EXHIBIT (a)(1)(i)
OFFER TO PURCHASE FOR CASH
BY
BELLAVISTA CAPITAL, INC.
OF
UP TO 750,000 SHARES OF ITS COMMON STOCK
AT $1.75 NET PER SHARE
THE TENDER OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., PACIFIC
DAYLIGHT TIME, ON SEPTEMBER 19, 2008, 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 $1.75 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Only shares properly tendered and not properly withdrawn will be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.
------------------------------
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.
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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 $1.75 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
6.35% 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. The number of Shares outstanding as of July 30, 2008 was
11,805,817. See Section 1. The tender offer is not conditioned on any minimum
number of shares being tendered. See Section 6.
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 another in a
series of periodic unsolicited tender offers (the "MPF Offer") to you and your
fellow shareholders, in this case offering to purchase up to 400,000 Shares at
$1.00 per Share. This is the eighth in a series of bi annual MPF tender offers
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for Shares over the last four years. 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; the
fourth was in October of 2006 for a price of $1.75 per Share; the fifth was in
June 2007 for a price of $2.25 per Share; the sixth was in September 2007 for a
price of $1.75 per Share; and the seventh was in March 2008 for $1.25 per Share.
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 $1.00 and
the Company's Offer price of $1.75 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 $1.75 per share, $1,312,500 will be required to purchase such shares.
The Company has available capital resources 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 September 19, 2008, at 5:00 p.m., Pacific Daylight Time,
unless we extend it. The foregoing date, 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 Daylight 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.
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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.
- - 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) 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 August 14, 2008). 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.
- - No reasonable likelihood 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. See Section 6.
How do I tender my shares?
To tender your shares, prior to 5:00 p.m., Pacific Daylight Time, on
September 19, 2008, 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.
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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 Daylight Time, on September 19, 2008, 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 October 14, 2008.
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.
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
6
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 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, 2008, the Company estimated that the net asset value of the Company to
be approximately $3.57 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 is
in the process of preparing its Form 10-QSB report for the quarter ended June
30, 2008, and will calculate and disclose the estimated net asset value of the
Company per Share as of that date. The Company's Board of Directors is currently
analyzing the Company's investment portfolio in order to determine its estimated
net asset value as of June 30, 2008, and has not yet made a final determination.
The Company expects to complete its analysis and file its quarterly report in
the next two weeks. The Company intends to liquidate its assets in three to
five years, and to commence a shareholder liquidity program beginning in 2009.
While these are the Company's current plans, however, there can be no assurance
as to when the Company might commence or complete liquidation, or as to when or
whether Shareholders will be able to liquidate Shares, or as to what value they
might realize upon such liquidation. 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 current MPF Offer is at $1.00 per Share.
The Company selected $1.75 as reflecting an appropriate margin over the MPF
Offer given the Company's current operations and liquidity. 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
better reflects the recent changes in estimated value, 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
7
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 Michael Rider
15700 Winchester Blvd
Los Gatos, CA 95030
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 prevailing interest rates and the
value of collateral securing loans;
o Risks related to fluctuations in the real estate markets, particularly the
residential 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;
8
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, 2007, AND OUR QUARTERLY REPORT ON FORM 10-QSB FOR THE
QUARTER ENDED MARCH 31, 2008, AS WELL AS OUR CURRENT REPORT ON FORM 8-K DATED
MARCH 3, 2008, EACH OF WHICH IS INCORPORATED BY REFERENCE HEREIN, FOR
INFORMATION ON THESE AND OTHER RISK FACTORS. EXCEPT AS REQUIRED BY LAW, WE
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..............................................................
FORWARD-LOOKING STATEMENTS .....................................................
THE TENDER OFFER................................................................
SECTION 1. Number of Shares; Proration........................................
SECTION 2. Purpose of the Tender Offer; Certain Effects of the Tender Offer;
Plans and Proposals................................................
SECTION 3. Procedures for Tendering Shares....................................
SECTION 4. Withdrawal Rights..................................................
SECTION 5. Purchase of Shares and Payment of Purchase Price...................
SECTION 6. Conditions of the Tender Offer.....................................
SECTION 7. Determination of Offer Price; Dividends............................
SECTION 8. Source and Amount of Funds.........................................
SECTION 9. Certain Information Concerning the Company.........................
SECTION 10. Directors and Executive Officers; Transactions and Agreements
Concerning Shares..................................................
SECTION 11. Legal Matters; Regulatory Approvals................................
SECTION 12. U.S. Federal Income Tax Consequences...............................
SECTION 13. Extension of the Tender Offer; Termination; Amendment..............
SECTION 14. Fees and Expenses..................................................
SECTION 15. Miscellaneous......................................................
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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
$1.75 per share, net to the seller in cash, without interest.
The term "expiration date" means 5:00 p.m., Pacific Daylight Time, on
September 19, 2008, 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 Daylight 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
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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
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
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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 400,000 shares at $1.00 per
share. This is the eighth in a consecutive 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; the fourth was in October of 2006 for
a price of $1.75 per Share; the fifth was in June 2007 for a price of $2.25 per
Share; the sixth was in September 2007 for a price of $1.75 per Share; and the
seventh was in March 2008 for $1.25 per Share. 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 $1.00 and the Company's
Offer price of $1.75 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.
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
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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, 11,055,817 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;
15
- - 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;
- - 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 Daylight 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
16
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
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.
17
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
18
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 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 October 14, 2008.
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
19
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.
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
20
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 August 14, 2008 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, theacquisition 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
21
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 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 August 14,
2008), or (b) any entity, group or person who has filed a Schedule 13D or
Schedule 13G with the Commission on or before August 14, 2008 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;
22
(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 evaluating the offer price. In connection with the
Company's most recent quarterly report on Form 10-QSB, for the quarter ended
March 31, 2008, the Company estimated that the net asset value of the Company to
be approximately $3.57 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 is
in the process of preparing its Form 10-QSB report for the quarter ended June
30, 2008, and will calculate and disclose the estimated net asset value of the
Company per Share as of that date. The Company's Board of Directors is currently
analyzing the Company's investment portfolio in order to determine its estimated
net asset value as of June 30, 2008, and has not yet made a final determination.
The Company expects to complete its analysis and file its quarterly report in
the next two weeks. The Company intends to liquidate its assets in three to five
years, and to commence a shareholder liquidity program beginning in 2009. While
these are the Company's current plans, however, there can be no assurance as to
23
when the Company might commence or complete liquidation, or as to when or
whether Shareholders will be able to liquidate Shares, or as to what value they
might realize upon such liquidation.
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 current MPF Offer is at $1.00 per Share. The Company selected $1.75 as
reflecting an appropriate margin over the MPF Offer given the Company's current
operations and liquidity. 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 better reflects the recent
changes in estimated value, 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. 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 $1.75 per share, approximately $1,312,500 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.
24
SECTION 9. CERTAIN INFORMATION CONCERNING THE COMPANY.
GENERAL.
The Company's principal executive office is located at 15700 Winchester
Blvd, Los Gatos, California 950301; 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, 2008.
Loans Receivable Secured By Real Estate
Loans Receivable Secured by Real Estate consist of loans to real estate
developers which are secured by deeds of trust on real property, pay interest
monthly and generally have repayment guarantees from the principals of the
borrowing entity.
The following table summarizes our loans receivable secured by real estate
by location as of March 31, 2008:
Amount Carrying
Invested Impairments Amount In Default
------------------ ----------------- ----------------- -----------------
First trust deeds
SF Bay Area $ 7,278,500 $ 165,000 $7,113,500 $ 1,130,000
Calif Central Valley 810,000 200,000 610,000 610,000
Other Western States 850,000 -- 850,000 --
------------------ ----------------- ----------------- -----------------
Total first trust deeds 8,938,500 365,000 8,573,500 1,740,000
Subordinate loans
SF Bay Area 1,893,777 -- 1,893,777 650,777
Calif Central Valley 150,000 -- 150,000 --
------------------ ----------------- ----------------- -----------------
Total subordinated 2,043,777 -- 2,043,777 650,777
------------------ ----------------- ----------------- -----------------
Total $10,982,277 $ 365,000 $10,617,277 $ 2,390,777
================== ================= ================= =================
The following table summarizes our loans receivable secured by real estate
by location as of September 30, 2007:
Amount Carrying
Description Invested Impairments Amount In Default
------------------ ----------------- ----------------- -----------------
SF Bay Area $ 9,353,000 $ -- $ 9,353,000 $ 600,000
California Central Valley 960,000 -- 960,000 --
Other Western States 850,000 -- 850,000 --
------------------ ----------------- ----------------- -----------------
Total $11,163,000 $ -- $11,163,000 $ 600,000
================== ================= ================= =================
25
Joint Venture Investments In Real Estate Developments
Joint Venture Investments in real estate developments consist of ADC Loans
and joint ventures investments with real estate developers. ADC Loans, which are
loan arrangements that are typically secured by real property, provide for the
payment of interest from an interest reserve established from loan funds and may
also provide for the payment of an exit fee as a percentage of sales from each
unit in the development or a share of project profits. Joint Venture investments
are equity investments in operating entities formed for the purpose of
developing real estate. Our investment typically earns a preferred return
calculated based on our investment amount at a specific rate during the term of
the investment and a share of the project profits. For the three months and six
months ended March 31, 2008 we recognized impairments totaling approximately
$2.3 million and $8.4 million on our joint venture investments in real estate
developments compared with $0 during the three months and six months ended March
31, 2007.
The following table summarizes our joint venture investments in real estate
developments by location as of March 31, 2008:
Remaining
Amount Carrying Funding
Description Invested Impairments Amount Obligation
------------------ ----------------- ----------------- -----------------
SF Bay Area $ 13,074,660 $ -- $13,124,196 $ 1,076,059
California Central Valley 10,643,969 4,668,897 6,015,958 94,042
Southern California 12,385,530 7,709,004 4,692,337 --
------------------ ----------------- ----------------- -----------------
Total $ 36,104,159 $ 12,377,901 $23,832,491 $ 1,170,101
================== ================= ================= =================
The following table summarizes our joint venture investments in real estate
developments by location as of September 30, 2007:
Remaining
Amount Carrying Funding
Description Invested Impairments Amount Obligation
------------------ ----------------- ----------------- -----------------
SF Bay Area $17,448,042 $ -- $17,497,206 $ 4,175,878
California Central Valley 11,697,253 2,303,348 9,429,120 1,283,679
Southern California 10,966,847 5,362,595 5,617,424 --
Other 1,157,425 -- 1,161,223 --
------------------ ----------------- ----------------- -----------------
Total $41,269,567 $ 7,665,943 $33,704,973 $ 5,459,557
================== ================= ================= =================
26
Direct Investments In Real Estate Developments
Direct Investments in Real Estate Developments include real estate
development projects we own, either directly or through a subsidiary company we
own or control.
The following table summarizes our Direct Investments in Real Estate
Developments by location as of March 31, 2008:
Amount Invested Recognized Carrying Costs to
Description (net of payments) Impairment Amount Complete
------------------ ----------------- ----------------- -----------------
SF Bay Area $23,267,430 $ 2,766,518 $20,764,064 $ 2,390,607
------------------ ----------------- ----------------- -----------------
Total $23,267,430 $ 2,766,518 $20,764,064 $ 2,390,607
================== ================= ================= =================
The following table summarizes our Direct Investments in Real Estate
Developments by location as of September 30, 2007:
Amount Invested Recognized Carrying Costs to
Description (net of payments) Impairment Amount Complete
------------------ ----------------- ----------------- -----------------
SF Bay Area $ 6,469,661 $ 1,492,052 $ 5,213,220 $ 50,000
------------------ ----------------- ----------------- -----------------
Total $ 6,469,661 $ 1,492,052 $ 5,213,220 $ 50,000
================== ================= ================= =================
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
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
27
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, 2007, and its quarterly report on Form 10-QSB for the quarter
ended March 31, 2008, and its Current Report on Form 8-K dated March 3, 2008,
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. In addition, Shareholders
should note that the Company intends to file its quarterly report on Form 10-QSB
for the quarter ended June 30, 2008 in the immediate future. 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 15700
Winchester Blvd, Los Gatos, California 95030; 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
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The business background and experience of our directors and executive
officers is as follows:
Michael Rider, age 46, 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
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 55, 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 66, 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
29
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 53, 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 62, 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.
The number of Shares outstanding as of July 30, 2008 was 11,805,817. All of
the outstanding shares are common shares. The 750,000 Shares subject to our
offer represent approximately 6.35% 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.
The following table presents information regarding the beneficial ownership
of our capital stock as of September 30, 2007, the end of our most recent fiscal
year, 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 3.44
Jeffrey Black 276,138 2.34
Patricia Wolf 167,030 1.42
William Offenberg 107,404 *
Michael Rider 12,164 *
Total 967,977 8.2
* Represents less than 1% of the total number of outstanding shares.
30
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.
As of September 30, 2007, MPF, as an affiliated group holding 1,369,622
shares, and Jay Duncanson, holding 658,735 shares, are the only persons known by
us to own beneficially five percent or more of our outstanding capital stock.
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
might not result in adverse consequences to its business and financial
31
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.
32
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 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
33
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.
34
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
35
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
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
36
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 Daylight 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.
37
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.
August 14, 2008
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.
15700 Winchester Blvd
Los Gatos, California 95030
Telephone (650) 328-3060
Facsimile (650) 328-3066
38