Mail Stop 3628
January 17, 2006
VIA FACSIMILE: (313) 225-7080
David B. Braun, Esq.
Butzel Long, P.C.
150 West Jefferson
Suite 100
Detroit, Michigan 48226
(313) 225-7000
Re: Sports Resorts International Inc.
Schedule 13E-3 - File No. 005-40279, filed January 4, 2005
Schedule TO-T - File No. 005-40279, filed January 4, 2005
Dear Mr. Braun:
We have reviewed your filing and have the following
comments. Where indicated, we think you should revise your documents
in response to these comments. If you disagree, we will consider
your explanation as to why our comment is inapplicable or a revision
is unnecessary. Please be as detailed as necessary in your
explanation. In some of our comments, we may ask you to provide us
with supplemental information so we may better understand your
disclosure. After reviewing this information, we may or may not
raise additional comments.
Please understand that the purpose of our review process is
to assist you in your compliance with the applicable disclosure
requirements and to enhance the overall disclosure in your filing.
We look forward to working with you in these respects. We welcome
any questions you may have about our comments or any other aspect
of our review. Feel free to call us at the telephone numbers listed
at the end of this letter.
General
1. As currently represented, the offer could be open for less than
20 full business days due to the 5:00 p.m. expiration time instead
of an expiration time of midnight on what ultimately may be the
twentieth business day following commencement. See Question and
Answer Eight in Exchange Act Release No. 16623 (March 5, 1980).
Please confirm that the offer will be open at least through midnight
on the twentieth business day. See Rule 14d-1(g)(3).
Schedule 13E-3
General
2. You should make clear and unequivocal statements that all of
the filing persons, including the Williamsons, considered the fairness
of the Rule 13e-3 transaction to unaffiliated security holders and
that they believe that the transaction is fair to unaffiliated security
holders. Each filing person must provide their own analysis or,
if none was performed by such filing person, expressly adopt the
analysis of the board of directors as its own. Please see Item
1014 of Regulation M-A and its Instructions for additional guidance.
3. It appears that Mr. Williamson, and possibly the remaining
Williamsons, who form the "Continuing Shareholders", as defined in
your disclosure may be a bidder or bidders in this tender offer
and should be added to an amended Schedule TO-I promptly. We note that
Mr. Williamson, a control person, is acting together with the
company and played a significant role in initiating, structuring, and
negotiating the tender offer with the company. We refer you to
the background of the offer disclosure. It appears that Mr.
Williamson is acting together with the company and in such role,
controlling the terms of the offer. We further note that through
his controlling positions, both in title and equity holdings,
Mr. Williamson may be viewed as the person on whose behalf the
tender offer is made. For example, it is the Williamson family,
the "Continuing Shareholders," as that phrase is defined in your
disclosure, that will benefit from the offer and going private
transaction. Please provide a detailed analysis explaining why
Mr. Williamson has not been identified as a bidder or has not
separately filed Schedules TO-T. For a list of factors to be
considered in determining the bidders in a tender offer, see the
section entitled "Identifying the Bidder in a Tender Offer" in the
Division ofCorporation Finance`s Current Issues Outline, dated
November 14, 2000, available on our website at www.sec.gov. In
this regard, please also note that the definition of bidder in
Rule 14d-1(g)(2) includes any person "on whose behalf a tender
offer is made. .. ." In your analysis, please identify the
Williamson "children," how each person holds the securities
of the company and a break down of the number and percentage of
securities held by each person. Further, identify any positions of
employment or on the board at the company, and any role in the
tender offer, relying on the Current Issues Outline referenced above.
4. Please provide us with your analysis as to why the Williamson
"children" who currently own shares of the company are not engaged
in this going private transaction. In the alternative, add those
persons as filers on the Schedule 13E-3 and consider whether they are
also bidders in the tender offer. For guidance, see "Schedule 13E-3
Filing Obligations of Issuers or Affiliates Engaged in a Going-Private
Transaction" in Section II.D.3 of the Division of Corporation
Finance`s "Current Issues and Rulemaking Projects" Outline
(November 2000), available on our web site at www.sec.gov. In your
analysis please address all of the factors identified in this Current
Issues guidance, including, but not limited to, future employment and
equity participation in the surviving company of each Williamson "child."
5. Please see our comment regarding the Williamsons as bidders in
the tender offer. We note that you will follow this tender offer by a
"squeeze out" merger of remaining unaffiliated shareholders. Given
the existing affiliation between the bidders and the company
before the Offer, you may not rely on the Rule 13e-3(g)(1) exception
for the second-step transaction. Discuss in your response letter how you
will comply with the timing, dissemination and disclosure requirements
of Rule 13e-3 and Schedule 13E-3 as to the second-step merger
transaction. Alternatively, revise the offer to purchase to
address both the fairness of the offer and the subsequent second-step
merger transaction. For example, the "Fairness of the Transaction"
section addresses only the fairness of the offer. Please be sure to
address both substantive and procedural fairness as required by Item
1014 of Regulation M-A.
6. Amend the Schedule TO to check the box that the schedule
constitutes an amendment to Schedule 13D under Rule 13d-2.
Alternatively, please file an amended Schedule 13D for the
Continuing Shareholders.
7. It appears that Mr. Donald J. Williamson and Ms. Patsy
Williamson, constituting part of the Continuing Shareholders, last
filed an amendment to the Schedule 13D on January 16, 1996 with respect
to the common stock. Please tell us why these holders, holding 98% of
the securities of the company, did not file an amendment to the
Schedule 13D when the Schedule TO-I to acquire the remaining shares was
filed on September 16, 2005. We may have additional comments.
8. We note that your disclosure indicates that the Williamson
"children" are Continuing Shareholders and security holders.
Please tell us at what date the Williamson children became beneficial
holders and how each person fulfilled his or her beneficial
ownership reporting obligation, if any, under Rule 13d-1.
Financial Statements
9. We note that the financial statements contained in the
company`s annual report on Form 10-K for the year ended December 31, 2004
is incorporated herein by reference. Further, the company`s unaudited
consolidated financial statements for the nine month periods ended
September 30, 2005 and September 30, 2004, are included in the
company`s quarterly report on Form 10-Q for the period ended
September 30, 2005 and are also incorporated herein by reference.
Please amend the financial statement section to clearly identify
the matter incorporated by page, paragraph, caption or otherwise.
See Instruction 3 to Item 13 of Schedule 13E-3.
10. Although you may incorporate by reference to disclosure
contained in other filings with the SEC, you must provide the summary
financial information required by Item 1010(c) of Regulation M-A in the
disclosure document disseminated to shareholders in connection
with this going private transaction. Please see Instruction 1 to Item
13 of Schedule 13E-3, Instruction 6 to Item 10 of Schedule TO and Q&A
7 in Section I.H of the Division of Corporation Finance`s Manual of
Publicly Available Telephone Interpretations (July 2001). Please
amend your summary information to include all the information
required, including, but not limited to the income per common
share, the net income per common share and the ratio of earnings to
fixed charges. See Item 1010(c)(2), (3), and (4), respectively.
Offer to Purchase - General
11. Where a transaction will impact different subsets of
shareholders differently, the fairness determination required by
Item 1014(a) must be made as to each group separately. See Q&A No. 19
in Exchange Act Release No. 17719 (April 13, 1981). Revise the disclosure
throughout this information statement to separately address fairness to
those shareholders being cashed out and fairness to those who will
remain as shareholders in a private company. We note that pursuant to
the anticipated second-step merger transaction, remaining
shareholders, other than the Continuing Shareholders, will be cashed out.
Summary Term Sheet, page 1
12. Please add a "question and answer" addressing the fact that
shareholders who exercise dissenters` rights under Michigan law
will receive a judicially determined fair value for their shares, which
value could be more or less than the price per share to be paid in
the merger and refer to the more detailed section on dissenters
rights. Please add the same disclosure where you address "the
only difference" between tendering shares now and waiting for the
transaction, if it should happen, as receiving the compensation
now or later under the Introduction on page 4.
Introduction, page 4
13. Please amend your disclosure on your intent to delist the
shares from the trading on the Nasdaq small cap market to disclose
the receipt of the Nasdaq delisting notice as described in your Form
8-K of January 10, 1006.
14. Disclose why the completion of the second-step transaction in
the form of a short-form merger is dependent upon the percentage of
shares owned by the continuing shareholders following the merger.
It appears that since the continuing shareholders own 90% or more of
the shares that remain outstanding now a short-form merger may be
effected, without a vote of the company`s security holders.
Please reconcile this disclosure with that found on page 7. Describe
the requirements to effect a short-form merger under Michigan law and
state that the Continuing Shareholders currently meet them, if
true, or how they plan to meet them. Further, confirm that there are
no more current plans of the continuing shareholders in this respect,
i.e., if true, state that the Continuing Shareholders now know
that they will effect a short-form merger. Disclose what factors would
affect the decision of the Continuing Shareholders to effect the
second-step transaction and specifically, a short-form merger.
15. We note your statement on page 4 that in the event of a
second-step transaction "all of the Shares not purchased in the Offer
would be exchanged for the same amount of cash per share that would
have been received had such Shares been tendered in the Offer." Please
reconcile this with your statement on page 7 that "[i]t is likely
that the consideration payable to the public shareholders in the
second-step transaction would be cash in an amount equal to the
purchase price in the offer.
Special Factors, page 6
16. Expand your disclosure to include the date of the meeting at
which "Mr. Williamson approached the other members of the Board of
Directors regarding a proposal to acquire all of the company`s
outstanding common stock from public shareholders." Describe
exactly what offer was presented to the board by Mr. Williamson. For
example, state whether or not Mr. Williamson provide the board
with a range of offers or offers with various conditions, or alternative
structures, etc. Further, identify the entirety of the factors
discussed by the "other members of the Board of Directors and Mr.
Williamson" regarding the "pricing of such a transaction."
17. Identify all of the factors considered by the board members in
making the determination that "the purchase price was fair to
unaffiliated shareholders based on historical financial results
and current financial condition of the company." We note your
reference to book value and revenues.
18. Please discuss the board`s consideration of the historical
market prices. For example, state whether the board considered the
fact that the company shares had fiscal year 2005 highs of up to $3.98.
We note the statement that the board considered that the company`s
stock "had settled into a trading range below $1.00." Is there
something specific that happened to the company between the 2005
first quarter highs and now that made the board believe that the
stock price would not rebound?
19. We note your discussion of the factors regarding procedural
fairness. Please state that the offer is not contingent on the
approval of at least a majority of the nonaffiliated shareholders.
See Item 1014(b) of Regulation M-A. You currently state that the
offer is not contingent on the approval of the nonaffiliated
shareholders. Please make corresponding changes throughout your
disclosure.
20. Please state whether or not the Rule 13e-3 transaction was
approved by a majority of the directors of the subject company who
are not employees of the subject company. See Item 1014(e) of
Regulation M-A. Please make corresponding changes throughout your
disclosure in response to the comments of this Special Factors
section at the Position of the Board of Directors; Fairness of the
Offer section starting at page 8.
Purposes, Alternatives, Reasons and Effects, Item 7 of Schedule
13E-3, page 7
21. Please amend your Schedule 13E-3 and corresponding disclosure
document to include disclosure responsive to Item 7 of Schedule
13E-3. Please be as detailed as possible in stating the alternatives
The subject company or affiliates considered to accomplish the stated
purposes, briefly describing the alternatives and state the
reasons for their rejection. Please note that conclusory statements
are not considered sufficient disclosure in response to this section.
See Instruction 1 to Item 1013 of Regulation M-A.
22. Please state the reason for undertaking the transaction at
this time. See Item 1013(c) of Regulation M-A. For example, we note
that the company has had the costs of public company reporting status
for some time now.
23. Please include a description of the effects of the Rule 13e-3
transaction on the subject company, its affiliates and
unaffiliated security holders, including the federal tax consequences.
The disclosure must include a reasonably detailed description of both
the benefits and detriments of the transaction to the subject company,
its affiliates and unaffiliated security holders. See Item 1013(d)
of Regulation M-A. The benefits and detriments of the transaction
must be quantified to the extent practicable. You should include
disclosure on the negative consequences to the unaffiliated
security holders. State whether or not the company currently has net
operating losses and the amount. At minimum, it would seem that
the loss of participation in any future NOLs, would be a detriment of
the transaction to such unaffiliated security holders. Such detriment
should be quantified.
24. Because this statement is filed by an affiliate of the subject
company, the "effects" description required by paragraph (d) of
Item 1013 of Regulation M-A must include, but not be limited to,
the effect of the Rule 13e-3 transaction on the affiliate`s interest
in the net book value and net earnings of the subject company in
terms of both dollar amounts and percentages. Provide the required
information for each affiliate filing person individually.
Rights of Shareholder in the Event of the Second-step Transaction,
page 8
25. Please explain your statement that "[i]n the event that the
Second-Step Transaction is implemented . . . the shareholders who
have not tendered the Shares beneficially held by them may have
certain rights to dissent and receive the fair value of such
Shares. It appears that Michigan allows for such dissenters` rights.
26. Please provide a brief summary of the procedures to be followed
by security holders desiring to exercise dissenters` rights under
Michigan law. At minimum, include disclosure regarding how a
security holder would preserve the right to exercise dissenters`
rights during the course of this tender offer and the preliminary
steps required to exercise such rights in a resulting short-form
merger. You should highlight potential actions or inactions that
would result in a loss of dissenters` rights.
Position of the Board of Directors; Fairness of the Offer, page 8
27. Each filing person should discuss in reasonable detail the
material factors upon which the belief of fairness of the Rule
13e-3 transaction as to the unaffiliated security holders is based
and, to the extent practicable, the weight assigned to each factor.
The discussion must include an analysis of the extent, if any, to
which the filing person`s beliefs are based on the factors described in
Instruction 2 of Item 1014 of Regulation M-A, and paragraphs (c),
(d) and (e) of this section and Item 1015 of Regulation M-A. To the
extent any of the factors listed there were not considered in the
context of this transaction, the explanation of why may be
important for a shareholder seeking to understand the filing persons`
and board`s analysis of this transaction. Please expand to address
these factors, including, but not limited to historical market prices,
going concern value, and liquidation value.
Interests of Certain Person in the Offer, page 9
28. Please disclose the amount of interest and principal
outstanding under the February 1999 loan to the Williamsons and the
company`s current plans of collection.
29. We note that the board "is aware of . . . actual and potential
conflicts of interest and has considered them along with the other
matters described [under other sections]." Please identify the
conflicts of interest that exist as between the Continuing
Shareholders and actions related to the company. We note the
identification of "control [of] all matters requiring approval of
the Company`s shareholders, including the election of directors and
approval of any Second-Step Transaction." Disclose the steps the
board took to address such conflicts. Please identify any other
area where the board considered there to be a conflict of interest
and measures of precautions or steps implemented to address such
conflicts.
30. If the company has net operating losses that will be available
to reduce the federal and state income taxes for its continued
operation, under the Continuing Shareholders, benefiting only
affiliates who retain an interest in the company, prominently
discuss here the plans of the Continuing Shareholders to continue
the business and take advantage of such NOLs.
Certain Conditions of the Offer, page 25
31. In our view, you may condition a tender offer on any number of
conditions, as long as they are described with reasonable
specificity, capable of some measure of objective verification,
and outside of your control. In the last paragraph of this section,
the phrase "regardless of the circumstances" is not consistent with
our position because it purports to allow you to assert an offer
condition even when the condition is "triggered" by your own
action or inaction. Please revise in accordance with our position.
32. In the same paragraph, you state that you may waive a
condition in whole or in part at any time and from time to time in
your sole discretion, and in the last sentence of the paragraph, that
each such right shall be deemed an ongoing right that may be asserted any
time and from time to time. As you know, all conditions must be
satisfied or waived prior to expiration of an offer. Please amend your
disclosure accordingly.
Closing Comment
We urge all persons who are responsible for the accuracy and
adequacy of the disclosure in the filing reviewed by the staff to
be certain that they have provided all information investors require
for an informed decision. Since the filing persons are in possession
of all facts relating to a company`s disclosure, they are responsible
for the accuracy and adequacy of the disclosures they have made.
In connection with responding to our comments, please
provide, in writing, a statement from each filing person acknowledging
that:
* that filing persons are responsible for the adequacy and
accuracy of the disclosure in the filing;
* staff comments or changes to disclosure in response to staff
comments do not foreclose the Commission from taking any action
with respect to the filing; and
* that filing persons may not assert staff comments as a defense
in any proceeding initiated by the Commission or any person under the
federal securities laws of the United States.
In addition, please be advised that the Division of
Enforcement has access to all information you provide to the staff of
the Division of Corporation Finance in our review of your filing or in
response to our comments on your filing.
As appropriate, please amend your filings in response to
these comments. You may wish to provide us with black-lined copies of
the amended filings to expedite our review. Please furnish a cover
letter with your amended filing that keys your responses to our
comments and provides any requested supplemental information and
file such letter on EDGAR. Detailed cover letters greatly facilitate
our review. Please understand that we may have additional comments
after reviewing your amended filings and responses to our comments.
If you have any questions please contact me at (202) 551-3257 or
by facsimile at (202) 772-9203.
Very truly yours,
Celeste M. Murphy
Special Counsel
Office of Mergers and Acquisitions
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