SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________________________________
SCHEDULE 13E-3
RULE 13E-3 TRANSACTION STATEMENT
(Pursuant to Section 13(e) of the Securities Exchange Act of 1934 and
Rule 13e-3 thereunder)
(Amendment No. 1)*
MASCOTT CORPORATION
(Name of the Issuer)
MASCOTT CORPORATION AND DINE, LLC
(including Richard Gillman, Scott M. Gillman and Marc A. Gillman,
the principals of DINE, LLC)
(Name of Persons Filing Statement)
Common Stock, no par value 574672-30-9
(Title of Class of Securities) (CUSIP Number of Class of Securities)
_________________________________
Scott M. Gillman, Chairman
DINE, LLC AND MASCOTT CORPORATION
5N Regent Street
Suite 508
Livingston, New Jersey 07039
(201) 535-1000
(Name, Address and Telephone Number of Persons Authorized to Receive
Notices and Communications on Behalf of the Persons Filing Statement)
__________________________________
Copies to:
Robert G. Minion, Esq.
Lowenstein, Sandler, Kohl,
Fisher & Boylan, P.C.
65 Livingston Avenue
Roseland, New Jersey 07068
(201) 992-8700
April 13, 1995
(Date Tender Offer First Published, Sent or Given to Security Holders)
This Statement is Filed in Connection With a Tender Offer
Calculation of Filing Fee
Transaction valuation Amount of Filing Fee
$ 672,908* $135.00
* For purposes of calculating filing fee only. This amount assumes the
purchase of 434,134 shares of Common Stock, no par value, of Mascott
Corporation at $1.55 in cash per share. The amount of the filing fee
calculated in accordance with Regulation 240.0-11 of the Securities
Exchange Act of 1934 equals 1/50 of 1% of the value of the shares to
be purchased.
[X] 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: $135.00
Form of Registration Schedule 13E-3, No.: Rule 13e-3
Transaction Statement
Filing Party: DINE, LLC
Date Filed: April 13, 1995
Introduction
This Amendment No. 1 to the Rule 13E-3 Transaction Statement
filed on April 13, 1995 (the "Statement") relating to a tender offer
by DINE, LLC (the "Purchaser") to purchase any and all outstanding shares
of Common Stock, no par value (the "Shares"), of Mascott Corporation, a
New Jersey corporation (the "Company"), at $1.55 per Share, net to the
seller in cash, amends and supplements such Statement. The tender offer is
being made on the terms and subject to the conditions set forth in the
Purchaser's Offer to Purchase, dated April 13, 1995 and as amended
May 3, 1995 (the "Offer to Purchase"), and the related Letter of
Transmittal (which together constitute the "Offer"), and is intended
to satisfy the reporting requirements of Section 13(e) of the
Securities Exchange Act of 1934, as amended. Copies of the Offer to
Purchase and the related Letter of Transmittal, each dated April 13,
1995, were filed by the Purchaser as Exhibits (a)(1) and (a)(2),
respectively, to the Schedule 14D-1 (the "Schedule 14D-1") which was
filed by the Purchaser with the Securities and Exchange Commission
(the "Commission") contemporaneously with the Statement and a copy of
the Offer to Purchase, as amended, is attached as Exhibit d(9) hereto.
The Schedule 14D-1 has been amended and such amendment has been filed
by the Purchaser with the Commission contemporaneously with this
Amendment No. 1.
Item 2. Identity and Background.
The response to Item 2 is hereby amended to change the first
sentence of such response to the following:
This Statement is being filed jointly by (i) the Purchaser, a
New Jersey limited liability company, (ii) the principals of the
Purchaser, and (iii) the Company, a New Jersey corporation which is the
issuer of the class of equity securities which is the subject of the
Rule 13e-3 transaction.
Item 4. Terms of the Transaction.
The response to Item 4(a) is hereby amended by incorporating
herein by reference the information set forth under the caption
"THE TENDER OFFER - Certain Conditions of the Offer," in the Offer to
Purchase, as amended.
Item 6. Source and Amount of Funds or Other Consideration.
The answer to Item 4 of the amended Schedule 14D-1 is
incorporated herein by reference.
Item 8. Fairness of the Transaction.
The response to Items 8(b)-(d) is hereby amended incorporating
herein by reference the information set forth under the caption
"SPECIAL FACTORS - Fairness of the Offer and the Merger; Recommendation
by the Board of Directors" in the Offer to Purchase, as amended.
Item 9. Reports, Opinions, Appraisals and Certain Negotiations.
The response to Items 9(a)-(b) is hereby amended by incorporating
herein by reference the information set forth under the caption
"SPECIAL FACTORS - Opinion of Financial Advisor" in the Offer to
Purchase, as amended.
Item 16. Additional Information.
The answer to Item 10 of the amended Schedule 14D-1 is
incorporated herein by reference.
Item 17. Material to be Filed as Exhibits.
The response to Item 17 is hereby amended by adding the following new
exhibits, which are filed herewith:
(a) Background Report Prepared by the Financial Advisor
(b)(9) Offer to Purchase, as amended, dated May 3, 1995
SIGNATURE
After due inquiry and to the best of its knowledge and belief,
the undersigned certifies that the information set forth in this
statement is true, complete and correct.
Dated: May 3, 1995 DINE, LLC
By:/s/ Scott M. Gillman
Scott M. Gillman, Chairman
MASCOTT CORPORATION
By:/s/ Scott M. Gillman
Scott M. Gillman, Chairman
/s/ Richard Gillman
Richard Gillman
/s/ Scott M. Gillman
Scott M. Gillman
/s/ Marc A. Gillman
Marc A. Gillman
EXHIBIT INDEX
Exhibit No. Seq. Page No.
(b)(2) Background Report Prepared by the Financial Advisor
(d)(9) Offer to Purchase, as amended, dated May 3, 1995
Exhibit (b)(2)
MASCOTT CORPORATION
Orderly Sale of Assets Analysis
April 10, 1995
Unaudited Estimated
Book Value Orderly Sale Value
2/26/95 Range
Current Assets:
Cash & Equivalents 619,000 619,000 to 619,000
Accounts Receivable -
Trade 42,000 2,000 42,000
Inventories 68,000 68,000 68,000
Prepaid 251,000 251,000 251,000
Expenses
Note Receivables (Shore 23,000 23,000 23,000
Group Note) _________ _________ _________
Total Current Assets 1,003,000 1,003,000 1,003,000
Operating Business Fixed
and Intangible Assets:
Cinnabon Restaurant Franchises 2,890,000 3,250,000 (a)
Markers Restaurant 270,000 330,000 (b)
Willie Mays Restaurants 170,000 200,000 (c)
Total Operating Business
Fixed & Intangible
Assets: 2,318,000 3,330,000 3,780,000
Investments:
Partnership Interest
in WMC-GP, Inc. 30,000 30,000 30,000 (d)
Common Stock in Shore 154,000 154,000 154,000 (d)
_______ _______ _______
Total Investments 184,000 184,000 184,000
Total Assets 3,505,000 4,517,000 4,967,000
Less: Current Liabilities:
Accounts Payable - Trade 186,000 186,000 186,000
Accrued Payroll 106,000 106,000 106,000
Accrued Interest 81,000 81,000 81,000
Accrued Sales Tax 31,000 31,000 31,000
Other Accrued Liabilities 106,000 106,000 106,000
Total Current Liabilities
Less: Long Term Liabilities:
Secured Convertible
Debenture 1,500,000 1,500,000 1,500,000
Operating Lease 150,000 0 0
Deferred Credit
Rent Escalation 126,000 0 0
_______ _________ __________
Total Long
Term Liabilities 1,776,000 1,500,000 1,500,000
Less: Class A
Preferred Stock 61,000 61,000 61,000
Equals: Total 1,156,000
Stockholders' Equity
Equals: Gross Sales
Proceeds to Common
Shareholders 2,444,000 2,884,000
Less: Selling Costs (e) 150,870 154,370
_________ ________
Equals: Net proceeds to Common
Shareholders(f) 2,283,130 2,729,630
Per Share (1,738,680
Outstanding Shares) $ 1.32 $ 1.57
Per Share (Note
Conversion Basis) $ 1.41 $ 1.57
MASCOTT CORPORATION
ORDERLY SALE OF ASSETS ANALYSIS
APRIL 10, 1995
Estimated Estimated Overhead Adjusted Acquisi-
1995 1995 Factor 1995 tion Orderly
Revenues EBDITA (g) EBDITA Multiple Sale Rounded
________ ______ ______ ______ ________ _______ _______
(a) Cinnabon 6,150,000 1,029,000 307,500 721,500 4.0 2,888,000 2,890,000
Fran- 1,029,000 307,500 721,500 4.5 3,246,750 3,250,000
chises
(b) Willie
Mays 1,065,000 100,000 43,400 56,600 3.0 169,800 170,000
Restaurants 100,000 43,400 56,600 3.5 198,100 200,000
(c) Markers 1,860,000 175,000 66,400 108,600 2.5 271,500 270,000
Restaurant 175,000 66,400 108,600 3.0 325,800 330,000
(d) Estimated at book value
(e) Estimated @ 3.0%
(f) Assumes no capital gain taxes paid by Mascott Corporation upon sale
of assets:
(g) Represents 5.0% of Estimated 1995 Cinnabon Sales Revenues
4.0% of Estimated 1995 Willie Mays Sales Revenues
4.0% of Estimated 1995 Markers Sales Revenues
MASCOTT CORPORATION
Analysis of Restaurant/Bakery Operations
For Year Ended Budgeted Actual Actual Actual Fiscal
December 31, 1995 1994 1993 1992 Year
1995
______________ ________ ______ ______ _______ _____
Total Sales:
Cinnabon 6,147 5,610 5,585 4,281
Willie Mays Chicken 1,085 1,054 993 435
Markers 1,662 1,598 1,508 1,439 8,557
_____ _____ _____ _____ _____
8,894 8,262 8,088 6,155 8,557
Total
Operating Income:
Paramus 107 118 103 90
% 18.8% 21.3% 20.3% 17.8%
Willowbrook 301 285 267 232
% 30.5% 29.7% 30.1% 27.8%
Rockaway 66 59 80 76
% 14.8% 13.6% 14.0% 17.5%
Ocean County 55 54 70 80
% 14.1% 14.3% 18.0% 19.6%
Menlo Park 200 185 199 241
% 28.2% 26.8% 29.6% 32.6%
Woodbridge 14.8 134 136 79
% 23.2% 22.0% 22.2% 28.4%
Staten Island 53 60 43 22
% 12.3% 14.2% 11.3% 19.8%
Arsenal 1 (14) (17) 21
% 0.5% -5.5% -8.0% 6.8%
Silver City (10) (16) (30) (45)
% -3.1% -5.2% 9.0% -7.0%
Cambridge 28 11 10 10
% 7.7% 3.1% 2.7% 5.3%
West Farms 0 0 (17)
% 0.0% 0.0% -24.8%
Independence 6 1 (23) 5
% 2.2% 0.5% -9.9% 9.0%
North Shore 44 24 43 29
% 11.4% 6.2% 10.2% 24.5%
Saugus 32 36 0 0
% 8.3% 21.3% 0.0% 0.0%
____ ____ ____ ____
Total Operating Income 1,029 937 863 855
% 16.8% 16.7% 15.5% 20.0%
Willie Mays
Chicken Restaurants:
Menlo Park 49 29 21 (19)
8.9% 5.5% 4.2% -4.3%
Willowbrook 51 52 43 33
9.4% 10.0% 8.5% 9.5%
100 81 64 14
WMC-GP, Inc. LP
Investments (1) 0 0 0
Markers Full Service
Restaurant-Jersey
City 176 152 89 (8)
10.8 6.2 1.6 -0.6
____ _____ ____ _____
2. Gross EBDITA 1,213 (13.8%) 1,096 13.3% 1,016 12.6% 861 14.0 1,314 15.4%
Less: Concept Development 49 0.6%
Less Direct Overhead 293 3.3% 302 3.5%
Less: Office Overhead 663 7.5% 574 6.7%
Net EBDITA 257 2.9% 438 5.1%
Less: Post Transaction
Adjustments
Public company expense 125 1.4% 125 1.4%
Adjusted Net EBDITA 382 4.3% 563 6.3%
AMENDED OFFER TO PURCHASE FOR CASH
ANY AND ALL OF THE OUTSTANDING SHARES OF COMMON STOCK
OF
MASCOTT CORPORATION
AT $1.55 NET PER SHARE
BY
DINE, LLC
THE OFFER AND WITHDRAWAL RIGHTS
EXPIRE AT 5:00 P.M. EASTERN
DAYLIGHT TIME, ON MAY 15, 1995,
UNLESS EXTENDED
THIS OFFER IS NOT CONDITIONED ON ANY MINIMUM NUMBER OF SHARES BEING TENDERED.
THIS TRANSACTION HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE FAIRNESS
OR MERITS OF SUCH TRANSACTION NOR UPON THE ACCURACY OR ADEQUACY OF THE
INFORMATION CONTAINED IN THIS DOCUMENT. ANY REPRESENTATION TO THE
CONTRARY IS UNLAWFUL.
NEITHER MASCOTT CORPORATION NOR ITS INDEPENDENT DIRECTORS MAKES ANY
RECOMMENDATION TO ANY STOCKHOLDER AS TO WHETHER TO TENDER OR TO
REFRAIN FROM TENDERING SHARES. EACH STOCKHOLDER MUST MAKE HIS OWN
DECISION WHETHER TO TENDER SHARES.
IMPORTANT
Any stockholder desiring to tender all or any portion of his
Shares (as defined below) should either (i) complete and sign the
Letter of Transmittal or a facsimile copy thereof in accordance with the
instructions in the Letter of Transmittal, mail or deliver it and any
other required documents to American Stock Transfer & Trust Company
(the "Depositary"), and either mail or deliver his stock certificates for
such Shares to the Depositary or follow the procedure for book-entry delivery
set forth in "THE TENDER OFFER - Procedure For Tendering Shares" or (ii)
request his broker, dealer, commercial bank, trust company or other
nominee to effect the transaction for him. A stockholder having Shares
registered in the name of a broker, dealer, commercial bank, trust
company or other nominee must contact that broker, dealer, commercial
bank, trust company or other nominee if such stockholder desires to
tender such Shares.
Stockholders who desire to tender Shares and whose certificates
for such Shares are not immediately available or who cannot comply with
the procedure for book entry transfer by the expiration of the Offer must
tender such Shares by following the procedures for guaranteed delivery set
forth in "THE TENDER OFFER - Procedure for Tendering Shares."
Questions and requests for assistance or for additional copies
of this Offer to Purchase, the Letter of Transmittal or the Notice of
Guaranteed Delivery may be directed to DINE, LLC, Attn: Secretary, at
(201) 535-1000.
________________________________
May 3, 1995
TABLE OF CONTENTS
Page
INTRODUCTION....................................................1
SPECIAL FACTORS.................................................2
Background of the Company and the Offer....................2
Purpose of the Offer and the Merger........................5
The Merger.................................................7
Fairness of the Offer and the Merger;
Recommendation of the Board of Directors.................7
Opinion of Financial Advisor............................10
Interests of Certain Persons in the Offer and the Merger;
Potential Conflicts of Interest......................14
Plans for the Company After the Offer and the Merger....14
Notice of Plan of Merger; Dissenters' Rights............15
Federal Tax Consequences................................18
Source and Amount of Funds..............................19
THE TENDER OFFER...............................................19
Terms of the Offer......................................19
Procedure for Tendering Shares..........................20
Withdrawal Rights.......................................21
Acceptance for Payment and Payment of Purchase Price....23
Certain Conditions of the Offer.........................23
Price Range of the Shares; Dividend Information.........24
Summary Historical Financial Information;
Public Filings.......................................24
Certain Information Concerning the Company
and the Purchaser....................................25
Effect of the Offer on the Market for Shares; Registration
Under the Exchange Act and SmallCap Market Listing...26
Certain Legal Matters...................................27
Fees and Expenses.......................................27
MISCELLANEOUS..................................................27
SCHEDULE I - Certain Information Regarding the Purchaser, the
Principals of the Purchaser and Executive Officers and the
Directors of the Company
SCHEDULE II - Certain Financial Statements of the Company
SCHEDULE III - Opinion of Financial Advisor
SCHEDULE IV - Plan of Merger
INTRODUCTION
DINE, LLC, a New Jersey limited liability company (the
"Purchaser"), hereby offers to purchase any and all of the outstanding
shares of common stock, no par value (the "Shares"), of Mascott
Corporation, a New Jersey corporation (the "Company"), at a price of
$1.55 per Share, to be paid net to the seller in cash (the
"Purchase Price"), as set forth in this Offer to Purchase and in the related
Letter of Transmittal (which together constitute the "Offer").
The Purchaser was organized in April 1995 by Scott M. Gillman, the
Chairman of the Board and Chief Executive Officer of the Company, Marc A.
Gillman, the President and Chief Operating Officer of the Company and
Richard Gillman, the former Chairman of the Board of the Company and the
father of Scott M. Gillman and Marc A. Gillman. Each of Scott M.
Gillman, Marc A. Gillman and Richard Gillman own approximately
one-third of the equity of the Purchaser. On April 13, 1995, Scott M.
Gillman, Marc A. Gillman and Richard Gillman contributed the 435,149,
435,149 and 435,148 Shares owned by each of them, respectively
(collectively, the "Gillman Shares"), to the Purchaser. See "SPECIAL
FACTORS - Interests of Certain Persons in the Offer and Merger;
Potential Conflicts of Interest," "THE TENDER OFFER - Certain Information
Concerning the Company and the Purchaser" and Schedule I.
If, following the consummation of the Offer, the Purchaser owns
90% or more of the outstanding Shares, the Purchaser intends to
contribute all of the Shares owned by it (including the Gillman
Shares) to DINE Acquisition Corp., a New Jersey corporation (the
"Acquisition Subsidiary") and effect a merger between the Acquisition
Subsidiary and the Company pursuant to Section 14A:10-5.1 of the New
Jersey Business Corporation Act (the "BCA") whereby the Company would
be the surviving corporation and all remaining Shares owned by
stockholders other than the Acquisition Subsidiary automatically will be
converted into the right to receive $1.55 per Share in cash (the "Merger").
See "SPECIAL FACTORS - The Merger" and "THE TENDER OFFER - Certain
Information Concerning the Company and the Purchaser." The Purchaser
currently owns 1,305,446 Shares (consisting entirely of the Gillman
Shares contributed to it), representing approximately 75% of the
urrently issued and outstanding Shares. Currently, 434,134 Shares are owned
by stockholders other than the Purchaser. If more than 260,175 Shares
are tendered and purchased pursuant to this Offer, the Purchaser intends
to consummate the Merger as soon as practicable thereafter. In addition, as
set forth on Schedule I hereto, the Purchaser and its members have the
right, through the exercise of currently exercisable options, warrants
and other convertible securities (the "Convertible Securities"), to acquire
1,052,500 Shares in the aggregate. Should the Purchaser and its members
exercise all such Convertible Securities, the Purchaser and its members
would then own 2,357,946 Shares of what would then be 2,792,080 Shares
outstanding. In such case, the Purchaser and its members would own
approximately 84.5% of the issued and outstanding shares in the
aggregate and if more than 154,925 Shares are tendered and purchased
pursuant to the Offer, would own 90% or more of the Shares and would
consummate the Merger. See "SPECIAL FACTORS - Interests of Certain
Persons in the Offer and the Merger; Potential Conflicts of
Interest," "-- Notice of Plan of Merger; Dissenters' Rights" and
Schedule I.
The Board of Directors of the Company (the "Board"), based on
the recommendation of a special committee of the Board (the
"Independent Committee") consisting of 2 of the independent directors, has
determined that the Offer and the Merger are fair and reflect the best
price available to the unaffiliated stockholders of the Company. The
Independent Committee was formed to review the Offer and the Merger with
the purpose of representing the interests of the unaffiliated stockholders.
The Independent Committee retained a financial advisor to advise the
Independent Committee on the fairness, from a financial point of view,
of the consideration to be received by the unaffiliated stockholders of
the Company in the Offer and the Merger and the determination made by
the Independent Committee was based upon many factors, including the
opinion from its financial advisor. See "SPECIAL FACTORS - Fairness of
the Offer and the Merger; Recommendation of the Board of Directors"
and "-- Opinion of Financial Advisor."
The Offer is not conditioned on any minimum number of Shares
being tendered or on availability of financing or any other condition
not described herein. See "THE TENDER OFFER - Certain Conditions of the
Offer."
No tendered Shares will be accepted for payment unless such Shares
are properly tendered and the holder of such Shares has duly executed
a Letter of Transmittal.
Tendering stockholders will not be obligated to pay brokerage
commissions, solicitation fees or, subject to Instruction 7 of the
Letter of Transmittal, stock transfer taxes on the Purchaser's purchase
of Shares. In addition, the Purchaser will pay all fees and expenses
of the Depositary in connection with the Offer. See "THE TENDER
OFFER - Fees and Expenses."
As of April 12, 1995, there were 1,739,580 Shares outstanding
and 352 holders of record. This Offer to Purchase, along with the
Letter of Transmittal and related documents, is being mailed to all
holders of record as of April 12, 1995. Such materials are also
being furnished to all participants named on the most recent
security position listing available to the Company of all clearing agencies
holding Shares of record for transmittal to the beneficial owners of
the Shares held by such participants.
NEITHER THE COMPANY NOR ITS BOARD OF DIRECTORS MAKES ANY
RECOMMENDATION TO ANY STOCKHOLDER AS TO WHETHER TO TENDER OR REFRAIN FROM
TENDERING SHARES. EACH STOCKHOLDER MUST MAKE HIS OWN DECISION WHETHER
TO TENDER SHARES AND, IF SO, HOW MANY SHARES TO TENDER.
SPECIAL FACTORS
Background of the Company and the Offer
Since the Company's initial public offering in 1989, it has
experienced consistent and substantial net losses. The net worth of the
Company at February 28, 1990 was $5,972,000, by February 27, 1994, the
Company's net worth was $1,283,000 and at November 27, 1994, the
Company's net worth was $1,010,000. The Company incurred a net
loss of $592,000 and $334,000, respectively, for the fiscal year ended
February 27, 1994 and the nine months ended November 27, 1994. The
Company's accumulated deficit at November 27, 1994 was $5,840,000.
The Company anticipates that it will achieve a net profit of
approximately $255,000 (of which approximately $150,000 will
represent non-recurring, non-operating income relating to the
settlement of certain lease obligations of the Company (the
"Leases Adjustment")) for the fourth quarter ended February 26,
1995 and a net loss of approximately $225,000 (without giving
effect to the Leases Adjustment) for the fiscal year ended
February 26, 1995. The anticipated results for the fourth
quarter of the fiscal year ended February 26, 1995 are comparable
to the net income of $106,000 achieved by the Company for the fourth quarter
of the fiscal year ended February 27, 1994.
The Company was originally organized to own and operate
full-service restaurants under the trade name "Markers." Although the
Company operated two such Markers restaurants, neither was very
successful and the Company closed one such Markers restaurant in 1994.
The other Markers restaurant, located in Jersey City, New Jersey,
incurred substantial net operating losses in each fiscal year from its
opening in 1989 through the Company's fiscal year ended February 28, 1993 and
the Company wrote-off the $1,607,000 value of this restaurant's assets in
February 1992. After continued efforts to increase revenues and
decrease expenses at such restaurant, such restaurant recently has achieved
modest net operating income. For the fiscal year ended February 27,
1994 and the nine month period ended November 27, 1994, it had operating
income of approximately $85,000 and $117,000, respectively, before the
allocation to such restaurant of any corporate level general,
administrative and other expenses, including depreciation, amortization,
interest and taxes, incurred by the Company (collectively, the
"Corporate G/A Expenses"). However, a new restaurant is expected to
open in the financial complex where the Company's Markers restaurant is
located, which the Company believes will substantially negatively impact
its Markers restaurant. Also, this Markers restaurant incurred a
substantial rent increase in December 1994, which likely will further
negatively impact its net operating income, if any, in future periods.
The Company has opened a total of 14 Cinnabon* [*Cinnabon is a
registered-trademark of Cinnabon, Inc.] bakeries in regional shopping
malls pursuant to territory and franchise agreements with Cinnabon, Inc.
These Cinnabon bakeries generally vary widely in their performance.
The Company's Cinnabon bakeries located in New Jersey generally are
successful and provide the bulk of the operating income of the
Company. For example, the Company's New Jersey Cinnabon bakeries
achieved operating income, after allocating to such locations
administrative expenses of the Company directly attributable to such
locations, but exclusive of Corporate G/A Expenses (such income (or loss),
the "Net Operating Income" or "Net Operating Loss") of $742,000 and
$513,000, respectively, for the fiscal year ended February 27, 1994 and
the nine months ended November 27, 1994. On the other hand, the Company's
Cinnabon bakeries located in New England generally are not successful.
For example, the New England Cinnabon bakeries incurred a Net Operating
Loss of $120,000 and $86,000, respectively, for the fiscal year ended
February 27, 1994 and the nine months ended November 27, 1994. The
Company closed 1 such location in August, 1993 due to poor operating
results. Although, overall, the Company's Cinnabon bakeries produce Net
Operating Income for the Company, the amount of Net Operating Income
generally has not resulted in significant net income for the Company
after the allocation of Corporate G/A Expenses. If the Company had
sufficient financing available, it likely would attempt to open
additional Cinnabon bakery franchises in regional shopping malls
in New Jersey. However, the Company believes that there are very limited
opportunities to do so because, among the regional shopping malls
which have the necessary high customer traffic volume, there are only a
limited number of stores which offer a suitable location and store size for
the successful operation of a Cinnabon bakery franchise. Although the
Company believes there exist expansion opportunities which would
enable the Company to open additional Cinnabon bakeries in New England,
given the performance of its existing Cinnabon bakeries in New England,
the Company believes there are a very limited number of locations in the
regional shopping malls in that region that would prove successful for
the operation of an additional Cinnabon bakery.
The Company also opened a total of 3 Willie Mays Chicken
locations in regional shopping malls in 1991 and 1992. Since opening,
such locations generally have not been profitable and the Company closed 1
such location in 1994 due to poor operating results. The Company's
remaining 2 Willie Mays Chicken locations in regional shopping malls
achieved Net Operating Income of $4,000 and incurred a Net Operating
Loss of $18,000, respectively, for the fiscal year ended February 27,
1994 and the nine months ended November 27, 1994.
In 1994, the Company through one of its wholly-owned
subsidiaries, formed a limited partnership with private investors
(the "WMCC Partnership") and opened a quick-service Willie Mays
Country Chicken restaurant in a strip-shopping center in
Livingston, New Jersey in May 1994. This restaurant, which cost
approximately $650,000 to open, has been operating at a net loss
since opening.
Because of its poor financial performance, the Company has
borrowed substantial sums from Richard Gillman. The Company has issued
to Richard Gillman a $1.5 million Secured Convertible Debenture
which bears interest at the prime rate as published by The Wall Street
Journal plus 1%. Interest on the Secured Convertible Debenture is
payable either in cash, or at the option of the Company, in Shares or in
shares of the Company's Class A Preferred Stock (the "Preferred Stock").
As interest payments thereon, the Company has to date issued to Richard
Gillman 20,271 shares of Preferred Stock (each of which was converted in
accordance with its terms into one Share by Richard Gillman on
April 7, 1995) and currently there is outstanding approximately
$96,000 of accrued but unpaid interest on the Secured Convertible Debenture.
In addition, in December 1993, the Company issued to Richard Gillman
Shares at market value in exchange for his forgiving $314,543 of what
was then $1,814,543 of indebtedness of the Company. The Secured
Convertible Debenture is convertible into 960,000 Shares at any time, in
whole or in part, prior to December 31, 1996. On April 7, 1995,
each of Scott M. Gillman and Marc A. Gillman purchased one-third of the
Secured Convertible Debenture (including accrued interest thereon) from
Richard Gillman and on April 13, 1995, each of Scott M. Gillman, Marc
A. Gillman and Richard Gillman contributed their interests in the Secured
Convertible Debenture to the Purchaser. The Secured Convertible
Debenture is secured by a pledge to the holder thereof of the stock of the
Company's subsidiaries which own and operate Cinnabon bakeries. The
Purchaser may not demand payment under the Secured Convertible Debenture
until December 31, 1995 but, may demand payment at that date or any time
thereafter. To the extent that the Purchaser does not demand repayment
of the Secured Convertible Debenture, the Company will continue to have
to pay interest thereon, resulting in either (i) if interest is paid
in cash, the further depletion of the cash available to the Company, and
(ii) if interest is paid in Shares or shares of the Preferred Stock
(which are convertible into Shares), the substantial further dilution of
the percentage ownership of the Company by shareholders other than the
Purchaser.
Given these events and the Company's financial condition, the
primary business plan of the Company in recent years has been to
attempt to reduce its losses and maintain or increase value for its
stockholders. Management's efforts to maintain or increase
shareholder value included continuing its efforts to increase revenues
and reduce expenses at each of the Company's existing locations,
closing 3 of the Company's underperforming locations, forming the WMCC
Partnership and opening the WMCC Partnership's Willie Mays Country
Chicken restaurant in an attempt to develop the Willie Mays Country
Chicken concept into a profitable operation, and attempting to raise
capital from third parties, including in the public market. Although
these efforts stabilized the Company's financial condition, the
Company's efforts to attract financing were unsuccessful. Given its
inability to generate substantial net income, its existing indebtedness
and its current financial condition, the Company is unable to generate
the external financing necessary for expansion and, therefore, the
Purchaser believes it is unlikely that the Company will be able to
substantially increase the value of the Company into the foreseeable future.
On March 27, 1995, Scott M. Gillman and Marc A. Gillman initiated
discussions with the Company regarding the possibility and terms of the
Offer and Merger. On March 28, 1995, at a meeting of the board of
directors of the Company, Scott M. Gillman announced to the board of
directors that the Purchaser intended to effect a going-private
transaction with the Company by completing the Offer and the Merger. In
response, the board of directors of the Company designated an Independent
Committee composed of Richard Levy and Alan Cohen, the two directors of
the Company who are not shareholders or employees of the Company, to
consider (i) the Company's response to any proposal that may be made
regarding taking the Company private and (ii) the terms of any proposed
transaction, with the purpose of representing the interests of the
unaffiliated stockholders of the Company. The Independent Committee hired
independent counsel and retained the services of American Appraisal
Associates, Inc. ("American Appraisal") as its financial advisor (the
"Financial Advisor") to advise the Independent Committee in connection
with the Offer and the Merger. See "SPECIAL FACTORS - Fairness of the
Offer and the Merger; Recommendation of the Board of Directors" and
"-- Opinion of Financial Advisor."
Discussions between the Purchaser (which at that time was in the
process of being formed) and the Independent Committee, with
Scott M. Gillman serving as the representative of the Purchaser, involved a
number of meetings prior to the Purchaser making a definitive proposal
regarding the Offer and the Merger. After the Independent Committee had
hired counsel and the Financial Advisor, a meeting took place on March
30, 1995 among the Purchaser and the Independent Committee. The Independent
Committee, among other things, advised the Purchaser that it had engaged
independent counsel and the Financial Advisor to assist it in evaluating
any proposal that might be made by the Purchaser and determining whether
the consideration payable pursuant to the Purchaser's proposal was fair,
from a financial point of view, to stockholders of the Company other
than the Purchaser and its affiliates. At that meeting, the Independent
Committee also advised the Purchaser of its concern that no transaction
proceed unless the Independent Committee was satisfied that such
transaction represented the best possible price for unaffiliated stockholders,
that a second-step merger would provide the same amount and form of
consideration to remaining unaffiliated stockholders and that, in
light of all the circumstances, the Offer and Merger were fair and represented
the best price available to the unaffiliated stockholders. During the
days that followed, many meetings were held among the Purchaser, the
members of the Independent Committee, the counsel to the Independent
Committee and the Financial Advisor and many discussions relating
to the Offer and the Merger ensued, with the Independent Committee seeking
what it believed would be the most favorable terms to the unaffiliated
stockholders. During these meetings, Scott M. Gillman, on behalf of
the Purchaser, informed the Independent Committee that the cash price the
Purchaser believed was fair and would offer to the unaffiliated
stockholders of the Company was $1.50 per Share.
On April 10, 1995, the Independent Committee met with its independent
counsel and with the Purchaser in order to further discuss structural,
pricing, and timing issues of the proposal. The Purchaser confirmed that
financing for the transaction would not be a condition and that the Purchaser
would verify availability of funds prior to commencement of a going private
transaction. The Independent Committee articulated that it would not
approve the proposed transaction unless, in its judgment, the offered price
reflected or exceeded the fair value for the current assets and business of
the Company and which would give any stockholder who wished to sell his or
her shares an opportunity to do so in an otherwise relatively illiquid
market, at a premium to that market.
On April 11, 1995, after a discussion regarding the Independent
Committee's judgment as to the value of the Company and a price that
would be fair to, and the best price obtainable by, the unaffiliated
stockholders, the Independent Committee informed the Purchaser that,
subject to the receipt of the fairness opinion from the Financial
Advisor, it believed the proposal at $1.50 per Share was within the
range of what was fair from a financial point of view to the
stockholders of the Company other than the Purchaser and its affiliates.
At a meeting held on April 12, 1995, the Independent Committee, after
(i) extensive discussions both with the Purchaser and with the Financial
Advisor, (ii) its further review of the proposed Offer and Merger and
(iii) the receipt of the written opinion regarding the fairness of the
proposed Offer and Merger from the Financial Advisor, determined that,
although the offered price of $1.50 per Share was fair, it believed that the
Purchaser should offer a small premium even to that price and recommended to
the Purchaser that it raise the price to $1.55 per Share. After extensive
further discussions, the Purchaser agreed to raise the price of the
Offer to $1.55 per Share. Based upon a price of $1.55 per Share, the
Independent Committee approved the Offer and the Merger and unanimously
determined to recommend that the Board approve the Offer and the Merger.
At a meeting of the Board attended in person by Alan Cohen, Richard Levy and
Ronald Winarick held on April 12, 1995, the Board, with Ronald Winarick
abstaining, approved the Offer and the Merger and determined that the
Offer and the Merger are fair from a financial point of view and reflect the
best price available to the unaffiliated stockholders of the Company.
See "SPECIAL FACTORS - Fairness of the Offer and the Merger; Recommendation
of the Board of Directors" and "-- Opinion of Financial Advisor."
Purpose of the Offer and the Merger
The primary purpose of the Offer and the Merger is to take the
Company private. There are four principal reasons for taking the
Company private, as described below.
First, there are substantial costs of being a public company, including
but not limited to securities laws compliance, shareholder communications
(including proxy statements, annual reports and other matters), transfer
agent fees, independent auditors fees and expenses, legal fees and expenses,
NASDAQ listing fees and expenses and similar items. The annual costs
incurred by the Company in connection therewith are approximately
$125,000 per year. In addition, there are other costs of being a
public company, including administrative costs and substantial time
demands on management. The Purchaser believes that, for the Company
in its present financial condition, these costs are not justified, since
they do not assist in providing any additional capital or financing to the
Company. Being a private company will substantially reduce or eliminate
these costs.
Second, due to the financial performance and the current financial
condition of the Company, the Company does not possess the prospects
for growth or expansion required for a public company. It is the
Purchaser's belief that the Company's future growth will require substantial
additional capital, which the Company is currently unable to obtain. The
Company has been unsuccessful during the last several years in its attempts
to secure external financing from unaffiliated parties, and it has relied on
capital provided by Richard Gillman for working capital and expansion.
$1.5 million, plus accrued interest of approximately $96,000, is due
and payable on the Secured Convertible Debenture held by the Purchaser upon
demand at any time after December 31, 1995. There can be no assurance
that the Purchaser will not demand payment at such time and Richard
Gillman has made no commitment to extend any additional capital to the
Company. Given the Company's financial condition and its reasonably
expected future prospects, the Company has very limited capacity to
repay its existing indebtedness at any time in the reasonably foreseeable
future. Any future advances by Richard Gillman would have to be based
upon a reasonable likelihood of repayment. Given the Company's inability
to relay its existing indebtedness, there is no such basis for any additional
advances. Moreover, interest continues to accrue on the Company's
indebtedness to the Purchaser pursuant to the Secured Convertible
Debenture. Even if the Purchaser does not demand repayment of the Secured
Convertible Debenture, interest thereon still must be paid by the
Company, resulting in a further depletion of the cash of the Company
(if such interest is paid in cash) or a substantial further dilution of
the percentage ownership of the Company by shareholders other than the
Purchaser (if such interest is paid in Shares or shares of the Preferred
Stock).
Third, as described below, after the Merger, the Purchaser may
substantially restructure and/or alter the business plan of the
Company. In doing so, the Purchaser may contribute other assets which
may be owned or acquired by it to the Company. While these assets
could be contributed to the Company if the Company remained public,
the costs, complexities and difficulties of valuing these entities would be
extremely burdensome, apart from the complications of ensuring fairness
to unaffiliated stockholders. Moreover, such restructuring or alteration,
if any, may not necessarily be appropriate for a public company of the
Company's size and financial condition and may involve risks not
appropriate for a public company. Also, any such restructuring likely would
only be of value to the Company if it were able to attract substantial
additional financing, which the Company is unable to do in its current
and anticipated future condition. See "SPECIAL FACTORS - Plans for
the Company After the Offer and the Merger."
Fourth, the Offer and Merger will provide the existing stockholders
with a means to liquidate their Shares at a substantial premium above the
price available in the limited market that exists. The bid price for
the Shares was as low as $1.00 per share in 1994 and during the Bulletin
Board Period (as defined below), there was often no active market in
the Shares. As recently as April 12, 1995, the bid price was as low as
$.87 per Share and the last reported transaction in the Shares prior to the
date hereof was at $.87 per Share. Also, the relative lack of liquidity
in the market and the cost of brokers' commissions make it difficult for
Shares to be sold in the market on an efficient basis by most of the
Company's stockholders. Additionally, because the bid price for the
Shares is below the minimum bid price of $1.00 required for continued listing
on the NASDAQ SmallCap Market, the Shares likely will be deleted from the
NASDAQ SmallCap Market in the future, which will result in further
significant impairment in the ability to buy and sell Shares. See
"THE TENDER OFFER - Price Range of the Shares; Dividend Information."
The purpose of preceding the Merger by the Offer is to acquire
sufficient Shares to allow the Acquisition Subsidiary to effect the
Merger under Section 14A:10-5.1 of the BCA. The Acquisition Subsidiary
may effect the Merger without any action of the Company pursuant to
Section 14A:10-5.1 of the BCA if, following the Offer and a subsequent
contribution of Shares to the Acquisition Subsidiary, the Acquisition
Subsidiary owns at least 90% of the outstanding Shares. If the Acquisition
Subsidiary does not own 90% of the outstanding Shares, the Acquisition
Subsidiary would not be able to effect a merger of the Acquisition
Subsidiary and the Company under Section 14A:10-5.1 of the BCA. In such
case, the Purchaser may, subject to numerous factors, including the
number of Shares, if any, purchased pursuant to the Offer, the availability
of Shares at prices acceptable to the Purchaser, the business condition
and prospects of the Company, and general economic and market conditions,
acquire additional Shares through the conversion of all or a portion of
the Convertible Securities, privately negotiated or open market
purchases, subsequent tender or exchange offers, or by any other
means the Purchaser deems advisable on such terms and at such prices as it
determines (which may be more or less than the price of the Offer) to
bring the ownership of the Purchaser (and, in turn, the Acquisition
Subsidiary) to at least 90% of the outstanding Shares. Thereafter, the
Acquisition Subsidiary could effect a merger under Section
14A:10-5.1 of the BCA without a vote or consent of the Company's
stockholders and without action by the Company's board of directors.
In such a case, such merger would be effected on such terms and at
such prices as the Purchaser may determine (which may be more or less than
the price being paid per Share in the Offer).
Upon consummation of the Offer, the Shares likely will be held of
record by fewer than 300 persons. Therefore, the Purchaser may cause the
Company to apply for termination of registration of the Shares under
the Securities Exchange Act of 1934, as amended (the "Exchange Act").
In addition, because the current bid price for the Shares is less than
the minimum required for continued listing on the NASDAQ SmallCap
Market, the Company expects that the Shares likely will be deleted from the
SmallCap Market in the future. If the Purchaser does not own at least
90% of the Shares, the Purchaser may elect not to proceed with a merger or
other transaction that would cash out non-tendering unaffiliated stockholders
following the Offer. Thus, following the consummation of the Offer,
certain unaffiliated persons may remain stockholders of the Company,
likely resulting in certain adverse effects to such persons, including an
inability to subsequently liquidate their Shares. See "THE TENDER
OFFER - Effect of the Offer on the Market for Shares; Registration
Under the Exchange Act and SmallCap Market Listing."
The Purchaser is offering to buy any and all of the outstanding
Shares. Approximately 75% of the Shares (84.5% of the Shares after
giving effect to the conversion of the Convertible Securities held by
the Purchaser or its members) are beneficially owned by the Purchaser
and will not be tendered.
The Merger
If, following consummation of the Offer, the Acquisition
Subsidiary owns at least 90% of the outstanding Shares, the Purchaser intends,
subject to certain conditions, to effect the Merger. The Company will be
the surviving corporation of the Merger (the "Surviving Corporation"). At
the effective time of the Merger (the "Effective Date"), each Share
other than those owned by the Acquisition Subsidiary or the Company
will be converted into and represent the right to receive $1.55 net in cash.
Each Share held by the Acquisition Subsidiary and each Share held by
the Company will be cancelled and retired without payment. The Shares of
the Acquisition Subsidiary (all of which are owned by the Purchaser) will
be converted into 100 shares of the Surviving Corporation in the
aggregate. In order to consummate the Merger, the Purchaser (and, in
turn, the Acquisition Subsidiary) must own at least 90% of the
outstanding Shares. All stockholders, whether tendering their Shares
or as a result of receiving cash in the Merger, shall receive the same
amount of consideration per Share, except stockholders who exercise
their dissenters' rights provided hereby. See "SPECIAL FACTORS -
Notice of Plan of Merger; Dissenters' Rights."
Fairness of the Offer and the Merger; Recommendation of the Board
of Directors
At a meeting held on April 12, 1995, the Independent Committee
unanimously determined to recommend that the Board approve the Offer
and the Merger. At a meeting held on April 12, 1995, the Board,
based on the recommendation of the Independent Committee, approved the Offer
and the Merger and determined that the Offer and the Merger are fair,
from a financial point of view, and reflect the best price available to the
unaffiliated stockholders of the Company (other than the Purchaser and
any affiliate thereof).
In reaching its conclusions, the Independent Committee considered a
number of factors, including but not limited to the following:
(i) the Company's financial condition and results of operations,
including its consistent and substantial net losses since its
initial public offering in 1989. As described above, the
Company has experienced a substantial decline in its net worth
(from $5,972,000 at February 27, 1990 to $1,283,000 at
November 27, 1994) and the Company's accumulated deficit
at November 27, 1994 was $5,840,000. The Company anticipates
that it will incur a net loss of approximately $225,000
(without giving effect to the Leases Adjustment) for the
fiscal year ended February 26, 1995. See "SPECIAL
FACTORS - Background of the Company and the Offer;"
(ii) the Company's current business and future prospects; including
that such businesses generally do not lend themselves to
the Company remaining a public company. As described
above, although the Company's Cinnabon bakery franchises
located in New Jersey generally are successful and provide
the bulk of the operating income of the Company, the Company
believes there are very limited opportunities to open
additional Cinnabon bakery franchises in regional shopping
malls in New Jersey because there are a limited number of
such malls that have the necessary high customer traffic
volume to support a successful Cinnabon bakery franchise and,
in such regional malls that do have the necessary high
customer traffic volume, there are only a limited number of
stores which offer suitable location and store size for a
Cinnabon bakery. Also, as described above, the Company's
other business -- its Markers restaurant, Willie Mays Chicken
locations and New England Cinnabon bakery-franchises --
generally do not generate the revenues necessary which would
make such business appropriate for expansion. See "SPECIAL
FACTORS - Background of the Company and the Offer;"
(iii) that the purchase price represents a substantial premium over
recent market prices and recent trading activity of the
Shares and that the Offer and the Merger will enable the
Company's stockholders to sell their Shares at a premium in an
otherwise relatively illiquid market See "SPECIAL FACTORS -
Purpose of the Offer and the Merger" and "THE TENDER
OFFER - Price Range of Shares; Dividend Information;"
(iv) that the purchase price represents a substantial premium to the
net book value of the Shares (which as of November 27, 1994 and
February 27, 1994 was $.59 and $.75 per Share, respectively)
and liquidation value of the Company, and the potential value
to the stockholders from an orderly sale of the Company's assets,
including that a sale of the Company's assets would be
difficult because, (i) with respect to the Willie Mays Chicken
locations, those entities are generally not profitable and any
such sale would require the consent of Willie Mays, which may not
be granted; (ii) with respect to the Company's Markers
restaurant, the such restaurant does not generate substantial
net income and a competing restaurant is expected to open in the
financial complex where such restaurant is located; and (iii)
with respect to the Company's Cinnabon bakery franchises,
there are substantial limitations imposed by the franchisor
with respect to any such transfer and the limited opportunities
for expansion thereof. See "SPECIAL FACTORS - Opinion of
Financial Advisor;"
(v) possible alternatives to the Offer and the Merger, including
the Company's going concern value and its continuing to
operate as a public entity. See SPECIAL FACTORS - Purpose
of the Offer and the Merger;"
(vi) the terms and conditions of the Offer and the Merger,
including a purchase price higher than the recent market
price for the Shares, the lack of financing as a condition of
either the Offer or the Merger, and that all unaffiliated
stockholders will receive the same price and form of
consideration for their Shares, whether in the Offer or the
Merger;
(vii) the oral presentations made by the Financial Advisor to the
Independent Committee at a meeting held on April 12, 1995
as to various financial and other considerations deemed
relevant to the evaluation of the Offer and the Merger;
(viii the written opinion of the Financial Advisor, a copy of which
is attached hereto as Schedule III, that the Offer and
Merger are fair, from a financial point of view, to the
unaffiliated stockholders; and
(ix) the belief on the part of members of the Independent
Committee, based upon their familiarity with and
investigation regarding the Company's business, its current
financial condition and results of operations, and its future
prospects, that the cash consideration to be paid in the Offer
and the Merger fairly reflects the Company's value and
represents, in their belief, the highest value that could be
obtained by the stockholders of the Company in a sale of the
Company and that the receipt of a higher bid, either from the
Purchaser or a third party, was not a realistic possibility.
In view of the wide variety of factors considered in connection
with this evaluation, the Independent Committee did not find it
practicable to, and did not, quantify or otherwise assign relative weights
to the factors considered in making its determination.
While the Board believes that the Offer is fair, from a financial
point of view, the Board determined that it would make no recommendation
to the stockholders of the Company regarding their respective decisions
to tender or refrain from tendering Shares pursuant to the Offer. The
Company is unable to take a position with respect to a recommendation
of the Offer because the Company believes that each stockholder should
evaluate the Offer in light of his individual circumstances and should
make his own decision whether to tender Shares pursuant to the Offer
based on the tax and other consequences of the Offer which may be
unique to each individual stockholder.
The Purchaser, including each of its principals, believes that
the Offer and Merger are fair to unaffiliated stockholders. This
conclusion is based upon factors substantially similar to those
considered by the Independent Committee set forth as (i) through (ix) above,
including an independent evaluation by the Purchaser and its principals
of, among other things, the following factors:
(a) the Company's financial condition and results of operations,
including its consistent and substantial net losses since
its initial public offering in 1989. As described above, the
Company has experienced a substantial decline in its net worth
(from $5,972,000 at February 27, 1990 to $1,283,000 at
November 27, 1994) and the Company's accumulated deficit at
November 27, 1994 was $5,840,000. The Company anticipates
that it will incur a net loss of approximately $225,000 (without
giving effect to the Leases Adjustment) for the fiscal year
ended February 26, 1995. See "SPECIAL FACTORS - Background of
the Company and the Offer;"
(b) the Company's current business and future prospects; including
that such businesses generally do not lend themselves to the
Company remaining a public company. As described above,
although the Company's Cinnabon bakery franchises located
in New Jersey generally are successful and provide the bulk of
the operating income of the Company, the Company believes
there are very limited opportunities to open additional
Cinnabon bakery franchises in regional shopping malls in New
Jersey because there are a limited number of such malls
that have the necessary high customer traffic volume to
support a successful Cinnabon bakery franchise and, in such
regional malls that do have the necessary high customer
traffic volume, there are only a limited number of stores
which offer suitable location and store size for a Cinnabon
bakery. Also, as described above, the Company's other
business -- its Markers restaurant, Willie Mays Chicken
locations and New England Cinnabon bakery-franchises --
generally do not generate the revenues necessary which
would make such business appropriate for expansion.
See "SPECIAL FACTORS - Background of the Company and
the Offer;"
(c) that the purchase price represents a substantial premium over
recent market prices and recent trading activity of the
Shares and that the Offer and the Merger will enable the
Company's stockholders to sell their Shares at a premium in an
otherwise relatively illiquid market See "SPECIAL FACTORS -
Purpose of the Offer and the Merger" and "THE TENDER
OFFER - Price Range of Shares; Dividend Information;"
(d) that the purchase price represents a substantial premium to the
net book value of the Shares (which as of November 27, 1994
and February 27, 1994 was $.59 and $.75 per Share,
respectively) and liquidation value of the Company, and the
potential value to the stockholders from an orderly sale of
the Company's assets, including that a sale of the Company's
assets would be difficult because, (i) with respect to the
Willie Mays Chicken locations, those entities are generally not
profitable and any such sale would require the consent of
Willie Mays, which may not be granted; (ii) with respect to the
Company's Markers restaurant, the such restaurant does not
generate substantial net income and a competing restaurant
is expected to open in the financial complex where such
restaurant is located; and (iii) with respect to the Company's
Cinnabon bakery franchises, there are substantial limitations
imposed by the franchisor with respect to any such transfer
and the limited opportunities for expansion thereof. See
"SPECIAL FACTORS - Opinion of Financial Advisor;"
(e) the possible alternatives to the Offer and the Merger, including
the Company's going concern value and its continuing to
operate as a public entity See "SPECIAL FACTORS - Background
of the Company and the Offer" and "--Purpose of the Offer
and the Merger;"
(f) the terms and conditions of the Offer and the Merger, including
a purchase price higher than the recent market price for the
Shares, the lack of financing as a condition of either the
Offer or the Merger, and that all unaffiliated stockholders
will receive the same price and form of consideration for
their Shares, whether in the Offer or the Merger;
(g) the written opinion of the Financial Advisor, a copy of which
is attached hereto as Schedule III, that the Offer and
Merger are fair, from a financial point of view, to the
unaffiliated stockholders; and
(h) the belief on the part of the Purchaser and its principals, based
upon their familiarity with the Company's business, its
current financial condition and results of operations,
and its future prospects, that the cash consideration to be paid
in the Offer and the Merger fairly reflects the Company's
value and represents, in its belief, the highest value that
could be obtained by the stockholders of the Company in a sale
of the Company and that the receipt of a higher bid from a third
party was not a realistic possibility. See "SPECIAL FACTORS -
Background of the Company and the Offer."
In the view of the Purchaser and its principals, the
consideration to be paid to unaffiliated stockholders in the Offer and the
Merger is equal to or higher than a valuation of the Shares using any
reasonable methodology or set of assumptions. However, the Purchaser and its
principals did not specifically determine the liquidation or value or
value from an orderly sale of the Company's assets.
Although (i) the Offer and the Merger do not require the approval
of at least a majority of the unaffiliated stockholders and (ii) the
Independent Committee did not retain an unaffiliated representative to
negotiate the terms of the Offer and the Merger with the Purchaser on behalf
of the unaffiliated stockholders, the Purchaser and its principals believe
the Offer and the Merger are fair to unaffiliated stockholders. The basis
for this determination are that the terms of the Offer and the Merger were
negotiated on behalf of the unaffiliated stockholders of the Company by
the Independent Committee, which retained the services of the Financial
Advisor to advise it with respect to the fairness of the Offer and the Merger
and which Independent Committee was represented by independent counsel who
met with representatives of the Purchaser, and in consultation with
the Financial Advisor, advised the Independent Committee on issues of
valuation and fairness with respect to the Offer and the Merger. In
addition, the members of the Independent Committee, along with their
independent counsel and the Financial Advisor, conducted a detailed and
thorough investigation and analysis of all factors they deemed
relevant to determine the fairness, from a financial point of view, of the
terms of the Offer and the Merger.
Opinion of Financial Advisor
At its meeting on April 12, 1995 to consider the Offer and Merger,
the Independent Committee received the opinion of American Appraisal
that, as of such date, the cash consideration of $1.55 per Share to be
received by stockholders of the Company pursuant to the terms of the Offer and
Merger, is fair to the stockholders of the Company (other than the
Purchaser) from a financial point of view. American Appraisal analyzed
the amount of consideration offered by the Purchaser, and did not come up
with the amount independently. American Appraisal's opinion related only to
the consideration to be paid by the Purchaser pursuant to the Offer and
Merger. The full text of American Appraisal's written opinion, which
summarizes the assumptions made, procedures followed and matters
considered in connection with such opinion, is attached as Schedule
III to this Offer to Purchase and is incorporated herein by reference. In
addition to being attached as Schedule III, a copy of American Appraisal's
written opinion is available for inspection and copying at the
principal offices of the Purchaser and the Company during normal business
hours. Stockholders of the Company are urged to read the opinion in its
entirety, especially with regard to the assumptions made and matters
considered by American Appraisal.
In connection with its opinion, American Appraisal reviewed, among
other things, a draft dated April 11, 1995 of each of the Schedule 14D-1
and Schedule 13E-3 to be filed by the Purchaser, as well as each of
the Company's publicly filed reports, with the Securities and Exchange
Commission (the "Commission") and certain internal financial analyses and
calendar year 1995 forecasts for the Company prepared by its management.
The calendar year 1995 forecasts consisted of budgets internally prepared
by management of the Company during 1994 which indicated that the
Company's Markers restaurant, Willlie Mays Chicken locations and
Cinnabon bakery franchises would achieve Net Operating Income of approximately
$176,000, $100,000 and $1,029,000, respectively, for calendar year 1995
and approximately $42,000, $11,500 and $186,000, respectively, for the
calendar quarter ended March 31, 1995 (the "First Quarter"). The actual
results for such businesses for the First Quarter was that the Company's
Markers restaurant, Willlie Mays Chicken locations and Cinnabon bakery
franchises achieved Net Operating Income of approximately $26,000, $6,500 and
$200,000, respectively. The Company anticipates that the results of
operations of its Willie Mays Chicken locations and its Cinnabon
bakery franchises for the remainder of calendar year 1995 will be consistent
with the calendar year 1995 forecasts but that the results of operations for
its Markers restaurant for calendar year 1995 will result in
substantially less Net Operating Income then projected in the calendar year
1995 forecasts. However, American Appraisal did not take such anticipated
negative results into consideration in completing its evaluation. No
special assumptions were made in connection with such projections other than
that such businesses would continue to operate consistent with existing
practices and there would be no material change to the consumer
demand for such businesses, whether due to a change in general economic
conditions in the regions such businesses are located or otherwise.
American Appraisal also held discussions with members of the senior
management of the Company (who generally are the members of the
Purchaser) regarding the Company's assets and liabilities, past and
current business operations, financial condition and future prospects.
In addition, American Appraisal reviewed the reported price and
trading activity for the Shares, compared certain financial and stock
market information for the Company with similar information for certain
other companies and performed such other analyses and studies as
American Appraisal deemed appropriate.
American Appraisal relied without independent verification upon the
accuracy and completeness of all of the financial and other information
reviewed by it for purposes of its opinion and assumed that the financial
forecasts for calendar year 1995 provided to it were reasonably prepared
on a basis reflecting the best currently available estimates and
judgments of the management of the Company (who generally are the
members of the Purchaser) as to its expected future financial performance as
currently configured and after giving effect to the Merger. In
addition, American Appraisal has not made an independent evaluation or
appraisal of the fixed and intangible assets of the Company or any of its
respective subsidiaries and American Appraisal has not been furnished
with any such evaluation or appraisal.
The following is a summary of certain financial analyses performed
by American Appraisal in connection with providing its written opinion,
dated April 12, 1995, to the Independent Committee. American Appraisal
reviewed these financial analyses with the Independent Committee at a meeting
on April 12, 1995.
American Appraisal reviewed information regarding recently announced
and completed mergers and acquisitions of public and privately held
companies that were engaged in the restaurant and fast food industries.
The terms and conditions of these transactions, including the consideration
offered, were analyzed for the purpose of measuring the prices paid for
the transactions in relation to the sales revenues and earnings before
depreciation, interest, taxes and amortization ("EBDITA") reported by the
acquired companies prior to the date of their respective transactions.
While several mergers and acquisitions of restaurant and fast food
company franchisee operations were reported during this period, there were
no transactions that involved businesses considered adequately comparable to
the Company in terms of mix of restaurant businesses, size, regional
market scope, operating history and growth expectations. Accordingly,
American Appraisal did not believe it appropriate to formulate an opinion of
value for the Shares from this analysis.
For the purpose of evaluating the current market price quotations of
the Shares, American Appraisal searched for publicly held restaurant
companies in order to (i) evaluate their stock market valuations and
their relationship to the companies' operating performance and (ii)
correlate these market valuation/operating performance relationships
to the business and operating performance of the Company. The search
focused on publicly held restaurant and fast food franchisee-based
companies comparable to the Company in terms of (i) revenue size and
operating history, (ii) regional market scope, (iii) financial condition
and (iv) growth expectations. While several public companies were
primarily franchisee operators of fast food restaurants, none were
found that were comparable to the Company in terms of size, nature of
franchise operations, operating history and growth expectations. Accordingly,
American Appraisal did not believe it to be appropriate to formulate
an opinion as to a value for the Shares from this analysis.
To arrive at its opinion with regard to the Shares, American
Appraisal relied primarily upon estimates of current market values for
the Company's underlying restaurant and Cinnabon bakery business,
assuming (i) a hypothetical orderly sale of such businesses (individually to
different buyers or in the aggregate to one buyer), (ii) that only the
Cinnabon bakery franchises would achieve their calendar year 1995
projections, (iii) that there would be certain costs associated with the
sale of such businesses, (iv) that a buyer would be willing to pay a
multiple of EBDITA for such businesses of up to 4.5 times EBDITA and
(v) no capital gain taxes would be paid by the Company on any such sale.
American Appraisal also assumed that there would be no material change
to the consumer demand for such businesses, whether due to a change in
general economic conditions in the regions such businesses are located
or otherwise. For this purpose, American Appraisal developed
estimates of the current sale value of (i) the total chain of Cinnabon
bakeries, (ii) the 2 Willie Mays fast food restaurants, (iii) the
Markers restaurant and (iv) the Company's general partnership interest
in the WMCC Partnership. In doing so, American Appraisal prepared a
report for the Independent Committee summarizing its methodology of
calculating such current sale values. Such report took the estimated
calendar year 1995 gross revenues for such businesses (which were
$6,150,000, $1,085,000 and $1,660,000, respectively, for the Company's
Cinnabon bakery franchises, Willie Mays Chicken locations and Markers
restaurant (and which, as noted above, have not been achieved by the
Markers restaurant and Willie Mays Chicken locations for the First
Quarter)) and derived therefrom an estimated EBDITA. American Appraisal then
subtracted from the EBDITA for such businesses an assumed overhead
factor of 5% of the estimated calendar year 1995 gross revenues of the
Cinnabon bakery franchises and 4% of the estimated calendar year 1995
gross revenues of the Willie Mays Chicken locations and the Markers
restaurant, resulting in an adjusted EBDITA of $721,500, $56,600 and
$108,600, respectively, for the Company's Cinnabon bakery franchises, Willie
Mays Chicken locations and Markers restaurant (the "Adjusted EBDITA").
The Adjusted EBDITA for each such business was then multiplied by a
low and high acquisition multiple of 4 and 4.5, 3 and 3.5 and 2.5 and 3,
respectively, for the Company's Cinnabon bakery franchises, Willie Mays
Chicken locations and Markers restaurant, resulting in an orderly sale
value range of $2,890,000 to $3,250,000, $170,000 to $200,000 and $270,000 to
$330,000, respectively, for the Company's Cinnabon bakery franchises,
Willie Mays Chicken locations and Markers restaurant. The current sale
value of the Company's interest in the WMCC Partnership was valued at $30,000.
Added to these values was the current book value of the Company's
consolidated working capital and other investments assets as of February
27, 1995, resulting in a gross sale value of the Company's operating
businesses, working capital and investment assets. Subtraction of the
face value of the Secured Convertible Debenture from this amount resulted
in an estimate of the consolidated net asset value of the Company's
total stockholder's equity. After subtraction from net asset value of
probable selling and other transaction costs (estimated to be 3% of the
total sale value of the businesses), American Appraisal estimated that
the net asset value of total stockholders' equity, based on the
orderly sale of its business premise, ranged from $1.32 to $1.57 per Share.
American Appraisal also believed that additional value to the
Shares was attributed to the Company's current net operating loss
carryforwards ("NOLs"), estimated to be approximately $4 million.
The potential use of these NOLs by the Company and/or the Surviving
Corporation is dependent on the extent that they will report taxable
income for federal tax purposes over the eligibility period of the
NOLs. The difficulty to estimate future operating results, including
taxable income, precludes accurate measurement of the use of the
NOLs by the Company or the Surviving Corporation. However, guided by
certain broad assumptions as the probable taxable income projected by the
Company over the eligibility period of the NOLs, American Appraisal
concluded that the value attributable to NOLs was approximately $.10
per Share. American Appraisal recognized that there is no assurance
that the NOLs will be utilized by the Company and/or the Surviving
Corporation.
American Appraisal did not perform a discounted cash flow analysis
with respect to the Company's future operations because financial
estimates of prospective operations beyond the year ended December 31,
1995 were not readily ascertainable by the Company's management. However, in
view of the foregoing analyses, American Appraisal believed such
analysis was not necessary for purposes of determining the fairness of
the Offer and Merger. In addition, American Appraisal did not consider the
tax consequences of the Offer and Merger as part of its fairness
determination.
The preparation of a fairness opinion is a complex process and is not
necessarily susceptible to partial analysis or summary description. While
American Appraisal considered many factors, none were dispositive and
none were given any particular weight in rendering its fairness opinion.
Selecting portions of the analyses or of the summary set forth above, without
considering the analyses as a whole, could create an incomplete view of
the processes underlying American Appraisal's opinion. In arriving at its
fairness determination, American Appraisal considered the results of all such
analyses. No company or transaction used in the above analyses as a
comparison is very comparable to the Company or the contemplated transaction.
The analyses were prepared solely for purposes of American Appraisal providing
its opinion to the Independent Committee as to the fairness of the
consideration to the holders of the Shares and do not purport to be
appraisals or necessarily reflect the prices at which businesses or securities
actually may be sold. Analyses based upon forecasts of future results
for calendar year 1995 are not necessarily indicative of actual future
results, which may be significantly more or less favorable than suggested
by such analyses. Because such analyses are inherently subject to
uncertainty, being based upon numerous factors or events beyond the control
of the parties or their respective advisors, none of the Company, American
Appraisal or any other person assumes responsibility if future results
are materially different from those forecasts. As described above, American
Appraisal's opinion and presentation to the Independent Committee was one of
many factors taken into consideration by the Board in making its
determination. The foregoing summary does not purport to be a complete
description of the analyses performed by American Appraisal and is qualified
by reference to the written opinion of American Appraisal set forth in
Schedule III to this Offer to Purchase.
American Appraisal, a worldwide valuation consulting firm, as part
of its business, is continually engaged in the valuation of businesses and
their securities in connection with mergers and acquisitions, competitive
biddings, private placements and valuations for estate, corporate and other
purposes. The Independent Committee selected American Appraisal as its
financial advisor because American Appraisal is an internationally
recognized appraisal and valuation firm that has experience in transactions
similar to the Offer and the Merger.
American Appraisal does not effect transactions or hold positions
in the securities of the Company.
The Purchaser and its principals, although not expressly adopting
the valuation determined by the Financial Advisor, believe that the range of
values of $1.32 to $1.57 per Share (without giving effect to the
approximately $4 million of NOLs) is appropriate and that the Purchase
Price of $1.55 per Share is at the very high end of such range. Also,
even after giving effect to the Financial Advisor's valuation of the NOLs
(which the Financial Advisor describes above as "precluding accurate
measurement of their use" and being based on "certain broad
assumptions"), the Purchase Price of $1.55 per Share is above the mid-point
of the range of values determined by the Financial Advisor.
Interests of Certain Persons in the Offer and the Merger; Potential Conflicts
of Interest
In considering the recommendation of the Independent Committee and the
approval of the board of directors as to the fairness of the Offer and the
Merger, stockholders should be aware that the Purchaser and certain
members of management and of the board of directors have interests
described below which present them with inherent conflicts of interest
with respect to the Offer and the Merger. In particular, Scott M. Gillman,
the Chairman of the Board, Chief Executive Officer and Principal Financial
and Accounting Officer of the Company, is one of the three members of the
Purchaser and owns an approximate one-third equity interest in the
Purchaser. Marc A. Gillman, the President and Chief Operating Officer of the
Company and the brother of Scott M. Gillman, is one of the three members
of the Purchaser and owns an approximate one-third equity interest in the
Purchaser. Richard Gillman, the former Chairman of the Board of the Company
and the father of Scott M. Gillman and Marc A. Gillman, is one of the
three members of the Purchaser and owns an approximate one-third equity
interest in the Purchaser. See "THE TENDER OFFER - Certain Information
Concerning the Company and the Purchaser" and Schedule I.
The table set forth on Schedule I attached hereto and incorporated
herein by reference lists the Share ownership in the Company of all
directors and officers of the Company. Neither the Purchaser or any of
the Gillmans will be tendering their Shares. The Purchaser has been
advised by Ronald Winarick, the only other officer or director of the
Company that owns Shares, that he will be tendering the 35,000 Shares
owned by him.
Pursuant to the Company's Restated Certificate of Incorporation, the
Company has limited the personal liability of its directors and officers
to the Company and its stockholders for damages to the maximum extent
permitted by New Jersey law. In addition, the Company's Restated Certificate
of Incorporation provides for the exculpation of directors and officers
of the Company for acts and omissions in violation of their fiduciary
duties. Under current New Jersey law, however, liability is not limited
in the case of a breach of a directors or officer's duty of loyalty to
the Company or its stockholders, the failure to act in good faith, the
knowing violation of law or the obtainment of an improper personal benefit.
The effect of these provisions of the Company's Restated Certificate of
Incorporation may be to limit possible claims which otherwise may be made
against the directors and officers of the Company.
Except for stock options the exercise price of which is less than
the Purchase Price and which will be terminated without consideration
in connection with the Merger, neither member of the Independent
Committee has any financial, ownership or other interest in the Purchaser.
The board of directors and the members of the Independent Committee
were aware of the conflicts of interest mentioned above and considered
them among the other matters described in "SPECIAL FACTORS - Fairness
of the Offer and the Merger; Recommendation of the Board of Directors."
Plans for the Company After the Offer and the Merger
Following the Offer and Merger, the board of directors and management
of the Surviving Corporation likely will consist of Scott M. Gillman,
Marc A. Gillman and Ronald Winarick.
As a future business plan for the Surviving Corporation, the
Purchaser intends not only to continue the efforts of survival and
stabilization, but to also take a number of new actions in an effort to
find profitable areas, and areas appropriate for expansion. Following
the consummation of the Offer and the Merger, the Purchaser intends to
conduct a detailed review of the Surviving Corporation, including its
assets, corporate structure, capitalization, operations, properties,
policies, management and personnel and to consider what, if any, changes
would be desirable in light of the circumstances which then exist.
After such review, changes could include the acquisition or disposition
of assets or other changes in the Surviving Corporation's capitalization,
corporate structure or business.
Specifically, the Purchaser contemplates that it likely will focus
substantial further attention on developing the Surviving Corporation's Willie
Mays Country Chicken concept. In connection with such development, the
Purchaser expects that it may have to substantially modify such concept and
anticipates that it may have to contribute significant additional capital to
the Surviving Corporation. If the Purchaser believes the further
development of the Willie Mays Country Chicken concept proves or may prove
successful, it may seek external financing in connection therewith, and
believes it may be able to obtain such financing, especially to the
extent that the Purchaser invests substantial additional capital therein.
If the Purchaser is able to attract such external financing, the Purchaser
anticipates that it may pursue public market financing for the further
development and expansion of the Willie Mays Country Chicken concept, either
alone or in combination with one or more other business concepts.
With respect to the Cinnabon bakery franchises, the Purchaser
currently intends that it will continue to operate the Cinnabon locations
consistent with current practices and may pursue the limited number of
viable expansion possibilities for additional Cinnabon bakeries. In order to
do so, the Purchaser anticipates that it may have to contribute additional
capital to the Surviving Corporation.
With respect to the Company's existing Markers Restaurant, the
Purchaser currently intends that it will continue to operate such
restaurant consistent with current practices, at least for the remaining
4 years of such restaurant's existing lease term.
The foregoing is only a general description of the Purchaser's
preliminary thoughts with respect to its future plans for the
Surviving Corporation upon the consummation of the Offer and the Merger.
Except for the general business concepts described above, some or all of
which may not be able to be pursued or completed by the Purchaser, the
Purchaser has no present plans or proposals that would result in an
extraordinary corporate transactions such as the merger, reorganization,
liquidation or sale or transfer of a material amount of assets
involving the Company or any of its subsidiaries, or any material changes to
the Company's capitalization, dividend policy, corporate structure or
businesses. In addition, given the existing financial condition of the
Company and the limited possibilities presented by it, it is conceivable that
the Purchaser may substantially revise some or all of the plans generally
described herein, or may pursue plans fundamentally different than those
described herein. However, the Purchaser is not currently aware of any such
specific revisions or changes.
As described above, as of February 26, 1995, the Company had
approximately $4 million of NOLs which may be used by the Company
(or the Surviving Corporation) to offset taxable income for federal
income tax purposes in future years. To the extent the Company (or the
Surviving Corporation) otherwise may have taxable income in future
years, such taxable income would be reduced by the NOLs. However, under
Section 382 of the Internal Revenue Code, the deductibility of these NOLs would
be substantially limited if there were a change of 50% or more of the stock
ownership of the Company (or the Surviving Corporation) occurring within
a 2-year period. The limitation imposed by Section 382 of the Internal
Revenue Code will not apply to the Offer or the Merger, but such
limitation effectively limits the use of such NOLs by any entity other
than one in which Scott M. Gillman, Marc A. Gillman and/or Richard
Gillman own a substantial percentage of the outstanding shares.
See "SPECIAL FACTORS - Opinion of Financial Advisor."
If the Purchaser, either through the contribution by it of substantial
additional capital to the Surviving Corporation, the securing of third
party financing, the contribution to the Surviving Corporation of
substantial other assets owned by or acquired by the Purchaser, the change
in business plan or change in performance of the Surviving Corporation's
operations, or one or more of the foregoing in any combination, is able
to attract the interest of the public markets in the Surviving Corporation
(or any successor entity which may at that time include assets now or
hereafter owned by the Purchaser or the Surviving Corporation), the Purchaser
anticipates that it may seek to complete a public offering of equity in
the Surviving Corporation (or any successor entity). The Purchaser
currently has no definitive plans to do so and there can be no assurance
that the Purchaser ever will be able to attract such public market financing.
Notice of Plan of Merger; Dissenters' Rights
This Offer to Purchase shall serve as notice to all stockholders that
the board of directors of the Acquisition Subsidiary has, contingent upon
the Acquisition Subsidiary obtaining at least 90% of the Shares,
authorized the merger of the Acquisition Subsidiary with and into the
Company pursuant to the plan of merger attached as Schedule IV (the
"Plan of Merger") adopted by the board of directors of the Acquisition
Subsidiary. The Plan of Merger provides that the holders of Shares not owned
by the Acquisition Subsidiary or the Company will be entitled to receive
$1.55 in cash per Share.
Under New Jersey law, Section 14:11-1 of the BCA, stockholders who
receive cash in exchange for their Shares as a result of the Offer and the
Merger will not have dissenters' rights. However, the Purchaser
nonetheless will grant dissenters' rights to record holders of Shares as
provided herein. The following is a description of the dissenters'
rights that will be made available by the Purchaser. Any stockholder who
contemplates the assertion of the dissenters' rights as provided herein is
urged to consult his own counsel. A stockholder who exercises the
dissenters' rights as provided herein will cease to have any rights as a
stockholder, and any dissenters' rights will be limited to those expressly
provided herein.
Record holders of Shares who desire to exercise their dissenters'
rights must satisfy all of the following conditions. Any such holder of
Shares must be a stockholder of record of the Company from the date
he makes a written demand for dissenters' rights through the date the Merger
is effective and must continuously hold his Shares throughout the period
between such dates.
Stockholders who desire to exercise their dissenters' rights must not
tender their Shares. If, as is anticipated, the Acquisition Subsidiary
is able to effect the Merger under BCA Section 14A:10-5.1 without taking
a vote of the stockholder's of the Company, a stockholder of the Company
will have the right to make a demand for the payment of the fair value
of his shares within 30 days (the "Demand Time") after the date this
Offer to Purchase, which includes a copy of the Plan of Merger as Schedule IV,
is mailed to such stockholder.
A demand for payment of fair value should be executed by or for the
stockholder of record fully and correctly, exactly as such stockholder's name
appears on the certificate or certificates representing his Shares. If
the Shares are owned of record by more than one person, as in a joint tenancy
or tenancy in common, such demand must be executed by all joint owners.
An authorized agent, including an agent for two or more joint owners,
may execute the demand for a stockholder of record; however, the agent must
identify the record owners and expressly disclose the fact that, in
exercising the demand, such person is acting as agent for the record owner.
If a stockholder holds Shares through a broker who in turn holds the shares
through a central securities depositary nominee such as Cede & Co., a demand
for dissenters' rights for such Shares must be made by or on behalf of
the depositary nominee and must identify the depositary nominee as the holder
of record.
A record owner, such as a broker, who holds Shares as a nominee
for others, may exercise dissenters' rights with respect to the Shares
held for all or less than all beneficial owners of Shares as to which
such person is the record owner. In such case, the written demand must set
forth the number of Shares covered by such demand.
A stockholder who elects to exercise dissenters' rights must mail
or deliver his written demand within the Demand Time to the Purchaser,
Suite 508B, 5N Regent Street, Livingston, New Jersey 07039 Attention:
Secretary. The written demand for payment of the fair value of Shares must
specify the stockholder's name and mailing address, the number of Shares
owned, and a statement that the stockholder is thereby demanding appraisal
of his Shares. Not later than 20 days after demanding payment for his Shares,
a stockholder must submit the certificate or certificates representing his
Shares to the Purchaser for notation thereon of such demand, whereupon such
certificate or certificates shall be returned to such stockholder. Within
20 days after the Effective Date, the Company will provide notice of the
Effective Date to all stockholders who have complied with these
requirements and have not tendered their Shares. Upon written request,
the Surviving Corporation shall furnish each stockholder who has complied
with these requirements a statement setting forth the aggregate number of
Shares with respect to which demands for appraisals have been received
and the aggregate number of holders of such Shares. The Surviving Corporation
will not provide a dissenting stockholder with any financial statements
other than those being provided as Exhibit II to this Offer.
If after 40 days from the expiration of the Demand Time, the
Surviving Corporation and the stockholder do not agree upon fair
value, a stockholder that has properly exercised his dissenters' rights
can make a written demand upon the Surviving Corporation that it
commence an action in Superior Court of New Jersey (the "Court")
for a determination of fair value of the Shares. Such written demand by
the stockholder must be made on the Surviving Corporation within 10 days
after the expiration of such 40-day period. If the stockholder makes
a timely demand upon the Surviving Corporation, but the Surviving Corporation
has not commenced an action within 10 days of such demand, the
stockholder may commence such action on behalf of the Surviving
Corporation. A stockholder will then have 10 days to commence such an action
on behalf of the Surviving Corporation. If no petition is filed within
this time period, all dissenting stockholders lose their right to an
appraisal and have the right to receive $1.55 per Share.
If a petition for an appraisal is timely filed, all stockholders who
have complied herewith shall become entitled to such a determination.
The Court likely will hold a hearing on such petition through which it
will determine the fair value of the Shares owned by such stockholders.
The appraisal will be based upon the Court's determination of the fair
value of such shares, exclusive of any appreciation or depreciation of value
arising from the accomplishment or expectation of the Merger. In determining
fair value, the Court likely will take into account all relevant factors.
Generally, proof of value by any techniques or methods which are generally
considered acceptable in the financial community and otherwise admissible
in court likely will be considered by the Court. The Court in its discretion
may appoint an appraiser to receive evidence and report to the Court on
the question of fair value.
The fair value of the Shares determined by the Court could be more
than, the same as or less than the consideration the stockholders are to
receive pursuant to the Offer and the Merger if they do not seek
appraisal of the Shares. Opinions of investment banking firms as to fairness,
from a financial point of view, are not binding on the Court. The cost of
the appraisal proceeding will be determined by the Court and levied against
the parties as the Court deems equitable under the circumstances. Upon
application of a dissenting stockholder, and if it is determined that
an offer of payment made by the Surviving Corporation was not made in
good faith, the Court may order that all or a portion of the expenses
incurred by any dissenting stockholder in connection with the
appraisal proceeding, including without limitation reasonable attorneys'
fees and fees and expenses of experts, be charged to the Surviving
Corporation. In the absence of such a determination or assessment, each
party bears its own attorneys' fees and fees and expenses of experts. In
addition, the Court may award interest on the fair value at an interest
rate the Court finds to be equitable. However, if the Court finds that
refusal of any dissenting stockholder to accept an offer of payment made
by the Surviving Corporation in good faith was arbitrary or otherwise
not in good faith, interest likely will not be awarded.
Any stockholder who has duly demanded appraisal in compliance
herewith will not, after the Effective Date, be entitled to vote his
Shares for any purpose or to receive payment of dividends or other
distributions on such Shares, except for dividends or distributions
payable to stockholders of record at a date prior to the Effective
Date. Such stockholder shall cease to have any rights of a shareholder
except the right to be paid the fair value of his Shares.
A stockholder may withdraw his demand for appraisal only with the
consent of the Surviving Corporation. If a stockholder does not comply
with the requirements detailed above, the stockholder's rights to
appraisal shall cease, and such stockholder shall be entitled to receive only
the consideration provided in the Merger.
Notwithstanding the foregoing, because the stockholders are not
entitled to and do not have dissenters' rights under New Jersey law or
the Company's Certificate of Incorporation, the Purchaser can give
no assurance that the Court will recognize the dissenters' rights provided by
the Purchaser herein or be willing to adjudicate the issue of the fair
value of the Shares. In such a case, the Surviving Corporation will pay
$1.55 in cash per Share for all Shares held by stockholders who otherwise
wished to exercise the dissenter's rights set forth herein.
Federal Tax Consequences
The following description of the federal tax consequences of the
ffer and the Merger is for general information only. The tax consequences
for a particular stockholder will depend upon his particular circumstances.
All stockholders should consult their personal tax advisors in determining
the tax consequences to them arising from the Offer and the Merger,
including the applicability and effect of state, local and foreign tax laws
and possible changes in tax law.
The following description is based upon federal income tax law in
effect at this time. However, the federal income tax consequences of the
Offer and the Merger will be governed by federal income tax law in
effect at the time of the stockholder's recognition of income.
In general, the receipt of cash by holders in exchange for shares
tendered by stockholders pursuant to the Offer or surrendered pursuant to
the Merger will be a taxable sale or exchange for federal income tax
purposes. The receipt of cash may be subject to "backup" withholding of 31%
of such case unless the stockholder either provides a correct taxpayer
identification number on the Substitute Form W-9 which is included in
the Letter of Transmittal with this Offer to Purchase, or is eligible for an
exemption from this requirement. Exempt stockholders (including among
others all corporations) are not subject to backup withholding and
should indicate their exempt status on the Substitute Form W-9. A foreign
stockholder may be required to certify its exempt status on Form W-8 to
avoid backup withholding.
Under present law, the federal income tax consequences to a
stockholder all of whose Shares are tendered or surrendered and who is
a citizen or resident of the United States generally will be as follows:
(i) Assuming the Shares are a capital asset in the hands of the
stockholder, the stockholder will, most likely, recognize a capital
gain or loss as a result of the purchase pursuant to the Offer or the
Merger. The capital gain or loss will be long term with respect to
Shares held for more than one year and short-term with respect to
Shares held for a shorter period. The amount of gain or loss
recognized by a stockholder will be measured by the difference, if
any, between (i) the amount of cash received pursuant to the Offer or the
Merger and (ii) the cost or other tax basis of the tendered or
surrendered Shares to such stockholder.
(ii) In the case of a stockholder who is not a corporation, the
excess, if any, of the stockholder's net long-term capital gains over
net short-term capital losses recognized during 1995, including in the
computation for that purpose the capital gain or loss, if any, on the Shares
tendered, is subject to tax at rates of up to 28%. The excess, if any, of
the stockholder's net short-term capital gains over net long-term
capital losses is taxable at the rates applicable to ordinary income,
for which there is a maximum rate of 39.6% in 1995. Capital losses
offset capital gains to the extent thereof, and any excess capital loss can be
used to offset up to $3,000 of other taxable income.
(iii) In the case of a stockholder that is a corporation, the excess
of the corporation's net long term gains over the corporation's net
short term losses, including in the computation for that purpose the capital
gain or loss, if any, on the Shares tendered, is taxed at the ordinary
income tax rate of the corporation. Capital losses may be deducted only to
the extent of capital gains.
However, capital gain treatment with respect to the Shares tendered
may not be applicable to a stockholder who is deemed to own constructively
(pursuant to Section 318 of the Internal Revenue Code) Shares of any
other stockholder whose Shares are not redeemed in the same transaction.
Under Section 318 of the Internal Revenue Code, a stockholder may be
deemed to own constructively Shares owned or constructively owned by
related individuals (including the stockholder's spouse, children,
grandchildren and parents) or related entities (including certain controlled
corporations, partnerships, trusts and estates). Any stockholder with
respect to whom related individuals or entities continue to own Shares
after the transaction should consult his or her tax advisor to determine
whether capital gain treatment is applicable and if not whether all of
the proceeds of the sale should be treated as a dividend under Section
302 of the Internal Revenue Code.
Under many tax treaties between foreign countries and the United States,
the character of a distribution under tax law of the country from which the
distribution is made often controls treatment of the distribution for
purposes of the treaty. As a result, a transaction of a particular non-U.S.
stockholder will be treated as a dividend under the United States tax
rules outlined above, and it may also be treated as a dividend under many
treaties. As such, the transaction may be subject to withholding as a dividend
under the terms of a particular treaty, even if the transaction is otherwise
characterized under the tax laws of the recipient's country or residence.
No gain or loss will be recognized by the Company or the Purchaser and
neither the Company nor the Purchaser will experience investment tax credit
recapture as a result of the purchase pursuant to the Offer of cash
payments pursuant to the Merger. If the Merger is not consummated,
stockholders who do not tender Shares pursuant to the Offer will
recognize no taxable gain or loss as a result of the consummation of the
Offer.
THE FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED FOR
GENERAL INFORMATION ONLY. EACH STOCKHOLDER IS URGED TO CONSULT SUCH
STOCKHOLDER'S OWN TAX ADVISOR TO DETERMINE THE PARTICULAR TAX CONSEQUENCES
TO SUCH STOCKHOLDER OF THE DISPOSITION OF SHARES PURSUANT TO THE OFFER.
Source and Amount of Funds
The Purchaser expects the maximum aggregate cost of acquiring all
outstanding shares not owned by the Purchaser, including all fees and expenses
applicable to the Offer and the Merger, to be approximately $800,000.
See "THE TENDER OFFER - Fees and Expenses." All funds required to
consummate the Offer will be obtained from available cash on hand of the
Purchaser. In addition, the funds to be used to consummate the Merger
will come from cash on hand of the Purchaser. Moreover, each of the
principals of the Purchaser has sufficient net worth to fund the purchase of
the Shares pursuant to the Offer and the Merger.
THE TENDER OFFER
Terms of the Offer
Upon the terms and subject to the condition of the Offer, the
Purchaser will accept for payment and thereby purchase any and all
outstanding Shares validly tendered on or prior to the Expiration Date
and not withdrawn in accordance with "THE TENDER OFFER - Withdrawal
Rights." The term "Expiration Date" means 5:00 p.m., Eastern Daylight
Time, on May 15, 1995, unless the Purchaser, in its sole discretion, has
extended the period of time for which the Offer is open, in which event
the term "Expiration Date" will mean the latest time and date on which the
Offer, as so extended by the Purchaser expires.
The Purchaser also expressly reserves the right (i) to terminate the
Offer and not accept for payment or pay for any Shares not theretofore
accepted for payment or paid for, upon the occurrence of any of the
conditions specified under "THE TENDER OFFER - Certain Conditions of the Offer"
by giving oral or written notice of such delay in payment or termination to
the Depositary and (ii) at any time or from time to time, to amend the
Offer in any respect. The Purchaser expressly reserves the right in its sole
discretion, any time or from time to time, to extend the period during
which the Offer is open and thereby delay acceptance for payment of, and
the payment for, any Shares, by giving oral or written notice of such
extension to the Depositary. Any extension, delay in payment, termination
or amendment will be followed as promptly as practicable by public
announcement thereof, such announcement in the case of an extension to be
issued no later than 9:00 a.m., Eastern Daylight Time, of the next
business day after the previously scheduled Expiration Date. The
reservation by the Purchaser of the right to delay acceptance for payment or
the purchase of Shares is subject to the provisions of applicable law,
which require that the Purchaser pay the consideration offered or return
the Shares deposited by or on behalf of stockholders promptly after the
termination or withdrawal of the Offer.
All Shares not purchased pursuant to the Offer will be returned to
the tendering stockholder at the Purchaser's expense as promptly as
practicable following the Expiration Date.
Procedure for Tendering Shares
Proper Tender of Shares. For Shares to be properly tendered
pursuant to the Offer:
(a) the certificate of such Shares (or confirmation of receipt of
such shares pursuant to the procedures for book-entry transfer set forth
below), together with a properly completed and duly executed Letter of
Transmittal (or facsimile thereof) with any required signature
guaranteed, and any other documents required by the Letter of Transmittal,
must be received on or before the Expiration Date by the Depositary at one of
its addresses set forth in this Offer to Purchase; or
(b) the tendering stockholder must comply with the guaranteed
delivery procedure set forth below.
The acceptance of Shares by the Purchaser for payment will constitute
a binding agreement between the then tendering stockholder and the Purchaser
upon the terms and subject to the conditions of the Offer, including the
tendering stockholder's representation that (i) such stockholder has full
power and authority to tender, sell, assign and transfer such Shares, and
(ii) when the same are accepted for payment by the Purchaser, the
Purchaser will acquire good, marketable and unencumbered title thereto, free
and clear of all liens, restrictions, charges and encumbrances and will not be
subject to any adverse claim.
Signature Guarantees and Method Delivery. No signature guarantee is
required on the Letter of Transmittal if the Letter of Transmittal is signed
by the registered holder of the Shares (which term, for purposes of this
Section, includes any participation in the Depository Trust Company ("DTC")
or a similar book-entry transfer facility (collectively, the
"Book-Entry Transfer Facilities") whose name appears on a security position
listing as the holder of the Shares tendered therewith, and payment is to be
made directly to such registered holder, or if Shares are tendered for
the account of a member firm on 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. In all other cases, all signatures on the Letter
of Transmittal must be guaranteed by an eligible guarantor institution (bank,
stockbroker, savings and loan association or credit union with membership
in an approved signature guarantee program), pursuant to Rule 17 Ad-15
promulgated under the Exchange Act (an "Eligible Institution"). See
Instruction 2 of the Letter of Transmittal. If a certificate representing
Shares is registered in the name of a person other than the signer of a
Letter of Transmittal, or if payment is to be made, or Shares not
purchased or tendered are to be issued, to a person other than the registered
holder, the certificate must be endorsed or accompanied by an appropriate
stock power, in either case signed exactly as the name of the registered
holder appears on the certificate, with the signature on the certificate
or stock power guaranteed by an Eligible Institution.
In all cases, payment for Shares tendered and accepted for payment
pursuant to the Offer will be made only after timely receipt by the
Depositary of certificates for such Shares (or a timely confirmation of a
book-entry transfer of such Shares into the Depository's account at one of
the Book-Entry Transfer Facilities), a properly completed and duly
executed Letter of Transmittal (or facsimile thereof) and any other
documents required by the Letter of Transmittal. The method or delivery
of all documents, including stock certificates, the Letter of
Transmittal and any other required documents, is at the election and
risk of the tendering stockholder. If delivery is by mail, registered mail
with return receipt requested, properly insured, is recommended.
Federal Income Tax Withholding. To prevent back-up federal income
tax withholding equal to 31% of the gross payments made pursuant to the
Offer, each stockholder who does not otherwise establish an exemption for
withholding must notify the Depositary of such stockholder's correct taxpayer
identification number (or certify that such taxpayer is awaiting a taxpayer
identification number) and provide certain other information by completing
the Substitute Form W-9 included in the Letter of Transmittal. Certain
stockholders, including corporations, are not subject to the withholding and
reporting requirements. Foreign stockholders who are individuals must
submit Form W-9 in order to avoid back-up withholding. The Depositary
will withhold 31% of the gross payments payable to a foreign stockholder
unless the Depositary determines that a reduced rate of withholding or an
exemption from withholding is applicable.
For a discussion of certain other federal income tax
consequences to tendering stockholders, see "SPECIAL FACTORS - Federal
Tax Consequences."
Book-Entry Delivery. The Depositary will establish an account
with respect to the Shares at each of the Book-Entry Transfer Facilities
for purposes of the Offer within two business days after the date of
this Offer to Purchase. Any financial institution that is a participant in
the Book-Entry Transfer Facility's system may make book-entry delivery of
the Shares by causing such facility to transfer such Shares into the
Depository's account in accordance with such facility's procedure for
such transfer. Even though delivery of Shares may be effected through
book-entry transfer into the Depository's account at one of the Book-Entry
Transfer Facilities, a properly completed and duly executed Letter of
Transmittal (or facsimile thereof), with any required signature
guarantees and other required documents must, in any case, be
transmitted to and received by the Depositary at one of its addresses
prior to the Expiration Date, or the guaranteed delivery procedure
set forth below must be followed. Delivery of the Letter of Transmittal
and any other required documents to one of the Book-Entry Transfer
Facilities does not constitute delivery to the Depositary.
Guaranteed Delivery. If a stockholder desires to tender Shares
pursuant to the Offer and such stockholder's certificates are not
immediately available (or the procedures for book-entry transfer cannot be
completed on a timely basis) or time will not permit all required
documents to reach the Depositary before the Expiration Date, such Shares
may nevertheless be tendered provided that all of the following conditions
are satisfied:
(a) such tender is made by or through an Eligible Institution;
(b) the Depositary receives (by hand, mail, telegram or facsimile
transmission), on or prior to the Expiration Date, a properly completed and
duly executed Notice of Guaranteed Delivery substantially in the form the
Purchaser has provided with this Offer to Purchase (indicating the price at
which the Shares are being tendered); and
(c) the certificates for all tendered Shares in proper form for
transfer (or confirmation of book-entry transfer of such Shares into the
Depository's account at one of the Book-Entry Transfer Facilities), together
with a properly completed and duly executed Letter of Transmittal (or
facsimile thereof) and any other documents required by the Letter of
Transmittal, are received by the Depositary within five business days after
the date the Depositary receives such Notice of Guaranteed Delivery.
Determinations of Validity; Rejection of Shares; Waiver of Defects;
No Obligation to Give Notice of Defects. All questions as to the number of
Shares to be accepted and the validity for eligibility (including the time
of receipt) and acceptance for payment of any tender of Shares will be
determined by the Purchaser, in its sole discretion, which determination
shall be final and binding on all parties. The Purchaser reserves the
absolute right to reject any or all tenders it determines not to be in
proper form or the acceptance of or payment for which may, in the opinion
of the Purchaser's counsel, be unlawful. The Purchaser also reserves the
absolute right to waive any of the conditions of the Offer and any defect
or irregularity in the tender of any particular Shares. No tender of
shares will be deemed to be properly made until all defects and
irregularities have been cured or waived. Neither the Purchaser nor the
Depositary or any other person is or will be obligated to give notice of
any defects or irregularities in tenders, and none of them will incur any
liability for failure to give such notice.
Withdrawal Rights
Except as otherwise provided in this Section, the tender of Shares
pursuant to the Offer is irrevocable. Shares tendered pursuant to the
Offer may be withdrawn at any time before the Expiration Date and,
unless theretofore accepted for payment and paid for by the Purchaser, may
also be withdrawn at any time after June 16, 1995.
For a withdrawal to be effective, the Depositary must timely receive
(at one of its addresses set forth in this Offer to Purchase) a written,
telegraphic or facsimile transmission notice of withdrawal. Such notice
of withdrawal must specify the name of the person having deposited the
Shares to be withdrawn, the number of Shares to be withdrawn and the name
of the registered holder, if different from that of the person who tendered
such Shares. If the certificates have been delivered or otherwise identified
to the Depositary, then, prior to the release of such certificates, the
tendering stockholder must also submit the serial numbers shown on the
particular certificates evidencing the shares and the signature on the notice
of withdrawal must be guaranteed by an Eligible Institution (except in the
case of Shares tendered by an Eligible Institution). If Shares have been
tendered pursuant to the procedure of book-entry transfer set forth in
"THE TENDER OFFER - Procedure for Tendering Shares," the notice of
withdrawal must specify the name and the number of the account at the
applicable Book-Entry Transfer Facility to be credited with the withdrawn
Shares and otherwise comply with the procedures of such facility. All
questions as to the form and validity (including time of receipt) of
notices of withdrawal will be determined by the Purchaser, in its sole
discretion, which determination shall be final and binding on all
parties. Neither the Purchaser nor the Depositary or any other person
is or will be obligated to give any notice of any defects or
irregularities in any notice of withdrawal, and none of them will incur
any liability for failure to give any such notice. Any Shares properly
withdrawn will thereafter be deemed not tendered for purposes of the Offer.
Withdrawn Shares may, however, be tendered before the Expiration Date by
again following any of the procedures described in "THE TENDER OFFER -
Procedure of Tendering Shares."
Acceptance For Payment and Payment of Purchase Price
Upon the terms and subject to the conditions of the Offer (including
if the Offer is extended or amended, the terms and conditions of any such
extension of amendment), the Purchaser will accept for payment, and
thereby purchase, and will pay for all Shares validly tendered prior to the
Expiration Date (and not properly withdrawn in the manner described in
"THE TENDER OFFER - Withdrawal Rights") as soon as practical after the
Expiration Date.
Payment for Shares purchased pursuant to the Offer will be made by
depositing the aggregate Purchase Price therefor with the Depositary,
which will act as agent for tendering stockholders for the purpose of
receiving payment from the Purchaser and transmitting payment to the tendering
stockholders. For purposes of the Offer, ownership of tendered Shares will
pass to the Purchaser, and the Purchaser will be deemed to have accepted
for payment, and thereby purchased, tendered Shares, if, as and when the
Purchaser gives oral or written notice to the Depositary of its acceptance
of such Shares for payment.
If any tendered Shares are not accepted for payment pursuant to the
terms and conditions to the Offer for any reason, or if certificates
representing more Shares than are tendered are submitted to the
Depositary, certificates for such unpurchased or untendered Shares will be
returned, without expense to the tendering stockholder (or, in the case of
Shares tendered by book-entry transfer of such Shares into the Depository's
account at a Book-Entry Transfer Facility in accordance with the procedures
set forth in "THE TENDER OFFER - Procedure for Tendering Shares,"
Shares will be credited to an account maintained within such Book-Entry
Transfer Facility), as promptly as practicable following the expiration,
termination or withdrawal of the Offer.
If, prior to the Expiration Date or prior to the Merger, the
Purchaser increases the consideration offered to stockholders pursuant
to the Offer or payable pursuant to the Merger, such increased
consideration will be paid to all stockholders whose Shares are purchased
pursuant to the Offer whether or not such Shares have been tendered
prior to such increase in consideration.
The Purchaser will pay all stock transfer taxes, if any,
payable on the transfer to it of Shares person other than the
registered owner, or if tendered certificates are registered in the
name of any person other than the person signing the Letter of
Transmittal, the amount of all stock transfer taxes, if any (whether
imposed on the registered owner or such other person), payable on account of
the transfer to such person will be deducted from the Purchase Price
unless evidence satisfactory to the Purchaser of the payment of such taxes
or exemption therefrom is submitted. See Instruction 7 of the Letter of
Transmittal.
ANY TENDERING STOCKHOLDER OR OTHER PAYEE WHO FAILS TO COMPLETE
FULLY AND SIGN THE SUBSTITUTE FORM W-9 INCLUDED IN THE LETTER OF
TRANSMITTAL MAY BE SUBJECT TO THE REQUIRED FEDERAL INCOME TAX
WITHHOLDING OF 31% OF THE GROSS PROCEEDS PAID TO SUCH STOCKHOLDER OR
OTHER PAYEE PURSUANT TO THE OFFER. SEE "THE TENDER OFFER - Procedure For
Tendering Shares."
Certain Conditions of the Offer
Notwithstanding any other provision of the Offer, the Purchaser shall
not be required to accept for payment, purchase or pay for any Shares
tendered, and may terminate or amend the Offer or may postpone the
acceptance for payment of, or the payment for, Shares tendered, if any time
before the time of purchase of, or payment for, any such Shares, any of
the following events shall have occurred:
(a) 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 or governmental, regulatory or
administrative authority or agency or tribunal, domestic or foreign,
which (i) challenges the making of the Offer, or the acquisition of
Shares pursuant to the Offer or the Merger or otherwise related in
any manner to the Offer or the Merger; or (ii) could materially affect
the business, condition (financial or other), income, operation or
prospects of the Company;
(b) 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,
entered, amended, enforced or deemed to be applicable to the Offer or the
Merger or any court or any government or governmental, regulatory or
administrative authority or agency or tribunal, domestic or foreign,
could: (i) make the acceptance for payment of, or payment for, some or
all of the Shares illegal or otherwise restrict or prohibit consummation
of the Offer or the Merger; or (ii) delay or restrict the ability of the
Purchaser, or render the Purchaser unable, to accept for payment or pay for
some or all of the Shares; or (iii) materially affect the business,
condition (financial or other), income, operations or prospects of the
Company or otherwise materially impair in any way the contemplated
future conduct of the business of the Company;
(c) any material change shall occur or be threatened to the
business, condition (financial or other), income, operations, Share
ownership or prospects of the Company which is material to the Company
or its stockholders;
(d) a tender or exchange offer for any or all of the Shares
(other than the Offer), or any merger, business combination or other
similar transaction with or involving the Company, shall have been proposed,
announced or made by any person;
(e) any entity, "group" (as that term is used in Section 13(d)(3)
of the Exchange Act) or person shall have acquired, or proposed to
acquire, beneficial ownership of Shares constituting more than 5% of the
outstanding Shares; or
(f) the Company shall have withdrawn or modified in a manner
adverse to the Purchaser its approval of the Offer or the Merger.
A number of states, including New Jersey, have adopted
"shareholder protection" or "takeover" statutes and regulations which
purport to varying degrees to be applicable to attempts to acquire securities
of corporations which are incorporated or have substantial assets,
stockholders, principal executive offices or principal places of
business in such states. The Purchaser does not believe that the Offer or
Merger is in violation of any such statutes. Should any person seek to
apply any state takeover statute to the Offer or the Merger, the
Purchaser would take such action as then appears desirable, and currently
expects that it would contest the validity and application of any such
statute in appropriate court proceedings.
The foregoing conditions are for the Purchaser's sole benefit and may
be asserted by the Purchaser regardless of the circumstances giving rise
to any such condition (including any action or inaction by the Purchaser)
or may be waived by the Purchaser in whole or in part. The Purchaser's failure
at any time to exercise any of the foregoing rights shall not be deemed a
waiver of any such right and each such right shall be deemed an ongoing
right which may be asserted at any time and from time to time.
Price Range of the Shares; Dividend Information
The Shares are traded in the over-the-counter market and are
quoted on the National Association of Securities Dealers Automated Quotation
System ("NASDAQ") under the trading symbol "DINE". From January 28, 1994
through May 17, 1994 (the "Bulletin Board Period"), the Shares traded in the
over-the-counter market and were quoted on the OTC Bulletin Board. The
following table sets forth the high and low bid prices for the Shares
for the periods indicated below. All prices set forth below were obtained
from NASDAQ.
Bid Price
Fiscal 1993* Low High
Quarter ended May 30, 1993 $ 5.00 $ 7.50
Quarter ended August 29, 1993 4.37 6.25
Quarter ended November 28, 1993 1.25 4.37
Quarter ended February 27, 1994 1.12 2.81
Fiscal 1994*
Quarter Ended May 29, 1994 1.00 4.00
Quarter Ended August 28, 1994 1.00 4.00
Quarter Ended November 27, 1994 1.24 2.24
Quarter Ended February 26, 1995 1.00 1.24
* All prices for dates prior to February 4, 1994 are reflected as adjusted
to give effect to the 1:5 combination of the Shares on February 4, 1994. All
prices for dates other than during the Bulletin Board Period reflect
quotations of the Shares on the NASDAQ SmallCap Market and all prices
during the Bulletin Board Period reflect quotations of the Shares on the
OTC Bulletin Board.
The price quotations set forth above represent prices between dealers,
do not include retail mark-ups, mark-downs or commissions and may not
necessarily represent actual transactions.
On April 12, 1995, the last trading day prior to any public
announcement of the proposal by the Purchaser to acquire Shares, the
closing bid price was $.87.
The Company has not paid any dividends, whether in cash or in stock,
on the Shares since its organization and has no plans to do so in the
foreseeable future.
Summary Historical Financial Information; Public Filings
Set forth below is a summary of certain consolidated financial
information with respect to the Company excerpted or derived from the
information contained in the Company's Annual Report on Form 10-K for
the Year Ended February 27, 1994 (the "Company's 1993 10-K") and the Company's
Quarterly Report on Form 10-Q for the Nine Months ended November 27,
1994 (the "Company's 10-Q"). A copy of the financial statements set
forth in the Company's 1993 10-K and the Company's 10-Q are reproduced as
part of Schedule II hereto. More comprehensive financial information is
in such reports and other documents filed by the Company with the
Commission, and the following summary is qualified in its entirety by
reference to such reports and other documents and all of the financial
information and notes contained therein. Such reports and other
documents may be inspected and copies may be obtained from the offices of the
Commission in the manner set forth below.
Selected Operating Data:
Fiscal Year Ended Nine Months Ended
_________________ _________________
(dollars in thousands, except per share amounts)
Feb. 27 Feb. 28 November 27, November 28,
1994 1993 1994 1993
_______ _______ ___________ ___________
(unaudited) (unaudited)
Net sales......... $9,795 $ 9,346 $ 6,065 $ 7,409
Net loss (592) (1,676)(1) (334) (697)
Per share of Common Stock:
Net loss (.40) (1.21) (.19) (.50)
Selected Balance Sheet Data Fiscal Year Ended Nine Months Ended
_________________ _________________
(dollars in thousands)
Feb. 27, Feb. 28 November 27, November 28,
1994 1993 1994 1993
(unaudited) (unaudited)
Working Capital
(deficiency)............. $ 378 $ (1,425) 195 (147)
Total assets 3,546 3,718 3,458 3,548
Long-term debt, less
current maturities 1,500 -- 1,500 1,700
Total liabilities 2,263 2,357 2,448 2,884
Stockholders equity 1,283 1,361 1,010 664
___________
(1) Includes the write-off of $945,000 of value of capital assets of the
Company.
(2) Reflective of the weighted average of shares outstanding after giving
effect to the 1:5 combination of the Common Stock effective
February 4, 1994 and the issuance of additional shares during the fiscal
year ended February 27, 1994.
The Company is subject to the information and reporting
requirements of the Exchange Act and, in accordance therewith, is
obligated to file reports and other information with the Commission
relating to its business, financial condition and other matters.
Information as of particular dates concerning the Company's directors
and officers, their remuneration, stock options granted to them, the principal
holders of the Company's securities, any material interests of such
persons in transactions with the Company and other matters is disclosed
in proxy statements and annual reports distributed to the Company's
stockholders and filed with the Commission. Such reports, proxy
statements and other information may be inspected at the Commission's office
in Room 1024, 450 Fifth Street, N.W. Judiciary Plaza, Washington, D.C.
20549, and should be available for inspection at the following regional
offices of the Commission: Northwestern Atrium Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661 and 7 World Trade Center,
13th Floor, New York, New York 10048. Copies may be obtained, by
mail, upon payment of the Commission's customary charges, by writing to its
principal office at 450 Fifth Street, N.W. Judiciary Plaza, Washington,
D.C. 20549.
Certain Information Concerning the Company and the Purchaser
The Purchaser is a limited liability company organized under the laws
of the State of New Jersey in April 1995. Its principal executive
offices are located at 5N Regent Street, Suite 508B, Livingston, New Jersey
07039. To date the Purchaser has engaged in no activities other than those
related to its formation and the Offer and the Merger. Set forth as
Schedule I hereto is certain information with respect to each member of the
Purchaser.
Except as set forth in this Offer to Purchase, neither the Purchaser
nor its members has any contract, arrangement, understanding or relationship
with any other person with respect to any securities of the Company,
including but not limited to any contract, arrangement, understanding or
relationship concerning the transfer or the voting of any such
securities, joint ventures, loan or option arrangements, puts or calls,
guaranties of loans, guaranties against loss or the giving or withholding
of proxies.
Except as set forth in this Offer to Purchase, there have been
no contacts, negotiations or transactions between the Purchaser or its
members on the one hand and the Company or its affiliates on the
other hand, concerning a merger, consolidation or acquisition; a tender
offer or other acquisition of securities; an election of directors,
other than the annual solicitation of proxies of stockholders; or a sale or
other transfer of a material amount of assets. See "SPECIAL FACTORS -
Background of the Company and the Offer."
Except for (i) the open market purchase in an ordinary brokerage
transaction of 16,711 Shares by Richard Gillman on February 21, 1995 at
a purchase price of $1.05 per Share, (ii) the private sale by Richard
Gillman of 90,682 and 98,682 Shares, respectively, to Scott M. Gillman
and Marc A. Gillman at a sale price of $1.00 per Share on March 20,
1995 and (iii) the contribution of the Gillman Shares to the Purchaser
as described above, neither the Purchaser nor any of its members, nor, to the
best of the Purchaser's knowledge, any of the other executive officers
and directors of the Company, has effected any transaction in the Shares
during the past 60 days.
Effect of the Offer on the Market for Shares, Registration Under the
Exchange Act and SmallCap Market Listing
As a result of the Offer, the Purchaser's percentage interest in the
Company, including its net book value and net earnings, will increase in
proportion to the number of Shares acquired in the Offer. If the
Merger is consummated, the Purchaser's interest in the Company,
including its net book value and net earnings, will be 100%. Upon
consummation of the Merger, the Purchaser will own 100% of the equity
interest in the Company and will be entitled to all the benefits resulting
from those interests, including all income generated by the Company's
operations and any future increase in the Company's value. Similarly, the
Purchaser will be subject to 100% of the risk of any decrease in value of
the Company.
The purchase of Shares pursuant to the Offer will reduce the number of
Shares that might otherwise trade publicly and the number of holders of the
Shares and, if the Merger is not consummated, would likely adversely
affect the liquidity and market value of the remaining Shares held by the
public.
The Shares are currently registered under the Exchange Act. However,
the Purchaser intends to cause the Company to apply for termination of
registration of the Shares under the Exchange Act following consummation
of the Offer. The termination of registration of the Shares would render
inapplicable certain provisions of the Exchange Act, including requirements
that the Company file periodic reports and furnish stockholders with
proxy materials regarding meetings of stockholders of the Company, requirements
that the Company's officers, directors and ten-percent stockholders file
certain reports concerning ownership of the Company's securities and
provisions that any profit by such officers, directors and stockholders
through purchases and sales of the Company's equity securities within any
six-month period may be recaptured by the Company. In addition, if the
Company were no longer required to make such periodic filings because of the
deregistration of the Shares under the Exchange Act, affiliates and any
other holders of "restricted securities" of the Company would be deprived
of their ability to dispose of Shares pursuant to Rule 144 promulgated under
the Securities Act of 1933, as amended.
In addition, the Purchaser intends to terminate the listing of the
Shares on the NASDAQ SmallCap Market upon consummation of the Offer.
The effect of the termination of such listing, along with the deregistration
of the Shares under the Exchange Act, will be to effectively eliminate the
public transferability of the Shares.
Certain Legal Matters
The Purchaser is not aware of any license or permit which is
material to the Company's business which might be adversely affected by
the Purchaser's acquisition of Shares pursuant to the Offer or the Merger
or of any approval or other action by any governmental or administrative
agency that would be required prior to the acquisition of Shares
pursuant to the Offer or the Merger. Should any such approval be required,
it is Purchaser's present intention that such approval or action would be
sought. There is, however, no present intent to delay the purchase of
Shares tendered pursuant to the Offer pending the outcome of any such action
or receipt of such approval (subject to the Purchaser's right to decline to
purchase Shares as described in "THE TENDER OFFER - Certain Conditions of
the Offer"). There can be no assurance that any such approval or action,
if needed, would be obtained, or, if obtained, that it will be obtained without
substantial conditions, or that adverse consequences might not result to the
Company's business in order to obtain such approval or other action.
The Purchaser's obligation to purchase and pay for Shares is subject to
certain other conditions. See "THE TENDER OFFER - Certain Conditions of
the Offer."
Fees and Expenses
The Purchaser has retained American Stock Transfer & Trust Company to
serve as Depositary in connection with the Offer and disbursing agent in
connection with the Merger. American Stock Transfer & Trust Company will
receive reasonable and customary compensation for its services in connection
with the Offer and the Merger from the Purchaser, will be reimbursed for its
reasonable out-of-pocket expenses by the Purchaser, and will be
indemnified against certain liabilities and expenses in connection with the
Offer and the Merger by the Purchaser.
The Purchaser will reimburse brokers, dealers, commercial banks
and trust companies for customary handling and mailing expenses incurred
in forwarding this Offer to Purchase to their customers.
No officers or employees of the Company other than Scott M.
Gillman and Marc A. Gillman have assisted the Purchaser in preparing this
Offer to Purchase. The Purchaser will reimburse the Company for the
costs to the Company of such assistance if the Merger is not consummated.
It is estimated that the following expenses will be incurred by the
Purchaser and the Company in connection with the consummation or the
Offer and the Merger. The Purchaser will pay all costs except for the
Financial Advisor's fees and fees of counsel to the Independent Committee.
Depositary fees and expenses.............................$ 7,500
Printing and mailing expenses ............................ 5,000
Financial Advisor's fees..................................15,000
Independent Committee counsel............................. 5,000
Purchaser's legal fees and expenses.......................45,000
Filing fees............................................... 500
Accounting fees........................................... 1,000
Miscellaneous............................................. 5,000
______
Total..........................................$ 84,000
MISCELLANEOUS
The Offer is not being made to, nor will tenders be accepted from or
on behalf of, holders of Shares in any jurisdiction in which the making
or acceptance thereof would not be in compliance with the securities,
blue sky or other laws of such jurisdiction.
Except where otherwise stated, the information concerning the Company
contained in this Offer to Purchase has been furnished by the Company or has
been taken from or based upon publicly available documents and records on
file with the Commission and other public sources and the information
concerning the Purchaser has been furnished by the Purchaser. Although the
Purchaser has no knowledge that would indicate that any statements
contained herein based on such documents are untrue, the Purchaser takes no
responsibility for the accuracy or completeness of the information furnished
by the Company or contained in such documents and records or for the
failure of the Company to disclose events which may have occurred or
may effect the significance or accuracy of any such information.
Although the Company has stated that it does not have any knowledge
that would indicate that any statement contained herein based on information
furnished by the Purchaser is inaccurate or incomplete, the Company has
informed the Purchaser it takes no responsibility for the accuracy or
completeness of the information furnished by the Purchaser or for any such
persons to disclose events which may have occurred or may affect the
significance or accuracy of such information.
The Purchaser has filed with the Commission a Tender Offer Statement
on Schedule 14D-1, with exhibits thereto, pursuant to Rule 14d-3, and the
Purchaser has filed a Schedule 13E-3 pursuant to Rule 13e-3, of
the General Rules and Regulations under the Exchange Act, each of which
furnish certain additional information with respect to the Offer and the
Merger, and the Company has filed a Solicitation Recommendation Statement on
Schedule 14D-9 pursuant to Section 14(d)(4) of the Exchange Act and both may
file amendments thereto. Such Schedules and any amendments thereto,
including exhibits, may be examined and copies may be obtained from the
principal office of the Commission in Washington, D.C. in the same manner as
set forth in "Summary Historical Financial Information; Public Filings."
No person has been authorized to give any information or make any
representation on behalf of the Purchaser not contained in this Offer to
Purchase or in the Letter of Transmittal and, if given or made, such
information or representation must not be relied upon has having been
authorized.
SCHEDULES HAVE BEEN INTENTIONALLY OMITTED FROM THIS AMENDED OFFER TO
PURCHASE AS NO CHANGES WERE MADE THERETO FROM THE SCHEDULES SET FORTH IN
THE OFFER TO PURCHASE, DATED APRIL 13, 1995