EXHIBIT (a)(1)(i)
OFFER TO PURCHASE FOR CASH
BY
BELLAVISTA CAPITAL, INC.
OF
UP TO 750,000 SHARES OF ITS COMMON STOCK
AT $2.40 NET PER SHARE
THE TENDER OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., PACIFIC
STANDARD TIME, ON JULY 13, 2007, UNLESS THE TENDER OFFER IS EXTENDED.
BellaVista Capital, Inc., a Maryland corporation (the "Company"), is
offering to purchase for cash up to 750,000 shares of its common stock, par
value $0.01 per share, at a purchase price of $2.40 per share net to the seller
in cash without interest, upon the terms and subject to the conditions set forth
in this offer to purchase and the related letter of transmittal (which together,
as they may be amended and supplemented from time to time, constitute the tender
offer). Unless the context otherwise requires, all references to shares shall
refer to the shares of common stock, par value $0.01 per share, of the Company.
Only shares properly tendered and not properly withdrawn will be purchased,
on the terms and subject to the conditions of the tender offer. However, because
of the proration provisions described in this document, all of the shares
tendered may not be purchased if more than the number of shares we seek are
properly tendered. Shares not purchased in the tender offer will be returned to
the tendering stockholders at our expense promptly after the expiration of the
tender offer. See Section 1. To tender shares properly, you must properly
complete and duly execute the letter of transmittal.
We reserve the right, in our sole discretion, to purchase more than 750,000
shares in the tender offer, subject to applicable law.
THE TENDER OFFER IS NOT CONDITIONED ON ANY MINIMUM NUMBER OF SHARES BEING
TENDERED. THE TENDER OFFER IS, HOWEVER, SUBJECT TO OTHER CONDITIONS. SEE SECTION
6.
The shares are not traded or listed for trading on any market or exchange.
Therefore, no current market prices for the securities are available.
OUR BOARD OF DIRECTORS HAS APPROVED THE TENDER OFFER. HOWEVER, NEITHER WE NOR
OUR BOARD OF DIRECTORS MAKES ANY RECOMMENDATION TO YOU AS TO WHETHER YOU SHOULD
TENDER OR REFRAIN FROM TENDERING YOUR SHARES. YOU MUST MAKE YOUR OWN DECISION AS
TO WHETHER TO TENDER YOUR SHARES AND, IF SO, HOW MANY SHARES TO TENDER.
OUR DIRECTORS AND EXECUTIVE OFFICERS HAVE ADVISED US THAT THEY DO NOT INTEND TO
TENDER ANY SHARES IN THE TENDER OFFER. SEE SECTION 10.
Questions and requests for assistance may be directed to the Company at the
address and telephone numbers set forth on the back cover page of this offer to
purchase. Requests for additional copies of this offer to purchase, the letter
of transmittal or the notice of guaranteed delivery, or any document
incorporated herein by reference, may be directed to the Company.
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______________________________
IMPORTANT
If you wish to tender all or any part of your shares, you should complete
and sign a letter of transmittal, or a facsimile of it, according to the
instructions in the letter of transmittal and mail or deliver it, together with
any required signature guarantee and any other required documents, to the
Company and mail or deliver the share certificates to the Company together with
any other documents required by the letter of transmittal.
The tender offer is not being made to (nor will any tender of shares be
accepted from or on behalf of) holders in any jurisdiction in which the making
of the tender offer or the acceptance of any tender of shares therein would not
be in compliance with the laws of such jurisdiction. However, we may, at our
discretion, take such action as we may deem necessary for us to make the tender
offer in any such jurisdiction and extend the tender offer to holders in such
jurisdiction.
WE HAVE NOT AUTHORIZED ANY PERSON TO MAKE ANY RECOMMENDATION ON OUR BEHALF AS TO
WHETHER YOU SHOULD TENDER OR REFRAIN FROM TENDERING YOUR SHARES IN THE TENDER
OFFER. WE HAVE NOT AUTHORIZED ANY PERSON TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION IN CONNECTION WITH THE TENDER OFFER OTHER THAN THOSE CONTAINED IN
THIS DOCUMENT OR IN THE LETTER OF TRANSMITTAL. IF GIVEN OR MADE, ANY
RECOMMENDATION OR ANY SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON
AS HAVING BEEN AUTHORIZED BY US.
SUMMARY TERM SHEET
We are providing this summary term sheet for your convenience. It
highlights the most material information in this document, but you should
understand that it does not describe all of the details of the tender offer to
the same extent described in this document. We urge you to read the entire
document and the related letter of transmittal because they contain the full
details of the tender offer. We have included references to the sections of this
document where you will find a more complete discussion.
Who is offering to purchase my shares?
BellaVista Capital, Inc., which we refer to as "we," "us" or the "Company,"
is offering to purchase shares of its common stock, par value $0.01 per share,
in a self-tender offer.
What will the purchase price for the shares be and what will be the form of
payment?
Stockholders whose shares are purchased in the tender offer will be paid
$2.40 per share in cash, without interest, promptly after the expiration of the
tender offer. Under no circumstances will we pay interest on the purchase price,
even if there is a delay in making payment. See Section 1.
How many shares will the Company purchase?
We will purchase 750,000 shares validly tendered in the tender offer, or
such fewer number of shares as are properly tendered and not properly withdrawn
prior to the expiration date. 750,000 shares represents approximately 5% of our
outstanding common stock. We also expressly reserve the right to purchase an
additional number of shares not to exceed 2% of the outstanding shares, and
could decide to purchase more shares, subject to applicable legal requirements.
As of June 8, 2007, there were 14,260,108 shares issued and outstanding. See
Section 1. The tender offer is not conditioned on any minimum number of shares
being tendered. See Section 6.
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Why is the Company making the tender offer?
The Company has publicly stated that it did not intend to engage in any
redemptions of Shares prior to the end of 2008, and it has not changed its
suspension of redemptions. However, a group of entities associated with
Mackenzie Patterson Fuller, Inc. (collectively "MPF") have made an unsolicited
tender offer (the "MPF Offer") to you and your fellow shareholders to purchase
up to 750,000 Shares at $2.25 per Share. This is the fifth in a series of MPF
tender offers for Shares. The first MPF offer was in June of 2005 for a price of
$2.25 per share; the second was in October of 2005 for a price of $2.25 per
Share; the third was in April of 2006 also at $2.25 per Share; and the fourth
was in October of 2006 for a price of $1.75 per Share. Though the Company's
performance and operations have resulted in increases in its publicly reported
estimated asset value per share in each of the succeeding years since the first
MPF offer, MPF gives no explanation as to why it is now offering a price equal
to the price offered in June 2005, other than to repeat the same basis for its
valuation that it stated in 2005. The Company believes the MPF Offer is an
overly opportunistic effort by MPF to capitalize on the illiquidity of the
Shares. The Company believes the value of the Shares is substantially in excess
of both the MPF Offer price of $2.25 and the Company's Offer price of $2.40 per
Share. Accordingly, the Company recommends that you and your fellow Shareholders
reject the MPF Offer and not tender any Shares in connection with the MPF Offer.
As the Company's competing offer is made solely in response to the MPF Offer,
the Board remains neutral with respect to the Company Offer and does not make
any recommendation as to whether you should tender or refrain from tendering
your shares in response to the Company Offer. Nevertheless, the Company
recognizes that some Shareholders may have a pressing need or desire to
liquidate their Shares at this time. Given the overly opportunistic nature of
the MPF Offer, the Company believes that it is in the best interest of the
Company and its Shareholders to provide these Shareholders an opportunity to
liquidate at a price in excess of the MPF Offer price.
How will the Company pay for the shares?
Assuming we purchase 750,000 shares in the tender offer at the purchase
price of $2.40 per share, $1,800,000 will be required to purchase such shares.
The Company has available liquid capital for purposes of funding the purchase of
shares. The tender offer is not conditioned upon the receipt of financing. See
Sections 6 and 8.
How long do I have to tender my shares?
You may tender your shares until the tender offer expires. The tender offer
will expire on July 20, 2007, at 5:00 p.m., Pacific Standard Time, unless we
extend it. July 20, 2007, or such date to which the offer may be extended, is
sometimes referred to below as the "expiration date." See Section 1. We may
choose to extend the tender offer for any reason, subject to applicable laws.
See Section 13.
How will I be notified if the Company extends the tender offer?
We will issue a press release by 9:00 a.m., Pacific Standard Time, on the
business day after the previously scheduled expiration date if we decide to
extend the tender offer. See Section 1.
What will happen if I do not tender my shares?
Upon the completion of the tender offer, non-tendering stockholders will
realize a proportionate increase in their relative ownership interest in us and
thus in our future earnings and assets, subject to our right to issue additional
shares of common stock and other equity securities in the future. See Section 2.
Are there any conditions to the tender offer?
Yes. Our obligation to accept and pay for your tendered shares depends upon
a number of conditions, including:
- No legal action shall be pending, or shall have been threatened or
taken, that might adversely affect the tender offer.
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- No commencement or escalation of a war, armed hostilities or other
international or national calamity, including, but not limited to, an act
of terrorism.
- No significant decrease in the value of our common stock or in the
price of equity securities generally and no adverse changes in the U.S.
stock markets or credit markets shall have occurred during the tender
offer.
- No one shall have proposed, announced or made a tender or exchange
offer (other than the MPF Offer and this tender offer), merger, business
combination or other similar transaction involving us.
- No one (including certain groups) other than MPF shall have
acquired, or proposed to acquire, beneficial ownership of more than 5% of
the outstanding shares (other than anyone who publicly disclosed such
ownership in a filing with the Securities and Exchange Commission prior to
June 8, 2007). In addition, no new group shall have been formed which
beneficially owns more than 5% of the outstanding shares. Finally, no one
shall have filed a Notification and Report Form under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, or made a public announcement
reflecting an intent to acquire us or any of our assets or securities.
- No material adverse change in our business, condition (financial or
otherwise), assets, income, operations, prospects or stock ownership shall
have occurred during the tender offer. See Section 6.
How do I tender my shares?
To tender your shares, prior to 5:00 p.m., Pacific Standard Time, on July
20, 2007, unless the tender offer is extended, you must deliver your share
certificate(s) and a properly completed and duly executed letter of transmittal
to the Company at the address appearing on the back cover page of this document.
Once I have tendered shares in the tender offer, can I withdraw my tender?
You may withdraw any shares you have tendered at any time before 5:00 p.m.,
Pacific Standard Time, on July 20, 2007, unless we extend the tender offer, in
which case you may withdraw tendered shares until the tender offer, as so
extended, expires. If we have not accepted for payment the shares you have
tendered to us, you may also withdraw your shares after August 7, 2007.
How do I withdraw shares I previously tendered?
You must deliver, on a timely basis, a written, telegraphic or facsimile
notice of your withdrawal to the Company at the address appearing on the back
cover page of this document. Your notice of withdrawal must include the number
of shares to be withdrawn and the name of the registered holder of these shares.
See Section 4.
Has the Company or its board of directors adopted a position on the tender
offer?
Our board of directors has approved the tender offer. However, neither we
nor our board of directors makes any recommendation to you as to whether you
should tender or refrain from tendering your shares. You must make your own
decision as to whether to tender your shares and, if so, how many shares to
tender. See Section 2.
Will the Company's directors and executive officers tender shares in the tender\
offer?
Our directors and executive officers have advised us that they do not plan
to tender any shares in the tender offer. See Section 10.
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Following the tender offer, will the Company continue as a public company?
We do not believe that our purchase of shares in the tender offer, alone or
in combination with the MPF Offer, will cause our remaining shares to be
eligible for deregistration under the Securities Exchange Act of 1934 (the
"Exchange Act"). It is a condition of our obligation to purchase shares pursuant
to the tender offer that there not be any reasonable likelihood, as determined
by us in our reasonable judgment, that these events will occur. See Section 6.
What happens if more than 750,000 shares are tendered in the tender offer?
We will purchase shares on a pro rata basis from all shareholders who have
validly tendered their shares and not withdrawn them as of the expiration date.
When will the Company pay for the shares I tender?
We will pay the purchase price, net to you in cash, without interest, for
the shares we purchase promptly after the expiration of the tender offer and the
acceptance of the shares for payment. In the event of proration, we will make
the proration calculation and pay for the shares as soon as practicable after
the expiration date, but we do not expect to be able to commence payment for
shares until approximately 10 business days after the expiration date. See
Section 5.
What is the recent market price of my the Company shares?
There is no public market for the Company's shares, so no market prices are
available for purposes of evaluating the offer price. In connection with the
Company's most recent quarterly report on Form 10-QSB, for the quarter ended
March 31, 2007, the Company estimated that the net asset value of the Company is
approximately $4.66 per Share. No independent appraisal or opinion has been
obtained to support the Company's analysis and, as there is no public market for
the Shares, the Company's estimated value does not constitute a market value for
the Shares but only the estimated value of the Company's assets. The Company has
no plans to liquidate its assets and there can be no assurance as when or
whether Shareholders will be able to liquidate Shares or what value they might
realize upon such liquidation, other than through the current offers. The
Company Offer price was established solely for the purpose of providing
Shareholders who may need or desire an immediate liquidation of Shares with an
opportunity to sell their Shares for a better price than offered by MPF. The
first three MPF tender offers were and the current MPF Offer is at $2.25 per
Share, and the Company offered $2.25 per Share in its response to the most
recent MPF tender offer at $1.75 per Share. The Company selected $2.40 as an
appropriate increase in the most recent offer to reflect the increase in the
Company's estimated net realizable asset value per Share since the date of the
last offer. The MPF offers and the Company's responsive offers represent the
only recent opportunities for liquidity. The Company therefore determined to
offer Shareholders a price which reflects the value created by recent Company
operations, but also a price which, if it is accepted by Shareholders tendering
Shares, will nevertheless benefit the remaining Shareholders by potentially
increasing the value of those Shares that remain outstanding. See Section 7.
Will I have to pay brokerage commissions if I tender my shares?
If you are a registered stockholder and you tender your shares directly to
the Company, you will not incur any brokerage commissions. See Section 2.
What are the U.S. federal income tax consequences if I tender my shares?
Generally, you will be subject to U.S. federal income taxation when you
receive cash from us in exchange for the shares you tender. In addition, the
receipt of cash for your tendered shares will be treated either as (1) a sale or
exchange eligible for capital gains treatment, or (2) a dividend. Any non-United
States holders are urged to consult their tax advisors regarding the application
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of U.S. federal income tax withholding and backup withholding, including
eligibility for a withholding tax reduction or exemption, and the refund
procedure. See Section 12.
Will I have to pay any stock transfer tax if I tender my shares?
If you instruct the Company in the letter of transmittal to make the
payment for the shares to the registered holder, you will not incur any stock
transfer tax. See Section 5.
Whom can I talk to if I have questions?
You may contact the Company at the following address with any questions you
may have concerning the offer:
BellaVista Capital, Inc.
c/o Diane Christensen
420 Florence Street, Suite 200
Palo Alto, California 94301
Telephone (650) 328-3060
Facsimile (650) 328-3066
FORWARD-LOOKING STATEMENTS
This Offer to Purchase contains forward-looking statements. All statements other
than statements of historical fact may be forward-looking statements. These
include statements regarding the Company's future financial results, operating
results, business strategies, projected costs and capital expenditures,
products, competitive positions, and plans and objectives of management for
future operations. Forward-looking statements may be identified by the use of
words such as "may," "will," "should," "expect," "plan," anticipate," "believe,"
"estimate," "predict," "intend" and "continue," or the negative of these terms,
and include the assumptions that underlie such statements. The Company's actual
results could differ materially from those expressed or implied in these
forward-looking statements as a result of various risks and uncertainties,
including, without limitation, the following:
o Risks inherent in real estate lending and investment, including the
risk of default, the risks inherent in seeking to realize on
collateral upon a default, and the risks of fluctuation in the value
of collateral;
o Risks related to fluctuations in the real estate markets, which may
affect both the demand for real estate financing provided by the
Company and the terms available for such financing, as well as the
demand and prices for real estate held by the Company;
o Construction loan risks, including the risk that the completed
property may not have the market value projected prior to construction
and the risk that the property may not be completed at the cost and in
the time initially projected;
o Risks related to damage of real property collateral due to natural
disasters, including earthquake and flood, terrorism or acts of war
which may not be insured or insurable;
o Risks relating to general economic conditions, which may affect the
supply of and demand for capital and the rates of return available to
lenders and real estate investors;
o Risks relating to environmental liability, which may affect the value
of real estate and create potential liability to tenants or
neighboring properties and cause the Company to incur cleanup costs;
and
o Risks relating to legislation and regulation, which may affect the
Company's ability to conduct its operations or increase the costs of
operations.
IN ADDITION, PLEASE REFER TO OUR ANNUAL REPORT ON FORM 10-KSB FOR THE FISCAL
YEAR ENDED SEPTEMBER 30, 2006, WHICH IS INCORPORATED BY REFERENCE HEREIN, FOR
INFORMATION ON THESE AND OTHER RISK FACTORS. EXCEPT AS REQUIRED BY LAW, WE
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UNDERTAKE NO OBLIGATION TO MAKE ANY REVISIONS TO THE FORWARD-LOOKING STATEMENTS
CONTAINED IN THIS DOCUMENT OR TO UPDATE THEM TO REFLECT EVENTS OR CIRCUMSTANCES
OCCURRING AFTER THE DATE OF THIS DOCUMENT.
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TABLE OF CONTENTS
SUMMARY TERM SHEET.............................................................2
FORWARD-LOOKING STATEMENTS ....................................................6
THE TENDER OFFER...............................................................9
SECTION 1. Number of Shares; Proration.......................................9
SECTION 2. Purpose of the Tender Offer; Certain Effects of the Tender
Offer; Plans and Proposals.......................................10
SECTION 3. Procedures for Tendering Shares..................................12
SECTION 4. Withdrawal Rights................................................14
SECTION 5. Purchase of Shares and Payment of Purchase Price.................14
SECTION 6. Conditions of the Tender Offer...................................15
SECTION 7. Determination of Offer Price; Dividends..........................16
SECTION 8. Source and Amount of Funds.......................................17
SECTION 9. Certain Information Concerning the Company.......................17
SECTION 10. Directors and Executive Officers; Transactions and Agreements
Concerning Shares................................................22
SECTION 11. Legal Matters; Regulatory Approvals..............................24
SECTION 12. U.S. Federal Income Tax Consequences.............................25
SECTION 13. Extension of the Tender Offer; Termination; Amendment............28
SECTION 14. Fees and Expenses................................................29
SECTION 15. Miscellaneous....................................................29
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THE TENDER OFFER
SECTION 1. NUMBER OF SHARES; PRORATION
GENERAL. Upon the terms and subject to the conditions of the tender offer,
the Company will purchase 750,000 shares, or such fewer number of shares as are
properly tendered and not properly withdrawn in accordance with Section 4,
before the scheduled expiration date of the tender offer, at a purchase price of
$2.40 per share, net to the seller in cash, without interest.
The term "expiration date" means 5:00 p.m., Pacific Standard Time, on July
20, 2007, unless and until the Company, in its sole discretion, shall have
extended the period of time during which the tender offer will remain open, in
which event the term "expiration date" shall refer to the latest time and date
at which the tender offer, as so extended by the Company, shall expire. See
Section 13 for a description of the Company's right to extend, delay, terminate
or amend the tender offer. In accordance with the rules of the Securities and
Exchange Commission, the Company may, and the Company expressly reserves the
right to, purchase under the tender offer an additional number of shares not to
exceed 2% of the outstanding shares without amending or extending the tender
offer. See Section 13. In the event of an over-subscription of the tender offer
as described below, shares tendered will be subject to proration. Except as
described herein, withdrawal rights expire on the expiration date.
If (1)(a) the Company increases or decreases the price to be paid for
shares, (b) the Company increases the number of shares being sought in the
tender offer and this increase in the number of shares being sought exceeds 2%
of the outstanding shares, or (c) the Company decreases the number of shares
being sought, and (2) the tender offer is scheduled to expire at any time
earlier than the expiration of a period ending on the tenth business day from,
and including, the date that notice of any increase or decrease is first
published, sent or given in the manner specified in Section 13, the tender offer
will be extended until the expiration of ten business days from the date that
notice of any increase or decrease is first published. For the purposes of the
tender offer, a "business day" means any day other than a Saturday, Sunday or
U.S. federal holiday and consists of the time period from 12:01 a.m. through
12:00 Midnight, Pacific Standard Time.
The tender offer is not conditioned on any minimum number of shares being
tendered. The tender offer is, however, subject to other conditions. See Section
6.
Only shares properly tendered and not properly withdrawn will be purchased,
upon the terms and subject to the conditions of the tender offer. However,
because of the proration provisions of the tender offer, all of the shares
tendered will not be purchased if more than the number of shares the Company
seeks are properly tendered. All shares tendered and not purchased under the
tender offer, including shares not purchased because of proration, will be
returned to the tendering stockholders at the Company's expense promptly after
the expiration date. Stockholders can specify the order in which their shares
will be purchased in the event that, as a result of the proration provisions,
some but not all of the tendered shares are purchased pursuant to the tender
offer. In the event a stockholder does not designate the order and fewer than
all shares are purchased due to proration, the order of shares purchased will be
selected by the Company. If the number of shares properly tendered and not
properly withdrawn prior to the expiration date is fewer than or equal to
750,000 shares, or such greater number of shares as the Company may elect to
purchase, subject to applicable law, the Company will, upon the terms and
subject to the conditions of the tender offer, purchase all such shares.
PRORATION. If proration of tendered shares is required, the Company will
determine the proration factor as soon as practicable following the expiration
date. Proration for each stockholder tendering shares, other than odd lot
holders, shall be based on the ratio of the number of shares properly tendered
and not properly withdrawn by the stockholder to the total number of shares
properly tendered and not properly withdrawn by all stockholders. Because of the
difficulty in determining the number of shares properly tendered, the Company
does not expect that it will be able to announce the final proration factor or
commence payment for any shares purchased under the tender offer until
approximately 10 business days after the expiration date. The preliminary
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results of any proration will be announced by press release promptly after the
expiration date.
Shareholders may indicate, by checking a box on the Letter of Transmittal
(the 'All or None' Box), that they only wish to sell their Shares if they will
be able to sell all of their Shares, without any proration. If more than 750,000
Shares have been properly tendered without checking the All or None Box, then
the above description of proration will apply only to tenders of such Shares
that do not have the All or None Box checked.
As described in Section 12, the number of shares that the Company will
purchase from a stockholder under the tender offer may affect the U.S. federal
income tax consequences to that stockholder and, therefore, may be relevant to
that stockholder's decision whether or not to tender shares. The letter of
transmittal affords each stockholder who tenders shares registered in such
stockholder's name directly to the Company the opportunity to designate the
order of priority in which shares tendered are to be purchased in the event of
proration. See Section 6.
This offer to purchase and the related letter of transmittal will be mailed
to record holders of shares and will be furnished to brokers, dealers,
commercial banks and trust companies whose names, or the names of whose
nominees, appear on the Company's stockholder list or, if applicable, that are
listed as participants in a clearing agency's security position listing for
subsequent transmittal to beneficial owners of shares.
SECTION 2. PURPOSE OF THE TENDER OFFER; CERTAIN EFFECTS OF THE TENDER
OFFER; PLANS AND PROPOSALS.
PURPOSE OF THE TENDER OFFER. No public market currently exists for the
shares. The Company has publicly stated that it did not intend to engage in any
redemptions of shares prior to the end of 2008, and it has not changed its
suspension of redemptions. However, a group of entities associated with
Mackenzie Patterson Fuller, Inc. (collectively "MPF") have made an unsolicited
tender offer (the "MPF Offer") to you and your fellow shareholders to purchase
up to 750,000 shares at $2.25 per share. This is the fifth in series of MPF
tender offers for shares. The first MPF offer was in June of 2005 for a price of
$2.25 per share; the second was in October of 2005 for a price of $2.25 per
Share; the third was in April of 2006 also at $2.25 per Share; and the fourth
was in October of 2006 for a price of $1.75 per Share. Though the Company's
performance and operations have resulted in increases in its publicly reported
estimated asset value per share in each of the succeeding years since the first
MPF offer, MPF gives no explanation as to why it is now offering a price equal
to the price offered in June 2005, other than to repeat the same basis for its
valuation that it stated in 2005. The Company believes the MPF Offer is another
overly opportunistic effort by MPF to capitalize on the illiquidity of the
shares. The Company believes the value of the shares is substantially in excess
of both the MPF Offer price of $2.25 and the Company's Offer price of $2.40 per
share. Accordingly, the Company recommends that you and your fellow Shareholders
reject the MPF Offer and not tender any Shares in connection with the MPF Offer.
As the Company's competing offer is made solely in response to the MPF Offer,
the Board remains neutral with respect to the Company Offer and does not make
any recommendation as to whether you should tender or refrain from tendering
your shares in response to the Company Offer. Nevertheless, the Company
recognizes that some shareholders may have a pressing need or desire to
liquidate their shares at this time. Given the nature of the MPF Offer, the
Company believes that it is in the best interest of the Company and its
shareholders to provide these shareholders an opportunity to liquidate at a
price in excess of the MPF Offer price. It also provides a method for
stockholders not participating to increase their relative percentage interest in
the Company and its future operations at no additional cost. As a result, the
board of directors believes that investing in the Company's own shares in this
manner is an appropriate use of capital.
Rule 13e-4 under the Securities Exchange Act of 1934, referred to herein as
the "Exchange Act," prohibits the Company and its affiliates from purchasing any
shares, other than in the tender offer, until at least 10 business days after
the expiration date.
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Neither the Company nor the Company's board of directors makes any
recommendation to any stockholder as to whether to tender or refrain from
tendering any shares. The Company has not authorized any person to make any
recommendation. Stockholders should carefully evaluate all information in the
tender offer, should consult their own investment and tax advisors, and should
make their own decisions about whether to tender shares, and, if so, how many
shares to tender.
The Company's directors and executive officers have advised the Company
that they do not intend to tender any shares in the tender offer. See Section
11.
CERTAIN EFFECTS OF THE TENDER OFFER. Upon the completion of the tender
offer, non-tendering stockholders will realize a proportionate increase in their
relative ownership interest in the Company and thus in the Company's future
earnings and assets, subject to the Company's right to issue additional shares
of common stock and other equity securities in the future. The Company can give
no assurance, however, as to whether or at what price a stockholder may in the
future be able to sell his or her shares, which price may be higher or lower
than the purchase price paid in the tender offer.
Shares that the Company acquires pursuant to the tender offer will be held
as treasury stock.
The purchase of shares in the tender offer will reduce the number of shares
that might otherwise trade publicly and is likely to reduce the number of the
Company stockholders. Assuming the Company acquires 750,000 shares in the tender
offer, 13,510,108 shares will be outstanding immediately after the tender offer.
The shares are registered under the Securities Exchange Act of 1934, which
requires, among other things, that the Company furnish information to its
stockholders and to the Securities and Exchange Commission and comply with the
Securities and Exchange Commission's proxy rules in connection with meetings of
stockholders. The Company believes that the purchase of shares pursuant to the
tender offer will not result in the shares becoming eligible for deregistration
under the Exchange Act. The tender offer is conditioned upon there not being any
reasonable likelihood, in the Company's reasonable judgment, that the
consummation of the tender offer and the purchase of shares will cause its
common stock to be eligible for deregistration under the Exchange Act. See
Section 6.
PLANS AND PROPOSALS. Except as disclosed herein, or as may occur in the
ordinary course of its business, the Company currently has no plans or proposals
that relate to or would result in:
- an extraordinary transaction, such as a merger, reorganization or
liquidation, involving the Company or any of its subsidiaries;
- a purchase, sale or transfer of a material amount of the Company's
assets;
- any material change in the Company's present dividend rate or
policy, indebtedness or capitalization;
- any change in the Company's present board of directors or
management, including, but not limited to, any plans or proposals to change
the number or the term of directors, or to fill any existing vacancies on
the board or to change any material term of the employment contract of any
executive officer;
- any other material change in the Company's corporate structure or
business;
- a class of the Company's equity security being delisted from a
national securities exchange or ceasing to be authorized to be quoted in an
automated quotations system of a registered national securities
association;
- a class of the Company's equity securities becoming eligible for
termination of registration pursuant to Section 12(g)(4) of the Exchange
Act;
11
- the suspension of the Company's obligation to file reports pursuant
to Section 15(d) of the Exchange Act;
- the acquisition by any person of additional securities of the
Company, or the disposition of securities by the Company; or
- any changes in the Company's charter, bylaws or other governing
instruments or other actions that could impede the acquisition of control
of the Company.
The Company reserves the right to change its plans and intentions at any
time, as it deems appropriate.
SECTION 3. PROCEDURES FOR TENDERING SHARES.
PROPER TENDER OF SHARES. For shares to be tendered properly under the
tender offer, the share certificates, together with a properly completed and
duly executed letter of transmittal, or a manually signed facsimile thereof,
including any required signature guarantees, and any other documents required by
the letter of transmittal, must be received before 5:00 p.m., Pacific Standard
Time, on the expiration date by the Company at its address set forth on the back
cover page of this offer to purchase.
SIGNATURE GUARANTEES AND METHOD OF DELIVERY. No signature guarantee is
required if the letter of transmittal is signed by the registered holder of the
shares tendered therewith and the holder has not completed either the box
captioned "Special Delivery Instructions" or the box captioned "Special Payment
Instructions" in the letter of transmittal. If a share certificate is registered
in the name of a person other than the person executing a letter of transmittal,
or if payment is to be made to a person other than the registered holder, then
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 guaranteed by an eligible guarantor
institution.
Payment for shares tendered and accepted for payment under the tender offer
will be made only after timely receipt by the Company of share certificates, a
properly completed and duly executed letter of transmittal or a manually signed
facsimile thereof, and any other documents required by the letter of
transmittal. The method of delivery of all documents, including share
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 BACKUP WITHHOLDING TAX. Under the United States federal backup
withholding tax rules, 28% of the gross proceeds payable to a stockholder or
other payee under the tender offer must be withheld and remitted to the United
States Treasury, unless the stockholder or other payee provides such person's
taxpayer identification number (employer identification number or social
security number) to the Company and certifies under penalties of perjury that
such number is correct or otherwise establishes an exemption. If the Company is
not provided with the correct taxpayer identification number or another adequate
basis for exemption, the holder may be subject to certain penalties imposed by
the Internal Revenue Service. Therefore, each tendering stockholder should
complete and sign the Substitute Form W-9 included as part of the letter of
transmittal in order to provide the information and certification necessary to
avoid backup withholding, unless such stockholder otherwise establishes to the
satisfaction of the Company that the stockholder is not subject to backup
withholding. Specified stockholders (including, among others, all corporations
and certain foreign stockholders (in addition to foreign corporations)) are
exempted from the backup withholding and reporting requirements rules. In order
for a foreign stockholder to qualify as an exempt recipient, that stockholder
must submit an IRS Form W-8 or a Substitute Form W-8, signed under penalties of
perjury, attesting to that stockholder's exempt status. The applicable form can
be obtained from the information agent. See Instructions in the letter of
transmittal.
To prevent federal backup withholding tax equal to 28% of the gross
payments made to stockholders for shares purchased under the tender offer, each
stockholder who does not otherwise establish an exemption from such withholding
must provide the Company with the stockholder's correct taxpayer identification
12
number and provide other information by completing the substitute Form W-9
included with the letter of transmittal. For a discussion of United States
federal income tax consequences to tendering stockholders, see Section 12.
FEDERAL INCOME TAX WITHHOLDING ON FOREIGN STOCKHOLDERS. Foreign
stockholders are urged to consult their tax advisors regarding the application
of U.S. federal income tax withholding, including eligibility for a reduction of
or an exemption from withholding tax, and the refund procedure. See Instructions
in the letter of transmittal.
RETURN OF UNPURCHASED SHARES. If any tendered shares are not purchased
under the tender offer or are properly withdrawn before the expiration date, or
if fewer than all shares evidenced by share certificates are tendered,
certificates for unpurchased shares will be returned promptly after the
expiration or termination of the tender offer or the proper withdrawal of the
shares, as applicable, without expense to the stockholder.
DETERMINATION 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, form, eligibility (including time of receipt)
and acceptance for payment of any tender of shares will be determined by the
Company, in its sole discretion, and the Company's determination will be final
and binding on all parties. The Company reserves the absolute right to reject
any or all tenders of any shares that it determines are not in proper form or
the acceptance for payment of or payment for which the Company determines may be
unlawful. The Company also reserves the absolute right to waive any of the
conditions of the tender offer or any defect or irregularity in any tender with
respect to any particular shares or any particular stockholder, and the
Company's interpretation of the terms of the tender offer will be final and
binding on all parties. In the event a condition is waived with respect to any
particular stockholder, the same condition will be waived with respect to all
stockholders. No tender of shares will be deemed to have been properly made
until all defects or irregularities have been cured by the tendering stockholder
or waived by the Company. Neither the Company nor any other person will be under
any duty to give notification of any defects or irregularities in any tender or
incur any liability for failure to give this notification.
TENDERING STOCKHOLDER'S REPRESENTATION AND WARRANTY; THE COMPANY'S
ACCEPTANCE CONSTITUTES AN AGREEMENT. A tender of shares under any of the
procedures described above will constitute the tendering stockholder's
acceptance of the terms and conditions of the tender offer, as well as the
tendering stockholder's representation and warranty to the Company that (1) the
stockholder has a net long position in the shares or equivalent securities at
least equal to the shares tendered within the meaning of Rule 14e-4 promulgated
by the Securities and Exchange Commission under the Exchange Act, and (2) the
tender of shares complies with Rule 14e-4. It is a violation of Rule 14e-4 for a
person, directly or indirectly, to tender shares for that person's own account
unless, at the time of tender and at the end of the period during which shares
are accepted by lot (including any extensions thereof), the person so tendering
(1) has a net long position equal to or greater than the amount tendered in (a)
the subject securities, or (b) securities immediately convertible into, or
exchangeable or exercisable for, the subject securities, and (2) will deliver or
cause to be delivered the shares in accordance with the terms of the tender
offer. Rule 14e-4 provides a similar restriction applicable to the tender or
guarantee of a tender on behalf of another person. The Company's acceptance for
payment of shares tendered under the tender offer will constitute a binding
agreement between the tendering stockholder and the Company upon the terms and
conditions of the tender offer.
LOST OR DESTROYED CERTIFICATES. Stockholders whose share certificate for part or
all of their shares have been lost, stolen, misplaced or destroyed may contact
the Company for instructions as to obtaining a replacement share certificate.
That share certificate will then be required to be submitted together with the
letter of transmittal in order to receive payment for shares that are tendered
and accepted for payment. A bond will be required to be posted by the
stockholder to secure against the risk that the share certificates may be
subsequently recirculated. Stockholders are urged to contact the Company
immediately in order to permit timely processing of this documentation. Share
certificates, together with a properly completed and duly executed letter of
transmittal, or a manually signed facsimile thereof, including any signature
13
guarantees and any other required documents must be delivered to the Company.
Any such documents delivered to any other person will not be forwarded to the
Company and, therefore, will not be deemed to be properly tendered.
SECTION 4. WITHDRAWAL RIGHTS.
Except as otherwise provided in this Section 4, tenders of shares under the
tender offer are irrevocable. Shares tendered under the tender offer may be
withdrawn at any time prior to the expiration date and, unless previously
accepted for payment by the Company under the tender offer, also may be
withdrawn at any time after August 7, 2007.
For a withdrawal to be effective, a written, telegraphic or facsimile
transmission notice of withdrawal must be timely received by the Company at its
address set forth on the back cover page of this offer to purchase. Any such
notice of withdrawal must specify the name of the tendering stockholder, the
number of shares to be withdrawn and the name of the registered holder of the
shares. If the share certificates to be withdrawn have been delivered or
otherwise identified to the Company, then, before the release of the share
certificates, the serial numbers shown on the share certificates must be
submitted to the Company.
Withdrawals may not be rescinded and any shares properly withdrawn
thereafter will be deemed not properly tendered for purposes of the tender
offer, unless the withdrawn shares are properly re-tendered before the
expiration date by following one of the procedures described in Section 3.
If the Company extends the tender offer, is delayed in its purchase of
shares or is unable to purchase shares under the tender offer for any reason,
then, without prejudice to the Company's rights under the tender offer, the
Company may, subject to applicable law, retain tendered shares on behalf of the
Company, and these shares may not be withdrawn except to the extent tendering
stockholders are entitled to withdrawal rights as described in this Section 4.
SECTION 5. PURCHASE OF SHARES AND PAYMENT OF PURCHASE PRICE.
Upon the terms and subject to the conditions of the tender offer
(including, if the tender offer is extended or amended, the terms and conditions
of any such extension or amendment), promptly following the expiration date, the
Company will accept for payment and pay for, and thereby purchase, shares
properly tendered and not properly withdrawn prior to the expiration date. For
purposes of the tender offer, the Company will be deemed to have accepted for
payment, and therefore purchased shares, that are properly tendered and not
properly withdrawn, subject to the proration provisions of the tender offer,
only when, as and if it gives oral or written notice to the Company of its
acceptance of the shares for payment under the tender offer.
In all cases, payment for shares tendered and accepted for payment pursuant
to the tender offer will be made promptly, but only after timely receipt by the
Company of certificates for shares, a properly completed and duly executed
letter of transmittal and any other required documents.
The Company will pay for shares purchased under the tender offer by
transmitting payment directly to the tendering stockholders.
In the event of proration, the Company will determine the proration factor
and pay for those tendered shares accepted for payment as soon as practicable
after the expiration date; however, the Company does not expect to be able to
announce the final results of any proration and commence payment for shares
purchased until approximately 10 business days after the expiration date.
Certificates for all shares tendered and not purchased, including shares not
purchased due to proration, will be returned to the tendering stockholder
promptly after the expiration date or termination of the tender offer without
expense to the tendering stockholders. Under no circumstances will interest on
the purchase price be paid by the Company regardless of any delay in making the
payment. In addition, if certain events occur, the Company may not be obligated
to purchase shares under the tender offer. See Section 6.
14
The Company will pay all stock transfer taxes, if any, payable on the
transfer to it of shares purchased under the tender offer. If, however, payment
of the purchase price is to be made to any person other than the registered
holder, 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 holder or the other
person), payable on account of the transfer to the person will be deducted from
the purchase price unless satisfactory evidence of the payment of the stock
transfer taxes, or exemption therefrom, is submitted. See Instructions in the
letter of transmittal.
Any tendering stockholder or other payee who fails to complete fully, sign
and return to the Company the substitute Form W-9 included with the letter of
transmittal may be subject to U.S. federal income tax backup withholding of 28%
of the gross proceeds paid to the stockholder or other payee under the tender
offer. See Section 3. Also see Section 12 regarding United States federal income
tax consequences for foreign stockholders.
SECTION 6. CONDITIONS OF THE TENDER OFFER.
Notwithstanding any other provision of the tender offer, the Company will
not be required to accept for payment, purchase or pay for any shares tendered,
and may terminate or amend the tender offer or may postpone the acceptance for
payment of, or the purchase of and the payment for shares tendered, subject to
Rule 13e-4(f) under the Exchange Act if, at any time on or after June 8, 2007
and before the expiration date, any of the following events shall have occurred
(or shall have been determined by the Company to have occurred) that, in the
Company's reasonable judgment and regardless of the circumstances giving rise to
the event or events, makes it inadvisable to proceed with the tender offer or
with acceptance for payment; provided, however, that the occurrence of the event
was not within the reasonable control of the Company and was not caused to occur
by the Company with an intended purpose or effect of causing the amendment or
termination of the Offer:
(1) there shall have been threatened, instituted or pending any action
or proceeding by any government or governmental, regulatory or
administrative agency, authority or tribunal or any other person, domestic
or foreign, before any court, authority, agency or tribunal that directly
or indirectly (a) challenges the making of the tender offer, the
acquisition of some or all of the shares under the tender offer or
otherwise relates in any manner to the tender offer, or (b) in the
Company's reasonable judgment, could materially and adversely 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 or materially impair the
Company's ability to purchase up to 750,000 shares in the tender offer;
(2) 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 tender offer or the
Company by any court or any authority, agency or tribunal that, in the
Company's reasonable judgment, would or might, directly or indirectly, (a)
make the acceptance for payment of, or payment for, some or all of the
shares illegal or otherwise restrict or prohibit completion of the tender
offer, (b) delay or restrict the ability of the Company, or render the
Company unable, to accept for payment or pay for some or all of the shares,
or (c) materially and adversely 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;
(3) there shall have occurred (a) any general suspension of trading
in, or limitation on prices for, securities on any national securities
exchange or in the over-the-counter market in the United States or the
European Union, (b) the declaration of a banking moratorium or any
suspension of payments in respect of banks in the United States or the
European Union, (c) the commencement of a war, armed hostilities or other
international or national calamity directly or indirectly involving the
United States or any of its territories, including, but not limited to, an
act of terrorism, (d) any limitation (whether or not mandatory) by any
governmental, regulatory or administrative agency or authority on, or any
event, or any disruption or adverse change in the financial or capital
15
markets generally or the market for real estate mortgage loans in
particular, that, in the Company's reasonable judgment, might affect, the
extension of credit by banks or other lending institutions in the United
States, (e) any significant decrease in the estimated value of the shares
or any change in the general political, market, economic or financial
conditions in the United States or abroad that could, in the reasonable
judgment of the Company, have a material adverse effect on 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, or (f) in the case of any of the
foregoing existing at the time of the commencement of the tender offer, a
material acceleration or worsening thereof;
(4) a tender or exchange offer for any or all of the shares (other
than this tender offer or the MPF Offer), or any merger, acquisition,
business combination or other similar transaction with or involving the
Company has been proposed, announced or made by any person or has been
publicly disclosed;
(5) the Company learns that (a) any entity, "group" (as that term is
used in Section 13(d)(3) of the Exchange Act) or person has acquired or
proposes to acquire beneficial ownership of more than 5% of the outstanding
shares, whether through the acquisition of stock, the formation of a group,
the grant of any option or right, or otherwise (other than as and to the
extent disclosed in a Schedule 13D or Schedule 13G filed with the
Commission on or before June 8, 2007), or (b) any entity, group or person
who has filed a Schedule 13D or Schedule 13G with the Commission on or
before June 8, 2007 has acquired or proposes to acquire, whether through
the acquisition of stock, the formation of a group, the grant of any option
or right, or otherwise (other than by virtue of the tender offer made
hereby), beneficial ownership of an additional 2% or more of the
outstanding shares;
(6) any person, entity or group has filed a Notification and Report
Form under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended, reflecting an intent to acquire the Company or any of its shares
of common stock, or has made a public announcement reflecting an intent to
acquire the Company or any of its subsidiaries or any of the respective
assets or securities of the Company and its subsidiaries;
(7) any change or changes have occurred or are threatened in the
Company's business, condition (financial or otherwise), assets, income,
operations, prospects or stock ownership that, in the reasonable judgment
of the Company, materially impairs the Company's ability to purchase up to
750,000 shares in the tender offer; or
(8) there shall be any reasonable likelihood, as determined by the
Company in its reasonable judgment, that the consummation of the tender
offer and the purchase of the shares will cause the shares to be eligible
for deregistration under the Exchange Act.
The foregoing conditions are for the sole benefit of the Company and may be
asserted or waived by the Company, in whole or in part, at any time and from
time to time, before the expiration date, in its sole exercise of reasonable
discretion. The Company's failure at any time to exercise any of the foregoing
rights shall not be deemed a waiver of any of these rights, and each of these
rights shall be deemed an ongoing right that may be asserted at any time and
from time to time. In certain circumstances, if the Company waives any of the
conditions described above, the Company may be required to extend the expiration
date. Any such determination or judgment by the Company concerning the events
described above will be final and binding on all parties.
SECTION 7. DETERMINATION OF OFFER PRICE; DIVIDENDS.
There is no public market for the Company's shares, so no market prices are
available for purposes of determining the offer price. In connection with the
Company's most recent quarterly report on Form 10-QSB, for the quarter ended
March 31, 2007, the Company estimated that the net asset value of the Company is
approximately $4.66 per share. No independent appraisal or opinion has been
obtained to support the Company's analysis and, as there is no public market for
the shares, the Company's estimated value does not constitute a market value for
16
the shares but only the estimated value of the Company's assets. The Company has
no plans to liquidate its assets and there can be no assurance as when or
whether shareholders will be able to liquidate shares or what value they might
realize upon such liquidation, other than through the current offers.
The Company Offer price was established solely for the purpose of providing
shareholders who may need or desire an immediate liquidation of shares with an
opportunity to sell their shares for a better price than offered by MPF in the
MPF Offer. In doing so, the Company selected $2.40 as the price because the
Company believes it is an appropriate increase in the price offered by the
Company in response to the most recent MPF tender offer as it reflects the
increase in the Company's estimated net realizable asset value per share since
the date of such offers. As these tender offers represent the only recent
opportunities for liquidity, the Company determined to offer shareholders an
appropriate increase over the last offer, but a price which, if it is accepted
by shareholders tendering shares, will nevertheless benefit the remaining
shareholders by potentially increasing the value of those shares that remain
outstanding.
The Company's estimate of net asset value relies on estimates and
assumptions of the Company's real estate investments and other assets. The
estimated valuations of investments in real estate include management's best
estimates of the amounts we expect to realize on the sale of our investments.
The estimates are based on an analysis of the properties, including certain
inherent assumptions and estimates that are involved in preparing such
valuations. While management believes that its assumptions are reasonable, there
can be no assurance that the assumptions will prove to be accurate, or that
other factors might not have a material affect on what might actually be
realized from the Company's assets. Accordingly, the amounts the Company might
ultimately realize from liquidation of its assets could differ materially from
management's estimates.
Dividends
The Company has not paid any dividends on the shares since September, 2003,
and currently anticipates that, if its current business plan is pursued, no
dividends will paid at least through the fourth quarter of 2008.
SECTION 8. SOURCE AND AMOUNT OF FUNDS.
Assuming the Company purchases 750,000 shares in the tender offer at the
purchase price of $2.40 per share, approximately $1,800,000 will be required to
purchase such shares. The Company currently holds liquid capital in the amount
of the funds necessary to purchase shares tendered in the tender offer, as well
as to pay related fees and expenses. The tender offer is not conditioned upon
the receipt of financing. See Section 6.
SECTION 9. CERTAIN INFORMATION CONCERNING THE COMPANY.
GENERAL.
The Company's principal executive office is located at 420 Florence Street,
Suite 200, Palo Alto, California 94301; telephone (650) 328-3060.
INVESTMENT PORTFOLIO
The following information concerning the Company's investment portfolio is
extracted from its quarterly report on Form 10-QSB for the quarter ended March
31, 2007.
Loans Receivable Secured By Real Estate
As of March 31, 2007 we had the following loans receivable secured by real
estate which are described below:
17
Collateral Maturity Date Balance
---------------------- --------------------- ------------------
Loan 2719 First Trust Deed March 2008 $ 5,000,000
Loan 2724
Trust Deeds Various 7,960,000
Loan 2807 First Trust Deed Jul 2007 2,171,500
------------------
Total $ 15,131,500
==================
Loan 2719 - Our loan was made to a developer who is subdividing a parcel of land
in East Palo Alto, California into 78 lots for construction of live/work units.
The loan is secured by a first deed of trust on the development parcel, requires
payments of interest only each month and is due March 2008 and is personally
guaranteed by the developer's principal partner.
Loan 2724 - Loan 2724 comprises loans that are originated and serviced by a
California Real Estate broker. The loans are secured by deeds of trust on real
property in California, pay interest monthly and most have repayment guarantees
from the principals of the borrowing entities. BellaVista's investment in each
loan, in most cases, is a portion of the entire loan, with other individuals or
companies owning the balance of the loan receivable. In addition to the loans
the Company intends to hold in its portfolio, when we have had idle cash
available, we have also funded loans originated by the broker for short-term
purposes. These bridge loans are typically repaid within 90 days and may have
characteristics that do not meet the Company's investment criteria. The
following table presents details related to loans originated and serviced by
this broker:
Type Subordinate Maturity Rate Amount
Portfolio loans
Oakdale Residential 8/1/07 10.75% 600,000
Mountain View Commercial 10/1/07 9.25% 600,000
Morgan Hill Residential 8/1/08 9.50% 550,000
Escalon Commercial 9/1/08 10.00% 210,000
San Jose Residential 7/1/08 10.00% 600,000
Modesto Commercial X 5/1/09 11.00% 225,000
San Jose Residential X 5/11/09 11.00% 125,000
Stockton Commercial 7/21/08 12.00% 530,000
San Jose Commercial X 1/6/09 12.00% 550,000
Emeryville Commercial 1/31/09 10.50% 900,000
Denver Commercial 3/8/10 11.500% 850,000
-----------------
5,740,000
Bridge loans
Gilroy Residential 11/6/07 11.00% 70,000
Emeryville Commercial 1/31/09 10.50% 675,000
Cupertino Residential 8/22/08 11.00% 125,000
Cupertino Residential 9/15/08 11.00% 405,000
Cupertino Residential 9/15/08 11.00% 530,000
Cupertino Residential 9/15/08 11.00% 415,000
-----------------
2,220,000
-----------------
7,960,000
=================
Loan 2807 - Our loan was made to a developer who is subdividing a 130-acre
parcel of land in Nampa, Idaho. During January 2007 the developer received
approval to subdivide the parcel into 130 approximately one acre single-family
lots. The loan is secured by a first deed of trust on the development parcel,
requires payments of interest only each month, is due in July 2007 and has
repayment guarantees from the developer's principal partners.
18
Joint Venture Investments In Real Estate Developments
As of March 31, 2007 we had the following joint venture investments in real
estate developments which are described below:
Remaining
Amount Capitalized Carrying Funding
Description Investment Type Invested Interest Costs Amount Obligation
- --------------- ------------------- --------------- ------------------ ---------------- -----------------
2524 Secured Loan $ 247,706 $ 6,617 $ 254,322 $ --
2525 Equity 2,273,857 13,861 2,287,718 892,892
2526 Secured Loan 3,291,664 21,650 3,313,314 --
2557 Secured Loan 2,000,000 4,450 2,004,450 --
2630 Secured Loan 1,555,821 3,409 1,559,230 3,985,686
2676 Equity 2,656,050 9,065 2,665,115 493,950
2679 Equity 6,146,954 19,706 6,166,660 106,233
2688 Secured Loan 4,457,380 7,320 4,464,700 1,742,620
2701 Equity 4,100,000 10,827 4,110,827 --
2703 Secured Loan 2,150,000 3,108 2,153,108 --
2753 Secured Loan 1,433,218 3,722 1,436,940 --
2785 Secured Loan 1,117,015 80 1,117,095 2,306,985
2789 Secured Loan 1,625,000 782 1,625,782 575,000
2828 Equity 3,440,000 272 3,440,272 --
2857 Equity 1,721,377 136 1,721,513 --
--------------- ------------------ ---------------- -----------------
Total $ 38,216,042 $ 105,005 $ 38,321,046 $ 10,103,366
=============== ================== ================ =================
Investment 2524 - This investment is structured as a $1,200,000 loan secured by
a third deed of trust on a 10.3 acre parcel in Colorado Springs, Colorado which
will comprise 148 condominium units, scheduled to be constructed in phases. The
loan is junior to a deed of trust in the amount of $2,392,000 and a revolving
construction deed of trust totaling $4,000,000, both in favor of Ohio Savings
Bank. During December 2006 the loan was modified to extend the maturity date to
November 2007. The note was issued on May 12, 2004, and accrues interest which
is due and payable at the loan's new maturity date, November 12, 2007. The note
also provides for additional interest equal to a percentage of the gross sales
price of each condominium unit sold.
Investment 2525 - this $3,250,000 investment is structured as an equity
investment in a 1.1 acre development in East Palo Alto, California. The property
will comprise 30 condominiums over approximately 18,000 square feet of retail
use. Our agreement with the developer provides for the payment of a preferred
return on our invested capital and a portion of the development's profits. The
project is currently under construction with completion scheduled in early 2008.
Investment 2526 - This investment is structured as a $3,353,000 loan secured by
a second deed of trust on a 6,551 square foot parcel in San Francisco,
California which will comprise 32 condominium units in a six story steel frame
building. The loan is junior to a construction deed of trust in the amount of
$9.3 million. The note was issued on December 7, 2004 and matured on March 15,
2006. During April 2006, we modified the loan by extending the maturity date to
September 15, 2006 and providing additional proceeds increasing the total amount
of the loan to $4,453,000. The note provides for additional interest equal to a
percentage of the gross sales price of each completed unit. The note is
currently past its maturity date and we have entered into a forbearance
agreement with the developer to provide additional time necessary to complete
and sell the project. The project is nearly complete and marketing has started.
Investment 2557 - This investment is structured as a $2,200,000 loan secured by
a second deed of trust on approximately 10 acres in Sacramento, California which
will comprise 160 condominium units. The loan is junior to a construction deed
of trust in the amount of $12.0 million. The note was issued on November 15,
2005 and matures on May 31, 2007. The note provides for additional interest
19
calculated as a percentage of the gross sales price of each unit sold. Work on
the project has currently ceased while the developer negotiates an increase in
the construction loan to provide funds necessary to complete the first phase
units.
Investment 2630 - This investment is structured as a $5.45 million loan secured
by a first deed of trust on a 7,500 square foot parcel in Oakland, California
which will comprise 16 condominium units in a four story wood frame building
over a concrete parking garage at grade. Units are expected to sell for
approximately $400,000 per unit. Our loan is secured by a first deed of trust,
with a repayment guarantee from the developer and is due on June 30, 2007. In
addition to interest accruing on the outstanding balance of the loan, we are
entitled to receive a share of the profits from the development. The project is
currently under construction with completion scheduled in early 2008.
Investment 2676 - This investment is structured as a $3.15 million equity
investment in Livermore Village I, LLC for the purpose of acquiring, entitling
and developing approximately 300 condominium units on 5.5 acres in downtown
Livermore, California. We supplied 90% of the equity required with the developer
contributing the remaining 10%. We will receive a preferred return and a share
of the profits from the development. During November 2006 the project received
approval to build 281 residential units together with retail space. The project
is currently listed for sale.
Investment 2679 - This investment is structured as a $6.7 million loan secured
by a first deed of trust on a 40 unit apartment building in Modesto, California.
The developer has subdivided the apartments and will sell them as condominium
units. Units are expected to sell for approximately $225,000 per unit. Our
investment is secured by a first deed of trust, with a repayment guarantee from
the developer. The note was issued on August 18, 2005, and accrues interest
which is due and payable at the loan's maturity date in August 2007. In addition
to the interest which accrues on the outstanding balance of the note, we are
entitled to receive a share of the profits from the development. The project is
expected to begin sales during Spring 2007.
Investment 2688 - This investment is structured as a $7.0 million loan secured
by a first deed of trust on a 13 story office building in Oakland, California.
The developer has converted the building into six office condominiums, six
residential condominium units, and one retail unit. Our loan matures on April
20, 2007 and we are entitled to a share of the profits from the development.
Currently the project is under construction with sales expected to begin closing
during Summer 2007.
Investment 2701 - this $4,100,000 investment is structured as an equity
investment in a 2-acre development in Goleta, California. The developer is
building 37 town home units which are expected to sell for approximately
$765,000 per unit. Our joint venture agreement with the developer provides for
the payment of a preferred return on our invested capital and a portion of the
development's profits. The project is under construction with the first units
expected to complete during summer 2007.
Investment 2703 - This investment is structured as a $3.0 million loan secured
by a second deed of trust on 66 condominiums in Bremerton, Washington. The loan
is junior to a construction deed of trust in the amount of $19.3 million. Units
are expected to sell for an average of $470,000. The note was issued on February
10, 2006, matures on February 10, 2008, and accrues interest on the outstanding
balance. The project is nearing completion with sales expected to begin closing
escrow during Summer 2007.
Investment 2753 - This investment is structured as a $1.730 million loan secured
by a second deed of trust on 10 single family homes and 40 residential lots
approximately 60 miles north of Lake Tahoe in Clio, California. The loan is
junior to a construction deed of trust in the amount of $6.545 million. The note
was issued on December 21, 2005, matures on June 21, 2007 and, in addition to
interest accruing on the outstanding balance, the note provides for additional
interest calculated as a percentage of the gross sales price of each of the 10
homes sold. Construction of the 10 homes is nearly complete and the developer
has closed one sale as of March 31, 2007. Sales are expected to continue though
2007.
Investment 2785 - This investment is structured as a $3.7 million loan secured
by a first deed of trust on a 16,500 square foot parcel in Redwood City,
California which will comprise 6 single family homes. Units are expected to sell
for approximately $850,000 per unit. Our loan is secured by a first deed of
20
trust and is due on May 31, 2008. In addition to interest accruing on the
outstanding balance of the loan, we are entitled to receive a share of the
profits from the development. The project is expected to break ground in May
2007 with construction continuing through 2007.
Investment 2789 - This investment is structured as a $3.1 million loan secured
by a second deed of trust on 40 condominium units in West Hollywood, California.
Units are expected to sell for approximately $875,000 per unit. The loan is
junior to a construction deed of trust in the amount of $18.5 million. The note
was issued on June 15, 2006, matures on February 15, 2008, and accrues interest
on the outstanding balance. The project recently started construction and is
expected to complete during Summer 2008.
Investment 2828 - this $3,440,000 investment is structured as a joint venture in
a 56-acre development in the unincorporated San Diego county area known as
Lakeside, California. The developer is building 31 single family detached
residences which are expected to sell for an average of approximately $782,000
per unit. Our joint venture agreement with the developer provides for the
payment of a preferred return on our invested capital and a portion of the
development's profits. The developer broke ground during winter 2006 and
construction is expected to continue over three phases during 2007.
Investment 2857 - this $1,721,377 investment is structured as a joint venture in
a 2.6-acre development in the city of El Cajon, California. The developer is
building 26 single family detached residences which are expected to sell for an
average of approximately $590,000 per unit. Our joint venture agreement with the
developer provides for the payment of a preferred return on our invested capital
and a portion of the development's profits. The developer processing plans
through the building permit application with groundbreaking expected during
summer 2007.
Direct Investments In Real Estate Developments
As of March 31, 2007, we or our wholly-owned subsidiary Sands Drive San Jose,
Inc., held title to two properties which we received through foreclosure. The
properties are described below:
Carrying
Amount Invested Capitalized Recognized Amount of Costs to
Description (net of payments) Interest Costs Impairment Property Complete
- ----------------------- --------------------- ------------------ ------------------ ------------------ ------------------
Under construction
2518 $ 5,825,467 $ 235,442 $ 1,492,052 $ 4,568,857 $ 131,350
Held for sale
2216 408,212 8,913 26,919 390,206 47,739
--------------------- ------------------ ------------------ ------------------ ------------------
Total $ 6,233,679 $ 244,355 $ 1,518,983 $ 4,959,063 $ 179,089
===================== ================== ================== ================== ==================
Property 2518 - This property will be an approximately 6,400 square foot home in
Tiburon, California. Construction is currently expected to complete in June
2007.
Property 2216 - This is a 72-unit townhomes and condominiums project totaling
approximately 123,372 square feet in San Jose, California. Construction of all
the units was completed in October 2006 with 71 units having closed escrow at
March 31, 2007. The final unit closed escrow during April 2007 thus completing
the project.
AVAILABLE INFORMATION.
The Company is subject to the information requirements of the Exchange Act,
and, in accordance therewith, files periodic reports and other information
relating to its business, financial condition and other matters. The Company is
required to disclose in these periodic reports certain information, as of
21
particular dates, concerning the Company directors and executive officers, their
compensation, stock options granted to them, the principal holders of the
securities of the Company and any material interest of such persons in
transactions with the Company. Pursuant to Rule 13e-4(c)(2) under the Exchange
Act, the Company has filed with the Securities and Exchange Commission an Issuer
Tender Offer Statement on Schedule TO which includes additional information with
respect to the tender offer. This material and other information may be
inspected at the public reference facilities maintained by the Securities and
Exchange Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C.
20549. Copies of this material can also be obtained by mail, upon payment of the
Securities and Exchange Commission's customary charges, by writing to the Public
Reference Section at 450 Fifth Street, N.W., Washington, D.C. 20549. The
Securities and Exchange Commission also maintains a web site on the Internet at
http://www.sec.gov that contains periodic reports and information statements and
other information regarding registrants that file electronically with the
Securities and Exchange Commission.
INCORPORATION BY REFERENCE.
The Company's annual report on Form 10-KSB for the fiscal year ended
September 30, 2006, and its quarterly reports on Form 10-QSB for the quarters
ended December 31, 2007, and March 31, 2007, all as filed with the Securities
and Exchange Commission, are hereby deemed incorporated herein by reference and
shall be deemed to be a part hereof from the date of filing of such documents
and reports. Any statement contained in a document incorporated or deemed to be
incorporated by reference herein, or contained in this offer to purchase, shall
be deemed to be modified or superseded for purposes of this offer to purchase to
the extent that a statement contained herein or in any subsequently filed
document or report that also is or is deemed to be incorporated by reference
herein modifies or supersedes such statement. Any statement so modified shall
not be deemed to constitute a part of this offer to purchase, except as so
modified or superseded.
Stockholders can obtain any of the documents incorporated by reference in
this document from the Company or from the Securities and Exchange Commission's
web site at the address described above. Documents incorporated by reference are
available from the Company without charge, excluding any exhibits to those
documents. Stockholders can obtain documents incorporated by reference in this
document by requesting them in writing or by telephone from the Company at 420
Florence Street, Suite 200, Palo Alto, California 94301; telephone (650)
328-3060. Any stockholder requesting information should be sure to include his
or her complete name and address in the request. If a stockholder requests any
incorporated documents, the Company will mail them to you by first class mail,
or another equally prompt means, within one business day after the Company
receives your request.
SECTION 10. DIRECTORS AND EXECUTIVE OFFICERS; TRANSACTIONS AND
ARRANGEMENTS CONCERNING SHARES.
Our Board of Directors consists of five director positions. Our directors,
executive officers and senior officers and their
positions, as of the date of this filing, are:
Name Position
---- --------
Michael Rider Chief Executive Officer, Chief Financial
Officer and Director
William Offenberg Chairman
Robert Puette Director
Jeffrey Black Director
Patricia Wolf Director
Eric Hanke Chief Investment Officer
The business background and experience of our directors and executive
officers is as follows:
Michael Rider, age 45, is a co-founder, director, Chief Executive Officer
and Chief Financial Officer of the Company. Mr. Rider's term of office as a
director expires in 2008. Mr. Rider was controller, then Chief Financial Officer
for The Plymouth Group and its successor, TPG Development Corporation, a San
22
Francisco Bay Area real estate development company from 1991 until 1998. From
1986 to 1990 Mr. Rider was senior accountant with Kenneth Leventhal & Company, a
national public accounting firm specializing in real estate accounting and
advisory services. Mr. Rider is a certified public accountant and a member of
the Urban Land Institute. Mr. Rider received a B.A. degree in Economics/Business
from the University of California Los Angeles.
William Offenberg, age 54, has been a member of the Board since July 2005.
Prior to joining the Board, Mr. Offenberg acted as a consultant to the Board
since July 2004. From 1998 to 2005, Mr. Offenberg was an Operating Partner at
Morgenthaler Partners, a $2 billion private equity firm, where he specialized in
recapitalizations and leveraged buyouts. In his capacity as Operating Partner,
Mr. Offenberg has served in a variety of executive and board positions at
various Morgenthaler portfolio companies. Between 1993 and 1997, Mr. Offenberg
was President and Chief Executive Officer of Gatan International, a developer of
scientific instrumentation. Prior to joining Gatan, Mr. Offenberg was President
of Spectra-Physics Analytical from 1986 to 1993. Between 1977 and 1986, Mr.
Offenberg held various management positions at Perkin-Elmer's Instrument Group.
Mr. Offenberg began his career as a chemist at Atlantic Richfield. Mr. Offenberg
has degree in Chemistry from Bowdoin College and did graduate work in analytical
chemistry at Indiana University.
Robert Puette, age 65, is the President of Puette Capital Management, Inc.,
an investment and consulting company that he founded in 2005. He has been a
member of the BellaVista Board since March 1, 2002. Prior to such time, Mr.
Puette served as an advisory director to the Company. Between 2001 and 2004, Mr.
Puette was a partner at the WK Technology venture capital firm. Between 1997 and
2000, Mr. Puette was the President, Chief Executive Officer, and member of the
Board of Directors of Centigram Communications Corporation (NASDAQ), a
communications technology firm. Prior to his position at Centigram, from 1995 to
1997, Mr. Puette served as President, CEO and Chairman of the Board of Directors
at NetFRAME Systems (NASDAQ), a high-availability computer server company, and
from 1990 to 1993, Mr. Puette served as President of Apple USA, Apple
Corporation (NASDAQ). Prior to 1990, Mr. Puette served as a Group General
Manager of Hewlett-Packard Corporation (NYSE). Mr. Puette is also on the Boards
of Cupertino Electric Corporation (Private), iPolicy Networks Corporation
(Private), Bentek Corporation (Private), Fat Spaniel Corporation (Private) and
Aether Wire Corporation (Private). He is also a former director of Cisco Systems
(NASDAQ). Mr. Puette holds a BSEE degree from Northwestern University and a MSOR
degree from Stanford University.
Jeffrey Black, age 52, is a Senior Vice President in the Silicon Valley
office of Grubb & Ellis, a national real estate company, where he has worked
since 1977. In his 28 years as a real estate broker, he has concluded real
estate transactions in excess of $1 billion. Notable clients that Mr. Black has
represented include eBay, Altera, Amdahl, AT&T, Exxon Corporation, Marriott, TRW
Corporation, VLSI Technology, Steelcase, Advanced Micro Devices and Ernst &
Young. He has been named one of the Top 10 Brokers Nationwide (Grubb & Ellis
2003); No. 4 Broker in Silicon Valley (San Jose Business Journal 2003); the Hall
of Fame Award (Association of Silicon Valley Brokers 1997). Mr. Black has a
Bachelor's of Science and Commerce degree in Finance from the University of
Santa Clara.
Patricia Wolf, age 61, is currently Chair of the Board of Trustees for
Ottawa University where she focuses on strategic planning issues. From 1986
until 2002 she was employed by Management Technology America, the computer
software company she founded in 1986. In 1999, Ms. Wolf sold Management
Technology America to a company listed on the NYSE. During the period from 1999
to 2002 she continued her employment with Management Technology America. Ms.
Wolf holds a Bachelor's degree in Business Administration and a Master's degree
in Management, both from Ottawa University.
Eric Hanke, 38, is the Vice President of Business Development. His
activities include overseeing the origination of new investment opportunities
and capital raising activities, marketing and investor relations. Prior to
joining Primecore, Mr. Hanke was an investment-banking associate with Arthur
Andersen's Real Estate Capital Markets Group based in San Francisco and
Washington D.C. He is a member of the Urban Land Institute and is a licensed
real estate broker. Mr. Hanke earned his B.A. in economics from the University
of California at Irvine and a MBA, with an emphasis in real estate and finance,
from the Marshall School of Business at the University of Southern California.
23
As of March 31, 2007, the Company had 14,266,108 issued and outstanding
shares. The 750,000 shares that the Company is offering to purchase represent
approximately 5.26% of the shares outstanding as of such date. All of the
outstanding shares are common shares.
The following table presents information regarding the beneficial ownership
of our capital stock as of March 31, 2007 of each of our directors and executive
officers; and (3) all of our directors and executive officers as a group. Unless
otherwise indicated in the footnotes to the table, the beneficial owners named
have, to our knowledge, sole voting and investment power with respect to the
shares beneficially owned, subject to community property laws where applicable.
Number Percent
Title of Class Beneficial Owner of Shares of Class
------------------ ------------------
Common Stock Robert Puette 405,241 2.70
Jeffrey Black 267,341 1.78
Patricia Wolf 167,030 1.11
William Offenberg 107,404 0.72
Michael Rider 12,164 *
Eric Hanke 2,170 *
------------------ ------------------
Total 961,350 6.41
================== ==================
* Represents less than 1% of the total number of outstanding shares.
The foregoing officers and directors holding shares have represented to the
Company that they do not currently intend to tender their shares in response to
this Offer to Purchase.
MPF, as an affiliated group, is the only person known to the Company to
beneficially own more than 5% of the outstanding shares, and, as of March 31,
2007, MPF held 1,231,232 shares or approximately 8.63% of the outstanding
shares.
Agreements, Arrangements Or Understandings
As of July 13, 2004, the Company entered into a Shareholder Rights
Agreement with Mellon Investor Services, LLC as Rights Agent. Concurrently with
the adoption of the Shareholder Rights Plan represented by the Shareholder
Rights Agreement, the Board of Directors declared a dividend of one Right (as
defined in the Agreement) per outstanding share of its Common Stock, par value
$0.01 per share (the to holders of record as of July 1, 2004. Each Right
entitles the holder thereof to acquire a share of the Company's capital stock on
the terms and conditions, and subject to the restrictions and adjustments, set
forth in the Agreement, a copy of which is attached to the Company's Current
Report filed with the Securities and Exchange Commission and dated July 13, 2004
as Exhibit 4.4 and is hereby incorporated herein by this reference.
SECTION 11. LEGAL MATTERS; REGULATORY APPROVALS.
Except as described above, the Company is not aware of any license or
regulatory permit that appears material to its business that might be adversely
affected by its acquisition of shares as contemplated by the tender offer or of
any approval or other action by any government or governmental, administrative
or regulatory authority or agency, domestic or foreign, that would be required
for the acquisition or ownership of shares by the Company as contemplated by the
tender offer. Should any approval or other action be required, the Company
presently contemplates that it will seek that approval or other action. The
Company is unable to predict whether it will be required to delay the acceptance
for payment of or payment for shares tendered under the tender offer pending the
outcome of any such matter. There can be no assurance that any approval or other
action, if needed, would be obtained or would be obtained without substantial
cost or conditions or that the failure to obtain the approval or other action
24
might not result in adverse consequences to its business and financial
condition. The obligations of the Company under the tender offer to accept for
payment and pay for shares is subject to conditions. See Section 6.
SECTION 12. U.S. FEDERAL INCOME TAX CONSEQUENCES.
GENERAL. The following summary describes the material United States federal
income tax consequences of the tender offer to stockholders whose shares are
properly tendered and accepted for payment in the tender offer. This summary is
based upon the Internal Revenue Code of 1986, as amended (the "Code"), Treasury
regulations promulgated thereunder, administrative pronouncements and judicial
decisions, all as in effect as of the date hereof and all of which are subject
to change, possibly with retroactive effect. This summary addresses only shares
that are held as capital assets within the meaning of Section 1221 of the Code
and does not address all of the tax consequences that may be relevant to
stockholders in light of their particular circumstances or to certain types of
stockholders subject to special treatment under the Code, including, without
limitation, certain financial institutions, dealers in securities or
commodities, traders in securities who elect to apply a mark-to-market method of
accounting, insurance companies, tax-exempt organizations, S corporations,
expatriates of the United States, persons who are subject to alternative minimum
tax, persons that have a "functional currency" other than the United States
dollar, persons who hold shares as a position in a "straddle" or as a part of a
"hedging," "conversion" or "constructive sale" transaction for United States
federal income tax purposes. This summary also does not address the state, local
or foreign tax consequences of participating in the tender offer or any United
States tax other than federal income tax. You should consult your tax advisor as
to the particular tax consequences to you of participation in this tender offer.
In addition, except as otherwise specifically noted, this summary applies
only to holders of shares that are "United States holders." For purposes of this
discussion, a "United States holder" means a holder of shares that for United
States federal income tax purposes is:
- a citizen or resident of the United States;
- a corporation or other entity created or organized in the United
States or under the laws of the United States or of any political
subdivision thereof;
- an estate, the income of which is includible in gross income for
United States federal income tax purposes regardless of its source; or
- a trust whose administration is subject to the primary supervision
of a United States court and which has one or more United States persons
who have the authority to control all of its substantial decisions.
If a stockholder is a partnership (including any entity treated as a
partnership for United States federal income tax purposes), the tax treatment of
a partner in the partnership will generally depend upon the status of the
partners and the activities of the partnership. A holder that is a partnership,
and partners in such partnership, should consult their own tax advisors
regarding the tax consequences of participating in the tender offer.
STOCKHOLDERS ARE URGED TO CONSULT THEIR TAX ADVISORS TO DETERMINE THE
PARTICULAR TAX CONSEQUENCES TO THEM OF PARTICIPATING IN THE TENDER OFFER.
Stockholders are urged to consult their tax advisors to determine the
particular tax consequences to them of participating in the tender offer.
CHARACTERIZATION OF THE PURCHASE. The purchase of a United States holder's
shares by the Company under the tender offer will be a taxable transaction for
United States federal income tax purposes. As a consequence of the purchase, a
United States holder will, depending on the United States holder's particular
25
circumstances, be treated either as having sold the United States holder's
shares or as having received a distribution in respect of stock from the
Company.
Under Section 302 of the Code, a United States holder whose shares are
purchased by the Company under the tender offer will be treated as having sold
its shares, and thus will recognize capital gain or loss if the purchase:
- results in a "complete redemption" of the United States holder's
equity interest in the Company;
- results in a "substantially disproportionate" redemption with
respect to the United States holder; or
- is "not essentially equivalent to a dividend" with respect to the
United States holder.
Each of these tests, referred to as the "Section 302 tests," is explained
in more detail below.
TREATMENT OF TENDER OFFER AS SALE OR EXCHANGE. If a United States holder
satisfies any of the Section 302 tests explained below, the United States holder
will be treated as if it sold its shares to the Company and will recognize
capital gain or loss equal to the difference between the amount of cash received
under the tender offer and the United States holder's adjusted tax basis in the
shares surrendered in exchange therefore. This gain or loss will be long-term
capital gain or loss if the United States holder's holding period for the shares
that were sold exceeds one year as of the date of purchase by the Company under
the tender offer. Specified limitations apply to the deductibility of capital
losses by United States holders. Gain or loss must be determined separately for
each block of shares (shares acquired at the same cost in a single transaction)
that is purchased by the Company from a United States holder under the tender
offer. A United States holder may be able to designate which blocks of shares it
wishes to tender under the tender offer if less than all of its shares are
tendered under the tender offer, and the order in which different blocks will be
purchased by the Company in the event of proration under the tender offer.
United States holders should consult their tax advisors concerning the mechanics
and desirability of that designation.
TREATMENT OF TENDER OFFER AS A DIVIDEND OR DISTRIBUTION. If a United States
holder does not satisfy any of the Section 302 tests explained below, the
purchase of a United States holder's shares by the Company under the tender
offer will not be treated as a sale or exchange under Section 302 of the Code
with respect to the United States holder. Instead, the entire amount received by
a United States holder with respect to the purchase of its shares by the Company
under the tender offer will be treated as a distribution to the United States
holder with respect to its shares under Section 301 of the Code, taxable as a
dividend to the extent of the United States holder's share of the available
current and accumulated earnings and profits (within the meaning of the Code) of
the Company. To the extent the amount exceeds the United States holder's share
of the available current and accumulated earnings and profits of the Company,
the excess first will be treated as a tax-free return of capital to the extent
of the United States holder's adjusted tax basis in its shares and any remainder
will be treated as capital gain (which may be long-term capital gain as
described above). To the extent that a purchase of a United States holder's
shares by the Company under the tender offer is treated as the receipt by the
United States holder of a dividend, the United States holder's remaining
adjusted tax basis in the purchased shares will be added to any shares retained
by the United States holder.
CONSTRUCTIVE OWNERSHIP OF STOCK AND OTHER ISSUES. In applying each of the
Section 302 tests explained below, United States holders must take into account
not only shares that they actually own but also shares they are treated as
owning under the constructive ownership rules of Section 318 of the Code. Under
the constructive ownership rules, a United States holder is treated as owning
any shares that are owned (actually and in some cases constructively) by certain
related individuals and entities as well as shares that the United States holder
has the right to acquire by exercise of an option or by conversion or exchange
of a security.
26
SECTION 302 TESTS. One of the following tests must be satisfied in order
for the purchase of shares by the Company under the tender offer to be treated
as a sale or exchange for federal income tax purposes:
Complete Redemption Test. The purchase of a holder's shares by the Company
under the tender offer will result in a "complete redemption" of the holder's
equity interest in the Company if all of the shares that are actually or
constructively owned by the holder are sold under the tender offer, provided
that no shares of any other class of stock in the Company are actually or
constructively owned by the holder. If the tender offer is prorated, the shares
not purchased due to such proration must be taken into account in determining
whether a "complete redemption" has occurred. With respect to shares owned by
certain related individuals, the holder may be entitled to and may waive, in
accordance with Section 302(c) of the Code, attribution of shares which
otherwise would be considered as constructively owned by the holder. Holders
wishing to satisfy the "complete redemption" test through waiver of the
constructive ownership rules should consult their tax advisors.
Substantially Disproportionate Test. The purchase of a holder's shares by
the Company under the tender offer will result in a "substantially
disproportionate" redemption with respect to the holder if, among other things,
the percentage of the then outstanding shares actually and constructively owned
by the holder immediately after the purchase is less than 80% of the percentage
of the shares actually and constructively owned by the holder immediately before
the purchase (treating as outstanding all shares purchased under the tender
offer). For those holders who also own the Company common stock, the
"substantially disproportionate" test will not be satisfied unless the holder's
ownership of common stock immediately after completion of the tender offer is
less than 80 percent of that owned immediately before the completion of the
tender offer.
Not Essentially Equivalent to a Dividend Test. The purchase of a holder's shares
by the Company under the tender offer will be treated as "not essentially
equivalent to a dividend" if the reduction in the holder's proportionate
interest in the Company as a result of the purchase constitutes a "meaningful
reduction" given the holder's particular circumstances. Whether the receipt of
cash by a stockholder who sells shares under the tender offer will be "not
essentially equivalent to a dividend" will depend upon the stockholder's
particular facts and circumstances. Holders should consult their tax advisors as
to the application of this test in their particular circumstances.
FOREIGN STOCKHOLDERS. If a foreign stockholder (i.e., a stockholder other
than a United States holder,) is treated as having sold its stock to the
Company, it will be subject to United States federal income tax on any gain
realized on the purchase of shares by the Company in the tender offer if (i) the
gain is effectively connected with the conduct by such foreign stockholder of a
trade or business in the United States (in which case the branch profits tax
discussed below may also apply if the foreign stockholder is a corporation); or
(ii) the foreign stockholder is an individual and is present in the United
States for 183 days or more in the taxable year of such sale or exchange and
certain other conditions are met; or (iii) the Company is or has been a U.S.
real property holding corporation (a "USRPHC") for United States federal income
tax purposes. If a foreign stockholder is subject to U.S. income tax under the
foregoing circumstances, it will also be subject to withholding (in addition to
any backup withholding to which it may be subject).
If a foreign stockholder does not satisfy any of the Section 302 tests
explained above, the purchase of a foreign stockholder's shares by the Company
under the tender offer will not be treated as a sale or exchange under Section
302 of the Code with respect to the foreign stockholder. Instead, the entire
amount received by the foreign stockholder with respect to the purchase of its
shares by the Company under the tender offer will be treated as a distribution
to the foreign stockholder with respect to its shares under Section 301 of the
Code, and treated as a dividend to the extent of the foreign stockholder's
allocable share of the available current and accumulated earnings and profits
(within the meaning of the Code) of the Company. Dividends paid to foreign
stockholders are subject to United States withholding at a rate of 30% of the
gross amount of the dividend or, if applicable, at a lower treaty rate, if the
stockholder provides proper evidence that it qualifies for benefits under such a
treaty. A dividend that is effectively connected with the conduct of a trade or
business in the United States by a foreign stockholder will be exempt from the
27
withholding tax described above and subject instead to the United States federal
income tax on net income that generally applies to United States stockholders.
STOCKHOLDERS WHO DO NOT RECEIVE CASH UNDER THE TENDER OFFER. Stockholders
whose shares are not purchased by the Company under the tender offer should not
incur any United States federal income tax liability as a result of the
completion of the tender offer.
BACKUP WITHHOLDING. See Section 3 with respect to the application of United
States federal backup withholding tax.
SECTION 13. EXTENSION OF THE TENDER OFFER; TERMINATION; AMENDMENT.
The Company expressly reserves the right, in its sole discretion, at any
time and from time to time, and regardless of whether or not any of the events
set forth in Section 6 shall have occurred or shall be deemed by the Company to
have occurred, to extend the period of time during which the tender offer is
open and thereby delay acceptance for payment of, and payment for, any shares by
giving oral or written notice of the extension to the Company and making a
public announcement of the extension. The Company also expressly reserves the
right, in its sole discretion, to terminate the tender offer and not accept for
payment or pay for any shares not theretofore accepted for payment or paid for
or, subject to applicable law, to postpone payment for shares upon the
occurrence of any of the conditions specified in Section 6 by giving oral or
written notice of termination or postponement to the Company and making a public
announcement of termination or postponement. The Company's reservation of the
right to delay payment for shares that it has accepted for payment is limited by
Rule 13e-4(f)(5) promulgated under the Exchange Act, which requires that the
Company must pay the consideration offered or return the shares tendered
promptly after termination or withdrawal of a tender offer. Subject to
compliance with applicable law, the Company further reserves the right, in its
sole discretion, and regardless of whether any of the events set forth in
Section 6 shall have occurred or shall be deemed by the Company to have
occurred, to amend the tender offer in any respect, including, without
limitation, by decreasing or increasing the consideration offered in the tender
offer to holders of shares or by decreasing or increasing the number of shares
being sought in the tender offer.
Amendments to the tender offer may be made at any time and from time to
time effected by public announcement, the announcement, in the case of an
extension, to be issued no later than 9:00 a.m., Pacific Standard Time, on the
next business day after the last previously scheduled or announced expiration
date. Any public announcement made under the tender offer will be disseminated
promptly to stockholders in a manner reasonably designed to inform stockholders
of the change. Without limiting the manner in which the Company may choose to
make a public announcement, except as required by applicable law, the Company
shall have no obligation to publish, advertise or otherwise communicate any
public announcement other than by issuing a press release.
If the Company materially changes the terms of the tender offer or the
information concerning the tender offer, the Company will extend the tender
offer to the extent required by Rules 13e-4(d)(2), 13e-4(e)(3) and 13e-4(f)(1)
promulgated under the Exchange Act. These rules and certain related releases and
interpretations of the Securities and Exchange Commission provide that the
minimum period during which a tender offer must remain open following material
changes in the terms of the tender offer or information concerning the tender
offer (other than a change in price or a change in percentage of securities
sought) will depend on the facts and circumstances, including the relative
materiality of the terms or information. If (1) the Company increases or
decreases the price to be paid for shares or increases or decreases the number
of shares being sought in the tender offer and, if an increase in the number of
shares being sought, such increase exceeds 2% of the outstanding shares, and,
(2) the tender offer is scheduled to expire at any time earlier than the
expiration of a period ending on the tenth business day from, and including, the
date that the notice of an increase or decrease is first published, sent or
given to security holders in the manner specified in this Section 14, the tender
offer will be extended until the expiration of such ten business day period.
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SECTION 14. FEES AND EXPENSES.
No fees or commissions will be payable by the Company for soliciting
tenders of shares under the tender offer. No broker, dealer, commercial bank or
trust company has been authorized to act as the agent of the Company, for
purposes of the tender offer. The Company will pay or cause to be paid all stock
transfer taxes, if any, on its purchase of shares, except as otherwise provided
in this document and the Instructions in the letter of transmittal.
SECTION 15. MISCELLANEOUS.
The Company is not aware of any jurisdiction where the making of the tender
offer is not in compliance with applicable law. If the Company becomes aware of
any jurisdiction where the making of the tender offer or the acceptance of
shares pursuant thereto is not in compliance with applicable law, the Company
will make a good faith effort to comply with the applicable law. If, after such
good faith effort, the Company cannot comply with the applicable law, the tender
offer will not be made to (nor will tenders be accepted from or on behalf of)
the holders of shares in that jurisdiction.
Pursuant to Rule 13e-4(c)(2) under the Exchange Act, the Company has filed
with the Commission an Issuer Tender Offer Statement on Schedule TO which
contains additional information with respect to the tender offer. The Schedule
TO, including the exhibits and any amendments and supplements thereto, may be
examined, and copies may be obtained, at the same places and in the same manner
as is set forth in Section 9 with respect to information concerning the Company.
The Company has not authorized any person to make any recommendation on
behalf of the Company as to whether stockholders should tender or refrain from
tendering shares in the tender offer. The Company has not authorized any person
to give any information or to make any representation in connection with the
tender offer other than those contained in this offer to purchase or in the
letter of transmittal. If given or made, any recommendation or any such
information or representation must not be relied upon as having been authorized
by the Company.
June 8, 2007
The letter of transmittal and share certificates and any other required
documents should be sent or delivered by each stockholder to the Company at the
address set forth below:
BellaVista Capital, Inc.
Diane Christensen
420 Florence Street, Suite 200
Palo Alto, California 94301
Telephone (650) 328-3060
Facsimile (650) 328-3066
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