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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 13E-4
ISSUER TENDER OFFER STATEMENT
(Pursuant to Section 13(e) of the
Securities Exchange Act of 1934)
FOOD COURT ENTERTAINMENT NETWORK, INC.
(Name of Issuer)
FOOD COURT ENTERTAINMENT NETWORK, INC.
(Name of Person(s) Filing Statement)
CLASS A WARRANTS AND CLASS B WARRANTS
(Title of Class of Securities)
CLASS A WARRANTS 344690 11 0
CLASS B WARRANTS 344690 12 8
-------------------------
(CUSIP Number of Class of Securities)
MR. JAMES N. PERKINS
PRESIDENT AND CHIEF EXECUTIVE OFFICER
FOOD COURT ENTERTAINMENT NETWORK, INC.
220 EAST 42ND STREET, 16TH FLOOR
NEW YORK, NEW YORK 10017
(212) 983-4500
(Name, Address and Telephone Number of Person Authorized to
Receive Notice and Communications on Behalf of
Person(s) Filing Statement)
COPY TO:
STEPHEN F. RITNER, ESQUIRE
STEVENS & LEE
ONE GLENHARDIE CORPORATE CENTER
P.O. BOX 236
WAYNE, PENNSYLVANIA 19087
(610) 964-1480
AUGUST __, 1997
(Date Tender Offer First Published, Sent or
Given to Security Holders)
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CALCULATION OF FILING FEE
TRANSACTION VALUATION* AMOUNT OF FILING FEE
$1,581,363 $316.33
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* For purpose of calculation of a filing fee only. The amount of the filing
fee equals 1/50 of 1% of the value of the securities to be exchanged. There
is a public market for the securities to be exchanged. Accordingly, the
transaction value is based upon the market value of the Class A Warrants
and Class B Warrants based on the closing price of the Class A Warrants and
Class B Warrants on the Nasdaq SmallCap Market as of August ___, 1997.
[ ] Check box if any part of the fee is offset as provided by Rule 0-11(a)(2)
and identify the filing with which the offsetting fee was previously paid.
Identify the previous filing by registration statement number, or the form
or schedule and the date of its filing.
Amount previously paid: N/A Filing party: N/A
Form or registration No.: N/A Date filed: N/A
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ITEM 1. SECURITY AND ISSUER
(a) The name of the issuer is Food Court Entertainment Network, Inc., a
Delaware corporation (the "Company"), which has its principal executive offices
at 220 East 42nd Street, 16th Floor, New York, New York 10017 (telephone number
212-983-4500).
(b) This Schedule relates to the offer by the Company to exchange (i)
0.6 shares of its Series A Common Stock, $.01 par value per share (the "Series A
Common Stock") for each outstanding Class A Warrant which entitles the holder
thereof to purchase one share of Series A Common Stock and one Class B Warrant
at an exercise price of $5.13 (the "Class A Warrant") and (ii) 0.4 shares of its
Series A Common Stock for each outstanding Class B Warrant which entitles the
holder thereof to purchase one share of Series A Common Stock at an exercise
price of $6.85 (the "Class B Warrant;" the Class A Warrants and Class B Warrants
shall be referred to herein as the "Warrants"), upon the terms and subject to
the conditions set forth in the Offer to Exchange dated August 22, 1997 (the
"Offer to Exchange") and related Letter of Transmittal, copies of which are
attached hereto as Exhibits (1) and (a)(2), respectively. There are outstanding
8,796,797 Class A Warrants and 7,097,447 Class B Warrants. The information set
forth under "The Exchange Offer -- Terms of the Exchange Offer" and "Interest of
Certain Persons in the Transaction" in the Offer to Exchange is incorporated
herein by reference.
(c) The Company's Units consisting of one Share of Series A Common
Stock, one Class A Warrant and one Class B Warrant (the "Units"), Series A
Common Stock, Class A Warrants and Class B Warrants are listed for trading on
the Nasdaq SmallCap Market under the symbols "FCENU, FCENA, FCENW and FCENZ."
The information set forth in the Offer to Exchange under "Price Range of the
Company's Securities" is incorporated herein by reference.
(d) Not applicable.
ITEM 2. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION
(a) See Item 1(b) above.
(b) Not applicable.
ITEM 3. PURPOSE OF TENDER OFFER AND PLANS OR PROPOSALS OF THE ISSUER OR
AFFILIATE
The information set forth in the Offer to Exchange under "Summary of
Offer to Exchange -- Purposes and Effects of the Exchange Offer," "Purposes and
Effects of the Exchange Offer" and "The Exchange Offer" (and the subheadings
thereunder) is incorporated herein by reference. The Company will retire and
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does not have any plans to reissue Warrants acquired pursuant to the Exchange
Offer.
(a) The information set forth in the Offer to Exchange under "Summary
of Offer to Exchange -- Purposes and Effects of the Exchange Offer," "Purposes
and Effects of the Exchange Offer," and "The Exchange Offer" (and the
subheadings thereunder) is incorporated herein by reference.
(b) -- (j) Not applicable.
ITEM 4. INTEREST IN SECURITIES OF THE ISSUER
On July 17, 1997, Robert H. Lenz, Chairman of the Company, purchased
9,000 units at a price of $1 5/16 for an aggregate price of $11,817 and on July
21, 1997, Mr. Lenz purchased 11,000 units at a price of $1 7/16 for an aggregate
purchase price of $15,817 on the Open Market.
Neither the Company, nor to the knowledge of the Company, any person
referred to in Instruction C to this Schedule, other than Mr. Lenz, or any
subsidiary or associate of any such person, including any director or executive
officer of any such subsidiary, has effected any transaction in the Warrants
during the 40 business days prior to the date hereof. The information set forth
under "Transactions and Agreements Concerning the Series A Common Stock" in the
Offer to Exchange is incorporated herein by reference.
ITEM 5. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO
THE ISSUER'S SECURITIES
Not applicable.
ITEM 6. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED
No person has been retained to make solicitations or recommendations
with respect to the Exchange Offer. The information set forth in the Offer to
Exchange under "The Exchange Offer -- Solicitation of Tenders; Fees" and "The
Exchange Offer -- Exchange Agent" is incorporated herein by reference.
ITEM 7. FINANCIAL INFORMATION
(a) -- (b) The information set forth in the Offer to Exchange under
"Selected Financial and Pro Forma Information" and "Capitalization and Book
Value per Share" and the information set forth in the Company's Annual Report on
Form 10-KSB for the year ended December 31, 1996, and the Quarterly Reports on
Form 10-QSB for the quarters ended March 31, 1997 and June 30, 1997, which are
attached to the Offer to Exchange as Exhibits A, B, C and D, respectively, are
incorporated herein by reference.
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ITEM 8. ADDITIONAL INFORMATION
(a) -- (d) Not applicable.
(e) Additional information is contained in the Offer to Exchange and
the Exhibits thereto and Letter of Transmittal, which are attached hereto as
Exhibits (a)(1) and (a)(2), respectively, and incorporated herein by reference.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS
(a)(1) Offer to Exchange dated August 25, 1997 (Exhibit A, the
Company's Form 10KSB for December 31, 1997, Exhibit B, the
Company's Form 10QSB for March 31, 1997, Exhibit C, the
Company's Form 10QSB for June 30, 1997 and Exhibit D, the
Company's Notice and Proxy Statement for the 1997 Annual
Meeting of Shareholders are incorporated herein by
reference).
(a)(2) Form of Letter of Transmittal dated August 25,
1997.
(a)(3) Form of Notice of Guaranteed Delivery dated
August 25, 1997.
(a)(4) Form of Letter to Holders of Warrants from the
President of the Company.
(a)(5) Form of Letter to the Holders of Warrants from
Brokers and Instructions from Holders of Warrants to
Broker regarding exchange.
(a)(6) Press Release dated August 25, 1997.
(b) Not applicable.
(c) Not applicable.
(d) Not applicable.
(e) Not applicable.
(f) Not applicable.
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SIGNATURE
After due inquiry and to the best of my knowledge and belief, I certify
that the information set forth in this statement is true, complete and correct.
FOOD COURT ENTERTAINMENT
Dated: August 25, 1997
By: /s/ James N. Perkins
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James N. Perkins
President and Chief Executive
Officer
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EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION PAGE
(a)(1) Offer to Exchange dated August 25, 1997 (Exhibit A, the
Company's Form 10KSB for December 31, 1997; Exhibit B, the
Company's Form 10QSB for March 31, 1997; Exhibit C, the
Company's Form 10QSB for June 30, 1997; and Exhibit D,
the Company's Notice and Proxy Statement for the 1997
Annual Meeting of Shareholders are incorporated herein
by reference).
(a)(2) Form of Letter of Transmittal dated August 25, 1997
(a)(3) Form of Notice of Guaranteed Delivery dated August 25, 1997
(a)(4) Form of Letter to Holders of Warrants from the President
of the Company
(a)(5) Form of Letter to the Holders of Warrants from Brokers and
Instructions from Holders of Warrants to Broker regarding
exchange.
(a)(6) Press Release dated August 25, 1997
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FOOD COURT ENTERTAINMENT NETWORK, INC.
OFFER TO EXCHANGE
CLASS A WARRANTS AND
CLASS B WARRANTS
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT
5:00 P.M., NEW YORK CITY TIME, ON SEPTEMBER 26, 1997
(THE "EXPIRATION DATE"), UNLESS EXTENDED.
Food Court Entertainment Network, Inc. (the "Company") hereby offers,
upon the terms and subject to conditions set forth herein and in the
accompanying Letter of Transmittal (which together constitute the "Exchange
Offer"), to exchange (i) 0.6 shares of its Common Stock, $.01 par value per
share (the "Series A Common Stock"), for each issued and outstanding Class A
Warrant ("Class A Warrant"); and (ii) 0.4 shares of its Series A Common Stock
for each issued and outstanding Class B Warrant ("Class B Warrant"). Each Class
A Warrant currently entitles the holder to purchase one share of Series A Common
Stock and one Class B Warrant at an exercise price of $5.13. Each Class B
Warrant currently entitles the holder to purchase one share of Series A Common
Stock at an exercise price of $6.85 per share. Class A Warrants and Class B
Warrants collectively shall be referred to herein as the Warrants.
The Exchange Offer is conditioned upon, among other things, the valid
tender for exchange of not less than 6,157,758 Class A Warrants (70% of the
Class A Warrants issued and outstanding) and 4,968,213 Class B Warrants (70% of
the Class B Warrants issued and outstanding), which tender has not been
withdrawn. The Exchange Offer is also subject to certain other conditions. See
"The Exchange Offer -- Conditions of the Exchange Offer." Warrants not tendered
for exchange pursuant to the Exchange Offer will continue to have all of the
existing rights granted in the Warrant.
The Company's Series A Common Stock, Class A Warrants and Class B
Warrants are traded on the Nasdaq SmallCap Market ("Nasdaq") under the symbols
FCENA, FCENW, and FCENZ, respectively. The Company's securities are also traded
as Units consisting of one share of Series A Common Stock, one Class A Warrant
and one Class B Warrant (the "Units") which trade on Nasdaq under the symbol
FCENU. The Exchange Offer is being made by the Company in reliance on the
exemption from the registration requirements of the Securities Act of 1933 (the
"Securities Act") afforded by Section 3(a)(9) thereof.
Except for shares of Series A Common Stock underlying Warrants
purchased in the private placement of Units on November 14, 1996 (the "Private
Placement Warrants"), the resale of shares of Series A Common Stock issued in
exchange for the Warrants may be sold without restriction. The resale of shares
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of Series A Common Stock issued in exchange for the Private Placement Warrants
(the "Restricted Shares") will be "restricted securities" within the meaning of
Rule 144 promulgated under the Securities Act ("Rule 144") and will be subject
to resale restrictions under Rule 144. The shares of Series A Common Stock
issued in exchange for the Private Placement Warrants cannot be sold until
November 14, 1997, which is the one year anniversary of the Private Placement.
Thereafter, the Restricted Shares may be sold in certain limited amounts. See
"Resale of Restricted Shares." Unless specifically excepted, references to the
Warrants shall include the Private Placement Warrants. The resale of shares of
Series A Common Stock issued to "affiliates" tendering Warrants hereunder are
also subject to limitations under Rule 144 regarding the number of shares which
may be sold.
On August 22, 1997, the last full day of trading prior to the public
announcement of the commencement of the Exchange Offer, the last reported sale
price of the Units, the Series A Common Stock, the Class A Warrants and the
Class B Warrants on Nasdaq was $0.781 per Unit, $0.266 per share, $0.125 per
Class A Warrant, and $0.125 per Class B Warrant. Holders of the Warrants are
urged to obtain current market quotations for the Units, the Series A Common
Stock, the Class A Warrants and the Class B Warrants.
The Company expressly reserves the right to extend the period of the
Exchange Offer, to terminate the Exchange Offer or to otherwise amend the
Exchange Offer in any respect, subject to the terms set forth in this Offer to
Exchange (the "Offer to Exchange"). See "The Exchange Offer -- Extension of
Exchange Offer Period; Termination; Amendments."
NEITHER THE COMPANY NOR ITS BOARD OF DIRECTORS MAKES ANY RECOMMENDATION TO ANY
HOLDER OF WARRANTS AS TO WHETHER TO TENDER OR REFRAIN FROM TENDERING ANY
WARRANTS. EACH HOLDER OF WARRANTS MUST MAKE HIS OWN DECISION AS TO WHETHER TO
ACCEPT THE EXCHANGE OFFER, WHICH REQUIRES THE TENDER OF ALL THE HOLDER'S
WARRANTS.
For a discussion of certain risks in connection with the Exchange
Offer, see "Risk Factors" commencing on page 15.
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THIS TRANSACTION AND THE SECURITIES OFFERED HEREBY HAVE NOT BEEN
APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION. NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY
STATE SECURITIES COMMISSION HAS PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
OFFER TO EXCHANGE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The Exchange Agent for the Exchange Offer is:
American Stock Transfer & Trust Company.
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The date of this Offer to Exchange is August 25, 1997
This Offer to Exchange does not constitute an offer or solicitation by
the Company or any other person for the exchange of any securities other than
the securities covered by this Offer to Exchange. The Exchange Offer is not
being made to, and tenders will not be accepted from or on behalf of, holders of
Warrants in any jurisdiction in which the making of the Exchange Offer or
acceptance thereof would not be in compliance with the laws of such
jurisdiction. However, the Company may, in its sole discretion, take such action
as it may deem necessary to make the Exchange Offer in any such jurisdiction and
to extend the Exchange Offer to holders of Warrants in such jurisdiction.
No person has been authorized to make any recommendation on behalf of
the Company as to whether holders of Warrants should tender their Warrants
pursuant to the Exchange Offer.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS IN CONNECTION WITH THE EXCHANGE OFFER OTHER THAN THOSE CONTAINED
HEREIN OR IN THE LETTER OF TRANSMITTAL. IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY.
THE DELIVERY OF THIS OFFER TO EXCHANGE AT ANY TIME DOES NOT IMPLY THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE
HEREOF.
The Company is making the Exchange Offer in reliance on the exemption
from the registration requirements of the Securities Act afforded by Section
3(a)(9) thereof. The Company therefore will not pay any commission or
remuneration to any broker, dealer, salesman or other person for soliciting
tenders of Warrants. Regular employees of the Company may solicit exchanges from
the holders of the Warrants, but such employees will not receive additional
compensation therefor.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company's Annual Report on Form 10-KSB for the year ended December
31, 1996, its Quarterly Reports on Form 10-QSB for the quarters ended March 31,
1997 and June 30, 1997, its Notice of the Annual Meeting of Stockholders and
Proxy Statement dated May 2, 1997, all of which have been filed by the Company
with the Securities and Exchange Commission, are attached to this Offering
Circular as Exhibits A, B, C, and D, respectively, and are incorporated herein
by this reference.
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AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and,
accordingly, files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information filed with the Commission are available for
inspection and copying at the public reference facilities maintained by the
Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington,
D.C. 20549, and at the Commission's Regional Offices located at Citicorp Center,
500 West Madison Street, Suite 1400, Chicago, Illinois 60661 and at Seven World
Trade Center, Suite 1300, New York, New York 10048. Copies of such documents may
also be obtained from the Public Reference Section of the Commission at
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed
rates. In addition, copies of such documents may be obtained through the
Commission's Internet address at http://www.sec.gov. The Units, Series A Common
Stock, Class A Warrants and Class B Warrants are authorized for quotation on the
Nasdaq SmallCap Market and, accordingly, such materials and other information
can also be inspected at the offices of the National Association of Securities
Dealers, Inc., 1735 K Street, N.W., Washington, D.C. 20006.
The Company has filed with the Commission under the Securities Act of
1933, as amended (including the rules and regulations thereunder, the
"Securities Act"), a Schedule 13e-4 with respect to the Exchange Offer.
The Company furnishes to its shareholders annual reports containing
audited financial statements and makes available copies of quarterly reports for
the first three quarters of each fiscal year containing unaudited interim
financial information.
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TABLE OF CONTENTS
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE........................... 3
AVAILABLE INFORMATION..................................................... 4
SUMMARY OF OFFER TO EXCHANGE.............................................. 7
THE COMPANY............................................................... 7
PURPOSES AND EFFECTS OF THE EXCHANGE OFFER................................ 9
THE EXCHANGE OFFER........................................................ 12
RISK FACTORS.............................................................. 15
SELECTED FINANCIAL AND PRO FORMA INFORMATION.............................. 23
CAPITALIZATION AND BOOK VALUE PER SHARE................................... 25
PRICE RANGE OF COMPANY'S SECURITIES....................................... 26
DIVIDEND POLICY........................................................... 26
THE EXCHANGE OFFER........................................................ 27
TERMS OF THE EXCHANGE OFFER...................................... 27
ACCEPTANCE NOT MANDATORY......................................... 27
PROCEDURE FOR EXCHANGE........................................... 28
WITHDRAWAL RIGHTS................................................ 30
ACCEPTANCE OF WARRANTS FOR EXCHANGE.............................. 31
CONDITIONS OF THE EXCHANGE OFFER................................. 31
ANTI-DILUTION PROVISIONS OF WARRANTS WITH RESPECT
TO EXCHANGE OFFER.............................................. 33
CONSENT TO WAIVER OF ANTI-DILUTION PROVISIONS OF
WARRANTS WITH RESPECT TO EXCHANGE OFFER........................ 34
EXTENSION OF EXCHANGE OFFER PERIOD;
WAIVER OF TENDER OF ALL WARRANTS REQUIREMENT;
TERMINATION; AMENDMENTS........................................ 34
SOLICITATION OF TENDERS; FEES.................................... 36
EXCHANGE AGENT................................................... 36
TRANSFERABILITY OF SERIES A COMMON STOCK.................................. 36
RESALE OF RESTRICTED SHARES...................................... 36
CERTAIN FEDERAL INCOME TAX CONSEQUENCES................................... 37
INTERESTS OF CERTAIN PERSONS IN THE TRANSACTION........................... 38
TRANSACTIONS AND AGREEMENTS CONCERNING THE SERIES A COMMON STOCK.......... 40
DESCRIPTION OF SECURITIES................................................. 40
GENERAL.......................................................... 40
UNITS............................................................ 40
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COMMON STOCK........................................................ 40
REDEEMABLE WARRANTS................................................. 41
PREFERRED STOCK..................................................... 43
EXHIBITS
EXHIBIT A -- Annual Report on Form 10-KSB for the year ended
December 31, 1996
EXHIBIT B -- Quarterly Report on Form 10-QSB for the quarter
ended March 31, 1997
EXHIBIT C -- Quarterly Report on Form 10-QSB for the quarter
ended June 30, 1997
EXHIBIT D -- Notice of Annual Meeting of Stockholders and Proxy
Statement dated May 2, 1997
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SUMMARY OF OFFER TO EXCHANGE
The following summary is qualified in its entirety by reference to the
more detailed information, exhibits and financial statements, including the
notes thereto, appearing elsewhere herein. Please read this Offer to Exchange in
its entirety.
THE COMPANY
The following discussion under the heading "The Company" contains
certain forward looking statements within the meaning of the "safe harbor"
provision of the Private Securities Litigation Reform Act of 1995 that involve
risks and uncertainties. The Company's actual results could differ materially
from those discussed herein. Factors that could cause or contribute to such
differences include, but are not limited to, those discussed in "Risk Factors"
below and in "Management's Discussion and Analysis of Financial Condition and
Results of Operations" in the Company's Annual Report on Form 10-KSB for the
fiscal year ended December 31, 1996 and quarterly Report on Form 10-QSB for the
quarters ended March 31, 1997 and June 30, 1997, which are incorporated herein
by reference. See "Incorporation of Certain Documents by Reference."
Development Stage Company. Food Court Entertainment Network, Inc. (the
"Company") was organized in February 1992. The Company's initial plan has been
to establish a national television network to broadcast a high quality
television program called Cafe USA to large, enclosed shopping mall food courts
("Food Courts") across the United States. While the development of a national
television network remains the core business of the Company, management has
determined that it is in the Company's best interest to expand the Company's
mission. The Company's current plan is to promote, introduce and operate
electronic entertainment, information and transaction systems in high- traffic
consumer areas such as shopping centers, multi-purpose malls, resorts, travel
facilities and entertainment and retail destinations, utilizing both new and
traditional media and contemporary communications technologies.
The Company is in its development stage. The Company's activities to
date have consisted primarily of designing, developing and producing Cafe USA
programming, producing and evaluating three market tests of Cafe USA to
determine its acceptance in the marketplace, developing and refining an
end-to-end distribution system for the delivery and management of Cafe USA
programming into Food Courts, attracting and engaging management employees,
consultants and advisers for marketing, operations and implementation of the
Cafe USA network, establishing contacts and entering into agreements with
advertisers and mall operators, and installing and operating Cafe USA in 20 Food
Courts.
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In the fall of 1995, the Company began a ten-week evaluation period
("Evaluation Period") of Cafe USA during which the Company broadcast the Cafe
USA program in four major enclosed malls in the Chicago, Philadelphia, New York,
and Greenville, South Carolina market areas. The Company engaged A. C. Nielsen
to conduct a survey of 4,800 mall and Food Court visitors to the four malls
during the ten-week Evaluation Period (the "1995 Nielsen Survey"). The purpose
of the Evaluation Period was to gather data necessary to evaluate the acceptance
of Cafe USA by mall operators and Food Court visitors, and, assuming marketplace
acceptance, to determine the pricing structure for advertising. The Company's
future viability and profitability are dependent upon the generation of
advertising revenue. To date, the Company has generated very limited revenues
from advertising sales.
Based upon the results of the 1995 Nielsen Survey, management believed
sufficient support for the Cafe USA concept existed to justify expansion of Cafe
USA in Food Courts throughout the United States (the "Mall Buildout"). The
conclusions drawn by management from the Evaluation Period, the 1995 Nielsen
Survey and marketing and sales activities during 1996 resulted in management
modifying the Company's business strategy. The Company determined that to
successfully sell Cafe USA to a substantial number of advertisers, and thereby
generate significant revenues, the distribution network for Cafe USA must be
expanded nationally. Accordingly, the Company requires substantial funds in
addition to existing revenues from operations and financing available from
external sources in order to implement its business plan and achieve profitable
operations. The Company is seeking strategic alliances, either through a joint
venture, merger or acquisition transaction with other entities that have
significant financial or other resources, in order to provide the Company with
the necessary funding to successfully complete the Mall Buildout and to build
its internal marketing and advertising sales force. There can be no assurance
that the Company will be able to enter into any such arrangements. If the
Company is unsuccessful in securing any arrangement with third parties to
provide the necessary funding, the Company will be unable to complete the Mall
Buildout and may be required to cease operations. See "Risk Factors - Capital
Intensive Nature of Business; Need for, and No Assurance of, Strategic Alliances
and Additional Financing to Develop Cafe USA."
Going Concern. The Company's Independent Auditors, Richard A. Eisner &
Company, LLP ("Eisner"), have included in their opinion on the Company's
Financial Statements as at December 31, 1996 and for the year then ended an
explanatory paragraph indicating that there was substantial doubt about the
Company's ability to continue as a going concern. Management believes that the
Company will continue as a going concern only so long as the Company can expand
its network into a significant number of mall Food Courts, and can obtain
substantial additional financing or enter into a strategic alliance with a
company with substantial financial or other resources. The Company expects
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substantial losses to continue until it is able to attract a significant number
of advertisers.
Current Operations. The Company is currently producing its own weekly
television programming for Cafe USA and broadcasting Cafe USA in 20 Food Courts.
The Company has modified its strategy of negotiating contracts with mall
developers and mall operators. Management is seeking commitments from major mall
operators to install Cafe USA in all Food Courts that they own or manage.
Discussion and negotiations are currently in process with several significant
mall operators that own or manage more than 300 malls with Food Courts. The
Company has not entered into any definitive agreements and there is no assurance
that the Company will be able to obtain such commitments.
The Company has no paid advertisers for the third quarter of 1997. The
Company has five paid advertisers currently scheduled for the fourth quarter.
Based upon its current plan to proceed with the Mall Buildout, the Company is
attempting to obtain commitments from additional advertisers for participation
in mall expansion.
For a more detailed description of the Company's business, see the
Company's Annual Report on Form 10-KSB for the year ended December 31, 1996,
attached as Exhibit A hereto.
The Company is a Delaware corporation with its principal executive
offices located at 220 East 42nd Street, 16th Floor, New York, New York 10018,
and its telephone number is 212-983-4500.
PURPOSES AND EFFECTS OF THE EXCHANGE OFFER
In October 1995, the Company completed an initial public offering (the
"IPO") of 3,220,000 Units. Each Unit consists of one share of Series A Common
Stock, One Class A Warrant and one Class B Warrant. In connection with the IPO,
the Company issued 1,125,000 Class A Warrants in exchange for certain warrants
(the "Bridge Warrants") issued to purchasers of notes in a private financing
which closed in February 1995 and the Company issued 319,063 warrants in
exchange for certain warrants issued in September, 1995, identical to the Bridge
Warrants issued to officers and directors for loans advanced and for certain
loans to the Company and to a consultant for services rendered to the Company.
In November 1996, the Company issued an additional 2,857,189 Units in a
private placement (the "Private Placement"). Pursuant to the anti-dilution
provisions set forth in the Class A and Class B Warrants, the issuance of Units
in the Private Placement required the Company (i) to issue an additional
1,275,545 Class A Warrants and 1,020,258 Class B Warrants, (ii) to adjust the
exercise price of each Class A Warrant from $6.00 to $5.13, and (iii) to adjust
the exercise price of each Class B Warrant from $8.00 to $6.85.
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In connection with the IPO and the Private Placement, the Company
issued to D. H. Blair Investment Banking Corp. and its affiliates an option to
purchase 1,279,000 Units ("Unit Purchase Options") of which 280,000 Unit
Purchase Options have an exercise price of $6.50 and 999,000 have an exercise
price of $3.15.
In December 1996, the Company issued to Furman Selz LLC ("Furman Selz")
warrants to purchase 401,321 shares of Series A Common Stock (the "Consultant
Warrants") at an exercise price of $2.00 per share pursuant to the terms of a
financial advisory agreement. By agreement between the Company and Furman Selz,
the Consultant Warrants will be forgiven and cancelled upon the successful
closing of the Exchange Offer.
The issuance of Warrants, the Unit Purchase Options and the Consultant
Warrants has made it difficult for the Company to obtain additional financing or
to enter into strategic alliances due to the dilutive effect these securities
could have on future investment in the Company. Therefore, the Company has
decided to offer to exchange shares of its Series A Common Stock for the
Warrants pursuant to the terms of the Exchange Offer set forth in this Offer to
Exchange. The completion of the Exchange Offer will substantially decrease the
potential dilutive effect of the Warrants upon the Company's capital structure
as an impediment to possible future investment. Upon completion of the Exchange
Offer, the Company intends to seek additional financing or strategic alliances
to foster continued growth and expansion of the Company. There is no assurance
that the Exchange Offer will be completed or, if completed, that the Company
will be able to obtain new financing or enter into strategic alliances. If the
Company is unable to complete the Exchange Offer, obtain new financing or enter
into one or more strategic alliances, the Company will be required to cease
operations.
The Company will retire any Warrants accepted for exchange and has no
present plans to reissue such securities.
The following is a description of the relative rights of the holders of
Warrants who tender and those who do not tender after completion of the Exchange
Offer. It does not purport to be complete and is qualified in its entirety by
the more detailed information appearing below under "Description of Securities."
<TABLE>
<CAPTION>
HOLDERS TENDERING HOLDERS NOT TENDERING
------------------------------ ------------------------------
<S> <C> <C>
Class A Warrants.............. 0.6 shares of Series A Entitles holder to receive
Common Stock. one share of Series A Common
Stock and one
Class B Warrant
upon exercise.
Exercise Price........... Not applicable (will have Warrants exercisable at
received 0.6 shares of Series $5.13 per share.
A Common Stock).
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Dividends................ Dividends payable when, No dividends payable on
as and if declared by the Warrants.
Company's Board of Directors.
Redemption............... Series A Common Stock is not Subject to redemption by the
redeemable. Company for $.05 per Warrant,
upon 30 days' written notice,
if the average closing bid
price of Series A Common Stock
exceeds $9.00 per share for 30
consecutive business days
ending within five days of the
notice of redemption.
Anti-Dilution .......... Waiver of all anti-dilution Entitles holders to benefit
provisions of the Warrants from certain anti-dilution
and the underlying shares of provisions if the Exchange
Series A Common Stock. See Offer is deemed a triggering
"Consent to Waiver of Anti- event thereof and future anti-
Dilution Provisions of the dilution rights if the
Warrants with respect to the Company's securities are
Exchange Offer." sold at a discount to market.
See "Description of
Securities - Redeemable
Warrants."
Class B Warrants.............. 0.4 shares of Series A Entitles holder to receive
Common Stock. one share of Series A Common
Stock upon exercise.
Exercise Price........... Not applicable (will have Warrants exercisable at
received 0.4 shares of Series at $6.85 per share.
A Common Stock).
Dividends................ Dividends payable only when, No dividends payable on
as and if declared by the Warrants.
Company's Board of Directors.
Redemption............... Series A Common Stock is not Subject to redemption by the
redeemable. Company for $.05 per Warrant,
upon 30 days' written notice,
if the average closing bid
price of Series A Common Stock
exceeds $12.00 per share for 30
consecutive business days
ending within five days of the
notice of redemption.
Anti-Dilution .......... Waiver of all anti-dilution Entitles holders to benefit
provisions of the Warrants from certain anti-dilution
and the underlying shares of provisions if the Exchange
Series A Common Stock. See Offer is deemed a triggering
"Consent to Waiver of Anti- event thereof and future
Dilution Provisions of the anti-dilution rights if the
Warrants with respect to the Company's securities are
Exchange Offer." sold at a discount to market.
See "Description of
Securities - Redeemable
Warrants."
</TABLE>
11
<PAGE>
The Units, Series A Common Stock and the Warrants are traded on the
Nasdaq SmallCap Market.
THE EXCHANGE OFFER
Exchange Ratio 0.6 shares of Series A Common Stock for each
Class A Warrant, and 0.4 shares of Series A Common
Stock for each Class B Warrant.
Expiration Date 5:00 p.m., New York City time, on
September 26, 1997, unless extended.
Minimum Amount to be The Company is not required to accept any Warrants
Tendered for exchange in the Exchange Offer unless an
aggregate of 6,157,758 Class A Warrants (equal to
70% of the Class A Warrants issued and
outstanding) and 4,968,213 Class B Warrants (equal
to 70% of the Class B Warrants issued and
outstanding) are tendered and not withdrawn.
Additionally, the Company will only accept those
tenders of holders exchanging all Warrants
currently held by such holders.
Acceptance of All Warrants Subject to the conditions of the Exchange Offer,
the Company intends to accept all Warrants duly
tendered and not withdrawn. If all Warrants are
duly tendered and accepted for exchange, a total
of 8,117,057 shares of Series A Common Stock
representing 115% of the issued and outstanding
shares of Series A Common Stock will be issued
pursuant to the Exchange Offer.
Withdrawal Rights Tenders of Warrants pursuant to the Exchange Offer
may be withdrawn (1) at any time prior to the
Expiration Date or (2) after the Expiration Date,
if they have not yet been accepted by the Company.
See "The Exchange Offer -- Withdrawal Rights" and
"Acceptance of Warrants for Exchange."
How to Tender A holder of Warrants wishing to accept the
Exchange Offer must complete the accompanying
Letter of Transmittal and forward it with the
12
<PAGE>
Warrants and any other required documents to the
Exchange Agent. Letters of Transmittal and
Warrants should not be sent to the Company. See
"The Exchange Offer -- Procedure for Exchange."
Acceptance of Tenders and Subject to satisfaction of the terms and
Issuance of Series A Common conditions of the Exchange Offer, the Company
Stock will deliver shares of Series A Common Stock in
exchange for Warrants accepted for exchange as
soon as practicable after the Expiration Date. See
"The Exchange Offer -- Acceptance of Warrants for
Exchange."
Conditions of the Exchange The Exchange Offer is subject to a number of
Offer conditions. See "The Exchange Offer -- Conditions
of the Exchange Offer." In particular, the
Exchange Offer may be withdrawn by the Company if
less than 6,157,758 Class A Warrants and 4,968,213
Class B Warrants are properly tendered and not
withdrawn pursuant to the Exchange Offer.
Certain Income Tax Tendering Warrants pursuant to the Exchange Offer
Consequences is a taxable event. For further discussion of
certain federal income tax consequences, see
"Certain Federal Income Tax Consequences."
Consent to Waiver of Anti- By accepting this Offer to Exchange, holders of
Dilution Provisions of the Warrants consent to the waiver of the anti-
Warrants with Respect to dilution provisions in the Warrants that might be
the Exchange Offer triggered as a result of the Exchange Offer. See
"Consent to Waiver of Anti-Dilution Provisions of
the Warrants with Respect to the Exchange Offer."
Risk Factors Recipients of the Exchange Offer should consider
carefully the information set forth under the
caption "Risk Factors," and all
13
<PAGE>
other information set forth in this Offer to
Exchange.
Listing and Trading of The Company's Units, Series A Common Stock, Class
Securities A Warrants and Class B Warrants are traded on the
Nasdaq SmallCap Market under the symbols FCENU,
FCENA, FCENW, and FCENZ, respectively. However,
the Series B Common Stock, $.01 par value per
share, of the Company is not listed.
Transferability of Series A The Company has registered the resale of shares of
Common Stock Series A Common Stock underlying all Warrants
other than the Private Placement Warrants and
Warrants held by "affiliates." Upon consummation
of the Exchange Offer, the resale of shares issued
to holders of Warrants upon exercise in the
Exchange Offer, other than the Private Placement
Warrants and Warrants held by "affiliates," is not
restricted under Federal Securities Law. See
"Transferability of Series A Common Stock."
Resale of Restricted Shares Holders of Private Placement Warrants who tender
pursuant to the Exchange Offer must hold the
shares of Series A Common Stock issued in exchange
therefore until November 14, 1997, and,
thereafter, may sell these shares only in
accordance with the provisions of Rule 144. See
"Resale of Restricted Shares."
Market Price for Company's On August 22, 1997, the last reported sale price
Securities of the Units, the Series A Common Stock, the Class
A Warrants and the Class B Warrants as reported on
the Nasdaq Small Cap Market, was $0.781 per Unit,
$0.266 per share, $0.125 per Class A Warrant and
$0.125 per Class B Warrant.
14
<PAGE>
Warrants Outstanding As of June 30, 1997 there were 8,796,797 Class A
Warrants and 7,097,447 Class B Warrants issued and
outstanding.
Series A Common Stock
Outstanding As of June 30, 1997 there were 7,055,396 shares of
Series A Common Stock outstanding and 1,091,168
shares of Series B Common Stock outstanding.
Exchange Agent American Stock Transfer & Trust Company.
RISK FACTORS
In addition to the other information in this Offer to Exchange, the
following information should be carefully considered by holders of the Warrants
in evaluating the Exchange Offer. Investment in the Company's securities is
highly speculative and involves a high degree of risk. The Common Stock included
in the Exchange Offer involves different risks than those risks associated with
the Warrants. Holders of the Warrants should consider carefully, among other
things, the differences between the Series A Common Stock and the Warrants
before making any decision to exchange their Warrants for shares of Series A
Common Stock.
Unproven Commercial Viability; Need for Market Acceptance. The
commercial viability of the Cafe USA concept will be determined in large part by
the acceptance of Cafe USA by advertisers and mall operators. The Company is
currently broadcasting Cafe USA in only 20 Food Courts. Without further
acceptance by the marketplace, the Company may be forced to cease operations.
The Company has no current paid advertisers. The Company currently has five paid
advertisers scheduled for the fourth quarter of 1997. While the Company has
conducted limited testing of its Cafe USA concept and has operated in 20 Food
Courts, there is no assurance that the test results indicating the acceptance of
Cafe USA by consumers or the acceptance in 20 malls are indicative of widespread
acceptance in the marketplace or that, if accepted, it will ever result in the
Company achieving profitable operations.
Capital Intensive Nature of Business; Need for, and No
Assurance of, Strategic Alliances and Additional Financing to Develop Cafe USA.
The Company has received only minimal revenues from operations and has relied on
the proceeds of equity financings to fund its operations. Management of the
Company is pursuing strategic alliances because existing advertising revenues
and financing that may be available from external sources will not provide the
Company with sufficient capital to complete the Company's business plan.
However, there can be no assurance that the Company will be able to complete any
strategic alliances. If the Company is unable to either complete one or more
15
<PAGE>
strategic alliances or obtain substantial additional financing on acceptable
terms, the Company will be unable to complete the expansion of Cafe USA and
will be forced to cease business.
Development Stage Company; Significant Losses. The Company is
a development stage company that has engaged primarily in the development of the
Cafe USA network. The Company has realized only minimal revenues to date, has
incurred substantial losses since its inception. Accordingly, the Company, as of
June 30, 1997, had an accumulated deficit of approximately $19,554,000. The
Company has continued to incur substantial losses since such date. Furthermore,
for the foreseeable future, the Company expects losses to continue and will be
entirely dependent on public or private financing or a strategic alliance.
Requirement for Capital Equipment; Potential Negative Effect
on Statement of Operations. The Company's business is capital intensive,
requiring substantial outlays for the purchase and installation of broadcasting
equipment. The cost of "outfitting" each mall with equipment necessary to
transmit and receive Cafe USA currently costs approximately $80,000, consisting
of approximately $40,000 in equipment costs and $40,000 in installation costs.
Because of the Company's limited cash resources, the Company has been seeking
additional financing for all or a portion of these costs. To date, the Company
has been unsuccessful in securing such financing and there is no assurance that
this financing can be obtained on favorable terms, if at all. Regardless of
whether financing is obtained, the Company's future operations will be charged
for the depreciation of the equipment, including the installation costs. If the
Company has to remove equipment before expiration of its expected life, a loss
would have to be recognized equal to the undepreciated installation costs.
Possible Need for Additional Statistical Data. To provide the
necessary data for the sale of advertising, the Company will need on-going
market research to develop reliable statistical data. The Company retained A.C.
Nielsen to conduct the 1995 Nielsen Survey. The Company had previously conducted
a much smaller A.C. Nielsen survey during a week-long demonstration of its
programming and advertising in May, 1994 in Haywood Mall in Greenville, South
Carolina and a more preliminary Audits and Surveys research study in October,
1992. The 1995 Nielsen Survey was still limited in scope (only four malls) and
may not provide sufficient data required for the sale of advertising.
Accordingly, the Company will require substantial additional data in order to
validate rates to advertisers. Pricing for advertising is based substantially on
the number of visitors exposed to Cafe USA programming and advertising and the
impact of the advertising upon those exposed. There is no assurance that all of
the necessary data will be obtained, or if obtained, will be favorable or be
accepted by advertisers.
16
<PAGE>
New Enterprise. The Company was formed in February, 1992 and
its success depends upon several factors, including the quality of its
programming and management of the technical aspects of its operations. Investors
should be aware of the difficulties normally encountered by a new enterprise and
the high rate of failure of such enterprises. There is no history upon which to
base any assumption as to the likelihood that the Company will prove successful.
The likelihood of success must be considered in light of the problems, expenses,
difficulties, complications and delays encountered in connection with the
development of a business in the area in which the Company operates and in
connection with the formation and commencement of operations of a new business
in general. The Company is unable to predict how long it will be before it
begins to generate additional revenues or how long its losses will continue.
Dependence Upon Others. The success of the Company's
operations will depend upon numerous factors, many of which are beyond the
Company's control, including (i) the ability of the Company to obtain additional
financing; (ii) the ability of the Company to enter into strategic alliances
through a combination of one or more joint venture, merger or acquisition
transactions; (iii) the ability of the Company to obtain contracts with
advertisers that will produce revenues; (iv) the availability of resources to
produce or purchase programming; (v) the availability of operating resources to
satisfactorily install, maintain and service the video and audio system; and
(vi) the ability to enter into contracts with malls for additional
installations. These and other factors will require the use of outside suppliers
as well as the talents and efforts of Company management and employees. There
can be no assurance of success with any or all of these factors on which the
Company's operations will depend.
Lack of Programming and Production Experience. Because of the
absence of any operating history, there can be no assurance that the Cafe USA
programming and advertising will be viewed favorably by consumers or that
advertisers will be attracted to either the concept of this medium or the
specific programming developed by the Company. Further, the Company has
broadcast for only approximately 21 months in a limited number of Food Courts
and there can be no assurances that the technology associated with the
broadcasting will prove to be manageable.
Reliance on ABC New Media Sales ("ABC") for Advertising
Revenue. In January, 1997, the Company entered into a six-year exclusive
advertising sales representative agreement with ABC. The agreement provides that
ABC will be the exclusive advertising representative for Food Court and will use
the ABC sales force to seek advertisers for the Company's programming. The
Company believes that the addition of the ABC sales force will, in the long
term, have a major impact on obtaining a significant volume of advertising sales
for the Cafe USA network. The Company has no paid advertisers for the third
quarter of 1997 and has only five advertisers for the fourth quarter. ABC has
17
<PAGE>
the right to terminate the ABC Agreement upon 90 days written notice for a
period of 30 days after the end of the second contract year and each contract
year thereafter. The Company has the right to terminate the ABC Agreement upon
30 days written notice, after the second and fourth contract years, if certain
minimum advertising sales benchmarks have not been met.
Dependence Upon Mall Operators. The ability of the Company to
establish the Cafe USA network is dependent upon the Company entering into
agreements with mall operators for the installation of Cafe USA in mall Food
Courts. While agreements have been entered into with several mall operators,
there is no assurance that a sufficient number of mall operators will accept
Cafe USA in Food Courts or continue to accept it once it is installed.
Reliance on Senior Management and Key Employees. The Company
is substantially dependent on the efforts of five members of senior management.
The Company has entered into employment agreements with its Chairman, Robert H.
Lenz, and its President and Chief Executive Officer, James N. Perkins, with
terms ending September 30, 1999. The Company has also entered into employment
agreements with Scott Phillips, its Executive Vice President of Operations, Ed
Padin, its Senior Vice President of Mall Marketing, and Mark Chalom, its Vice
President of Production and Programming, each expiring on December 31, 1999,
March 31, 2000 and January 31, 1998, respectively. The loss of services of any
of the foregoing individuals could have a material adverse effect on the
Company's prospects. The Company maintains key-person life insurance coverage in
the face amount of $2,000,000 for each of Messrs. Lenz and Perkins naming the
Company as beneficiary. Management of the Company believes that the future
success of Cafe USA will depend on the Company's ability to attract additional
key personnel in sales, marketing, technical support, finance, programming and
mall relations. However, there can be no assurances that the Company will be
successful in attracting or retaining additional personnel necessary to conduct
its business.
Competition. While the Company is operating in a new industry,
it is aware of other companies that have unsuccessfully attempted to utilize the
shopping mall for point of sale broadcast or video advertising. Entities that
enter the Food Court video advertising business in the future may have
substantially greater marketing, financial and human resources than the Company
and may provide significant long term competition. Because Cafe USA is a
broadcasting medium, the Company also will be competing for advertising revenue
with other established media. Furthermore, the Company does not possess any
patented or copyrighted trade secrets or intellectual property to provide
barriers to competition.
18
<PAGE>
Exchange Offer is a Taxable Transaction. The exchange of
Warrants for shares of Series A Common Stock pursuant to the Exchange Offer is a
taxable transaction. The amount of any gain or loss recognized by a holder of
the Warrants will depend on the value of the shares of Series A Common Stock
received and the basis of the holder in the Warrants exchanged. See "Certain
Federal Income Tax Consequences."
Influence by Management and Other Stockholders; Possible
Depressive Effect on the Company's Securities. One of the Company's current
directors (who is also an officer) and five other stockholders own collectively
100% of the issued and outstanding Series B Common Stock. All current officers
and directors, together with such five other stockholders of Series B Common
Stock, beneficially own, prior to the exchange, in the aggregate, approximately
19.32% of the total outstanding capital stock of the Company and have
approximately 41.8% of the total voting power thereof. Subsequent to the closing
of the Exchange Offer and assuming a 70% exchange, one of the current directors
(who is also an officer) and five other stockholders of Series B Common Stock
will have approximately 25.39% of the total voting power. As a result, such
individuals may still be able to influence the election of all of the Company's
directors and otherwise influence the Company's operations. Furthermore, the
disproportionate vote afforded the Series B Common Stock could also impede or
prevent a change of control of the Company. As a result, potential acquirors may
be discouraged from seeking to acquire control of the Company through the
purchase of Series A Common Stock, which could have a depressive effect on the
price of the Company's securities. See "Description of Securities."
Possible Depressive Effect of Future Sales of Common Stock and
Exercise of Registration Rights. A substantial portion of the Series B Common
Stock and 573,125 shares of Series A Common Stock issued prior to the IPO are
now tradeable under Rule 144 subject to restrictions on sales by "affiliates."
Messrs. Lenz and Perkins have agreed not to sell any shares of the Company's
Common Stock they own for a 15-month period following February 27, 1997, without
the written consent of D.H. Blair Investment Banking Corp. ("Blair"), the
placement agent for the Private Placement. There are 636,115 shares of Series B
Common Stock in escrow that are owned by current and prior management. The
Company also has outstanding stock options and warrants to purchase
approximately 2,943,459 shares of Series A Common Stock at prices ranging from
$1.37 to $6.85 per share.
Shares of Series A Common Stock issuable upon exercise of the
Company's Class A and Class B Warrants, except for Private Placement Warrants,
may be resold without restriction. See "Resale of Restricted Shares."
Furthermore, 1,120,000 shares of Series A Common Stock underlying the unit
purchase options (the "Unit Purchase Options") are subject to restrictions on
transferability until October 11, 1998 and thereafter, are freely transferable
without restriction provided there is a current prospectus under the Act
19
<PAGE>
relating thereto and applicable state securities laws are complied with.
Although the Exchange Offer will significantly reduce potential future dilution,
the existence of the Unit Purchase Options issued in the Public Offering and
Private Placement of November 14, 1997, outstanding options and warrants, Class
A Warrants and Class B Warrants not exchanged in this Exchange Offer, and other
options that may be issued by the Company in the future may hinder future
financing by the Company. The exercise of these securities may further dilute
the interest of the persons holding Series A Common Stock. Further, the holders
of such options and warrants may exercise them at a time when the Company would
otherwise be able to obtain additional equity capital on terms more favorable to
the Company. No prediction can be made as to the effect, if any, that sale of
these securities or the availability of such securities for sale without
restriction will have on the market prices of the Company's securities.
Nevertheless, the possibility that a significant amount of securities may be
sold in the public market may adversely affect market prices for the Company's
securities and could impair the Company's ability to raise capital through the
sale of its securities.
Effect of Outstanding Options and Warrants. The Company
currently has outstanding a substantial number of Class A Warrants, Class B
Warrants and other options to purchase shares of Series A Common Stock. The
holders thereof are given an opportunity to profit from a rise in the market
price of the Series A Common Stock with a resulting dilution in the interest of
the other stockholders. Further, the terms on which the Company may obtain
additional financing during that period may be adversely affected by the
existence of such options and warrants. The holders of such options and warrants
may exercise them at a time when the Company might be able to obtain additional
capital through a new offering of securities on terms more favorable than those
provided by such securities.
Charge to Income in the Event of Release of Escrow Shares. If
the Company attains certain earnings thresholds or the Company is sold in excess
of a certain per share price, the Company will be required to recognize
additional compensation expense in connection with the release from escrow to
certain stockholders of the Company of 636,115 shares of Series B Common Stock
(the "Escrow Shares"). Accordingly, in the event of the release of the Escrow
Shares, the Company will recognize during the period in which the earnings
thresholds are met or such per share sale price is obtained, what could be a
substantial charge that would have the effect of substantially increasing the
Company's loss or reducing or eliminating earnings, if any, at such time. Such
charge will not be deductible for income tax purposes. Although the amount of
compensation expense recognized by the Company will not affect the Company's
total stockholders' equity or cash flow, it may have a depressive effect on the
market price of the Company's securities.
20
<PAGE>
Authorization of Preferred Stock. The Company's Certificate of
Incorporation authorizes the issuance of up to 5,000,000 shares of preferred
stock, par value $.01 per share, with such designation, rights and preferences
as may be determined from time to time by the Board of Directors. Accordingly,
the Board of Directors is empowered, without stockholder approval, to issue
preferred stock with dividend, liquidation, conversion, voting or other rights
that could adversely affect the voting power or other rights of the holders of
the Series A and Series B Common Stock. In the event of issuance, preferred
stock could be utilized, under certain circumstances, as a method of
discouraging, delaying or preventing a change in control of the Company. There
can be no assurance that the Company will not issue shares of preferred stock in
the future.
No Dividends Anticipated. The Company has never paid any cash
dividends on its Series A or Series B Common Stock and does not anticipate the
payment of cash dividends in the foreseeable future.
PURPOSES AND EFFECTS OF THE EXCHANGE OFFER
In October, 1995 the Company completed the IPO of Units. Each Unit
consists of one share of Series A Common Stock, one Class A Warrant and one
Class B Warrant. Upon exercise of the Class A Warrant, the warrantholder is
entitled to one share of Series A Common Stock and one Class B Warrant. Upon
exercise of the Class B Warrant, the warrantholder is entitled to one share of
Series A Common Stock. On November 14, 1996 the Company completed the Private
Placement of Units identical to the Units sold in the IPO. In addition, prior to
the IPO, the Company completed a private sale of notes with attached warrants
which warrants converted to Class A Warrants upon the closing of the IPO.
The capital structure of the Company, as of June 30, 1997, following
the IPO, the Private Placement and the private offering includes 7,055,396
shares of Series A Common Stock, 1,091,168 shares of Series B Common Stock,
8,796,797 Class A Warrants and 7,097,447 Class B Warrants plus approximately
2,943,459 other options and warrants including Unit Purchase Options, employee
and directors options, and Consultants Options and warrants. Because each Class
A Warrant upon exercise entitles the Warrantholder to an additional Class B
Warrant in addition to one share of Series A Common Stock, there are an
additional 8,796,797 Class B Warrants that the Company may be obligated to
issue. Accordingly, the total number of Class A and Class B Warrants granted by
the Company (including the Class B Warrants to be issued upon exercise of the
Class A Warrants) is 24,691,041.
The Company requires substantial funds in order to implement and carry
out its business strategy and to capitalize future growth. The Company has been
actively seeking funding through traditional sources of capital as well as
21
<PAGE>
through strategic alliances such as joint ventures or mergers and acquisitions
with other entities that have significant financial or other resources. To date,
the Company has been unable to obtain necessary additional financing.
Management believes that one significant impediment to obtaining
financing is the substantial number of Warrants the Company has issued. These
Warrants represent substantial dilution to any potential investor or strategic
partner. Management began to review methods of restructuring the Company to
provide a fair value to its shareholders and warrantholders while attracting
potential investors and strategic partners to invest in the Company without
concern of substantial dilution from existing Warrants. As a result of this
evaluation, the Company has decided to offer to exchange shares of its Series A
Common Stock for the Warrants pursuant to the terms of the Exchange Offer as set
forth in this Offer to Exchange. The successful completion of the Exchange Offer
will substantially decrease the dilutive effect of the Warrants upon the
Company. Management believes that the resulting capital structure, without the
substantial dilution from the Class A and Class B Warrants, will provide the
Company with opportunities for future financing. Upon completion of the Exchange
Offer, the Company intends to seek additional financing or strategic alliances
to foster continued growth and expansion of the Company. There is no assurance,
however, that the Exchange Offer will be successfully completed or, if
successfully completed, that the Company will be able to obtain new financing or
enter into strategic alliances. If the Company is unable to complete the
Exchange Offer, obtain new financing or enter into one or more strategic
alliances, the Company will be required to cease operations.
The Board has not sought a fairness opinion with respect to the
fairness of the Offer to Exchange to the shareholders or the holders of
Warrants. The exercise price of the Warrants materially exceeds the market price
of the Series A Common Stock; therefore, management of the Company did not
believe a fairness opinion was necessary or the expense of a fairness opinion
was justified.
The Company will retire any Warrants accepted for exchange and has no
present plans to reissue such securities.
22
<PAGE>
SELECTED FINANCIAL AND PRO FORMA INFORMATION
The following table shows the pro forma effects the Exchange Offer
would have had on the Company's balance sheet as of June 30, 1997 if the
specified percentages of the Warrants had been exchanged as of such date:
PRO FORMA INFORMATION
<TABLE>
<CAPTION>
70% EXCHANGE 100% EXCHANGE
---------------------------- ------------------------------
HISTORICAL ADJUSTMENTS PRO FORMA ADJUSTMENTS PRO FORMA
------------ ----------- ------------ ----------- -------------
<S> <C> <C> <C> <C> <C>
Total Assets $5,196,676 $5,196,676 $5,196,676
========== ========== ==========
Total Liabilities $762,437 $762,437 $762,437
Preferred stock - 5,000,000 shares
authorized, none issued
Series A common stock-$.01 par value
200,000,000 shares authorized;
issued and outstanding, historical,
7,055,396; 70%, 12,737,336;
100%, 15,172,453 70,553 56,819 127,372 81,171 151,724
Series B common stock-$.01 par value
1,250,000 shares authorized,
1,091,168 issued 10,912 10,912 10,912
Additional paid-in capital 23,906,996 (56,819) 23,850,177 (81,171) 23,825,825
Deficit accumulated in the
development stage (19,554,121) (19,554,121) (19,554,121)
------------ ------------ ------------
Total 4,434,340 4,434,340 4,434,340
Treasury Stock (101) (101) (101)
------------ ------------ ------------
Total stockholders' equity 4,434,239 4,434,239 4,434,239
----------- ----------- -----------
Total $5,196,676 $5,196,676 $5,196,676
========== ========== ==========
</TABLE>
For purposes of the pro forma presentation, no adjustment has been
reflected for the difference, if any, between the fair values of the Warrants
and the stock anticipated to be exchanged. Therefore, any resulting difference
would be recorded as a dividend deemed for the benefit of the existing
shareholders.
The following table shows the pro forma effects the Exchange Offer
would have had on the Company's results of operations for the year ended
December 31, 1996 and for the six months ended June 30, 1997 if the specified
percentages of the Warrants had been exchanged on the first day of each period:
23
<PAGE>
<TABLE>
<CAPTION>
70% EXCHANGE 100% EXCHANGE
---------------------------- ------------------------------
PRO FORMA PRO FORMA
HISTORICAL ADJUSTMENTS RESULTS ADJUSTMENTS RESULTS
------------ ----------- ------------ ----------- -------------
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1996:
Net (loss) ($6,270,432) --------- ($6,270,432) --------- ($6,270,432)
Net (loss) per share ($1.32) --------- ($0.60) --------- ($0.49)
Weighted Average Number of common
shares used in computation 4,738,565 5,681,940 10,420,505 8,117,057 12,855,822
Six months ended June 30, 1997:
Net (loss) (3,863,349) --------- (3,863,349) --------- (3,863,349)
Net (loss) per share ($0.56) --------- ($0.31) --------- ($0.26)
Weighted Average Number of common
shares used in computation 6,933,557 5,681,940 12,615,497 8,117,057 15,050,614
</TABLE>
24
<PAGE>
CAPITALIZATION AND BOOK VALUE PER SHARE
The following table sets forth the capitalization and the book value
per common share (includes both Series A and Series B) of the Company at June
30, 1997 and as adjusted to give effect to the Exchange Offer (assuming 70% and
100% of the Warrants, respectively, are exchanged):
<TABLE>
<CAPTION>
JUNE 30, 1997
---------------------------------------------
AS
ADJUSTED,
70% AS ADJUSTED,
HISTORICAL EXCHANGE 100% EXCHANGE
----------- ----------- -------------
<S> <C> <C> <C>
Stockholders' equity:
Series A Common Stock, $.01 par value,
200,000,000 shares authorized;
historical, issued and outstanding,
7,055,396 (1)(2); upon 70% exchange,
issued and outstanding 12,737,336(3);
upon 100% exchange, issued and
outstanding 15,172,453(4)............. $ 70,553 $ 127,372 $ 151,724
Series B Common Stock, par value $.01 per
share, 1,250,000 shares authorized, and
1,091,168 shares issued (1)(5)........ 10,912 10,912 10,912
Additional paid in capital.............. 23,906,996 23,850,177 23,825,825
Deficit accumulated in the development
stage................................. (19,554,121) (19,554,121) (19,554,121)
------------ ------------ ------------
Total............................... 4,434,340 4,434,340 4,434,340
Treasury Stock........................... (101) (101) (101)
------------ ------------ ------------
Total Stockholders' Equity.......... 4,434,239 4,434,239 4,434,239
=========== =========== ===========
Book value per share(6)............................ $.54 $.32 $.27
==== ==== ====
</TABLE>
(1) The Series A Common Stock and Series B Common Stock are identical, except
that such share of Series A Common Stock is entitled to one vote and each
share of Series B Common Stock is entitled to five votes. See "Description
of Securities -- Common Stock."
(2) Excludes up to 27,634,500 shares of Series A Common Stock issuable
upon exercise of stock options and warrants outstanding as of the date of
this Offer to Exchange, including the Class A Warrants and Class B
Warrants and 5,116,000 shares of Series A Common Stock issuable upon the
exercise of 1,279,000 Unit Purchase Options and Class A Warrants and Class
B Warrants exerciseable thereunder.
(3) Assumes 70% of Class A Warrants and Class B Warrants are exchanged for
Series A Common Stock; excludes up to 10,350,771 shares of Series A Common
Stock issuable upon exercise of stock options and warrants outstanding as
of the date of this Offer to Exchange including 30% of the Class A Warrants
and Class B Warrants and 5,116,000 shares of Series A Common Stock
issuable upon the exercise of 1,279,000 Unit Purchase Options and Class
A Warrants and Class B Warrants exerciseable thereunder.
(4) Assumes 100% of the Class A Warrants and Class B Warrants are exchanged for
Series A Common Stock; excludes up to 2,943,459 shares of Series A Common
Stock issuable upon exercise of stock options and warrants outstanding as
of the date of this Offer to Exchange and 5,116,000 shares of Series A
Common Stock issuable upon the exercise of 1,279,000 Unit Purchase Options
and Class A Warrants and Class B Warrants exerciseable thereunder.
25
<PAGE>
(5) Excludes 636,115 Escrow Shares of Series B Common Stock that have been
placed in escrow by certain stockholders of the Company, which Escrow
Shares are subject to cancellation if the Company does not attain certain
earnings levels or the sale price of the Company's Series A Common Stock in
a private sale does not achieve a certain target, during the period ending
December 31, 1998 and 10,000 additional shares of Series B Common Stock
held in treasury. See "Risk Factors -- Charge to Income in the Event of
Release of Escrow Shares" and "Principal Stockholders -- Escrow Shares."
(6) The historical book value per share at December 31, 1996 was $1.01.
PRICE RANGE OF COMPANY'S SECURITIES
The Company's Units, Series A Common Stock, Class A Warrants and Class
B Warrants are traded on the Nasdaq SmallCap Market under the symbols FCENU,
FCENA, FCENW and FCENZ, respectively. The following table sets forth the high
and low closing sales price of the Units, the Series A Common Stock, the Class A
Warrants and the Class B Warrants for the periods indicated, as reported by
Nasdaq:
<TABLE>
<CAPTION>
QUARTER ENDED Series A Class A Class B
- --------------------------- Units Common Stock Warrants Warrants
High Low High Low High Low High Low
---- --- ---- --- ---- --- ---- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1995:
December 31(1)............. $6-5/8 $5 $5 $2-7/8 $1-7/8 $1-5/8 $(2) $(2)
1996:
March 31................... 6-3/4 5 4-1/2 2-3/4 1-7/8 1-1/8 1/2 1/2
June 30.................... 9 5-1/8 5-3/4 3 2-27/64 1-1/4 1-5/8 1-1/2
September 30............... 9-1/2 5-1/4 5-3/4 2-1/2 2-1/2 1 2 1-1/8
December 31................ 6-9/16 3 3-5/8 2 1-7/8 7/8 1-3/4 3/4
1997:
March 31................... 6-7/8 2-1/4 4-3/16 1-1/8 1-3/4 1/2 1-3/8 5/8
June 30.................... 4-5/8 2 1-3/4 7/8 1 15/32 1-1/4 3/8
September 30 (to August 18,
1997).................... 2-3/32 3/4 1-5/16 1/4 19/32 1/8 3/8 1/8
</TABLE>
(1) Trading with respect to all securities did not commence until October 11,
1995.
(2) Did not trade.
DIVIDEND POLICY
The Company has not paid any dividends on its Series A Common Stock.
The Company has had no earnings to date and does not anticipate substantial
earnings in the near future. Therefore, the Company does not anticipate paying
dividends on the Series A Common Stock or the Series B Common Stock in the
foreseeable future.
26
<PAGE>
THE EXCHANGE OFFER
TERMS OF THE EXCHANGE OFFER
The Company hereby offers, upon the terms and subject to the conditions
set forth in this Offer to Exchange and in the accompanying Letter of
Transmittal, to exchange (i) 0.6 shares of its Series A Common Stock for each
Class A Warrant issued and outstanding, and (ii) 0.4 shares of its Series A
Common Stock for each Class B Warrant issued and outstanding, that is validly
deposited and tendered and not withdrawn prior to the Expiration Date. Holders
of Warrants who accept the Exchange Offer must tender all Warrants held by such
holders.
The Exchange Offer is subject to a number of conditions. See "The
Exchange Offer -- Conditions of the Exchange Offer." There are 8,796,797 Class A
Warrants and 7,097,447 Class B Warrants outstanding. The Exchange Offer is being
made for any and all Warrants and is subject to, among other things, a minimum
of 6,157,758 Class A Warrants (70% of the Class A Warrants issued and
outstanding) and 4,968,213 Class B Warrants (70% of the Class B Warrants issued
and outstanding) being tendered and not withdrawn. The Company reserves the
right to terminate or amend the Exchange Offer at any time on or prior to the
Expiration Date upon the occurrence of certain conditions discussed below. In
addition, the Company reserves the right to waive the condition that a holder of
Warrants who tenders pursuant to the Exchange Offer must tender all Warrants
held by the holder.
The Exchange Offer expires at 5:00 p.m., New York City time, on
September 26, 1997 unless the Company, in its sole discretion, extends the
period of time that the Exchange Offer is open, in which event the "Expiration
Date" shall mean the latest time and date to which the Exchange Offer is
extended. Only Warrants validly deposited and tendered prior to the Expiration
Date will be eligible for exchange. See "The Exchange Offer -- Extension of
Exchange Offer Period; Termination; Amendments."
ACCEPTANCE NOT MANDATORY
Each holder of the Warrants is free to exchange or not exchange his
Warrants pursuant to the Exchange Offer, however any holder who accepts the
Exchange Offer must exchange all of his Warrants by properly completing and
delivering a Letter of Transmittal, together with the Warrants being exchanged,
and any other required documents to the Exchange Agent. Holders of the Warrants
who do not accept the Exchange Offer will continue to have all of the existing
rights and preferences of the Warrants. See "DESCRIPTION OF
SECURITIES-REDEEMABLE WARRANTS."
27
<PAGE>
PROCEDURE FOR EXCHANGE
Any holder of Warrants who accepts the Exchange Offer must:
(i) deliver all of his Warrants; and (ii) deliver a properly completed
and duly executed Letter of Transmittal with any required signature
guarantees and any other required documents to the Exchange Agent. A
guarantee of signature is not required if the Warrants deposited and
tendered pursuant hereto are deposited and tendered by a registered
holder of the Warrants who has not completed either the box entitled
"Special Issuance Instructions" or the box entitled "Special Mailing
Instructions" on the Letter of Transmittal or for the account of an
Eligible Institution. However, in all other instances, signatures on
Letters of Transmittal must be guaranteed by a firm that is a member of
a recognized Medallion Program approved by The Securities Transfer
Association, Inc. (an "Eligible Institution").
Such Warrants and other documents must be received by the Exchange
Agent, on or prior to the Expiration Date of the Exchange Offer at the address
specified below under "The Exchange Offer -- Exchange Agent." LETTERS OF
TRANSMITTAL AND THE WARRANTS SHOULD NOT BE SENT TO THE COMPANY.
If the Warrants are registered in the name of a person other than the
person who signed the Letter of Transmittal, the Warrants must be endorsed by,
or be accompanied by a written instrument or instruments of transfer or exchange
in form satisfactory to the Company duly executed, by the registered holder,
with signatures thereon guaranteed, as set forth above.
Delivery of Warrants may not be completed through Book Entry Transfer,
and must, in any case, be received by the Exchange Agent prior to the Expiration
Date or the holder must comply with the guaranteed delivery procedure described
below.
The Warrants will be accepted for exchange only if the holder exchanges
the entire amount of his Warrants.
Holders of the Warrants exchanging their Warrants are required under
federal income tax law to provide the Exchange Agent with a correct Taxpayer
Identification Number on Substitute Form W-9 which is included, together with
instructions, in the Letter of Transmittal. Failure to complete properly such
information may result in the rejection of such holder's deposit and tender.
Should such requirement be waived by the Company, failure to complete and return
the Substitute Form W-9 to the Exchange Agent may subject the holder to backup
withholding on dividends on the Series A Common Stock that might be payable in
the future.
The holder is free to choose the method of delivery of the
Warrants as well as the use of all other required documents at
28
<PAGE>
the risk of the holder. If the holder chooses delivery by mail, the following
methods along with proper insurance are suggested: registered mail with return
receipt requested, or overnight delivery service.
If a holder chooses to exchange his Warrants and such holder's Warrants
are not immediately available or time will not permit such holder's Letter of
Transmittal, Warrants and any other required documents to reach the Exchange
Agent before the Expiration Date of the Exchange Offer, such holder may accept
the Exchange Offer if:
(i) such tender is made through an Eligible
Institution; and
(ii) prior to the Expiration Date, the Exchange Agent
has received from such Eligible Institution a duly executed Notice of
Delivery setting forth the name and address of the holder of such
Warrants and the principal number and type of Warrants tendered and
stating that the tender is being made thereby and guaranteeing that,
within three Nasdaq trading days after the date of such Notice, the
Letter of Transmittal, together with the Warrants and any other
documents required by the Letter of Transmittal, will be deposited by
such Eligible Institution with the Exchange Agent; and
(iii) such Letter of Transmittal and Warrants, in
proper form for transfer, and other required documents are received by
the Exchange Agent within three Nasdaq trading days after the date of
such Notice.
The Notice of Guaranteed Delivery may be delivered by hand or
transmitted by telegram, facsimile transmission, telex or letter to the Exchange
Agent and must include a guarantee by an Eligible Institution in a form
acceptable to the Exchange Agent.
The acceptance by a holder of the Warrants of the Exchange Offer
pursuant to one of the procedures set forth above will constitute a binding
agreement between the holder and the Company in accordance with the terms and
subject to the conditions set forth herein and in the accompanying Letter of
Transmittal.
All questions as to the form of all documents and the validity
(including time of receipt) and acceptance of all tenders will be determined by
the Company, in its sole discretion, which determination shall be final and
binding. The Company reserves the absolute right to reject any and all tenders
not in proper form or the acceptance of which would, in the opinion of the
Company's counsel, be unlawful. The Company also reserves the absolute right to
waive any of the conditions of the Exchange Offer or any defect or irregularity
in the deposit and tender of Warrants. The Company's interpretation of the terms
and conditions of the Exchange Offer (including the Letter of
29
<PAGE>
Transmittal and the instructions thereto) will be final. No deposit and tender
of the Warrants will be deemed to have been properly made until all defects and
irregularities have been cured or waived. Neither the Company, the Exchange
Agent nor any other person shall be under any duty to give notification of any
defects or irregularities in tenders, and none of them shall incur any liability
for failure to give such notification.
WITHDRAWAL RIGHTS
Tenders of Warrants pursuant to the Exchange Offer may be withdrawn: at
any time (i) prior to the Expiration Date or (ii) after the Expiration Date,
unless the Company has already accepted such Warrants for exchange. Subject to
the Withdrawal Rights included herein, the Exchange Agent may retain all
Warrants tendered hereunder for (i) the time period of the Exchange Offer is
extended, (ii) the Company's acceptance of Warrants is delayed, or (iii) the
Company is unable to accept the Warrants tendered. See "The Exchange Offer
- --Withdrawal Rights." Such right to retain the Warrants is subject to Rule
13e-4(f)(5) which provides that the Company must either provide the
consideration offered or return the Warrants upon the termination of the
Exchange Offer or the Withdrawal of the Exchange Offer.
To be effective, a written, telegraphic, telex or facsimile
transmission notice of withdrawal must be received by the Exchange Agent on a
timely basis at its address specified under "The Exchange Offer -- Exchange
Agent" and must include the following information: (i) the name of the person
having tendered the Warrants to be withdrawn and the name(s) in which the
Warrants are registered, if different from that of the depositing and tendering
holder; and (ii) the number of Warrants to be withdrawn.
If the Warrants have been physically delivered to the Exchange Agent,
then prior to the release of such Warrants, the tendering holder must get a
written notice of withdrawal with the signature on such notice of withdrawal
guaranteed by an Eligible Institution. All questions as to validity, form and
eligibility (including time of receipt) of notices of withdrawal will be
determined by the Company, in its sole discretion, which determination shall be
final and binding. Withdrawals may not be rescinded, and any Warrants
effectively withdrawn will be deemed not to have been duly deposited and
tendered for purposes of the Exchange Offer. However, withdrawn Warrants may be
retendered by following one of the procedures described in "The Exchange Offer
- -- Procedure for Exchange" at any time prior to the Expiration Date.
Neither the Company, the Exchange Agent, nor any other person will be
under any duty to give notification of any defects or irregularities in any
notice of withdrawal or incur any liability for failure to give such
notification.
30
<PAGE>
ACCEPTANCE OF WARRANTS FOR EXCHANGE
Upon the terms and subject to the conditions of the Exchange Offer, the
acceptance for exchange of Warrants validly deposited and tendered and not
withdrawn will be made promptly after the Expiration Date. For purposes of the
Exchange Offer, the Company shall be deemed to have accepted for exchange
validly tendered Warrants when, as and if the Company has given oral or written
notice thereof to the Exchange Agent. The Exchange Agent will act as agent for
the tendering holders for the purposes of receiving Series A Common Stock from
the Company and transmitting such securities to such holders. If the Company
extends the time period of the Exchange Offer or is delayed in accepting tenders
of Warrants pursuant to the Exchange Offer, the Exchange Agent shall retain the
tendered Warrants subject to the Withdrawal Rights included herein. See "The
Exchange Offer -- Withdrawal Rights." Tendered Warrants not accepted for
exchange by the Company because of an invalid tender, the termination of the
Exchange Offer or failure to meet any other condition set forth below, will be
returned without expense to the tendering holders as promptly as practicable
following the expiration or termination of the Exchange Offer.
The Company will deliver shares of Series A Common Stock to the holders
of Warrants tendered pursuant to the Exchange Offer to the Exchange Agent, as
agent for the tendering holders, only after (i) receipt by the Exchange Agent of
such Warrants, (ii) a properly completed and duly executed Letter of Transmittal
(or facsimile thereof) and (iii) any other required documents.
CONDITIONS OF THE EXCHANGE OFFER
Regardless of the acceptance of tendered Warrants for exchange or the
exchange thereof, upon the occurrence of any of the following listed conditions
on or after August 25, 1997, the Company may (i) terminate or amend the
Exchange Offer, or (ii) postpone the Exchange Offer:
(i) less than 6,157,758 Class A Warrants (70% of the Class A
Warrants outstanding) and less than 4,968,213 Class B Warrants (70% of
the Class B Warrants outstanding) are properly tendered and not
withdrawn prior to the Expiration Date;
(ii) there shall have been threatened, instituted or pending
any action or proceeding by any government or governmental, regulatory
or administrative agency or authority or tribunal or any other person,
domestic or foreign, or before any court, authority, agency or tribunal
which (a) challenges the making of the Exchange Offer, the acquisition
of some or all of the Warrants pursuant to the Exchange Offer or
otherwise relates in any manner to the Exchange Offer; or (b) in the
Company's sole judgment, could materially affect the business,
condition (financial or other), income, operations or prospects of the
31
<PAGE>
Company and its subsidiaries, taken as a whole, or otherwise
materially impair in any way the contemplated future conduct of the
business of the Company or any of its subsidiaries or materially
impair the Exchange Offer's contemplated benefits to the Company;
(iii) there shall have been any action threatened, pending or
taken, or approval withheld, or any statute, rule, regulation,
judgment, order or injunction threatened, proposed, sought,
promulgated, enacted, amended, enforced or deemed to be applicable to
the Exchange Offer or the Company or any of its subsidiaries, by any
court or any authority, agency or tribunal which, in the Company's sole
judgment, would or might directly or indirectly (a) make the acceptance
for exchange or exchange of some or all of the Warrants for shares of
Series A Common Stock illegal or otherwise restrict or prohibit
consummation of the Exchange Offer; (b) delay or restrict the ability
of the Company, or render the Company unable, to accept for exchange or
exchange some or all of the Warrants for shares of Series A Common
Stock; (c) materially impair the contemplated benefits of the Exchange
Offer to the Company, or (d) materially affect the business, condition
(financial or other), income, operations or prospects of the Company
and its subsidiaries, taken as a whole, or otherwise materially impair
in any way the contemplated future conduct of the business of the
Company or any of its subsidiaries;
(iv) any tender or exchange offer with respect to some or all
of the Series A Common Stock or the Warrants (other than the Exchange
Offer), or a merger, acquisition or other business combination proposal
for the Company, shall have been proposed, announced or made by any
person or entity;
(v) any change shall occur or be threatened in the business,
condition (financial or other), income, operations, Series A Common
Stock ownership, or prospects of the Company and its subsidiaries,
taken as a whole, which, in the sole judgment of the Company, is or may
be material to the Company; or
(vi) (a) any general suspension of trading in, or limitation
on prices for, securities on any national securities exchange or in the
over-the-counter market, (b) the declaration of a banking moratorium or
any suspension of payments in respect of banks in the United States,
(c) the commencement of a war, armed hostilities or other international
or national calamity directly or indirectly involving the United
States, (d) any limitation (whether or not mandatory) by any
governmental, regulatory or administrative agency or authority on, or
any event which, in the Company's sole judgment, might affect, the
extension of credit by banks or other lending institutions
32
<PAGE>
in the United States, (e) any significant change in the market price of
the Series A Common Stock, or any change in the general political,
market, economic or financial conditions in the United States or abroad
that could, in the sole judgment of the Company, have a material
adverse effect on the Company's business, operations or prospects or
the trading in the Common Stock or the Exchange Offer's contemplated
benefits to the Company or (f) in the case of any of the foregoing
existing at the time of the commencement of the Exchange Offer, a
material acceleration or worsening thereof;
(vii) (a) any person, entity or "group" (as that term is used
in Section 13(d)(3) of the Exchange Act) shall have acquired, or
proposed to acquire, beneficial ownership of shares of Series A Common
Stock entitled to more than 5% of the aggregate votes entitled to be
cast by all shares of Series A Common Stock then outstanding (other
than a person, entity or group which had publicly disclosed such
ownership in a Schedule 13D or 13G (or an amendment thereto) on file
with the Commission prior to September 26, 1997) or (ii) any new group
shall have been formed which beneficially owns shares of Series A
Common Stock entitled to more than 5% of the aggregate votes entitled
to be cast by all shares of Series A Common Stock then outstanding;
and, in the sole opinion of the Company, in any such case and regardless of the
circumstances (including any action or omission to act by the Company) giving
rise to such condition, such event makes it inadvisable to proceed with the
Exchange Offer or with such acceptance for exchange.
The foregoing conditions are for the sole benefit of the Company and
may be asserted by the Company regardless of the circumstances (including any
action or inaction by the Company) giving rise to any such condition and any
such condition may be waived by the Company, in whole or in part, at any time
and from time to time in its sole discretion. The Company's failure at any time
to exercise any of the foregoing rights shall not be deemed a waiver of any such
right; the waiver of any such right with respect to particular facts and
circumstances shall not be deemed a waiver with respect to any other facts or
circumstances; and each such right shall be deemed an ongoing right which may be
asserted at any time and from time to time. Any determination by the Company
concerning the events described above will be final and binding on all parties.
ANTI-DILUTION PROVISIONS OF WARRANTS WITH RESPECT
TO EXCHANGE OFFER
The Warrants contain certain anti-dilution provisions that protect the
holders thereof against dilution by adjustment of the exercise price per share
and the number of shares and Class A Warrants issuable upon exercise thereof
upon the occurrence of certain events, including issuances of Series A Common
33
<PAGE>
Stock (or securities convertible, exchangeable or exercisable into Series A
Common Stock) at less than market value, stock dividends, stock splits, mergers,
a sale of substantially all of the Company's assets, and for other extraordinary
events such as reclassification or capital reorganization; provided, however,
that no such adjustment shall be made upon, among other things, (i) the issuance
or exercise of options or other securities under the Company's stock option
plans or other employee benefit plans, or (ii) the sale or exercise of
outstanding Options or Warrants.
CONSENT TO WAIVER OF ANTI-DILUTION PROVISIONS OF WARRANTS
WITH RESPECT TO EXCHANGE OFFER
The Warrants contain anti-dilution provisions that adjust the
Conversion Price at which the Warrants are converted into shares of Series A
Common Stock and, therefore, the number of shares of Common Stock issuable upon
conversion of the Warrants. Depending on the price of a share of Series A Common
Stock on the Expiration Date, issuance of Series A Common Stock pursuant to the
Exchange Offer could cause an adjustment to the Conversion Price and the number
of shares issuable upon subsequent conversion of any Warrants that are not
tendered for exchange. Accordingly, as part of the Exchange Offer, each person
who tenders Warrants to be exchanged, by signing the Letter of Transmittal,
consents to waive any anti-dilution adjustments with respect to the Conversion
Price or the number of shares of Series A Common Stock issuable upon conversion
of the Warrants as a result of the Exchange Offer. In addition, the waiver of
anti-dilution adjustments shall apply to the Series A Common Stock, and any
dilution rights which might apply thereto, which are issued in exchange for the
tendered Warrants. Except as set forth above, the anti-dilution provisions of
any Warrants remaining outstanding after the Exchange Offer shall not be
affected.
EXTENSION OF EXCHANGE OFFER PERIOD;
WAIVER OF TENDER OF ALL WARRANTS REQUIREMENT;
TERMINATION; AMENDMENTS
The Company expressly reserves the right, in its sole discretion, at
any time or from time to time, to extend the period of time during which the
Exchange Offer is open by giving oral or written notice of such extension to the
Exchange Agent. During any such extension, all Warrants previously tendered and
not exchanged or withdrawn will remain subject to the Exchange Offer, except to
the extent that such Warrants may be withdrawn as set forth in "The Exchange
Offer -- Withdrawal Rights." The Company also expressly reserves the right, in
its sole discretion, to waive the condition that a holder of Warrants who
tenders pursuant to the Exchange Offer must tender all of his Warrants and also
to terminate the Exchange Offer and not accept for exchange or exchange any
Warrants not previously accepted for exchange or exchanged or, subject to
applicable law, to postpone the exchange of Warrants for Series A Common Stock
34
<PAGE>
upon the occurrence of any of the conditions specified in "The Exchange Offer --
Conditions of the Exchange Offer" by giving oral or written notice of such
termination or postponement to the Exchange Agent and making a public
announcement thereof. The Company's reservation of the right to delay exchange
of Warrants which it has accepted for payment is limited by Rule 13e-4(f)(5)
promulgated under the Exchange Act, which requires that the Company must pay the
consideration offered or return the Warrants tendered promptly after termination
or withdrawal of a tender offer.
Subject to compliance with applicable law, the Company further reserves
the right, in its sole discretion, to amend the Exchange Offer in any respect.
Amendments to the Exchange Offer may be made at any time or from time to time
effected by public announcement thereof, such announcement, in the case of any
extension, to be issued no later than 9:00 a.m., New York City time, on the next
business day after the previously scheduled Expiration Date. Any public
announcement made pursuant to the Exchange Offer will be disseminated promptly
to holders in a manner reasonably designed to inform holders of such change.
Without limiting the manner in which the Company may choose to make a public
announcement, except as required by applicable law, the Company shall have no
obligation to publish, advertise or otherwise communicate any such public
announcement other than by making a release to the Dow Jones News Service.
If the Company materially changes the terms of the Exchange Offer or
the information concerning the Exchange Offer, the Company will extend the
Exchange Offer to the extent required by Rules 13e-4(d)(2) and 13e-4(e)(2)
promulgated under the Exchange Act. These rules provide that the minimum period
during which an offer must remain open following material changes in the terms
of the offer or information concerning the offer (other than a change in
consideration offered or a change in percentage of securities sought) will
depend on the facts and circumstances, including the relative materiality of
such terms or information. The Commission has stated that as a general rule, it
is of the view that an offer should remain open for a minimum of five business
days from the date that notice of such a material change is first published,
sent or given. If (i) the Company increases or decreases the consideration
offered for the Warrants pursuant to the Exchange Offer and (ii) the Exchange
Offer is scheduled to expire at any time earlier than the expiration of a period
ending on the tenth business day from, and including, the date that notice of
such increase or decrease is first published, sent or given, the Exchange Offer
will be extended until the expiration of such period of ten business days.
35
<PAGE>
SOLICITATION OF TENDERS; FEES
The Company is making the Exchange Offer in reliance on the exemption
from the registration requirements of the Securities Act, afforded by Section
3(a)(9) thereof. The Company, therefore, has not retained, and will not pay any
commission or other remuneration to, any broker, dealer, salesman or other
person for soliciting tenders of the Warrants. However, regular employees of the
Company (who will not be additionally compensated therefor) may solicit tenders
and will answer inquiries concerning the Exchange Offer.
EXCHANGE AGENT
American Stock Transfer & Trust Company has been appointed as Exchange
Agent for the Exchange Offer. The Company will pay the Exchange Agent reasonable
and customary compensation for its services in connection with the Exchange
Offer, will reimburse the Exchange Agent for its reasonable out-of-pocket
expenses, and will indemnify the Exchange Agent against certain liabilities and
expenses in connection therewith, including liabilities under the federal
securities laws. All correspondence in connection with the Exchange Offer and
the Letter of Transmittal should be addressed to the Exchange Agent as follows:
AMERICAN STOCK TRANSFER & TRUST COMPANY
BY MAIL, OVERNIGHT COURIER OR HAND DELIVERY TO:
AMERICAN STOCK TRANSFER & TRUST COMPANY
40 WALL STREET
NEW YORK, NY 10005
BY FACSIMILE TRANSMISSION (FOR ELIGIBLE INSTITUTIONS ONLY):
718-234-5001
TO CONFIRM FACSIMILE TRANSMISSION CALL:
718-921-8237
TRANSFERABILITY OF SERIES A COMMON STOCK
Except for the Private Placement Warrants, the resale of shares of
Series A Common Stock issued in exchange for the Warrants is exempt from the
registration requirements of the Securities Act, by reason of Section 4(1)
thereof.
RESALE OF RESTRICTED SHARES
The resale of shares of Series A Common Stock issued in exchange for
the Private Placement Warrants, described herein as the Restricted Shares, shall
be subject to certain resale restrictions pursuant to Rule 144. Rule 144 places
certain restrictions upon the sale of securities that are acquired in
transactions not involving any public offering and requires such securities to
be sold pursuant to an effective registration under the Securities Act or after
the expiration of a one year waiting period. No registration statement has been
36
<PAGE>
filed with respect to the resale of the Restricted Shares and the Company has no
present intent to file a registration statement covering such resales.
Therefore, the Restricted Shares will be tradeable only on or after November 14,
1997, which is one year from the date of issuance of the Private Placement
Warrants, subject to certain volume limitations described below. Similarly,
shares of Series A Common Stock issued to "affiliates" shall be subject to the
same volume limitations as the Restricted Shares. On or after November 14, 1997,
Restricted Shares and the shares of Series A Common Stock issued to "affiliates"
may be resold if the number of shares of Series A Common Stock together with all
other sales of Restricted Shares by the same holder within the preceding three
months does not exceed:
(i) one percent of the Series A Common Stock
outstanding; or
(ii) the average weekly reported volume of trading in
Series A Common Stock during the four calendar weeks preceding the
execution of the transaction by the broker, the date of execution of
the transaction with the market marker or the date of filing a 144
Notice (where greater than 500 Restricted Shares are sold or the
aggregate sale price exceeds $10,000); or
(iii) the average weekly volume of trading in Series
A Common Stock, reported through the consolidated transaction reporting
system of Rule 11Aa3-1 under the Exchange Act during the four-week
period specified in (ii) above.
On and after November 14, 1998, the foregoing volume restrictions shall lapse
with respect to Restricted Shares but shall remain in effect with respect to all
shares of Series A Common Stock issued to "affiliates."
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The exchange of Warrants for shares of Common Stock will be a taxable
event for federal income tax purposes. A holder will recognize taxable gain (or
loss) equal to the amount by which the fair market value of the Series A Common
Stock received for the Warrants, respectively, exceeds (or is less than) the
holder's adjusted tax basis in the Warrants. The fair market value of the Series
A Common Stock will depend on the price of the Series A Common Stock on the
Expiration Date, and, accordingly, is not presently determinable. A holder's
basis in the Warrants, if acquired for cash and held from the date of original
issuance, is the original purchase price attributable to the Warrants. The
taxable gain (or loss) will be characterized as a short-term or long-term
capital gain (or loss), depending on the holding period of the Warrants
exchanged, if the Warrants are capital assets in the hands of the holder. In
this regard, holders should note that the Taxpayer Relief Act of 1997 provides
37
<PAGE>
for the taxation of certain capital gains at different rates which vary with the
taxpayer's holding period for the capital asset. Generally, for assets held for
more than one year but not more than 18 months, the maximum tax rate is 28%. For
capital assets held for more than 18 months, the maximum tax rate is 20%.
The foregoing discussion is only a summary of the basic federal income
tax consequences of an exchange of Warrants for Series A Common Stock, it does
not apply to holders who acquired Warrants as compensation for Services, and it
may not apply to holders subject to special provisions of the Internal Revenue
Code because of their tax status or otherwise. Accordingly, holders should
consult their tax advisors concerning the specific tax consequences to them of
the Exchange Offer, including relevant state, local and foreign tax
consequences.
INTERESTS OF CERTAIN PERSONS IN THE TRANSACTION
Following is a table listing those directors and/or executive officers
of the Company and their ownership of securities of the Company:
<TABLE>
<CAPTION>
Shares of Shares of
Series A Series B
Common Stock Common Stock
Beneficially Beneficially
Name Position Owned(1) Owned(2)(3)(4)
- ------------------------------- ---------------------------------- ------------ ---------------
<S> <C> <C> <C>
Robert H. Lenz................. Chairman of the Board of Directors 1,044,471(3) 440,748(7)
James Perkins.................. President, Chief Executive Officer 215,873(7) -0-
and Director
Gary Penisten.................. Director 90,000(4) -0-
Howard W. Phillips............. Director 123,488(5) -0-
Robert S. Wussler.............. Director 90,000(4) -0-
Benjamin Frank................. Director 75,000(6) -0-
James Galton................... Director 30,000(7) -0-
All Officers and Directors 440,748
as a Group (7 persons)....... 1,668,832(8)
</TABLE>
- ---------------
(1) The securities "beneficially owned" by an individual are determined in
accordance with the definition of "beneficial ownership" set forth in the
regulations of the Securities and Exchange Commission. Accordingly, they
may include securities owned by or for, among others, the wife and/or minor
children of the individual and any other relative who has the same home as
such individual, as well as other securities as to which the individual has
or shares voting or investment power or has the right to acquire under
38
<PAGE>
outstanding stock options, warrants or convertible securities within 60
days after the date of this table. Beneficial ownership may be disclaimed
as to certain of the securities.
(2) Certain holders of Series B Common Stock have placed a portion of their
shares of Series B Common Stock in escrow and may vote such shares but not
transfer them as of this time ("Escrow Shares").
(3) Includes warrants to purchase 542,850 shares of Series A Common Stock and
440,748 shares of Series A Common Stock which may be acquired upon the
conversion of Series B Common Stock. Does not include (i) 55,668 shares of
Series A Common Stock underlying warrants which are not exercisable until
November 14, 1997 or (ii) 600,000 shares of Series A Common Stock
underlying unvested options.
(4) Represents 90,000 shares of Series A Common Stock which may be acquired
upon the exercise of currently exercisable options. Does not include 30,000
shares of Series A Common Stock underlying unvested options.
(5) Represents 123,488 shares of Series A Common Stock which may be acquired
upon the exercise of currently exercisable options and warrants. Does not
include 154,560 shares of Series A Common Stock which may be acquired upon
exercise of a unit purchase option not exercisable until October, 1998.
Does not include 30,000 shares of Series A Common Stock underlying unvested
options.
(6) Represents 75,000 shares of Series A Common Stock which may be acquired
upon the exercise of currently exercisable options. Does not include 30,000
shares of Series A Common Stock underlying unvested options.
(7) Represents 30,000 shares of Series A Common Stock which may be acquired
upon exercise of currently exercisable options. Does not include 60,000
shares of Series A Common Stock underlying unvested options.
(8) Represents 318,488 shares of Series A Common Stock which may be acquired
upon the exercise of currently exercisable options. Does not include
750,000 shares of Series A Common Stock underlying unvested options.
The above-listed officers and/or directors are eligible to participate
in the Exchange Offer upon the same terms and conditions as any other holder.
39
<PAGE>
TRANSACTIONS AND AGREEMENTS CONCERNING THE SERIES A COMMON STOCK
On July 17, 1997, Robert H. Lenz, Chairman of the Company, purchased
9,000 Units at a price of $1-5/16 per Unit for an aggregate purchase price of
$11,817 on the open market and on July 21, 1997 Mr. Lenz purchased 11,000 Units
at a price of $1-7/16 per Unit for an aggregate purchase price of $15,817 on the
open market.
During the 40 business days preceding the date hereof, neither the
Company nor, to its knowledge, any of its subsidiaries, executive officers or
directors or any associate of such officer or director other than Mr. Lenz has
engaged in any transaction involving the Series A Common Stock or the Warrants.
DESCRIPTION OF SECURITIES
GENERAL
The Company's authorized capital stock consists of 200,000,000 shares
of Series A Common Stock, $.01 par value per share, 1,250,000 shares of Series B
Common Stock, $.01 par value per share, and 5,000,000 shares of undesignated
Preferred Stock. As of the date of this Offer to Exchange, there were issued and
outstanding, 7,070,396 shares of Series A Common Stock and 1,076,168 shares of
Series B Common Stock. The Series A Common Stock and Series B Common Stock are
held of record by approximately 173 and 6 stockholders, respectively.
UNITS
Each Unit consists of one share of Series A Common Stock, one Class A
Warrant and one Class B Warrant. Each Class A Warrant entitles the holder
thereof to purchase one share of Series A Common Stock and one Class B Warrant,
and each Class B Warrant entitles the holder thereof to purchase one share of
Series A Common Stock. The Series A Common Stock, the Class A Warrants and the
Class B Warrants included in the Units are transferable separately.
COMMON STOCK
The Series A Common Stock and Series B Common Stock are substantially
identical except that holders of Series A Common Stock have the right to cast
one vote for each share held of record and holders of Series B Common Stock have
the right to cast five votes for each share held of record on all matters,
submitted to a vote of the holders of Common Stock. The Series A Common Stock
and Series B Common Stock vote together as a single class on all matters on
which stockholders may vote, including the election of directors, except when
class voting is required by applicable law. Holders of Common Stock do not have
cumulative voting rights.
40
<PAGE>
Holders of the Series A Common Stock and Series B Common Stock have
equal ratable rights to dividends from funds legally available therefor, when,
as and if declared by the Board of Directors and are entitled to share ratably,
as a single class, in all of the assets of the Company available for
distribution to holders of shares of Common Stock upon the liquidation,
dissolution or winding up of the affairs of the Company. Holders of Series A
Common Stock or Series B Common Stock do not have preemptive, subscription or
conversion rights except that the Series B Common Stock will be automatically
convertible into an equivalent number of fully paid and non-assessable shares of
Series A Common Stock upon the sale or transfer of such shares by the record
holder thereof except to another holder of Series B Common Stock. Each share of
Series B Common Stock will also be convertible at any time upon the option of
the holder into one share of Series A Common Stock. No redemption or sinking
fund provisions exist for the benefit of the Series A Common Stock or Series B
Common Stock. All outstanding shares of Series A and Series B Common Stock are,
and those shares of Series A Common Stock offered hereby, will be validly
issued, fully paid and non-assessable. The Series B Common stockholders have the
power to influence control of the Company.
The difference in voting rights described above increases the voting
power of the Series B Common stockholders and accordingly has an anti-takeover
effect. The existence of the Series B Common Stock may make the Company a less
attractive target for a hostile takeover bid or render more difficult or
discourage a merger proposal, an unfriendly tender offer, a proxy contest, or
the removal of incumbent management, even if such transactions were favored by
the stockholders of the Company other than the Series B Common stockholders.
Thus, the stockholders may be deprived of an opportunity to sell their shares at
a premium over prevailing market prices in the event of a hostile takeover bid.
Any such proposed business combination will have to be approved by the Board of
Directors, which may be influenced by the Series B Common stockholders.
REDEEMABLE WARRANTS
Class A Warrants. The holder of each Class A Warrant is entitled, upon
payment of the exercise price of $5.13 to purchase one share of Series A Common
Stock and one Class B Warrant. Unless previously redeemed, the Class A Warrants
are presently exercisable at any time and until 5:00 p.m. (New York time) on
October 11, 2000, except the Private Placement Class A Warrants can be exercised
by the Selling Securityholders only between November 14, 1997 and 5:00 p.m. (New
York time) on October 11, 2000. The Class A Warrants included in the Units are
immediately transferable separately from the Series A Common Stock and the Class
B Warrants issued with such Class A Warrants as part of the Units. The Class A
Warrants are subject to redemption, as described below.
41
<PAGE>
Class B Warrants. The holder of each Class B Warrant is entitled to
purchase one share of Series A Common Stock at an exercise price of $6.85.
Unless previously redeemed, the Class B Warrants are presently exercisable at
any time and until 5:00 p.m. (New York time) on October 11, 2000, except the
Private Placement Class B Warrants can be exercised by the Selling
Securityholders only between November 14, 1997 and 5:00 p.m. (New York time) on
October 11, 2000. The Class B Warrants included in the Units are immediately
transferable separately from the Series A Common Stock and the Class A Warrants
issued with such Class B Warrants as part of the Units. The Class B Warrants
underlying the Class A Warrants will be transferable separately from the Series
A Common Stock received upon exercise of the Class A Warrants. The Class B
Warrants are subject to redemption, as described below.
Redemption. The Warrants are subject to redemption by the Company, upon
30 days' written notice, at a price of $.05 per Warrant if the average closing
bid price of the Series A Common Stock for any 30 consecutive business days
ending within five days of the date on which the notice of redemption is given
shall have exceeded $9.00 per share with respect to the Class A Warrants and
$12.00 per share with respect to the Class B Warrants. Holders of Warrants will
automatically forfeit their rights to purchase the shares of Series A Common
Stock issuable upon exercise of such Warrants unless the Warrants are exercised
before the close of business on the business day immediately prior to the date
set for redemption. All of the outstanding Warrants of a class, except for those
underlying the Unit Purchase Options, must be redeemed if any of that class are
redeemed. The Warrants underlying the Unit Purchase Options are not subject to
redemption by the Company unless, on the date fixed for redemption, the Unit
Purchase Options have been exercised and the underlying warrants are
outstanding. A notice of redemption shall be mailed to each of the registered
holders of the Warrants by first class mail, postage prepaid, upon 30 days'
notice before the date fixed for redemption. The notice of redemption shall
specify the redemption price, the date fixed for redemption, the place where the
Warrant certificates shall be delivered and the redemption price to be paid, and
that the right to exercise the Warrants shall terminate at 5:00 p.m. (New York
City time) on the business day immediately preceding the date fixed for
redemption.
General. The Warrants may be exercised upon surrender of the
certificate(s) therefor on or prior to the expiration or the redemption date (as
explained above) at the offices of the Company's warrant agent (the "Warrant
Agent") with the form of "Election to Purchase" on the reverse side of the
certificate(s) completed and executed as indicated, accompanied by payment (in
the form of certified or cashier's check payable to the order of the Company) of
the full exercise price for the number of Warrants being exercised.
42
<PAGE>
The Warrants contain provisions that protect the holders thereof
against dilution by adjustment of the exercise price per share and the number of
shares issuable upon exercise thereof upon the occurrence of certain events,
including issuances of Series A Common Stock (or securities convertible,
exchangeable or exercisable into Series A Common Stock) at less than market
value, stock dividends, stock splits, mergers, a sale of substantially all of
the Company's assets, and for other extraordinary events; provided, however,
that no such adjustment shall be made upon, among other things, (i) the issuance
or exercise of options or other securities under the Company's stock option
plans or other employee benefit plans, or (ii) the sale or exercise of
outstanding options or warrants.
The Company is not required to issue fractional shares of Series A
Common Stock, and in lieu thereof will make a cash payment based upon the
current market value of such fractional shares. A holder of Warrants will not
possess any rights as a stockholder of the Company unless and until the Warrants
are exercised.
PREFERRED STOCK
The Company is authorized to issue up to 5,000,000 shares of
undesignated Preferred Stock ("Undesignated Preferred Stock").
Undesignated Preferred Stock. The Undesignated Preferred Stock may be
issued in series, and shares of each series will have such rights and
preferences as are fixed by the Board of Directors in the resolutions
authorizing the issuance of that particular series. In designating any series of
Undesignated Preferred Stock, the Board of Directors may, without further action
by the holders of Common Stock, fix the number of shares constituting that
series and fix the dividend rights, dividend rate, conversion rights, voting
rights (which may be greater or lesser than the voting rights of the Common
Stock), rights and terms of redemption (including any sinking fund provisions),
and the liquidation preferences of the series of Undesignated Preferred Stock.
The holders of any series of Undesignated Preferred Stock, when and if issued,
are expected to have priority claims to dividends and to any distributions upon
liquidation of the Company, and they may have other preferences over the holders
of the Common Stock.
The Board of Directors may issue series of Undesignated Preferred Stock
without action by the stockholders of the Company. Accordingly, the issuance of
Undesignated Preferred Stock may adversely affect the rights of the holders of
the Common Stock. In addition, the issuance of Undesignated Preferred Stock may
be used as an "anti-takeover" device without further action on the part of the
stockholders. Issuance of Undesignated Preferred Stock may dilute the voting
power of holders of Common Stock (such as by issuing Undesignated Preferred
Stock with super-voting rights) and may render more difficult the removal of
43
<PAGE>
current management, even if such removal may be in the stockholders' best
interest.
44
<PAGE>
LETTER OF TRANSMITTAL
TO EXCHANGE CLASS A WARRANTS AND CLASS B WARRANTS
TO PURCHASE CLASS B WARRANTS AND SHARES OF
SERIES A COMMON STOCK OF
FOOD COURT ENTERTAINMENT NETWORK, INC.
FOR
SHARES OF SERIES A COMMON STOCK OF
FOOD COURT ENTERTAINMENT NETWORK, INC.
AND CONSENT TO WAIVER
OF ANY ANTI-DILUTION ADJUSTMENT
TO THE CLASS A WARRANTS AND CLASS B WARRANTS
AS A RESULT OF THE EXCHANGE OFFER
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS EXPIRE AT 5:00 P.M., NEW YORK
CITY TIME, ON SEPTEMBER 26, 1997, UNLESS THE EXCHANGE OFFER IS EXTENDED.
THE INSTRUCTION IN THIS LETTER OF TRANSMITTAL SHOULD BE CAREFULLY READ
BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED.
The Exchange Agent for the Offer is:
AMERICAN STOCK TRANSFER & TRUST COMPANY
as Exchange Agent
on Behalf of
Food Court Entertainment Network, Inc.
By Mail, Overnight Courier or Hand Delivery to:
American Stock Transfer & Trust Company
40 Wall Street
New York, NY 10005
By Facsimile Transmission (For Eligible Institutions Only):
718-234-5001
To Confirm Facsimile Transmission Call:
718-921-8237
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE
OR TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE TRANSMISSION NUMBER OTHER THAN
THE ONE LISTED ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
If you require additional information, please call the Exchange Agent
at 800-937-5449, extension 237.
1
<PAGE>
This Letter of Transmittal is to be used in connection with the
delivery of Series A Common Stock, par value $.01 per share ("Series A Common
Stock"), of Food Court Entertainment Network, Inc. ("Company"). Holders who
cannot deliver the Class A Warrant Certificates and/or Class B Warrant
Certificates (collectively, the "Warrant Certificates") and all other documents
required hereby to the Exchange Agent by the Expiration Date (as defined in the
Offer to Exchange referred to below) must tender such Warrant Certificates
pursuant to the guaranteed delivery procedure set forth under the heading "The
Exchange Offer -- Procedure for Exchange" in the Offer to Exchange.
- --------------------------------------------------------------------------------
BOX 1
DESCRIPTION OF WARRANTS SURRENDERED
(ALL HOLDERS MUST FURNISH THE INFORMATION REQUESTED BELOW)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NAME AND ADDRESS OF REGISTERED HOLDER(S)
(KINDLY INDICATE ADDRESS CORRECTIONS, IF ANY, IN
BOX 4 BELOW TITLED "SPECIAL MAILING INSTRUCTIONS")
- --------------------------------------------------------------------------------
CLASS A WARRANTS NUMBER
CERTIFICATE NO(S). OF WARRANTS
(IF AVAILABLE)
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
TOTAL
- ------------------------------------------------------
CLASS B WARRANTS NUMBER
CERTIFICATE NO(S). OF WARRANTS
(IF AVAILABLE)
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
TOTAL
- ------------------------------------------------------
2
<PAGE>
Class A Warrants entitle the holder to purchase one share of Series A
Common Stock, $.01 par value per share (the "Series A Common Stock") and one
Class B Warrant at an exercise price of $5.13 (the "Class A Warrants") and Class
B Warrants entitle the holder to purchase one share of Series A Common Stock at
an exercise price of $6.85 (the "Class B Warrants"). The Class A Warrants and
Class B Warrants are collectively referred to herein as the "Warrants".
All Warrants delivered to the Exchange Agent are being tendered.
/ / Check here if tendered Warrant(s) are being delivered pursuant to a
Notice of Guaranteed Delivery previously sent to the Exchange Agent and complete
the following:
Name(s) of tendering holder(s):
Date of Notice of Guaranteed Delivery: __________, 1997
Name of Institution which Guaranteed Delivery:
Unless you complete Box 2 titled "Special Issuance Instructions," the
certificates representing the shares of Series A Common Stock to which you are
entitled will be registered in the name or names in which the Warrants
surrendered with this Letter of Transmittal are registered, as stated in Box 1.
Ladies and Gentlemen:
The undersigned hereby tenders to Food Court Entertainment Network,
Inc., a Delaware corporation (the "Company"), the above-described Warrants
pursuant to the Company's offer to exchange 0.6 shares of its Series A Common
Stock for each issued and outstanding Class A Warrant and 0.4 shares of Series A
Common Stock for each issued and outstanding Class B Warrant on the terms and
subject to the conditions set forth in the Offer to Exchange dated August __,
1997 (the "Offer to Exchange"), receipt of which is hereby acknowledged, and in
this Letter of Transmittal (which, together with any amendments or supplements
thereto or hereto, collectively constitute the "Exchange Offer").
The tender of the Warrants herein is subject to the terms and
conditions of the Exchange Offer including the requirement that the holder
tender all of his/her Warrants pursuant to the Exchange Offer. Effective upon
acceptance for exchange and delivery of shares of Series A Common Stock to be
issued in exchange for the Warrants tendered herewith, the undersigned hereby
tenders, exchanges, sells, assigns and transfers to or upon the order of the
Company the Warrants included herein. In
3
<PAGE>
addition, the undersigned irrevocably constitutes and appoints the Exchange
Agent the true and lawful agent and attorney-in-fact of the undersigned with
respect to the Warrants, with full power of substitution (such power of attorney
being deemed to be an irrevocable power coupled with an interest), to present
the Warrants for transfer on the books of the Company, including, by delivery of
the Warrants together with all accompanying evidences of transfer and
authenticity, to or upon the order of the Company and thereby to transfer all
right, title and interest to the Company in the Warrants so tendered.
The undersigned hereby represents and warrants (i) that the undersigned
has full power and authority to tender, exchange, sell, assign and transfer the
Warrants described above, (ii) that the undersigned has good title thereto free
and clear of all liens, restrictions, charges, encumbrances and any adverse
claims, and (iii) that when the Warrants are accepted for exchange by the
Company, the Company will acquire good and unencumbered title thereto, free and
clear of all liens, restrictions, charges and encumbrances and not subject to
any adverse claims. The undersigned will, upon request, execute any additional
documents necessary or desirable to complete the exchange of the Warrants
surrendered herewith.
All authority herein conferred or agreed to be conferred shall survive
the death or incapacity of each of the undersigned, and all obligations of the
undersigned hereunder shall be binding upon the heirs, personal representatives,
successors and assigns of such undersigned.
The undersigned understands that tenders of Warrants pursuant to the
procedures described in the Offer to Exchange and the instructions hereto will
constitute a binding agreement between the undersigned and the Company upon the
terms and subject to the conditions of the Exchange Offer. Except as stated in
the Exchange Offer, this tender is irrevocable.
The Company reserves the right to waive the requirement that a holder
of Warrants who tenders pursuant to the Exchange Offer must tender all of
his/her Warrants.
CONSENT TO WAIVER OF ANTI-DILUTION PROVISIONS OF WARRANTS
WITH RESPECT TO EXCHANGE OFFER
The Conversion Price of the Warrants (as defined therein) is subject to
adjustment upon the occurrence of certain events. Depending on the price of a
share of Series A Common Stock on the Expiration Date, the Conversion Price
might be affected by the Exchange Offer. THE UNDERSIGNED, THE REGISTERED HOLDER
OF THE WARRANTS LISTED IN BOX 1, BY SIGNING THIS LETTER OF TRANSMITTAL IN BOX 5
BELOW, HEREBY CONSENTS TO THE WAIVER OF THE APPLICABILITY OF ANY ANTI-DILUTION
PROVISIONS IN THE WARRANTS WHICH MIGHT ADJUST THE CONVERSION PRICE OF THE
WARRANTS OR THE NUMBER OF SHARES OF SERIES A COMMON STOCK ISSUABLE UPON EXERCISE
4
<PAGE>
OF THE WARRANTS AS A RESULT OF ANY SHARES OF SERIES A COMMON STOCK ISSUED
PURSUANT TO THE EXCHANGE OFFER.
5
<PAGE>
The undersigned requests that the certificates representing the Series
A Common Stock be issued and delivered to the undersigned at the address
appearing in Box 1 unless otherwise indicated in Boxes 2 or 4 below titled,
respectively, "Special Issuance Instructions" or "Special Mailing Instructions."
TO CHANGE OWNER'S NAME
If you wish to change the name in which the shares of Series A Common
Stock are to be registered, complete Box 2 below titled "Special Issuance
Instructions."
- --------------------------------------------------------------------------------
BOX 2
SPECIAL ISSUANCE
INSTRUCTIONS
TO BE COMPLETED ONLY if the certificate for the Series A Common Stock
is to be registered in the name(s) of someone other than the registered holder
of Warrants as stated in Box 1.
Issue to:
- --------------------------------------------------------------------------------
(PLEASE PRINT OR TYPE FULL NAME OF PERSON TO BECOME THE
REGISTERED HOLDER OF THE SERIES A COMMON STOCK)
Address:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(INCLUDE ZIP CODE)
SOCIAL SECURITY OR TAXPAYER IDENTIFICATION NUMBER OF PERSON:
- --------------------------------------------------------------------------------
(SEE INSTRUCTION 9)
Note: If you complete this Box, your signature must be guaranteed in
Box 3 by an Eligible Institution. (SEE INSTRUCTION 4)
6
<PAGE>
- --------------------------------------------------------------------------------
BOX 3
SIGNATURE GUARANTEE
(SEE INSTRUCTION 4)
TO BE COMPLETED ONLY if you have completed Box 2 or Box 4 and as
required by Instruction 5 or Instruction 7.
The undersigned hereby guarantees the signature(s) which appear on this
Letter of Transmittal and the Warrants deposited pursuant to this Letter of
Transmittal.
- --------------------------------------------------------------------------------
(NAME OF ELIGIBLE INSTITUTION ISSUING GUARANTEE)
- --------------------------------------------------------------------------------
(SIGNATURE OF OFFICER)
- --------------------------------------------------------------------------------
(TITLE OF OFFICER SIGNING THIS GUARANTEE)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(ADDRESS OF ELIGIBLE INSTITUTION)
- --------------------------------------------------------------------------------
(DATE)
(OTHER THAN SIGNATURE, PLEASE PRINT OR TYPE)
- --------------------------------------------------------------------------------
7
<PAGE>
SPECIAL MAILING INSTRUCTIONS
If you wish to have the Series A Common Stock sent to an address other
than the record address of the registered holder which appears in Box 1, fill in
Box 4 below titled "Special Mailing Instructions." If you wish to change the
record address for the registered holder(s) named in Box 1, enter the new
address in Box 4 below titled "Special Mailing Instructions" and check the small
box immediately below the corrected or new address.
- --------------------------------------------------------------------------------
BOX 4
SPECIAL MAILING INSTRUCTIONS
TO BE COMPLETED ONLY if the Series A Common Stock is to be registered
in the name of the registered holder of the Warrants named in Box 1, BUT IS TO
BE MAILED to a person or an address different from that which appears in Box 1.
Mail to:
Name:
- --------------------------------------------------------------------------------
(PLEASE PRINT OR TYPE)
Address:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(INCLUDE ZIP CODE)
ADDRESS CORRECTION OR NEW RECORD ADDRESS?
/ / Check this box if the above address is intended to be either an
address correction or new record address for the registered holder(s) named in
Box 1 and is to be used for all future shareholder correspondence.
NOTE: If you complete this Box, your signature must be guaranteed in
Box 3 by an Eligible Institution. (SEE INSTRUCTION 7)
8
<PAGE>
- --------------------------------------------------------------------------------
BOX 5
ALL REGISTERED HOLDERS MUST SIGN HERE
This Letter of Transmittal must be signed on the spaces immediately
below by all registered holders exactly as their names appear on the Warrant
Certificates surrendered herewith. If signing is by an attorney-in-fact,
executor, administrator, trustee, guardian, officer of a corporation, agent or
other person acting in a fiduciary or representative capacity, please set forth
full title and submit evidence (which must be satisfactory to the Exchange
Agent) of the authority to so act. SEE INSTRUCTION 6. THE UNDERSIGNED, AS THE
REGISTERED HOLDER OF THE WARRANTS DESCRIBED IN BOX 1, HEREBY CONSENTS TO THE
WAIVER OF THE APPLICABILITY OF ANY ANTI-DILUTION PROVISIONS IN THE WARRANTS WITH
RESPECT TO THE EXCHANGE OFFER.
Signature(s)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Name(s)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(PLEASE TYPE OR PRINT)
Capacity
- --------------------------------------------------------------------------------
Daytime Area Code and Telephone No.
- --------------------------------------------------------------------------------
Name of Contact Person
- --------------------------------------------------------------------------------
Date: __________, 1997
- --------------------------------------------------------------------------------
9
<PAGE>
IMPORTANT TAX INFORMATION
PLEASE PROVIDE YOUR SOCIAL SECURITY OR OTHER TAXPAYER IDENTIFICATION
NUMBER ON THE SUBSTITUTE FORM W-9 BELOW AND CERTIFY THEREIN THAT YOU ARE NOT
SUBJECT TO BACKUP WITHHOLDING. FAILURE TO DO SO MAY SUBJECT YOU TO BACKUP
WITHHOLDING ON DIVIDENDS ON THE SERIES A COMMON STOCK THAT MIGHT BE PAYABLE IN
THE FUTURE. SEE INSTRUCTION 9.
- --------------------------------------------------------------------------------
PAYER'S NAME: FOOD COURT ENTERTAINMENT NETWORK, INC.
- --------------------------------------------------------------------------------
PART I -- PLEASE PROVIDE YOUR TIN AND CERTIFY BY SIGNING AND DATING BELOW
- ------------------------------
SUBSTITUTE FORM W-9
- ------------------------------
Social Security Number
OR
- ------------------------------
Employer Identification Number
- --------------------------------------------------------------------------------
PART II -- Certification -- Under penalties of perjury, I certify that:
(1) The number shown on this form is my
correct taxpayer identification number (or
I am waiting for a number to be issued to
me).
(2) I am not subject to backup withholding
either because (a) I am exempt from backup
withholding, or (b) I have not been
notified by the Internal Revenue Service
("IRS") that I am subject to withholding
as a result of a failure to report all
interest or dividends, or (c) the IRS has
notified me that I am no longer subject to
backup withholding.
10
<PAGE>
- --------------------------------------------------------------------------------
PART III --
AWAITING TIN
- --------------------------------------------------------------------------------
CERTIFICATION INSTRUCTIONS -- You must cross out item (2) above if you have been
notified by the IRS that you are currently subject to backup withholding because
of underreporting interest or dividends on your federal tax return. However, if
after being notified by the IRS that you were subject to backup withholding you
received another notification from the IRS that you are no longer subject to
backup withholding, do not cross out such item (2).
Tax Identification Number (TIN)
- --------------------------------------------------------------------------------
SIGNATURE __________________________________________
DATE __________, 1997
- --------------------------------------------------------------------------------
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX IN
PART III OF SUBSTITUTE FORM W-9.
- -----------------------------------------------------------------
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification
number has not been issued to me, and either (1) I have mailed or delivered an
application to receive a taxpayer identification number to the appropriate IRS
Center or Social Security Administration Office or (2) I intend to mail or
deliver an application in the near future. I understand that if I do not provide
a taxpayer identification number by the time of payment, 31% of all reportable
payments made to me will be withheld, but that such amounts will be refunded to
me if I then provide a Taxpayer Identification Number within sixty (60) days.
SIGNATURE ________________________________________
DATE __________, 1997
- --------------------------------------------------------------------------------
11
<PAGE>
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING
OF 31% OF DIVIDENDS ON THE SERIES A COMMON STOCK THAT MIGHT BE PAYABLE IN THE
FUTURE. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER
IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS AND FOR
FURTHER GUIDANCE ON PROPERLY COMPLETING THE FORM INSTRUCTIONS.
1. EXECUTION AND DELIVERY OF LETTER OF TRANSMITTAL
This Letter of Transmittal should be completed, dated, signed and
mailed or hand delivered to the Exchange Agent, American Stock Transfer & Trust
Company, 40 Wall Street, New York, NY 10005, accompanied by the Warrant
Certificates which you desire to tender. Please do not send Warrant Certificates
directly to the Company. Holders who cannot deliver the Warrant Certificates and
all other required documents to the Exchange Agent by the Expiration Date must
tender such Warrant Certificates pursuant to the guaranteed delivery procedure
set forth in the Offer to Exchange under the caption "The Exchange Offer
- --Procedure for Exchange." Pursuant to such procedure: (a) such tender must be
made by or through an Eligible Institution; (b) a properly completed and duly
executed Notice of Guaranteed Delivery substantially in the form provided by the
Company must be received by the Exchange Agent by the Expiration Date; and (c)
the Warrant Certificates, as well as a properly completed and duly executed
Letter of Transmittal (or facsimile thereof) and any other documents required by
this Letter of Transmittal must be received by the Exchange Agent within three
Nasdaq trading days after the date of execution of such Notice of Guaranteed
Delivery, all as provided in the Offer to Exchange under the caption "The
Exchange Offer -- Procedure for Exchange."
THE METHOD OF TRANSMITTING OR DELIVERING THE WARRANT CERTIFICATES IS AT
YOUR OPTION, RISK AND ELECTION, BUT IF YOU SEND THE CERTIFICATES BY MAIL, IT IS
RECOMMENDED THAT THEY BE SENT BY CERTIFIED OR REGISTERED MAIL WITH RETURN
RECEIPT REQUESTED OR BY OVERNIGHT DELIVERY SERVICE AND THAT THEY BE PROPERLY
INSURED FOR THEIR REPLACEMENT VALUE SINCE TITLE TO THE CERTIFICATES SHALL PASS
ONLY UPON DELIVERY TO THE EXCHANGE AGENT. AN ADDRESSED ENVELOPE IS ENCLOSED FOR
YOUR CONVENIENCE. DELIVERY WILL BE DEEMED EFFECTIVE ONLY WHEN ACTUALLY RECEIVED
BY THE EXCHANGE AGENT.
No alternative, conditional or contingent tenders will be accepted and
only tenders all of a holder's Warrants will be accepted for exchange.
12
<PAGE>
2. SIGNATURES
The Letter of Transmittal must be signed by or on behalf of the
registered holder(s) of the Warrant Certificates transmitted. If the Warrant
Certificates are registered in the names of two or more owners, all such owners
must sign. The signature(s) on the Letter of Transmittal must correspond exactly
to the name(s) written on the face of the Warrant Certificates transmitted. If
the Warrant Certificates to be surrendered are registered in different names or
different forms of the same name, it will be necessary to complete, sign and
submit as many separate Letters of Transmittal as there are different
registrations of certificates.
3. ISSUANCE OF CERTIFICATE FOR SERIES A COMMON STOCK IN SAME
NAME
If the certificate representing the Series A Common Stock is to be
issued in the name of the registered holder(s) set forth on the surrendered
Warrant Certificates and to be mailed to the address set forth in Box 1, the
surrendered certificates need not be endorsed and no guarantee of the signature
on the Letter of Transmittal is required. Remember, however, that proper
completion of Box 5 titled "All Registered Holders Must Sign Here" and of the
Substitute Form W-9 is still required. For corrections in name and changes in
name not involving changes in ownership, see Instruction 4(b).
4. ISSUANCE OF CERTIFICATE FOR SERIES A COMMON STOCK IN
DIFFERENT NAME
If the certificate representing the Series A Common Stock is to be
issued in the name of someone other than the registered holder(s) of the
surrendered Warrant Certificates, you must follow the guidelines below. Note
that in each circumstance listed below, shareholder(s) must complete Boxes 2 and
5 and the Substitute Form W-9 and must have their signature(s) guaranteed in Box
3.
(a) Registration in Different Name. In addition to completing
Boxes 2 and 5 and the Substitute Form W-9, the Warrant Certificate surrendered
must be properly endorsed and the Form of Assignment at the end of the Warrant
Certificate must be properly completed and executed (or such certificates must
be accompanied by appropriate transfer forms properly executed) by the
registered holder(s) of such Warrant Certificates to the person who is to
receive the Series A Common Stock. The signature(s) of the registered holder(s)
on the applicable transfer or assignment form and in Box 5 must correspond with
the name(s) written upon the face of the Warrant Certificates in every
particular and must be guaranteed in Box 3 by an Eligible Institution as defined
below. An "Eligible Institution" is a firm that is a member of a recognized
Medallion Program approved by The Securities Transfer
13
<PAGE>
Association Inc., which includes most commercial banks, savings and loan
associations and brokerage houses.
(b) Correction of or Change in Name. For a correction of name
or for a change in name which does not involve a change in ownership, proceed as
follows: For a change in name by marriage, etc., the Letter of Transmittal
should be signed, e.g., "Mary Doe, now by marriage Mary Jones." For a correction
in name, the Letter of Transmittal should be signed, e.g., "James E. Brown,
incorrectly inscribed as J.E. Brown." The signature in each case must be
guaranteed in Box 3, and Box 2, Box 5 and the Substitute Form W-9 should be
completed.
You should consult your own tax advisor as to any possible tax
consequences resulting from the issuance of the certificate for the Series A
Common Stock in a name different from that of the registered holder(s) of the
surrendered certificates.
5. SUPPORTING EVIDENCE
In case any Letter of Transmittal, certificate endorsement or stock
power is executed by an agent, attorney, administrator, executor, guardian,
trustee or any person in any other fiduciary or representative capacity, or by
an officer of a corporation on behalf of the corporation, there must be
submitted (with the Letter of Transmittal, surrendered certificates, and/or
stock powers) documentary evidence of appointment and authority to act in such
capacity (including court orders and corporate resolutions where necessary), as
well as evidence of the authority of the person making such execution to assign,
sell or transfer the certificates. Such documentary evidence of authority must
be in form satisfactory to the Exchange Agent.
6. SPECIAL INSTRUCTIONS FOR DELIVERY BY THE EXCHANGE AGENT
The certificate representing the Series A Common Stock will be mailed
to the address of the registered holder(s) as indicated in Box 1 unless
instructions to the contrary are given in Box 4 titled "Special Mailing
Instructions." In the event you complete Box 4, "Special Mailing Instructions,"
in addition to completing Box 1, and signing Box 5 and the Substitute W-9 Form,
you must also have your signature guaranteed in Box 3.
7. IMPROPER TENDER
Shares of Series A Common Stock will be distributed only if a Letter of
Transmittal, properly completed and signed, is received by the Exchange Agent,
together with the Warrant Certificates that are registered in the name or names
which appear in Box 1 and any other documents required by the Letter of
Transmittal.
The Exchange Agent and the Company reserve the absolute
right to reject any or all tenders that are defective or
14
<PAGE>
irregular and may request from persons making such tenders such additional
documents as the Exchange Agent and the Company deem appropriate to correct such
defects or irregularities. However, the Exchange Agent and the Company reserve
the right in their discretion to waive any defect or irregularity in any tender
as provided for herein, and upon such waiver they may treat and receive any such
defective or irregular tender as if no such defect or irregularity had been
present. Tenders will not be deemed to have been made until all defects or
irregularities, which have not been waived, have been cured.
8. LOST CERTIFICATES
In the event the holder of Warrants is unable to deliver to the
Exchange Agent the Warrant Certificates due to the loss or destruction of such
certificate(s), such fact should be indicated on the face of this Letter of
Transmittal. In such event, the Exchange Agent will forward additional
documentation which the holder must complete in order to surrender such lost or
destroyed certificate(s).
9. FEDERAL TAX INFORMATION
In order to avoid backup withholding on dividends on the Series A
Common Stock that might be payable in the future, the U.S. Treasury Department
requires that a taxpayer identification number be provided on Form W-9 and that
you certify that the taxpayer identification number provided on Form W-9 is
correct (or that you are awaiting a taxpayer identification number) and that (a)
you have not been notified by the Internal Revenue Service that you are subject
to backup withholding as a result of failure to report all interest or dividends
or (b) the IRS has notified you that you are no longer subject to backup
withholding.
Furnish the taxpayer identification number of the person, corporation
or other entity in the name of which the Series A Common Stock is to be
registered on the Substitute Form W-9 included on this Letter of Transmittal. If
shares are to be registered in the name of someone other than the registered
holder of the Warrant Certificates, the persons indicated in Box 2 titled
"Special Issuance Instructions" must complete the Substitute Form W-9. Then
complete the remainder of the Substitute Form W-9 according to the instructions
to the Form W-9. For individuals having a social security number, the taxpayer
identification number is the same as your social security number. For others, a
number will be furnished by the Treasury Department upon request, if you do not
already have a taxpayer identification number. If the Series A Common Stock
certificates are to be registered in more than one name or are not in the name
of the actual owner, consult the enclosed instructions for Form W-9 for
additional guidelines on which number to report.
15
<PAGE>
Failure to complete Substitute Form W-9 properly may subject you to a
penalty and a federal backup withholding tax. If the backup withholding tax
requirements apply to you, the Company may be required to withhold 31% of any
dividend payments that might be made to you in the future.
If you are an exempt shareholder (including, among others, all
corporations and certain foreign individuals), you are not subject to these
backup withholding and reporting requirements. In order for a foreign individual
to qualify as an exempt recipient, that person must submit a statement, signed
under penalties of perjury, attesting to that individual's foreign status. Such
statements can be obtained from the Exchange Agent.
10. WITHDRAWAL RIGHTS
Tendered Warrants may be withdrawn only pursuant to the procedures set
forth under the caption "The Exchange Offer -- Withdrawal Rights" in the Offer
to Exchange.
11. INQUIRIES
If you have any questions or need assistance relating to the Letter of
Transmittal, please contact the Exchange Agent at 1-800-937-5449, extension 237.
Additional copies of the Letter of Transmittal may be obtained from the Exchange
Agent.
GUIDELINES FOR CERTIFICATION OF TAXPAYER
IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE
PAYER.--Social Security numbers have nine digits separated by two hyphens: i.e.
000-00-0000. Employer identification numbers have nine digits separated by only
one hyphen: i.e. 00-0000000. The table below will help determine the number to
give the payer.
Give the
For this type of account: SOCIAL SECURITY number of:
1. An individuals' account The individual
2. Two or more individuals The actual owner of the
(joint account) account or, if combined funds,
any one of the individuals(1)
3. Husband and wife The actual owner of the
(joint account) account or, if joint funds,
either person(1)
4. Custodian account of a The minor(2)
minor (Uniform Gifts to
Minors Act)
16
<PAGE>
5. Adult and minor The adult or, if the minor
(joint account) is the only contributor, the
minor(1)
6. Account in the name of The ward, minor, or
guardian or committee for incompetent person(3)
a designated ward, minor,
or incompetent person
7. a. The usual revocable The grantor-trustee(1)
savings trust account
(grantor is also trustee)
b. So-called trust account The actual owner(2)
that is not a legal or
valid trust under State
law
8. Sole proprietorship account The owner(4)
Give the EMPLOYER
For this type of account: IDENTIFICATION number of:
9. A valid trust, estate, or The legal entity (Do not
pension trust furnish the identifying number
of the personal representative
or trustee unless the legal
entity itself is not
designated in the account
title)(5)
10. Corporate account The corporation
11. Association, club, The organization
religious, charitable,
educational or other tax-
exempt organization account
12. Partnership account The partnership
13. A broker or registered The broker or nominee
nominee
14. Account with the Department The public entity
of Agriculture in the name
of a public entity (such as
a State or local government,
school district, or prison)
that receives agricultural
program payments
- ------------
17
<PAGE>
(1) List, first and circle the name of the person whose number
you furnish.
(2) Circle the minor's name and furnish the minor's social
security number.
(3) Circle the ward's, minor's or incompetent person's name and furnish
such person's social security number.
(4) You must show your individual name, but you may also enter your
business or "doing business as" name. You may use your social security
number or employer identification number.
(5) List first and circle the name of the legal trust, estate,
or pension trust.
NOTE: If no name is circled when there is more than one name, the number will be
considered to be that of the first name listed.
OBTAINING A NUMBER
If you do not have a taxpayer identification number or you do not know
your number, obtain Form SS-5, Application for a Social Security Number Card, or
Form SS-4, Application for Employer Identification Number, at the local office
of the Social Security Administration or the IRS and apply for a number.
PAYEES EXEMPT FROM BACKUP WITHHOLDING
Payees specifically exempted from backup withholding on ALL payments
include the following:
- - A corporation.
- - A financial institution.
- - An organization exempt from tax under section 501(a), or an
individual retirement plan, or a custodial account under
section 403(b)(7).
- - The United States or any agency or instrumentality
thereof.
- - A State, the District of Columbia, a possession of the
United States, or any subdivision or instrumentality
thereof.
- - A foreign government, a political subdivision of a
foreign government, or any agency or instrumentality
thereof.
- - An international organization or any agency, or
instrumentality thereof.
18
<PAGE>
- - A registered dealer in securities or commodities
registered in the U.S. or a possession of the U.S.
- - A real estate investment trust.
- - A common trust fund operated by a bank under
section 584(a).
- - An exempt charitable remainder trust, or a nonexempt
trust described in section 4947(a)(1).
- - An entity registered at all times under the Investment
Company Act of 1940.
- - A foreign central bank of issue.
Payments of dividends and patronage dividends not generally subject to
backup withholding include the following:
- - Payments to nonresident aliens subject to withholding
under section 1441.
- - Payments to partnerships not engaged in a trade or
business in the U.S. and which have at least one
nonresident partner.
- - Payments of patronage dividends where the amount
received is not paid in money.
- - Payments made by certain foreign organizations.
- - Payments made to a nominee.
Payments of interest not generally subject to backup withholding
include the following:
- - Payments of interest on obligations issued by
individuals.
NOTE: You may be subject to backup withholding if this interest is $600
or more and is paid in the course of the payer's trade or business and you have
not provided your correct taxpayer identification number to the payer.
- - Payments of tax-exempt interest (including
exempt-interest dividends under section 852).
- - Payments described in section 6049(b)(5) to
non-resident aliens.
- - Payments on tax-free covenant bonds under section 1451.
- - Payments made by certain foreign organizations.
19
<PAGE>
- - Payments made to a nominee.
Exempt payees described above should file Substitute Form W-9 to avoid
possible erroneous backup withholding. FILE THIS FORM WITH THE PAYER, FURNISH
YOUR TAXPAYER IDENTIFICATION NUMBER, WRITE "EXEMPT" ON THE FACE OF THE FORM IN
PART II, SIGN AND DATE THE FORM, AND RETURN IT TO THE PAYER.
Certain payments other than interest, dividends, and patronage
dividends, that are not subject to information reporting are also not subject to
backup withholding. For details, see the regulations under sections 6041,
6041A(a), 6045, and 6050A.
ACT NOTICE.--Section 6109 requires most recipients of dividend,
interest, or other payments to give taxpayer identification numbers to payers
who must report the payments to IRS. IRS uses the numbers for identification
purposes. Payers must be given the numbers whether or not recipients are
required to file tax returns. Payers must generally withhold 31% of taxable
interest, dividend, and certain other payments to a payee who does not furnish a
taxpayer identification number to a payer. Certain penalties may also apply.
PENALTIES
(1) Penalty for Failure to Furnish Taxpayer Identification Number.--If
you fail to furnish your taxpayer identification number to a payer, you are
subject to a penalty of $50 for each such failure unless your failure is due to
reasonable cause and not to willful neglect.
(2) Failure to Report Certain Dividend and Interest Payments. --If you
fail to include any portion of an includible payment for interest, dividends, or
patronage dividends in gross income and such failure is due to negligence, a
penalty of 20% is imposed on any portion of an under-payment attributable to
that failure.
(3) Civil Penalty for False Information With Respect to
Withholding.--If you make a false statement with no reasonable basis which
results in no imposition of backup withholding, you are subject to a penalty of
$500.
(4) Criminal Penalty for Falsifying Information. --Falsifying
certifications or affirmations may subject you to criminal penalties including
fines and/or imprisonment.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE
SERVICE.
20
<PAGE>
NOTICE OF GUARANTEED DELIVERY TO
EXCHANGE CLASS A WARRANTS AND CLASS B WARRANTS
TO PURCHASE CLASS B WARRANTS AND SHARES OF
SERIES A COMMON STOCK OF
FOOD COURT ENTERTAINMENT NETWORK, INC.
FOR SHARES OF SERIES A COMMON STOCK OF
FOOD COURT ENTERTAINMENT NETWORK, INC.
This form (or one substantially equivalent to this from) must be used
to accept the Exchange Offer (as defined below) if the certificates for the
Class A Warrants or the certificates for the Class B Warrants of Food Court
entertainment Network, Inc., a Delaware corporation ( the"Company"), are not
immediately available. Such form may be delivered by hand or transmitted by
telegram, telex, facsimile transmission or letter to the Exchange Agent.
The Class A Warrants grant the holder the right to purchase one share
of Series A Common Stock, $.01 par value per share (the "Series A Common Stock")
and one Class B warrant at an exercise price of $5.13 (the "Class A Warrants").
The Class B Warrants grant the holder the right to purchase one share of Series
A Common Stock at an exercise price of $6.85 (the "Class B Warrants"), the Class
A Warrants and the Class B Warrants shall be collectively referred to herein as
the "Warrants." See the Company's Offer to Exchange dated August 22, 1997 (the
"Offer to Exchange").
AMERICAN STOCK TRANSFER & TRUST COMPANY
(the "Exchange Agent")
800-937-5449
EXTENSION 237
(For Information)
By Mail or Hand:
AMERICAN STOCK TRANSFER & TRUST COMPANY
40 WALL STREET
NEW YORK, NEW YORK 10005
Facsimile Transmission Copy Number:
718-234-5001
Confirm by Telephone to:
718-921-8237
THE ELIGIBLE INSTITUTION WHICH COMPLETES THIS FORM MUST COMMUNICATE THE
GUARANTEE TO THE EXCHANGE AGENT AND MUST DELIVER THE LETTER OF TRANSMITTAL AND
CERTIFICATES FOR THE WARRANTS TO THE EXCHANGE AGENT WITHIN THE TIME PERIOD SHOWN
HEREIN. FAILURE
<PAGE>
TO DO SO COULD RESULT IN A FINANCIAL LOSS TO SUCH ELIGIBLE INSTITUTION.
2
<PAGE>
Ladies and Gentlemen:
The undersigned hereby tenders to the Company for exchange ______ Class
A Warrants, pursuant to the guaranteed delivery procedures set forth in the
Offer to Exchange, the record holder thereof to be entitled to receive 0.6
shares of the Series A Common Stock, upon exchange of each such Class A Warrant,
and ______ Class B Warrants, pursuant to the guaranteed delivery procedures set
forth in the Offer to Exchange, the record holder thereof be to be entitled to
receive 0.4 shares of the Series A Common Stock, upon exchange of such Class B
Warrant, pursuant to the terms and subject to the conditions set forth in the
Offer to Exchange (the "Exchange Offer"), the receipt of which is hereby
acknowledged. See "The Exchange Offer -- Procedure for Exchange" in the Offer to
Exchange.
Name(s) of Class A Warrant Class B Warrant
Record Holder(s) Certificate No.(s) Certificate No.(s)
- ---------------------------------------------------------------------------
- ------------------------------
Address(es)
- ------------------------------
- ------------------------------
- ------------------------------
- ------------------------------
- ------------------------------
Area Code and Telephone Number
3
<PAGE>
GUARANTEE
The undersigned, a member firm of a registered national securities
exchange, a member of the National Association of Securities Dealers, Inc. or a
commercial bank or trust company having an office, branch or agency in the
United States, hereby guarantees that the Certificates representing the Warrants
tendered hereby, together with a Letter of Transmittal and any other required
documents, will be received by the Exchange Agent at its address set forth
above, no later than five Nasdaq trading days after the date hereof.
- -----------------------------------
(Firm)
- -----------------------------------
(Authorized Signature)
- -----------------------------------
(Name)
- -----------------------------------
(Title)
- -----------------------------------
(Address)
- -----------------------------------
- -----------------------------------
(Area Code and Telephone Number)
Date: __________, 1997
NOTE: DO NOT SEND WARRANT CERTIFICATES
WITH THIS FORM. SUCH CERTIFICATES SHOULD BE
SENT WITH THE LETTER OF TRANSMITTAL.
4
<PAGE>
[FOOD COURT ENTERTAINMENT NETWORK, INC. LETTERHEAD]
August 25, 1997
To: Holders of Class A Warrants and Class B Warrants to purchase shares of
Series A Common Stock, $.01 par value per share, and Class B Warrants
of Food Court Entertainment Network, Inc.
Ladies and Gentlemen:
Food Court is offering to exchange shares of Series A Common Stock for
Class A and Class B Warrants which have been issued to you.
Specifically, each Class A Warrant will be exchanged for 0.6 shares of
Series A Common Stock and each Class B Warrant will be exchanged for 0.4 shares
of Series A Common Stock.
Enclosed is an Offer To Exchange which describes in specific detail the
Company's offer, the process for exchange and the reason Food Court management
has determined to make such an offer. Also enclosed is a Letter of Transmittal
which you must complete to effect the exchange and several other documents
containing important information about the Exchange Offer. Please read all of
these documents carefully before deciding to make the exchange.
The Exchange Offer begins on August 25, 1997 and will expire at 5:00
p.m. on September 26, 1997, unless the Company decides to extend the Exchange
Offer. The Company has conditioned the Exchange Offer upon, among other things,
at least 70% of the Class A Warrants (6,157,758 of Class A Warrants issued and
outstanding) and 70% of the Class B Warrants (4,968,213 of the Class B Warrants
issued and outstanding) being tendered for exchange and not withdrawn. The terms
of the Exchange Offer are subject to amendment.
The Company believes that the Exchange Offer is necessary to decrease
the dilutive effect of the Warrants upon the Company's capital structure. The
large number of Warrants issued and outstanding has made it difficult for the
Company to obtain necessary financing. Upon completion of the Exchange Offer,
the Company intends to seek additional financing or strategic alliances to
foster continued growth and expansion of the Company. The Company cannot,
however, provide assurance to you that the Exchange Offer will be successfully
completed or, if
<PAGE>
successfully completed, that the Company will be able to obtain new financing or
enter into strategic alliances.
Neither the Company nor its Board of Directors makes any recommendation
to you whether you should accept this Exchange Offer and tender your Warrants or
refrain from doing so. You must make your own decision whether to accept or
reject the Exchange Offer.
The Exchange Offer is described in detail in the Offering Materials,
which include the Company's Annual Report on Form 10-KSB for the year ended
December 31, 1996, the Company's Quarterly Reports on Form 10-QSB for the
quarters ended March 31, 1997 and June 30, 1997, and the Notice of the Annual
Meeting of Stockholders and Proxy Statement for the Company's 1997 Annual
Meeting of Stockholders dated May 2, 1997, as Exhibits to the Offer to Exchange,
and the Letter of Transmittal. PLEASE READ THE ACCOMPANYING EXCHANGE OFFER
MATERIAL FOR A FULL DESCRIPTION OF THE TERMS AND CONDITIONS OF THE EXCHANGE
OFFER.
The Offering Materials are comprehensive and have been written, in
part, to satisfy certain legal requirements. If you have any questions regarding
the terms and conditions of this Exchange Offer, please contact Eric C.
Mendelson, Esquire, Director of Business Affairs, Food Court Entertainment
Network, Inc., 220 East 42nd Street, 16th Floor, New York, New York 10017,
telephone number (212) 983-4500. If you have any questions regarding the
procedure for tendering Warrants please contact the representatives of American
Stock Transfer & Trust Company, which is acting as the Exchange Agent for the
Exchange Offer. The Telephone number for American Stock Transfer & Trust Company
is set forth in the Offering Circular and Letter of Transmittal.
Very truly yours,
/s/ James N. Perkins
James N. Perkins
President and
Chief Executive Officer
JNP/scv
Enclosures
<PAGE>
FOOD COURT ENTERTAINMENT NETWORK, INC.
Offer to Exchange 0.6 Shares of
Series A Common Stock for Each
Class A Warrant and 0.4 Shares of
Series A Common Stock for Each Class B Warrant
To Our Clients:
Enclosed for your consideration are the Offer to Exchange, dated August
25, 1997 and the related Letter of Transmittal (which together constitute the
"Exchange Offer") in connection with the Exchange Offer by Food Court
Entertainment Network, Inc., a Delaware corporation (the "Company"), to exchange
0.6 shares of Series A Common Stock for each outstanding Class A Warrant and 0.4
shares of Series A Common Stock for each outstanding Class B Warrant
(collectively "Warrants") on the terms and subject to the conditions of the
Exchange Offer.
If prior to the Expiration Date (as defined in the Offer to Exchange)
at least 70% of the Class A Warrants (6,157,758 Class A Warrants ) and 70% of
the Class B Warrants (4,968,213 Class B Warrants) are tendered and not
withdrawn, the Company, will upon the terms and subject to the conditions of the
Exchange Offer, accept the Class A Warrants and Class B Warrants in exchange for
Series A Common Stock.
We are the holder of record of Warrants held for your account. As such,
we are the only ones who can tender your Warrants, and then only pursuant to
your instructions. We are sending you the Letter of Transmittal for your
information only; you cannot use it to tender Warrants we hold for your account.
Please instruct us as to whether you wish us to tender all of the
Warrants we hold for your account on the terms and subject to the conditions of
the Offer to Exchange. You must exchange all of your Warrants in order to accept
the Exchange Offer.
We call you attention to the following:
1. You may tender each of your Class A Warrants for 0.6 shares of
Series A Common Stock and each of your Class B Warrant for 0.4 shares of Series
A Common Stock as indicated in the attached instruction form.
2. The Exchange Offer is conditioned upon all of your
Warrants being tendered.
3. The Exchange Offer and withdrawal rights will expire at 5:00 p.m.,
Eastern time, on September 26, 1997 unless the Company extends the Offer.
<PAGE>
4. Tendering holders of Warrants will not be obligated to pay any
brokerage commissions, solicitation fees or, subject to Instruction 7 of the
Letter of Transmittal, stock transfer taxes on the Company's exchange of
Warrants for Shares pursuant to the Exchange Offer.
If you wish to have us tender all of your Warrants, please so instruct
us by completing, executing and returning to us the attached instruction form.
An envelope to return your instructions to us is enclosed. If you authorize us
to tender your Shares, we will tender all such Shares unless you specify
otherwise on the attached instruction form.
YOUR INSTRUCTION FORM SHOULD BE FORWARDED TO US IN AMPLE TIME TO PERMIT
US TO SUBMIT A TENDER ON YOUR BEHALF ON OR BEFORE THE EXPIRATION OF THE OFFER.
THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS EXPIRE AT 5:00 P.M., EASTERN
TIME, ON SEPTEMBER 26, 1997 UNLESS THE COMPANY EXTENDS THE OFFER.
The Company is not making the Exchange Offer to, nor will it accept
tenders from or on behalf of, owners of Warrants in any jurisdiction in which
the Exchange Offer or its acceptance would violate the securities, blue sky or
other laws of such jurisdiction.
<PAGE>
Instruction Form
With Respect to the
FOOD COURT ENTERTAINMENT NETWORK, INC.
Offer to Exchange 0.6 Shares of
Series A Common Stock for Each
Class A Warrant and 0.4 Shares of
Series A Common Stock for Each Class B Warrant
The undersigned acknowledges receipt of your letter and the enclosed
Offer to Exchange, dated August 22, 1997 and related Letter of Transmittal
(which together constitute the "Exchange Offer"), in connection with the
Exchange Offer by Food Court Entertainment Network, Inc., a Delaware corporation
(the "Company"), to exchange 0.6 shares of Series A Common Stock for each Class
A Warrant and 0.4 shares of Series A Common Stock for each Class B Warrant, upon
the terms and subject to the conditions of the Exchange Offer.
The undersigned hereby instructs you to accept the Exchange Offer of
the Company and, therefore, to tender all Class A Warrants of the Company held
by you for the undersigned in exchange for 0.6 shares of Series A Common Stock
of the Company and to tender all Class B Warrants of the Company held by your
for the undersigned in exchange for 0.4 shares of Series A Common Stock, on the
terms and subject to the conditions of the Exchange Offer. The undersigned
acknowledges that the Exchange Offer is conditioned upon, among other things,
the valid tender for exchange of not less than 70% of the Class A Warrants and
70% of the Class B Warrants, which tender has not been withdrawn. Further, upon
closing of the Exchange Offer, the undersign relinquishes and waives all rights
granted by the Class A Warrants and Class B Warrants, including, without
limitation, all anti-dilution provisions of the Class A Warrants and Class B
Warrants.
Aggregate number of Class A Warrants to be
tendered by you for the account of the
undersigned:
________________ Class A Warrants
Aggregate number of Class B Warrants to be
tendered by you for the account of the
undersigned:
________________ Class B Warrants
<PAGE>
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SIGNATURE BOX
Signature(s)___________________________________________________________________
Dated ___________________________________________________________________, 1997
Name(s) and Address(es)________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
(Please Print)
Area Code and Telephone Number_________________________________________________
Taxpayer Identification or
Social Security Number_________________________________________________________
===============================================================================
<PAGE>
Contact: Allan Priaulx or
Jean Brandolini
Novell Communications
---------------------
Phone: (212) 687-7977
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FOR IMMEDIATE RELEASE
FOOD COURT ENTERTAINMENT NETWORK, INC.
OFFER TO EXCHANGE
SHARES OF ITS SERIES A COMMON STOCK FOR
CLASS A WARRANTS AND CLASS B WARRANTS
New York City, August 25, 1997 -- Food Court Entertainment Network, Inc.,
(Nasdaq "FCENU, FCENA"), which operates an entertainment and information
television network in shopping malls across the country, offered today to
exchange 0.6 shares of the Company's Series A Common Stock for each outstanding
Class A Warrant and 0.4 shares of the Series A Common Stock for each outstanding
Class B Warrant.
Terms and conditions of the Offer to Exchange, subject to amendment, extension
or termination, include a provision that at least 70% of the issued and
outstanding Class A Warrants and Class B Warrants be tendered, prior to
5:00 p.m. EST on September 26, 1997.
The Company said it decided to offer to exchange common stock shares for
warrants in order to substantially decrease the potention dilution effect the
warrants have upon the company's capital structure.
If 8,796,797 outstanding Class A Warrants and 7,097,400 outstanding Class B
Warrants are exchanged, the Company will have approximately 15,200,000 shares of
Series A Common Stock issued and outstanding, while if all of these were
exercised, the Company would have approximately 31,750,000 common stock shares
issued and outstanding.
Company management said that by eliminating the potential dilution from the
Class A and Class B warrants, the Company will have opportunities for future
financing. The Company is seeking additional financing or strategic alliances
to foster continued growth and expansion.
1
Forward-looking statements in this news release, if any, are made under the
safe harbor provisions of the Private Securities Litigation Reform Act of
1995. Certain important factors could cause results to differ materially from
those anticipated by the forward-looking statements, including the impact of
changing economic or business conditions and other risk factors inherent in the
retail, real estate and entertainment industries and other factors discussed
from time to time in reports filed by the company with the Securities and
Exchange Commission.
