorandum, insofar as it relates to
future periods, reflects management's judgment of the expected results to be
realized. Actual results may differ since events and circumstances do not
necessarily occur as expected, and such differences may be material. The
undersigned acknowledges that it understands the risks associated with an
investment in the Company and acknowledges that it has been advised that the
offering price has been arbitrarily determined by management.
The undersigned further acknowledges that the Company has advised it
that the proceeds to be received by the Company from this subscription offer, as
well as from other subscriptions, will be added to the Company's working
capital. Of the proceeds, $2,472,000 will replace funds used to acquire the
limited partner interests in Silver Diner Limited Partnership.
The undersigned acknowledges that the Company reserves the right to
apply the proceeds for other business purposes should economic conditions
change, that, except as expressly set forth in this Agreement, no warranty or
representation has been made by the Company or any of its affiliates, employees,
officers, directors or agents in connection with the Offer and that an
investment in the Shares involves a high degree of risk including, but not
limited to, those identified under the heading "Investment Considerations" in
the Offering Memorandum.
(ii) The undersigned has adequate means of providing for the
undersigned's current needs and contingencies, is able to bear the substantial
economic risks of an investment in the Shares, including the risk that the
entire investment could be lost, has no need for liquidity in such investment,
and could afford a complete loss of such investment.
(iii) The undersigned is an "accredited investor" as defined
under Rule 501(a) of Regulation D adopted pursuant to the Securities Act and was
not formed for the specific purpose of acquiring the Shares.
(iv) The undersigned has such knowledge and experience in
financial and business matters that the undersigned is capable of evaluating the
merits and risks of the investment in the Company.
- 3 -
<PAGE>
(v) The undersigned, if a corporation, partnership, trust,
estate or other entity, is authorized and otherwise duly qualified to purchase
and hold the Shares and such entity has its principal place of business as set
forth on the signature page hereof.
(vi) The undersigned is purchasing the Shares for the
undersigned's own account for investment and not with a view to, or for sale in
connection with, any distribution; and the undersigned will not sell, transfer
or otherwise dispose of any of the Shares, or any interest in the Shares, except
in accordance with the Securities Act or any similar Federal statute, and the
applicable rules and regulations of the Commission promulgated thereunder, as
then in force and any applicable law, rule, or regulation of any state or other
jurisdiction ("State Laws"). The undersigned agrees that a legend substantially
in the following form may be placed upon the Certificate issued to evidence the
Shares:
"These securities have not been registered under the
Securities Act of 1933, as amended. They may not be offered or
transferred by sale, assignment, pledge or otherwise unless
(i) a registration statement for the shares under the
Securities Act of 1933, as amended, is in effect, or (ii) the
corporation has received an opinion of counsel, which opinion
is satisfactory to the corporation, to the effect that such
registration is not required under the Securities Act of 1933,
as amended."
(b) The undersigned further understands and agrees that:
(i) None of the Shares has been registered under the
Securities Act or the State Laws and, consequently, the Shares must be held
indefinitely unless subsequently registered thereunder or an exemption from such
registration is available. Except as set forth in Section 6 of this Agreement,
the Company does not have an obligation to register any of the Shares or any of
its securities under the Securities Act or the State Laws, or to provide an
exemption from registration under the Securities Act or State Laws for any of
the Shares.
(ii) The Shares have not been registered under the Securities
Act on the basis that the issuance thereof is exempt under Section 4 of the
Securities Act and/or by Regulation D as a transaction by an issuer not
involving any public offering and/or as a transaction to accredited investors
and that the Company's reliance on such exemption is predicated in part on the
undersigned's representations and warranties as set forth in this Subscription
Agreement. The Shares have not been registered under certain State Laws in
reliance on specific exemptions from registration thereunder and no securities
administrator of any state or the Federal government has made any finding or
determination relating to the fairness for investment of the Shares and no
securities administrator or the Federal government has recommended or endorsed
the offering of these Shares.
- 4 -
<PAGE>
(iii) In the view of the Commission, the statutory basis for
the exemption claimed would not be present if, notwithstanding the undersigned's
representations, warranties, understandings, and agreements set forth in this
Subscription Agreement, the undersigned has in mind merely acquiring the Shares
for resale upon the occurrence or non-occurrence of some predetermined event.
(c) All representations and warranties set forth above or in any other
written statement or document delivered by the undersigned in connection with
the transactions contemplated thereby shall be true and correct in all respects
on and as of the date of the Closing as if made on and as of the date of such
closing and shall survive Closing.
Section 5. Company's Representations and Warranties
(a) All corporate action on the part of the Company and its officers
and directors necessary for the authorization, issuance and sale of the Shares
pursuant to this Subscription Agreement, and the performance of all obligations
of the Company under this Subscription Agreement, has been taken. The Shares to
be issued pursuant to this Subscription Agreement have been duly authorized and,
when issued in accordance with this Subscription Agreement, will be validly
issued, fully paid and non-assessable and free and clear of any and all claims,
liens and encumbrances.
(b) The offer and sale of the Shares in accordance with the terms of
this Subscription Agreement (assuming the accuracy of the representations and
warranties of the undersigned subscriber) are exempt from the registration
requirements of the Securities Act and applicable state securities laws.
(c) The Company meets the eligibility requirements for use of Form S-3
set forth in Paragraph I.A. to the General Instructions to Form S-3.
(d) The Company has made available to the undersigned copies of its
periodic reports filed with the Securities and Exchange Commission, including
financial statements for the year ended December 31, 1995 and unaudited
quarterly financial statements for the fiscal period ended April 21, 1996.
Except as disclosed in the Disclosure Documents or as contemplated therein,
since April 21, 1996, there has not been:
(1) Any material change in the assets, liabilities, financial
condition or operations of the Company from that reflected in its financial
statements filed with the SEC;
(2) Any change in the contingent obligations of the Company by
way of guaranty, endorsement, indemnity, warranty, or otherwise;
- 5 -
<PAGE>
(3) Any damage, destruction, or loss, whether or not covered
by insurance, materially and adversely affecting the properties or business of
the Company;
(4) Any waiver or compromise by the Company of a valuable
material right or of a material debt owed to it;
(5) Any extraordinary increases in the compensation of any of
the Company's employees, officers, or directors;
(6) Any declaration or payment of any dividend or other
distribution of the assets of the Company;
(7) Any issuance or sale by the Company of any shares of its
Common Stock or other securities;
(8) Any strike, any organization campaign or demand for
collective bargaining, or other similar event relating to the Company's
employees;
(9) Any borrowing by the Company or any creation of a
consensual lien upon any material asset of the Company;
(10) Any issue of notes or bonds of the Company, any sale of
substantial assets, or any discharge of any lien on any assets of the Company;
(11) Any capital expenditure exceeding $500,000;
(12) Any other event or condition of any character that has,
or in the Company's reasonable judgment can be reasonably expected to have, a
material adverse effect on the Company's business or prospects; or
(13) Any agreement or commitment by the Company to do any of
the things described in this Section 5(d).
(e) Except as set forth in the Disclosure Documents, there are no
loans, leases, royalty agreements or other continuing transactions between the
Company, its subsidiaries, any of its or their customers or suppliers and any
officer or director of the Company or any person owning ten (10%) percent or
more of any class of capital stock of the Company or any member of such officer,
director or stockholder's immediate family or any corporation or other entity
controlled by such officer, director or stockholder or a member of such officer,
director or stockholder's immediate family.
- 6 -
<PAGE>
(f) Except as set forth in the Disclosure Documents, the Company has
not assumed, guaranteed, endorsed or otherwise become directly or contingently
liable on (including, without limitation, liability by way of agreement,
contingent or otherwise, to purchase, to provide funds for payment, to supply
funds for or to otherwise invest in any debtor or otherwise to assure any
creditor against loss), any indebtedness of any other person.
(g) Except as set forth in the Disclosure Documents, other than
advances in the ordinary course of business to employees, which are not in the
aggregate material, and loans or advances to its subsidiaries, the Company has
not made any loan or advance to any person which is outstanding on the date of
this Agreement, nor is it committed or obligated to make any such loan or
advance.
(h) The Disclosure Documents provided by the Company do not contain any
untrue statement of a material fact or omit to state a material fact necessary
in order to make the statements contained herein or therein in light of the
circumstances under which they are made not misleading.
(i) The Company has complied, or will comply, with all applicable
federal or state securities laws in connection with the issuance and sale of the
Shares. Neither the Company nor anyone acting on its behalf has offered or will
offer to sell the Shares or similar securities to, or solicit offers with
respect thereto from, or enter into any preliminary conversations or
negotiations relating thereto with, any Person, so as to bring the issuance and
sale of the Shares under the registration provisions of the Securities Act.
Based on the representations of the undersigned set forth in this Agreement, the
issuance of the Shares and the transactions contemplated hereby do not require
registration under the Securities Act or any state securities law.
(j) Except as expressly set forth in this Agreement, the Company has
not engaged, directly or indirectly, any person to represent it in connection
with the transactions contemplated by this Agreement, and no such person has any
right, interest or valid claim against or upon the undersigned or the Company
for any commission, fee or other compensation as a finder or broker; and the
Company agrees to indemnify and hold the undersigned harmless against any claim
for any such commissions, fees or other compensation.
(k) The Company has a total authorized capitalization consisting of
20,000,000 shares of Common Stock, $.00074 par value per share, and 1,000,000
shares of preferred stock issuable in series. The aggregate number of shares of
Common Stock of the Company issued and outstanding and the aggregate number of
options, warrants and rights outstanding are disclosed in the Disclosure
Documents. All shares of Common Stock issued and outstanding have been duly
authorized, are validly issued, fully paid and nonassessable, and are free of
any claims, lien or encumbrance created by the Company. All shares of Common
Stock issuable upon exercise of outstanding options and warrants have been duly
authorized and, when issued
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in accordance with the terms of such options and warranties will be validly
issued, fully paid and nonassessable. No shares of any series or classes of
preferred stock are issued or outstanding.
Section 6. Covenants of the Company
(a) With a view to making available the benefits of certain rules and
regulations of the Commission which may at any time permit the sale of the
Shares to the public without registration, at all times the Company shall:
(i) make and keep public information available, as those
terms are understood and defined in Rule 144 under the Securities Act;
(ii) use its best efforts to file with the Commission in a
timely manner all reports and other documents required of the Company under the
Securities Act and the Securities Exchange Act of 1934 (the "Exchange Act"); and
(iii) furnish to each holder of Shares forthwith upon request
a written statement by the Company as to its compliance with the reporting
requirements of such Rule 144 and of the Securities Act and the Exchange Act, a
copy of the most recent annual or quarterly report of the Company, and such
other reports and documents so filed by the Company as such holder may
reasonably request in availing itself of any rule or regulation of the
Commission allowing such holder to sell any shares of Common Stock without
registration.
(b) The Company shall, at its expense (which term shall include without
limitation any and all costs and expenses, additional registration and
qualification fees and any additional fees and disbursements of counsel to the
Company and accountants for the Company, and printing costs and expenses, but
excluding underwriting discounts and commissions and selling fees and expenses
of the undersigned and counsel fees of the undersigned), within 30 days of the
earlier of the Termination Date or the sale of all of the Shares in the
Offering, prepare and file with the Commission a registration statement on Form
S-3 with respect to all Shares sold in the Offering for an offering on a
continuous basis pursuant to Rule 415 under the Securities Act. Thereafter, the
Company shall use its best efforts to cause that registration statement to
become effective as soon as is reasonably practicable and to remain effective
for a period of three years and to comply with the provisions of the Securities
Act with respect to the disposition of all Shares covered by such registration
statement in accordance with the sellers' intended method of disposition set
forth in such registration statement for such period. If and whenever the
Company is required by the provisions of this Section 6(b) to use its best
efforts to effect the registration of any Shares under the Securities Act,
the Company will, as expeditiously as possible:
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(i) furnish to each seller of Shares and to each placement
agent such number of copies of the registration statement and the prospectus
included therein (including the preliminary prospectus) as such persons
reasonably may request in order to facilitate the public sale or other
disposition of the Shares covered by such registration statement; and
(ii) immediately notify each seller of Shares and each
placement agent under such registration statement, at any time when a prospectus
relating thereto is required to be delivered under the Securities Act, of the
happening of any event of which the Company has knowledge as a result of which
the prospectus contained in such registration statement, as then in effect,
includes an untrue statement of a material fact or omits to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading in light of the circumstances then existing and correct as
promptly as possible any such untrue statement of a material fact or disclose
any omitted material fact required to be stated therein or necessary to make the
statements therein not misleading.
(iii) use its best efforts to register and qualify the Shares
covered by such registration statement under such other securities or Blue Sky
laws of such jurisdictions as shall be reasonably appropriate for the
distribution of the Shares covered by the registration statement provided that
the Company shall not be required in connection therewith or as a condition
thereto to qualify to do business or to file a general consent to service of
process in any such states or jurisdictions.
(c) (i) In the event of a registration of any of the Shares under the
Securities Act pursuant to Section 6(b) above, the Company will indemnify and
hold harmless each seller of Shares thereunder, each placement agent of such
Shares thereunder and each other person, if any, who controls such seller or
placement agent within the meaning of the Securities Act, against any losses,
claims, damages or liabilities, joint or several, to which such seller,
placement agent or controlling person may become subject under the Securities
Act or otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon any untrue statement
or alleged untrue statement of any material fact contained in any registration
statement under which such Shares were registered under the Securities Act
pursuant to Section 6(b) above, any preliminary prospectus or final prospectus
contained therein, or any amendment or supplement thereof, or arise out of or
are based upon the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statement therein not
misleading, and will reimburse each such seller, each such placement agent and
each such controlling person for seller, each such placement agent and each such
controlling person for any legal or other expenses reasonably incurred by them
in connection with investigating or defending any such loss, claim, damage,
liability or action, provided, however, that the Company will not be liable in
any such case if and to the extent that any such loss, claim, damage or
liability arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission so made in conformity with information
furnished by
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any such seller, any such placement agent or any such controlling person in
writing specifically for the use in such registration statement or prospectus.
(ii) In the event of a registration of any of the Shares under
the Securities Act pursuant to Section 6(b) above, each seller of such Shares
thereunder, severally and not jointly, will indemnify and hold harmless the
Company, each person, if any, who controls the Company within the meaning of the
Securities Act, each officer of the Company who signs the registration
statement, each director of the Company, each placement agent and each person
who controls any placement agent within the meaning of the Securities Act,
against all losses, claims, damages or liabilities, joint or several, to which
the Company or such officer, director, placement agent or controlling person may
become subject under the Securities Act or otherwise, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) arise out of or
are based upon any untrue statement or alleged untrue statement of any material
fact contained in the registration statement under which such Shares were
registered under the Securities Act pursuant to Section 6(b) above, any
preliminary prospectus or final prospectus contained therein, or any amendment
or supplement thereof, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, and will reimburse the
Company and each such officer, director, placement agent and controlling person
for any legal or other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage, liability or action,
provided, however, that such seller will be liable hereunder in any such case if
and only to the extent that any such loss, claim, damage or liability arises out
of or is based upon an untrue statement or alleged untrue statement or omission
or alleged omission made in reliance upon and in conformity with information
pertaining to such seller, as such furnished in writing to the Company by such
seller specifically for use in such registration statement or prospectus, and
provided, further, however, that the liability of each seller hereunder shall be
limited to the proportion of any such loss, claim, damage, liability or expense
which is equal to the proportion that the public offering price of the Shares
sold by such seller under such registration statement bears to the total public
offering price of all securities sold thereunder.
Section 7. Indemnification.
The undersigned understands the meaning and legal consequences of the
representations and warranties contained in Section 4 and the other agreements,
acknowledgments and understandings contained in this Subscription Agreement and
agrees to indemnify and hold harmless the Company and JMS from and against any
and all loss, damage or liability due to or arising out of a breach of any
representation, warranty, agreement, acknowledgment or understanding of the
undersigned contained in this Subscription Agreement. Notwithstanding any of the
representations, warranties, agreements, acknowledgements or understandings
herein
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by the undersigned, the undersigned does not thereby or in any other manner
waive any rights granted to the undersigned under Federal or state securities
laws.
Section 8. Irrevocability
The undersigned hereby acknowledges and agrees that this subscription
offer is irrevocable and that the undersigned is not entitled to cancel,
terminate or revoke this Subscription Agreement or any agreements of the
undersigned hereunder and that this Subscription Agreement and such agreement
shall survive the death or disability of the undersigned.
Section 9. Binding Effect
This Subscription Agreement shall be binding upon and inure to the
benefit of the undersigned and the undersigned's successors but shall not be
assignable by the undersigned without the prior written consent of the Company,
which consent may be withheld by the Company for any reason.
Section 10. Applicable Law
This Subscription Agreement and all rights hereunder shall be governed
by, and interpreted in accordance with, the laws of the State of Maryland,
without reference to any conflict of laws.
Section 11. Entire Agreement.
This Subscription Agreement contains the entire agreement between the
parties and is intended by the parties to be an integration of all prior
agreements by the parties regarding the Offer. The parties hereto shall not be
bound by any agreements, conditions, representations or warranties relating to
the Offer, oral or written, not set forth in this Subscription Agreement.
Section 12. Separability.
Should any clause, sentence, paragraph, subsection or Section of this
Subscription Agreement be judicially declared to be invalid, unenforceable or
void, such decision will not have the effect of invalidating or voiding the
remainder of this Subscription Agreement, and the parties hereto agree that the
part or parts of this Subscription Agreement so held to be invalid,
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<PAGE>
unenforceable or void will be deemed to have been stricken herefrom by the
parties hereto, and the remainder will have the same force and effectiveness as
if such stricken part or parts had never been included herein.
Section 13. Survivability.
All representations, warranties, agreements, acknowledgements and
understandings of the parties made herein shall be deemed material and to have
been relied upon by the other party and shall survive the closing of the Offer
and delivery of the Shares.
Section 14. Execution in Counterparts.
This Subscription Agreement may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
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<PAGE>
IN WITNESS WHEREOF, the undersigned has executed this Subscription
Agreement to purchase shares of Common Stock in Silver Diner, Inc. on this ___
day of _____________, 1996.
*A. Corporation, Partnership,
Trust, Estate or Other Entity:
-------------------------------
(Print or Type Name of Entity)
By:____________________________
(Print or type name(s) and
title(s) of Authorized Repre-
sentative(s) or Agent(s))
By:_____________________________
(Signature(s))
Subscriber's
principal place of
business:
--------------------------------
--------------------------------
--------------------------------
Telephone: ____________________
--------------------------------
Taxpayer ID No.
* If Trustee is not individual making investment decision, both individual
beneficiary and Trustee must execute Subscription Agreement.
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<PAGE>
APPENDIX A
Subscription Information
Please indicate manner in which Shares are to be held with your initials in the
space provided:
________Corporation
________Partnership
________Trust
________Other (specify)
Number of Shares Subscribed for: _______
Aggregate Purchase Price (at $5.50 per Share): _________
ACCEPTANCE
The foregoing offer is hereby accepted this ____ day of __________,
1996.
Silver Diner, Inc.
By: ___________________________
Robert T. Giaimo
President
