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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 13E-3 FINAL AMENDMENT
RULE 13E-3 TRANSACTION STATEMENT
(Pursuant to Section 13(e) of the Securities Exchange Act of 1934
and Rule 13e-3 (Section 240.13e-3) thereunder)
SPECTEX INDUSTRIES INC.
(Name of the Issuer)
SPECTEX INDUSTRIES, INC. AND NNEWCO-KING, INC.
(Name of Person(s) Filing Statement)
Common Stock, Par Value $.01 Per Share 12686100
(Title of Class of Securities) (CUSIP Number of Class of
Securities)
MICHAEL OBERLANDER, PRESIDENT
SPECTEX INDUSTRIES, INC. and NNEWCO-KING, INC.
505 CARROLL STREET
BROOKLYN, NY 11215
(718)797-9400
(Name, Address and Telephone Number of Person Authorized to Receive Notices and
Communications on Behalf of Person(s) Filing Statement)
------------------------
THIS STATEMENT IS FILED IN CONNECTION WITH (CHECK THE APPROPRIATE BOX):
a. /X/ The filing of solicitation materials or an information statement subject
to Regulation 14A, Regulation 14C, or Rule 13e-3(c) under the Securities
Exchange Act of 1934.
b. / / The filing of a registration statement under the Securities Act of 1933.
c. / / A tender offer.
d. / / None of the above.
Check the following box if the soliciting materials or information
statement referred to in checking box (a) are preliminary copies: / /
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ITEM 1. ISSUER AND CLASS OF SECURITY SUBJECT TO THE TRANSACTION.
(a) The name of the issuer is Spectex Industries, Inc. having an address of 505
Carroll Street, Brooklyn New York (the "Company"). The class of stock subject to
Rule 13e-3 are all the outstanding shares (approximately 10% of the total) of
the Company held by shareholders other than Nnewco Inc. (hereinafter after
sometimes referred to as the "Public Share holders" or the "Dissenting
Shareholders").
(b) As of January 30, 1997, eight shareholders of the Company will exchange all
their shares of the Company for shares of Nnewco-King, Inc. These eight
shareholders own 4,101,711 shares of the Company which account for over 90% of
the total outstanding. As of this date there remains 436,809 shares of the
Company held by 739 people or institutions. There is only one class of stock.
(c) Although the common stock of the Company is traded in the over-the-counter
market, there is no established trading market for such stock. The stock of
this company is known as a bulletin board stock. The quotations below,
represent prices between dealers and do not include retail markup, markdown or
commission. They do not represent actual transactions.
<TABLE>
<CAPTION>
HIGH/ASK LOW/BID CLOSE/BID VOLUME
<S> <C> <C> <C> <C>
1996
1st Qtr. $0.2500 $0.0325 $0.2800 0
2nd Qtr. $0.2500 $0.0325 $0.2800 0
3rd Qtr. $0.2500 $0.0100 $0.2800 0
4th Qtr. $0.2500 $0.0100 $0.1500 2,500
</TABLE>
As of December 31, 1996, there were 746 holders of record of the Company's
common stock. The Transfer Agent of the Company's common stock is Registrar
and Transfer Company, 10 Commerce Drive, Cranford, New Jersey 07016.
(d) No dividends have been paid in the last two years.
(e) Not applicable.
(f) Not applicable.
(e) Not applicable.
ITEM 2. IDENTITY AND BACKGROUND.
(a) This statement is being filed jointly by the Company and Nnewco-King, Inc
(the "Parent Company"). The Parent Company owns over 90% of the Common Stock of
the Company and the officers and directors of the two companies are the same.
The Parent Company maintains its office at the same place as the Company. On
June 27, 1997 the merger was declared effective with the filing of the
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certificate of merger with New York's Secretary of State. The Parent is the only
surviving entity and will thereafter obtain the name of the Company, all its
assets and liabilities.
(b) 505 Carroll Street Brooklyn, NY 11215
(c) Spectex Industries, Inc., is a New York corporation organized in 1971.
The Company is principally engaged in both the knitted sweater business, which
is operated by and through the Company, and since July 15, 1981, in the
wholesale distribution of dairy products. In 1995, the Company's knitted
sweater business resulted in an operating loss of $156,874 before interest
expense and income taxes. The Company's dairy products segment accounted for an
operating profit of $342,107 before taking into account interest expense, and
income taxes. The dairy product business is operated by J&J Farms Creamery,
Inc. ("J&J"), a 51% owned subsidiary of the Company. The remaining shares of
J&J are held by Messrs. Simon Friedman and Morris Schlager, the sons-in-law of
the Company's President.
The Company designs, knits and manufactures cotton, wool and acrylic
sweaters and sportswear at its headquarter's premises in Brooklyn, New York.
Sales are made nationally to department stores, chain stores, discount stores,
jobbers and retail outlets as well as to the United States government. The
Company also operates through certain divisions and its subsidiaries: JA
Knitting Mills, Perfect Knitting Mills, Inc. and Special Studies Development
Corp. J&J purchases dairy and related food products from major food companies
and food distributors and sells and delivers such products to local retailers
and distributors principally in the New York city metropolitan area.
Nnewco-King, Inc. or the Parent Company is a newly formed New York company.
It was formed for the sole purpose of having the Controlling Shareholders
contribute their stock holdings of the Commons Shares of the Company to Nnewco-
King, Inc in a tax free exchange and to facilitate this short form merger.
After the merger is completed the Parent Company will carry on the same business
in the same place of business as the Company has been doing heretofore.
(d) The Directors and Officers of both the Company and the Parent are the same
and it is anticipated they will be even after the merger. Reference to their
personal data is made to Item 10 of the most recent 10-K of the Company filed on
June , 1996.
(e) and (f) During the last five years, none of Parent, the Company nor any of
its officers or Directors, to the best of their knowledge, (i) has been
convicted in a criminal proceeding (excluding traffic violations or similar
misdemeanors), or (ii) was a party to a civil proceeding of a judicial or
administrative body of competent jurisdiction and as a result of such proceeding
was or
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is subject to a judgment, decree or final order enjoining further violations of,
or prohibiting activities subject to, Federal or State securities laws or
finding any violation of such laws.
ITEM 3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS.
(a)-(b) Other than the terms of the Merger described more fully in Item 4 below
there have been no transactions or negotiations between the Company and the
Parent Company.
ITEM 4. TERMS OF THE TRANSACTION.
(a) This Rule 13E-3 Transaction Statement relates to the short form statutory
merger (the `Merger') of the Company, Spectex Industries, Inc. into Nnewco-King,
Inc., a newly-formed New York corporation (the `Parent Company'). The Company is
an approximately 91% owned subsidiary of Parent Company. After the merger only
the Parent Company will survive and it will at that time change its name to
Spectex Industries, Inc. On June 27, 1997, the date of filing a Certificate of
Merger with the Secretary of State of New York, (the `Effective Date'), the
Merger was be consummated.
Certain shareholders (listed on the Company's Form 8-K filed on February
15, 1997 and referred to hereinafter as the "Controlling Shareholders") have
contributed to Parent Company all of their shares of Common Stock, constituting
4,101,711 shares of the Company they own so that the Company is an approximately
91%-owned subsidiary of Parent Company. The Controlling Shareholders received
one share of Parent Company for each 1,000 shares of Common Stock they
contributed to the Parent with ownership of more than 1,500 shares of the
Company allowing a one share increase of stock of the Parent Company for
rounding off purposes. Prior to such contribution the Parent Company owned no
stock of the Company. No cash was paid by the Parent Company or anyone else for
the contribution to the Parent Company of the Controlling Shareholders' Common
Stock of the Company.
Each share of Common Stock of the Company outstanding and held of record as
of the close of business on the day immediately preceding the Effective Date by
persons other than (i) Parent Company and (ii) persons who own more than 1,000
shares of the Company and desire to exchange those shares for shares of the
Parent Company (the shares other than those described in (i) and (ii) of this
sentence being hereinafter referred to as the `Shares' and the holders of the
Shares being hereinafter referred to as the 'Public Shareholders') will, without
any action on the part of any holder thereof, be automatically converted on the
Effective Date into the right solely to receive cash in the amount of $.10 per
share without interest (the 'Merger Consideration') upon surrender of such
Shares, upon the terms and subject to the conditions set
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forth in the Plan of Merger (the 'Plan') and in the Letter of Transmittal,
copies of which are included with this Statement.
Each share of Common Stock of the Company outstanding on the Effective Date
has been cancelled and extinguished. Effective June 27, 1997 the Company no
longer existed, it having been merged into the Parent Company.
ITEM 5. PLANS OR PROPOSALS OF THE ISSUER OR AFFILIATE.
(a)-(c) Other than the fact the Company will be merged into the Parent, have
fewer shareholders and no longer be obligated to file reports pursuant to
Section 15(d), the Company expects its business operations to remain the same.
The present officers and directors are expected the be the same officers and
directors of the Parent Company after the Merger. There are no employment
contracts with any of the officers and Parent Company does expect to enter into
any after completion of the merger.
(d)-(e) Not applicable.
(f)-(g) The Common Stock of the Company is currently registered under Section
12(g) of the Exchange Act. Upon consummation of the Merger, the Company will
apply to the Commission for termination of the registration of its shares under
the Exchange Act. Termination of registration of the shares under the Exchange
Act will eliminate the Company's obligation to furnish information to the public
and the Commission pursuant to Sections 13 and 15(d) of the Exchange Act.
IT IS THE PRESENT INTENTION OF PARENT COMPANY TO SEEK TO CAUSE THE COMPANY TO
MAKE AN APPLICATION FOR TERMINATION OF REGISTRATION OF ITS SHARES OF COMMON
STOCK AS SOON AS PRACTICABLE FOLLOWING THE MERGER.
ITEM 6. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
(a) The Company does not expect the amount of funds necessary to complete the
Rule 13e-3 transaction of purchasing the Common Shares belonging to the Public
Shareholders to exceed $45,000. It expects to be able to meet this amount from
working capital and will not borrow any money to meet this need.
(b) The Company expects the costs involved in this Rule 13e-3 transaction to not
exceed $34,000. The Company will pay for all these costs with working capital.
An itemized list of such expenses is as follows:
i. Legal Fees $13,000
ii. Accounting Fees $2,000
iii. Appraisal Fees $10,000
iv. Printing and mailing costs $8,000
v. Filing Fees $1,000
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(c)-(d) not applicable.
ITEM 7. PURPOSE(S), ALTERNATIVES, REASONS AND EFFECTS.
(a), (c) The purpose of the Merger is for Parent to acquire the entire
equity interest in the Company for fair consideration in a prompt and orderly
manner and to take the Company private. About two years ago the Company began
to analyze the benefit of remaining a public company verses being becoming a
privately held one. After this analysis and a review of the performance of the
Company's stock over the last two years it was determined by the Controlling
Shareholders to create a new company and to contribute all of their stock to
that company. With the Parent owning more than 90% of the outstanding shares of
the Company, a short form merger could be accomplished under the Business
Corporation Law of New York ("BCL"). This short form merger would not need the
approval of the shareholders of either the Company or the Parent, but could be
approved simply by a vote of the Directors of the Parent Company.
The Company had anticipated that by becoming a public company its
shareholders would have received greater liquidity for its investments and the
Company may have been able to use its public position for additional financing.
Over the years the stock of the Company has not appeared as an active investment
vehicle for the Company. Moreover, the Company does not, in the near future,
anticipate seeking additional financing through issuance of stock offerings.
Another one of the reasons the Controlling Shareholders proposed the Merger
when they did, and why the Merger, in the view of the management of Parent, will
be beneficial to the Company and to Parent, is that the Company must now make
full disclosures of its financial statements to the public and its competitors.
Management of the Company does not feel that it is beneficial that competitors
and customers are regularly apprised of the Company's income and the extent to
which the Company may depend on any one customer.
Parent also considered the expense associated with the filing requirements
of a public company. Since the Company's Common Stock is currently registered
under the Securities Exchange Act of 1934, as amended (the `Exchange Act'), the
Company has an obligation to comply with the proxy rules of Regulation 14A and
Section 14 of the Exchange Act. In addition, the Company is obligated to file
reports with the Commission pursuant to Sections 13 and 15(d) of the Exchange
Act or to disseminate the information contained in such reports. Following the
Merger, the Company will not be required to incur the expense in connection with
filing such reports and complying with such proxy rules.
The acquisition of the entire equity interest in the Company has been
structured as a short form merger under the BCL in which
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Public Shareholders will receive cash for their shares and the Company will
become a wholly-owned subsidiary of Parent in order to enable Parent to acquire
100% ownership of the Company and merge the Company into the Parent.
Because immediately prior to the adoption of the Plan, Parent Company owned
more than 90% of the outstanding shares of the Common Stock of the Company, the
Plan was adopted solely by the Board of Directors of Parent. The approval of
the Board of Directors, shareholders or Public Shareholders of the Company is
not required.
Upon consummation of the Merger, the Public Shareholders of the Company
will no longer have an equity interest in the Company and, therefore, will not
benefit from future earnings and growth. Instead, under the Plan, each Public
Shareholder will have only the right to receive cash as specified in the Plan
for each Share theretofore held by him or her.
The Company will, as a result of the Merger, become a privately-held
corporation, with no active market for its shares of Common Stock. The
registration of the Company's Common Stock under the Exchange Act will be
terminated. The Company will be relieved of the obligation to comply with the
proxy rules of Regulation 14A under Section 14 of the Exchange Act. Moreover,
the Company will no longer be obligated to file reports with the Commission
pursuant to Sections 13 and 15(d) of the Exchange Act or to disseminate the
information contained in such reports.
The Company and the Parent have chosen the Plan as the most efficient
method to achieve their goals of being a private company while at the same time
providing the Public Shareholders with a fair return on their investment which
has not performed well over the years. The Plan is being adopted now because
the same reasons mentioned above for its adoption have persisted over the last
two years with no foreseeable change in sight. Management of the Company does
not anticipate any change in the business outlook of the Company in the near
future. Economic benefits of going private outlined above have been anticipated
for a few years.
(b) Not applicable.
(d) The Merger is complete and the Parent has merged the Company into it. The
shares of the Company cease to exist. The Company, as an independent entity will
also cease to exist. All of the Company's assets and liabilities will be assumed
by the Parent and business of the Company will carry on as before. Any Public
Shareholder who owns more than 1,000 shares of the Company will be given the
right to convert his or her shares of the Company into one share of the Parent
for each 1,000 shares of the Company. Alternatively, all Public Shareholder
shall have the right to receive $.10 (ten cents) for each share of the Company
to be paid by the Parent. Those Public Shareholders owning less than 1,000
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shares shall only be able to receive $.10 (ten cents) for each share they
surrender of the Company. (See, below at Item 13 for a discussion of the law in
New York where a shareholder objects to the price offered by the merger
participant. Such an objecting shareholder can seek judicial determination of
the fairness.) Management of the Parent does not anticipate that any dividends
will be paid on the stock of the Parent in the near future. Moreover the Company
does not anticipate that many, if any, of the Public Shareholders who own more
than 1,000 shares of the Company will opt to exchange there shares for those of
the Parent.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
Generally, the receipt of cash by a Public Shareholder of the Company in
exchange for his or her Shares pursuant to the Plan or the receipt of cash by
holders of Dissenting Shares (excluding interest, if any, awarded by a court in
a proceeding related thereto) will result in gain or loss for federal income tax
purposes equal to the difference between the amount of cash received in exchange
for the shares sold and such shareholder's adjusted tax basis in such shares.
Provided that the shares constitute capital assets in the hands of the
shareholder, such gain or loss will be capital gain or loss, and will be long-
term capital gain or loss if the holder has held the shares for more than one
year at the time of sale.
The foregoing discussion may not be applicable to certain types of shareholders,
including shareholders who are not citizens or residents of the United States
and foreign corporations, or to entities that are otherwise subject to special
tax treatment under the Internal Revenue Code of 1986, as amended (such as
insurance companies, tax-exempt entities and regulated investment companies).
Neither Controlling Shareholders, the Company nor Parent anticipates the
recognition of any gain, loss or income by reason of the Merger.
THE FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED FOR GENERAL
INFORMATION ONLY AND IS BASED UPON PRESENT LAW. THE PRECISE TAX CONSEQUENCES OF
THE PLAN WILL DEPEND ON THE PARTICULAR CIRCUMSTANCES OF THE HOLDER. SHAREHOLDERS
ARE URGED TO CONSULT THEIR TAX ADVISORS WITH RESPECT TO THE SPECIFIC TAX
CONSEQUENCES OF THE MERGER TO THEM, INCLUDING THE APPLICATION AND EFFECT OF THE
ALTERNATIVE MINIMUM TAX, AND STATE, LOCAL AND FOREIGN TAX LAWS.
ITEM 8. FAIRNESS OF THE TRANSACTION.
(a) Since the officers and directors of both the Company and the Parent are the
same, as are the majority shareholders of both companies it was determined that
the appointment of an independent board of directors would be unnecessary and of
no value. In lieu
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of any independent evaluation of the fairness of the transaction the Directors
hired Alfred Simon of American Capital Group to apprise the Company and the
Parent of his estimate of a fair consideration for the shares. This was done and
provided to Directors of both the Company and the Parent on January 15, 1997
(hereinafter the "Simon Report"). All the Directors of the Parent and Company
believe the Merger Consideration is fair to the Public Shareholders.
Parent considered the Simon Report for the purpose of supporting the fairness
of the Merger Consideration to the Public Shareholders. The Simon Report was
received by the Parent on January 15, 1997.
Simon valued the shares of the Company's Common Stock after taking into
account such factors and information as Simon considered relevant.
Parent and Company considered each of the following valuation approaches
utilized by Simon, solely to determine whether the Merger Consideration is fair
to the Public Shareholders: (i) the current market price; (ii) the historic
market price comparison, (iii) book value; (iv) liquidation value and (v) the
recent sale of a large block of stock of the Company pursuant to a public
auction of the shares.
(b) After review of Simon Report the Directors (See the full Simon Report
reproduced under EXHIBIT (b)(1) , the Directors are unable to weigh each factor
separately, but they do note that under all factors considered in the Simon
Report, (except historic market prices) the Merger Consideration of $.10 per
share exceeds the price determined by the other indices.
The Directors believe the one and only recent block sale of a potentially
controlling interest of the shares of the Company to be very instructive as to
fair consideration of the Shares of the Company. In settlement of a lawsuit,
1,707,450 shares of the Company were sold at a public auction to satisfy a debt
owed by the owner of those shares. That many shares represented approximately
39% of the outstanding shares of the Company. Nevertheless the average per
share price was only $.09. (For a full explanation of the circumstances
surrounding the sale these shares referenced is made to the Form 8-K filed by
the company on or about March 17, 1996).
The Merger Consideration of $.10 exceeds every indices except the closing
bid price as reported by IDD Information Services. The Company does not believe
the prices are reflective of the actual price a seller of the stock would expect
to receive for the sale of the shares of the Company. For years the Company has
not been able to generate much interest in the sale of its stocks. Since
September 1, 1996 there has been only one reported trade and that
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was 2,500 shares in November 1996.
The Company believes that the other indices mentioned in the Simon Report
are more reflective of the true value of the Company and its stock. For the
last few years the Company has run at a deficit. Even liquidation value would
lead to a per price share value of only $.07.
(c) Because immediately prior to the adoption of the Plan, Parent owned more
than 90% of the outstanding shares of the Common Stock of the Company and the
Plan was adopted by the Board of Directors of Parent, the approval of the Board
of Directors, shareholders or Public Shareholders of the Company is not
required.
(d)-(e) As a consequence of the foregoing, the Board of Directors of Parent
believed that the creation of a special committee of independent directors was
not warranted under the circumstances. Moreover, all of the Directors of Parent
and Company are the same and, consequently, none of the Directors are likely to
be viewed as independent.
Under the New York Business Corporation Law ("BCL"), Parent may effect the
proposed Merger without seeking the approval of the Board of Directors or
shareholders of the Company. On January 31, 1997, the Board of Directors and
the shareholders of Parent Company approved the Plan. Parent believes that the
Merger Consideration is fair to the Public Shareholders. Parent determined the
Merger Consideration solely on the basis of the Simon Report. Parent then
considered a number of factors which support the fairness of its determination
of the Merger Consideration, including, without limitation, the factors set
forth below.
(f) None.
ITEM 9. REPORTS, OPINIONS, APPRAISALS AND CERTAIN NEGOTIATIONS.
(a) Parent received an analysis from the Simon Report with respect to the
fair valuation of the Company's shares of Common Stock held by the Public
Shareholders.
(b) Alfred Simon is a certified public accountant, has a MBA from Harvard
School of Business Administration and has been involved in investment banking
since 1978 where he worked for various New York investment houses. Simon has
been engaged in the valuation of businesses and their securities in connection
with mergers and acquisitions. Simon was selected by Parent to act as its
appraiser based upon his expertise and reputation in the valuation of small
companies in the garment business. Moreover Simon has been an expert witness in
litigation controversies concerning fairness compensation matters. His full
resume is
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attached as exhibit (b)(2).
In conducting its analysis, Simon considered such financial and other
factors as he deemed appropriate under the circumstances, including (i) the
current market price; (ii) the historic market price comparison, (iii) book
value; (iv) liquidation value and (v) the recent sale of a large block of stock
of the Company pursuant to a public auction of the shares.
Simon conducted such investigation as he considers appropriate in order to
render an opinion to the Board of Directors of the Company and Parent as to the
fairness of the cash payment of ten cents ($0.10) per share to the holders of
approximately 9% of the outstanding shares of Spectex. In rendering his opinion
he used and relied upon financial statements, information and documents
furnished orally and in writing by Spectex, its affiliates, employees,
independent auditors, and representatives without conducting an independent
audit or investigation of these items.
The following valuation approaches to determine the fairness of the price
to be paid to the public shareholders: (1) current market price; (2) historic
market prices; (3) going concern value; (4) book value; (5) liquidation value;
and (6) the recent sale of a potential controlling block of Spectex shares.
CURRENT MARKET PRICE. The closing bid price on December 12, 1996, was 15.6
cents as reported by IDD Information Services and five cents as reported by the
National Quotation Bureau. However these prices are not representative of the
price a seller could expect to receive, as since September 1, 1996, there was
only one trade of 2,500 shares in November.
HISTORIC MARKET PRICE.
Average quarterly bid price: 1994 $ 0.076
1995 0.145
first half 1996 0.033
Average weekly closing bid Sept. 1 to Dec. 6, 1996 0.142
Again, Simon did not believe this price to necessarily represent the price a
seller could have received due to the small volume of transactions.
GOING CONCERN VALUE. For the five years ending 12-31-95, the Company reported a
cumulative net loss of $536,000, or an average annual loss of $107,000. Even
eliminating 1992, which contained nonrecurring losses and substitute 1990, there
is a cumulative five year profit of $116,000, or an average annual profit of
$23,000. In the last full year, 1995, there was a $148,000 loss and for the
nine months ended 9-30-96, Spectex reported a $163,000 loss verses a $3,000
profit in the same 1995 period. Management told Simon that it expects losses
greater than the 1995 level to continue into the foreseeable future. His
estimate of the going concern value
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therefore ranges between zero and eight times the $23,000 five year average
annual profit described above, or $184,000, or $0.04 per share.
NET BOOK VALUE. At August 3, 1996, the reported shareholder's equity was
calculated at $0.86 per share. However, this figure is not meaningful as the
Company is unprofitable and is expected to remain unprofitable. Also, if
various accounts are adjusted to their realizable or liquidation value the net
book value is reduced to the range of a defect to $0.07 per share.
LIQUIDATION VALUE. Spectex primarily consists of two operating subsidiaries,
the 100% owned J&A Apparel and the 51% owned J&J Farms. If liquidated, Spectex
is computed to produce $362,000 defect. However, if J&A Apparel alone were to
liquidate, a defect of $417,000 would result, and J&J Farms could then be sold
as a separate going concern. J&J Farms reported earnings for the five years
ending 12-31-95 which fluctuated between an $80,000 loss and a $105,000 profit.
For the twelve months ending 9-30-96, he com puted J&J's profit as $118,000. A
sale of J&J might be arranged by Spectex at about twelve times $118,000, or
$1,416,000. Spectex would realize 51% of this amount or $722,000, from which it
would have to pay out its defect on the liquidation of J&A of $417,000. This
course would yield a $305,000, or $0.07 per share.
RECENT SALE OF BLOCK. On February 29, 1996, 1,707,450 shares, or 41.6% of the
outstanding shares of Spectex, were sold as a single block at a public auction
for $158,939, or $0.09 per share, by Michael Oberlander. As a potential
controlling block these shares would be expected to sell at a premium to the
shares of the public shareholders.
A full copy of the report is attached hereto as an exhibit (b)(1). Mr.
Simon was selected by the Directors of Parent based solely on his reputation in
the community in dealing with companies the size of the Company. Other than
retention of Mr. Simon to prepare this report there have been no material
relationships between Mr. Simon and the Company or the Parent in the last two
years. Mr. Simon's fee of $10,000 was negotiated between himself the Directors
of Parent and the Company on an arm's length basis. Neither the Parent nor the
Company gave Mr. Simon any recommendations, instructions or limitations in
connection with the Simon Report other than a request that he determine a fair
and reasonable price to paid to the Public Shareholders.
(c) The foregoing description of the Simon Report is qualified by reference to
the full text of such report included as Exhibit(b)(1) to the Schedule 13E-3
filed with the Securities and Exchange Commission (the 'Commission'). Each
Public Shareholder will be sent a copy of this Form 13e-3 statement and the
exhibits including the Simon Report. Copies of the Simon Report will also be
made available for inspection and copying at the principal executive
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offices of Parent during regular business hours by any interested shareholder of
the Company, or by his or her representative who has been so designated in
writing, and may be inspected and copied, and obtained by mail, from the
Commission. The Company will send each shareholder of record this Form 13-e, the
Merger documents and the Simon Report 20 days prior to filing the Certificate of
Merger with the Secretary of State of Albany.
ITEM 10. INTEREST IN SECURITIES OF THE ISSUER.
(a) The filers of this statement are the Company and the Parent. The Parent
now owns over 90% of the Shares of the Company. Theses shares are not a part of
the shares to which the 13-e transaction relates.
(b) none.
ITEM 11. CONTRACTS, ARRANGEMENTS OR UNDERSTANDINGS WITH RESPECT TO THE ISSUER'S
SECURITIES. None.
ITEM 12.
PRESENT INTENTION AND RECOMMENDATION OF CERTAIN PERSONS WITH REGARD TO THE
TRANSACTION.
(a) After inquiry by the officers of the Company and Parent there is not known
any executive officer, director, Controlling Shareholders or affiliate of the
Parent or the Company who intends who presently intends to sell or otherwise
dispose of any shares of the Company other than in connection with the Merger
Plan or to sell or dispose of the shares they own of the Parent. Moreover it is
not known that any of these people have entered into any agreement in connection
with the vote of their shares of the Parent.
(b) Other than the officers of the Company who have recommend the Merger Plan,
and the Controlling Shareholders who have contributed their Common Stock of the
Company to the Parent, no other persons mentioned in the preceding paragraph
have made a recommendation in support or in opposition to the Merger Plan. As
regards the Rule 13e-3 transaction (i.e., the fairness of the payment to the
Public Shareholders for their Common Stock of the Company), no officers or
persons have made any recommendations in support or in opposition other than as
set forth in this Statement.
ITEM 13. OTHER PROVISIONS OF THE TRANSACTION.
(a) Under the BCL, the Public Shareholders of the Company do not have rights to
dissent from adoption of the Merger Plan. However under BCL (S)910(a)(2), the
Public Shareholders have a right to dissent to the amount of the consideration
being offered by the
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Parent and to file a written dissent in accordance with BCL (S)623(c). This
latter section of the BCL requires the shareholder who elects to dissent from a
merger to file a written notice of such election to dissent within twenty days
after the giving to him of a copy of the plan of merger or exchange or an
outline of the material features thereof under section 905. (A copy of that
notice will be sent to each Public Shareholder and is attached as an exhibit
hereto) A shareholder may not dissent as to less than all of the shares, as to
which he has a right to dissent, held by him of record, that he owns
beneficially. Such rights, if the statutory procedures are complied with, could
lead to a judicial determination of the fair value (excluding any element of
appreciation or depreciation in anticipation of the accomplishment of the
merger) required to be paid in cash to such dissenting holders ('dissenting
shareholders') for their shares ('dissenting shares'). Any such judicial
determination of the fair value of dissenting shares could be based upon
considerations other than or in addition to the market value of the shares and
the factors used to determine the Merger Consideration to be paid in the merger,
including asset values and the investment value of the dissenting shares. The
value so determined could be more or less than the merger consideration paid
pursuant to the merger.
Shareholders electing to dissent must demand payment for their shares by
completing the letter of transmittal and dissenters demand for payment form
included herewith and returning such documents as instructed therein, together
with their certificates representing dissenting shares and any other required
documents by March 9, 1997.
(b) Not applicable.
(c) Not applicable.
ITEM 14. FINANCIAL INFORMATION.
(a) Set forth below is a summary of certain financial information with respect
to the Company. The audited financial statements contained in the Company's
Annual Report on Form 10-K for the fiscal year ended December 31, 1995 and the
unaudited financial statements contained in the Company's Quarterly Report on
Form 10-Q for the nine (9) months ended September 30, 1996 are filed with the
Commission. More recent and comprehensive financial information can be obtained
at the office of the Company where they are available for inspection.
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Below is selected date which summarizes the financial information
concerning the company.
<TABLE>
<CAPTION>
SELECTED FINANCIAL DATA
-----------------------
SPECTEX INDUSTRIES, INC.
THREE YEARS ENDED DECEMBER 31, 1995
-----------------------------------
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Revenues $34,696,815 $33,252,671 $31,597,930
Income, Loss Be- (45,885) 194,473 194,088
fore Extraordinary
items and Taxes
Net Income (loss) (148,770) 57,833 380,094
Net Income (loss) (.03) 0.01 0.08
per Share
Long term Debt 2,119,198 2,669,641 2,940,549
Book Value per .88 0.91 0.90
Common Share
Total Assets 8,908,594 9,573,797 9,453,256
Weighted Average 4,338,520* 4,338,520 4,388,520
Numbers of Shares
**
</TABLE>
* Includes outstanding common stock and treasury shares.
** No cash Dividends paid in any of the above years.
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The Company relies upon its net earnings from operations as its
primary source of cash, although it does employ cash reserves and short-term
bank loans to provide additional liquidity. This is true for both the Company's
knitwear segment and its dairy products segment. In 1995, the Company purchased
virtually no new machinery as compared to 1994 when it purchased new machinery
outright for approximately $314,379. Selling, general and administrative
expenses as a percentage of sales remained, to a great extent, in line with the
two previous years and, thus, had little effect on liquidity. The Company
expects to continue to rely on cash and bank loans for its liquidity in 1996.
while it has no formal commitment from its bank, the Company maintains a line of
credit of up to $500,000 to provide additional liquidity for its knitwear
segment. Interest is payable on loans made under such line at a rate of prime
plus 1/2%.
Consolidated revenues of the Company increased by approxima tely $1,444,144
in 1995 as compared to 1994 and by approximately $1,654,741 in 1994 as compared
to 1993, and by approximately $750,000 in 1993 as compared to 1992. The
increase in revenues in 1995 was solely attributable to an increase in revenues
of the Company's dairy segment to $30,294,695 in 1995 from $28,361,000 in 1994,
or an increase of $1,933,695 (6%).
The Company's operating profit before provision for the 1992 investment
loss of $635,000, taxes, interest expense and minority interest decreased by
$184,593 in 1995 as compared to 1994. The Company's operating profit before
provision for the 1992 investment
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loss of $635,000, taxes, interest expense and minority interest decreased by
$37,445 in 1994 as compared to 1993, and increased by approximately $258,973 in
1993 as compared to 1992. The 1995 decrease was attributable to a $156,874 loss
in the operation of the garment segment before minority interest, taxes and
interest expenses. The 1994 decrease was attributable to a $52,899 decrease in
the operating profit of the garment segment before minority interest, taxes and
interest expenses. The 1993 increase was attributable to $218,468 increase in
the operating profit in the dairy segment before minority interest, taxes and
interest expenses.
Based on the unaudited consolidated financial statements filed with the
Company's 10-Q for period ended in June 30, 1996, net sales and gross revenue
for the six months were $15,914,044 but total expenses and costs were
$16,543,940. Taking into consideration losses for income taxes and minority
interests the net loss for the six months ending June 30, 1996 was $282,790
which is an increased over the same time in 1995 when the net loss was $138,370.
The loss per share as of June 30, 1996 was $.07.
(b) Not applicable.
ITEM 15. PERSONS AND ASSETS EMPLOYED, RETAINED OR UTILIZED.
(a) None.
(b) Not applicable.
ITEM 16. ADDITIONAL INFORMATION.
Not applicable.
ITEM 17. MATERIAL TO BE FILED AS EXHIBITS.
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(a) Not applicable.
(b)(1) Fair Value Report of American Capital Group, Inc.
(b)(2) Consent of Albert Simon from American Capital Group, Inc. and
resume
(c) none
(d) Form of Letter to Shareholders of the Company.
(d)(1) Form of Letter of Transmittal from Shareholder.
(d)(2) Form of Dissenters Demand for Payment Form.
(d)(3) Form of Notice of Adoption of Plan of Merger to be included with
the Letter of Transmittal.
(d)(4) Form of Notice of Merger to be delivered to record shareholders
of the Company following the Effective Date of the Merger.
(d)(5) Plan of Merger adopted by the Board of Directors of Parent on
January 31, 1997.
(d)(6) Text of Press Release issued by the Company on January 31, 1997.
(d)(7) Text of Sections 623, 902, 905, and 910 of the New York Business
Corporation Law.
(e) See Discussions under Item 13(a).
(f) Not applicable.
SIGNATURE
After due inquiry and to the best of my knowledge and belief, I certify
that the information set forth in this Statement is true,
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complete and correct.
Dated: July 17, 1997 Spectex Industries, Inc.
/s/ Michael Oberlander
By:_________________________
Michael Oberlander, Pres.
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